Something puzzling is happening with salaries at Sand Island Treatment Center.
The rehab, the subject of a Civil Beat investigation in April, lists widely disparate salaries for the same top workers in its tax returns and in bids for state contracts.
Consider the case of Cathy Ahana, one of Sand Island’s top counselors.
In Sand Island’s tax returns, Ahana’s pay in 2013 and 2014 averaged $141,390. But when Sand Island bid for a state Department of Health contract, it stated that her salary for the 2014 fiscal year would be $70,000, less than half.
For Ahana, it wasn’t the first time that public documents showed widely varying salaries for the same year.
In a divorce case in June 2009, she stated that she made $6,294 per month, an annual salary of $75,528. Yet Sand Island’s tax returns state that in 2009, she made $144,754.
Ahana, meanwhile, has failed to pay taxes on all of her reported income. According to a state tax lien, she racked up $241,440 in unpaid state income tax, penalties and interest between 2004 and 2013 – an average of about $24,000 for each year.
The Hawaii Bureau of Conveyances offers no further information on the lien – such as the origin of the income for which she owed taxes. Ahana, who has lived in a house owned by Sand Island executive director Mason Henderson, could not be reached for comment.
Sand Island would not explain the different salary figures for many of its top employees, including Henderson. In a prepared statement, the rehab said only that its accounting and contracting practices meet state and federal guidelines and that it has undergone annual audits since 1990.
In a lawsuit, a former Sand Island employee offered an example of what he alleged was artificially inflated pay.
Charles Kahalehoe, a former patient who became a counselor at Sand Island, said over the course of 17 years he and several other top workers routinely got paid twice — a white check, which they got to keep, and a blue check or “kick back” which they were told to cash and hand over to executive director Henderson.
The first time it happened in 1992, he alleged, Henderson said it was for a “contribution to a political campaign that is supportive of our treatment center.”
Because Kahalehoe’s apparent pay was much higher than what he actually got, he was rejected by low-income housing programs, he said. Sand Island denied the allegations, saying part of his pay had been diverted to legitimate in-house programs and repaying personal loans from Henderson.
The lawsuit was settled in 2013 for an undisclosed amount.
Sand Island’s operations are overseen by a six-person board of directors. The Hawaii attorney general pressured the rehab to appoint members who were more independent from Henderson. Sand Island did appoint new members this year, but all four have deep ties to the organization.
The rehab started in the early 1960s as a halfway house for alcoholics in a ramshackle chapel on a vegetation-choked parcel of public land on industrial Sand Island.
The nonprofit, which offers as much as two years of residential treatment, gets contracts from state and federal governments as well as payments from medical insurance. Criminal defendants routinely ask to be sent to Sand Island instead of jail, and many judges agree, requiring them to get treatment either before sentencing or as part of probation.
It’s considered so crucial that the city of Honolulu this year paid $9 million for a new home for the rehab, which had been operating rent-free, without a lease, on state land for more than five decades. The new location in Kalihi had until this year housed Hawaii’s only federal halfway house, Mahoney Hale.
In its April investigation, Civil Beat documented that Sand Island pays its top employees far beyond the norm for the rehab industry in Hawaii. Henderson’s pay topped out in 2014 at $500,000. By comparison, another rehab with an annual budget two-and-a-half times Sand Island’s paid its top executive $116,920 in 2016.
For years, Sand Island justified the pay by comparing its operation to the nationally known Betty Ford Center, which after it merged with the Hazelden Foundation in 2014, had almost 50 times the revenue of Sand Island.
The rehab has reported salaries for several people identified on Sand Island’s tax returns as “counselors” and “senior counselors” well into six figures, including a former Miss Hawaii who lives in a Colorado mountain house owned by Henderson. The average pay for a substance abuse counselor in Hawaii in 2016 was $42,760.
Civil Beat has since discovered that in its bids for state contracts, Sand Island reports far lower pay for counselors and for executive director Henderson.
Its tax returns showed that employees, including the chief financial officer, the clinical director and a lead counselor, were being paid as much as $70,000 more than the treatment center reported they would be paid for the same period in its state bids. The bigger salaries were from 50 percent higher to double.
Some workers whose salaries were listed in the bids were not included in that years’ tax returns. But their salaries were itemized in tax documents a year or two earlier, and were also much higher than the bid documents claimed.
This included the chief of maintenance, whose salary on the tax return was more than double the bid document figure, and a counselor and chief of security, whose salary was 131% higher.
Civil Beat found these discrepancies in three separate bid proposals submitted by Sand Island – one for a Department of Public Safety contract and two for Department of Health contracts.
The disparities also occurred in the case of Henderson, the executive director.
The nonprofit’s tax returns show that he earned an average annual salary of $469,000 in 2014 and 2015. But according to the rehab’s bid in for a state Department of Public Safety contract, Henderson was going to make only $225,000 in the 2015 fiscal year – less than half the figure in its tax return.
The salaries are listed on a standard form that shows what percentage of time employees will spend on the contract and their annual wages. The question about annual wages is just what it appears to be, said Sarah Allen, Hawaii state procurement administrator — that is, there are no reasons to report partial pay or to only count certain kinds of income.
Former counselor Charles Kahalehoe claimed that he ran into problems as the result of a salary that on paper was much higher than what he actually got.
The double pay, he alleged, began in 1992. He and five other employees got white checks and blue ones, he said. They drove in a van to banks where they could cash the blue checks and returned to Sand Island, where each worker handed over an envelope full of cash to Henderson and shook his hand.
Over the years, Kahalehoe alleged that he complained to Henderson several times that he could not qualify for low-income housing programs because he appeared to be making too much. He said he was also forced to pay taxes on the phantom income. The state of Hawaii slapped him with liens for unpaid income tax in 2001, 2007 and 2008.
Henderson told Kahalehoe and his wife that the money was being set aside for a down payment on a house for them, according to the lawsuit. But when they reminded him of the promise, he put them off.
Finally, in 2009, Kahalehoe forced the issue and Henderson asked him how much he wanted to keep quiet, the lawsuit alleges. Two other counselors told him not to seek legal advice or they would all lose their houses and jobs, he said.
He went out on leave for stress, but says he kept getting his full pay plus the phantom pay for several months, until his job at Sand Island finally ended under disputed circumstances. Kahalehoe was later convicted on a federal methamphetamine charge and did time in a Texas prison before returning to Hawaii.
Sand Island, in its reply to the lawsuit, cited other explanations for Kahalehoe’s disparate pay. Part of it was diverted to pay for his housing and, until 1995, to repair his credit, and he was also repaying personal loans from executive director Henderson, the rehab stated.
Hawaii judges routinely refer criminal defendants to Sand Island, sometimes before sentencing and sometimes as a condition of probation. Defendants ask to delay sentencing to give them a chance to apply. Even though the wait list can be several months or more, completion of the Sand Island program may get them more lenient sentences. One judge told a defendant it was the best program in the state.
After Civil Beat published its investigation in April, the Hawaii Attorney General’s office revealed publicly for the first time that, in 2017, it had ordered Sand Island to fix problems identified in an independent consultant’s report, including drastically cutting Henderson’s pay.
The executive director had also agreed to return some of his pay from prior years that the consultant had found to be excessive.
But Sand Island did not comply with the agreement until Civil Beat’s story prompted attorney general officials to check.
Henderson, for instance, did not pay back excessive salary until after receiving a May letter from the attorney general. The rehab explained that he had “always intended to pay but got distracted.”
One of the issues raised by the AG in 2017 was the composition of the board of directors, which the state had found failed to adequately oversee the rehab’s operations. The AG blamed it on an “apparent conflict” between board members’ fiduciary duties and “their loyalty and reliance on Mr. Henderson.”
After the AG’s renewed scrutiny this year, Sand Island did indeed appoint four new members of the six-member board, retaining only Paul Ramos, who has served on the board, often as chairman, since at least 1998 and executive director Henderson.
But it appears that the four new board members also have deep ties to Sand Island. David Graves, one of the names on a list provided by the rehab, is also the name of a longtime senior counselor there – one of its highest paid employees.
Another is Carole Manuwa. That’s the name of the wife of longtime Sand Island senior counselor, James Manuwa, who died in 2017.
Graves and James Manuwa were two of the five other Sand Island workers Kahalehoe said accompanied him to the bank to cash checks for Henderson, though the rehab suggested they would deny that at the trial that never took place because of the settlement.
The Rev. Vernon Suter, another new board member, is a longtime consultant with the rehab, based in California. An organizational chart in a Sand Island contract bid as recently as Oct. 29 shows Suter as the head of staff development and training.
“Our use of various therapeutic approaches and clinical techniques is based upon training provided by the Rev. Vernon Suter,” according to a contract bid in 2017. Suter and another consultant “have provided in excess of 400 hours of training to our clinical staff.”
The last new board member is Suter’s wife, Bonnie.
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