by Jennifer LaFleur and Michael Grabell ProPublica
Revenues of Alaska Native Corporations that are major federal contractors have grown much faster than profits and dividends they have paid to native shareholders, according to an analysis of financial data compiled by ProPublica.
Seventeen of the highest-grossing ANCs saw revenues rise 82 percent from 2005 through 2009, while profits increased just 14 percent, the analysis shows. During this period, most native shareholders received less than $500 a year in dividends from the corporations.
The findings provide evidence for one of the major criticisms of ANCs: that non-native consultants and subcontractors hired by the corporations reap large sums from the contracts for themselves, leaving little for the native shareholders the program was intended to help.
Under a series of special rules, ANCs can get no-bid contracts of unlimited size. The companies often subcontract with big, non-native companies who perform much of the work.
ProPublica's analysis is based on annual reports and other documents from the ANCs, many of which are filed only on paper in a tiny office in Anchorage. While the corporations have been around for decades, their finances have been difficult to track.
ANCs are exempt from U.S. Securities and Exchange Commission reporting rules, and only those with at least 500 shareholders are required to file annual reports with the state of Alaska.
ProPublica has created an online archive of ANC annual reports for every regional corporation and some of the largest village corporations, dating back, in some cases, to 2000.
ANCs were created by Congress in 1971 to settle land claims and smooth a path for an oil pipeline from the North Slope. The law promised new jobs and fresh economic opportunities for Alaska natives living in poverty and isolation.
ANCs' unique status, however, has come under renewed scrutiny following years of government audits and congressional investigations.
Sen. Claire McCaskill, D-Mo., and Rep. Bennie Thompson, D-Miss., this fall introduced bills that would strip ANCs of their exemption from contract size limits and their ability to pass work through to large non-native contractors.
In 2009, ANCs received $5.7 billion in contracts through the Small Business Administration's minority contracting program. That represents more than one-fifth of the total for all minority firms in the program, even though there are only 100,000 Alaska natives in the United States.
The Native American Contractors Association, which represents ANCs, declined to comment on ProPublica's analysis of profits and revenue. Sarah Lukin, the group's executive director, said looking at dividends alone doesn't give a complete picture because ANCs provide other benefits, such as contributing to cultural programs and advocating for subsistence rights.
An investigation by the Senate Subcommittee on Contracting Oversight in 2009 said the average Alaska native receives $615 a year in dividends, scholarships and other ANC programs as a result of the contracts.
ProPublica's analysis of the financial reports for major ANC contractors found wide variations in revenues and dividends paid to shareholders. At NANA Regional Corp., in northwest Alaska, for example, dividends tripled to $12 a share from 2005 to 2009.
By contrast, Cape Fox Corp., near Ketchikan, saw revenues rise from $8 million to more than $200 million over a five-year period through 2008, yet the $20-per-share dividend barely budged as consultants took millions in fees, bought condos and put family members on the payroll, according to lawsuits, audits and a criminal investigation.
In a few cases, ANCs with small profit margins still netted big payouts. Afognak, in Kodiak, earned a 2 percent profit on $766 million in revenue in 2009. But the typical shareholder received $24,000, the highest of the ANCs whose reports are public.
Afognak has only 750 shareholders, however, and is more an exception than the rule. Of the several dozen ANCs involved in contracting, ProPublica could confirm only one other, Chenega Corp., with 170 shareholders, that paid five-figure dividends to a typical shareholder last year.
"It's clear that this program is broken," McCaskill said in a statement to ProPublica. "The program exists to help Alaska natives, but instead they have resulted in lucrative no-bid contracts that have enriched many, but not Alaska natives."
McCaskill’s bill faces resistance from ANC supporters, such as Sen. Lisa Murkowski, R-Alaska. ANCs spent $1.3 million supporting Murkowski’s successful re-election campaign, according to federal campaign reports.
Murkowski said in a statement that abuses are not widespread.
"We in Alaska have watched the evolution of our Alaska Native Corporations over the past 38 years and know the great progress that has been made in terms of jobs, scholarships and important investments in revitalizing our native cultures," she said.
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