by Andrew Walden
Ka Piko vs OHA, filed December 31, 2014 in Kauai's 5th Circuit Court, alleges that OHA Trustee Haunani Apoliona's crony Mona Bernadino and her sub-cronies looted the Waimea, Kauai Makaweli Poi Mill via OHA's wholly-owned corporation Hiilei Aloha LLC and its subsidiary Hiipoi while also using the two corporations as a conduit for transferring OHA assets to their own pockets. After Apoliona's alleged cronies were allegedly finished, one of OHA CEO Kamanao Crabbe's cronies allegedly took a turn. Many of the alleged acts could be a subject for criminal prosecution.
The alleged schemers' plan gained them a $10,000 award for 'entrepreneurship' from Chaminade University in 2012.
The full text of the suit may be read >>> HERE.
Especially noteworthy: Line 137 alleges "Defendant OHA indicated that because Defendant HI’IPOI was an LLC whose sole member was Defendant OHA, HIIPOI was exempt from the Hawaii State Public Agency and Meetings Laws, HRS Chapter 92, and from the Hawaii Uniform Information Practices Act, HRS Chapter 92F."
Akamai readers will remember that Sen Brickwood Galuteria introduced in the 2014 legislature SB2992 SD1 which would have exempted “meetings of the Board of Trustees, Office of Hawaiian Affairs from Chapter 92, Part I, Hawaii Revised Statutes, relating to open meetings.”
From the complaint:
35. In 2007, the Board of Trustees of Defendant OHA approved the purchase of Makaweli Poi Mill (MPM), paying the Previous Owners approximately $185,000.00 for the purchase. John A'ana used his proceeds from the sale to expand his taro patch, and remained on board as a consultant for one year.
36. Despite the decline in the availability of taro that prompted the sale, MPM remained profitable from 1993 until its purchase by Defendant OHA in 2007.
45. Between 2008 and the first quarter of 2012, Defendant HIIPOI received grants and assistance from Defendants OHA and HIILEI in the amount of at least $369,448.00 (Three Hundred Sixty-Nine Thousand Four Hundred Forty Eight Dollars), as follows:
a. in 2008, HIIPOI received a $65,000.00 (Sixty-Five Thousand Dollars) no-interest loan for “operations” which was never paid back and upon information and belief, has since been forgiven;
b. in 2009, HIIPOI received $55,000.00 (Fifty Five Thousand Dollars) that had been previously earmarked by Defendant OHA for a project on Maui (“Maui BOT”), again for “operations”;
c. in 2009, HIIPOI received a $6,279.00 (Six Thousand Two Hundred Seventy-Nine Dollars) grant from Defendant HIILEI;
d. in 2010, HIIPOI received two separate grants to from Defendant OHA totaling $49,998.00 (Forty-Nine Thousand Nine Hundred Ninety Eight Dollars) for “market expansion to Honolulu” and new product testing;
e. in 2010, HIIPOI received a $16,069.00 (Sixteen Thousand Sixty-Nine Dollars) grant from Defendant HIILEI;
f. in 2011, HIIPOI received an additional $49,450.00 (Forty-Nine Thousand Four Hundred Fifty Dollars) for “market expansion to Honolulu” and new product testing;
g. in 2011, HIIPOI received a $249,583 (Two Hundred Forty-Nine Thousand Five Hundred Eighty Three Dollars) grant from Defendant HIILEI;
h. in the first quarter of 2012, HIIPOI received an additional $150,000.00 (One Hundred Fifty Thousand Dollars) to “continue expanding market” to Honolulu and to test new products.
46. According to Defendant HIIPOI’s own records, it also received two separate grants of $150,000.00 from Defendant OHA to expand the market in 2012 and 2013.
47. Despite substantial increases in revenue from the sale of poi made at Makaweli, and the exorbitant amounts of grants received for operations, HIIPOI operated at a loss in every year from 2008 through 2011.
48. The following table represents the income and expenses of Defendant HIIPOI from 2008 through 2011 as compiled by Defendant BERNARDINO:
49. The actual accounting of Defendant HIIPOI is inconsistent with the numbers compiled by Defendant BERNARDINO. According to HIIPOI's records, it had:
a. Expenses of $214,944 in 2009, not expenses of $178,069 as Defendant BERNARDINO represented;
b. Expenses of $286,838 in 2010, not expenses of $228,099 as Defendant BERNARDINO represented;
c. Expenses of $377,432 in 2011, not expenses of $272,870 as Defendant BERNARDINO represented.
The discrepancy in reporting from BERNARDINO and OHA for expenses for those three years totals $200,176.
50. During its management of MPM, Defendant HIIPOI experienced the first losses since MPM’s inception by expending large sums of money on extravagant expenditures unrelated to, and upon information and belief, to compete with, the manufacture of poi at MPM and taro production in West Kauai, in direct contradiction of its mission statement and business plan.
51. Upon information and belief, the “pet projects” described herein were designed not to benefit the West Kauai poi and taro industries pursuant to Defendant’s missions, but instead to increase Defendant BERNARDINO's political status, and/or enrich friends, business acquaintances, and family of Defendants and their employees.
52. Further, the administrative expenditures of Defendant HIIPOI soared due to the expenditure of monies on items inappropriate in size and scope for an operation its size, including but not limited to:
a. After taking over MPM, HIIPOI engaged the services of an auditing firm at significant expense to HIIPOI. Upon information and belief, all individuals that benefitted from this change were personal and/or professional associates of Defendant BERNARDINO and/or the Officers of Defendant OHA. The costs of the audits were $16,760.00 in 2008 (including over $1,000.00 in travel expenses), $8,500.00 in 2009, $9,948.00 in 2010 an $8,901 in 2011.
b. Prior to HIIPOI, MPM paid a local accountant on Kauai to handle all finances, including payroll. Instead of continuing this practice, HIIPOI spent tens of thousands of dollars on accounting software, training, payroll services, consultants and computer services. Upon information and belief, the software was, and continues to be, used for purposes other than the operation of MPM, despite Defendants charging the entire amount to HIIPOI’s budget. In addition, HIIPOI hired a large accounting firm which billed at far higher rates than would be available or necessary for a company the size of HIIPOI;
c. Defendant HIIPOI expended significant funds on professional computer networking hardware and services to track the activity on MPM’s one computer located on Kaua’i;
d. Under OHA, Defendant HIIPOI expended several thousand dollars on legal services, while MPM had no need for ongoing, regular legal services prior to being purchased by OHA.
53. Defendant HIIPOI expended over $80,500.00 on accounting services for the three-year period from 2009 through 2011, an average of over $26,800.00 per year.
54. By contrast, MPM’s expenditures on those items for the fifteen-year period from 1994 through 2008 was under $80,000.00, or less than $5,400.00 per year.
55. In addition, upon information and belief, for the three-year period between 2006 and 2008, the OHA Defendants expended approximately $250,000.00 in legal and other expenses to acquire MPM in addition to the moneys paid to the Previous Owners.
56. In 2011, Defendant BERNARDINO caused a brand new van to be purchased for use on Oahu. Upon information and belief, the expense of the van was charged solely to the budget of Defendant HI’IPOI. The stated purpose for this van was for delivery of Makaweli Poi created at MPM to vendors. Upon information and belief, all individuals that benefitted from this purchase were personal and/or professional associates of Defendants.
57. Large, custom decals were affixed to the van that advertised Makaweli Poi as a product of Defendant HIIPOI.
58. Upon information and belief, the cost of insurance and other incidental expenses, including maintenance and parking for the vehicle, were also charged to the budget of Defendant HIIPOI.
59. In addition to the van, Defendant BERNARDINO hired a full-time driver for the van, whose salary was paid from Defendant HIIPOI’s budget. Upon information and belief, the van driver, Lena Racimo, had personal and professional ties to Defendant BERNARDINO. Racimo was hired full-time despite being the owner and operator full time of an auto body repair business.
60. The cost of the van and driver on Oahu greatly exceeded any legitimate business revenue that could have been made from the delivery of Makaweli Poi on Oahu.
61. Defendant BERNARDINO demanded shipment of significant amounts of poi from MPM to Oahu to justify the expense of the van, even though the revenue from Oahu sales never justified the costs associated with the van.
62. Upon information and belief, the remainder of the time, the van and driver on Oahu were at the personal disposal of Defendant BERNARDINO and employees of Defendant OHA, with no use of the van for purposes of supporting MPM other than the very small amount of time it was used to deliver poi, as described above.
63. Defendants devised a plan to use (a) HIIPOI funds earmarked for operations, and (b) OHA grants to HIIPOI earmarked for market expansion, to develop a separate and distinct business to operate a mobile poi mill to operate on Oahu (“Mobile Mill”) and to serve taro growers exclusively on Oahu.
64. In order to implement this plan, Defendants used HIIPOI funds to pay an external company to develop a business plan for the creation and operation of the Mobile Mill.
Team members of winning plan for Chaminade's Hogan Entrepreneurs/ American Savings Non-Profit Business Plan Competition: From left to right, Dr. Peter Hanohano, Mona Bernardino, Gigi Cairel, and Lena Racimo of Hi`ilei Aloha LLC. Chaminade University April, 2012 (LINK)
65. Defendants later caused that business plan to be submitted to Chaminade University of Hawaii for a business plan competition the university sponsored.
66. On April 19, 2012, The Honolulu-Star Advertiser reported that Defendant HIILEI was awarded $10,000.00 in a business plan competition concerning the creation of the mobile poi mill on Oahu. Upon information and belief, funds and resources earmarked for HIIPOI were used in the creation of the business plan.
67. Regarding the Mobile Poi Mill, Defendant HIILEI’s website stated: The mobile certified kitchen and poi mill is a pending project that we hope to have operational by this summer. We have purchased a lunch truck that we will retrofit for poi-making and get certified as a DOH-approved kitchen. We will bring the truck to farmers in rural communities on O‘ahu so they can mill their taro into poi on the truck for a nominal fee.They will then be able to sell their poi as a value-added product to commercial retail outlets, thereby making $3 to $5 more per pound. This will help taro farming to become more self-sustaining.
68. Defendant BERNARDINO justified the Mobile Mill by reasoning that its revenues would be used to assist MPM operations. Defendant BERNARDINO also considered marketing the poi created from the Mobile Mill under the name of Makaweli Poi because of the wide recognition of the brand name.
69. Upon information and belief, the Mobile Mill is in actuality the delivery van described above. The small size of the Mobile Mill makes it impractical for serious use as a poi mill, and has not been used significantly, if at all, to produce marketable poi.
70. In 2013, HIIPOI received a grant from the USDA in the amount of $50,000.00 to support the Mobile Mill. HIIPOI applied for this grant through its offices in Oahu, while at the same time preventing the local employees on Kaua’i from spending any HIIPOI time on seeking the grant to support West Kaua’i taro farmers or the MPM.
71. Despite receiving significant funds from Defendant OHA to foster taro farming and poi production in Makaweli, Kauai, Defendants HIIPOI and HIILEI continued to thwart the success of MPM through mismanagement, neglect, and sabotage, instead expending the resources of HI’IPOI to projects other the express purposes of HIIPOI and HIILEI.
73. After the termination of the MPM operations manager in 2011, Defendant BERNARDINO traveled from Oahu to MPM, at the expense of HIIPOI, in order to purge the computer of all files, and also removed all physical files from the the MPM site. The purged information and removed filed included:
a. All personnel files, including employee contact information;
b. All financial information for operation of MPM;
c. All invoices and billing information for customers on Kauai; and
d. All safety and operational manuals for how to operate MPM equipment.
As discussed below, Defendant BERARDINO would later demand the reproduction of much of this documentation from scratch, while refusing to provide these documents for reference.
74. Defendant BERNARDINO travelled to Kauai every week for several months at the expense of Defendant HIIPOI, spending in excess of $11,000.00 in travel expenses in 2011.
75. Defendants BERNARDINO and OHA required that all financial transactions, including billing and invoicing, be performed in the OHA offices in Oahu. This requirement resulted in significant delays in payment to farmers and in collection from customers, thus creating a burden for the taro farmers of West Kauai.
82. Defendant BERNARDINO repeatedly changed her mind about who MPM was allowed to purchase taro from for production, which severely damaged MPMs relationships with farmers, and negatively affected consistency of product over time. Specifically, for example, Defendant BERNARDINO directed MPM employees to purchase taro from an associate of BERNARDINO’s who was “helpful to” and “very supportive” of her, despite the fact that associate did not farm in West Kauai did not grow traditional poi taros.
85. Defendant BERNARDINO refused to allow the mill to close for yearly maintenance, which had been done for many years prior to OHA’s involvement. This refusal created sanitation issues with the mill involving black mold, green algae, rusty machines, rotten wood, and flaking paint, among other issues.
86. In response to these sanitation problems, Defendant BERNARDINO sent her Honolulu van driver Racimo to food preparation and handling safety training at the sole expense of Defendant HI’IPOI. However, Racimo never inspected or worked to correct those problems at MPM.
87. The van driver Racimo accompanied Defendant BERNARDINO from Oahu to Kauai on several occasions during BERNARDINO’s frequent trips even though Racimo's attendance was not necessary and did nothing to assist the business of MPM. Upon information and belief, these travel expenses were charged to the budget of Defendant HIIPOI.
88. In response to being informed that an electrical motor had failed in a taro washer, Defendant BERNARDINO indicated that she would send her van driver Racimo from Oahu to Kauai to perform welding on the washer. When questioned by an MPM employee why she would favor that over using the on-site maintenance person or simply replacing the washer, Defendant BERNARDINO responded that it would keep costs down. Thereafter, BERNARDINO refused to authorize repair or replacement of the taro washer, greatly decreasing the efficiency of poi production at MPM.
89. Defendant BERNARDINO demanded that a significant amount of taro be shipped from MPM to Oahu. MPM employees objected, citing the significant expense, low taro supply, low consumer demand, and significant competition in the poi market in Oahu. BERNARDINO demanded poi be shipped to Oahu even when decreased taro supply prevented MPM from meeting local demand for its product.
90. Despite these objections, Defendant BERNARDINO still required shipments of taro from Kauai to Oahu. Upon information and belief, Defendant BERNARDINO required these shipments in order to justify the employment of her van driver Racimo on Oahu.
91. Upon information and belief, Defendant BERNARDINO’s focus on retaining Racimo as an employee was based on providing political favors to allies rather than on any legitimate business purpose related to Defendants HIIPOI, HIILEI and/or OHA.
92. Defendant BERNARDINO demanded that empty MPM retail bags be provided to her on Oahu so that she could have poi produced on Oahu and sell it as MPM poi.
93. In February 2012, Bryna Storch (“Storch”) began training and was officially hired as operations manager on location at the MPM on Kauai.
94. BERNARDINO met with Storch immediately after being hired, and during that meeting:
a. indicated that because it was losing money, the MPM would be shut down at the end of March, 2013 unless it became profitable;
b. indicated that if Storch could present a new business plan and budget that would show MPM could become profitable within six months, then Defendant OHA would implement that plan and keep the mill in operation;
c. indicated that if Storch could form a community group to take over MPM by December 2012, then Defendants BERNARDINO and OHA would turn the mill over to that group.
d. denied that an operating budget for MPM existed, and told Storch one would have to be developed from scratch;
e. refused to provide any financial or operational information to aid in development of a new business plan and budget.
95. However, one week earlier, on January 25, 2012, BERNARDINO failed to mention any financial difficulty or planned transfer at the MPM while presenting the status of HIIPOI to OHA's Board of Trustees.
96. Immediately after her meeting with BERNARDINO, Storch and members of the West Kauai community began working together to save the MPM and keep it functioning.
97. On or about April 16, 2012, Storch submitted a quarterly report for the first quarter of 2012 to Defendants. The report itemized various problems that existed at MPM and outlined the actions necessary to assure compliance with Defendant HIIPOI’s mission statement. The report further addressed Defendant BERNARDINO’s concerns from the February meeting with Storch. Defendants failed and refused to respond to Storch’s report or any of the concerns raised therein.
98. Shortly thereafter, Storch prepared a detailed report which specifically outlined Storch’s concerns, suggested improvements, and requested assistance of OHA directly in future operations of MPM. Storch consulted several taro industry experts in the preparation of the report.
99. On May 4, 2012, Storch sent that report directly to Defendant CRABBE via email, and included a cover letter referencing Defendant BERNARDINO’s actions in regard to the closure of MPM. Storch received no immediate reply from CRABBE.
100. Later in the day on May 4, 2012, Defendant BERNARDINO advised Ms. Storch by telephone that MPM would cease operations.
101. In a Memorandum sent via email to follow up on the May 4, 2012 conversation, Defendant BERNARDINO indicated that MPM would suspend operations effective May 23, 2012 for financial reasons. According to the Memorandum, all employees were to be laid off effective May 24, 2012.
102. The May 4, 2012 Memorandum further indicated that the West Kauai farmers would be notified of the “change in operations”; it further indicated that Defendant HIIPOI would “consider” purchasing taro from the farmers for shipment to Honolulu.
103. Curiously, Defendant BERNARDINO failed to mention the closure just the day before when she presented a status update on the operations of Defendants HIILEI and HIIPOI to Defendant OHA's Board of Trustees on May 3, 2012.
104. Defendant CRABBE waited until May 11, 2012 to respond to Storch's Memorandum, when he telephoned Storch in response . During that conversation:
a. CRABBE asked for an update on what had been happening, since he was not aware of anything in relation to MPM;
b. Storch informed CRABBE that the West Kauai community was upset by the announcement of the closure and was organizing a meeting to discuss the future of MPM, to which CRABBE expressed support;
c. Storch expressed her concerns about Defendant BERNARDINO’S mismanagement, and indicated that it appeared that BERNARDINO was intentionally sabotaging the success of MPM, was obstructing Storch's efforts to safely and effectively operate MPM, and was confrontational and aggressive in her demeanor towards Storch and other MPM employees;
d. Storch informed CRABBE that she was willing to provide CRABBE with specific information concerning these matters; and
e. CRABBE scheduled a personal meeting with Storch the following week, and further indicated that he would personally consider what course of action to take with regard to MPM, and would have Defendant OHA's Chief Financial Officer Hawley Iona (“Iona”) and Chief Operating Officer Aedward Los Banos (“Los Banos”) investigate Defendant BERNARDINO’s actions.
106. On May 15, 2012, approximately 100 members of the West Kauai community met to discuss the MPM. At that meeting, the community decided to create a community organization to operate MPM. In addition, a steering committee was formed consisting of farmers, MPM employees, and over thirty others interested in preserving the MPM and the culture, customs and practices the MPM and its predecessors had represented throughout its years of operation. At the meeting, the community also selected three delegates to present the community response to the OHA Board of Trustees at its May 16, 2012 hearing on Kauai.
107. John A'ana, the prior owner/operator of MPM and OHA's representative on the State Taro Task Force at the time, fully supported the group, and served as an advisor and member of the committee in charge of transitioning the MPM to the community group. Throughout 2012 and 2013, A'ana supported transfer of the mill to the community group (later KA PIKO), and committed to provide guidance to its board and operators of the MPM.
108. On the afternoon of May 16, 2012 (prior to the OHA Board of Trustees meeting), Storch, along with the other delegates, met personally with Defendants CRABBE and BERNARDINO, as well as other OHA staff. At that meeting:
a. CRABBE stated that OHA required the establishment of a committed community group to keep MPM operating;
b. Defendants were informed that an organization had already been formed by the community to save MPM from closure;
c. CRABBE agreed that MPM stay open, that OHA would continue to operate MPM to effect a smooth transition to the community group, and that OHA would transfer liquid assets and equipment, and provide other financial and administrative assistance.
d. After the delegates expressed concerns that MPM’s financial assets would be exhausted before any transfer could be affected, Defendants committed to creating a viable budget, cutting all unnecessary costs; and
e. Defendants further committed to create a management agreement with the new community organization wherein the excessive expenditures incurred by Defendant HIIPOI would be eliminated in order to ensure that funds would remain to transfer to the community organization.
Defendants committed to allow the community group to make operational decisions prior to the transfer taking place.
109. Also during that meeting, Defendant BERNARDINO presented a summary report of Defendant HIIPOI’s income and expenses from 2008 to the present. The report represented that Defendant OHA had allocated $300,000.00 in funds for the operation of HIIPOI in 2012 and 2013.
110. However, Defendant BERNARDINO explained that those funds were in fact allocated to Defendant HIILEI, and had already been spent. No representative of Defendant OHA present questioned, disagreed or objected to Defendant BERNARDINO’s representations.
111. Storch responded that HIIPOI funds were not being used for the MPM, and were instead being spent on Oahu.
112. Defendant BERNARDINO then screamed at Storch, accusing her of slandering her in the media. BERNARDINO then stated to Storch: “I am targeting you and I will sue you.”
113. In an attempt to avoid further confrontation and to maintain a smooth transition in the face of Defendant BERNARDINO’s verbal attack, Storch left the room.
114. During Storch's absence, CRABBE exited the meeting. Upon Storch’s return, the remaining Defendant OHA representatives repeated their commitment to turn over MPM and all HI’IPOI assets to the community group, along with seed money and loan forgiveness (including moneys already spent by Defendant BERNARDINO on items unrelated to MPM's operation) in order to ensure a smooth transition to the community group. Specifically, Defendant OHA committed to provide the following:
a. the transfer of MPM's assets to the community group;
b. to enter into a management agreement for continued operation of MPM during the transition;
c. the payment by Defendant HIILEI of administrative, personnel and other expenses of HIIPOI through the date of transfer to avoid depletion of HIIPOI resources;
d. all HI’IPOI information, including budgets, audit reports, and other documents in order to facilitate the transfer would be turned over to the community group;
e. technical and advisory support would be given for operation of MPM by the community group; and
f. assistance in seeking grant funding and assistance in capacity building from Defendants and other sources.
115. Immediately thereafter, Storch and Los Banos met privately. During that meeting:
a. Los Banos first inquired as to whether Storch planned to sue based on Defendant BERNARDINO’s conduct and admissions; Storch indicated that her priority was to save the MPM and had no intention of suing;
b. Storch indicated that BERNARDINO's hostility toward her and the MPM would impede the transition process, and asked that BERNARDINO be removed from her direct supervision and from supervision of any transition process;
c. Los Banos acknowledged the complicity of BERNARDINO in sabotaging MPM’s operations and Storch's efforts to save MPM;
d. Storch asked that HIIPOI be reimbursed by HIILEI for the significant expenditures that were made during BERNARDINO’s oversight from HI’IPOI funds for endeavors unrelated to and not beneficial to the mission of HIIPOI. Los Banos agreed to take those funds into account during the transition period;
e. When specifically asked by Storch if the van was considered a HIIPOI asset, Los Banos responded that it was, and that without MPM, Defendants would have no use for the van on Oahu.
f. Los Banos reiterated that Defendants wanted STORCH to tell the community that they were working to transfer MPM, and specifically requested that none of their “dirty laundry” be aired before the public;
g. Specifically, Los Banos described that Defendants wanted a positive message delivered to the community rather than “negative” examples of “administrative corruption”.
116. Later that evening, Storch represented during the OHA meeting of the Board of Trustees that Defendant CRABBE and Los Banos had committed to transition the MPM to the newly created community organization, and offered specific details of the plans discussed at the earlier meeting. Neither BERNARDINO, nor any representative of Defendant OHA objected, questioned, or otherwise corrected the representations made by Storch at that meeting.
119. The West Kauai community met on May 17, 2012, where KA PIKO O WAIMEA was officially formed, and a board of directors was nominated and elected by the West Kauai taro farmers and MPM employees. Storch was appointed as Executive Director.
120. On May 18, 2012, Storch emailed CRABBE, Los Banos and Kehau Abad (who had been assigned by Defendant OHA to supervise the transition due to BERNARDINO’S attack on Storch) to inform them of KA PIKO’s progress and to initiate the logistics of transition.
121. Only BERNARDINO responded to that email at the time, even though Storch had not sent it to her. In that email, Defendant BERNARDINO:
a. stated that their outside counsel was working on a management agreement, and expected to have a draft by May 21, 2012;
b. agreed to turn over all accounting and HR processing by May 31, 2012;
c. agreed to prepare a line item budget; and
d. agreed to advise on how staff layoffs and rehiring would be handled.
122. BERNARDINO and the other Defendants failed to provide any of those items.
132. On June 4, 2012, Storch met with CRABBE, Iona and Los Banos at the OHA offices on Oahu. In acknowledging their unresponsiveness, CRABBE, Iona and Los Banos agreed that all communications from Storch would be subject to a 24-hour response time, and that Los Banos’ assistant would monitor all correspondence to ensure compliance with this time frame. Los Banos later confirmed this agreement via email on June 5, 2012.
133. On June 6, 2012, Iona emailed Storch to inform her that the van on Oahu would not be part of the asset transfer, even though funds earmarked for the operation of MPM were used for its purchase and BERNARDINO had justified its purchase (and her driver Racimo's hiring) as being in furtherance of operations of MPM.
134. Also during the June 4 meeting, Defendant OHA demanded that KA PIKO enter into a confidentiality agreement prior to OHA releasing any documentation to assist KA PIKO in preparation of the business plan. Defendants had not previously demanded, or even mentioned, a confidentiality agreement, nor did they require any for the original purchase of MPM.
135. Defendants' stated reason for the confidentiality agreement at the time was to protect its competitive advantage and “mitigate exposure of OHA's trust fund to any losses of the business”. However, since Defendants were divesting themselves of the MPM, there were no competitive advantages to protect.
136. However, the real reason Defendants sought the confidentiality agreement was “so that there would not be media hysteria”, as explained by Defendant CRABBE to OHA's Trustees on January 31, 2013. Upon information and belief, the “hysteria” would be over matters including, but not limited to, the misuse and abuse of OHA, HIILEI and HIIPOI funds.
137. During negotiations concerning the language of the confidentiality agreement, Defendant OHA indicated that because Defendant HI’IPOI was an LLC whose sole member was Defendant OHA, HIIPOI was exempt from the Hawaii State Public Agency and Meetings Laws, HRS Chapter 92, and from the Hawaii Uniform Information Practices Act, HRS Chapter 92F.
140. Also at the June 4 meeting, Defendants set a firm deadline of June 30, 2012 for receipt of the business plan, even though they had failed to timely provide any documentation or other support to which they had committed to provide to aid KA PIKO in development of their business plan.
141. During the month of June 2012, KA PIKO worked diligently on creation of the business plan, and KA PIKO’s board approved a business plan to be submitted on or before the arbitrary deadline set by Defendants. KA PIKO was able to prepare the business plan even without the documentation Defendants had agreed to, and then subsequently refused to, provide. KA PIKO’s board also began steps to obtain 501(c)(3) tax exempt status, perform community outreach, raise funds, as well as other business activities.
142. During the month of June, 2012, Defendants failed to pay rent on the MPM property. In addition, Defendant BERNARDINO attempted to overwhelm Storch with work that was not within her responsibilities, including but not limited to demanding information on unpaid invoices and other financial matters which BERNARDINO kept in Defendant OHA’s offices. Upon information and belief, the actions of Defendant BERNARDINO during this time were attempts to hinder the progress on KA PIKO’s business plan because of BERNARDINO's animosity towards Storch, KA PIKO and the West Kauai Community.
143. KA PIKO submitted its business plan to Defendants on June 30, 2012 to meet the arbitrary deadline imposed by Defendants. The plan contained two five-year budget projections, and included a statement that it was subject to revision if and when KA PIKO could review the documentation Defendants were refusing to provide.
144. Defendants failed and refused to provide any documentation to KA PIKO prior to June 30, 2014.
145. Defendant OHA, through Los Banos, acknowledged receipt of the business plan on July 9, 2012, and indicated that feedback to the plan would be provided shortly thereafter. No feedback to the business plan was ever provided to KA PIKO by any of the Defendants until after Defendants had decided to the MPM to an associate of CRABBE's.
146. After brief negotiations concerning the language of the confidentiality agreement, Los Banos stated that no further changes to the confidentiality agreement would be entertained, and reiterated Defendants' new demand that the agreement be signed prior to any documentation being provided.
147. Even though KA PIKO had reservations about the language of the confidentially agreement, on July 11, 2012, Storch emailed Defendants that KA PIKO would enter into the confidentiality agreement based on Los Banos’ representation that no further modifications would be accepted. In that July 11, 2012 email, Storch specifically requested that a final, unedited version be sent to her for signature, since it was unclear to her what the final language was supposed to be. Defendants failed and refused to provide a copy of the confidentiality agreement until December 5, 2012.
148. During July, 2012, KA PIKO’s board continued to meet in anticipation of taking over operation of the mill.
149. Throughout July, Storch continued to correct problems caused by Defendants’ mismanagement and animosity towards KA PIKO, Storch and the West Kauai community. Defendants, especially Defendant BERNARDINO, continued to attempt to sabotage the operation of the MPM, KA PIKO and Storch. Defendants’ actions during this time included, but are not limited to:
a. demanding the preparation of new safety manuals for MPM, but withholding existing safety and operations manuals from Storch that were previously removed by BERNARDINO;
b. when asked for specific information on the manuals via email, rather than providing assisting documentation, Defendant BERNARDINO responded simply: “Your email is inappropriate. I will not be responding to it further”;
c. accusing Storch of impeding the billing process when, in fact, Defendant BERNARDINO maintained all billing and financial procedures in Defendant OHA’s offices in Oahu;
d. hampering the efforts of Storch to properly staff MPM with employees and/or volunteers;
e. continuously making rude, negative and threatening statements to vendors, customers, and others regarding MPM;
f. expressed a lack of appreciation for the West Kauai community and those involved in KA PIKO.
150. Defendant CRABBE was made aware of this improper conduct via a confidential report provided to him by Storch on August 8, 2012. Neither CRABBE nor any other Defendant responded or otherwise addressed the conduct complained of.
155. On August 15, 2012, Storch sent an urgent email to Defendants regarding serious understaffing issues and Defendant BERNARDINO’s failure to respond to hiring requests.
156. Defendants responded on August 18, 2012 by stating that they were unaware of the staffing problems and that further hiring did not fit into their transfer plans. Defendants further complained that no operations/safety manual had been submitted and that a completed business plan had not been submitted, despite the fact that Defendants had repeatedly failed and refused to supply any information necessary for completion of those documents.
157. On August 23, 2012 KA PIKO responded to in writing that:
a. informed them that the staffing problems had been previously explained to Defendants via email and that staffing was a critical issue to the continued operation of MPM;
b. informed them that safety procedures had been delivered to Defendant BERNARDINO on July 25, 2012, but that Defendant BERNARDINO had immediately responded that it was unacceptable to the insurance company, but failed to provide clarification and direction to correct any alleged problems;
c. reminded Defendants that a business plan had been delivered to them on June 30, 2012 based on information available to KA PIKO, but that Defendants had refused to provided budget and financial information to assist in further development of the plan;
d. expressed concerns that Defendant BERNARDINO was sabotaging operations and using burdensome bureaucracy in order to blame Storch for mismanagement, and questioned the status of previous assurances by Defendants that BERNARDINO’s improper conduct would be controlled and that her participation would be limited.
158. Defendants failed and refused to respond to KA PIKO's August 23, 2012 response.
161. On November 13, 2012 Storch Storch contacted Defendants to request personal leave from November 24, 2012 until January 6, 2013. Storch indicated that she had trained individuals to fulfill her obligations during her absence.
162. On November 29th, Los Banos and Iona visited the MPM, where they informed members of KA PIKO’s board that Defendants planned to transfer the MPM, but that other entities were interested who had complied with Defendants’ requirements of a business plan and confidentiality agreement, and a transfer to KA PIKO was not guaranteed. Los Banos and Iona also stated that Storch was being terminated from her employment, and that a new manager was being brought in to replace her. That new manager had no experience in taro farming, taro processing, or poi production.
163. Iona and Los Banos, as representatives of Defendants, failed to notify KA PIKO that a decision had already been made to transfer the MPM to another party.
164. Upon information and belief, the timing of their visit was designed to avoid Storch.
165. At the November 29, 2012 meeting, Defendants yet again committed to provide, this time by December 5, 2012, information to KA PIKO so that could further develop their business plan.
166. Storch was terminated via U.S. Mail in a letter dated November 29, 2012, but that was postmarked November 28, 2012.
167. Thereafter, KA PIKO received, via U.S. Mail, a letter dated December 4, 2012 from Defendants stating, among other things, that Defendants had received “serious offers” from other “Native Hawaiian entities” interested in operating the poi mill and that because KA PIKO had not provided a complete business plan, Defendants were “forced” to consider those other offers.
168. The letter further acknowledged receipt of a “preliminary” business plan but denied receipt of a “comprehensive” business plan and an executed confidentiality agreement.
169. The December 4, 2012 letter further stated that Defendants had decided to end exclusive negotiations with KA PIKO and allow two other organizations an opportunity to submit a business plan for consideration, but that KA PIKO was welcome to submit as well. Finally, the letter again promised to forward financial information once the confidentiality agreement was signed.
170. On December 5, 2012, Defendants finally provided a copy of the modified confidentiality agreement to KA PIKO for signature via email, that had been requested repeatedly for months. The email stated that all entities would be presented with the same agreement for signature.
171. On December 8, 2012, Defendants wrote to KA PIKO indicating that financial and other information had been turned over to other groups and that a decision would be made by December 31, 2012, and for the first time, provided a minimal critique and comments on the business plan submitted June 30, 2012 by KA PIKO.
172. Despite the representations made by Defendants in late November and early December 2012, Defendants had already decided by mid-November, if not earlier, to give the MPM to a friend and associate of Defendant CRABBE's, Al “Nakulu” Arquette.
173. On December 27, 2012, the Garden Island Newspaper reported that OHA had announced that it was transferring MPM to Supporting the Language of Kauai, Inc., which would enter into a management agreement with Lehua Poi Company to operate the poi mill KA PIKO was not independently notified by Defendants of this decision.
174. Lehua Poi Company is a limited liability company created on December 21, 2012 by Al “Nakulu” Arquette, a close personal friend of Defendant CRABBE. Arquette later stated that they had applied to acquire the mill only after Defendants had decided not to go forward with the transfer to KA PIKO.
175. Arquette has further stated that they did not express interest in the MPM, but were approached by Defendants and given two weeks to write up a business plan and take over the MPM. Thus, the decision to transfer the MPM to Lehua was made prior to the submission of any documentation to Defendants, and any and all documentation submitted was created to justify the previously-made decision.
176. In addition to the MPM, Lehua Poi Company and/or Supporting the Language of Kauai, Inc. received $25,000.00 from Defendants. Upon information and belief, that money was used in part to purchase a $17,000.00 food dehydrator for use in Arquette’s other for-profit businesses.
183. Defendant OHA’s newsletter reported in February that they had “looked for — and found — a community group that could sustain poi production and support Hawaiian language in the school system.”
184. Upon receipt of the MPM, Lehua Poi Company has produced very little poi, and has instead used the facilities for other products.
185. On January 31, 2013, Defendants CRABBE and BERNARDINO made a presentation concerning the transfer of MPM to Defendant OHA's Board of Trustees. During that presentation, CRABBE made numerous false and/or misleading statements and/or omissions designed to discredit Plaintiff and the West Kauai community that formed it so that he could justify the transfer of MPM to Lehua Poi Company.
186. Defendant BERNARDINO, present at the meeting, did nothing to correct or clarify Defendant CRABBE's false and misleading statements and/or omissions, despite her personal knowledge that they were false and/or misleading.
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