Color of Money trumps Color of Light

Commentary on the judgment in Smith vs.

Norton Sound Economic Development Corp.

By Tim Smith

The only reason NSEDC ever held elections for its board of directors is because they were court ordered to do so following the complaint I filed in 1994.

On January 9, this year, another court issued a ruling that means NSEDC is no longer obligated to elect board members in fair and open elections. The judge held that as a privately owned nonprofit corporation having no individual members, the NSEDC board and not the residents of the 15 NSEDC communities will get to decide who will sit on the board in the future.

NSEDC was founded in 1989 beforethe CDQ program existed. Its articlesof incorporation and bylawcontained the following provisions, “membership in this corporation shall be available and open to all persons interested in the goals and purposes of the organization as stated in the bylaws. The corporation recognizes and admits to the principle that

all persons are equal and that this corporation does not discriminate against anyone on the basis of race, color, ethnic origin or religion.”

After the CDQ program came along in 1992 and brought millions of dollars of fisheries revenue to the region, things changed radically as they often do when money is involved. The individuals who seized control of NSEDC in 1992 locked out the people who were formerly members to maintain exclusive control of their newly created hoard of cash. They didn’t hold elections for their board of directors and all of their financial and other records were kept secret.

Today, NSEDC’s governing documents contain the following passage, “communities satisfying the requirements

set forth in the bylaws are eligible for membership in the corporation. The individual residents of those communities or any other community are not eligible for membership.” That’s a major departure from the way things were with respect to the rights of regional residents in NSEDC.

Prior to 1992, as with most nonprofit corporations in America, NSEDC’s members owned NSEDC. The members were the people living in Norton Sound communities. We are no longer the owners. Now, NSEDC management says they represent us, but how they represent us is up to them.

Even though NSEDC agreed to the 1994 judgment in order to end litigation, the people in control never really went along with the concept of fair and open elections. Things got out of hand in 2006 when Nome’s NSEDC election had to be overturned because of election fraud and a new one held. NSEDC was making up election rules as they went along.

Following the 2009 election, I asked the court to again review the rules governing NSEDC director elections and tell us what rights Norton Sound residents have when it comes to choosing our CDQ program representatives. Judge Jeffery ruled that the NSEDC bylaws control how our representatives are chosen and the NSEDC board of directors

unilaterally determines the content of the bylaws. Norton Sound residents don’t have any say in it.

Judge Jeffery’s decision confirms that the rules for CDQ group governance are inadequate for protecting the rights of the people living in the 65 CDQ eligible communities that the program was supposed to benefit. I am hoping that this judgment will serve as a wakeup call to Congress and the Alaska Legislature about the need for additional lawmaking

to codify the rights of the residents of our communities to participate meaningfully in decisions about how CDQ program resources will be used. If we don’t enact laws detailing how NSEDC and the other CDQ groups are supposed to be governed, we shouldn’t be surprised when we find that we have no voice in what happens to our CDQ program money.

Contrary to what NSEDC is saying, this case was never about who can or can’t vote for NSEDC board members. What it was about is determining who, under the existing laws, gets to make the rules for how the residents of our 15 Norton Sound communities participate in NSEDC governance. Now that we know, it is time to talk to the lawmakers about making the necessary changes to ensure that community residents are fairly and meaningfully represented

in this important program.