Peterson/Reft Response to Koniag Securities Complaint '08

Frank R. Peterson, Sr., Candidate
PETERSON/REFT INDEPENDENT SLATE
1162 Grow Avenue, NW
Bainbridge Island, WA 98110

Ms. Jill Farrell, Securities Examiner
Division of Banking and Securities
Department of Commerce, Community and
Economic Development
State of Alaska
550 West 7th Avenue, Suite 1940
Anchorage, Ak 99501
February 28, 2009
RE: ANCSA Complaint no. 09-AS-00064

Dear Ms. Farrell:

Introduction. There is a pattern of conduct and behavior on the part of attorney William Timme and his lawfirm, as legal counsels for Koniag, which leads us to believe that he was and is the mastermind behind the deceptive, fraudulent and criminal acts in Koniag since Pagano was ousted in or about 1996. Their first lawfirm name was Middleton, Timme & McKay, PC. Their second firm name was Middleton & Timme, PC. His current firm name now is Timme & Cain, PC. Attorney McKay is or was the legal counsel for the Anchorage Daily News, which is why no negative letters or news articles about Koniag has ever been published in the ADN. Timme’s pattern of conduct and behavior is that each time independent board candidates ran for the Koniag board, he has filed securities complaints and/or lawsuits against them. Going back to the 90’s, when Peterson ran with Kathy Balenger and Andy Teuber, he filed against that slate. When Alicia Reft and Peterson ran several years ago, he filed against them. Now, before the 2008 Koniag Annual Meeting, he filed two complaints against Peterson and Reft. Additionally, there is a consistent pattern of Koniag restructuring of its organization and organization chart every so often for what we believe to be to destroy certain corporate and subsidiary records after the 7-year statute of limitation expires, after which corporations can destroy certain corporate records. The destruction of corporate records is a legal way in which to cover up the fraud and any criminal act that may have been committed within that 7-year period of time. We will lay down what we believe to be Timme’s behavioral pattern during Pagano’s last year serving as Koniag, Inc. president from 1995 to the present time.

We find it reprehensible and disgusting that Timme lies, twists, distorts, discredits, denigrates, impugns characters and files securities complaints against any shareholder who questions or challenges the Koniag management. When Peterson and Reft previously ran for the Board several years back, they were subjected to a securities complaint by Timme and Middleton. No shareholder who questions or challenges the board or management, dare to run for the board for fear of being sued by their own Regional Native Corporation. We further find and accuse the members of the board of directors in violation of their oaths of office and their prescribed duties and authority in the law, for their cowardly conduct and behavior and their failure to exercise their duty and responsibility, specifically, AS 10.06.450 Board of Directors; Duty of Care; Right of Inspection; Failure to Dissent, by allowing the likes of Timme to dictate and intimidate them into the corrupt practices employed by the corporation. On the matter of Timme’s initial complaint of November 3, 2008, we submit the following

First, we wish to revisit and clarify our responses numbered 1, 2, 4, 5, 6, and 7 to certain allegations in attorney William Timme’s complaint against the Peterson/Reft Independent Slate. Following the revisit, we will address the material issue of the Koniag-denied “Kangaroo Hearing” and supply exhibits pertaining to the issue.

1. Misrepresentation Regarding 1998 Petition. Change to admit. The referenced petition requested a special shareholder meeting within 60 days of its issuance in which shareholders were to vote on: a) the recall of all nine (9) directors; b) re-election of nine (9) new board members as nominated by shareholders pursuant to the Koniag, Inc. bylaws; and, c) the distribution of corporate funds to Koniag, Inc. shareholders in the amount of up to one hundred dollars per share…and, all the future monies received from ANCSA lands sales, including the Koniag percentage of any AJV land sales. Koniag refused to call such a meeting as was requested in violation of its own bylaw rules and instead combined the requested special meeting with the regular annual meeting, which deliberately confused, exacerbated and frustrated shareholders. It is our belief that our answer to this issue does not rise to the level of materiality to warrant administrative action. (Please see Exhibit #___)
2. Failure to Make Required disclosures. Denied. By naming and listing the Karluk IRA Council as the entity providing the Slate a loan, we believe that we met the requirements of Section 3 AAC 08 365. We further believe that our answer to this issue does not rise to the level of materiality to warrant administrative action by the Division.
4. False and Misleading Statements on Claimed ASRC ANWR Development. Denied. Timme omits the fact that Koniag did not question the deal on behalf of its shareholders, with ASRC and instead went ahead and signed an agreement which we believe to be in contradiction to ANCSA Section 7(i), which provides that natural resources, including timber and subsurface resource development revenues are to be shared among the twelve regional corporations. The least that Koniag could have done is make a good faith effort to challenge the ASRC deal and request Congressional solution to the issue, for the benefit of its shareholders. Reason: Should ANWR be opened for development, Alaska Natives within the 12 regional Native corporations, under ANCSA Section 7(i), could be receiving substantial dividends. But, instead, the ASRC shareholders and the corporation will be getting the revenues from the subsurface oil development upon the opening of ANWR, in violation of ANCSA Section 7(i). We believe that our answer to this issue does not rise to the level of materiality to warrant administrative action by the Division. (Please see Exhibit #2)
5. False and Misleading Claims About the Election of Non-management
supported Candidates. Denied. Timme omits the names and number of the supposed non-management candidates he states were elected to the Koniag Board. This is false and misleading by omission. Further false and misleading is Timme’s statement that “The last non-management candidate was elected in 1998. It was Mr. Peterson.”
Mr. Peterson ran on an independent and separate slate, was not a part of the non-management slate candidates listed on the Koniag proxy, and even if he was listed as a non-management candidate, he would not have been elected as a non-management candidate, but rather as a member of an independent slate and was elected by cumulation of votes by the independent slate, which is allowable only to candidate slates, and not for individual candidates.
To clarify, Koniag sponsors a “management slate” of preferred and management-chosen candidates. Other candidates, other than independent slates, who are not chosen, are then listed in the management’s proxy and proxy statement as non-management candidates. The records show that no candidate not part of the management slate has ever been elected since the inception of the management slate system. Since Koniag develops the proxy and proxy statement on behalf of the corporation, it has the records and therefore the burden of proof. Koniag should be required to substantiate its assertion and supply the Division with copies of the management’s proxy and proxy statements going back to the inception of the “management slate” concept to corroborate and substantiate their claim. We believe that the record would support our assertion to the contrary.
Additionally, the majority of shareholders do not vote for any of candidates, including the management’s candidates. Shareholders vote primarily for the chance or opportunity to win a prize offer from Koniag’s lottery system. The rationale here as to why shareholders cast their votes for the management candidates, is that because Koniag sponsors the lottery prize offers, they almost automatically cast their vote for the management slate, and thus the inadequate votes for either the non-management or independent slate candidates. We believe that our answer to this issue does not rise to the level of materiality to warrant administrative action by the Division.
6 False and Misleading Statements by Mr. Peterson in Video. Denied. We
Acknowledge and state that Mr. Peterson was and is being punished primarily for his support of the Defendants in Koniag’s lawsuit against the six shareholders, and mainly for his support of past Koniag, Inc. President Frank Pagano. Timme and some of the directors know that Frank Pagano and Frank Peterson have knowledge of and documented evidence of fraud in which we believe that Timme, Gross and others have master-minded in Koniag and its subsidiaries. Please see Exhibits # ____. In our view, when the judge issued his summary judgment against the Pagano slate, et al, it was without consideration of the perjury evidence submitted to the court by the Defendants. Additionally, the issue of perjury and perjury by inconsistent statements by the Late Glenn Godfrey, Dennis Metrokin, Charles Pemberton and Kurt Martens was documented and a part of Koniag’s lawsuit against the Pagano Slate. It is our understanding that, according the Alaska statutes, had the perjury issue been considered by the court, the Koniag lawsuit against the Pagano and Meidinger Slates, should have been dismissed by the Court! The purported “flagrant violations of the Regulations” are secondary and excuses with which to justify the censures against Peterson, to discredit, punish, defame him and cover up a felony crime and fraud by the named officer and directors of Koniag, Inc. (See Exhibits #_____ )
Timme’s statement that Peterson misused his company credit card for purchasing airline ticket for his family members (sic) is accurate, but is false and misleading where he omits to state that the late Glenn Godfrey, chairman of the board and Commissioner of Public Safety for the State of Alaska, and, perhaps other directors, also used his Koniag, Inc. company credit card to purchase airline tickets for his wife and children. This would make the censures against Peterson false and misleading by way of 03 AAC 08.315 False and Misleading Statements, where the censures materials directly or indirectly impugns Peterson’s character, integrity and personal reputation. Timme further omits the fact the Ayakulik, Inc., the company in which the Peterson “family members” was the presiding officer, reimbursed Koniag, Inc. in full. At that particular time, for reasons unknown, when Peterson used his Koniag, Inc. company credit card, the airlines did not take Ayakulik, Inc.’s company check for the purchase of the airline ticket from Anchorage to Kodiak, thus Peterson’s use of his company credit card. Timme’s deliberate omission of the above related information was meant to damage and impugn Peterson’s character and therefore deems his allegation and the censure resolutions against Peterson False and Misleading by omission pursuant to 03 AAC 08.315 False and Misleading Statements.
On the fish and game violation, the explanation is as follows: the U.S. Fish and Wildlife Service allowed the taking of five deer on the Kodiak National Wildlife Refuge lands, within which the Native Village of Akhiok is located. The State of Alaska allowed the taking of four deer on State lands, in which Kodiak city and Ouzinkie village are located. When applying for the deer hunting license in the Kodiak vicinity (State lands), Peterson was given 6 deer tags, when the allowed take of deer was only four on State lands. As is the custom in the villages located within the Kodiak National Wildlife Refuge, Alaska Natives and others are allowed the taking of five deer, in which Peterson was accustomed to, having lived in the Native Villages of Akhiok, Larsen Bay and Old Harbor, all of which are located within the Refuge. Thus, the inadvertent taking of the accustomed five deer on State land, which were confiscated by the officer.
On the purported “disclosure of confidential personnel records”on Peterson’s website, Timme omits to state the Peterson corrected his statement by eliminating the names of certain personnel in his disclosure. We believe that our answer to this issue does not rise to the level of materiality to warrant administrative action.
6. Misrepresentation of Board Resolution No. 01-01. In his statement, Timme
omits to state the meaning of “advisory[1]” vote of shareholders, compared to a “mandatory[2]” binding vote, which therefore makes his statements false and misleading by omission. Shareholders are misled, thinking that because Koniag Board has adopted a resolution providing for an “advisory vote”by them, that the Board would abide by that vote, when, in fact, the Board could ignore the advisory vote. He also omits to state that there was intense debate at the November 8th, 2008 annual shareholder meeting, which was webcast and should have been recorded, on the topic heretofore stated. During the debate, Timme, was, in fact, asked by Peterson whether or not an “advisory” vote could be ignored or overridden by the board of directors. His answer was “yes”, that if shareholders were to vote to not sell, the board could ignore the shareholder “advisory” vote and proceed to sell the Easement lands. When Peterson asked the chairman of the Board, Chris Johnson, whether he knew the difference between an “advisory” versus a “mandatory” vote, he did not know, or could not answer the question adequately. Director Perry Eaton expressed seeming concern of the issue, but did not offer any solutions nor did he propose any action on the topic at issue. President and CEO, William Anderson frustratedly stated that the discussion and debate were nothing but “semantics”, but again he offered no solution to the issue. During the discussion and debate on the topic, directors Unger, Suydam, Peterson and Fields remained totally silent. Their silence begs their knowledge and understanding of the issues and the application of their duties and responsibilities as directors as provided by law! Timme tells a bold-face lie, when he states

“…While the resolution describes the vote as being “advisory”, since it is advising the Board of the position of the shareholders and that vote alone would not be sufficient to bind the corporation, it is clear from the language of the resolution that the Board has directed that its approval of the sale would not be effective unless the vote of the shareholders (the vote of the shareholders folding a majority of all outstanding voting shares), also approved the sale.

When asked at the November 8th, 2008 Koniag, Inc. Annual Meeting, Timme admitted in his answer to the question: “can the board of directors ignore or over-ride a shareholder “advisory” vote on whether or not to sell the Easement lands,” or words to that effect, he answered “yes.” Pure and simple, a mandatory vote is a binding vote. An advisory vote is non-binding.
I have requested a copy of the webcast video from Mr. Anderson, but so far have not been provided with a copy. If the webcast was recorded, I encourage the Division to use its subpoena powers to acquire a copy of the webcast video of the 2008 Koniag Annual Meeting, as it contains the discussions and debate on this issue. In a more crucial and related matter, pertaining to the “advisory” versus “mandatory” vote, we quote excerpted portions of the
AGREEMENT FOR PROTECTION OF CERTAIN LANDS AND RESOURCES BETWEEN KONIAG, INC., THE UNITED STATES OF AMERICA AND THE STATE OF ALASKA of page 1, 3 and 4 and include as exhibits the above numbered pages:

On page 3:

“…Under this Agreement, Koniag, in its sole[3] (sic) option, may sell to the United States, no earlier than December 15, 2012, the lands subject to the Conservation Easement…”

On page 4:

“(4) Elections of Koniag. The initial term of the Conservation Easement and the Camp Island Limited Development Easement are each ten (10) years. No later than July 15, 2012, Koniag shall notify the United States and the State in writing of its election, which election shall be in Koniag’s sole (sic) discretion, whether it wishes to:

(a) Convey the lands subject to the Conservation Easement in fee to the United States by the Limited Warranty Deed in the form set forth at attached Exhibit V, subject to the State Conservation Easement in the form set forth at attached Exhibit IV, to convey the Permanent Camp Island Limited Development Easement in the form set forth at attached Exhibit VI, and to issue the Quitclaim Deed in the form as set forth at attached Exhibit VIII, in return for those funds remaining at closing in the Special Account established pursuant to Section 5(b) of this Agreement.
(b) Extend the Conservation Easement and the Camp Island Limited Development Easement for an additional ten year term…
(c) Allow the Conservation Easement and the Camp Island Limited Development Easement to expire at midnight on October 14, 2012.

The two phrases, “sole option”, and, “sole discretion” and the word “election”, are operative, which authorizes Koniag and its management to sell the Easement lands. Other than the Board’s resolution calling for an “advisory” vote on whether or not to sell the Conservation Easement lands, the above-contractual Agreement states that Koniag, Inc., meaning its authorized management, has the sole option and/or discretion with which to sell the subject lands, with or without an advisory shareholder vote. There are no provisions for a shareholder vote in the Easement Agreement, advisory or mandatory.

We now address Timme’s paragraph numbered 3. False and Misleading
Allegations of a “Kangaroo Hearing”. Timme omits any supporting or corroborating evidence to controvert or disprove Peterson’s statement. Instead, Timme alludes to Peterson’s alleged impugning of Vice President Dick Frost who chaired the ad hoc committee’s Kangaroo Hearing, when, in fact, the reverse has occured. The Slate’s statement regarding Dick Frost is restated here verbatim:

“Dick Frost was the chairman of the ad hoc committee that took my Evidence of Perjury by the Late Glenn Godfrey, Dennis Metrokin, the Late Charles Pemberton and CFO Kurt Martens. He held a Kangaroo Hearing and was responsible for having my Report/Evidence of Perjury denied and dismissed by the Board of Directors.”

“Dick states ‘the board has done well’...that ‘recent data supports this still improving direction’, but the corporations bottomline figures do not support his statement. Koniag’s answers to Peterson’s list of 22 questions may refute or support Koniag’s assertions as stated by the management candidates.”

That Dick Frost was the chairman is a fact. That Dick Frost took “my” evidence of perjury is a fact. That Chairman Dick Frost held a Kangaroo Hearing as defined in footnote #4 is a fact: Dick Frost’s notes and his notes submitted to the Board, of the meeting illustrate the committee’s frustration of the corporations bylaw rules under Article 6 Committees, i.e., Dick Frost did not cite any of Peterson’s statement’s when reporting his notes to the Board. Dick Frost violated the fair dealing, fair hearing and fairness doctrine standards. Dick Frost did not supply Peterson with a copy of the Board’s resolution forming, authorizing and empowering the ad hoc committee to receive Peterson’s report on perjury. Dick Frost did not record in the form of meeting minutes the ad hoc committee meeting, nor were there motions made and voted on. Dick Frost as Vice President and Chairman of the ad hoc committee violated the corporation’s own bylaw rules in the composition of the ad hoc committee. The bylaw provides that special purpose committees… shall consist of at least one (1) director and such other shareholders (sic) and individuals deemed appropriate or necessary… Dick Frost denied Peterson due process by his repeated interruptions during his presentation. Dick Frost violated Peterson’s due process rights with his non-compliance with due process standards of fairness and justice
Peterson was and is being punished by Koniag for reporting and exposing a felony crime in the form of perjury and perjury by inconsistent statements which occurred during Koniag’s lawsuit against the six shareholders. Both Koniag and the Attorney Generals office stated that the perjury issue was investigated, that the results indicated insufficient evidence of the alleged crime. However, upon written requests by Frank Pagano for copies of the referenced investigations, neither Koniag or the Attorney General’s office have provided the requested investigative reports to support and corroborate their assertions.

We submit our response and provide the following exhibits as evidence, controverting Timme’s and Koniag’s assertions. Timme states that “Statements by Slate regarding a “Kangaroo Hearing” are material Misrepresentations” and “The allegation that Mr. Frost presided over a “Kangaroo Hearing” was a bare (sic) accusation, not supported by any factual foundation.” To the contrary, we believe and state that the book entitled “A Presentation of the Evidence of Perjurus Acts…contains corroborating information, substantiating that the Kangaroo Hearing did take place. Timme did not supply any evidence to the contrary. This “Kangaroo Hearing” took place in the Middleton & Timme, PC offices in Anchorage, Ak, in which Middleton was in attendance.

(In January 16, 1996, the Koniag board of directors met. The purpose of this meeting was for the board to consider terminating Mr. Pagano as President. However, it was deemed that Pagano was under an contractual employment. Mr. Pagano was put on administrative leave with pay. This also was the meeting in which the board purportedly authorized CEO Uwe Gross to purchase the 10% interest of Mr. Livingston. This is also the time in which several directors did discuss the possible purchase of the 10% interest, but there was not a quorum with which to take action. There was concern that the purchase of the 10% would bring the ownership interest of Koniag’s up from 40% to the 50% threshold, bringing the tax obligation to the corporation, instead of the majority interest holders. Admittedly, the majority interest holders didn’t have the revenue with which to pay a cash call and the tax obligation, so, Gross being friends with Livingston made the unauthorized purchase of the subject interests…thus, the perjury and perjury by inconsistent statements.)

1. In reference to Timme’s November 3rd, 2008 allegation numbered 3, as a Koniag shareholder, Peterson was denied access to the Koniag litigation files. After being elected as a director, however, and pursuant to the AS 10.06.450(d), which states as follows,

“(d) A director has the absolute right at a reasonable time to inspect and copy all books, records, and documents of every kind and to inspect the physical properties of the corporation or a domestic or foreign subsidiary of the corporation. Inspection by a director may be made in person or by agent or attorney and the right of inspection includes the right to copy and make extracts…”

Peterson had the absolute right to access the requested litigation files of Koniag, Inc. which he did access. The purpose in accessing the corporate litigation files was to substantiate, corroborate and verify the
perjurous and sworn affidavits of Godfrey, Metrokin, Pemberton and Martens which Peterson previously uncovered in the court files of the Koniag, Inc. v
Pagano and Meidinger litigation.

Concerning Timme’s second paragraph on page 5 of his November 3, 2008
Complaint, in alleging that Peterson “directly impugns the character, integrity and personal reputation of Mr. Frost”, he states that Peterson “states no facts…” as to the “kangaroo hearing.” Here, Timme lies and attempts to twist,
distort and ignore what was submitted to the ad hoc committee and others. What was submitted is entitled,

“A Presentation of the Evidence of Perjurus Acts in RE: In the Superior Court for the State of Alaska Third Judicial District at Anchorage…”,

which includes the following exhibits pertaining to the “Kangaroo
Hearing[4]” held by the Koniag ad hoc committee on Peterson. These exhibits substantiate that the “Kangaroo Hearing” was indeed held and conducted by Frost, Selig and Christriansen of the Koniag Board’s ad hoc committee.

Exhibits:

1. Dick Frost’s notes of the ad hoc committee meeting dated April 7, 1999;
2. Dick Frost’s notes of telephone poll of May 2, 1999 Re purchase of 4300 B Street interests;
3. Committee Report to Koniag, Inc. Board of Directors, dated May 10, 1999;
4. Peterson Letter to Godfrey, Martens and Pemberton Re materials presented to ad hoc committee on April 1, 1999;
5. Peterson Letter to attorney Middleton;
6. Attorney Middleton Letter to Peterson dated April 15, 1999;
7. Attorney Middleton Letter to Godfrey, Martens and Pemberton Re Peterson’s Letter of April 7;
8. Peterson Letter to ad hoc committee chair, Dick Frost dated April 19, 1999 Re The current matters before the Ad Hoc Committee;





[1] Advisory and Advisory Opinion (Webster’s New World Dictionary pg 10) and (Black’s Law Dictionary pg 511): Advising or empowered to advise (advise: 1. to give advice to; counsel; 2. to offer as advice; 3. to notify; inform.) 1. A nonbinding statement by a court of its interpretation of the law on a matter submitted for that purpose.

[3] Sole (Webster’s New World Dictionary pg 613): without another; single; one and only.
[4] Kangaroo court (Hearing)(Black’s Law Dictionary pg 160): 1. A self-appointed tribunal or mock court(here, Koniag’s ad hoc committee) in which the principles of law and justice are disregarded, perverted, or parodied. 2. A court or tribunal characterized by unauthorized or irregular procedures, esp. so as to render a fair proceeding impossible. 3. A sham legal proceeding.