Kake land swap bill heads to Clinton

Posted: Monday, October 09, 2000

A bill headed to the desk of President Clinton is key to the economic revival of Kake Tribal Corp., which filed for bankruptcy a year ago today.

The bill authorizes a land swap with the U.S. Forest Service, for which the Native village corporation on Kupreanof Island would receive $5 million in cash.

"We hope we're on the president's desk this week," said Tom Findley of Juneau, attorney for the corporation.

The actual appropriation is awaiting action in a House-Senate conference committee on the budget after being approved by each house separately, Findley said.

Kake Tribal probably will ask for an additional appropriation next year, but $5 million was what Alaska Sen. Ted Stevens thought could be accomplished politically this year, Findley said.

On Oct. 9, 1999, Kake Tribal became the sixth Native regional or village corporation to file for protection under Chapter 11 of the federal bankruptcy code.

Explanations for the corporation's insolvency differ. Findley says badly timed investments in the fishing industry led to losses of more than half a million dollars for five consecutive years.

But Fred Triem of Petersburg, attorney for some dissident shareholders, contends the corporation board broke state law by paying out $36.9 million in dividends in the mid-1990s.

"If they had saved some of that money, they wouldn't be in the hole," he said.

Board Chairman Gordon Jackson has blamed Triem for bringing lawsuits against the corporation that have led to millions of dollars in outstanding judgments. The suits, which alleged discrimination in the offering of insurance benefits, left Kake Tribal with $6.5 million in debt, or more than 40 percent of the total owed by the corporation and its subsidiaries.

But all parties to the case agree the land swap is the best bet for Kake Tribal now. It would give the corporation some cash flow from which to propose a reorganization plan to the bankruptcy court, which it must do by Nov. 17.

The bill awaiting Clinton's signature requires Kake Tribal to give up about 2,500 acres in the Gunnuk Creek watershed, which is the main water supply for the city of Kake, as well as protect critical habitat for the Gunnuk Creek hatchery. Some 1,430 acres of that land will go to the city of Kake. Another 1,127 will be given under terms of a conservation easement to be protected in the future. In return, the corporation will get 1,389 acres of Forest Service timberland, as well as the cash.

"It would be wonderful," Triem said. "There will be no solvency without the legislation."

"I think we're on the edge of the most significant event in the case," said Anchorage attorney Spencer Sneed, who represents a committee of Kake Tribal's major unsecured creditors. "The committee certainly has focused on this as what is really going to be the economic basis of the reorganization."

David Bundy of Anchorage, Kake Tribal's attorney in the bankruptcy action, said most creditors appear to be patient and realistic about the corporation's position. "Typically, a bankruptcy case is negotiated out."

Kake Tribal must file a disclosure statement with the court that lays out the financial basis for the corporation's reorganization plan. The plan will propose how much the corporation will pay creditors over a period of time, either in dollar amounts or as a percentage of profits, Bundy said. Eventually, creditors will vote on the corporation's proposed plan.

Some legal issues are still unresolved.

For example, there is a conflict between the Alaska Native Claims Settlement Act and federal bankruptcy law. Bundy contends none of the 23,000 acres of land conveyed to Kake Tribal under ANCSA can be considered assets in the bankruptcy case, unless pledged as collateral. But Triem says land that has been developed comes under the court's jurisdiction. The issue never has been litigated.

Meanwhile, Kake Tribal was having a satisfactory year financially until the dam in Kake broke, Bundy said. "I think it's essentially been a break-even operation made some money but not a lot of money." Loss of the dam, which interrupted the municipal water supply, hurt the corporation's fish-processing operation at the peak of the season, he said.

A separate measure, passed by Congress but vetoed by Clinton, would provide $7 million to rebuild Kake's dam.

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