Aleut: A problem of geography

Few corporations would choose to set up operations in a remote string of wind-swept islands, but that's the land The Aleut. Corp. received in the Alaska Native Claims Settlement Act

Posted: Sunday, January 24, 1999

The Aleut Corp. is a business at odds with its geography.

After all, few entrepreneurs would choose to set up a company based in a chain of more than 200 remote islands, where winds can whip up to 100 mph and halt all travel.

 

Stark contrast: The Aleut Corp. has its main offices in Anchorage, where the commercial opportunities are. But distance from its region makes it difficult for Aleutian Island shareholders to stay in touch with their regional Native corporation.

MICHAEL PENN / THE JUNEAU EMPIRE

Few business owners would launch companies where virtually the only resources are reindeer, sea birds and volcanic gravel.

But that is what The Aleut Corp. has had to cope with since the Alaska Native Claims Settlement Act created it as the regional corporation for the Aleutian and Pribilof islands.

Historically, the Aleut people were expert fishermen and hunters of sea mammals, with rich fisheries teeming off their rocky shores. But the settlement act was about land, not the sea.

``In the Aleutian region and the Pribilofs, we like to say our natural resources - our timber, our timber rights - are under water,'' said Ron Philemonoff, a former board member for The Aleut Corp. in Anchorage. ``It was the fish.

``Our culture was based on the fish. We didn't get our cultural natural resources like Southeasterners did, so we got kind of screwed.''

The Aleut Corp. was until recently one of the poorest financial performers among Alaska's regional Native corporations, according to economist Steve Colt of the Institute of Social and Economic Research in Anchorage.

``But if you looked at how hard it is to operate a business out there and how small they are, they've actually done a very good job,'' Colt said.

After years of annual reports blemished with red ink, the corporation recently turned itself around, earning up to $4 million in profits annually for the last several years.

In 1998 its revenues grew by more than 79 percent, more than any other of the top Alaska-based companies, according to the Alaska Business Monthly. The magazine ranked The Aleut Corp. as the 15th biggest producer of revenue among companies based in the state.

The extremely rapid growth came about through one of the regional corporation's subsidiaries, Space Mark, which became the caretaker for the U.S. Navy base at Adak in the western Aleutians, said Elary Gromoff Jr., president of The Aleut Corporation.

In its early days, the corporation tried to tap into the lucrative Bering Sea fisheries that lay offshore. But the cost of maintaining boats outweighed the profits, and the corporation pulled out of the fishing industry in 1986 after it lost millions of dollars and a 120-foot boat at sea.

``It's kind of a sore subject with some of the shareholders,'' Gromoff said.

Along with early financial losses came a major upheaval in the board of directors in the late 1970s. Shareholders filed a lawsuit and claimed corporate President Carl Moses, now a state representative, wrote a misleading letter to shareholders shortly before the 1977 board election. They won their suit and the Superior Court in Anchorage called for new board elections.

The new directors forced Moses to resign, according to Larry Merculieff, who was involved in the lawsuit and was elected chairman of the new board. But Moses recently said he resigned by his own choice because he was fed up with the turmoil within the corporation.

The new board pulled the company out of questionable investments and wrote off several others. The corporation had been losing $200,000 to $2.6 million a year, but under new direction began seeing annual profits of several hundred thousand dollars.

Now The Aleut Corp. has invested much of its money in real estate, owning four Anchorage office buildings. But its biggest moneymaker is Space Mark, which is based in Denver and has 15 contracts to maintain military bases in six states and Antarctica.

Alice Petrivelli, former chairman and president, views the corporation's move into government-service contracts as one of its high points.

Yet for most Aleuts who live in the region, the corporation is but a distant landlord, its headquarters in a mirrored glass building in Anchorage, more than 500 miles away from the worn wooden buildings of Aleut villages.

Trying to run a business out of remote islands in the Bering Sea just isn't practical, company officials said.

``The further you get from Anchorage, the more expensive it gets,'' Philemonoff said.

Yet another problem is bringing people together for annual meetings and other gatherings. In 1997, The Aleut Corp. held a two-day summit so shareholders could create a unified front on the vital issue of subsistence hunting and fishing. The cost of the summit, attended by 35 people, was $20,000, most of which was for air fare.

``You asked what's the hardest thing,'' Gromoff said at corporate headquarters. ``It's just to gather so we can all sit down together. It may take people two days to get into Anchorage.''

The corporation provides few jobs in the islands, but Gromoff wants to change that. The Aleut Corp. is working on a land exchange with the U.S. government that would allow it to take over shut-down of the U.S. Navy base at Adak, which had once been an Aleut village. The $3 billion base includes a port, an airport, a hospital, a fuel facility and more than 1,000 homes, with schools, a theater and a ski lodge.

The plan could provide 400 to 600 jobs within the first five to 10 years, bringing a number of regional corporation jobs to the Aleutians for the first time. Hiring as many shareholders as possible would also mean resettling Adak as an Aleut community.

``My goal is to hire people who want to make Adak their home,'' Gromoff said.

However the people of Atka, about 90 miles east of Adak, are also trying to bring more income to their village by developing a port.

Atka worked for almost 20 years to build a new dock to attract boats, but it would have a tough time competing with Adak, with its two runways and tanks for 22 million gallons of fuel, said Mark Snigaroff, president of Atxam Corp., Atka's village corporation.

``I personally feel it's in direct competition with Atka,'' Snigaroff said.

Gromoff is aware of villagers' worries, and said that's one reason The Aleut Corp. has avoided developing businesses in the Aleutians and Pribilofs.

``I don't want to compete with the village corporations,'' Gromoff said. ``I don't want to be the big guy stomping on their corporation.''

Yet, Adak is the biggest new project the corporation is working on and Gromoff hopes that one day it will be a major source of income for the corporation.

``I would say it's going to be the pit stop for all fishing vessels in the western Aleutians,'' Gromoff said. ``It's closest to the foreign fishing grounds so we think we have the potential to provide all the services out there.''





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