The history of bankruptcy proceedings involving Native corporations suggests that Kake Tribal will ultimately survive.
No Native corporation has ever been dissolved through bankruptcy.
However, more than half a dozen Native corporations have filed to reorganize their finances under Chapter 11 of the bankruptcy code. These include the 13th Regional Corp., Haida village corporation on Prince of Wales Island, Bering Straits Regional Corp., Chugach Alaska Corp. in Southcentral, and Tigara village corporation, now Tikigaq, at Point Hope, north of Kotzebue. Haida filed in 1985, Chugach in 1991 and the others in 1986.
All of the corporations emerged from the bankruptcies at least technically intact.
``These are all turn-arounds, which is good,'' said David Bundy, an Anchorage attorney who has been involved with all of the Chapter 11 reorganizations to date, except for the 13th Regional Corp.
Bundy, who represented Kake Tribal at a hearing in Juneau last month, emphasized that the bankruptcy code is geared toward eventual compromises between creditors and corporations, rather than drastic measures that would lead to liquidating a company.
The unique nature of Native corporations is an additional guarantee against liquidation, he said.
``There's no rational alternative to reorganizing it,'' Bundy said. ``They have responsibilities you just can't get rid of. They have these long-term trust relationships with their shareholders.''
The profit motive that Congress saw for Native corporations in a capitalist economy doesn't fit neatly with the broader concerns of the corporations, according to Bundy in a 1989 Alaska Law Review article ``When Worlds Collide: Alaska Native Corporations and the Bankruptcy Code.''
While Native corporations were designed to make a profit, they were also intended to improve the social and economic welfare of their shareholders.
Therefore, the usual capitalist principle that uncompetitive businesses should die is ``a difficult and perhaps callous doctrine to apply to the Native corporations,'' Bundy wrote.
And that's where ANCSA conflicts with Chapter 11: The bankruptcy code puts creditors' claims ahead of protecting shareholders' stock; ANCSA, however, generally protects shareholders' stock and ANCSA land from creditors' claims, according to Bundy.
To date, those involved in Native corporation bankruptcies have managed to work out compromises around this contradiction.
Chugach filed under Chapter 11 in March 1991, completed its reorganization plan in July 1992, and paid off the last unsecured creditor of the parent corporation in 1998, said corporation attorney Peter Giannini.
Creditors of Chugach subsidiaries eventually will get 70 to 80 cents on the dollar, or complete repayment if litigation over the Exxon Valdez oil spill - a factor in the bankruptcy - is satisfactorily resolved, he said.
The Chapter 11 experience was a success of negotiation over litigation, Giannini said: Creditors got more than they would have through protracted litigation, and now ``the company's doing very well.'' For shareholders, there is the possibility of dividends being resumed in two years, he said.
In past bankruptcy cases, Native corporations have found needed cash in a couple of ways.
Bering Straits, Tigara, the 13th Regional and Chugach sold net operating losses to other companies for tax write-offs. Haida Corp. got several million dollars in cash through land sales to the federal government, under special congressional action in 1986-87.