Dems, Natives blame Murkowski for '70s bank losses

Posted: Sunday, October 13, 2002

ANCHORAGE (AP) -- The president of a village Native corporation and the state Democratic Party levied separate charges this week against GOP gubernatorial candidate Frank Murkowski, questioning his role in a series of devastating investment losses in the 1970s.

Robbie Fagerstrom, president and chief executive of Sitnasauk Native Corp. of Nome, held a press conference Thursday in Anchorage to explain how the company lost millions of dollars held by the now defunct Alaska National Bank of the North during the time Murkowski was its president.

Also this week, the Alaska Democratic Party sent out a flier charging that Murkowski mismanaged the bank, causing Sitnasauk to lose millions in risky ventures that later went bust.

The mailing and the press conference opened an issue that has been brought up again and again since Murkowski entered the U.S. Senate in 1980.

Murkowski was not available for comment. But in an interview in Washington, D.C., earlier this week, he said was never directly responsible for the bad investments, which were initially handled by bank trust officers.

In a prepared statement released Thursday, Murkowski blasted the Democrats for making ''malicious accusations.''

State Democratic Party chairman, Tammy Troyer, said Friday, that the party believes the issue speaks to Murkowski's abilities.

''We just think that if Murkowski was president of the bank when this was going on, this was mismanagement if he didn't know what was going on,'' Troyer said.

Most of the bad investments were made in the mid-1970s by Bering Straits Native Corp., a regional corporation for the Seward Peninsula area. The 1971 Alaska Native Claims Settlement Act required Bering Straits to hold settlement payments for Sitnasauk and 16 other Seward Peninsula village corporations.

In 1974, the Bering Straits group opened an account in the Bank of the North's trust department and eventually deposited more than $19 million. The following year Bering Straits' board and company executives, working with Bank of the North, began investing in ventures to take advantage of Alaska's oil construction boom. The bank also extended loans backed by the trust money to Bering Straits subsidiaries.

By 1976, the bank began to worry about Bering Straits' spending. According to court papers, several loans to Bering Straits subsidiaries were criticized by federal bank examiners as ''substandard'' -- loans to borrowers that could not repay or had poor credit histories.

With a risk of default by the bank's biggest client, Murkowski took control. In 1977, as risk of default threatened the bank, Murkowski helped restructure the debt. At the time he expressed his displeasure with how the bank handled one of its most important clients and said the bank should have looked more carefully at the loans.

In 1980, Sitnasauk and Bering Straits sued the bank, charging it had violated its trust responsibilities. Bering Straits later dropped its suit. But Sitnasauk continued. In a 1986 ruling, state Superior Court Judge Mark Rowland said the bank engaged in conflicts of interest and violated federal regulations that allowed the trust money to be squandered. While Murkowski was never singled out for responsibility, the court awarded Sitnasauk $10 million. The judgment helped bring down the bank, which failed in 1988.

The issues are nothing new; they've been brought up in nearly every Senate race since Murkowski began running. But Troyer said the bank debacle remains an issue no matter how long ago it happened.

''I think that mismanagement is mismanagement,'' she said.

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