Federal agency wants $8 million returned

The U.S. Department of Housing and Urban Development is expected to put the squeeze on the city to return about $8 million in disputed grant money after the Caldwell administration’s announcement late Friday that negotiations with Wahiawa nonprofit ORI Anue­nue Hale have ended.

City Managing Director Ember Shinn told the Hono­lulu Star-Advertiser on Sunday that ORI has been unresponsive and that if the city ends up needing to return any money to HUD, it would conversely seek reimbursement from the nonprofit.

"If HUD is successful in an enforcement action, and it ends up being a judgment against the city, the city has the basis to go after (ORI) for the $8 million," Shinn said.

Attorneys for the embattled nonprofit and its founder, Susanna Cheung, disputed Shinn’s accusation of noncooperation and said it was city officials who walked away from negotiations after ORI refused to agree to pay all money owed to the federal government.

At the center of the dispute is HUD’s accusation that the Aloha Gardens Wellness Center and Camp Pineapple 808, developed with the $8 million, were both operated improperly and failed to comply with eligibility requirements of the grant. HUD official Mark Chandler has also been critical of the city’s failure to correct the deficiencies despite HUD’s warnings.

After the city proposed to pay back HUD $1.88 million, Chandler in September said his agency was willing to accept $2.88 million from the city. Both proposals were contingent on the city purchasing the Camp Pineapple 808 site, thus allowing ORI to continue operations there without being bound by certain restrictions — such as the number of seniors and disabled people who use the camp’s cabins on a monthly basis.

Shinn’s letter to Chandler on Friday said the city would not be able to meet the terms of HUD’s counteroffer because it could not reach any agreement with ORI.

"Regrettably, (ORI) is not willing to make any contribution to the reimbursement to HUD which is a condition to changing the existing agreement with HUD, and the next step in HUD’s process may be referral of this matter for enforcement," she said. The failure to do so was unfortunate, she said, because ORI had made progress toward compliance recently.

Without an agreement on the $2.8 million plan, Shinn said, she expects HUD to seek the entire $8 million back from the city.

"Whatever enforcement action results in, whatever liability against the city is incurred, we will seek reimbursement from ORI," she said.

Shinn’s letter prompted an angry rebuke from Michael Green and William Shipley, attorneys for ORI and Cheung, who called the city’s explanation of the situation as "incomplete and inaccurate."

HUD officials stated clearly in June that their concerns "have more to do with the failures on the part of (the city) in administering its CDBG program than problems that are allegedly attributable to ORI as the recipient of the grant funds," Green and Shipley said in an email to the Star-Advertiser. "ORI used the funds for exactly the purpose intended — to acquire land and do site preparation work for the construction of its Wellness Center and Camp Pineapple 808."

ORI’s attorneys said it has been cooperative and forthright with both HUD and city officials as they looked into "the one issue" HUD raised about the nonprofit: whether use of the facilities complies with HUD program requirements. Even so, "ORI continues to believe that HUD’s concerns are inaccurate and/or overstated," Green and Shipley said.

The nonprofit was willing to discuss with the city the terms of the proposed settlement with HUD but was taken aback when city officials demanded that ORI pay the entire $2.88 million, the ORI attorneys said.

"The money demanded by (the city) would come at the cost of providing services and employment to ORI’s clients — senior citizens and severely disabled adults," they said. "ORI has consistently maintained to the City & County that it would not divert its limited capital from the needs of its clients to solve a problem with HUD of the city’s own making."