2 investigations examining nonprofit’s handling of federal funds

Published On: Jun 10 2013 06:22:00 PM HST

A nonprofit group that provides shelter, training and work experience for the elderly and people with learning disabilities is the focus of two separate investigations regarding the use of $7.9 million in Community Development Block Grant funds, which were given to the city by the U.S. Department of Housing and Urban Development.

Last week, Mayor Kirk Caldwell said Managing Director Ember Shinn and Corporation Counsel Donna Leong were heading up an internal review of Opportunities and Resources Inc, also known as ORI. The investigation is being augmented by private investigator Steve Goodenow of the Hawaii Investigative Group, LLC, although the cost of the contract has not been made public.   

Caldwell removed himself from any involvement in the review, since he served as managing director and then acting mayor at the time HUD was investigating issues surrounding ORI. In a letter sent last week to the mayor, HUD Community Planning and Development Director Mark Chandler of the Honolulu field office demanded that nearly $8 million given to ORI be repaid.

The letter highlighted six findings and two areas of concern, which includes ORI's misuse of funds for property acquisition and construction at Helemano Plantation, a possible $90,000 kickback to a contractor hired by the nonprofit group, and the conversion of $1.2 million of city loans into grants.

"Before we unilaterally agree to just refund money, we need to find out where the problems lie, what was done, and then we need to act appropriately," Caldwell told reporters last Wednesday.

KITV4 also confirmed the Honolulu Ethics Commission has launched its own investigation into the matter, after being notified by members of Caldwell's cabinet. 

Councilwoman Ann Kobayashi said Monday she agrees with the two independent probes into ORI's use of grant money, but doesn't believe there was any intent by city officials to purposefully mislead the federal government on how funds were being used.

"I think they're a good nonprofit, (and) I was surprised at all this mess," said Kobayashi. "It's something that happened a few years ago and we should look into it, and that's that."

However, the HUD letter says city officials may have been pressured to look the other way, even as ORI consistently failed to live up to federal guidelines regarding CDBG funds.

"ORI has maintained significant support over many years by the direct involvement of high-ranking city and state officials regarding ORI's projects," wrote Chandler. "The direct involvement of the officials' appears to have placed pressure on staff resulting in the city ignoring regulatory violations in favor of completing the project and satisfying ORI's requests."

At the time, ORI loans were forgiven by the city on July 26, 2010 ($815,000) and Oct. 15, 2010 ($350,000), Council Chairman Ernie Martin was deputy director of the Department of Community Services, the city agency that oversees federal grants. Kirk Caldwell ended his role as acting mayor on Oct. 11, after serving 18 months as managing director under former Mayor Mufi Hannemann.

Caldwell said last week he could not recall any loan documents pertaining to ORI. "I do not think I signed any document approving any forgiveness of a loan," the mayor said. "I do not think I approved any form of forgiveness, but this review is going to find this all out."

Martin is currently on the mainland and was unavailable for comment. Phone calls and emails to ORI Monday were not returned.

According to state campaign spending records, ORI founder Susanna Cheung has donated thousands of dollars to local politicians, including $17,000 to Hannemann, $7,000 to Martin and $1,000 to Caldwell.

CORRECTION:  An earlier version of this story stated Kirk Caldwell was acting mayor at the time the second ORI loan was forgiven. Caldwell vacated his role as acting mayor on Oct. 11, 2010.


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