‘Native’ Corporations Nudge Alaska Indians Into Capitalistic Ways
From his third-floor office in Doyon Ltd.’s unpretentious corporate headquarters, Morris Thompson oversees a financial empire unique to the 49th state.
Doyon, created just 16 years ago, has assets of $61 million. That figure doesn’t include the 12.5 million acres of land, much of it rich in timber and minerals, that Doyon owns, making the corporation Alaska’s largest landlord after the federal and state governments. Other ventures include oil-drilling rigs and real estate.
But Doyon is different from most ordinary companies, for its 9,000 shareholders are all Alaskan natives, predominantly Athabascan-speaking Indians, and their wealth was bestowed by Congress, which wanted to settle native land claims in the early 1970s in order to speed approval for the construction of the Alaska pipeline.
Not anxious to repeat the failures made in establishing Indian reservations in the American West, Congress in 1971 gave 44 million acres of federal land and nearly $1 billion in cash to 13 newly created regional and about 200 village corporations. Each of Alaska’s natives--34,000 Eskimos, 34,000 American Indians and 8,800 Aleuts--received 100 shares in a regional corporation and 100 in a village corporation. In order to protect native ownership and to nudge the natives into the mainstream of a capitalistic society, Congress decreed that none of the shares could be sold for 20 years. Now, that deadline is less than four years away.
Thus far, native capitalism has been less than a full-fledged success. Many corporations have been plagued by inexperience--some of the board members didn’t even have high school degrees--and by bad management and unwise investments. Three filed bankruptcy petitions last year and others just are keeping afloat. But Doyon, which showed a $1.7-million profit last year on revenue of $22 million, has been among the winners, which gives hope to Congress’ bold experiment. The corporation has made a profit in all but three years.
Powerful Role
“We’ve operated with two strong philosophies,” said Thompson, Doyon’s president and the former federal commissioner of Indian Affairs from 1973 to 1976. “First, we want to create employment opportunities for our shareholders; and second, we want a strong and growing company. We were in the position of having land and capital but not management expertise. Now we’re developing the expertise to go with our assets, and that’s put us in the strongest position today we’ve been in for many years.”
Almost everyone agrees that the corporations will play an increasingly important role in Alaska, and not just because they are politically active as a group. Their money is invested locally; their shareholders’ concerns are exclusively local, unlike those of typical corporations whose interests may be spread over several continents, and their assets are enormous, ranging from ownership of the Hilton and Sheraton hotels in Anchorage to car washes and small businesses to vast land holdings and mineral rights. As Thompson put it: “We’re here to stay, and if we’re economically healthy, so will be Alaska.”
But now an obstacle threatens the very survival of the corporations. In 1991, the shareholders will be allowed for the first time to sell their stock, and because most of the corporations are not paying dividends, many natives may be tempted to sell their undervalued shares to outside interests in exchange for a one-time windfall. Such a transaction would, in effect, negate the accomplishments of the Native Claims Settlement Act of 1971 and could transfer control of indigenous lands into the hands of whites and non-Alaskan multinational corporations.
Also in 1991, the native lands, currently tax-exempt, will become taxable, and some observers fear large tracts of land may have to be sold to pay off taxes. Already 24% of the corporate shares belonging to natives who have died since 1971 have passed to non-natives. Others have been transferred because of divorces.
“Sure I’d be tempted to sell,” said Henry Swanson, a 92-year-old Aleut bachelor who lives in Dutch Harbor. “I’ve gotten one dividend check for $200 and one for $100 since 1971--that’s all. There’s lots of things I could use the money for, but what those shares are worth, I don’t know. No one does.”
1991 Issue Is Crucial
Swanson lives on about $1,000 a month provided by the state and federal governments. He rolls his own cigarettes, has a 60-year-old cast-iron stove that he has rigged up with an oil burner to provide heat and built his two-room home himself, partly out of plywood taken from abandoned World War II army buildings. His modest existence underscores the fact that few aboriginal Alaskans have achieved real economic gain because of the Native Claims Act.
Last March, the House passed an amendment, introduced by Rep. Don Young (R-Alaska), to the claims act that is intended to deal with the so-called 1991 issue. Basically, it would require shareholders who wanted to sell to offer their stock back to the corporations. It would also permit shareholders to issue new stock to native children born after 1971 who are not covered by the original act; exempt undeveloped native land from taxation, and protect that land from loss due to debt and bankruptcy. The amendment is identical to one that passed the House last year.
The bill was endorsed by native leaders and the Alaska Federation of Natives (AFN), of which Doyon Ltd.’s Thompson is co-chairman. But the natives dropped their support after changes were made by the Senate, which feared that the amendment might be interpreted as giving the natives tribal sovereignty over their land and affairs, thus putting them outside the jurisdiction of Congress and U.S. laws. Young insists that his bill deals solely with stock and land ownership, not sovereignity. The bill now is in the Senate Energy and Natural Resources Committee.
U.S. Sen. Ted Stevens, an Alaska Republican, said he thinks the bill can be passed this session, although he believes that a small, loud group of “sovereignity natives” wants to delay the legislation. “They literally want to create a series of states within a state, and we can not survive that,” Stevens said. “These are the same people who were against the 1971 claims act. The fact is, the vast majority of natives oppose sovereignity.”
Officials at AFN headquarters in Anchorage admit that enormous problems remain to be solved before the settlement issue is fully resolved. The actual transfer of public land to the natives, for instance, may not be completed for years because of bureaucratic red tape, the difficulty in finding rightful owners and the problems inherent in allocating unsurveyed land. Supporters of the legislation must also overcome opposition from the Reagan Administration, which is leery of any legislation telling any shareholders what they can or can not do with their stock.
Other indigenous groups throughout the world--including Hawaiians, aborigines in Australia, Indians in Canada and natives in Greenland--are closely following the process in Washington and Alaska, believing that it has significance for their own claims. Thus far, Congress has appeared keen to help the native corporations get back on their feet.
Under the new tax reform law, the native corporations can sell their accumulated tax losses, which they never use, to other profitable companies. The buyers use the losses to lower their taxes, then funnel part of the savings back to the native corporations. Another plum allows the native corporations to peg the cost of their timber for accounting purposes to the peak prices of the 1970s, thus taking a bookkeeping loss on profitable transactions.
“The 1991 legislation is essentially Congress’ first chance to show that the settlement was an honest settlement,” said Jim Benedetto, an AFN spokesman. “If the original act was merely a way to let the natives hang on to their land for an additional 20 years, after which time it would pass to non-native hands--well, I just don’t believe that was Congress’ intent in 1971.”
Although Doyon is usually spoken of as the most successful of the corporations, there are a handful of other success stories as well. Cook Inlet Region Inc. of Anchorage turns a tidy profit from its natural gas wells, and last month Bristol Bay Native Corp., helped by the “sale” of tax losses to an undisclosed corporation, reported that it had doubled its profits in fiscal 1986 and said its professionally managed stock portfolio had doubled in value.
“There’s been a lot of stone-throwing in Alaska at the native community about the corporations, but the structure was never in place to make them initially successful,” said William Bivin, general manager of the Bethel Native Corp., a village company with 1,759 shareholders and assets of $13 million, excluding 250,000 acres conservatively worth $50 an acre.
“What we’ve seen is that the native community has been yanked into the 20th Century without going through the steps we had to in the Lower 48. I think the jury is still out in assessing the success or failure of the corporation idea. But what has happened here isn’t much different than what would happen if you went into any moderately rural area in the United States, took the first 500 people you found on the street, handed them $5 million and said, ‘Here, you’re a corporation.’ ”
