The Federal Communications Commission has interrupted the monthly subsidy payments it has provided to Hawaii telecommunications company Sandwich Isles Communications Inc. for more than a decade in the wake of federal criminal convictions of company founder Albert Hee, according to federal records.
Sandwich Isles has the license to provide telephone and data services on Hawaiian homelands, and for years the company has relied heavily on those federal subsidies from the Universal Service Fund to support the telecommunications network it uses to deliver services to homesteaders.
Federal records show Sandwich Isles received more than $242 million in “High Cost Support” subsidies from the Universal Service Fund since 2003. Those subsidies are paid out by the fund to support telecommunications companies that operate in rural areas where it is expensive to provide services.
Federal records show the subsidy payments of more than $1.36 million per month continued to flow to Sandwich Isles through May. However, Universal Service Administrative Co. records indicate Sandwich Isles was not issued a High Cost Support subsidy payment from the fund in June, marking the first time in more than 12 years the company was not provided with such a monthly payment.
Laura Betancourt, manager of external relations for the Universal Service Administrative Co., said she could not immediately explain why no payment was made in June to Sandwich Isles. She said her agency would defer to the Federal Communications Commission for guidance on how to respond.
“Typically we don’t give out a lot of information about these kinds of things, especially when it gets into these investigations,” Betancourt said. “Obviously our goal is to protect the integrity of the fund, and if anything comes up that shows that there is questionable activity or areas that have been shown in federal investigations that show there is some sort of compromise of integrity, we follow the orders of the FCC and do what they tell us to do in terms of funding.”
When asked about the missing June payment, Sandwich Isles Chief Executive Officer Janeen-Ann Olds said the company has been working closely with Universal Service Administrative Co. to address their concerns “and our discussions have been productive.”
“Notwithstanding, USAC has continued to provide partial funding to Sandwich Isles Communications so our operations have not been negatively impacted and we continue to deliver telecommunication services to Native Hawaiians living on Hawaiian Home Lands throughout our state,” Olds said in a prepared statement. “We’re confident that we’ll be able to resolve the other outstanding issues with USAC.”
Olds refused to say what kind of “partial funding” USAC provided or how much.
Mark Wigfield, deputy director of the Office of Media Relations for the FCC, declined to comment on the interruption in subsidy payments, saying in an emailed response that “we can’t comment on any holds on USF funding.” He also said the agency “can’t comment on or confirm or deny the existence of any investigation.”
Hee, 61, was convicted in federal court on July 13 in Honolulu of six counts of filing false income tax returns and one count that he corruptly impeded the IRS from correctly calculating and collecting his taxes, offenses that could draw prison terms of up to three years on each count.
Those federal tax charges involved expenses claimed by Waimana Enterprises Inc., a company Hee founded in 1988. Sandwich Isles, which provides services on Hawaiian homelands, is a subsidiary of Waimana.
The FCC has pointedly questioned some of the expenses claimed by Sandwich Isles, and in a 2013 decision the FCC specifically cited Sandwich Isles payments to Waimana as an example of “unreasonable expenses.”
The FCC’s Wireline Competition Bureau complained in that decision that Sandwich Isles was seeking special consideration from the FCC “that would allow it to retain a number of significant and wasteful expenses, totaling many millions of dollars, including significant payments to a number of affiliated and closely-related companies.”
Hee was convicted of concealing from the IRS that Waimana deducted $2.75 million as business expenses that it had paid to cover Hee’s personal expenses. Hee was also convicted of filing false federal tax returns because he failed to list those payments as personal income.
Among the supposed business expenses cited by prosecutors were $718,559 the company paid for college tuition and living expenses for Hee’s three children, $92,000 in payments for massages for Hee and $121,878 in credit card charges made by Hee for personal expenses, according to the federal indictment.
The indictment also listed $722,550 in payments by Waimana as “wages” to Hee’s children, who the indictment alleged actually did little or no work for the company. The indictment also alleged Waimana claimed as wages $590,201 that was paid to Hee’s wife, when she allegedly did no work for the company.
Hee’s conviction has prompted a “review and assessment” by the state Department of Hawaiian Home Lands to determine whether legal problems linked to Hee could affect services for homesteaders.
Paula Aila, DHHL information and community relations officer, said the department has not been notified of any reduction or interruption in federal Universal Service Fund subsidies for Sandwich Isles.
The Hawaiian Homes Commission is scheduled to hear an update on Monday on Maui on the status of the DHHL license to Sandwich Isles and Waimana Enterprises to provide telecommunications services on homelands.
