Press ReleaseJan 9, 2013
GAO Report Finds Need for Better Financial Reporting by Alaska Native Corporations
Contact: Eben Burnham-Snyder, Rep. Ed Markey, 202-225-6065
Rep. Markey to Introduce Legislation Protecting ANC shareholders
WASHINGTON (January 9, 2013) -- A new Government Accountability Office report raises concerns about the quality of financial information provided to shareholders by Alaska Native Corporations (ANCs), which are exempt from federal securities laws. In response, Rep. Edward J. Markey (D-Mass.), who requested the report, plans to introduce legislation that would enhance protections for the Alaska Native shareholders.
As part of its evaluation, GAO asked the Securities and Exchange Commission (SEC) to review ANC financial reports. The SEC found that most ANC reports did not fully explain “material uncertainties reasonably likely to affect future trends and prospects,” as required of corporate financial reports filed with the SEC. Further, the SEC was unable to determine what accounting standards were used by ANCs in preparing their financial statements. The SEC cautioned that since its review was limited, it was unclear whether there were in fact “deficiencies or noncompliant accounting or disclosures.”
Current law exempts ANCs from complying with the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940, as well as subsequent amendments to those laws. Instead, ANCs must provide an annual report with “substantially all the information” that a corporation registered with the SEC must provide to shareholders. The law, however, does not define what “substantially all” means.
The GAO also found that financial reporting by ANCs is largely unmonitored. Current law does not authorize any federal entity to monitor the annual financial reports of ANCs, and GAO found that there is limited oversight at the state level.
“The law shouldn’t treat Alaska Natives as second-class shareholders,” said Markey, the top Democrat on the Natural Resources Committee, which has jurisdiction over Alaska Native affairs. “Indeed, transparency is uniquely important for Alaska Native Corporations because they were created to serve and benefit the Alaska Native people, and because Alaska Native shareholders cannot sell their shares like shareholders in other corporations can. That is why I will be introducing legislation to ensure Alaska Native Corporations are operating in the best interests of their Alaska Native shareholders.”
In line with GAO’s findings, Markey’s forthcoming legislation will increase transparency in ANC financial reporting by clarifying what must be reported and authorize shareholder recourse in cases of corporate abuses, including fraudulent financial reporting and false or misleading shareholder solicitations.
The Alaska Native Claims Settlement Act of 1971 (ANCSA) established Alaska Native Corporations in resolving Alaska Native claims to over 360 million acres of land. Alaska Natives gave up those claims and in exchange Congress awarded ANCs about 44 million acres of land, nearly $1 billion, and rights to Alaska state oil royalties. Each Alaska Native living in Alaska at the time of the settlement was entitled to shares in one of 12 regional corporations as well as a smaller village corporation, of which there are around 200. The 13th regional corporation was added four years later to include Alaska Natives living outside of Alaska. GAO’s evaluation focused on the 13 regional corporations.
GAO’s report (GAO-13-121) is available here.