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GAO probe: Are Alaska Native corporations accountable to their shareholders?

Pat Forgey
Wayde Carroll / FIrst Alaskans Magazine

A federal review questions whether shareholders of Alaska Native corporations are getting the information they need to guide the corporations that have become a powerful force in Alaska's economy over the last four decades.

The review of the regional Native corporations created by the Alaska Native Claims Settlement Act was conducted by the Government Accountability Office (GAO), the investigative arm of Congress. The review, made public Wednesday, raised questions about how much the corporations tell their shareholders. Native corporations are exempt from federal Securities and Exchange Commission disclosure regulations that allow shareholders in other public corporations to know how the businesses they own are faring financially.

The GAO report noted, however, that the corporations provided substantial economic, social and cultural benefits to shareholders. Those include dividends, jobs, job training, scholarships and charitable contributions that preserve Native cultures for future generations.

'Another useless study'

That wasn't the part of the report that raised the ire of U.S. Congressman Don Young, however. Young called it “another useless study” and said it was a “waste of the GAO's valuable time.”

During the study, GAO auditors visited locations in Alaska from Kake to Kwethluk in preparation of the 79-page report.

Among the questions raised by the GAO was whether the requirement in the Alaska Native Claims Settlement Act that “substantially all” the information that the SEC requires publicly traded corporations to provide to shareholders is being complied with. Auditors said they could not confirm that was happening.

The review also reported that the exemption from SEC disclosure written into law 40 years ago and since renewed also meant that Native corporations have subsequently been exempt from financial reform measures such as the Sarbanes-Oxley Act of 2002 and the more recent Dodd-Frank Wall Street Reform and Consumer Protection Act.

The review also called in the SEC itself for its expertise. While corporations are supposed to provide shareholders with the same information as publicly traded corporations, there is no definition of “substantially all,” making it difficult to determine whether that requirement is being met.

No federal review

Corporations provide proxy materials, including financial data, to their shareholders for annual meetings, but the GAO said there was no federal review of the adequacy of that information and that the state did not have sufficient staff to do its own review.

“State officials we spoke with said they do not automatically review the proxy materials submitted by the regional corporations or their shareholders because they do not have the resources to routinely review proxy filings to assess compliance with the requirements,” the report said.

Instead, Alaska relied on corporations or their shareholders to police themselves, using the courts if they need to.

The SEC staff that reviewed the regional corporation filings observed that they didn't appear to comply with public company disclosure requirements.

Most corporations' reports didn't provide adequate discussion of material uncertainties reasonably likely to affect future business prospects. There were also uncertainties about the accounting standards the corporations follow.

'Transparency and integrity' valued 

Regional corporations on Thursday referred questions about the GAO study to the ANCSA Regional Association, a group representing the top leaders of the corporations from around the state. Association Chair Jason Metrokin issued a statement defending how the corporations held themselves accountable to their shareholders.

"Our regional corporations value transparency and integrity, and deliver financial documents tailored to each region's demographics based upon those principles and are generated according to generally accepted accounting procedures (GAAP) by licensed or certified auditing firms," said Metrokin, who is also president and CEO of the Bristol Bay Native Corp.

Sen. Lisa Murkowski, R-Alaska, said Native corporations already went to great lengths to present their annual reports “in plain English that their shareholders can understand, not the financial and legal gibberish that is routinely found in the financial reports of public companies.”

And they've even done that in times of financial difficulty, she said. “I would be reluctant to push Alaska Native Corporations into a box that obfuscates rather than informs,” she said in a statement.

The GAO report said the proxy materials provided shareholders are less detailed than the annual reports known as Form 10-K that public companies provide to the public.

The GAO also reported that it had hoped to survey corporation shareholders to determine their satisfaction with the information that they are provided, but the corporations refused to provide shareholder lists.

The review was requested by Alaska Sens. Mark Begich and Lisa Murkowski, and Rep. Edward Markey, D-Mass. Markey did not return calls Thursday, but issued a press release saying he would be introducing legislation improving Native corporation transparency.

Young said that Markey was finding problems where none existed. “In the end, the congressman from Massachusetts is proposing to save Alaska Natives from themselves by costing their own ANCs millions of dollars,” Young said.

Alaska state law is already adequate to protect shareholder interests, Young said. While Murkowski expressed reluctance to change existing laws, she said she was willing to look at whatever Markey proposed. “If Congressman Markey's ideas are constructive, I will work with him. If they are misguided, I will tell him that,” she said.

Contact Pat Forgey at pat(at)alaskadispatch.com