Friday, December 14, 2018
Hawai'i Free Press

Current Articles | Archives

Sunday, December 02, 2018
Fraud, Collusion, Embezzlement: Hawaii OPEB Debt
By Andrew Walden @ 9:48 AM :: 1733 Views :: Ethics, Hawaii History, Labor

by Andrew Walden

Where does Hawaii’s multi-billion dollar OPEB deficit come from? 

Part of the answer lies in the 2014 State Supreme Court decision in State v HGEA which, in the words of Justices Paula Nakamura and Richard Pollack, “sanctions illegally inflated insurance premiums.”

HGEA, UPW and other public employees unions are believed to have received millions of dollars in kickbacks 1992-2002 from payments to insurance providers funneled through Royal State Insurance--then controlled by criminal UPW boss Gary Rodrigues.  The $663M “porting” scheme was first publicly detailed by Employer-Union Health Benefits Trust Fund (EUTF) Chair Gregory Saito, March 31, 2003.  The scheme had become the subject of litigation in 2002—and like many politicized cases was slow-walked through the courts.

Eleven years later a 2-1 Intermediate Court of Appeals (ICA) majority ruled:

…there is nothing in the statute or legislative history that required the unions to seek the hoped-for savings, or prohibited any particular level of fees and/or profit by the unions' insurers, or prohibited related-party transactions, or required "bona fide negotiations," bidding, or other procurement procedures….

The 2013 ICA ruling was upheld in 2014 by the State Supreme Court 3-2. 

Dissenting Justices Nakayama and Pollack explain:

…premiums were inflated by fraud, collusion, embezzlement, and other forms of illegality….

…did the legislature agree to pay “the premium charged by and paid to the [insurance] carrier,” no matter what manner or magnitude of corruption permeated that premium?….

…The majority opinion … gives the word “actual” a meaning that would embrace fraudulent expenditures…..

…there is nothing in the legislative history that indicates … the legislature intended that “actual” would embrace manifestly illegal charges….

…the suggestion that the legislature would authorize payments for fraud, collusion, embezzlement, or bad faith tends toward absurdity….

…Under my interpretation of HRS chapter 87, the auditor would have the authority to adjust insurance premiums that are permeated by illegality….

…The majority’s interpretation embraces the view that the legislature has authorized payment for fraud, collusion, embezzlement, and bad faith dealings. But any portion of an insurance premium that was embezzled via sham transactions or that was illegally inflated by fraud, collusion, or bad faith, would have unconstitutionally accrued to the sole benefit of private individuals. The fact that illegal sums may have been baked into the monthly cost of an insurance premium does not insulate them from the reach of the public purpose doctrine….

…And of course, if the legislature had intended to authorize payments for fraud, collusion, embezzlement, or bad faith, that authorization would be unconstitutional because it would not have been made “pursuant to standards provided by law.”….

…In its proposed amended complaint, the State made several allegations that I think are actionable under HRS §§ 87-22.3, 87-22.5 and 87- 23. These include:

33. Defendants HGEA, UPW, RSC, TRIA, and VEBAH used, or allowed the use of, ported funds to make payments to themselves or to related parties for Welfare Benefits Plans in amounts that exceeded the actual cost of coverage. . . .

34. Defendants UPW, RSC, TRIA, and VEBAH used, or allowed the use of, ported funds to make improper payments to Gary W. Rodrigues (“Rodrigues”), who was the executive director of UPW, a director of RSC, and a trustee of VEBAH, to Rodrigues’ daughter Robin Sabatini, and to corporations owned or controlled by them.

35. Some of said payments were paid through MAP or VEBAH in order to disguise or misrepresent their true nature.

36. Amounts paid as aforesaid between March 28, 1996 and December 19, 2000 totaled $446,278.60. Additional amounts were paid to Rodrigues, Sabatini, and/or corporations owned or controlled by them, at Rodrigues’ direction, by insurers that underwrote UPW’s medical and dental plans, including Pacific Group Medical Association (“PGMA”) and Hawaii Dental Service (“HDS”). Those included $146,361.32 paid by PGMA and $231.742.31 paid by HDS.

37. Amounts paid by or on behalf of UPW as aforesaid exceeded the actual cost of providing insurance coverage to the members of UPW[.] . . .

In addition, the State’s expert’s report found evidence of suspiciously high administrative expenses that constituted as much as 45% of the monthly premiums. This report also found evidence of suspiciously high profits that averaged as much as 58.7% of the premiums charged over a nine-year period….

In sum, given the seriousness of the State’s allegations and the defendants’ recalcitrance in submitting to the State’s initial audit, dismissing the State’s complaint will shield these alleged abuses under a shroud of darkness.

And that is exactly what had happened.  The Circuit Court in 2006 refused to allow the State to amend its complaint.  The ICA in 2013 ruled the denial of the amended complaint “is no longer justiciable.”  And the Supreme Court majority in 2014 ruled:

…We cannot rewrite the State's complaint to allege causes of action the State did not pursue. Nor can we rewrite the statutes to include prohibitions that the legislature never contemplated. Even if the State could have asserted a claim for conspiracy to defraud wholly apart from the provisions of chapter 87, it did not do so. The question here, as framed by the State, is a narrow one: do the factual allegations constitute a violation of the provisions of chapter 87? The answer to that question is no.

The State concedes that such a disposition would render moot its second argument regarding the pleadings process. Thus, we do not reach that issue. Accordingly, we affirm the judgment of the ICA.

See how that works?

---30---

2013: Act 268 Hawaii Unfunded Liabilities Plan: Pot of Gold for Corrupt Union Leaders 

2013: Oral Arguments No. SCWC-29352 Thursday, October 17, 2013

2014: Supreme Court Ruling and Dissent

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

808 State Update AM940

ABCDEFG Blog

ACA Signups Hawaii

ACCE

Affordable Hawaii Coalition

ALEC

Alliance Defending Freedom

Aloha Conservative Alliance

Aloha Life Advocates

Aloha Pregnancy Care Center

American Council of Trustees and Alumni

American Mothers of Hawaii

AMVETS-Hawaii

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Audit The Rail

Ballotpedia Hawaii

Better Hawaii 

Blaisdell Memorial Project

Broken Trust

CAFR Hawaii

Castaway Conservative

Children's Alliance Hawaii

Children's Rights Institute

Christian Homeschoolers of Hawaii

Citizens for Recall

Cliff Slater's Second Opinion

Coffee Break

Conservative Forum for Hawaii

CSIS Pacific Forum

DAR Hawaii

DeedySupport.com

DVids Hawaii

E Hana Kakou Kelii Akina

E Māua Ola i Moku o Keawe

Farmers For Choice Hawaii

FIRE

Fix Oahu!

Follow the Money Hawaii

Frank in Hawaii

Front Page Magazine

Frontline: The Fixers

Genetic Literacy Project

Get Off Your Butts!

God, Freedom, America

Grassroot Institute

Habele.org

Hawaii Aganst Assisted Suicide

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crime Victims' Rights

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defending Marriage

Hawaii Defense Foundation

Hawaii Families for Educational Choice

Hawaii Family Advocates

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Firearm Community

Hawaii Fishermen's Alliance

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii March for Life

Hawaii Meth Project

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Right to Life -- Big Island

Hawaii Right to Life -- Oahu

Hawaii Senate Informer

Hawaii Shield Law Coalition

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

Heritage Foundation

HI Coalition Against Legalized Gambling

HIEC.Coop

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Homeless Crisis

Honolulu Navy League

Honolulu Traffic

Horns of Jericho Blog

House Minority Blog

House Republican Caucus YouTube

HPACC

Hump Day Report

Hunting, Farming and Fishing Assoc.

I Vote Hawaii

If Hawaii News

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

Iowa Meets Maui

Jackson v Abercrombie

Jihad Watch

Judgepedia Hawaii

July 4 in Hawaii

Kahle v New Hope

Kakaako Cares

Kau TEA Party

Kauai Co GOP

Keep Hawaii's Heroes

KeyWiki

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Mauna Kea Recreational Users Group

MentalIllnessPolicy.org

Middle East Forum--The Legal Project

Mililani Conservatives for Change

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

Muslim Brotherhood in America

NAMI Hawaii

NARTH

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

National Wind Watch

New Zeal

NFIB Hawaii News

No GMO Means No Aloha

Northwest Economic Policy Seminar

Not Dead Yet, Hawaii

Now What I Really Think

NRA-ILA Hawaii

Oahu Alternative Transport

ObamaCare Abortion Hawaii

OHA Lies

Ohana Policy Group

OurFutureHawaii.com

Pacific Aviation Museum

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons 

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

Republican Party -- Hawaii State

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

Salvage The Rail

Save the Plastic Bag

School Choice in Hawaii

SenatorFong.com

SIFE Remington

SIFE W. Oahu 

Sink the Jones Act

Smart About Marijuana--Hawaii

St Marianne Copenull

State Budget Solutions Hawaii

State Policy Network

Statehood for Guam

Tax Foundation of Hawaii

TEA Party Maui

TFB Micronesia

The Harriet Tubman Agenda

The Long War Journal

The Real Hanabusa

Time Out Honolulu

Truth About Trade & Technology - Hawaii

UCC Truths

Union Members Know Your Rights

US Tax Foundation Hawaii Info

Valor in the Pacific

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT