Mayoral candidate Charles Djou has filed an ethics complaint against Mayor Kirk Caldwell, alleging the incumbent lied on his official financial disclosure form about the value of his stock in Territorial Savings Bank.

Caldwell, who earns $164,928 as mayor, reported receiving between $200,000 and $299,999 last year from the bank for serving on its board. The mayor also reported owning Territorial bank stock valued between $900,000 and $999,999.

But Djou contends that Caldwell gets even more than that from the bank. An April stockholders’ proxy statement shows Caldwell owned 72,997 bank shares, including 34,395 stock options.

Djou wrote in his complaint to the Honolulu Ethics Commission that the total value of those shares was $1.9 million in January, when Caldwell filed his financial disclosure. The mayor was supposed to report all “ownerships or beneficial interests having a value of $5,000 or more.”

Honolulu Mayoral candidate Charles Djou debates Mayor Kirk Caldwell debate held at the Plaza Club. 29 sept 2016
Honolulu mayoral candidate Charles Djou debates Mayor Kirk Caldwell at the Plaza Club on Sept. 29. Cory Lum/Civil Beat

Caldwell’s campaign chairman Lex Smith dismissed the ethics complaint as frivolous and predicted it will be thrown out.

“Mr. Djou is a lawyer and he knows that his complaint is ridiculous,” Smith said in an emailed statement. “Mayor Caldwell has options that give him the right to buy Territorial stock; but the Mayor has never exercised those options, hence he absolutely does not ‘own’ any of the shares that Mr. Djou’s complaint is based on.”

But Dale Kobayashi, former chief financial officer of First Hawaiian Bank, told reporters at a press conference called by Djou that stock options are appropriate to include when reporting compensation. Dale Kobayashi is the son of Honolulu City Council member Ann Kobayashi, who has endorsed Djou.

“By any standard of financial measurement, these are beneficial shares that he owns,” Kobayashi contended. “You might try to play semantics with it … in reality anybody you talk to in finance will tell you the same answer. Those are beneficial shares owned by Mayor Caldwell.”

Djou’s ethics complaint notes that the law requires elected officials to disclose “economic benefits received for services rendered” as well as any private interests that might cause a reasonable person to question a public official’s objectivity.

The complaint further notes that the Internal Revenue Service says “stock options that are payment of services are recognized as taxable income, even if the stock options are not specifically exercised.”

Smith took issue with this and said the IRS section Djou cited does not apply to Caldwell’s stock options.

Jan Yamane, who leads the city Ethics Commission, didn’t want to comment on Djou’s complaint on Friday. She said ethics investigations are confidential and she had not yet reviewed the complaint.

Djou also emphasized that the value of Caldwell’s stock at Territorial Savings Bank has grown from $300,000 in 2012 to $2.1 million this year.

“This is nothing more than paying off the mayor for his political connections,” Djou said, although he acknowledged that former Honolulu Ethics Commission director Chuck Totto previously concluded that Caldwell’s work with the bank did not violate city ethics rules.

He noted that Territorial’s reports cite Caldwell’s political experience as reasons for having him on the board, rather than legal or financial expertise.

“Because of his current and past positions, Mr. Caldwell is uniquely positioned to advise the Board of Directors on community and economic developments affecting the State of Hawaii and the localities in which we operate,” a 2012 report said.

“Kirk Caldwell has used his public position and exploited it for extraordinarily lucrative private gain,” Djou told reporters.

Glenna Wong, campaign spokeswoman for Caldwell, dismissed Djou’s allegations as campaign posturing.

“I know Charles Djou is trying to drum up a lot of noise right now because we’re on the home stretch,” she said. “He’s making it problematic but it’s not.”

A Civil Beat poll released earlier this week showed Djou trails Caldwell by 7 percentage points in the mayor’s race. The election is Nov. 8.

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