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Saturday, September 28, 2019
OHA Refuses to Cooperate with Auditor—May Lose Legislative Appropriation to Hide LLC Secrets
By Andrew Walden @ 9:40 PM :: 1069 Views :: Ethics, OHA

by Andrew Walden

Hawaii State Auditor Les Kondo is threatening to suspend his audit of limited liability corporations owned by the State of Hawaii Office of Hawaiian Affairs (OHA) due to OHA’s refusal to cooperate with auditors.  That’s the word from a September 11, 2019, letter addressed by Kondo to OHA Trustees and copied to key legislators.

Kondo is demanding unredacted OHA Trustees’ executive session minutes --including from late 2018 and early 2019 -- a period in which a secret timeline published by Hawai’i Free Press shows OHA lying to the Legislature while stonewalling auditors.  Perhaps Trustees don’t want legislators to get a more in-depth view of Trustees’ direct involvement in OHA’s dishonest Act 37 lobbying effort. 

After exposure of OHA’s dishonesty, HB172, which became Act 37 of 2019, was amended to make release of OHA’s $3,292,290 legislative funding for Fiscal Year 2020-21 contingent on the State Auditor completing “a financial and management audit of limited liability companies created and used by the Office of Hawaiian Affairs.”

According to minutes of the July 18, 2019 meeting of OHA’s Board of Trustees, State Auditor Les Kondo warned Trustees against attempting to withhold executive session minutes from state auditors.  Kondo also pointed out that the Auditor’s office would treat those minutes as confidential and would not release them to state and federal criminal investigators who are also looking at OHA.  Kondo also reminded Trustees that his office has the authority to subpoena the records and that OHA has in the past released executive session minutes to State auditors without concern.

But, according to Kondo, twelve days later OHA Board attorney Robert Klein wrote back, “refusing to provide (auditors) with complete copies of documents that we requested….” 

In the September 11 letter, Kondo reminds Trustees that they are likely to lose their funding.

Kondo explains:

“…We requested minutes of the executive sessions convened by the Board of Trustees relating to the limited liability companies (LLCs) that were created by OHA or on OHA's behalf; according to Mr. Klein, OHA intends to withhold portions of the minutes containing communications with its attorneys and will provide us with only redacted minutes.…

“ …OHA was committed to providing us with the unredacted copies of the executive session minutes by July 30; instead, we received Mr. Klein's letter.  Over six weeks later, we have yet to receive any of the requested minutes. redacted or otherwise.

“We request that OHA provide us with complete, unredacted copies of the requested executive session minutes by September 20, 2019. If we do not receive the requested documents by that date or experience other unreasonable interference by OHA, we may not be able to complete the audit required by Act 37 and will consider our options, one of which will be to suspend the audit until we receive the requested materials and appropriate cooperation.”

A source indicates that OHA did not reverse itself in response to the September 20 deadline.  The State Auditor’s office did not respond to a request for comment.

In Walden v Hiilei, First Circuit Court Judge Jeffrey Crabtree, June 25, 2019, ruled that OHA and its LLCs are state agencies subject to state law.  OHA’s LLCs elected not to appeal this decision. 

In a September 24, 2019 ruling on former OHA Trustee Rowena Akana’s lawsuit against the Hawaii State Ethics Commission, Judge James Ashford rejected Akana’s claim that “the (Ethics) Commission lacks the authority to regulate an Office of Hawaiian Affairs ("OHA") trustee's exercise of powers.”

Yet now, with $3.2M on the line, OHA Trustees, lawyers, and administrators are once again acting as if their department of the State of Hawaii is somehow above the law.

---30---

PDF: Kondo Sept 11, 2019 Letter

Text of letter….

The Honorable Colette Y. Machado, Chairperson
The Honorable Brendon Kalei'aina Lee, Vice Chairperson
The Honorable Leina'ala Ahu Isa, Ph.D.
The Honorable Robert K. Lindsey Jr.
The Honorable John D. Waihe'e IV
The Honorable Kalei Akaka
The Honorable Carmen Hulu Lindsey
The Honorable Dan Ahuna
The Honorable Keli'i Akina, Ph.D.

Office of Hawaiian Affairs
560 North Nimitz Highway, Suite 200
Honolulu, Hawai'i 96817

RE: Audit of the Office of Hawaiian Affairs

Dear Trustees:   September 11, 2019  VIA EMAIL

We are in receipt of a letter from Robert G. Klein, Esq., dated July 30, 2019, informing us that the Office of Hawaiian Affairs (OHA) is refusing to provide us with complete copies of documents that we requested for purposes of our audit of OHA. We requested minutes of the executive sessions convened by the Board of Trustees relating to the limited liability companies (LLCs) that were created by OHA or on OHA's behalf; according to Mr. Klein,
OHA intends to withhold portions of the minutes containing communications with its attorneys and will provide us with only redacted minutes.

We ask you to reconsider that decision. We are auditing OHA at the direction of the Legislature. See Act 37 (Session Laws of Hawaii 2019). As we told you during our entrance conference, we are considering audit objectives relating to the LLCs, including the Board of Trustees' creation and oversight of the LLCs. We also expressed our expectation that OHA fully cooperate in the audit, including providing us with unfettered access to
documents. We told you that it is not appropriate for OHA to interfere with or otherwise obstruct our ability to perform our audit work.

We are duty-bound by article VII, section 10 of the Hawaii Constitution to conduct audits of all departments, offices, and agencies of the State. Our statutory right to examine OHA's records flows from this constitutional duty and is clear, unambiguous, and unlimited: "The auditor may examine and inspect all accounts, books, records, files, papers, and documents and all financial affairs of every department, office, agency, and political subdivision[.]"

Hawaii Revised Statutes§ 23-5(a) (emphases added). The statute further requires OHA to search for and provide us with the requested information:

The auditor may cause search to be made and extracts to be taken from any account, book, file, paper, record, or document in the custody of any public official without paying any fee for the same~ and every office!· having the custody of the accounts, books, records, files, papers, and documents shall make such search and furnish such extracts as thereto requested.

Given our constitutional and statutory authority, OHA's decision to refuse us access to complete, unredacted copies of its executive session minutes is unreasonable and indefensible. OHA's position is interfering with and obstructing our ability to perform the audit mandated by Act 37 (Session Laws of Hawaii 2019).

We are compelled to also note that OHA was committed to providing us with the unredacted copies of the executive session minutes by July 30; instead, we received Mr. Klein's letter.  Over six weeks later, we have yet to receive any of the requested minutes. redacted or otherwise.

We request that OHA provide us with complete, unredacted copies of the requested executive session minutes by September 20, 2019. If we do not receive the requested documents by that date or experience other unreasonable interference by OHA, we may not be able to complete the audit required by Act 37 and will consider our options, one of which
will be to suspend the audit until we receive the requested materials and appropriate cooperation.

Very Truly Yours,

Leslie Kondo, State Auditor

CC:

Sylvia Hussey, Ed.D., acting Chief Executive Officer
Robert G. Klein, Esq.
The Honorable Ronald D. Kouchi
The Honorable Scott K. Saiki
The Honorable Donovan M. Dela Cruz
The Honorable Sylvia Luke
The Honorable Maile S.L. Shimabukuro
The Honorable Ryan I. Yamane

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