The Office of Hawaiian Affairs would have received a 5 percent stake in a 25-megawatt geothermal plant in exchange for a $1.25 million investment in the Huena Power Consortium, according to a due diligence report issued by Peninsula Real Estate
The Office of Hawaiian Affairs would have received a 5 percent stake in a 25-megawatt geothermal plant in exchange for a $1.25 million investment in the Huena Power Consortium, according to a due diligence report issued by Peninsula Real Estate Partners.
The document, which the Tribune-Herald received through an alternate source after OHA declined to disclose records related to the failed investment, offers some insight into a deal that the OHA Board of Trustees agreed to in a closed-door meeting two years ago.
Since then, officials with the state agency have declined to answer questions regarding the arrangement, which came with an upfront contribution of $600,000, and have recently criticized its business partner for mentioning it publicly.
“The board voted on the matter, and the information about it was leaked to the press, to you,” OHA board Chair Robert Lindsey said during a March 25 phone interview. “The source of information was illegal and breaches fiduciary duties.”
According to the report, OHA could have received $14 million over 30 years for the full investment. It had the option of purchasing a share of equity up to 50 percent.
That’s if Huena, a joint venture led by Honolulu-based Innovations Development Group, received the next geothermal contract with Hawaii Electric Light Co.
HELCO announced Feb. 24 that it instead selected Ormat Technologies, which owns Puna Geothermal Venture, to build the next power plant in Puna.
Mililani Trask, an IDG consultant, said the company plans to file a complaint against HELCO with the state Public Utilities Commission alleging that the utility’s selection process was flawed and rigged to benefit Ormat.
After previously stating she couldn’t comment on how much OHA invested, Trask confirmed Friday that its contribution to Huena was limited to the initial $600,000 disbursement.
OHA officials have declined to comment on or confirm how much was spent.
Trask said IDG, whose website says it is a majority-owned Native Hawaiian company, made a cash call around the beginning of the year, but trustees didn’t provide those funds due to conflicting reports from the agency as to whether Huena made HELCO’s final award group. The report says OHA would need to provide $400,000 if Huena was a finalist.
OHA would have provided the last $250,000 if HELCO and Huena reached a power purchase agreement, according to the report.
The report said failure of Huena to win the contract would mean a loss of $600,000 and “negative publicity for OHA.”
Trask said OHA remains a member of the joint venture and that a majority of its trustees still support it.
OHA CEO Kamanaopono Crabbe and Lindsey said the agency will not provide additional funds to Huena.
The Tribune-Herald filed a records request with OHA in March seeking documents disclosing investment of funds, the due diligence report, executive session minutes and a record of the vote. OHA attorney Ernest Kimoto wrote that the office is either not required to release the documents or they are exempt from disclosure “as they are work product of legal counsel.”
Following the denial of the request, OHA officials said they planned to eventually release information about the investment. Kimoto said it could take months to make that information public.
“We would agree the public does have a right to know what we did with those funds,” Crabbe said, adding the agency wants to first “reconcile our legal positions” with Huena.
Jeff Portnoy, a Honolulu attorney who specializes in First Amendment and open government issues, said OHA acted illegally by holding the vote behind closed doors.
He said that’s a violation of the state’s “sunshine law,” which requires decisions by public boards to be made before the public. Boards can go into a closed-door executive session for a handful of reasons, including to speak with legal counsel.
But votes are expected to occur in an open session. The only exception is if voting in public would “defeat the lawful purpose of holding the executive meeting,” according to the Office of Information Practices.
“A lot of state agencies would prefer to do everything in private,” Portnoy said. “… It’s not the way it works in a democracy.”
Additionally, he said OHA has no legal basis to decline to reveal how much it spent on the investment.
“Any time public money is spent, the public has an absolute right to the documents that reflect that expenditure,” Portnoy said.
Carlotta Amerino, OIP staff attorney, said in an email that some purchasing information relating to trade secrets, overhead costs or unit prices can be withheld, “but it is hard to see how the dollar amount invested by OHA in a geothermal venture would be entirely protected from disclosure.”
IDG representatives and supporters touted OHA’s vote to the media shortly after it was made. Several columns were submitted to online and print publications, calling the move a win for the office and Native Hawaiians.
“After months of careful internal consideration and external review, the OHA trustees voted almost unanimously to invest as a player in a groundbreaking effort to finally do something about our dependence on imported oil by developing a firm power alternative: geothermal,” IDG consultant Cy Bridges wrote in a July 2013 column in Civil Beat titled “For Native Hawaiians, Supporting Geothermal Makes Cultural Sense.”
Lindsey said that disclosure about two years ago remains an issue for OHA. Trask said the agency never complained about it before.
“We have more concerns right now about breaches of confidentiality and how we tighten up our governance process on that to protect the interests of the board moving forward,” Lindsey said, after being asked for information on the investment. Kimoto said OHA doesn’t have a confidentiality agreement with Huena or IDG.
The closed-door vote was not an anomaly, according to OHA officials, who claimed the practice was cleared by OIP and state Ethics Commission. Traditionally, the “bulk of decisions” have been heard and made in executive session, at least when it comes to investment decisions and land acquisitions, Kimoto said.
“A lot of times the actions taken often times are essentially questions of partnership and questions of other organizations participating … with the board in certain actions whether land acquisition, investment or other major decisions,” he said.
“The fact that the vote was taken may change the landscape to what the board is trying to accomplish. That is the main reason (for voting behind closed doors), but most likely what happens after that, (OHA staff) at the appropriate time create press releases and communications which will reveal the board action. But timing is very important.”
Lindsey, who represents Hawaii Island and has been board chair since December, said he is trying to reduce the number of executive sessions, but didn’t mention putting a stop to closed-door votes.
“Under my leadership, one of my goals in moving toward greater transparency at OHA is to have a minimum of executive sessions,” he said. “… (Crabbe and I) both have a commitment to do at OHA that will reflect well on our organization and transparency is a big piece.”
Email Tom Callis at tcallis@hawaiitribune-herald.com.
