Some Native Alaskans Benefit
From VoiceStream Deal
By Rhea Wessel
Dow Jones Newswires 05/31/2001
The Wall Street Journal Europe
(Copyright (c) 2001, Dow
Jones & Company, Inc.)
ANCHORAGE, Alaska -- For the past few years,
Judy Huddleston wondered at the end of each month whether she'd have any money
left over to save for a needed medical operation.
Then on Dec. 28 she
received a letter from the Cook Inlet Region, Inc., a corporation that manages
land rights and other assets owned by 7,000 native Americans from the southern
coast of Alaska.
"I looked at it and said, `There's too many zeros
here,'" recalled the 48-year-old travel agent, a descendant of Alaska's
Athabascan people and a CIRI shareholder.
Reading further, the widowed
mother learned that several years ago CIRI had invested about $100 million (117
million euros) in a partnership that eventually became part of VoiceStream
Then the mobile-phone company agreed to be acquired by
Deutsche Telekom AG for $27 billion. That deal, which closes today, helped lift
the value of CIRI's holding. As a special dividend, the letter explained, CIRI
decided to pay shareholders $50,000. Each.
"I just got like hot all
over," said Ms. Huddleston, who now lives in Seattle. "I said, `Oh, my gosh, oh
my gosh,' and I just started crying." A few months later, another letter came,
raising the dividend to $65,000 each.
CIRI is one of 13 corporations
formed in 1971 when the U.S. government settled land claims with the aboriginal
peoples of the largest U.S. state. Over the years, some of the companies have
lost more than half their original cash endowment and were able to pay
dividends only by selling off assets. The more successful corporations have
turned their settlement payments into vast investment portfolios.
represents people of Athabascan, Inupiat, Yupik Eskimo and Aleut heritage from
the Cook Inlet, a region just outside of Anchorage where the Chugach Mountains
plunge into glacier-chilled waters. More than half of CIRI's shareholders still
live in Alaskan towns where ivory carving, whale hunting and mask dancing were
once part of everyday life.
The company invests in oilfield services,
tourism and real estate and normally pays dividends of about $800 per quarter.
It also uses its proceeds to fund scholarships, hospitals, housing loans and an
Alaska Native Heritage Center in Anchorage.
Its biggest deal was the
move into wireless technology about five years ago. In 1997, the company
invested in a joint venture with Western Wireless that bid for wireless
spectrum rights auctioned by the U.S. Federal Communications Commission. Taking
advantage of rules favoring minority-controlled companies, the partnership
ended up with the right to operate mobile-phone networks in cities across the
U.S. just as the wireless industry was taking off.
Eventually, part of
Western Wireless became VoiceStream. Then in 2000, Deutsche Telekom bought
VoiceStream, paying $90 each for shares that cost CIRI about $14 each.
"We really hit a home run," said CIRI Chief Executive Carl Marrs, who
is one-quarter Aleut and who guided CIRI's investment into wireless
telecommunications. Late last year, CIRI decided to cash in some equity to give
shareholders the kind of payout that could make a big difference in their
lives. By one estimate, about 200 CIRI shareholders receive welfare benefits.
Others struggle with debt, homelessness, depression, addiction or lack of
The big question was how much to pay out. On Dec. 15, CIRI's
board discussed paying $50,000 to each shareholder, but some shareholders
wanted the distribution to be higher.
"It should have been $100,000,
not $50,000," said Delice Calcote, who represents about a dozen disgruntled
Ms. Calcote, who is of Aleut descent, has picketed
CIRI shareholder meetings and accuses the company of squandering land, spending
extravagantly and paying too little back to shareholders.
she's glad to get the money, but in view of how much equity the company has
built up, "This little pittance is a slap in the face." While helping some
people, the $50,000 dividends are "very damaging" to others who lose government
benefits if they get extra income, she said.
Mr. Marrs said CIRI has no
greater operating expenses than other native corporations of its size. He also
said CIRI's shareholder distributions have been higher than those of its peers.
At $408 million, the distributions, which were made possible by selling
7.2 million VoiceStream shares, were the largest payouts by a native Alaska
corporation, he adds. The payments "got most (shareholders) out of the
desperate situation they had been in," he said.
As a result of Deutsche
Telekom's acquisition, CIRI also ends up with 4.8 million shares in the German
phone company, and the right to convert its remaining interests in VoiceStream
into an additional 4.6 million Telekom shares.
At Telekom's current
share price of $21 on the New York Stock Exchange, those holdings are valued at
close to $200 million.
Back in December, Rita Jorgensen, a half Aleut
shareholder living in Denver, barely knew what Deutsche Telekom was.
She was living paycheck to paycheck, earning $11 an hour as a
shipping-room clerk, wondering how she'd put presents under the Christmas tree
in the two-bedroom apartment she shares with one of her four children.
Flipping through some bills, she found her letter from CIRI. In
disbelief, she began washing dishes in the kitchen, without whispering a word
to her daughter JaNene.
"I just about fainted. I almost couldn't
breathe," Ms. Jorgensen, 35 years old, recalled. "I sat there for about an hour
with a big glaze on my face." After the $50,000 check arrived, she put a down
payment on a red brick house with a big backyard where JaNene can play.
Then on Mother's Day, the second letter arrived, explaining an
additional $15,000 was on the way.
Ms. Jorgensen said she now feels
renewed pride in her Alaskan heritage. "I am reminded every single day when I'm
walking into my own house," she said.