Financial disclosure forms are the basis by which the public can judge possible conflicts of interest for elected officials.

Civil Beat exposed flaws with the forms at the state level. It found lawmakers not reporting stock they owned or listing any dependents with stocks or mutual funds and errors in the reporting of the value of real estate investments.

An examination of the disclosures of Honolulu’s nine City Council members reveals that there are also problems at the local level.

Part of the problem may be that the language in some of the questions on the forms isn’t as straightforward as it could be, according to Chuck Totto, executive director for the city ethics commission.

“I guess the normal practice is that we’d be relying on whatever the interpretation of the filer is,” Totto said. “That interpretation then is going to be at varying levels of sophistication… A lot of this is an honor system. That may sound naive, or even ridiculous in this day and age. But hopefully, especially at the high levels of government, people are watching each other and requiring one another to make sure those disclosures get in.”

Although several of the provisions are clear — for example, the form says to list all sources of income of $1,000 or more with some specific exemptions — others are less so.

The third provision on the form, asking filers to list any ownerships or interests in businesses in the state, is presented in legalese that even Totto had trouble deciphering.

It states: “Only report ownerships or beneficial interests having a value of $5,000 or more or equal to 10 percent or more of ownership of businesses incorporated, regulated, or licensed to carry on business in Hawaii. Do not report accounts in federal or state regulated financial institutions, mutual insurance policies, or individual items in a mutual fund or blind trust, if the fund or trust is disclosed under this item.”

Would council members be required to report, say, stock ownership in a company like Apple, which is incorporated in California but has stores in Hawaii? Does this mean members wouldn’t have had to disclose stock held in Walmart before the company opened in Hawaii? What about businesses that operate online, like Amazon?

“It is a relatively sophisticated legal issue,” Totto told Civil Beat. “And it could be stated more clearly. It’s been a long time since the directions or instructions for the financial disclosure have been re-written.”

As it turns out, the third provision on the disclosure requires council members to report stock in any business that operates in Hawaii. Any business that pays a general excise tax must be licensed with the state and all businesses must pay the tax.

On the disclosures, though, not a single member lists stocks in excess of $5,000.

Real Estate

Another example of confusion comes with the required disclosure of real estate investments.

Members are required to detail all their property, other than their personal residence. But District 5’s representative, Ann Kobayashi, undervalued some of her properties because she wasn’t aware she had to update the forms as the values of the properties increased.

For one home she listed, she said the value was from $300,000 to $399,999, but its assessed value by the City and County of Honolulu Real Property Tax Division was actually $725,900. Another property valued by Kobayashi between $400,000 and $499,999 had an actual assessed value of $895,000.

Kobayashi told Civil Beat she hadn’t updated the values of the properties listed on the disclosure since she was first elected to the council in 2002. She and her spouse obtained the properties in 1975 and 1967, respectively. Because she hadn’t sold the properties, and her personal investment in them hadn’t been altered, she didn’t know she was supposed to. She said she would update the forms after being made aware of the discrepancy.

Despite the problems with the forms, Totto says it is better to have them than not have them. Most of the time, simple mistakes can be corrected and are unintentional.