Internal squabbling is nothing new at the Office of Hawaiian Affairs. But now one trustee has filed a formal ethics complaint against a fellow trustee over what she says are shady dealings in a $21 million property purchase.

The complaint by Rowena Akana against Haunani Apoliona is pending before the Hawaii State Ethics Commission.

Akana alleges that Apoliona should not have voted last year to approve purchase of the Gentry Pacific Design Center because she sits on the board of directors for Bank of Hawaii, OHA’s financer of the purchase.

In her July 17 letter to the Ethics Commission, Akana argues that Apoliona’s vote is “a clear violation” of the state’s Ethics Code known as Chapter 84.

But Apoliona and other OHA officials say she was not in conflict because her vote came before OHA knew who its financer would be. Bank of Hawaii was competing against First Hawaiian Bank and Central Pacific Bank at the time.

Apoliona’s position is strongly backed by OHA Chairwoman Colette Machado, Trustee Ozwald Stender and Board of Trustee Counsel Robert Klein.

In a conference call with Civil Beat Wednesday — with Apoliona, Stender, Klein, legal counsel Ernie Kimoto and communications manager Garett Kamemoto on the line — Machado said both she and Apoliona, the prior chairwoman, have “always been transparent.”

She said the Gentry purchase was one of OHA’s first commercial acquisitions, and “we went through this with an uku (lice) comb. … We were looking to give us a high profile to show that we could do business and generate revenue for our people.”

Les Kondo, executive director for the Ethics Commission, said the commission is in the process of “investigating and deciding where further action is appropriate.”

Property Overvalued?

For those familiar with OHA, it is common knowledge that Akana has frequently clashed with Apoliona and Machado.

What’s different about the ethics complaint is that it involves a big purchase of a well-known property. OHA closed on its $21.37 million purchase of the Gentry Pacific Design Center last August. According to Pacific Business News, “The 185,787-square-foot building at 560 N. Nimitz Highway and its three parcels had been assessed for about $28.8 million in 2008, according to tax records.”

The purchase also came not long after OHA reached agreement with the state to accept 10 parcels in Kakaako Makai to settle past-due ceded land claims totaling $200 million.

In her complaint — which was filed a month before the purchase — Akana argues that OHA was not proposing to buy all of the Gentry parcels “therefore, the purchase amount is lower.”

Office of Hawaiian Affairs

Trustee Rowena Akana

Trustee Carmen Hulu Lindsey agrees that the property was not as valuable as assessed.

“I thought it was overpriced,” said Lindsey, a real estate broker and former state and Maui County official. “I proposed that we pay $18 million.”

The other trustee who opposed the purchase, Robert Lindsey (a distant relative of Hulu Lindsey’s), left a voice message with Civil Beat Wednesday acknowledging his “no” vote along with Lindsey’s and Akana’s.

“On the Gentry conversation I was with the minority, and we got outvoted fair and square, in my view,” he said. “Yes, I did have concerns about the starting price. I thought that we could maybe have gone into the negotiations using a lower number. But that didn’t happen.”

Robert Lindsey added, “Other colleagues felt differently. I honor their position, and I am very hopeful about the future as regarding the Gentry purchase by OHA.”

Not so Akana.

In her complaint and in interviews with Civil Beat, the trustee pointed out that Klein had ruled that Apoliona had a conflict of interest when the purchase was put to a vote at a May 17 board meeting in Kauai. According to Akana, Bank of Hawaii was specifically identified on the meeting’s agenda.

With Apoliona recused, four trustees voted for the purchase while Akana and the two Lindseys voted against it. But five votes were necessary for approval by the nine-member board, and Trustee Donald Cataluna was too ill to attend.

Less than a month later, at June 7 board meeting in Honolulu, the issue came up again. This time, Akana alleges, Stender “took out any references to Bank of Hawaii within the proposal.” Klein then determined that Apoliona no longer had a conflict.

The Gentry proposal was approved 5-3. (Cataluna abstained.)

At the July 5 board meeting, it was announced that Bank of Hawaii would finance the project because it offered the best loan rate.

“However, the fact remains that the Administration, and possibly Trustee Apoliona, knew this before the June 7, 2012 authorization vote was taken,” Akana alleges in her complaint.

Not A Done Deal

Not true, according to OHA administration.

Klein said the purchase was far from a “done deal” at the Kauai meeting in May. By the Honolulu meeting in June, negotiations were still continuing.

“It was still a race as to who would provide us with best credit to make the acquisition,” said Klein, a former Hawaii Supreme Court justice. “Akana tries to make it sound like something sinister, as if a decision had already been made. That is pure speculation without any foundation whatsoever. The administration worked long and hard even after June 7 to close the deal. The trustees did not become part of that decision-making process.”

Klein also said that Apoliona “was always clear” in asking for an opinion on recusal.

Office of Hawaiian Affairs

Trustee Haunani Apoliona

Akana is attempting to obtain the minutes of the OHA meetings addressing the Gentry purchase. Because they were held in executive session, however, there is a lag time before minutes are posted to OHA’s website. (OHA is a public agency.)

“We are working on that,” said Klein, who explained that the minutes contain confidential matters not necessarily tied to the Gentry deal. “We have to go through a redaction process, something that law allows us to do.”

Klein suggested the redactions might be done later this month, but at that point during the conference call OHA attorney Kimoto cautioned that there was still an active investigation by the Ethics Commission, which has in its possession “the minutes and more.” Not knowing what the commission would do, Kimoto urged Klein to not promise a specific time frame for release of the minutes.

Akana is not the only trustee with a complaint.

In an Aug. 22 confidential memo from Machado to Akana, the chairwoman makes clear just how upset she was with her fellow trustee. The memo focuses on an Aug. 1 letter Akana sent to Dawn Suyenaga, the chief operating officer for the seller of the Gentry property.

Machado wrote that Akana’s letter could have breached the sale contract and expose Akana “to a possible claim for tortiuous interference with contractural relations. Had the transaction been breached, lost profits to OHA would be measured in terms of millions of dollars.”

Machado calls Akana’s conduct “reckless” and not in the interest of OHA beneficiaries. Akana’s allegations against Apoliona, she said, “are harmful to her reputation and are libelous.”

She defends Stender, too, against Akana’s allegations “that he ‘was working behind the scenes’ to buy the property and that somehow OHA had misled its beneficiaries. You cite no facts whatsoever in your smear of Trustee Stender.”

‘Sour Grapes’

Akana is not backing off on her criticisms of the OHA administration.

She said Klein’s opinion on Apoliona’s votes “won’t stand up in a court of law.”

She says she has been disappointed with Klein as OHA’s attorney and thinks he profits off the agency.

As for Stender, she said he pushed the Gentry deal.

“The building was not even up for sale, and all of a sudden there it was. In 2011 he said, ‘Oh, we should take a look at the Gentry building, yada, yada’ — this was before deal with the governor. And so we went and looked at it and said we don’t want to move there. He wanted us to relocate offices. But we said no, buy it cheap as an investment, but we do not want to move there.”

Akana thought the Gentry proposal was dead. Instead, negotiations were underway for purchase in 2012.

Asked about the suggestion that they might have somehow profited from the Gentry deal, Klein and Stender vigorously denied it.

“My law firm does not represent the Bank of Hawaii,” said Klein. “I represent the OHA Board of Trustess, and I highly resent any implication that I would have gained anything. Also, I don’t get to vote for these things, so how I would I possibly benefit from something I couldn’t even vote on?”

Said Stender: “It’s so unfortunate that she makes that kind of statement. I know better than that. I am a trustee of this trust. It would be highly inappropriate for me to even consider that. I’m kind of insulted.”

“It’s about sour grapes,” said Machado. “I told that to her face.”

Akana has tried to get her side of the story out before. It included a column Akana submitted to the December 2012 issue of Ka Wai Ola, the OHA newsletter, in which she brought up Gentry. But it was edited out of the published version. (Both versions are reproduced below.)

Kamemoto, the OHA communications manager, said the board’s executive policy manual states that articles expressing the personal views of trustees “are encouraged” but must avoid “inflammatory attacks” and cannot include confidential matters “such as items appropriate for executive session.”

OHA interoffice memorandum to Rowena Akana
from Colette Machado, Aug. 22, 2012.

Rowena Akana’s complaint about Haunani Apoliona to Ethics Commission,
July 12, 2012; and Akana December 2012 Kai Wai Ola columns, pre- and post-edit.

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