Give us back $8M, feds tell city

After years of threats, federal housing officials are demanding that the city return $8 million in grant money issued to the controversial Hele­mano nonprofit group Opportunities and Resources Inc. Anue­nue Hale.

Besides charging the city with being lax in its monitoring of its Community Development Block Grant agreement with the nonprofit, a scathing 15-page report by the U.S. Department of Housing and Urban Development also said some city officials involved in decisions to forgive $1.2 million in loans — given in addition to the grants — received campaign donations from at least one ORI official.

"ORI has maintained significant support over many years by the direct involvement of high-ranking city and state officials regarding ORI’s projects," said the report delivered to Mayor Kirk Caldwell on Monday. "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."

Caldwell, in response to the report, said he will ask Managing Director Ember Shinn and Corporation Counsel Donna Leong to oversee an internal review of the findings.

While a slew of improprieties is outlined in the report, most of the concerns revolve around two issues:

» The city’s $7.9 million grant to ORI in 2003 to develop the Aloha Gardens Wellness Center and Camp Pineapple 808 ostensibly to serve elderly and disabled persons on acreage next to the Dole Plantation and ORI’s own Hele­mano Plantation. The report said ORI failed to comply with eligibility requirements and that the city failed to correct them despite HUD’s warnings.

» The city’s decision to forgive nearly $1.2 million in CDBG loans in 2010. The report said the decisions were made primarily by city employees running for office.

The HUD report was released on the eve of the City Council’s final deliberations today on the city’s $2 billion operating budget where the biggest fight is over the handling of CDBG funds.

The HUD report pointedly calls into question the city’s ability to manage federal grant money and could play a role in future CDBG funding.

"Records available support the conclusion that the city will not enforce and take action to ensure CDBG program compliance on ORI’s CDBG assisted projects," the report said.

The funding requirements for the Aloha Gardens and Camp Pineapple 808 projects said they were supposed to serve only seniors and the developmentally disabled.

However, 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 last month, 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 noncompliance (raises) serious questions about the city’s ORI CDBG compliance reviews," the report said.

In the past two years, since HUD first gave warnings about noncompliance in a preliminary report, the city has worked with ORI to "increase the appropriate use" of the two facilities, the report said. However, "the city took, and continues to take, no action to enforce its written requirements and ORI operated and continues to operate the facilities in noncompliance with the CDBG national objectives requirements."

The report also states that ORI used CDBG funds to pay for costs not associated with the Aloha Gardens and Camp Pineapple 808 projects, including a private residence and an ORI housing duplex.

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.

As for the forgiving of the $1.2 million in loans, "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 report does not name the campaigners by name, but on the dates the two loans were forgiven, July 26 and Oct. 15, 2010, respectively, then-managing director and later acting Mayor Kirk Caldwell was running for mayor, and current Council Chairman Ernie Martin was in the midst of his successful run for Council while serving as deputy director of the Department of Community Services, which was tasked with monitoring ORI. Mayor Mufi Hannemann resigned to run for governor July 20.

All three had received campaign contributions in recent years from ORI founder Susanna Cheung — $4,200 to Martin, $500 to Caldwell and $6,000 to Hannemann — while Hannemann also received $5,500 from Chief Operating Officer Ann K. Higa.

Martin said in a written statement that because of HUD’s compliance monitoring and the city’s internal audit, he has been advised by city attorney Leong’s office not to make public statements about the issue.

Caldwell, in a written statement, said the ORI problems "span almost a decade." After completion of the internal review, he said, "we will be in a better position to answer specific questions." The mayor did not give a timeline for completion of the review.

ORI officials did not return a call for comment.

Hannemann could not be reached for comment.

Former Mayor Peter Carlisle, in a written statement, called HUD’s concerns "wholly justified." He said his administration tried to cooperate "to the fullest extent possible with HUD" and develop a plan to bring ORI into compliance.

"The loans that were forgiven were part of old loans that had been on the books since the 1990s, and should have been grants in the first place," he said, adding that his campaign never received contributions from Cheung or ORI.

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Letter from the U.S. Department of Housing and Urban Development by mramos6179