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Saturday, August 24, 2019
With All Eyes on Mauna Kea, OHA, KSBE Insiders Make a Quick Grab for $6.7M
By Andrew Walden @ 9:33 PM :: 8029 Views :: Ethics, OHA

by Andrew Walden

With all eyes on Mauna Kea, Office of Hawaiian Affairs (OHA) and Kamehameha Schools (KSBE) insiders are taking the opportunity to grab for millions of beneficiary dollars.

With ‘the 72-hour rule waived’ and OHA Trustee Brendon Lee leading the charge, a $2.7M ‘investment’ of OHA beneficiary dollars was rushed onto the ‘new business’ agenda of the Committee of Resources and Management August 21, 2019.  The item reads:

New Business: Action Item: RM #19-12, Consider funding the Kalona Brand Company LLC private placement Investment Opportunity in an amount not to exceed $2.7MM from the Hawaii Direct Investment portfolio.

Kalona Brand Company LLC, according to DCCA records, was formed November 2, 2018.  Its four member-managers include Oregon-based Eric Pond of Greenleaf Farm Management and Noel Kullavanijaya of Equilibrium Capital—the parent company of BioLogical Capital.  Apparently representing Kamehameha Schools, the other two member-managers are KSBE CFO Ben Salazar and KSBE ‘Senior director of regional strategies for O'ahu’ Kamuela Cobb-Adams.  Kawika Burgess, a former OHA COO and former KSBE Land Manager, is the President and CEO of Kalona.  OHA Trustee Brendon Lee is the Oahu President of the Kamehameha Alumni Association.  An April 30, 2019 Kalona news release says: “The founders of the company include Hoʻoulu Mahiʻai LLC, an affiliate of Kamehameha Schools, Equilibrium Capital Group, and Greenleaf Farm Management.” 

Approved by the RM committee, RM #19-12 was rushed onto the Board of Trustees agenda the very next day—again with the ‘72-hour rule’ waived.

But instead of being hustled into rubber-stamping an obvious insider deal, Trustees Keli’i Akina, Carmen Hulu Lindsey, and Kalei Akaka voted ‘No.’  With trustees Lei Ahu Isa and John Waihee IV absent, the three ‘No’ votes were enough to deny Lee the super-majority he needed to approve a multi-million dollar ‘investment’ of OHA beneficiary dollars.

Beyond the one-sentence text of RM #19-12, very little information is available about the suitability of Kalona as an investment.  OHA Trustees were given a ‘confidential’ Kalona-related meeting packet.  The public portions of the meeting packets for both RM and BOT are not available on line.  During the OHA BoT debate, it came out that:

  • Kalona was promising no returns for 15 years 
  • OHA’s $2.7M would buy OHA 28% of Kalona shares
  • KSBE has ‘invested’ $4M and owns 40% of Kalona shares

It is not clear whether the alleged KSBE ‘investment’ came in the form of cash, a discounted land lease or both.  The Star-Advertiser May 8, 2019 reports, “Burgess declined to disclose how much money is being invested in the venture.”

Kalona’s April 30, 2019 news release explains:

Kalona Brand Company, LLC (“Kalona”) announced today that it has launched a new vertically integrated sustainable agricultural venture on Oahu’s North Shore focusing on growing cacao, ʻulu, and avocado to create value added food products including premium Hawaiian chocolate bars for both local and off-island markets. The 223-acre farm is designed to produce measurable environmental and community benefits. The company also plans to establish a 20-acre local foods component which will provide fruits and vegetables to Hawaii’s local schools and communities.

Kalona has secured a lease from Kamehameha Schools to establish the farm in Kawailoa above Haleiwa Town. The company will be planting permanent tree crops and native windbreaks which will restore the forest canopy and rebuild the soil on land had previously been used for corn and sugar cane.

Kawika Burgess has been hired as the Chief Executive Officer overseeing the company’s operations. “We’re seeking to create sustainable abundance as our namesake Kalona Iki created generations ago, through regenerative agriculture and the development of a uniquely Hawaiian brand of food products,” said Burgess.

About Kalona Brand LLC: Kalona Brand, LLC is a vertically integrated, sustainable farm, focusing on cacao, ulu, and avocado crops.

Smithsonian Magazine calls Hawaii The North Pole of Cacao after a litany of failed attempts to start a cacao industry locally.  Most cacao is grown in hotter and more humid areas such as West Africa.

According to the International Cocoa Organization the average productivity of cacao is 750kg per hectare.  223 acres minus 20 acres for local food crops is 203 acres, equivalent to 82 hectares. 82 hectares x 750 kg per hectare yields 61,500 kg or 61.5 tonnes of cacao beans.  The price of cacao beans has fluctuated between $2130 and $2420 per tonne over the last year.   61.5 tonnes at the high price--$2420 per tonne--yields a paltry $148,830 per year—not counting the cost of harvesting.

At $148,830 per year it would take 45 years to make back $6.7M—and that does not include whatever investment came from Equilibrium and Greenleaf. 

As the Hawaii State Auditor explains OHA finances: Millions are given to those who “know how and who to ask.”


Related: Trustee Brendon Lee: OHA Should be a Center of Influence Peddling

UPDATE Aug 23, 2020: Insider Cacao Scheme: KSBE out $4M -- but OHA Dodges Bullet


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