City officials are asking the federal housing agency to back off its demand that the city return a $7.9 million grant given to controversial Wahiawa nonprofit ORI Anuenue Hale and instead accept a $1.88 million "reimbursement" for land the city intends to take over.
Federal officials say they are still studying the proposal and have not agreed to accept it.
City Managing Director Ember Shinn hand-delivered a report late Thursday to the U.S. Department of Housing and Urban Development’s Honolulu office that acknowledged that city officials have received political contributions from ORI Anuenue Hale and its officers and that while an internal investigation found no evidence of quid pro quo, the matter is still being investigated by the city Ethics Commission.
Thursday was the deadline for the city to respond to the June 3 demand of HUD Honolulu field office Director Mark Chandler that $7.9 million in Community Development Block Grant funds be returned to HUD because of a series of improprieties. Mayor Kirk Caldwell initiated an internal investigation into the ORI Anuenue Hale situation and paid private detective Steve Goodenow and his Hawaii Investigators Group $80,000 to assist.
At the center of HUD’s concerns is the $7.9 million grant issued to ORI in 2003 by the city under then-Mayor Jeremy Harris to develop the Aloha Gardens Wellness Center and Camp Pineapple 808 to serve elderly and disabled people on 30 acres next to Dole Plantation and ORI’s own Helemano Plantation.
Chandler said both the wellness center and camp have been operated improperly and failed to comply with eligibility requirements of the grant. He was also highly critical of the city’s failure to correct the improprieties despite HUD warnings. He called for the city to reimburse HUD the entire amount and have ORI removed.
Shinn’s report proposes that the city reimburse HUD only $1.88 million, which was largely for the purchase of Camp Pineapple, so it doesn’t have to be put into federal compliance. The city says it will work with ORI to make the remainder of the Aloha Gardens Wellness Center compliant with federal requirements, thereby eliminating the need to reimburse HUD the remainder of the grant.
Shinn told reporters Friday that after taking a tour of the campgrounds, she concluded it is "clean, well maintained … and virtually empty. … It was totally underutilized."
Shinn said the city wants to either work with ORI on bringing the facility into compliance or finding ways the camp could be used to help others in the community, be it youth sports teams in search of convenient but simple accommodations or the homeless.
A HUD spokeswoman confirmed receipt of the city’s response and said the agency would not comment until it had a chance to review it. "At this point HUD has made no decisions regarding the document," said Gene Gibson, HUD regional public affairs officer.
Another concern raised by Chandler’s letter was the city’s 2010 decision to forgive nearly $1.2 million in CDBG loans that were granted to ORI decades ago and had long been outstanding. HUD said the decision to forgive the loans was made primarily by city employees running for office and suggested that the move may have been made in exchange for political contributions.
Caldwell last month removed himself from the city’s internal investigation on the ORI Anuenue Hale issue, noting he himself received a $500 contribution for his unsuccessful 2010 mayoral campaign from ORI Anuenue Hale President Susanna Cheung. Other key city politicos receiving contributions were former Mayor Mufi Hannemann and now-City Council Chairman Ernie Martin, who headed special projects for the city Department of Community Services and was running for Council as the loan was being forgiven.
Shinn told reporters Friday that Caldwell had no recollection of the loan forgiveness and that the investigation found that it was Hannemann, former Deputy Managing Director Trudi Saito, former Human Services Director Debbie Kim Morikawa and Martin who approved the forgiving of the loans.
Shinn said Goodenow was told that it was Hannemann and Saito who broke a stalemate when there was a disagreement between the Budget and Fiscal Services Department and Community Services Department over the decision on whether the loans should be approved.
Asked what proof Goodenow had, Shinn said Goodenow was told by former Budget Director Rix Mauer of a Post-it note written by Saito that said, "Generally speaking, the mayor wants to do this."
Contacted by the Star-Advertiser on Friday, both Hannemann and Saito issued statements insisting they were weighing in only on the propriety of forgiving outstanding loans in general, not on forgiving ORI Anuenue Hale’s loans.
Keeping on the books decades-old loans given to nonprofits without the ability to pay them is "contrary to generally accepted, good business and accounting policy of clearing nonperforming loans as it falsely represents public assets," Saito said.
Hannemann said there was no quid pro quo arrangement with ORI Anuenue Hale: "I didn’t have a problem with the forgiveness of the nonperforming loans as long as it was made available to everyone in a similar predicament."
Hannemann also stressed that "the actual forgiveness" of the loans was done subsequently by Caldwell, who as his managing director succeeded him as mayor when he resigned to run for governor, and then former Mayor Peter Carlisle, who defeated Caldwell in fall 2010 for the remaining two years on Hannemann’s term.
Both Hannemann and Saito noted that Carlisle has also told the Star-Advertiser that he believes the loans should initially have been grants without expectation of repayment.
(Carlisle, unlike Hannemann, Caldwell and Martin, never received contributions from Cheung or other ORI employees.)
The belief by Hannemann, Saito and Carlisle that the loans should have been forgiven, however, runs counter to the assessment Chandler made in his report.
Chandler said Mauer specifically objected to the plan to forgive the loans because it would "raise concerns of favoritism and access to federal funds, especially given the fact that the forgiveness was finalized immediately after an election in which a conflict of interest existed."
The $1.2 million, if repaid, could have been used to finance other worthy nonprofit projects, Chandler said.
Shinn said forgiving of the ORI Anuenue Hale loan was a pilot situation in that it was the first nonprofit to receive such a break under a new set of criteria. But asked by reporters whether it could prove the criteria were set up strictly to help ORI Anuenue Hale or the nonprofit was simply the first to benefit, Shinn said there was none.
Chandler had also raised questions about a possible kickback that Cheung asked of a Pearl City contractor on the project. The contractor last month told the Star-Advertiser that while she never made such a payment, she did forgive the remaining $20,000 due to her company from ORI at the nonprofit’s request.
Shinn said that matter was referred by Carlisle to the U.S. Attorney’s Office in 2012.
Attorneys for both Cheung and ORI Anuenue Hale could not be reached for comment. But previously, Cheung and ORI Anuenue Hale officials have insisted that they have done what they can to abide by an unclear set of rules.
Martin, in a statement, said Shinn’s response was "comprehensive and fair."
"Since neither Goodenow nor city attorneys found any evidence of impropriety," he said, "the focus should once again be the merits of the program."
Councilman Breene Harimoto said he believes the internal investigation by the Caldwell adminstration was a good first step. "I honestly think it’s to the point where people have lost faith and trust in government when things like this happen," he said.
