SNC sues to remove three board members
On August 16, Sitnasuak Native Corporation filed a civil lawsuit in the Anchorage Superior Court alleging that three of the corporation’s sitting board directors have “breached their fiduciary duty of loyalty and care to the company.” The legal action is seeking the removal of the three from SNC’s Board of Directors.
The defendants named in the case are Charles E. Fagerstrom, Edna R. Baker and Dr. Barbara Amarok.
At the heart of the lawsuit is a mailer that was sent out under the name of “SNC Shareholders for Free Speech” without identifying its originators. The complaint alleges that the three directors participated “in a coordinated scheme to send an anonymous proxy solicitation to Sitnasuak shareholders in violation of Alaska securities law.” The complaint states that the mailer was a proxy statement, contains misrepresentations, and that its originators violated Alaska law by “failing to provide the Division of Banking and Securities the name and address of each participant involved in the anonymous solicitation.”
The complaint states that the mailer was sent to nearly 1,000 SNC shareholders before the June 3, 2017 general SNC meeting and its planned elections. The mailer endorsed candidates Helen Bell and Barb Amarok for re-election and made the case against discretionary proxy voting while alleging that SNC Director Jason Evans aimed to swing the popular vote to a different outcome through the use of discretionary proxy process. The mailer also quoted a Deloycheet Inc. press release that informed of a jury verdict in a civil lawsuit against SNC director Trudy Sobocienski, whom a jury in April 2016 found guilty of defrauding Deloycheet of $400,000. Sobocienski settled with Deloycheet by paying $40,000. The lawsuit was dismissed with prejudice just last week, on August 17. The complaint states that the anonymous mailer did not disclose that the “jury verdict in that case is of no effect due to a negotiated settlement and lack of a judgement.”
Tensions have been simmering among shareholders who were outspoken against the use of discretionary proxies, alleging that they theoretically can be used to upset a candidate receiving more popular votes than a candidate who is bolstered via discretionary votes. According to the official proxy card, discretionary proxies are defined as votes for candidates on the Board of Director’s slate and that “the corporation will distribute your votes among its slate at the discretion of the proxyholders […].”
The complaint states that “the anonymous mailer falsely insinuates that discretionary proxy voting and independent proxy solicitations are inappropriate and unethical voting practices” and that the mailer omits to say that discretionary proxy voting is permitted by Alaska law and Sitnasuak’s election rules.
The complaint states that the mailer came up in numerous SNC board of director meetings and the directors standing accused of drafting it did not disclose their involvement.
The 11-member board voted to conduct an investigation with Fagerstrom, Baker and Amarok casting ‘no’ votes.
After the investigation resulted in identifying Fagerstrom, Baker and Amarok as alleged participants of drafting the mailer, SNC board approved resolutions that called for their resignations and to authorize legal action against them.
In other allegations, the complaint states that Dr. Amarok has requested an investigation in 2014 into whether Sitnasuak had violated state regulations by omitting the employer of candidate, Trudy Sobocienski, which was Deloycheet, the Native corporation that brought a civil lawsuit against Sobocienski. Although Sobocienski disclosed her employment with Deloycheet, SNC did not include the information in the proxy statement. This resulted in a consent order between SNC and the Alaska Division of Banking and Securities and the matter was resolved. However, Amarok was reprimanded by SNC for bringing the issue to the Division of Banking and Securities instead of taking the matter to the board. The complaint alleges that this cost SNC legal fees and disruption in services to shareholders. The complaint states that the SNC’s executive committee disciplined Amarok by “taking away her seat on the Elder’s committee and removing her from the board of directors of Sitnasuak Financial Services, LLC. It also discontinued compensating her for service on the Sitnasuak Board.” The complaint says the board was “particularly troubled that she had filed a request for investigation with the Division without first bringing potential violations to the Board so that any violations could be voluntarily remedied without the cost and expense of an administrative investigation.”
The complaint states that directors owe fiduciary duties to SNC of loyalty and care and that the duty of loyalty requires a corporate director to put the corporation’s interests ahead of his or her own interest. The complaint alleges that Fagerstrom, Baker and Amarok had “undisclosed financial and personal interests that were advanced by their conduct.”
The lawsuit, brought by attorney Howard Trickey with the Anchorage law firm Holland & Knight, seeks the removal of the three directors, declarations of state code violations, and monetary awards for damages as well as costs and attorney fees.
The elections set for the June 3 meeting in Anchorage were postponed due to a lack of quorum. In an interview with SNC President and CEO Bobbi Quintavell and Vice President Corporate Affairs Ukallaysaaq Okleasik, it was explained that in the past, the elections were held even if there was no 50 percent plus one vote quorum reached. In order to bring state laws and the Sitnasuak Articles of Incorporation into sync, the elections now set for Sept. 30 will include voting on a proposed amendment to the articles of incorporation to set quorum requirements at one-third of the shares outstanding and entitled to vote, instead of 50 percent plus one vote.
The upcoming elections will have a new official proxy card. The board has voted to include ten names to run for four seats, each for a three-year term. Barb Amarok and Marie Tozier were on the June 3 ballot, but the board did not vote to include their names on the new ballot. On social media they have announced write-in campaigns.
Amarok and Edna Baker declined to comment stating that they have yet to be served with the complaint.
Charles Fagerstrom has been served with the complaint but declined to comment because he needed time to absorb the material before responding to media requests.