 Hi, this is Jay Fidel. It's Think Tech on a given Thursday. We're talking about community matters and talking tax, talking tax with Tom Yamachika. Hi, Tom. Say hello. Hello, Jay. I knew you'd say that. Okay, we're going to talk about OHA today. Title of our show is the recent broad waste and abuse audit at OHA. Very important to talk about fiscal policy in the state of Hawaii because OHA is a government agency, unusual government agency, but nevertheless a government agency. I think a lot of people feel that OHA is a failure since it was established in the Constitutional Convention of 1978. It hadn't done much. Nobody cares. There was this case for Henry Rice versus Kaitano that determined that you didn't have to be native Hawaiian to vote for OHA trustees. I'm not sure that people do vote for OHA trustees. I think they care less about that than they do about choices. I do. Okay, and I do too. And there was this really strange letter to the Secretary of State John Kerry a few years ago where OHA claimed to be a foreign country. And we paid for that. We, the taxpayers, paid for that letter. The letter cost tens of thousands for the executive to write. And then there was a mistake with Abercrombie and Kakaako. And when they made a deal with Abercrombie and they got all this land in Kakaako and found that the zoning and, in fact, statutory zoning prohibited the development of the condos they were thinking about when they took that deal. And if you look carefully at Kakaako now, Kakaako Makai, they're honor condos. And that's years later. Then you wonder about leadership. You wonder, you know, whether OHA could have been, could be a leader. It could have, in my view, settled the matter of TMT, but it didn't. It had very little effect, in fact, negative effect on settling that matter. And that would have been a real feather in its cap, but it didn't do anything. It's not a pathway to higher office. I can't think of anybody who actually was an OHA trustee that took higher office in the ledge or otherwise. You know, and, you know, you like to see the native ones make some traction here. You'd like to see them, you know, have more native one representatives and senators and legislature, more judges and so forth. But OHA does not allow a path for that. And then, of course, there's a problem with Hawaiian homelands, where there are, you know, dozens of Hawaiian homesteads that have never been, you know, that's DHL. That's a different agency. Of course. Of course. And my point, though, is that OHA could have been a leader in that. Could have represented the interests of the native Hawaiian people. And it didn't. No action. Somebody should say something. OHA did not say anything. So we had problems here. I mean, some people feel that one of the reasons we haven't had a constitutional intervention since 1978 is because nobody wants to see OHA bite the dust. On the other hand, there are a lot of people out there would like to see it repealed. So what can we do to fix this? Well, the first thing we should do is have an audit and find out what's going on. So can you tell us the background of this audit at OHA? Sure. And one reason why we're concerned about OHA on on talking tax is because you're right. OHA is a government agency. It's set up by your constitution, and it's set up to protect and preserve the rights of the Hawaiian people. And one of the things that it does is it has a large amount of money that's at its disposal because of the trust lands that were created when OHA became a state. So like it or not, OHA has that control of a bunch of money. And they get more money every year from the general fund in the order of hundreds of millions? Not so much. But from seeded land revenues, they do get revenue, yes. And that's hundreds of millions. Yeah. Yeah. That's a lot of money. And it can be put to good use if the agency is correctly functioning now. So what happened was the the trustees got together and and at the prodding of one trustee in particular, they authorized an audit of the books and records of OHA to look for indicators of fraud, waste and abuse. Okay. And the the auditor, one of the national accounting firms in the I believe is the top 10. They came out with a with a report. And I think it was the end of 2019. And they identified a number of what we call red flag issues. Such as money being spent for a certain deliverable, but no evidence that the deliverable was ever delivered. That's pretty serious. You would think so. There were there was a lot of money dispersed for the the native Hawaiian election, the native Hawaiian rule commissions election. The aha, as it was called, about 2.6 million dollars of OHA money went to that. But instead of OHA following normal practices of, you know, reimbursing expenses that have been incurred by, you know, the, you know, the grant requester, the non-profit that requested the money said, hey, you know, pay us all the money in advance. And did all 2.6 million was the 2.6 million spent. We don't know where did ultimately go. There were, you know, proposals and bills for at least part of it. And that's, you know, that's fairly clear. But but the election didn't really happen. Because of court litigation, the election was called off. The the nonprofit that was running it and the relevant state agencies had to basically say, Oh, geez, well, anybody who ran for a seat on the seat on the aha gets it. So so the aha then becomes a number of, you know, a very large number of people. And some of the money that was requested by the nonprofit was on post election activities. And we don't know if there were any and where and where the money went. So that's, that's another issue. Okay. But in the recent debates that were held on PBS, the PBS channel, the trustee who called for the audit as well as his his opponent, and the the current chair of the board of trustees of Oh, you know, she was on because I guess she's running as well. And they had a spirited debate. And and the logic of the position taken by the chair of Oh, and the debate, the opponent of the guy who asked for the audit went something like this. Okay, the audit came out. It didn't, it did not identify actual illegal activity. Well, of course, not I mean, auditors aren't cops. They're not the FBI. They're not the attorney generals. They're not prosecutors. It doesn't mean that doesn't mean though, they don't find things worthy of further criminal investigation and prosecution. They just uncover things in general. That's right. But said said said the chair of Oh, board of trustees. Well, you know, since we didn't find the smoking gun, this $500,000 that we paid for the audit was a total waste of money. And it is on you, Mr. trustee who authorized this thing. It's on you now. That's kind of how the argument went. And then of course, said trustees, political opponent, you know, jumps right on that and says, Yes, of course, it was a waste of money. You know, it was it was to find the smoking gun. We didn't find the smoking gun. It was a waste of money. And the same kind of thinking that led to these red flags in the first place. Oh, I think it's worse. What kind of logic is that? How blind do you have to be? To equate, you know, not coming up not coming up with a criminal conviction with, you know, everybody did everything okay. It's not the same. Sounds like Trump and the investigation. Yeah. Well, that's pretty horrible. That is but but the but the sad fact that is is that it's being made a campaign issue in the election over either one or both of these over trustees. And and I think the voters should consider what's going on when they decide to vote for Oh, how which they can. But let's I do not have to be Hawaiian to vote for a trustee. Right, that's right versus Kaitano in the Supreme Court of the United States. The trustee who advocated for the audit is Khalia Keena, who actually is one of our one of our hosts here on Think Tech, you know, and he's he's he's very Akamai about about these issues. Yeah, I mean, I'm I'm in a 501 C3 so I can't see much about political candidates. But you know, talk all you want, Jay. Well, I think he's he's the one clearly that can save Oh, and is trying hard to save Oh, but the question is ultimately whether Oh, how can be saved with kind of magical thinking you're talking about to respond to the audit report, that's magical. And so query, you know, what can we do to fix Oh, this audit report sounds like honestly, you can help me with this. It like it doesn't sound like it's going anywhere, Tom. That's right. I mean, I don't think the Oh, how board of trustees took any further action with respect to the report because of their conclusion that you know, there is no smoking gun. But but I respectfully disagree. And I think the Attorney General should look at it. I think law enforcement should look at it. I think that you know, there's does seem to be you know, smoke Uh, where the fire was that may be revealed through further investigation. But I think the further investigation has to be done. You know, the corruption needs to be rooted out and dealt with and people need to be accountable. What's an embarrassment, you know, that we have this organization that was created in a very noble altruistic way to help the native Hawaiian people to focus their efforts and a it's failed and be it's wasted money and been involved in all kinds of abuses and magical thinking. And we haven't we haven't had the, you know, the gumption. I mean, this community hasn't had the gumption to actually address that took a long time for a Kalea Kena to get that audit going. And I must I must say that he gets credit for that. At the same time, the organization needs more now. It needs, as you say, the Attorney General to step in. It needs other people to worry. It's just it's the same thing as voting for OHA trustees. People get to ballots. They don't know who the candidates are. They don't know what the candidates stand for. There is precious little, you know, campaigning going on and precious little press on who's saying what what platforms and so forth. For example, there are some trustees there that favored TMT. There are some trustees that want to kill TMT. I like to know that if I'm going to vote on OHA trustees, and I'm entitled, and I will know that when I vote. But but you know, the problem I have with it is that, you know, it's like, it's like a sacred cow. OHA, you can quote me on this. OHA is a sacred cow. Nobody wants to touch it. Because it's native Hawaiian issues, even though other people can vote for the trustees, and nobody wants to take a whack at it. It needs to be corrected. It needs to be looked into. This audit should be studied and examined by further investigation. Oh, yeah, I mean, just to give you another example, there was a almost $100,000 provided to a nonprofit association, supposedly for scholarships to need of Hawaiian students. I mean, that sounds good, right? But then the auditors took a look at said non-profit association's tax return, which is a publicly available documents, Form 990. And the non-profits tax return for that period didn't show a dime paid out for scholarships. Isn't something wrong? Something's wrong. So what happens to the money? There's a carload of money here. What happens to it? Is it getting, I mean, we know it's not getting spent on the right things, but is it getting spent on the wrong things? Well, we don't know. You know, the money has gone out of OHA. We really have lost track of it after that point. So somebody should be asking the nonprofit what the heck happened to your $100,000? So where would you start on this? You know, is the internal, let's see, the Internal Revenue Service, do they get 990s from OHA? OHA is a government agency. We always forget, you know, it's like a natural forgetfulness. We forget that it is an attached agency to the state of Hawaii. It's a government agency. And it should be responsible under, you know, the transparency laws. It should be responsible to procurement code. I'm not sure that it is, or that it feels it should be. But I think theoretically, everything that applies to a government agency should apply to OHA now. Right. Now, even the IRS does recognize OHA as a government agency. And, you know, government agencies don't have to file tax returns. And that's fine. And matter of fact, that was, you know, kind of brought up in, you know, the recent litigation that was over the limited liability companies that OHA created. Okay, because OHA management for some time, you know, previous OHA management took the position that it wasn't accountable even to the trustees, because it had formed these limited liability companies for specific purposes. And they were supposed to run by themselves. Okay. And we thought that was a bunch of crock. And, you know, some journalists sued to have the LLCs financial records opened up to the public. The LLCs said, you know, take a long walk off a short pier, and we were in court. One of the things that we found during the court proceedings was that one of these LLCs was also recognized by the IRS as a government agency. And so it didn't have to file tax returns. It did. Okay. But, but, but the fact that the IRS recognized it as a government agency kind of undercut, you know, the LLCs argument that it was independent from OHA. No, it wasn't. Not at all. So the responsibility, as, as a trustee of OHA extends not only to, you know, the direct assets of OHA, but also to these limited liability companies that were formed with, you know, trust assets and, and trust moneys. You can't insulate responsibility just by putting it in a box. You know, it has to be accountable to the public for that whatever's going on in there as well. Why may, why may a false part being, being part of it. It goes back to the sacred cow thing. You know, if, if OHA was an attached agency to DBED, and DBED has a two or three, what would it call it, two or what would it call it? Government corporations. That are really government agencies. No question about it. They don't file tax returns, but they do report to DBED. In fact, DBED is all over them, all over their executives, even their middle management, telling them what to do, watching what they do, watching, you know, the expenditure of funds, controlling their budgets in terms of the amount of money these attached agencies get. Everybody watches them. In fact, it's a hamper in many ways. And on top of that, they have the sunshine laws to deal with and the procurement code and all this. So, you know, I don't know why it would be different from OHA. Do you know where OHA is supposed to be attached? Who on the chart, who in the schematic do they, do they respond to? Who's supposed to be supervising them? They are supervised by the board of trustees. I mean, it's an independently established agency under our constitution. So, our constitution created it. And it's specified that it's supposed to be governed by duly elected trustees. And that's how it is. It's not answerable to any agency, any, you know, executive agencies. It's not answerable to the governor. But it does have some accountability, you know, through our legislature, because they get public funds. Well, the public funds they get are, as you, as you said, they're a part of the Seated Lands program. And that's statutory. So, the legislature would have to change the statute. It's not just a budget item. It's, it's in the statute and then a budget item. Well, budget items are in a statute too. So, I suppose so. Bottom line is it sounds like the flaw here is that there is no accountability in the way it was set up. They don't really respond to anybody, but the trustees and the trustees don't respond to anybody. Well, the trustees are supposed to be accountable to the people who vote them in, just like just like the legislators are. So, you know, and that's that's kind of another really good reason why if you have a ballot that's in front of you and it has, you know, spaces for for OHA trustee and you're wondering whether I should, whether you should mark the ballot, not mark the ballot, if you can make an intelligent choice, because it does mean something. Yeah, a lot of people aren't marking the ballot because they don't know. And it's not just this year, although this year, you know, we're all motivated to vote more than before. But even in years past, as far as I know, a lot of people were not marking the ballot. Rice Revee Kigtano not was standing. They were not marking the ballot. They say, I don't know who these people are. I'm not going to vote for them. And they live in a bubble in that way. And they have a relatively small electorate voting them in. But that doesn't mean they don't have politics, though. Can we talk about that? A lot of politics, a lot of politics. Can you talk about that? I mean, it seemed like they're having fights in fact litigation, like all the time fighting about everything. And that's very distracting, as we know, from the Fed. Well, well, right now, the big hubbub is about there. They are being ordered by the state auditor list condo. He wants to see unredacted minutes from from the board of trustees meetings. Now, the issue has come up because during these board of trustees meetings, the the trustees can and do ask for advice from their their hired attorneys. And when when if you and I were to do that in a normal setting, that would be what's called attorney client privilege, and nobody has the right to to see what's in that that communication. The wrinkle here, though, is that is less condo and outsider because his office is also created by the same boy constitution. And, you know, kind of kind of look at it this way. Now, if if if you were my boss, I was doing something in, you know, the Kalihi branch office of whatever company that you and I both work for. And I asked for an attorney's advice on something. You get to see what I asked for and what the attorney responded because you're my boss, you work for the same company. And we're assuming, of course, that the company, rather than me, is the one who hired and paid for the attorney. OK, so you're not an outsider. And the question here is our. Or is the the state office of the auditor and outsider with respect to OHA? Certainly, the communications involved were attorney client communications. That's clear. Right. OHA hired an attorney. They gave advice to the board. You know, that's classic attorney client communications. The question is, is the state auditor somebody in the universe of people that that are not entitled to the seat? It all sounds like a perversion for me. I mean, if you take, for example, the high high tech development, Hawaii Tech Development Corporation, any number of other attached agencies, which are government corporations, they are served by the attorney general and an area meeting goes by with these agencies without having a deputy attorney general physically there to help them ostensibly to give them advice to answer the questions and so forth. Keep them on the right path. I don't know what would happen if they wanted to get an outside council. They'd have to find a way to fund that. And I don't think it's I don't think that's easy. In this case, it sounds like the culture of OHA as an organization is they don't use the attorney general. They don't permit the attorney general to perform the same services for all. Well, yeah, they don't have to. A number of a number of agencies have an exemption from the from the statute that basically said that there's a statute that says, you know, the attorney general is supposed to represent you. OK, a number of agencies have exemptions, including the Department of Taxation. They have they have their own attorneys and I used to be one of them. And, you know, this is for, you know, various and sundry reasons. OHA has an exemption as well. So so they are allowed to and they do hire their own attorney to advise them on on different things. Well, for them to claim privilege and say the state auditor cannot you know, have these communications involving a state agency is perverse. We can't achieve accountability this way. They can do what they want and ignore us. And some there knows that. So I mean, if you were, if I asked you as a legislator or maybe even for a constitutional amendment, how this could be cleaned up, how weak we the public could feel that our money hundreds of millions is being well spent and there is no fraud, waste or abuse happening. And we do have supervisory rights, accountability in this organization. What would you do to straighten it out? I give you all the power you need. What would you do to straighten it out? The auditor in first to so so, you know, I'd need some information about what went wrong. What's, you know, where are the bad spots, what we need to clean up. And that's kind of what he's doing right now. And and the and the legislature's hammer basically is they told Oha, look, if this audit doesn't get done, you don't get your money. Period. And Oha is now fighting with the auditor in court and they and they want the court to order the money to be dispersed even without the auditor's report because the auditor is saying, well, you know, if I don't get these documents unredacted, I'm not going to do my report. And you don't get your money. So there. So that's that's kind of the game that's being played even as we speak. OK. If it's gone before the court and and what the courts ruled on so far is, well, yeah, I looked at the unredacted minutes and yes, yes, these are in fact attorney kind of communications. Yeah, we know that. But I think they've been fighting about the wrong issue. Minutes of meetings can be redacted minutes of meetings. That's extraordinary. No, no, I mean, there's the executive council's part. Well, there's always executive session. Yeah, executive session. Yes. If that's what we're talking about, that that has a cultural background. But I mean, a law cultural background. But if it's just the minutes of the meeting, this has to be straightened out, Tom, because it's a sore. It's an open sore and there's so much money going into it. And let me enhance that by saying we need the money. You know, we talked about this so many times. We, the state, we need the money and to throw it away into an organization that is abusing it and wasting it and being involved in fraudulent deals, even arguably, even even, you know, the appearance of these things is enough to lose public confidence in the state in general. Why is the state supporting an agency which isn't, you know, providing information? No, I think you're exactly right. And that's I think the path we're going down. One thing that did happen is that the the executive director or the president of OHA he got he is no longer there. I don't know if he got canned or if he wanted to retire or whatever it is. He's actually still working with with another with another outfit. I think it's in my building somewhere. Is it connected to OHA? I don't think so. Yeah. Well, I mean, I think that they need a good investigation by some good investigators. And then we and we have to we have to look for, you know, actions, whatever they would be civil or criminal and the trustees have to account for their actions and their alleged fraud, waste or abuse. Yeah, or the people who receive the money and if they are found to have wasted it or or if they defrauded OHA, which is which is possible, then they should be called to account. Yes. And if OHA has been defrauded, it has an obligation to say something. You know, trustee has the word trust in it. You know, they are trustees to and they hold all the assets of OHA, which is very substantial in trust. Every deal they make, every deal that fails, every negotiation, every expenditure is with trust funds. I don't know how to put that. Yeah, keeping public trust is a very, very important component to that. And then that's, you know, what I think this issue is all about. Well, I think it's relevant and you and I, we should cover those things because the state is in duress and crisis financially and furthermore will be in crisis. When we get the next report of the council on revenues, what do you think you're going to see there? And what will that mean for the budget and the fiscal integrity of the state? What do you think you're going to see in the council on revenues? I think the bottom is going to fall out. But we shall see. We shall see. We should cover it, though. We should cover, you know, the fiscal policy in the legislature, which we do. We should cover these other agencies like OHA, which we are, and we should cover wherever the holes are in the boat, so to speak. Three more months before the legislature starts up again. In the meantime, next month is we figure out who's going to be in that legislature. To a large degree. Yeah. So the bottom line is people should vote for the trustees of OHA and they should educate themselves and they should do it right away, of course, because it's important that we vote right away. But this is not something that you want to turn your back on because it's your money. It is. Thank you, Tom. Tom Yamachika, I really appreciate you coming down. See you in a couple of weeks, eh? Thank you, Jay. Glad to be on the show. Take care. Be safe.