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Wednesday, February 01, 2017
OHA LLCs—A License to Self-Deal
By Andrew Walden @ 9:02 PM :: 1303 Views :: Ethics, OHA
 

by Andrew Walden

In response to an open records request, Hawai’i Free Press has obtained copies of the Operating Agreements with which the Office of Hawaiian Affairs created its Limited Liability Corporations (LLCs).

Using identical language, each of the LLCs Operating Agreement Article 4.03.a, states: “…the Managers shall have the power and authority on behalf of the Company to acquire or lease any real or personal property from any Person, whether or not such Person is directly or indirectly affiliated or connected with the Managers or any Member….“

Obviously this clause opens the door to violations of State ethics laws regarding procurement, conflict-of-interest, nepotism, and self-dealing.   OHA insiders with a controlling position in the LLCs, could funnel as much money as they want to as many friends and family as they wants while OHA subsidies and LLC operating revenues pick up the bill.

OHA has poured over $34M into the LLCs.  In 2016 alone, OHA’s check register shows Hiilei Aloha LLC received $662,090.00 from OHA and Hiipaka LLC received $26,226.30—contradicting attorney Kimberly Greeley, “represent(ing) Hi’ilei Aloha, LLC, Ho’okele Pono, LLC, and Hi’ipaka LLC” who falsely claims “the State … does not provide any funding for the Companies.” 

To find out where the money went, Hawai’i Free Press, back in November, filed a separate open records request for the entire check register of the LLCs.  After two months of stalling, Greeley wrote back claiming not only that the LLCs received no funding but that the LLCs were private organizations and they—and their assets such as Waimea Valley--were no longer property of the Office of Hawaiian Affairs. 

OHA owns a total of six LLCs and OHA’s ownership is completely documented with the DCCA BREG at the links below:

The Operating Agreements which we obtained show clearly that, contrary to Greeley’s claims, OHA 100% owns and controls the LLCs.  OHA organized Hiilei Aloha in September, 2007 and Hookele Pono in January, 2010.  Hookele Pono organized Hookipaipai in May, 2010.  Hiilei Aloha organized Hiipaka in December, 2007, Hiipoi in January, 2008, and Hiikualono in May, 2010.  (We did not request Operating Agreements for the sixth LLC, Hiikualono, because we were unaware of its existence at the time of filing. But the Articles of Organization for Hiikualono, obtained from DCCA BREG, confirm it is organized by Hiilei Aloha and therefore a property of OHA.)

In each Operating Agreement, Article 4:01 reads in part:

“…Any Manager must be a current employee of the Office of Hawaiian Affairs, a body corporate and instrumentality of the State of Hawai'i ("OHA")….”

In each Operating Agreement, Article 4:02 reads similarly to this text from Hookipaipai:

“4.02. Managers. The Company shall have two managers, one of whom shall be the Chief Executive Officer of OHA, who is presently Clyde W. Namu'o, and the other of whom shall be the Chief Financial Officer of OHA, who is presently Richard Pezzulo. Said individuals are designated to serve as the Managers and shall continue to serve as Managers until new Managers are designated by the Member.”

OHA is “sole Member” of Hiilei Aloha and Hookele Pono.  Hookele Pono is “sole Member” of Hookipaipai.  Hiilei Aloha is “sole Member” of Hiipaka, Hiipoi, and Hiikualono.

A non-compete clause for the LLCs reads:

4.05. Members and Managers, Limited Duty of Loyalty. The duty of loyalty of any Member or Manager of the Company is not violated by participation in the formation, management, performance of services for, employment by, or actions in support of any of the following entities:
a) Office of Hawaiian Affairs,
b) Hi' ilei Aloha LLC,
c) Ho'okele Pono LLC, or
d) any other entity (existing currently or in the future) of which the Office of Hawaiian Affairs, Hi'ilei Aloha LLC or Ho 'okele Pono LLC is a member, which is intended to further the purposes of the Office of Hawaiian Affairs as described in Chapter 10 of the Hawaii Revised Statutes.

Tthe wording in 4.05 could be construed to license the managers of the LLCs to carry out their own policy in contradiction to or competition with that of the OHA Trustees.  Cronies rejected for funding by the OHA Board of Trustees, could quietly go to the LLCs for a ‘contract’.

Only by obtaining the complete check register of all six of OHAs LLCs can we resolve these questions.

---30---

Operating Agreements:

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