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State: Huna Totem broke election law

Posted: Wednesday, January 31, 2001

In language harshly critical of Huna Totem Corp. for its treatment of dissident shareholders, state officials have ruled that the Native village corporation for Hoonah violated corporate election law in 1999.

The decision comes with proposed fines totaling $10,000 and could clear the way for a lawsuit that has been on hold in Superior Court.

Corporation President Peter Hocson said Tuesday he's not sure what his next move is. Huna Totem received the ruling Friday, which started the clock on a 15-day deadline for an administrative appeal.

Meanwhile, dissidents declared victory.

"Everybody has to be accountable for something," said Harlena Warford of Hoonah, president of the group Shareholders for Shareholders.

"My clients have been vindicated by this ruling so far," said the group's attorney, Richard Jameson of Anchorage.

The ruling from the Division of Banking, Securities and Corporations concerns a failed move in 1999 to recall the Huna Totem Board of Directors.

The underlying dispute concerned a controversial land swap with the U.S. Forest Service that is still pending in Congress. A majority of the board favored exchanging land immediately surrounding Hoonah for more remote land that could be logged without creating an eyesore. Dissidents objected to putting land with cultural and historical significance under control of a federal agency.

Along with the board recall, dissidents also tried to amend the articles of incorporation to prevent large land sales or transfers without the prior approval of two-thirds of shareholders.

Franklin T. Elder, the state administrator of securities, ruled that the management of Huna Totem violated the law by:

Failing to describe the proposed amendment in proxy solicitation materials.

Failing to provide a mechanism on the management proxy for voting yes or no on the recall and amendment.

Distributing a flyer saying two directors who supported the recall and amendment had signed the director's code of conduct only under protest, ignoring the fact that state law on fiduciary responsibilities held the directors to substantially the same standards, regardless, and thereby impugning their character.

Distributing a flyer saying no directors ever had voted against the land exchange, initially approved in 1997, while in fact three had voted to rescind it in 1998.

The tone of the ruling is harsh. Huna Totem's defense on the last point - that the motion to rescind the exchange was merely parliamentary, not substantive in nature - is described as "far-fetched and unbelievable." The flyer is called "intentionally false and misleading."

Hocson said an attorney is reviewing the ruling and hasn't come to any conclusions yet. But he said there are factual issues in dispute concerning what state law requires.

The flyer on the land exchange was issued because the three directors said at a shareholders meeting that they never had voted for the exchange, when in fact they initially did, Hocson said. "It was to set the record straight."

Hocson said it was notable that the state didn't overturn the election, in which the recall failed and Tilli Abbott, one of the dissident shareholders on the board, lost her seat.

But Vince Usera, senior securities examiner for the state and the drafter of the ruling, said such an extreme step would be extraordinary coming two years after the election.

Jameson, the dissidents' attorney, said the group might seek another recall election, saying the penalty imposed by the state isn't sufficient "for a rigged election." The Superior Court case, delayed last spring because a judge ruled that the dissidents hadn't exhausted their administrative options, now can go forward, he said.

Bill McAllister can be reached at billm@juneauempire.com.



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