Oversight of telecom firm fails

The conviction of Albert Hee, the Sandwich Isles Communications Inc. founder who bilked millions of dollars meant to provide telephone and data services on Hawaiian homelands, has become a glaring example of gross mismanagement and lack of oversight of federal funds.

Last month, Hee, 61, was convicted in federal court in Honolulu on six counts of filing false income tax returns and one count that he corruptly impeded the IRS from correctly calculating his taxes. Yet his conviction only raises broader questions that deserve immediate attention:

>> How was Hee’s company able to acquire more than $242 million in “High Cost Support” federal subsidies since 2003 with relatively scant oversight?

>> How was Hee able to siphon, according to court records, $2.75 million for personal expenses, including $718,559 for his kids’ college tuition and $722,550 in false wages paid to his children, who did no work for his company? Not to mention the $92,000 worth of massages for Hee and $590,201 in false wages paid to his wife, who also did not work for his company.

>> Why did it take take an investigation by the Internal Revenue Service — and not the Federal Communications Commission, which oversees the Universal Service Fund (USF) that provided subsidies to Hee’s company — to uncover Hee’s misdeeds?

>> Why aren’t the managers of the USF, which is funded by federal surcharges that telephone consumers pay, able or willing to say how much funding, if any, is still being funneled to Sandwich Isles?

>> How does the FCC get away with its refusal to comment or to confirm or deny the existence of any investigation?

The FCC’s lack of transparency and poor stewardship of the Universal Service Fund, at least in this case, are appalling.

Back in 2013, the FCC questioned some of the expenses claimed by Sandwich Isles and cited payments to Waimana Enterprises, a company Hee founded in 1988 as “unreasonable expenses.” Sandwich Isles is a subsidiary of Waimana.

Even after it raised those red flags, the $1.36 million monthly subsidy payments to Sandwich Isles continued uninterrupted.

The money kept flowing through this May, even though a federal indictment of Hee that was announced in December 2014 alleged that from 2002 to 2012, the Honolulu businessman tapped Waimana Enterprises to pay $4 million of his personal expenses.

The FCC apparently has interrupted the monthly subsidy payments it has provided to Sandwich Isles Communications since 2003, halting the June payment. But in a statement, Sandwich Isles confirmed that the Universal Service Administrative Co., which handles USF dispersements, has continued to provide partial funding so that its operations have not been negatively impacted.

It is still unclear to what extent Sandwich Isles has held up its end of the contract to provide telephone and data services to Hawaiian homelands. Has the scope of its work measured up to the $242 million in federal subsidies it has received for more than a decade?

The “High Cost Support” subsidies are paid out by the USF to support telecommunications companies that operate in rural areas where it is expensive to provide services.

In 2002, even Forbes took notice of Hee, then a first-time telecom entrepreneur building the newest leg of a $500 million fiber-optic network that would bring high-speed Internet access and cheap phone service to 225 households at Laiopua.

The article’s subheadline stated: “While foolhardy telecom chiefs choked their companies with debt to fund broadband rollouts, Al Hee contrived to have the U.S. government subsidize his state-of-the-art network.”

In that article, Hee said that his venture wasn’t completely about making money, but that he “wanted to do something for my people, to change things for the community of Hawaiians.”

That statement underscores the importance of the mission Sandwich Isles was given: To provide services to Native Hawaiians in the most rural areas — not to line the pockets of its founder.