TWO WORLDS A WASHINGTON POST INVESTIGATION

In Alaska, a promise unmet

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By Robert O'Harrow Jr.
Thursday, September 30, 2010

IN NOME, ALASKA They wander the streets of this chilly city just steps from the arctic tundra, native people who have little money and nowhere else to go. Some come from villages without plumbing. Others drift among the city's bars or hold down low-wage jobs. Wearing flannel shirts and tennis shoes, they are among America's poorest corporate shareholders.

They came by their holdings in the Sitnasuak Native Corp. as a birthright, when Congress established more than 200 Alaska native corporations, or ANCs, 40 years ago to provide land and money for indigenous people who had long been mired in deprivation and dislocation.

Each of the 75,000 original Alaska native shareholders received a stake in one of the new corporations, which held out the promise of economic development and a better life. The corporations have received extraordinary exemptions that have enabled them to receive $29 billion in federal contracts in the past decade.

But the original promise remains largely unfulfilled.

Native shareholders have gotten relatively little of the contracting largess. In many cases, the bulk of the money and jobs has gone to nonnative executives, managers, employees and traditional federal contractors in the lower 48 states, a Washington Post examination has found.

Under pressure to spend quickly after the terrorist attacks of Sept. 11, 2001, the Pentagon and other federal agencies took unprecedented advantage of the special contracting privileges given to the ANC-owned firms, including the ability to receive contracts of any size without competition. The result was one of the largest contracting booms for a minority group in U.S. history.

The Defense Department and civilian agencies have used the Alaska corporations as a shortcut for a dizzying array of work: intelligence analysis, base security, satellite support, janitorial services, bioterrorism research, computer systems, water tanks in Iraq, support for the drug war in Colombia.

Few addressed the obvious question: How could small, inexperienced native companies handle giant government contracts? The answer was to hire nonnative executives and workers and partner with established firms, including major Pentagon contractors. ANC-owned firms won contracts and passed on much of the work and revenue to the nonnatives and major contractors, audits and other records show.

The spending surge has had little effect on problems afflicting native Alaskan people. Unemployment rates among Alaska natives remain far above those in the rest of the nation. Many still lack indoor plumbing and must get their drinking water from communal "washeterias" and carry their waste by hand to trash cans known as "honey buckets."

Last year, Sitnasuak earned after-tax profits of $14.5 million on revenue of $212 million. But the amount paid to Sitnasuak's 2,238 shareholders was just $305 apiece, a total of $682,000, according to a Post analysis of data provided by the corporation.

At the same time, millions ended up at a consulting firm based in the Bethesda home of H. James Nunes, a nonnative hired to help run the corporation's federal contracting operations, with the approval of the corporation's native president. Nunes got $6.4 million last year. His chief financial officer made $1 million. The executive vice president received $470,000. The chief operating officer was paid $403,000. All are nonnatives.

Nunes's attorneys said he earned his money by making the company profitable. But some shareholders think they should have gotten more.


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