After Stevens, Questions for the Alaska Native Corporations

Published: October 29, 2008
The Alaska Native corporations have had Senator Ted Stevens to thank nearly every step of the way.

In 1971, a few years after he was first elected to the Senate, Mr. Stevens helped write the Alaska Native Claims Settlement Act. Also known as the “Billion Dollar Deal,” the act established more than 200 corporations to manage almost 45 million acres and gave $962 million to Alaska Natives in return for their ceding of all aboriginal land rights.

When the Alaska Native corporations struggled in their early years as they tried to turn people who had survived on fishing and hunting into business managers and to teach thousands of villagers to call themselves shareholders, Senator Stevens was there, too.

He helped corporations with financial difficulties by persuading Congress to approve a provision in the 1986 Tax Reform Act allowing the corporations to sell their accumulated tax losses to profitable companies seeking tax write-offs.

That same year, Senator Stevens introduced legislation that allowed Alaska Native corporations to participate in a Small Business Administration 8(a) contracting program, a provision that has proven lucrative to many of them.

And just a month ago, in the wake of questions that some of the corporations were misusing the contracting program, he successfully pushed Congress to remove a provision from the 2009 Defense Authorization Act that would have limited their access.

After his conviction on Monday on charges he violated federal ethics laws by failing to report tens of thousands of dollars in gifts and services he had received from friends, Senator Stevens’s future in Congress is uncertain.

But Louis A. Thompson, 72, who has run one of the corporations, Kavilco Inc., for 36 years, said the companies had grown into sophisticated operations that could stand on their own. “Senator Stevens was very helpful early on and not just to Alaska Native corporations, to all Alaskans,” he said. “But times have changed.”

Indeed, the Alaska Native corporations have made strides since the early days, when they built seafood plants before negotiating for fish deliveries and constructed hotels in remote villages that had never seen tourists. Today, they consistently rank among state’s largest businesses. The small-business 8(a) contracting program has been important to that success.

As of May, 187 Alaska Native-owned companies were participating in the 8(a) program, according to a report by the Small Business Administration’s Office of Inspector General. From 2000 to 2006, Alaska Native corporations won nearly $13 billion in federal contracts.

Maver E. Carey, 41, the leader of one of those corporations, sees the federal contracts as the future of her business. And other small corporations are looking to her to help them navigate the complicated and expensive path to federal business.

Her enterprise, the Kuskokwim Corporation, represents Aniak and nine other remote Alaska communities. Its responsibilities cover a geographic area larger than New England, but without cellphone towers, major road systems or many jobs. “In Kalskag, one of our largest villages, there are 80 homes and 40 of them don’t have running water,” Ms. Carey said.

Kuskokwim’s 2,903 shareholders want regular corporate dividends, and many also seek educational and employment opportunities from the corporation.

Kuskokwim was founded in 1977 when 10 village corporations decided that they did not have the staff or resources to build businesses alone. The merged entity formed a headquarters in Anchorage and eked out dividends primarily through investments in Alaska real estate and a conservative portfolio of stocks and bonds.

Ms. Carey, whose maternal grandparents are Yupik Eskimo and Athabascan Indian, turned to Kuskokwim in 1994 after earning a college degree, working for an engineering firm and being laid off. “My village corporation offered me $9 an hour and I took it thinking I’d continue to look for a real job,” she said. By 2003, after she had worked in every corporate department, the board asked her to become the chief executive.

She pushed diversification, with a goal of building Kuskokwim’s shareholder equity to $100 million by 2015. Last year, it topped $18 million, up from $14 million in 2006. In 2005, the company started TKC Development Inc. to focus on federal contracting. TKC subsidiaries have won work from the United States Navy and the Army Corps of Engineers.

Last year, Ms. Carey started an Alaska Native village corporation association. Her inspiration came from conversations with other chief executives facing challenges similar to her own. A membership drive under way has registered about 50 Native corporation executives.

Their goal is to be as successful as the Afognak Native Corporation, one of Alaska’s largest businesses. Afognak is owned by 700 shareholders descended from the Alutiiq people of the Kodiak Archipelago. In 2006, its profits reached $18.8 million on revenue of $537.9 million, the latest figures available. That year, each shareholder received a dividend payment of $21,688. Afognak employs 5,000 people globally, and about 50 of them are shareholders.

Afognak is now run by a non-native chief executive with significant government experience. It won the first of its major contracts in 2000, when it secured a deal to operate Kirtland Air Force Base in New Mexico. In recent years, it has won a contract to build a brigade combat team complex worth more than $100 million at Fort Bragg, N.C., and another worth more than $50 million to renovate the United States Embassy in São Paulo.

Still, there have been questions about the 8(a) contracts that have gone to Afognak and other Alaska Native companies. A 2006 study by the federal Government Accountability Office called for better S.B.A. supervision of Alaska Native corporations that hold 8(a) contracts. The agency’s inspector general is currently conducting an audit of S.B.A. oversight of 10 to 15 of the largest Alaska Native corporations engaged in federal contracting.

In August, it found that two companies, Goldbelt Raven L.L.C., owned by Goldbelt Inc. of Juneau, and APM L.L.C., a subsidiary of the Cape Fox Corporation of Ketchikan, violated terms of the contracting program by entering into agreements that resulted in millions of dollars in 8(a) revenues being paid to companies owned by non-native managers. The administration suspended them from the program and moved to end their eligibility. Both companies are appealing the move, according to officials representing Goldbelt and APM.

Steve Colt, the interim director at the Institute of Social and Economic Research at University of Alaska, who has studied Alaska Native corporations, said that many of the corporations struggled to stay afloat in their first two decades of operations and that Mr. Stevens and the rest of the Alaska delegation worked hard to keep them in business.

“If you look at the historical record, there were lots of incidents of Stevens being very helpful to Alaska Native corporations,” Mr. Colt said. “But I suspect that the number of assists has decreased over time.” He predicted that whoever holds the United States Senate seat for Alaska in the future will fight for legislation that protects Alaska Native corporations because they now have a major impact on the state’s economy.