From CNHA News Release June 27, 2013
“What our community leaders are sharing with us, is that if OHA wants to make high risk equity investments into privately owned businesses, then it is prudent for OHA to establish a fully accessible equity investment program for all businesses needing equity capital. Essentially, what members of the OHA Board have done is to choose a single business to get on their Board agenda to receive an investment of our collective trust funds. What is perhaps more proper is to establish an equity program to make sure any and every business owned by a beneficiary has access to compete for and apply for direct equity investments.” ...
“It’s just stunning, frankly. Out of nowhere, all of sudden, OHA has an appetite for equity investments into high risk privately owned enterprises, without developing a program, vetting criteria, consulting with business beneficiaries and community leaders, and establishing an open avenue for the hundreds of beneficiary businesses that might benefit and help to grow our Hawaii economy. For nonprofit organizations, there is a clear process, a clear competitive aspect, and an evaluation process that is well known in the community to receive resources. This investment, at first money in, is like giving someone a giant $600,000 grant to roll the dice in a $250 million dollar potential project. Okay, fine, but we all know someone that owns a small business, that has been around for a lot longer than 2011, that could absolutely use, say a $25,000 equity investment to survive the economic recession and kick a business expansion into high gear.
How does a small business, owned by a beneficiary get to be on the OHA agenda? What is the application process and criteria to receive an equity investment into a business? Nonprofits compete for grants, why has one business been singled out to receive our trust funds that benefit just a few people? Why is OHA doing equity investments at all? How did this happen without Beneficiary Consultation? Do other state agencies do this kind of equity investments with public funds?
It’s completely proper for beneficiaries of this trust to question the approval of a $1.25 million dollar investment into a private firm and to inquire as to the criteria used to evaluate such an investment. It doesn’t really matter who or what the business is, what matters is that any and every business has the same opportunity to participate, and that OHA has established prudent criteria. Equity investments are very high risk endeavors that need disciplined selection processes. Our trust fund resources are not private funds that belong to trustees, they belong to all us, and as such, a very high standard is required when contemplating trust funds that will directly benefit individuals, especially owners of private companies. These transactions are not investments into nonprofits that serve community, nor are they loans that a business has to pay back; essentially, this is a huge grant to a business owned by one individual, hoping to hit a big return. There are sources of capital that do this type of investment, and they are called Venture Capitalists. OHA, as a state agency, is definitely not an experienced Venture Capital firm.”
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