When I accepted the responsibility that comes with being an Alaska Native leader, I also made an unspoken agreement to put aside my personal feelings and do the right thing. My job is to offer my best advice, based on careful consideration and consultation with other leaders and my staff, and then carry out the wishes of the Board of Directors to the best of my ability. Whether I am called on to take action that brings me to my knees or makes me feel like I’m on top of the world – it’s all part of my job.

As most of you are aware, I’ve argued against a special dividend being paid at this time for many reasons. I believe that it is wrong to pay a dividend because one group or another is using such a demand politically to get elected to the Board of Directors. The corporation has a need for the capital it retains for future growth and investments in addition to the commitments that it already has, including paying taxes. As I have stated many times, it is my job to inform the CIRI Board of Directors as to the financial status of the corporation.

While it is true that we have enough cash to fund a special dividend, doing so will likely affect your future dividend payments. The reason for this is because we will have less cash to invest to grow the company and we will have less future income to pay dividends. Those who argue for special dividends today often gloss over the impacts they have on the future. Their arguments appeal to gains for the present as opposed to investment for the long-term.

I predict that within a year or two we will have another run on the treasury by those who really don’t care about the future of CIRI and want to gain control of the company for a variety of purposes. If that is what the majority of the shareholders desire, then by all means elect them to your Board. On the other hand, I believe the vast majority of you wish to see this corporation grow and prosper far into the future. If that is indeed the case, then you should send the people clamoring for more and more special dividends a message by not electing them. This corporation needs stability if it is going to grow, and the only way that you get stability is to stop the divisiveness that has been created by these minority groups that want to force their will on the Board for political purposes.

If you look historically at the success of this corporation, it’s phenomenal what it has done in just three decades. It has paid more in dividends than any other Alaska Native regional corporation in the history of ANCSA. This is a record we can continue, but only with stability. Financial institutions, other corporations, potential business partners – none likes doing business with companies that have constant turmoil with their shareholders, which they know causes constant turnover on the boards of directors.

If we look back over the last two and a half years since we paid out the large special dividends, which is about when the minority groups started their current attacks, we can see that as a corporation, we have had more and more difficulty achieving good quality investments. Those with whom we have been doing business and those with whom we want to do business are having second thoughts. They are not sure what the shareholders will do in the future. A group calling for a special dividend can cause damage by simply throwing out a number. They can create whatever expectation they want. If they tell people CIRI has the money and that it won’t hurt CIRI financially, companies, potential partners and financial institutions are going to go elsewhere. CIRI will be left out in the cold.

Hoping to put these damaging rumors and expectations to rest, your Board has seen fit to attempt to settle litigation with Bob Rude and Harold Rudolph. Additionally, the Board has voted to pay out a special dividend. While substantial, the amount has been set so that we will still be allowed to do some of the things that we have on our investment agenda, while at the same time continue to pay out our regular quarterly dividend for at least awhile.

I am still of the opinion that it damages the corporation to pay out this type of dividend at this time. Other Native corporations have paid out large distributions to their shareholders, and in many cases the shareholders are now lamenting the fact that they have mortgaged their future for immediate cash. At the same time, I recognize the Board of Directors has the final say. It is my job to carry out their directives and make it a priority of the company to get it done and done correctly. The attempt to settle with Mr. Rude and Mr. Rudolph will be a good step toward stabilizing the company. Your Board and management have always had a goal of working together to make CIRI a stable, prosperous company of which we can be proud.

In April, CIRI entered the professional casino gaming industry in Nevada with the opening of the 40,000-square-foot Casino MonteLago at Lake Las Vegas Resort. In order to conduct its gaming operations, CIRI (as holding company) and its wholly owned limited liability company, CIRI Lakeside Gaming Investors (as licensee), were required to undergo the strictest scrutiny to ensure that no persons within CIRI were deemed “unsuitable” under Nevada law. This is defined as possessing the kind of extensive criminal records, ties to organized crime, or other factors that would justify the Nevada Gaming Commission in concluding they were “unsuitable to be associated with a gaming enterprise in Nevada.”

The Licensing Process
In applying for a Nevada gaming license, CIRI’s leadership became subject to one of the most thorough and probing licensing processes in the country. CIRI executives and directors were subjected to extensive background checks, interviews, financial checks, credit checks and character reviews. The Gaming Commission sent agents to Anchorage to perform extensive reviews of CIRI documents, and to interview community leaders to determine the reputation of CIRI, its officers and directors. Business and personal financial records (sometimes going back as many as 10 years) were reviewed in detail by agents of the Commission. Personal safe-deposit boxes were searched. Residence addresses and educational backgrounds were checked, some as far back as childhood.

CIRI, its officers, directors and key employees passed these character “tests” with flying colors. On Jan. 23, 2003, the Nevada Gaming Commission found CIRI and its gaming subsidiary “suitable” to hold a gaming license in Nevada.


The Gaming Commission’s Licensing Order
CIRI made history by becoming the first Alaska Native corporation to be licensed in Nevada. This amounted to CIRI having to plow new ground in the licensing process. For instance, in approving CIRI’s license as a “holding company” for a Nevada casino interest, the Nevada Gaming Commission found it necessary to issue a comprehensive order designed to recognize the unique features of CIRI as an Alaska Native regional corporation, and to allow licensing of an entity which, in many ways, does not technically “fit” within the Nevada gaming law structure.

Nevada law prohibits persons deemed “unsuitable to be associated with a gaming enterprise,” (such as a person found to have ties to organized crime), from serving as an officer, director, employee, or shareholder of a licensed gaming enterprise. The point of these rules is to ensure that such persons do not influence, or profit from, the gaming industry. While an ANCSA corporation could fire an officer, director, or employee if, for example, they were found to be associated with organized crime, ANCSA corporations, unlike publicly held corporations, are prohibited by federal law from removing a shareholder who may be believed unsuitable for regulatory purposes from the corporation.

The Commission exempts CIRI from the regulations requiring public corporations to buy back the stock of any shareholders found “unsuitable.” Rather, the Commission’s order provides that, if the Commission identifies a CIRI shareholder as “unsuitable to be associated with a gaming enterprise” and the shareholder refuses to surrender his or her shares to a third party, CIRI must ensure that profits from the gaming subsidiary remain in that subsidiary until the shareholder ceases to be associated with CIRI. CIRI’s gaming subsidiary may continue to repay loans to CIRI, pay its proportional shares of income taxes, and engage in certain other specified transactions. CIRI may also sell its interest in the casino and distribute the sale proceeds. However, gains in value after the date of the Commission’s ruling of “unsuitability” must continue to be held at the subsidiary level until the shareholder in question ceases to be associated with CIRI.

The order requires that the Commission apply the same standards of “unsuitability” to CIRI shareholders as it does to shareholders of public corporations. There is no reported instance in which the Commission has acted to declare non-controlling shareholders (shareholders holding 1 percent or less of outstanding stock) of a public corporation “unsuitable.” Nonetheless, the order illustrates the importance of ensuring that CIRI’s reputation is protected at all times, and at all levels. To this end, CIRI has put in place a comprehensive system designed to ensure compliance with Nevada Gaming laws.


Gaming Compliance: A Full-Time Job
On Dec. 13, 2002, the CIRI Board of Directors adopted a comprehensive Gaming Compliance policy. The program appoints a committee made up of senior CIRI managers and a Board member. Together they oversee the legal aspects of the Casino’s operations, monitor its timely compliance with the Nevada gaming laws and filing requirements, and review reports and background checks of employees, vendors, managers, and business partners at the CIRI level and at CIRI Lakeside Gaming Investors, LLC. Under this program, violations of any rule, law or regulation related to gaming, as well as concerns regarding the “suitability” of any business associate, are reported to the Compliance Committee and, where appropriate, to the CIRI Board’s executive committee.


Leaving Gaming to the Guests: Rules Against Playing in Your Own Casino
To avoid the appearance of self-dealing, Nevada law prohibits “owners,” directors, officers and key employees from gambling in their own casino. Accordingly, CIRI’s policy is to prohibit gaming in the Casino MonteLago by all CIRI and CIRI Lakeside Gaming Investors, LLC officers, directors, employees and shareholders. All CIRI-related personnel and shareholders are encouraged to utilize CIRI’s other resort properties at Lake Las Vegas, but gaming at the Casino itself is prohibited.
CIRI has always been committed to the highest legal and ethical standards in its business dealings and its leadership. These values, which served the company well in the recent gaming licensing process, will continue to guide the corporation moving forward in the highly regulated world of Nevada casino gaming.

This article will be reprinted annually to provide important information to shareholders about the law, regulations and orders governing CIRI’s gaming operations.