HUD Tells Honolulu to Pay $3 Million for ORI Grant Mismanagement
Honolulu officials continue to negotiate with the U.S. Department of Housing and Urban Development over how much money the city owes the federal agency for mismanaging grant funds that were given to a Central Oahu nonprofit.
HUD just lowered their demand to $3 million.
For years the city and HUD have been fighting over Community Development Block Grant money that was supposed to go toward serving the elderly and developmentally disabled at ORI Anuenue Hale in Wahiawa.
But problems, including allegations of kickbacks, political favoritism and lax city oversight, have plagued the deal, resulting in the city and ORI falling out of compliance with HUD鈥檚 grant rules.
In June, HUD told the city it would have to pay back the nearly $8 million in block grant money it had given to ORI. The city countered with an offer to pay back only $1.88 million along with a commitment to bring ORI back into compliance with federal grant rules.
In a Sept. 27 letter that was released Thursday, HUD offered its response, telling city officials that the federal agency would be willing to accept about $3 million.
HUD also clarified to the city that if Honolulu is unable to bring ORI into compliance then it will be on the hook for the remaining balance, which is about $5 million.
鈥淎fter reviewing the City鈥檚 response and proposals, HUD first would like to acknowledge the City鈥檚 efforts to address the complicated issues identified in the June, 3, 2013 report,鈥 wrote Mark Chandler, the director of community planning and development in HUD鈥檚 Honolulu Field Office.
鈥淭he city鈥檚 proposals indicate the potential to resolve all findings and concerns. However, at this time HUD cannot accept all the City鈥檚 proposals.鈥
Chandler鈥檚 Sept. 27 letter goes point-by-point through the various concerns the federal agency has had with Honolulu over its management of the grant funds that went to ORI. It also summarizes the city鈥檚 responses to those concerns with a discussion about whether Honolulu鈥檚 actions have been good enough.
In many cases the HUD noted the city is heading in the right direction by updating its record-keeping systems and reorganizing its departments to provide better oversight of its grant program.
But there are still some problem areas, particularly when it comes to how the city deals with conflicts of interest.
Serious allegations were uncovered during HUD鈥檚 years-long investigation of ORI, including those of possible kickbacks between the non-profit group and a contractor, not to mention the use of campaign contributions to get political favors from city employees
The city told the U.S. Attorneys Office about the kickback scenario and performed its own internal investigation into the possible conflicts of interest related to political contributions and a $1.2 million loan-forgiveness deal for ORI.
That investigation found that none of the city officials who received money from ORI had a conflict because they didn鈥檛 receive a direct benefit.
HUD鈥檚 letter also notes that the city argued that the First Amendment protects the rights of individuals to make political contributions.
But Chandler said this doesn鈥檛 go far enough when it comes to satisfying HUD鈥漵 rules for conflicts of interest, and he disagreed with the argument that there is no conflict if an individual doesn鈥檛 receive a direct benefit.
Chandler also made clear that HUD doesn鈥檛 believe that ORI violated any rules in this regard.
鈥淥RI and its representatives did nothing wrong contributing funds to the City employee鈥檚 political campaign,鈥 Chandler said. 鈥淭he finding is and has been solely against the City and its failure to comply with the program conflict of interest regulation.鈥
Chandler added that the city鈥檚 failure to comply with the conflict-of-interest policy has been 鈥渁n on-going problem鈥 and that the city needs to fix it.
Honolulu spokesman Jesse Broder Van Dyke said the city has no comment on HUD’s response due to the possibility of future legal action.
Among the politicians who received money from ORI representatives are former Mayor Mufi Hannemann, current Mayor Kirk Caldwell and Honolulu City Council Chair Ernie Martin.
ORI and its attorneys have refuted any wrongdoing, saying HUD is overreaching.
Read Chandler鈥檚 letter here:
