Shareholders to meet Saturday

Rivalry riles CIRI meeting

Posted: Friday, April 26, 2002

Is Cook Inlet Region Inc. healthier than ever? Or is it flirting with disaster?

The state's second-largest Native corporation, with significant ties to the Kenai Peninsula, CIRI will hold a shareholder information meeting Saturday in Kenai. At issue are questions about finances, management philosophy and the upcoming, hotly contested election for five seats on the board of directors.

"This is probably going to be a pretty hot meeting," said Mary Ann Mills of Sterling.

Her brother, Britton Crosley, is one of the candidates backed by a group calling itself the Alliance for the Future of CIRI and challenging the current corporate leadership.

The contest is causing an uproar among CIRI shareholders, who include 822 Kenai Peninsula Borough residents.

"I've had a lot of calls from shareholders. They seem really confused," Mills said.

Leading the challenge is Roy Huhndorf, former longtime CIRI president, chief executive officer and board chairman. Huhndorf has aligned himself with his former rival, Bob Rude, and is heading a slate of five Alliance candidates. Although shareholders have criticized CIRI in the past, this is the first time an opposition has organized with such impressive credentials and insider knowledge of the company.

The Alliance is charging current CIRI president and CEO Carl Marrs with mismanagement and strong-arm tactics.

Huhndorf left CIRI in 1998 after 25 years at its helm. Marrs succeeded him.

Huhndorf has relatives in Nikiski, and Marrs grew up in Seldovia. Each has been named Citizen of the Year by the Alaska Federation of Natives and won numerous other professional accolades and positions.

"It is a sham," said Kenai resident Susan Wells, who happens to be Carl Marrs' sister. "I am just floored that Roy Huhndorf and Bob Rude would be running together."

Carol Dolan of Kenai agreed.

"I believe Carl Marrs has always done an excellent job," she said. "He has been like a brother to Huhndorf, and I can't believe Huhndorf is doing this."

Until recently, the same people who now back the Alliance said they worried that Huhndorf would try to regain control of the company and were on guard against that, Wells said.

But Alliance backers interpret the situation differently.

"It has to raise an eyebrow when Rude and Huhndorf can set aside their differences. ... I think it is prudent to be alarmed," said Ray Maloy, a stockbroker, financial planner and CIRI shareholder who now lives in Alabama but follows the company's fortunes closely.

He and other critics focus on financial decisions made over the past several years, alleging that CIRI is selling off assets to boost short-term profits at the expense of long-term income.

They describe recent sales of profitable CIRI ventures and high dividends as risky.

Marrs counters that such sales are part of normal, prudent business practices.

The company took one-time profits selling real estate and telecommunications interests over the past few years and has paid out record dividends to shareholders. Questions have arisen about the company's profitability excluding those sales.

"We have taken our eye off the ball of the recurring income stream," Maloy said.

Mills asked, "Was it a profit because of a liquidation, or was it a profit because of good business? There is a difference."

The February-March CIRI newsletter predicted that the 2001 financial statement would show record profits in the neighborhood of $430 million. But release of the final annual report has been delayed, sparking rumors of accounting shuffles and red ink.

"Where is the money going to come from next year?" Maloy asked. "What are we going to do? Keep selling our winners and keeping our losers? ... Where is (Marrs) going to pull his rabbits out of a hat next year? He has no vision for that."

Their other concern is the power the current management team wields. Last year, Marrs and other board members removed board chairman Robert Woodhead, who subsequently resigned, after he asked for an audit of expenditures. Following Woodhead's ouster, Alliance members say, Marrs removed board members who supported the audit from key committee positions.

Mills said the current CIRI management keeps both shareholders and board members at arm's length from key decisions and information. She and others in the Alliance are calling for more accountability and oversight.

She cited the example of Cook Inlet Energy Supply, a CIRI subsidiary she described as highly profitable but shadowy. Even board members had trouble finding information about it, but it supposedly had links with the notorious Enron Corp. Because of what happened with Enron, people are asking more questions.

"A lot of us are saying, 'Gee, we don't remember ever seeing that in our financial statement,'" Mills said.

"I think Roy and those running with him will bring in checks and balances that really need to be brought in to CIRI."

Wells told a different story. Although she has had differences with her brother in the past, she is supporting him and the corporate candidate slate in the current election.

Huhndorf dominated CIRI during his decades at the helm, she said, and he and his supporters have a lot of nerve to call Marrs' management style dictatorial.

"(Carl) instituted shareholder programs. He is much more responsive than Roy ever was," she said.

Dolan backed her up.

"(Marrs) listens to shareholders," she said. "He does not ignore phone calls, and I appreciate that."

Wells accused Huhndorf of exploiting the concerns of sincere people and seeking to regain power for his own purposes.

"He has made his millions, and he is back for more," she said.

CIRI has about 6,900 shareholders spread throughout the United States.

It is affiliated with tribes throughout the Cook Inlet Basin, including all the ones in the Kenai Peninsula Borough except those in Seward, Nanwalek and Port Graham. It is the largest private landowner in the borough, with about 532,000 acres plus subsurface rights to resources in additional areas.

CIRI officials said they expect to mail out the annual report today or Monday, and they will provide copies at the Kenai meeting.

The private Saturday meeting will be at Kenai Central High School. Senior CIRI executives, including Marrs, and board candidates, including Huhndorf, plan to attend. The meeting is restricted to shareholders and members of their immediate families.

The vote for the board will be at the corporation's annual meeting, which is scheduled for June 1 in Anchorage. Huhndorf predicted that the annual meeting will be postponed due to the late report.

Despite the controversy, shareholders said they are proud of the company. They point to its long-term strength, support for nonprofits and high shareholder dividends as important and appropriate for members who tend to have low incomes otherwise.

Mills said she is confident that the contest will be good for CIRI.

"I think one thing everyone can agree on is no one wants to see anything bad happen to our corporation," she said.

"This slate may open the dialogue. I think what is happening is not a negative thing. It can only help to make our corporation very strong."

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