Highway measure could affect St. Paul

 

               SAM BISHOP News-Miner Washington Bureau

 

               Monday, July 12, 2004 - WASHINGTON--As a select group of senators and

               members of Congress try to write a final version of a new national highway

               funding bill this summer, they will ponder two small sentences with potentially

               huge implications for the Native village corporation of St. Paul.

 

               One sentence would declare, as a matter of law, that the Tanadgusix Corp.

               owns an enormous old dry dock used for ship repair in Hawaii.

 

               The other sentence would terminate all related lawsuits, and there are

               several.

 

               At the root of all the disputes is one question: Did Tanadgusix officials dupe

               the government into giving them the dry dock by falsely promising they would

               move it out of Hawaii?

 

               Rep. Don Young, R-Alaska, inserted the sentences in the House version of the

               national highway bill to resolve the dispute in Tanadgusix's favor, according to

               those involved.

 

               The Senate version lacks similar language. This month, a conference

               committee of House and Senate members will begin writing a final version of

               the bill. The committee must decide whether Young's language stays or goes.

 

               The committee also might choose some other solution to the dispute, which

               has largely been driven by complaints from a competing dry dock company in

               Hawaii.

 

               Sen. Ted Stevens, R-Alaska, said Thursday he is trying to find a compromise

               that would send the dry dock to Samoa, answering the objections from the

               Hawaiian competitor.

 

               The fight over the dry dock is progressing on other fronts as well.

 

               In Washington, D.C., last month, the General Services Administration

               proposed to bar a Tanadgusix subsidiary from federal contracting work

               because of the alleged fraud.

 

               The GSA maintains that Tanadgusix officials deceived the agency into thinking

               the dry dock would be moved to Alaska when in fact the company planned to

               keep it in Hawaii all along.

 

               Tom Schlosser, attorney for Tanadgusix, said Tuesday that the GSA

               debarment is based on a gross misreading of the facts. But if it sticks, he

               said, the debarment would would have one clear result for Tanadgusix, which

               earns about 50 percent of its revenue from government contracts to clean up

               oil spills and military bombing ranges.

 

               "It would destroy them," Schlosser said.

 

               The chief executive of the competing Hawaiian company, Pacific Shipyards

               International in Honolulu, has little sympathy, though. "It's just a big scam,"

               said Bill Clifford. "They knew it had to be used in the state of Alaska."

 

               Tanadgusix was formed in 1973, with money and land provided by Congress

               through the Alaska Native Claims Settlement Act. Its shareholders are the

               Native residents of St. Paul, a village of 700 people on the remote Bering Sea

               island of the same name.

 

               Most islanders used to work for the federal government harvesting fur seals,

               but that was shut down in 1985 and the corporation is the main economic

               enterprise on the island now. It owns a hotel, an eco-tourism business, part

               of a seafood processing business, the wind-diesel power plant and even a

               cable TV and Internet provider. But, with limited local options and the crash

               of opilio crab stocks five years ago, the corporation has invested elsewhere

               to create revenue and jobs for shareholders.

 

               The Hawaii dry dock looked promising, corporation officials decided in late

               2000.

 

               Alaska Native corporations are eligible to receive certain property for free

               through the federal surplus program. The government had decided it didn't

               want the Navy dry dock, called the Ex-Competent, anymore. The floating

               dock, the length of almost two football fields, was built in 1944 and required

               significant cleanup and repairs.

 

               Tanadgusix officials tried a two-track approach, one through the federal Small

               Business Administration and one through the GSA. The SBA balked over

               procedural and liability issues, but the GSA agreed to the deal.

 

               In January 2001, Tanadgusix chief executive Ron Philemonoff signed a

               "transfer document" that promised the corporation would not "sell, trade,

               lease, lend, bail, cannibalize, encumber or otherwise dispose of the property,

               or remove it permanently for use outside the state."

 

               He also wrote a "letter of intent" to the Alaska state official who handled

               surplus property on behalf of GSA, saying the company planned to put the dry

               dock to use immediately to help shareholders. He attached a letter from

               Marisco Ltd., another Hawaii shipyard owner, that Philemonoff said would

               rehabilitate the dry dock so it could be "safely transported any long

               distances."

 

               Neither the transfer agreement nor the letter mentions anything about moving

               the dry dock to Alaska, though.

 

               Schlosser said that's because Tanadgusix never planned to do so and never

               tried to dupe anyone into thinking otherwise.

 

               "It was perfectly clear to GSA's officers," Schlosser said. "St. Paul Island isn't

               really in the shipping lanes."

 

               Schlosser, in recent legal documents, notes that another section of the

               transfer document says the dry dock is to be conveyed "as is, where is" and

               "delivery is made at the present location of the property." So the contract

               clearly allows and even requires the dry dock to stay in Hawaii, Schlosser

               said.

 

               The reference to safely transporting the dry dock over a long distance was

               not made to give agencies the false impression that it would be moved from

               Hawaii, according to a court declaration from Kevin Kennedy, Tanadgusix's

               director of marine operations.

 

               "I drafted the phrase 'transported long distances' ... with the intent of

               keeping TDX's future options for using the Ex-Competent," Kennedy said. "We

               did not want the dry dock if we could never move it out of Hawaii, such as to

               California or elsewhere if the Hawaiian market went sour, or Marisco went

               bankrupt, or our arrangement with Marisco fell apart."

 

               Kennedy acknowledged that he initially was concerned about whether GSA

               would require the dry dock to be moved to Alaska. But state officials actually

               asked him not to bring it to Alaska, saying the market wasn't large enough to

               support it.

 

               Kennedy also said he found that GSA doesn't actually have any regulations

               requiring "in-state" use. The law just requires that a donee follow its letter of

               intent. And GSA has "several times allowed donated property to be used

               outside the state of the transferring state agency for surplus property,"

               Kennedy said.

 

               The state officials handling the deal, Ken Browning and Jim Jobkar, "allayed

               my concern by stating that the same issue had arisen before with other

               transfers and had been successfully resolved," Kennedy said.

 

               The GSA and U.S. Justice Department didn't accept those arguments and

               explanations after it became apparent that Tanadgusix wasn't planning to

               move the dry dock out of Hawaii. Neither did U.S. District Court Judge Ralph

               Beistline of Anchorage.

 

               He ruled by summary judgment in late 2002 that Tanadgusix had violated its

               transfer agreement with the federal government by keeping the dry dock in

               Hawaii.

 

               Tanadgusix appealed that decision to the U.S. 9th Circuit Court of Appeals. A

               three-judge panel, including Judge Andrew Kleinfeld of Fairbanks, heard

               arguments in the case last week in Anchorage.

 

               In a separate case, the Justice Department is seeking $15 million in damages

               from Tanadgusix under the False Claims Act.

 

               The department alleges that Tanadgusix signed an agreement with Marisco

               several months before obtaining the dry dock from the GSA, a clear violation

               of the transfer document.

 

               Philemonoff and Marisco's president, Fred Anawati, signed a letter in which

               Marisco agreed to pay Tanadgusix $250,000 to "facilitate its interest" in using

               the dry dock, the Justice Department said in a brief. Tanadgusix promised to

               leave it at Marisco's shipyard for at least five years, according to the brief.

 

               "Tanadgusix and Marisco did not inform GSA or the (state) of the October

               agreement because both Mr. Anawati and Mr. Philemonoff knew that, if the

               government were aware of the October agreement, Tanadgusix would not

               receive the benefit of using and operating the Ex-Competent at its shipyard,"

               the Justice Department brief states.

 

               Philemonoff, in an interview, said that is untrue. The alleged agreement with

               Marisco was not a lease and didn't encumber the dry dock, he said. "We

               drafted it as a letter of understanding," he said. It was an "agreement to

               agree at a future date."

 

               At the time the letter was signed, Tanadgusix didn't even know whether it

               would get the dry dock, he said.

 

               He also said Tanadgusix was never convinced GSA's policy would require the

               dry dock to be moved.

 

               "That's all a bunch of crap," said Clifford, the Pacific Shipyards CEO in

               Honolulu, who admitted he gets "emotional" when talking about the issue.

 

               "It's very clear that (the dry dock) is to be used for economic development in

               Alaska," he said. In addition, he said, the dry dock wasn't supposed to be

               leased to Marisco, but "there was a lease agreement."

 

               He said Tanadgusix officials can't blame the Alaska officials, Browning and

               Jobkar, for misleading them about GSA's policies.

 

               "The Alaska Native corporations certainly know how to use the surplus

               property program," he said. "They knew (the dry dock) had to be used in the

               state of Alaska."

 

               Clifford said the GSA's in-state policy is a reasonable way to ensure that

               surplus property given away for free actually benefits the people who have

               been deemed needy enough to deserve it--in this case, the people of St.

               Paul.

 

               "The people of St. Paul haven't seen any money," he said. "The only people

               who are making money right now are lawyers."

 

               Sen. Dan Inouye, D-Hawaii, wrote to the Senate chairman of the highway bill

               conference committee in late April taking Pacific Shipyard's side and objecting

               to Young's proposed solution.

 

               "Aside from undermining and interfering with ongoing legal proceedings, (the

               House language) establishes bad legislative precedent that undermines the

               respect for the rule of law in our legislative and legal system," Inouye said.

 

               Calls to a Young spokesman last week were not returned.

 

               Stevens, who is good friends with Inouye, said they are now looking at a

               request from "some people in Samoa who want a dry dock because of the

               increased activity out there from the fishing fleet."

 

               Inouye "sort of looks after the interests of Samoa in the Senate," Stevens

               said.

 

               The proposal could "derive some value from the dry dock that will satisfy part

               of the claims of the Hawaiians and at the same time relieve the Alaskans of

               the current liabilities they have," he said.

 

               Philemonoff, the Tanadgusix CEO, said his company has more than $1 million

               invested in the repair and cleanup of the dry dock.

 

               If it can't obtain title, he said, he could envision a compromise where the

               corporation's interest is bought out and the dry dock is sent somewhere else.

 

               And where would that be? Not Alaska and not Hawaii, he said.

 

               Washington, D.C., reporter Sam Bishop can be reached at

               sbishop@newsminer.com or (202) 662-8721.