Some shareholders of Huna Totem Corp. are pressing a lawsuit in Juneau Superior Court this week that could allow shareholders to opt out of a $42 million trust.
Shares in the trust are worth $350 each. Shareholders with the typical 100 shares would get $35,000 if they could leave the trust.
Attorneys for the trust and for Huna Totem - the for-profit Native corporation for Hoonah, with 1,191 shareholders - said the trust has been beneficial to shareholders.
The trust was established in 1994 using proceeds from selling losses in the logging industry to another corporation. The Huna Totem directors also are the trustees of the trust.
The trust regularly pays out 60 percent of its interest to the corporation's shareholders, while reinvesting 40 percent of the interest to inflation-proof it, shareholders said. In 2000 the trust also made a $50-per-share payout from the principal.
But shareholders who support the lawsuit say they believed they would be able to vote to change or end the trust five years after it was formed. Some of them would rather have a large lump-sum payout than much smaller dividends three times a year.
Joyce Skaflestad, a shareholder who supports the plaintiffs, said some shareholders are ill and could use the money. She said one shareholder was homeless in Juneau.
"I'm thinking if they have (millions of dollars) in a bank somewhere, maybe they should let her improve her living," she said in an interview.
The plaintiffs argue they were told by Huna Totem, when they voted to approve the trust in 1994, that they could vote on it again in five years, said Fred Triem, the plaintiff's attorney, in his opening statement Monday. That belief was important to them in making their decision, he said.
Triem said Huna Totem may be liable for failing to make a complete disclosure of the trust's terms in 1994. And the corporation may be liable for not offering shareholders a full range of options in 1999-2000, when the five-year review occurred.
Triem said the trust should be ended by the court if it finds Huna Totem liable for its actions in 1994. If the court finds the corporation at fault for the procedure during the five-year review, in 2000, it could order a vote about continuing the trust, or let shareholders opt out of the trust if they want to, he said.
The trial, which does not have a jury, is being heard by Judge Patricia Collins.
Barbara Nault, attorney for Huna Totem, told Collins the disaffected shareholders "heard what they wanted to hear, and believed what they wanted to believe."
Huna Totem provided documents to shareholders that said the trust was perpetual and that outlined the procedures for the five-year review, she said. More than 80 percent of the shareholders, holding most of the shares, approved the proposed trust in 1994, she said.
"There's no evidence that the shareholders did not understand, or were told to disregard" the information in the proxy statement or the trust document, Nault said.
Under the trust agreement, the trustees would make a recommendation on the trust after five years, the defense says. Shareholders would vote on that recommendation. That's what happened in 2000, when shareholders approved a recommendation to pay out $50 a share from the trust.
Bruce Gagnon, attorney for the trust, told Collins that ending the trust would trample the rights of the other shareholders.
"It has been a very beneficial thing to all the shareholders," he said.
Eric Fry can be reached at email@example.com.
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