A state license awarded to businessman Albert Hee to provide telecommunications services on Hawaiian homelands requires that Hee apply some of his profits to job training and education programs for Native Hawaiians, but Hee now says his company has never actually paid out any benefits under that provision.

Hee told Hawaiian Homes Commission members last month he never provided the minimum 0.5 percent of profits from his homelands operations for education and training as required in his 1998 license agreement because his company, Sandwich Isles Communications Inc., never made a profit.

Commission members asked Hee more than a year ago for financial records to independently determine whether Sandwich Isles is profitable, but Hee said he never provided that information to the commission because he could not be sure those records would be kept confidential.

Hawaiian Homes Commissioner William K. Richardson said in an interview last week that Hee’s claim that Sandwich Isles was never profitable is “extremely questionable given the amount of subsidy that they get” from the federal government. Federal records show Sandwich Isles has received more than $242 million in federal subsidies since 2003 to support its phone and data network that now serves about 3,600 customers on Hawaiian homelands.

Hawaiian Homes has said it is planning a “review and assessment” of Sandwich Isles in the wake of Hee’s criminal convictions in July on seven federal tax charges, and a spokeswoman for Hawaiian Homes said the agency is now seeking “specialized legal expertise” to assist Hawaiian Home Lands with issues related to the company.

Richardson contends Hawaiian Homes should require Hee to open his books to determine if money is owed for training and education programs, and Hee told the commission he is willing to do so if the commission will assure the company’s financial information will not become public.

Sandwich Isles Chief Executive Officer Janeen-Ann Olds reminded the commission that Sandwich Isles has sunk nearly $200 million into telecommunications improvements on Hawaiian homelands, and provided service to homesteaders in isolated areas that Hawaiian Telcom did not serve.

“If Sandwich Isles was not doing what it does now and what it has done in the past for Hawaiian Homes, where would our homesteaders be? They wouldn’t be part of the information highway,” Olds said.

The exchange between Hee, Olds and the commission comes as new details have surfaced in connection with IRS investigations into another company Hee founded called Waimana Enterprises Inc., which allegedly used corporate funds to pay for jewelry, artwork, country club memberships, vehicles for use by executives, lobbying and other expenses.

Sandwich Isles Communications is a subsidiary of Waimana, and both the IRS and the Federal Communications Commission have questioned millions of dollars in payments by Sandwich Isles to Waimana over the years.

An FCC ruling in 2013 specifically cited payments by Sandwich Isles to Waimana Enterprises from 2009 to 2011 as an example of what it called “unreasonable expenses totaling many many millions of dollars.” An IRS auditor in 2009 also flagged payments by Sandwich Isles to Waimana, concluding that “expenses are being paid for unsubstantiated services,” according to federal court records.

Hee, 61, was convicted July 13 in federal court 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.

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 “false wages” to Hee’s children, whom 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 convictions prompted the FCC this summer to suspend federal subsidy payments to Sandwich Isles that are worth about $1.36 million per month. In an Aug. 7 letter to Sandwich Isles announcing the suspension of payments, federal officials specifically cited concerns about fees paid by Sandwich Isles to affiliates such as Waimana, and said they plan to investigate whether Sandwich Isles’ transactions from 2002 to 2015 complied with FCC rules.

Hee told the commission last month his lawyers warned him not to discuss his criminal case publicly because it could affect his sentencing scheduled for Nov. 30.

“I’ll leave it to others to decide why I may or may not have been singled out, but my life has been to help Hawaiian Homes with infrastructure costs, and I’m not ashamed of it, and to the best of my ability I’ll continue to do that, and we’ll see where this thing takes me,” Hee told the commission.

Olds assured the commission that despite the interruption in monthly federal subsidy payments, the company’s financial position is “solid.” However, if the suspension of federal subsidies for Sandwich Isles remains in effect indefinitely, “at some point down the line (it) would have an impact on our financial condition, and we’d have to look at other alternatives as far as funding it,” she said.

“From what we have been advised, we’re very confident to be able to resolve this in more than enough time,” she said.

However, Richardson said he believes Sandwich Isles may not survive its escalating problems. He said he has discussed that possibility with his fellow Hawaiian Homes commissioners.

“I personally believe that they are in so much trouble that there is a significant possibility that SIC may fail, and if the company fails, then I think it’s required under our fiduciary duty at DHHL to be prepared to reacquire the plant and somehow keep services flowing under different management,” Richardson said.

“I’ve had problems with this contract from the day I walked into DHHL. It’s a perpetual license for no fee, which is just crazy,” he said. Richardson is a Honolulu lawyer and interim director of technology transfer at the University of Hawaii.

Recent federal court filings include portions of a 2009 internal IRS auditor’s report entitled “Badges of Fraud for Waimana Enterprises Inc.” that noted Waimana billed expenses to Sandwich Isles that included meals and entertainment, country club membership dues for executives and lobbying expenses.

Waimana also billed Sandwich Isles $780,000 per year for “office expenses” that included charitable and political donations, and billed Sandwich Isles for federal taxes that were actually owed by Waimana, according to the report.

The auditor also questioned “unsubstantiated expenses incurred by Mr. Hee” that were billed to Sandwich Isles, and questioned loans totaling $450,000 that Sandwich Isles made to employee Harold C. Johnston as part of his employment agreement. The loan was later transferred to Waimana but had not been collected eight years after it was due to be paid off, and the IRS auditor wrote that “it appears the loan is forgiven,” according to court records.

At the time of the 2009 IRS report, Hee was president and owner of Waimana, and also president, secretary and director of Sandwich Isles. Olds, who is also a trustee of Kamehameha Schools, was later named president and CEO of Sandwich Isles.