An attorney for ORI  Anuenue Hale Inc. says Mayor Kirk Caldwell and the city "caved in" to the demands of the U.S. Department of Housing and Urban Development in coming up with a proposed settlement of HUD demands to return about $8 million used to help construct the embattled Wahiawa nonprofit’s Aloha Gardens project.

Nonetheless, attorney William Shipley Jr. said in a letter to city Corporation Counsel Donna Leong on Monday, ORI agreed to the city’s proposal to withdraw the Camp Pineapple 808 portion of Aloha Gardens from the federal Community Development Block Grant program and agree to make the facility open to "other needy constituencies which the (city) serves, and who might benefit from a recreational and therapeutic camp setting."

Only senior citizens and the severely disabled are now allowed to use either Camp Pineapple 808 or the Aloha Gardens Wellness Center, the other component of Aloha Gardens, under the conditions by which ORI received the CDBG grant through the city.

Mark Chandler, HUD’s Honolulu director of community planning and development, issued a letter to the city June 3 demanding that it return the $8 million grant because of what the agency saw as violations or noncompliance with the conditions of the grant. Among the allegations is that ORI not only allowed people other than senior citizens or the severely disabled to use its facilities, but may have committed other violations over the years.

The Chandler report also accused the city of failing to enforce the terms of the CDBG grant and said the city should have investigated strong political ties between ORI and key city officials over the years that could have led to favoritism.

The city, on July 18, responded to HUD that it would be willing to pay $1.88 million in "reimbursement" for taking over Camp Pineapple 808 and allowing other groups to use it since it would no longer fall under CDBG restrictions. The Aloha Gardens Wellness Center would continue to operate under its current arrangement.

Shipley, in his letter Monday, said ORI and its leaders "remain angry and embarrassed by misinformation put out to the media in comments by both HUD and (the city) when each chose to make their letters public."

The city submitted its July 18 response to HUD without consulting with ORI officials beforehand, Shipley said. In fact, ORI attorneys gave the city July 8 a lengthy response to the HUD allegations.

ORI was "astonished" by the city response to HUD, "wherein (the city) caved in to HUD’s demands, making only minimal effort" to defend itself or ORI.

As for HUD’s beef, ORI officials told the Star-Advertiser that they were not even made aware of the requirements prohibiting people other than senior citizens and the severely disabled from using Aloha Gardens until 2011 and that they have taken steps since then to come into compliance with the CDBG requirements.

Chandler, reached late Monday, said he not yet seen the Shipley letter and could not comment on it. He said his office is still studying the city’s proposal.

Shipley’s letter said ORI strongly objects to language in both letters.

He said ORI officials were the most bothered by the criticism that ORI asked for a $90,000 kickback from one of its construction contractors and, separately, made donations to political candidates in exchange for favors.

Shipley’s letter said there is no evidence to support either allegation.

Susanna Cheung, ORI founder and president, has told the Star-Advertiser that KORL Contracting agreed to make a $90,000 donation to ORI after completion of the project after the owner visited the Aloha Gardens site. That is affirmed in a 2004 letter from ORI to KORL that is part of HUD’s documentation, she said.

The donation was never made, but KORL later agreed to forgive a $20,000 outstanding balance that was owed to KORL by ORI.

ORI officials said it is not out of the ordinary for Cheung to ask anyone for contributions to her nonprofit.

ORI never selected KORL and talks between the parties after the contract was executed actually resulted in a lowering of the contract price, proof there was no kickback, Shipley said.

The city, meanwhile, could have asked to see the documents proving there was no kickback but instead responded to HUD by saying it had referred the matter to federal attorneys in 2012.

Shipley’s letter also takes issue with HUD’s accusation that it used its political influence to get city officials in 2010 to forgive $1.2 million in decades-old loans.

ORI principals have made numerous political contributions over the years, many of which were to candidates that have no influence over city policies, Shipley said.

The HUD allegations, "with a couple of exceptions, are almost all pointed at shortcomings on the part of the city, an analysis of its historial oversight practices and its inability to now produce documents that HUD claims the city should have," Shipley told the Star-Advertiser. "The city then turns around and, in its response and comments to the press, says (ORI) is the bad guy, that they’re not cooperating, that they’ve lawyered up, that they’re not providing records."

Far from being unresponsive to the city or HUD as has been characterized in the media, ORI issued a detailed response to each of the allegations on July 8, Shipley said.

"There’s a pattern that runs through the city’s responses to, in effect, try to deflect blame by mischaracterizing (what) HUD really found to be deficient is the city’s practices," he said.

As for ORI’s decision to accept "in principle" the city’s plan to withdraw Camp Pineapple 808 from the CDBG program, Shipley said the nonprofit is OK with other social service groups using the camp so long as they are compatible with the senior citizens and severely disabled adults using the Wellness Center next door.

Details are still being worked out with the city, he said.

City attorney Leong, in a statement, said it has been the city’s intent to reach "an acceptable agreement" with ORI and secure City Council approval of the settlement proposal that is being presented to HUD. ORI’s letter only reiterates what has been discussed in talks between the city and the nonprofit since its July 18 letter to HUD, she said.

"The city remains committed to working towards a constructive resolution to past challenges that were described in HUD’s June 3 letter to the city and the city’s July 18 letter to HUD," Leong said.