Remote Island Dealt Economic Blows By Uncle Sam

 

 

            An impoverished Alaskan island in the Bering Sea faces economic catastrophe if the federal government succeeds in pressing proposed economic sanctions against it.  These documents show the tortured paper trail of Tanadgusix Corporation’s acquisition of the de-commissioned Navy drydock Ex-Competent for use in Hawaii, which has led to this peril. 

 

            The Ex-Competent was acquired from the Federal General Services Administration (“GSA”), which acted through its agent in Anchorage, the Alaska State Agency for Surplus Property (“SASP”).  The sworn statement of Kevin Kennedy, Director of Marine Operations for Tanadgusix Corporation (“TDX”), dated June 26, 2002, describes what happened and lists exhibits in support of TDX’s claims.  The sworn statement of Brian Ashton, who acted on behalf of the Alaska SASP and GSA, dated February 11, 2003, confirms those events.

 

            At the center of the drydock use controversy is TDX’s Letter of Intent, Exhibit 29, dated January 19, 2001, which, together with its attachments, proposes use of the drydock with TDX’s partner in Hawaii, Marisco Ltd., and their plans to “utilize it for services to our various clients.”  The Letter of Intent became part of the Vessel Conditional Transfer Document, also dated January 19, 2001, Exhibit 30.  However, three weeks later, the SASP transferred ownership of the drydock to TDX’s subsidiary, Bering Sea Eccotech (“BSE”) on February 14, 2001, as shown in Exhibit 31.  E-mails between the SASP and officials in the Federal General Services Administration and Small Business Administration (“SBA”) reveal confusion among the agencies over how the drydock could be transferred to BSE but the SASP decided to “proceed with the transfer to BSE.”  Exhibit 33.  However, in May 2001, the SBA had determined that it could not help BSE because “the Federal Surplus Property Program under the 8(a) Program is on hold pending resolution of certain policy concerns.”  Exhibit 53.  Evidently this reactivated either an October 2000 or January 2001 transfer to TDX; it is not clear which set of documents applies. 

 

Matters took an ominous turn on June 25, 2001, when a Federal GSA official in Philadelphia announced to Senator Daniel Inouye that they believed TDX “plans to have the vessel transported to Alaska between the months of September and November 2001 . . . . [T]he dock will not remain in Honolulu.”  Exhibit 59.  That letter was sent without TDX’s knowledge and it made promises that were contrary to both TDX’s Letters of Intent and Vessel Conditional Transfer Documents.  Twenty-one key documents reveal exactly what happened during the critical period, October 19, 2000 through March 30, 2001, during which the federal agencies, TDX and BSE sought to transfer the drydock to one of the Pribilof Aleut corporations. 

 

            Upon completion of the most urgent repairs of the Ex-Competent, TDX and Marisco entered into the Interim Agreement, dated January 2, 2002, before the Ex-Competent began operations.  Later in January, the Ex-Competent lifted the Coast Guard cutter JARVIS, allowing emergency repairs and saving the cutter a trip to the West Coast. Photographs show the Ex-Competent, its control room, machine shop and kitchen available for TDX’s Aleut Apprenticeship Program, heavy-lift cranes, and pumps and old electrical systems still under repair.  After learning of this, in February 2002, the SASP sent TDX the final contract to sign to complete the donation, called the “Distribution Document.”

 

            The Lawsuits

 

            Pacific Shipyards International, a competitor of TDX’s partner in Hawaii fired the first shots in what has become a multi-front litigation battle against TDX’s drydock in Hawaii.  PSI v. TDX and Marisco was filed in Federal District Court in Honolulu.  The PSI case claimed that TDX and its partner were guilty of racketeering.  However, Judge Ezra dismissed the PSI complaint on May 31, 2002, and rejected claims that the Letter of Intent and related documents were fraudulent.  When PSI amended the complaint, Judge Ezra dismissed it again on January 31, 2003.  He subsequently entered an order amending his second dismissal on April 4, 2003.  PSI appealed, but in August 2005, the Ninth Circuit Court of Appeals affirmed the dismissal.

 

            TDX and BSE sued Deidre Huber, the federal agencies (GSA and SBA) and the state SASP on February 14, 2002, by filing a complaint in Federal District Court in Anchorage.  On December 5, 2002, newly-assigned Judge Ralph Beistline dismissed the Huber complaint and entered summary judgment against TDX.  However, a few months later, when GSA sought to seize the drydock, Judge Beistline stayed (placed on hold) his decision on March 4, 2003.  On December 12, 2003, he established a $10,000.00 per month rental value to be paid by TDX into an escrow account and authorized use of the drydock while his 2002 decision is under appeal. TDX submitted a brief to the Court of Appeals asking that Judge Beistline’s December decision be reversed. 

 

The Court of Appeals held a hearing on July 7, 2004 (listen to the arguments).  On July 29, 2004, TDX asked the Court of Appeals to reopen the case and consider two new documents critical to the transfer of the Ex-Competent, documents that had been hidden by GSA officials in Alaska.  The federal agencies opposed that request.  The Court refused the new documents.  On April 21, 2005, a three judge panel of the Court of Appeals issued an opinion affirming Judge Beistline’s decision and ruling that the Ex-Competent’s ownership has reverted to GSA.  The court found plausible evidence that “the people involved—on GSA’s side as well as TDX’s—knew full well that they were transferring to the St. Paul village corporation a vessel that would stay in Hawaii, and that the only misrepresentation made by anyone was when GSA told a senator from Hawaii that the vessel was going to be taken to Alaska.”  However, they ruled that a key document required TDX to move the vessel to Alaska for four years, failing which ownership reverted to the federal government. (In fact the provision they cited says nothing of the kind.)  TDX petitioned for rehearing, which was denied, and it is considering further appeal options.

 

            Meanwhile, back in Hawaii, members of the Pacific Shipyards workforce sued TDX claiming TDX lacked the necessary water permit to operate the drydock.  Federal District Judge Helen Gillmor denied both plaintiffs’ and TDX’s motions for summary judgment in the Rodrigues case on January 5, 2004.  Judge Gillmor issued a stay, delaying trial until the Court of Appeals rules in the Huber case.

 

            Matters turned threatening on September 26, 2003, when the United States filed a complaint against TDX and Marisco charging them with making false statements to obtain federal property, an action under the Federal False Claims Act that seeks damages of more than $15 million dollars, for a drydock the Navy classes as scrap.  On August 16, 2004 the District Judge denied cross motions for summary judgment as to the value of the “conditional title” to the drydock given to TDX; instead Judge Gillmor issued a stay of proceedings until the Court of Appeals issues a ruling in the Huber case, discussed above.

 

            GSA, piling injury on top of insult, issued a proposed debarment order on May 28, 2004, crippling TDX, BSE and Marisco and prohibiting new federal contracts with any of those companies. Incredibly, the debarment began just weeks after GSA wrote to Congressman Don Young assuring him that GSA had not interfered with federal agencies wishing to contract with TDX to use the drydock.  TDX and BSE responded on June 28 showing that GSA has no basis for debarment. The proposed debarment, while under appeal, applied regardless of any connection between a contract and the drydock that is in dispute.  Finally, on August 16, 2004 GSA canceled the proposed debarment. While not admitting error, GSA indicated it would only resume debarment action if new information or developments call for action to protect the government’s interests.

 

            Congress finally stepped in on August 10, 2005, enacting Section 4401 of Pub. L. 109-59.  That law required TDX immediately to relinquish all rights to the Ex-Competent to GSA. The law also required GSA to sell the vessel, subject to a condition that it cannot be used again in United States waters.  (Congress wanted to prevent GSA from repeating this fiasco with another “donee.”)  As a result, TDX conveyed its rights to GSA and, on September 1, 2005, the vessel was towed back to Pearl Harbor for sale.  The new law also reauthorized the Pribilof Islands Transition Act and it authorized $4 million in appropriations to reimburse TDX for its expenses, repairs and improvements made to the Ex-Competent.  Unfortunately, however, no moneys have been paid to TDX and further appropriations legislation will be necessary.

 

            Never have the residents of St. Paul Island had so much attention from the federal government.  Sadly, but perhaps not unexpectedly, that attention as been aimed at blocking them from dealing with the harsh hand that history has given to islanders.  This comes at a time when the Senate is debating a resolution that would have Congress apologize to Native people for the way the federal government has treated them.  If Washington needs a reason to apologize, then our lawmakers need to look westward to St. Paul Island.

 

 

 

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