Anchorage Daily News

State Sen. Ben Stevens held a secret option to buy into an Alaska seafood company at the same time his powerful father, U.S. Sen. Ted Stevens, was creating a special Aleutian Islands fishery that would supply the company with pollock worth millions of dollars a year.

The pollock allocation alone was projected to provide the company with $1.5 million in profits this year and $3.7 million in 2006, the company's founder said in an affidavit in March, before problems involving the company and the availability of fish cast doubt on those numbers. Under his deal, Ben Stevens would have been entitled to one-fourth of the profits of the company, Adak Fisheries.

During the time he held the option, the company grew in value from about $2 million to at least $8.5 million, according to an owner and court documents.

A copy of Ben Stevens' option agreement surfaced as one of hundreds of documents submitted in the last few months as evidence in several lawsuits involving the company, its owners, its landlord and government regulators.

In the past few weeks, Ben Stevens' attempt to obtain ownership in Adak Fisheries has been the subject of news stories on KTUU-Channel 2 and in the Daily News -- coverage denounced by Ted Stevens at a recent news conference.

The secret option was a surprise to officials of the Aleut Corp., the intended beneficiary of the pollock fishery, they said, when they learned of it late last year. The company, the regional Native corporation for the Aleutian Islands and the Pribilofs, had invited Ben Stevens to serve as a director of Aleut Enterprise Corp., its subsidiary charged with the economic development of the former Navy base at Adak.

As a director of Aleut Enterprise Corp., and without disclosing his conflict of interest, Ben Stevens voted to transfer the pollock rights to Adak Fisheries and argued against the Aleut Corp. claiming a larger share of the profits, according to Aleut officials in court testimony or interviews with the Daily News.

Ben Stevens has repeatedly declined to answer any questions from the Daily News about the option or any aspect of his activities involving fish processing at Adak or the Aleut corporations.

"My attorneys have advised not to discuss it because it's before the court," he told reporters two weeks ago.

Nevertheless, Stevens discussed the option on an Anchorage talk radio show last week and asserted he had no obligation to disclose it.

In a deposition Aug. 10, Aleut Corp.'s corporate counsel, Roger DuBrock, said he first heard rumors about Stevens' option in summer or fall 2004, after Stevens left the Aleut Enterprise Corp. board. He said he began worrying about the consequences if it were true and word leaked out.

"My concern is that if it ever became public knowledge that Sen. Ted Stevens got legislation passed for a pollock allocation that ended up getting assigned to Adak Fisheries, and that Ben Stevens, his son, had an ownership interest in that company, there would be all kinds of unfavorable newspaper reports written that might damage Senator Stevens and might damage Ben Stevens and might damage the Aleut Corporation," DuBrock testified.

TED STEVENS DENIES A LINK

There is no evidence that Ted Stevens created the pollock allocation to benefit his son. In angrily denying any such link, the elder Stevens told reporters on Sept. 9 that doing so would be a crime.

In fact, he said, he never discussed the pollock allocation with his son. He said he only learned of the option from recent news reports.

Stevens said he pushed the measure to spur the economic development of Adak.

"The people I talked to are (Aleut fish consultant Clem) Tillion and the (federal North Pacific fishery management) regional council people, and I'll be glad to show you the memos that (Senate staffer) Matt Paxton wrote to me back in '03," Stevens told reporters.

The next business day, Monday, when a Daily News reporter asked to see the memos, Stevens rescinded the offer.

George Lowe, Ted Stevens' chief of staff, offered Tuesday to go "off the record" to explain why Stevens now will not provide the documents, but the Daily News declined to accept the information under such a restriction.

Stevens' spokeswoman, Courtney Boone, said Stevens' offer to provide the documents was valid only during the course of the Friday press conference. Stevens said nothing about a time limit on access to the documents at the time, although he did say the press conference would be his last comment on his son's option.

A SECRET OPTION

Corporations often grant stock options to executives as an incentive for performance that raises the value of the stock. An option typically gives the holder the right to purchase shares at a specified price during a given period of time. The price may not be discounted at the time the option is given, but the option generally anticipates a rise in value.

Though Adak Fisheries was a limited liability company -- more like a partnership than a corporation with stock -- Ben Stevens' option was similar to a stock option. It gave him the right to buy a 25 percent stake in the fish processing company for an immediate payment of $50,000 and another $450,000 paid over time. The option does not specify an interest rate or term for the note.

Stevens had 29 months, until Dec. 31, 2004, to exercise the option.

Among the unresolved questions now subject to litigation is whether Stevens' option is valid.

Until two weeks ago, when a judge ruled in one of those lawsuits, Stevens was president of Adak Fisheries, for which he was paid $10,000 a month, according to a company owner's testimony.

Disclosure of Ben Stevens' option adds new political and ethical dimensions to a controversy that began in fall 2003, when a plan by Sen. Ted Stevens to allocate pollock to the Aleut Corp. surfaced in Congress.

At the time, Ted Stevens was chairman of the Senate Appropriations Committee, a powerful position from which he was extraordinarily able to push legislation through Congress. By attaching unrelated legislation to a vital spending bill and allowing it to go along for the "ride," he could bypass the usual process of introduction, committee hearings and waiting for debate to be scheduled on the Senate floor -- stopping points where opponents could slow, change or kill the measure.

The pollock allocation to the Aleut Corp. was such a rider.

The rider caught the attention first of Alaska reporters and then the national press because of Ben Stevens' known connections to that part of the fishing business.

Those connections were public because, under state law, Alaska legislators must disclose their business interests. Ben Stevens had reported that, between 2002 and 2004, his consulting company, Ben Stevens & Associates, received $280,000 from Adak Fisheries.

In addition, in 2000 and 2001, three related companies -- NorQuest Seafoods, Adak Fisheries Development Corp. and Adak Seafoods -- had paid $77,500 to his consulting firm.

Ben Stevens also reported his service on the board of directors of Aleut Enterprise Corp., for which he received a small fee.

In 2003, the media reported on Ben Stevens' consulting relationship with Adak Seafoods in connection with his father's pollock rider. At the time, Ted Stevens dismissed any connection between his fish rider and his son's consulting activity, and any criticism of their activities.

"I don't care what they say about me. My son's now a politician. ... He doesn't care what they say about him," Stevens said in one of those stories. "Neither one of us is getting rich. That's for damn sure. And we're doing what we think is right."

At the time, Ben Stevens' year-old option was still secret, Aleut officials said.

Adak Fisheries was growing quickly in value -- from an estimated $1 million to $2 million in 2002 to at least $8.5 million in 2004, according to one owner, Kjetil Solberg. As the value of the company increased, so did the value of Stevens' option.

And Adak Fisheries had the potential to grow much more, according to Solberg.

With the exclusive right to catch and process pollock, and the lease to do it at Adak, the company could ultimately be worth as much as $100 million, he said.

A Rider on fishing rights

The option eventually came to the attention of Adak Fisheries' landlord, the Aleut Corp., and raised conflict of interest concerns.

In the mid-1990s, the federal government began the process of transferring ownership of the decommissioned Navy base on Adak to the Aleut Corp. In 1997, the Aleut Corp. created a subsidiary, Aleut Enterprise Corp., to manage conversion of the base to civilian use. Ben Stevens was invited twice to join the board of directors of the Aleut Enterprise Corp., serving his longest stint from June 2001 until he resigned in July 2004, according to a company spokesman.

The Aleut Enterprise Corp. first leased some of its Adak real estate to Adak Fisheries on Dec. 28, 2001.

On Oct. 24, 2003, the rider allocating pollock rights to the Aleut Corp. was still pending in Congress but expected to pass. The Aleut Enterprise Corp. agreed to transfer the rights to those fish -- worth an estimated $10 million a year -- to Adak Fisheries as part of the lease agreement between the companies.

There were three directors of the Aleut Enterprise Corp. when it voted to assign those rights to Adak Fisheries. One of them was Ben Stevens, according to Aleut Corp. spokesman Curtis Smith.

Aleut Corp. chief executive David Jensen, who also serves as chairman of the Aleut Enterprise Corp. board, testified in a deposition on Aug. 9 that Ben Stevens never disclosed that he had an option to become a major owner of Adak Fisheries.

Jensen said when he found out about the option, in December 2004, he was "floored."

The secrecy surrounding the option was no accident. The parties to the deal pledged to keep it secret. In the section of the agreement headed "Confidentiality," it says:

"This agreement and its terms are to be kept strictly confidential, except to the extent necessary for any party to comply with public reporting or other requirements related to public service."

Though the language referring to public service suggests Stevens considered reporting the option in his required financial disclosures as a state senator, he never did. A spokeswoman for the Alaska Public Offices Commission said the law is unclear about whether disclosure of such an option is required.

ORIGINS OF THE DEAL

Ben Stevens was brought into the Adak deal by a plain-speaking Norwegian seaman who saw a big opportunity in a relatively untapped fishery. The Norwegian, Kjetil Solberg, recognized that Ben Stevens could be a powerful ally -- even before, he says, he knew Ben Stevens was the son of Sen. Ted Stevens.

Solberg, now 40, was born in the far-north Norwegian coastal town of Narvik and went to sea when he was 15. Later, he graduated from the Royal Norwegian Naval Academy and served in the special forces of the Norwegian navy.

After the navy, Solberg went into the sea-transport business, where he occasionally found himself in Alaska, picking up frozen cod for delivery in Europe. In Dutch Harbor in 1998, he ran into a fisherman who told him about Adak.

"He said if you go to Adak and build a fish plant there, you'll create the cod capital of the world. Naive immigrant as I was, I believed him," Solberg said, "but he was right."

With the end of the Cold War, the U.S. Navy was closing its sprawling base there, while the Aleut Corp., which hoped to obtain the site in a land trade with the U.S. government, was looking for economic partners.

"And I went home, and I looked at the globe," Solberg said. He saw the future.

"That's where you want to be if you want to do shipping in 2025 and fishing," he said. "It's a perfect location."

While an Alaskan might view Adak as the remotest of the remote -- 135 miles closer to the Kamchatka capital of Petropavlovsk than to Anchorage -- to Solberg, it looked like the on-ramp to a freeway connecting major ports on both sides of the Pacific.

"It's right there on the Great Circle (shipping route). Several times I crossed just south of Adak on my way from Japan, Tokyo Bay, to the U.S. Northwest and the Bay Area," he said.

Dutch Harbor, 450 miles east at the head of the Aleutian chain, is the nation's leading fishing port, serving the massive pollock fishery in the Bering Sea. To Solberg and the Aleut Corp., it wasn't a farfetched dream that the old Navy base at Adak could be transformed into another fishery hub well situated for transport.

Solberg flew to Adak in April 1998. He couldn't find a single fishing vessel, so he borrowed a rubber dinghy and a fishing pole and caught more cod than he dreamed possible.

"I was on top of an undetected chest of treasure," he said. "Cod is called 'the gold of the ocean' in Norway."

As he flew out of Adak, he drafted a letter to the Aleut Corp. expressing his desire to embark on a new line of work: fish processing.

By the end of 1998, Solberg had raised nearly $1 million by selling his Norwegian businesses and real estate, and moved his family to America. Within a year, with a Norwegian friend, Irgen Iverson, Solberg launched Adak Seafoods by converting an old Navy building at the edge of the Adak harbor into a processing plant.

In November 1998, the same Dutch Harbor man who told him about Adak introduced Solberg to Ben Stevens. Stevens had limited involvement in Alaska public policy at the time, primarily the politics of fishery regulation and marketing. He had fished for salmon in Bristol Bay and captained a crab boat in the Bering Sea.

When he met Solberg, Ben Stevens was building a career working with regulatory agencies and giving advice -- some of it on issues in which his father was involved. At that point, Solberg said, he didn't know who Ted Stevens was.

When Solberg did learn about Alaska's senior U.S. senator, he said, he didn't make the connection between father and son. In fact, Solberg was angry with legislation that Ted Stevens had recently pushed through Congress -- the American Fisheries Act. The law Americanized the fishing fleet nationwide and divided up the vast pollock resource of the Bering Sea and Aleutian Chain among competing U.S. fishing groups.

Because it based fishing rights on past catches, and the Navy hadn't allowed fishing near Adak, the law excluded Solberg and others from a potentially lucrative pollock fishery in the area.

"It was quite some time after I met him (Ben), I had to ask him if he was related to that guy over there that was doing all these terrible things to me. And he said, 'Yeah, that's my dad.' "

Ben Stevens' advice to Solberg was to buy and process under-used species like brown crab and cod from local waters and be patient about changing the law, Solberg said.

In 1997, the Aleut Corp. created the Aleut Enterprise Corp. Its president and chief executive was Sandra Moller, a civil engineer educated at the University of Alaska Fairbanks.

Leaders of the parent company thought it would be helpful for the subsidiary to bring in directors with special expertise, Moller, 41, said recently.

Both Ben Stevens, with his fishing background and family connection to Ted Stevens, and Art Hackney, an Anchorage political and marketing consultant, were named as outside directors of the Aleut Enterprise Corp. on Oct. 20, 1999.

Hackney served through early 2001, according to a company spokesman. Stevens left after a year and then rejoined the board June 7, 2001. Five weeks later, Gov. Tony Knowles appointed him to a vacant state Senate seat from Anchorage.

Solberg, meanwhile, had begun the first in a series of troubled partnerships.

He and his friend Iverson sold Adak Seafoods to the established Seattle company, NorQuest Seafoods, which then created a new company, NorQuest-Adak Inc. As payment, Solberg said, he got 45 percent of the new company. But NorQuest-Adak fell behind in its rent to the Aleut Enterprise Corp., and Solberg again assumed responsibility for the plant.

In December 2001, he found another Seattle partner, Icicle Seafoods Inc. Together they created another company, Adak Fisheries LLC, with each partner owning 50 percent.

The new company signed a new lease with the Aleut Enterprise Corp. on Dec. 28, 2001, agreeing to pay rent of $9,000 a month to start. Beginning in 2004, the lease required Adak Fisheries to pay an additional 30 percent share of its profits to the Aleut Enterprise Corp. after deducting the base rent and capital improvements.

CONSULTING AT $10,000 A MONTH

As a new state senator, Stevens was required to disclose his sources of income beginning in 2000. Those documents show that Solberg's companies had paid him $37,000 in consulting fees that year, an amount that increased in the ensuing years.

Solberg said Stevens was worth the money.

"The good thing with Ben is that he's extremely knowledgeable when it comes to fisheries," Solberg said. "He fished out there for several years, battled the same storms."

Solberg said Stevens worked as a consultant, helping him with regulatory issues and business, and traveled to Europe with him to meet fish buyers. Stevens didn't keep track of hours or prepare formal reports, Solberg said.

"He's sending me a lot of e-mails -- kind of reports," Solberg said.

Stevens was paid a flat fee of $10,000 a month.

In particular, Solberg said, Stevens went to bat for him on crab issues before the federal North Pacific Fishery Management Council "and the state, the Board of Fisheries," Solberg said. He said Stevens lobbied the state Fish Board on his behalf before he was a state senator.

Stevens did other tasks that could only be done in Anchorage while Solberg was out in Adak, including picking up fishermen at the airport.

"He was a friend who helped while I struggled," he said. "Maybe he believed in me. Who knows?"

The 46-year-old Stevens managed to get his work done despite other demands on his time, Solberg said.

"He is up at 4 o'clock in the morning working out, he can drink beer till after midnight and then be up at 4 o'clock in the morning. He does a lot. I can do a little stuff, but sometimes I need to rest a little bit, and both him and his old man -- Ben just keeps going."

On July 29, 2002, Solberg and Icicle offered Ben Stevens the chance to own part of Adak Fisheries.

They drew up an option that gave Stevens until Dec. 31, 2004, to pay $50,000 down, and $450,000 over time, to buy 25 percent of the company. His share would come equally from the other partners, whose holdings would be reduced to 37 ½ percent each.

The agreement was signed by Solberg, Stevens and Icicle president Don Giles.

The option document notes that Adak Fisheries had been formed with an initial investment of $2 million. Solberg said the company was probably worth half that much at the time Stevens obtained the option.

Reciting the reasons for granting the option, the document expresses hope that Stevens will help increase the company's worth.

"Stevens is a consultant with extensive experience in the Alaska fisheries and the skills to help increase the value of the company, and has consulted with Solberg regarding fish processing opportunities in Adak, Alaska, for several years," it says. "In recognition of Stevens' contribution to the company, and incentive for the further efforts on behalf of the company, Icicle and Solberg are prepared to grant Stevens the option as set forth in this agreement."

The company grew quickly, primarily on its cod processing, though it also processed halibut and sablefish. Valuable pollock was still off limits. In the first few months of 2004, the company showed a $2.3 million profit, Solberg has said, though it ended that year with a loss, primarily because of the business failure of a buyer in Norway that cost Adak Fisheries $900,000.

Solberg wasn't satisfied with just processing cod and other under-utilized species. As a finished product in the countries that eat salted cod -- mainly Norway, Portugal and Brazil -- it's a valuable food. But the best profit is in the final processing in Norway, Solberg said, not the preliminary freezing his plant was doing. Crab was much more lucrative, but the volumes were small, he said.

Getting a share of the valuable pollock catch dominated by the Seattle-based fleet could greatly improve his prospects. Pollock, a white-fleshed bottom fish, is highly valued in Asia.

"Ben and I worked very hard on getting the pollock allocation through Congress," Solberg said in an interview. "It's no secret."

Solberg said Ben Stevens gave him advice, but to his knowledge didn't personally take Adak Fisheries' case to Washington or to his father in particular.

For the allocation to pass into law, Solberg has asserted, it wasn't enough that the fish go to the Aleut Corp. The Native corporation also had to assure Congress that it had a solid long-term lease with Adak Fisheries specifically, or "it would not have been eligible for, nor would it have received, the allocation," Solberg's attorney said in a court filing in July.

At the time, Ted Stevens said giving the pollock to Adak was important for the state, for the Aleut people and for making use of a military installation that cost taxpayers more than $3 billion.

Aleut officials and Solberg stressed that processing the fish on shore would promote long-term stability for Adak's economy. There was only one onshore processor on Adak: Adak Fisheries.

In October 2003, with Ted Stevens' $10 million pollock rider pending in Congress, a deal was struck: The Aleut Enterprise Corp., with Ben Stevens voting as a board member, amended its lease to assign the prospective pollock allocation to Adak Fisheries.

In return, Adak Fisheries' base rent doubled to $18,000 a month and the company agreed to make additional investments in the processing plant.

Moller, the Aleut Enterprise Corp. president, said she wanted an additional change in the October 2003 agreement: a bigger share of profits after rent and capital investments were deducted. The original lease called for a 70-30 split of profits: 70 percent for Adak Fisheries, 30 percent for Aleut Enterprise Corp. She proposed a 50-50 split.

"Our argument was that there was a lot to do on Adak. Lots of improvements, lots of things that need to be done, and it's a partnership, 50-50," she said in an interview.

But Stevens, she said, "was instrumental" in convincing her to let Adak Fisheries keep 70 percent of the profits.

CONCERNS AT ALEUT

Moller said she and other Aleut officials knew Stevens worked as a consultant to Adak Fisheries, but they had no idea, even as he voted on her board, that he had a personal economic interest in the company.

"Kjetil came to a meeting we all had once, with Ben as his consultant, and I asked him, "Well, what's Ben do,' because I think he might've been on our board at that time, but I don't remember. He said, 'Oh, you know, lobbyist, and stuff like that.' "

By coincidence, on the day the Aleut Enterprise Corp. board was scheduled to assign the pollock rights to Adak Fisheries, a story appeared in the Daily News about Ted Stevens' pollock rider pending in Congress. The story mentioned Ben Stevens' consulting relationship with Adak Fisheries.

Moller said she read the story with concern. She said she expressed her worries to David Jensen, the Aleut Corp. chief executive and the chairman of her board of directors.

"This is blatant, front-page news," she recalled, urging him to get Stevens to "put it on the table."

Jensen took up her request, she said. During the meeting, Jensen asked Stevens directly whether he had any conflicts of interest other than his consulting income from Adak Fisheries.

Stevens said he didn't, Moller said.

The pollock rider passed in January 2004. Federal fishery regulators initially told the Aleut Corp. the company could obtain more than 15,000 tons of pollock in 2005 and the same in 2006, Moller said.

Despite the good news, Adak Fisheries was going through turmoil.

"They wanted to own everything themselves," Solberg said of his Icicle partners. "And I fought back and bought them out."

Solberg couldn't afford the takeover on his own, so he found another partner, Aleutian Spray Fisheries Inc., also of Seattle.

Cary Swasand, the chief executive of Aleutian Spray, testified recently that he first discussed buying into Adak Fisheries in a meeting with Solberg and Stevens on his boat in Seattle on May 1, 2004.

Swasand said he reluctantly agreed to buy in. He became less troubled, he said, when Solberg agreed that Aleutian Spray would have two votes on the Adak Fishery board to Solberg's one, giving Swasand control of the partnership.

So, in simultaneous transactions on June 3, 2004, Icicle sold its 50 percent share back to Solberg for $4.3 million, and Solberg immediately sold it to Aleutian Spray for the same price.

Solberg said he thought the 50 percent share was underpriced -- the company was probably worth $10 million at the time, he said.

If Solberg's estimate is accurate, it would mean the value of Stevens' option had grown from $250,000 to $2.5 million in less than two years.

Solberg said he told Aleutian Spray's president, Swasand, about Ben Stevens' option and Swasand agreed to honor it. Swasand has testified that he learned of the option during the meeting on his boat, but whether he agreed to honor the option is an issue to be decided in one of the lawsuits. Swasand, his attorney John Young and his son Chris, all of whom are deeply involved in Adak Fisheries today, have declined to answer questions about the option because of the ongoing litigation.

On Nov. 16, 2004, Stevens attempted to exercise his option, sending a $50,000 check to Swasand, according to court documents.

The check was still in the Aleutian Spray office in Seattle in December when David Jensen, the Aleut Corp. chief executive, paid a visit.

The 2001 lease between the Aleut Enterprise Corp. and Adak Fisheries had a 33-year life. But because it was signed while the federal government still owned the land, it required a complex cascade of real estate transactions involving five entities to remain in effect. The lease contained a clause saying it would terminate when the land transfer to the Aleut Corp. was completed. That clause also required the parties to negotiate a new lease with substantially the same provisions as the old, taking into account changed conditions.

'I WAS FLOORED'

The transfer of the Navy base occurred March 17, 2004. The Aleut Corp. declared the lease void and began negotiations on a new one. But the talks dragged on, which is why Jensen visited Aleutian Spray in Seattle in December of last year. He had thought that the Aleut Corp. might propose to take a 30 percent ownership stake in Adak Fisheries and reduce the rent to $1 a year, according to a Sept. 9, 2005, affidavit by Jensen in one of the court cases.

It was there that he first learned of Stevens' option, he testified in the deposition. He was shown the $50,000 check, No. 115, and Stevens' demand letter. That suspended any talk of ownership for the Aleut Corp., since it was suddenly unclear whether 30 percent of the company was even available, he said.

"I didn't say anything other than I was floored," he said. "I had no idea of it."

Jensen also was confronted with a significant ethical issue, he said.

"Had I known about an option or ownership issue, that would have been a real problem," he said at the deposition. As far as he had known, he said, "Mr. Stevens was a consultant for Adak Fisheries, not an owner."

"He was on the board of the directors of AEC (Aleut Enterprise Corp.) ... you can't be on the board and serving your own personal interests. That wouldn't have been acceptable."

Solberg said he and Ben Stevens discussed the option with Jensen when the three traveled to Europe together in summer 2003.

Jensen insisted in his deposition that he never knew about the option until last December. At one point in his questioning, Adak Fisheries attorney Bruce Johnston pressed Jensen about whether Ben Stevens disclosed the option at a meeting in Anchorage in 2003. Jensen held firm.

"I remember him coming and talking to Roger (DuBrock) and I in my office, and he wanted to have an arrangement with Solberg," Jensen said.

"Are you telling me, Mr. Jensen, that if Mr. Stevens were to testify that he did, in fact, tell you about that option, that you would say directly that he is lying?" Johnston asked.

"I would say that he did not tell me about an option," Jensen said.

"Are you telling me that if he were to swear that he told you that, you would swear in a counter sense that he was lying?" Johnston asked.

"I'm not going to call him a liar. I'm not going to tell -- I'm not going to say that I heard him say the word 'option.' Because I never heard 'option.' I have never heard that from him," Jensen said.

While Ben Stevens told reporters Sept. 8 that he couldn't discuss the case, last week he spoke by telephone to talk show host Dan Fagan on KFQD-AM and asserted that he had no requirement to disclose the option to the Aleut Enterprise Corp. The comments were rebroadcast Friday on KTUU Channel 2.

"I didn't own any interest" in Adak Fisheries, he told Fagan. "I owned an option that had to be granted. It was a right to buy under an agreement that the owners would agree to sell to me."

An expert on business ethics and the law, professor Daniel Kane of George Washington University in Washington, D.C., said conflicts involving outside directors like Stevens are not rare in business but are remedied by disclosure.

"He has a duty to tell the other directors," Kane said. "Why does it have to be a secret if it's up and up? ... It definitely could raise ethical questions of what the hell is going on."

Alaska corporate law also provides that directors must disclose conflicts to other directors and shareholders. Failing to do so opens the door to a lawsuit that could void contracts or transactions touched by the conflict of interest.

Moller, the Aleut Enterprise Corp. president, said she first learned about the option in December 2004. She was having coffee with Young, the attorney for Aleutian Spray, when he told her about it.

"I was astounded," she said. "He (Stevens) was on our board and he was apparently exercising a personal right into something that he should've been looking at as a board member. He should have at least disclosed it.

"A lot of what we did over the last five years at the board level was dealing with fisheries," Moller added. "We did have several meetings, throughout several years on what to do with the fish plant, everything from NorQuest to Icicle and Aleutian Spray."

As a board member, Stevens was privy to the discussions and voted on matters involving those Solberg companies.

Moller said Stevens signed a conflict-of-interest statement for his board service and in it failed to disclose the option.

APOC TO WEIGH IN

On Aug. 3 of this year, five days after the Daily News contacted his lawyer about the option and three years after he was offered it, Stevens asked the Alaska Public Offices Commission staff for the first time whether it was something he needed to report, according to Christina Ellingson, the agency's assistant director.

Ellingson said she told Stevens the law wasn't clear. While it specifically requires disclosure of options to purchase real estate, she said, the law doesn't specifically require the reporting of an option to buy a business.

Stevens argued to the public offices commission staff that he shouldn't have to report the option because it couldn't be sold and therefore "had no intrinsic value," she said.

Ellingson said she has sought additional documentation out of the court cases and expects the full commission to consider the issue of Stevens' option when it meets later this year.

On Dec. 23, 2004, Young returned Stevens' check and rejected his demand to exercise the option. Young's letter, entered as evidence in one of the court cases, acknowledged that Aleutian Spray's Cary Swasand knew about the option before he bought into the company. But Young said any agreement Swasand made was based on information about the company provided by Stevens and Solberg.

"As you are aware," he told Stevens, "many of those representations turned out to be inaccurate and the financial position and business prospects of the company are significantly different than what was represented to Mr. Swasand."

Those misrepresentations voided any obligation of Aleutian Spray to honor the option agreement, he said.

Relations between the Swasands, Solberg and Stevens deteriorated from there. In March, the Swasands agreed in principle to sell their 50 percent share to Solberg for $3 million, payable over two years. They said the deal was never completed; Solberg said it was.

Solberg, asserting he was sole owner of Adak Fisheries, accepted Stevens' $50,000 check on March 28 and honored the option, though Solberg's lawyer said he never officially transferred ownership, pending legal resolution of the competing claims.

On June 9, Aleutian Spray called a meeting of the Adak Fisheries board. It asserted its full control, firing Solberg as chief executive and declaring that Ben Stevens had no role in the company.

On June 15, Solberg filed documents with the state saying he was the 100 percent owner and chief executive and that Stevens had been appointed Adak Fisheries' president.

Meanwhile, the Aleut Corp. agreed to mediate the lease issues with Adak Fisheries.

On May 23, an Adak Fisheries attorney, Paul Davis, urged the Swasands and Solberg to keep their disagreements to themselves and present a "united front" to the Aleut Corp. and the mediator.

Referring to an earlier meeting between the Swasands, Solberg and the Aleut Corp., Davis wrote, "I advised all of you (Swasands and Solberg) that any further public divisiveness at this point in time would be effectively used by TAC (the Aleut Corp.) as an excuse not to negotiate a new lease, and would result in the death of AF (Adak Fisheries). I cannot be more serious in my advice to all of you. Whatever you have invested in AF is at complete and total risk of being lost."

But the relationships, if anything, got worse and more public. On June 16, Aleutian Spray sued Solberg and Stevens, seeking an order establishing that it is still the 50 percent owner of Adak Fisheries. Solberg counter-sued, asking that the alleged March sale be declared valid and seeking damages.

Adak Fisheries has sued the Aleut Corp., demanding reinstatement of the lease, and The Aleut Corp. is in court trying to evict Adak Fisheries.

Last fall, the federal government accused Adak Fisheries and Icicle Seafoods of violating federal crab quotas. The companies are in court fighting the government's proposed $3.4 million fine.

And the Aleut Corp. has sued Solberg for back rent.

The first phase of the ownership trial ended earlier this month with a judge ruling that Solberg had taken over Adak Fisheries illegally, restoring the 50-50 split between Aleutian Spray and Solberg. He voided Solberg's filing with the state that declared himself the sole owner of Adak Fisheries and Ben Stevens as president.

Solberg contends the Aleut Corp. wants to get rid of Adak Fisheries altogether and sell its pollock to at-sea processors. Moller and other Aleut Corp. officials say that's nonsense, they just want a stable company on Adak and hope to negotiate a deal with "the last one standing" after the court cases are resolved.

Somehow, seafood has continued to be processed at the plant under Solberg's supervision. That changed Thursday when Solberg turned the plant over to Aleutian Spray.

With the lease unresolved and almost all aspects of the Adak Fisheries management and finances tied up in litigation, it's unclear whether the company has any value today.

In a hearing on Aug. 22, Solberg was still looking ahead, thinking about how he could get more cod to the Adak fish plant by getting the state to open waters in the Aleutians with the help of Ben Stevens and Clem Tillion, the Aleut consultant and former state legislator.

"If we politically work together up here in Alaska we could secure our cod resource," Solberg told Superior Court Judge Michael Rindner, at times stumbling a bit in his adopted language. "If we can sit together, have Mr. Tillion, have Mr. (Ben) Stevens, and have the Aleuts and myself work together, we can secure that by maybe implement the state Board of Fisheries on an emergency basis -- Mr. (Ben) Stevens for us is very crucial in this process. If we cannot do that, if we don't work together, I believe that out-of-state harvesters will profit and we will lose."

Outside of court, Solberg said he wasn't suggesting that Ben Stevens would lobby the state Board of Fisheries, an agency over which he has funding and oversight responsibility as president of the state Senate. Instead, Solberg said, Ben Stevens would work with federal fisheries managers to reduce the cod take in the Bering Sea to offset an increased harvest from state waters.

Reporter Richard Mauer can be reached at rmauer@adn.com or at 257-4345.