The city’s municipal leasing program is coming under fire with the recent sentencing of a city concessionaire who pleaded guilty to participating in an elaborate real estate scheme involving seven properties on Oahu and the Big Island.

Sakara Blackwell, the 38-year-old president of Optimum Marketing and Management Corp., the company that holds a city contract to run the Barefoot Beach Cafe at Kapiolani Park through 2018, was sentenced in U.S. District Court to a 30-month prison term Sept. 22. The judge also ordered Blackwell, formerly known as Dawn Sakaguchi, to pay up to $881,755 restitution with the full amount to be determined later.

In addition to Blackwell’s conviction, the registered agent for Optimum, Kekoa Ornellas, served time in prison in California for drug possession.

The criminal records of the beach concession operator’s officials have raised concerns about how the city evaluates concessionaires. The issue takes on added importance as the city considers offering three more concessions at Waikiki pavilions. Critics say the city should exercise more stringent vetting and put additional safeguards in place to prevent a repeat of the red flags that have emerged during the city’s partnership with Optimum.

Blackwell, who also worked as a real estate broker, signed a plea agreement June 9, pleading guilty to two conspiracy charges. Blackwell is currently incarcerated at Federal Correctional Institution, Phoenix, and could not be reached for comment. Her release date is scheduled for Nov. 24, 2017.

Her actions were part of a scheme in which seven mortgaged properties were sold to buyers who were unaware of the encumbrance. According to court records, Blackwell’s co-defendant, Marc Melton, created bogus satisfaction-of-mortgage documents on properties that still had mortgages due. Another co-defendant, Jennifer McTigue, recorded the documents at the Bureau of Conveyances. According to court records, Blackwell would sell the properties, representing that they were free and clear.

According to the indictment, Blackwell deposited money from the scheme into an Optimum banking account.

Still ‘in good standing’

Ornellas, the company’s registered agent, was indicted in 1998 by a Hawaii grand jury for possession of heroin and methamphetamine with intent to distribute. He pleaded guilty and served a short stint at Federal Correctional Institution, Lompoc, in California. According to court records, he was released in April 2001.

Ornellas also accrued several petty misdemeanors. In 1992 he was found guilty of operating a vehicle under the influence of an intoxicating liquor. In 2010 he again was found guilty of operating a vehicle under the influence of an intoxicant. In 2011 he was found guilty of operating a vehicle under the influence of an intoxicant and operating a vehicle after his license had been suspended. Ornellas did not respond to the Honolulu Star-Advertiser’s attempts to contact him via email, phone and in person.

Ornellas’ father, Richard Ornellas, also was a third-party defendant in a related real estate fraud case and agreed in May to pay a $522,000 settlement to Ocwen, a mortgage company.

Tracy Kubota, deputy director at the city Department of Enterprise Services, said Optimum is in compliance with its contracts, so the sentencing has no effect on the company’s business with the city. Contractual requirements mandate that all concessions forward sales and fiscal reports to the city; Kubota said the reports, which are due March 31, will be provided to the Department of Budget and Fiscal Services for review.

"As a concessionaire, Optimum is in good standing with the city," she said.

Kubota said the city will monitor the business for contract compliance, but "who they select to manage the contract is their business decision."

Amid concerns raised about the Optimum contract, the city plans to fill three more Waikiki pavilions with vendors, who would likely be on month-to-month revocable permits. This past spring the city allowed the Waikiki Grass Shack Bistro to open a commercial enterprise in a Kuhio Beach pavilion that had been plagued by homeless campers, crime and drug use. The pavilion concept was modeled after the city’s partnership with Optimum, which produced the Barefoot Beach Cafe.

"We don’t get complaints on the cafe’s service. They are fully compliant with their contract, and since they took the adjacent bathrooms over, we’ve had very few to no complaints about their quality and upkeep," said Guy Kaulukukui, director of the city Department of Enterprise Services. "The pavilion has had its growing pains, but the current concession is providing a good-quality product and I think it’s working out for them as a business and as a model."

Kaulukukui said the city envisions filling the pavilions with services that could provide lockers and sell items like sunscreen, towels, sunglasses, water and other items that beachgoers need.

Debate over expansion

Mark Howard, principal broker and president of Hawaii Americana Realty, said the city’s contract with Optimum needs further probing before officials move to put more businesses in the Kuhio Beach pavilions.

"The Optimum situation is just outrageous," Howard said. "The city needs to put steps in place so that they know that they are dealing with reputable people. Why wouldn’t the city want to know that who they are dealing with is reputable, especially when it comes to taxes and public money and taking away our public spaces?"

Honolulu City Councilwoman Ann Kobayashi said the city needs further oversight of its multimillion-dollar assets. Since concession stands are mostly cash businesses, Koba