After Receiving Campaign Contributions, OHA Trustees Give $1.25M to Insolvent Geothermal Company
by Andrew Walden
Reacting to OHA Trustees decision to 'invest' Trust money in Mililani Trask's "Innovations Development Group" (IDG) geothermal scheme, Robin Danner points out: "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.”
True. If OHA were more skilled at 'due diligence' it would have spotted the million dollar loan IDG's New Zealand partner wrote off last year. IDG's insolvency comes in spite of records which show the group has vacuumed up approximately $5M from various sources without building anything. But OHA's geothermal deal is about political payback not good business practices.
After receiving supportive testimony from Richard Ha, Rep. Denny Coffman, Rep. Mark Nakashima, Sen. Malama Solomon, and Sen. Gil Kahele, OHA Trustees voted 6-1 April 18, 2013 to 'invest' $1.25M in IDG, with an initial payment of $600K. According to IDG's spokesperson, cartoonish progressive columnist Dawn Morais Webster, Pierre Omidyar's Ulupono Initiative is also 'investing' in IDG. This will likely buy OHA support for his scheme to build McMansions on a bluff overlooking Hanalei.
OHA's backing for IDG's geothermal rent seeking plan has been a long time coming. IDG and affiliated company Honua Group controlled Cal Lee's unsuccessful 2012 challenge to former OHA Chair Haunani Apoliona and backed several other successful OHA Trustee candidates. As Ian Lind November 4, 2012 explained:
The two companies paid to reserve the internet domain name, VoteCalLee.com, rent a post office box, hire a public relations consultant, order campaign signs from a company in Los Angeles, and fly them back to Honolulu, and then run Lee’s first campaign ads in the Star-Advertiser. As the campaign developed, funds from the two companies went to pay for fundraising expenses, interisland travel, more campaign signs, and other items. Lee’s expense report, filed with the Campaign Spending Commission, lists $10,988.09 in expenditures made by Honua Group on Lee’s behalf. Innovations Development added another $8,771.93, according to the disclosure reports. The two companies are reported to have made 47 separate loans to Lee’s campaign between June 15 and October 17, 2012, with a total value of $24,735.79....
In addition to paying expenses for the campaign, Lee received direct contributions from Innovations Development office manager, Ryan Matsumoto ($3,475) and corporate treasurer, Nainoa Kuna ($2,500). Financial advisor Lee Erwin, who is listed as a member of IDG’s management team, is also the treasurer of Lee’s campaign organization. Kuna is also co-manager of Honua Group with Roberta Cabral, state business registration records show. Cabral, in turn, is a director and “Senior Advisor” of Innovations Development. Innovations Development’s management team also includes CEO Pat Brandt and community advisor Mililani Trask. Trask has recently been active speaking out in support of the controversial Public Lands Development Corporation in various public meetings and in published statements. Geothermal projects could be among those that would benefit from exemptions to zoning and environmental regulations available through the PLDC. The two companies also made substantial contributions to OHA candidates Carmen “Hulu” Lindsey ($5,000 each), while Honua Group contributed $3,500 to OHA trustee Robert Lindsey.
Trask is a consultant hired by IDG as a front. According to BREG, the principals of IDG are Patricia Brandt, Peter Britos, Lee Erwin, Roberta LK Cabral, and Ryan Matsumoto.
(UPDATE: In 2002 Cabral pled guilty to defrauding Unity House. She is a convicted felon.)
According to records filed with the Campaign Spending Commission, IDG officers and associates gave over $10,000 to Malama Solomon for her tightly contested primary race against Lorraine Inouye:
- Mililani Trask contributed $2500 to Malama Solomon's Senate campaign.
- Ryan Matsumoto gave $2875 to Solomon.
- Nainoa Kuna gave $2500 to Solomon.
- Patricia Brandt gave $2500 to Solomon and $250 to Gil Kahele.
As evidenced by the high profile support form Hawaii's venal political elite, IDG's track record in New Zealand justifies Danner's concern. The Gisborne (NZ) Herald July 13, 2013 points out that IDG is already insolvent:
EGL’s option to invest seems to have come at the price of a $1.25 million loan to fund or part-fund IDG’s involvement in the project. There was enough uncertainty over its repayment that it was written off last year.
$1.25M NZD equals approximately $1M USD. As Trask herself pointed out earlier this year, she has been identified by other Hawaiians as "a damned sellout."
Proceedings of New Zealand's Maori Land Court provide an unvarnished look at IDG's so-called 'native to native model' of geothermal development and the related cash flow patterns.
According to its cultural impact assessment, the Maori land trust known as 'Kawerau A8D', site of the as-yet-unbuilt New Zealand geothermal plant, is approximately 170.66 ha (470 acres) ... "administered by an Ahu Whenua Trust, has 875 shares and according to the latest information available, 70 owners. The Fox whanau (ohana) – still resident on the block - hold the largest shareholding."
IDG's website explains: "IDG and the A8D Trustees officially entered into a partnership on January 25, 2008 with the execution of a Memorandum of Understanding (MoU). This MoU outlined the selection of IDG as a Joint Venture partner to the Kawerau A8D Ahu Whenua Trust, transferring to IDG the exclusive development rights to the geothermal resource under A8D land. IDG is now the official developer of record for the A8D Geothermal project."
But the deal quickly soured. Court findings in a 2010 lawsuit filed by Trust beneficiary Kani Hunia against Trustees Tomairangi Fox and Colleen Skerrett-White reveal:
…that several important documents including deeds of assignment had not been signed by Mr Fox despite requests that he do so.
In response Mr Fox indicated that he had no intention of signing the documents principally because they gave, he asserted, exclusive control over cultural matters to the geothermal project’s Hawaiian partners.
...the Hawaiian partners involved in the trust’s geothermal venture had been paid in excess of $2 million by the third party participant, Eastland Energy Limited, while the trust is only to receive rental income of approximately $200,000.00 per annum. Ms Skerrett-White stated that, even though the trustees had advisers, they were also under pressure and to paraphrase her statements in Court “we folded.” At first blush this does not seem the conduct of prudent and responsible trustees....
The Court ordered Skerrett-White removed from the Board of Trustees.
In plain language, IDG collected $2M for pressuring the Maori Trustees into signing away all their cultural rights over their own land. Add to that the $1M loan write-off, the $1.25M 'invested' by OHA, an additional amount from Ulupono, and the total score for IDG approaches $5M.
And what did that buy? As the Gisborne (NZ) Herald points out:
To the outside observer, it always seemed Eastland Group’s geothermal partner Hawaiian-based IDG brought little to the table apart from its relationship with the Maori landowners of a geothermal energy resource in the Eastern Bay of Plenty.
However, the opportunity to get in at the early stages of geothermal development in Hawaii — a potentially large market due to the state’s untapped geothermal resources and its reliance on fossil fuels for power — does appear to be a good one.
Because of the differential between its cheap production costs and Hawaii's high retail electric rates, geothermal presents an irresistible target for Hawaii's legions of rent-seekers. So the key question for Eastland is whether it has bought off the right protesters.
On the face of it Eastland has made a classic malihini developer's error--attempting to buy off protesters before the protest leaders emerge. In Hawaii developers must wait until the very last minute before greasing palms. This translates to a long drawn out process of amortization in which only local landowners such as A&B and KSBE can endure. The classic example of course is Hokulia whose Arizona developers stupidly thought they had paid off everybody only to face the last-minute lawsuit which ultimately drove them into bankruptcy.
As a result of Eastland's foolish reliance on IDG, the OHA trustees April 18 had to endure the testimony of convicted drug dealer Ralph 'Palikapu' Dedman in opposition to the IDG/Eastland/OHA partnership. As evidenced by his two convictions for misdemeanor theft, Dedman likes money. A real professional would have made the necessary arrangements, but thanks to IDG's unwillingness to share the loot, Eastland's hopes for an edge now hinge on OHA's proven inability to face down hordes of Punatic protesters.
The best thing for Eastland would be to quit now before they fork out another penny. They are doomed.