Jury finds Nome woman committed fraud, breech of fiduciary duty in civil lawsuit
Last week, Trudy Sobocienski, the former CEO of the Holy Cross Native Corporation Deloycheet, Inc., stood a civil trial in Anchorage, accused of fraud, conspiracy to commit fraud, breach of fiduciary duties, conversion and unfair trade practices, causing Deloycheet to loose at least $400,000.
After three days of hearing evidence at the trial, the jury found that Sobocienski did engage in the alleged acts, awarded damages to Deloycheet in the amount of $32,490 and of punitive damages at $5,000.
According to an amended complaint, in the court case of Deloycheet vs. Trudy Sobocienski, Sobocienski transferred $400,000 from Deloycheet’s operations account as a loan to a Virginia company called Sylvain Analytics Inc. without Deloycheet’s board approval and without disclosing her working relationship with the company receiving the money.
According to the complaint, Sobocienski and a co-worker called Corbett “Jim” Beach also caused Holy Cross Oil Inc., a Deloycheet subsidiary, to make four wire transfers totaling $100,000 without documentation in place that Holy Cross Oil would own 20 percent in Sylvain Analytics, as presented to the Holy Cross Oil board. That investment was changed into a ‘loan’ without proper loan documentation. Eventually, the $100,000 were paid back. A court action against Beach was stayed when he declared bankruptcy last year.
While employed at Deloycheet, Sobocienski began working as a management consultant for Sylvain Analytics. While still on the Deloycheet payroll, Sobociencski and Beach created a consulting company called Alaska Native Enterprise Developers LLC and sent a proposal for ANED to work for Sylvain Analytics, according to court documents. In addition, both plotted to leave Deloycheet but first put in place a severance agreement.
“Around the end of January or early February, and knowing that they planned to leave Deloycheet, Sobocienski and Beach fraudulently caused Deloycheet to amend their employment agreements to independent contractor agreements which included severance not just when the company terminates their employment, but when they voluntarily chose to no longer work for Deloycheet,” reads the complaint.
According to the complaint, after submitting their resignation notices to Deloycheet on May 15, 2012, effective May 25, Sobocienski and Beach caused Deloycheet to wire $400,000 without board approval or the board’s knowledge to Sylvain Analytics on May 21, 2012.
After leaving Deloycheet, both Beach and Sobocienski demanded but did not receive their severance pay, worth $125,000.
Sylvain Analytics has not returned the $400,000 despite repeated demands, according to Deloycheet’s lawyers.
The court action was filed in July 2014. Deloycheet, represented by lawyers with Dorsey & Whitney LLP, while Sobocienski represented herself in the civil proceedings in Judge Eric Aarseth’s court room last week.
According to Alaska CourtView, Sobocienski filed for bankruptcy with the court on April 7. In response to the filing, the court stayed any further action in the case.
Although Sobocienski defrauded Deloycheet Inc., the case has caused ripples extending to Nome. Sobocienski is a current board member of Sitnasuak Native Corporation, and a member of the SNC Finance and Land Committees. Sobocienski’s employment with Deloycheet was at the center of an investigation by the Alaska Dept. of Commerce, Community and Economic Development, Division of Banking and Securities. The division found that SNC violated provisions of the Alaska Securities Act when it did not disclose in the 2014 board of director proxy solicitation that Trudy Sobocienski had been the CEO of Deloycheet, Inc. from 2010 until 2012. According to documents from the state, Sobocienski did disclose her employment with Deloycheet, but SNC failed to include the information on the proxies when Sobocienski ran for the board.
Deloycheet filed their civil lawsuit in July 2013.
In 2014 Sobocienski was elected to the SNC board of directors by discretionary proxy votes, a practice that has become controversial. According to an open letter published in September 2014 in the Nome Nugget, 14 SNC shareholders alleged that Sobocienski gained the board seat when another board member used a large number of discretionary proxies to secure her election over several other contenders. Marie Tozier, a SNC shareholder who was one of the 14 who had signed the letter, said that in retribution, the SNC board did not allow her to run for a board of director’s seat the following year. According to an email exchange with SNC, Tozier asked for the reason of her exclusion. A shareholder relations coordinator answered, “The choice to not place you on the Sitnasuak 2015 board solicited proxy is not information that corporation [sic] needs to disclose.” In light of the recent verdict, Tozier calls for Sobocienski’s resignation. “I think she should resign and the board needs to seriously look at discretionary proxies,” Tozier said.
A Government Accountability Office report from 2013 on Alaska Native Regional Corporations explains that nine out of the 13 ANCSA regional corporations use discretionary proxies, but all use cumulative voting for their elections of directors. Discretionary proxy votes means that shareholders may grant the board or other specified proxy holders discretion to cast their votes as the proxy holders see fit.
In 2015, SNC again failed to include Sobocienski’s former employment at Deloycheet on the 2015 Notice of Annual meeting and statement, which included information about current board members.
The state issued an order in January and stipulated that SNC is to cease and desist from omitting mandatory disclosures in its proxy solicitations and to comply with all provisions of the Alaska Securities Act. SNC was ordered to pay a civil penalty of $1,000.
SNC President Michael Orr, in an email to the Nome Nugget, said that Sitnasuak Native Corporation reached a settlement with the State of Alaska Division of Banking & Securities on the matter of the 2014 and 2015 proxy statements. “We have improved our process in 2016 and will make all required disclosures to our shareholders,” he wrote.
Seeking comment from Trudy Sobocienski, she asked to delay all statements to a later date in time and then deferred to her attorney as she at press time was in a hospital.
Michael Orr said in an email exchange with the Nugget that SNC was not involved in the ongoing litigation and stated “We will continue to monitor the situation as it continues to develop.”
Asked about the consequences the recent verdict may or may not have on SNC, Orr responded, “There are eleven members of the Sitnasuak Native Corporation Board of Directors, which will continue to perform its duties as the governing body of the Corporation. The Board, through its Chairman, oversees a team of professional executives responsible for the day to day management of the Corporation. Furthermore, the Corporation maintains extensive internal controls, put in place to maintain the integrity of the financial information put forward to shareholders.”
Update: Sobocienski settled with Deloycheet by paying $40,000 as a settlement outside of court. The lawsuit was dismissed with prejudice on August 17, 2017.