Labor organization ‘greatly concerned’ about UPW audit

A national labor organization has raised red flags over record keeping and spending by some top staff in the United Public Workers union in Hawaii, citing tens of thousands of dollars in union funds spent on restaurants, airfare and other costs without proper supporting documentation.

Auditors with the national labor organization American Federation of State, County and Municipal Employees became “greatly concerned” after reviewing more than two years of internal financial records for the UPW last year, and suggested the UPW executive board consider seeking repayment from four staff members of the union.

“There does not appear to be meaningful oversight on how funds are spent and accounted for, and as detailed below, the opportunity for abuse or misuse of union funds exists as a result,” the AFSCME audit department wrote in its review of the UPW finances.

The 25-page report obtained by the Honolulu Star-Advertiser describes nearly $293,000 that was spent on airfare from January 2017 to July 2019, and singled out spending by UPW State Director Dayton Nakanelua on one union credit card that included $26,659 for meals during that period.

“Many charges for meals, which were reported on expense reports were either not supported by a receipt, did not document attendees and union business purpose, or both,” according to the Dec. 19 report by AFSCME.

Nakanelua declined to discuss details of the report in an interview Monday because the audit was supposed to be an internal report that deals with confidential union records. However, Nakanelua said that he personally accepts “sole and full responsibility for the findings and the deficiencies pointed out by the AFSCME audit.”

The UPW has about 13,000 members statewide and represents unionized county, state and private- sector workers.

The audit report makes no mention of any criminal wrongdoing, but UPW members may be particularly alarmed at its findings because of the union’s history. Longtime UPW State Director Gary Rodrigues was convicted in 2002 of conspiracy, embezzling union money, money laundering and health care fraud.

Rodrigues served more than four years in federal prison and also paid $378,000 in restitution to the union.

The December audit report said union officials initially failed to provide supporting documentation for thousands of dollars in expenses but later submitted supporting documentation for many of the costs.

Nakanelua, for example, put nearly $30,000 on one union credit card but eventually provided receipts for all of that spending except for $1,220.64. He submitted a “certification” document for that last amount, but that was deemed unacceptable by the auditors.

“The lack of substantiation for expenses” meant it was not possible to determine whether $13,653 spent by Nakanelua was for legitimate union business, according to the auditors. The same criticism applied to $18,807 spent by Executive Assistant Clifford Uwaine and $1,655 spent by Oahu Division Director Loyna Kamakeeaina, according to the report.

The report also cited $400.36 in personal charges Nakanelua made with another union credit card, and remarked that “although he timely reimbursed the local, personal use must not be allowed.”

The practices cited in the report are “in clear violation of the (AFSCME) Financial Standards Code, and are of serious concern,” the report states.

The report also questioned $88,871 in reimbursements paid to Fiscal Administrator Jeanne Endo from 2017 to 2019. Endo used her personal credit card to make purchases of office supplies, gifts, Christmas decorations, airfare for union members and other expenses.

She was then reimbursed by the union, according to the report, but “the union business purpose of the items reimbursed was in many instances not noted, and it is not possible to determine if any purchases were personal.”

The report cited “exceedingly high” legal costs for the union local, including nearly $4.49 million paid to the firm Takahashi and Covert from 2017 to mid-2019.

When the auditors asked union officials for contracts and retainer agreements, “there were no retainer agreements on file nor signed contracts that detail their rate and the type of services they perform for the Local,” according to the audit report.

As for the airfare costs, “the local may want to consider tele-conferencing or other mediums to reduce the costs of actual meetings,” according to the report.

Nakanelua said about half of the concerns raised by the auditor already have been addressed, and the union executive board was presented with the entire audit report in a meeting Feb. 15.

The report suggested that the board consider seeking some reimbursements from Nakanelua and three other staff members, but Nakanelua said the board decided against that after hearing from the four.

The staff had obtained receipts from a travel agency for expenses that had been questioned by the auditor, and the board concluded those were “legitimate union expenses,” he said.

Nakanelua also said he is planning a series of meetings to brief the membership on the findings of the audit and what is being done about them. “I have, in my view, an obligation to get out to the membership to provide a report to the membership,” he said.