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City told to return $8 million in federal housing grants

By Gordon Y.K. Pang

LAST UPDATED: 2:11 p.m. HST, Jun 4, 2013

A scathing 15-page report by the U.S. Department of Housing and Urban Development calls on the city to return nearly $8 million in Community Development Block Grant funds it issued to a Wahiawa-area nonprofit organization.

The report, handed to Mayor Kirk Caldwell on Monday, said Opportunities and Resources Inc. (ORI) Anuenue Hale, the recipient of the funding, consistently failed over several years to comply with the requirements for receiving the money. The report took the city to task for failing to ensure ORI was in compliance.

The report outlines a series of other questionable moves by the city, including the decision to forgive a separate $1.165 million in CDBG loans made by the city to ORI.

Further, the report suggests that pressure from high-ranking city and state officials may have contributed to the lax enforcement of ORI’s CDBG eligibility, and noted that decisions to forgive $1.2 million in ORI loans were made by city employees running for office.

The report also said that there may have been evidence of a “kickback” scheme involving the money.

“ORI has maintained significant support over many years by the direct involvement of high-ranking city and state officials regarding ORI’s projects,” the report said. “The direct involvement of the officials appears to have placed pressure on staff resulting in the city ignoring regulatory violations in favor of completing the project and satisfying ORI’s requests.”

The Aloha Gardens Wellness Center and Camp Pineapple 808 were projects developed by ORI ostensibly to serve elderly and disabled persons, the report said.

But Camp Pineapple 808 was “used and marketed … to individuals and organizations that did not exclusively serve the elderly and disabled” while the wellness center was “underutilized in this regard.”

As late as May, the report said, ORI was marketing Camp Pineapple 808 to the public for weddings, parties, banquets, fundraisers, corporate retreats, conferences and family reunions.

“ORI’s noncompliance and the city’s failure to report the non-compliance (raises) serious questions about the city’s ORI CDBG compliance reviews,” the report said.

City employees, additionally, made several other questionable moves. The most eye-raising involves two amendments made to CDBG contracts with ORI in 2010 that forgave a total of approximately $1.2 million in loans.

“The city made a decision to forgive ORI nearly $1.2 million in CDBG loans in which city employees, running for elected office, were directly involved in approving, developing or recommending the ORI CDBG loan forgiveness while receiving campaign donations from ORI representatives,” the report said.

“The city’s decision to forgive ORI was out of the ordinary, not consistent with the city’s practice to deny loan forgiveness, and processed without established loan forgiven procedures further (raises) questions related to the conflict of interest and the decision to forgive ORI’s CDBG loans.”

The report does not name the city officials running for office.

City officials also allowed nearly $600,000 to be used for an “illegal” parking lot attached to a separate training facility, an ineligible use of CDBG funds, the report said.

The city also awarded $226,680 in CDBG public service funds to ORI for what HUD officials have determined to be “questionable and ineligible CDBG expenses.” That money was supposed to go to services for people with physical or mental disabilities, the report said.

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