Opinion ID: 2514808
Heading Depth: 3
Heading Rank: 1

Heading: 1999 Through Early 2001

Text: Ahtna, Inc. is a regional corporation created under the Alaska Native Claims Settlement Act. In the spring of 1999, Darryl Jordan, then president of Ahtna, Inc., asked Harris to join the company in forming a new Ahtna, Inc. subsidiary, Ahtna Government Services Corporation. Harris agreed. Ahtna Government Services's ostensible purpose was to pursue government contracts under the auspices of the United States Small Business Administration's Section 8(a) program. [1] At this point, Harris was also closely related to two other companies. Harris owned Pacific Native Development Corporation, his wife, Sandra Harris, was its president, [2] and he was an officer, and at certain points, president, of AEI Pacific. Pacific Native Development assisted section 8(a) firms in procuring government contracts, and AEI Pacific was a section 8(a) contracting firm. On May 27, 1999, Ahtna Government Services was incorporated. Ahtna, Inc. owned fifty-one percent of Ahtna Government Services's shares and Harris owned forty-nine percent. Ahtna Government Services's organizational meeting was held in August 1999. The board consisted of five members, including Jordan as chairperson and Harris as president. In the two-year period between Ahtna Government Services's incorporation and Harris's termination, Harris engineered a number of transactions, each of which the trial court determined was self-dealing and unfair to Ahtna Government Services, breaching Harris's fiduciary duty to the company. Following is a summary of these transactions, based on the trial court's findings:
AEI Pacific was the general contractor for a roofing job at Clear Air Force Base that began in the fall of 1999. When AEI Pacific submitted its bid for the work in May of that year, Harris personally guaranteed the bonding for the contract, as did Pacific Native Development. By the time it was awarded the contract, AEI Pacific was insolvent. As president of the company, Harris understood AEI Pacific's financial condition. In November 1999 the Clear project itself was in substantial financial jeopardy, due to significant unpaid bills and the approaching winter. On November 3 Harris, as the president of Ahtna Government Services, signed a subcontract with AEI Pacific committing Ahtna Government Services to complete all remaining work on the project. On November 30 Harris, again in his capacity as Ahtna Government Services president, had Ahtna Government Services pay AEI Pacific's overdue freight bills so that materials could be delivered to complete the project. Despite the extremely cold weather, and against the recommendation of an AEI Pacific employee who had visited the job site, Harris pushed the crew to complete the project through the winter. To postpone the work until spring would have triggered liquidated damages against AEI Pacific, for which Harris would have been personally liable  AEI Pacific was insolvent and Harris had guaranteed the bond. Ahtna Government Services ultimately incurred a $191,000 loss on the project, which the trial court awarded as damages to Ahtna Government Services.
On the same day that he authorized transfer of the Clear project, Harris, in his capacity as Ahtna Government Services president, signed a subcontract committing Ahtna Government Services to complete another AEI Pacific project, at Kulis Air National Guard Base. Due to AEI Pacific's insolvency, the Kulis project was, like the Clear project, plagued by unpaid debts. The Kulis project was independently bonded, but $48,000 of losses could not be collected. Ahtna Government Services therefore incurred a $48,000 loss on the project, which the trial court awarded as damages to Ahtna Government Services.
Pacific Native Development was committed to a lease of office space, a portion of which Harris directed Ahtna Government Services to sublease. At some point Ahtna Government Services assumed the entire lease. The trial court found that the rent Ahtna Government Services paid was excessive because the company did not need more than one-third of the space and that Ahtna Government Services was overcharged by at least $104,000. The trial court awarded these damages to Ahtna Government Services.
Ahtna Government Services rented two vehicles, a Land Rover and a Ford Expedition, from Pacific Native Development at Harris's behest. Ahtna Government Services paid $800 per month for rental of the former and $1,100 per month for rental of the latter. The trial court found that the reasonable monthly rental rates for these vehicles were $300 and $350, respectively. Ahtna Government Services later purchased these vehicles at Harris's behest. It paid $28,585 for the Land Rover, which the trial court valued at $23,185, and $31,150 for the Expedition, the Kelly Blue Book value of which was $18,250. The trial court valued the total overpayment on the cars at $25,400 and awarded that amount to Ahtna Government Services.
Ahtna Government Services was billed for Pacific Native Development employees' time purportedly spent working on Ahtna Government Services projects. Pacific Native Development did not submit time sheets to Ahtna Government Services or provide details about these charges. Harris approved the charges to Ahtna Government Services for Pacific Native Development employees' time. Though he acknowledged that Pacific Native Development employees kept time sheets, and that he had likely saved the time sheets, Harris could not account for the whereabouts of these documents and did not produce them for trial. But Christopher Smith, a former Pacific Native Development employee and later the president of Ahtna Government Services, retained personal copies of his Pacific Native Development time sheets. A comparison of the hours Harris charged Ahtna Government Services for Smith's work with the hours recorded on the time sheets that Smith retained revealed an overcharge of 197 hours. The trial court inferred from this demonstrated overcharge and Harris's failure to produce time sheets that Harris inflated other employees' time as well. The trial court awarded Ahtna Government Services the $50,968.13 that it requested for these unsubstantiated charges.
Harris directed Ahtna Government Services employees to work on his personal boat and used Ahtna Government Services funds to pay his attorney's fees in personal litigation. The trial court awarded Ahtna Government Services $10,472.21 for these charges.
The day before his termination, Harris's wife obtained draft leases for equipment and furniture in Ahtna Government Services's Anchorage, Hawaii, and California offices, and Harris backdated invoices charging Ahtna Government Services $46,685 for the rentals. When an Ahtna Government Services employee refused to sign the backdated leases, Harris himself signed them on behalf of Ahtna Government Services and Harris's wife signed for Pacific Native Development. Notably, two of the leases were backdated to July 1999, which preceded Ahtna Government Services's organizational meeting. The trial court found that these leases overcharged Ahtna Government Services by $40,000 and awarded Ahtna Government Services that amount.