An $80,000 private investigator and hundreds of hours of scrutiny by attorneys have left key questions unanswered in the ongoing scandal involving the City and County of Honolulu and a Central Oahu nonprofit that received nearly $8 million in federal grants to serve the elderly and the developmentally disabled.

The city and ORI Anuenue Hale have long been at odds with the U.S. Department of Housing and Urban Development. Two points of contention have been ORI’s use of federal Community Development Block Grant money and whether the nonprofit had undue influence inside city hall, where oversight was lax and questionable decisions were made involving millions of dollars in government funds.

In a June 3 letter, HUD suggested that it was fed up and demanded that the city pay back nearly $7.9 million in funds from the community block grants.

That came after the agency found that the grant funds had been mismanaged on the city’s watch and that the nonprofit wasn’t fulfilling its promises about who it would serve and how many people it would help. There were also concerns that ORI had solicited kickbacks and used political campaign contributions to get preferential treatment from city officials when securing a $1.2 million loan-forgiveness deal.

On Friday, the city responded to HUD’s letter with a 148-page report that detailed its own internal investigation into the matter. Honolulu Mayor Kirk Caldwell recused himself from the investigation because he was former mayor Mufi Hannemann’s managing director around the time ORI’s loan debt was forgiven.

But the report does not offer any definitive answers to some of the most controversial questions raised during HUD’s probe of ORI, such as whether the city or ORI engaged in any wrongdoing.

For one, current city officials still don’t know exactly why a previous administration decided to write-off $1.2 million in community block grant loans. Documents and witness interviews indicate that the loan forgiveness was part of a “pilot project” to convert the loans to grants, but no explanation was given to explain why ORI was the sole beneficiary. The city had never before done anything like this.

Many high-ranking officials in Honolulu were involved in the decision-making, some of whom were getting campaign contributions from ORI President Susanna Cheung and her affiliates.

According to city officials, a Post-It note discovered during the city’s investigation said that Hannemann “wants to do this.” It was written by then-Deputy Managing Director Trudi Saito and meant to resolve a conflict between the Community Services Department and the Department of Budget and Fiscal Services, which doubted the logic of forgiving ORI’s loan.

Hannemann has received thousands of dollars from Cheung over the years, as have other city officials who were running for office, including current Honolulu City Council Chair Ernie Martin, who at the time of the loan-forgiveness was the head of the Office of Special Projects.

Cheung had also given money to other city council members, including Ann Kobayashi, Rod Tam, Romy Cachola and Charles Djou. In 2009, she gave Caldwell $500 for his 2010 mayoral campaign.

Despite HUD’s concerns about potential conflicts of interest surrounding these donations, the city’s investigation dismissed the idea that the money influenced any decisions.

“Our research disclosed many City officials and employees who received campaign contributions over the years from ORI Representatives,” the report states. “While this list indicates that ORI Representatives contributed over $100,000 over the past 16 years to political campaigns, and while some may infer an attempt to unlawfully influence the political process, we have found no evidence of a quid pro quo relationship, nor any direct benefit resulting from the loan conversions inuring to City officials who participated in the decision that would constitute a conflict of interest.”

Caldwell’s managing director, Ember Shinn, who spearheaded the city’s investigation, also said during a press conference that her boss did not appear to have any involvement in the loan forgiveness and that he “doesn’t have any recollection of any of this.”

The people directly involved in the loan forgiveness, according to the report, were Hannemann, Saito, Martin, then-Community Services Director Debbie Kim Murakawa, then-Budget Director Rix Maurer and then-Community Service Division Chief Keith Ishida.

Honolulu’s internal investigation was stymied in part by fading memories, poor record-keeping and legal roadblocks. The city has a relationship with ORI that dates back to the early 1980s, when the nonprofit was known as Opportunities for the Retarded Inc. and federal money was given to develop the Helemano Plantation in the pineapple fields outside of Wahiawa.

This long history coupled with the fact that HUD raised issues dating back nearly a decade clouded the recollection of many of the witnesses. City officials also said there were thousands of pages of documents that needed to be reviewed and that not all of the paperwork was in the city’s possession.

ORI also didn’t make it easy for the city to complete its investigation. Shinn said the nonprofit and Cheung “lawyered up,” hiring Honolulu attorneys Michael Green, Mark Bennett and Bill Shipley.

As a result ORI employees and volunteers were told not to speak with the city investigators. ORI also initially refused to give the city access to its records. The nonprofit later backed off its blanket refusal and allowed officials to briefly inspect its documents, but no copies were allowed.

HUD’s 45-day window for the city to submit a response also hindered the investigation, Shinn said, leaving many questions unanswered, particularly those related to how the federal dollars were actually spent.

“If HUD decides to come after us for everything we would certainly need to use more resources to look at the ORIAH records to determine exactly where the money trail went,” Shinn said.

As it stands, the city is offering to pay back $1.88 million in grant funds while at the same time working with ORI to bring it into compliance with federal rules. The hope is that HUD will accept this proposal instead of forcing the city to refund the entire $7.9 million, which could hurt the city’s overall Community Development Block Grants program that gets about $10 million annually to help disadvantaged populations on Oahu.

Shinn said it was clear that the city had poor oversight of ORI, particularly in relation to HUD’s community development grants program. The city has now developed an 18-page action plan to update how it manages and tracks federal grant money.

“We still have a long ways to go no matter what happens,” Shinn said. “But we’re absolutely committed to working with ORIAH in trying to resolve this in a way that makes sense for both the city, as well as the organization.”

The Honolulu Ethics Commission has also opened up its own investigation into the matter, and the U.S. Attorney’s Office has been notified about a possible $90,000 kickback solicitation.

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