Nepotism, Sole-Source Contracting, and Corruption -- How OHA, Hawaiian Homelands, and Kamehameha School/Bishop Estate Make Rich Hawaiians Even Richer at Everyone Else's Expense

(c) Copyright 2002 - 2004 Kenneth R. Conklin, Ph.D. All rights reserved

This web-page was started in December, 2001 after a new version of the Native Hawaiian Recognition bill was introduced in Congress: S.1783. The new bill contained a curious section that was never a part of earlier versions of the bill. This section 9, entitled "Ethics," is an explicit waiver of the federal law that prevents people from holding federal government positions where they or their close relatives and family members can profit from the decisions they make. Although S.1783 died in the 107th Congress without even a committee hearing, the "Ethics" clause lives on! It was inserted into S.344 in the Senate of the 108th Comgress during committee markup on May 14, 2003, where it is now Section 10. The main supporters of the Hawaiian Recognition bill are huge, wealthy institutions whose administrators and staff stand to profit enormously if the bill is passed. Thus, it was clear why the "Ethics" section was included in the bill. These people are shamelessly exploiting the Hawaiian grievance industry, getting land, money, and power for themselves by claiming to work on behalf of poor, downtrodden Hawaiians. Passing the bill will let them pass lots of other bills -- i.e., passing the Native Hawaiian Recognition Bill will give land, money, and power to large institutions and wealthy Hawaiians, allowing them to pass along to everyone else their BILL for housing, healthcare, education, infrastructure development, and lavish lifestyles. Party on!

After describing the "Ethics" section of the Native Hawaiian Recognition bill, this webpage will then demonstrate several examples of nepotism, sole-source contracting, and possible corruption in relations among the Office of Hawaiian Affairs, the Department of Hawaiian Homelands, Kamehameha School/Bishop Estate, and government officials. All information is taken from published sources easily available to the public.

Sections provided below include: (1) Text and analysis of the "Ethics" section; (2) Beadie Dawson's role in writing the Native Hawaiian Recognition bill, and her family corporation's history of profiting from sole-source government contracts; (3) The Office of Hawaiian Affairs plan to spend up to $9 Million for media propaganda and to lobby for the bill's passage; (4) A sole-source contract for OHA Chairman Clayton Hee's brother, family members, and political cronies to spend $400 Million of federal funds to provide fiber-optic cable exclusively to interconnect all 203,000 acres of the racially exclusionary Hawaiian Homelands; (5) An upscale housing development on racially exclusionary Hawaiian Homelands overlooking downtown Honolulu, where wealthy professionals get free land for homes worth up to $385,000.



This "Ethics" section is inappropriately named. It should be re-named "The Dawson/Hee Provision: License for Nepotism and Corruption." Here is the text:

"The provisions of section 208(a) of title 18, United States Code, prohibiting involvement by a Federal Government officer or employee in particular matters where the officer or employee or his or her spouse or minor child has a financial interest shall not apply to Native Hawaiians employed by the United States Office for Native Hawaiian Relations if the financial interest that would be affected by the particular matter involved is that resulting solely from the interest of the officer or employee or his or her spouse or minor child that results from his or her status as a Native Hawaiian."

This language of the "Ethics" section means that nepotism and financial conflict of interest are explicitly permitted, so that the people who run the federal office for Native Hawaiian Relations could be the same people (or their close relatives) who own and operate businesses in Hawai'i receiving minority set-asides or who otherwise engage as service-providers under contracts administered by the federal office. We know that such practices have produced gross corruption in many Indian tribes, most notably the Mashantucket Pequots (Dan Inouye, Chairman of the Senate Committee on Indian Affairs responsible for recognizing that tribe originally, has raised over $100,000 in campaign contributions from Mashantucket Pequot tribal members and service-providers and has attended their local events in Connecticut). Section 208(a) of title 18 of the United States Code was probably written specifically to prohibit the sorts of flagrant corruption which the "Ethics" section of the Akaka bill seeks to allow.

The author of this website is naming this new "Ethics" section the "Dawson/Hee Provision" in (dis)honor of Beadie Dawson and the Dawson Group, together with Clayton Hee who was Chairman of the Office of Hawaiian Affairs. Information is provided below, from published sources, about the nepotism and sole-source contracting already being practiced by the families of Beadie Dawson and Clayton Hee based on their "Native Hawaiian" ancestries and their political connections with the Office of Hawaiian Affairs. Such nepotism, wealth-building, and corruption will surely intensify if the Native Hawaiian Recognition bill passes, because then family members and close business associates can become officials in the federal agency that will be writing specifications and contracts for projects on "Hawaiian Homelands" and for other aspects of the new Hawaiian "nation."

The "ethics" section was mysteriously removed from the new versions of the Akaka bill introduced in the House and Senate in 2004; perhaps because Beadie Dawson has now received her payoff -- a new sole-source federal contract worth up to $30 Million.

The remainder of this webpage includes several sections that illustrate nepotism, sole-source contracting, and the likelihood of corruption. More sections will be added later as information becomes available. (1) Beadie Dawson's role in writing the Native Hawaiian Recognition bill, and her family corporation's history of profiting from sole-source government contracts; (2) The Office of Hawaiian Affairs plan to spend up to $9 Million for media propaganda and to lobby for the bill's passage (and appropriation of $450,000 to pay as a retainer fee to a major Washington lobbying firm in 2003); (3) A sole-source contract for OHA Chairman Clayton Hee's brother, family members, and political cronies to spend $400 Million of federal funds to provide fiber-optic cable exclusively to interconnect all 203,000 acres of the racially exclusionary Hawaiian Homelands; (4) An upscale housing development on racially exclusionary Hawaiian Homelands overlooking downtown Honolulu, where wealthy professionals get free land for homes worth up to $385,000.



Beadie Dawson has been a major author of the new bill, collaborating closely with the staffs of Senators Inouye and Akaka. She and her family corporation, the Dawson Group, were featured in a newspaper article in the Honolulu Advertiser on August 12, 2001, excerpt below:

"Tens of millions of federal dollars that flow through a government program intended to give a boost to minority- and women-owned small businesses have mostly benefited a handful of well-heeled Hawai'i entrepreneurs. Last year, the program's Hawai'i office amassed $154 million in federal contracts. But critics of the program say it is riddled with loopholes and contradictions that foster a business climate in which the rich get richer. In some cases in the past, minorities have been used as fronts for wealthy male Caucasian-run businesses, as have wives who have little or nothing to do with their spouse's business ... Poepoe says if Native Hawaiians receive federal recognition via a bill that is making its way through Congress, they, too, would be eligible for unlimited-dollar sole source federal contracts. In that event, he says, non-Hawaiian 8(a) contractors might think about selling or giving 51 percent of their businesses to Native Hawaiian groups so that they can all benefit from the program. One company that stands to benefit from federal recognition is the woman- and Hawaiian-owned Dawson Group, owned by Charles Dawson and his mother, Beadie Kanahele Dawson, the former attorney for the association of Kamehameha Schools parents, alumni and students. Dawson and her husband own a Nu'uanu home with a swimming pool assessed at close to $1 million. The firm offers environmental, construction and information technology services, and landed a $2,999,999 sole-source contract from the General Services Administration last year. Asked if they are disadvantaged, Beadie Dawson said, "Absolutely. Both my son and myself have had huge hurdles to overcome. Assumptions are made about minorities, and you feel them acutely, and it is very real."

Beadie Dawson's leadership role in writing the Native Hawaiian Recognition bill has been common knowledge in Hawai'i, and was described in a Star-Bulletin article on September 28 excerpted below:

"We were very adamant about having this clarification and are so pleased that it is included in the report. Our (congressional) delegation has been enormously helpful and responsive to the native Hawaiian people," said Beadie Kanahele Dawson, a lawyer and businesswoman who was among native Hawaiian leaders that last year helped draft the original bill... In August, Dawson and others sent a letter to Hawaii's congressional delegation expressing their objections to some of the changes and asking for more public input... Dawson and others had also objected to language giving the Hawaii state government a role in approving a native Hawaiian government."


On May 30, 2004 it was reported that Beadie Dawson’s company has won yet another sole-source federal contract -- this one worth up to $30 Million. It is clearly a payoff from Senators Inouye and Akaka to Beadie Dawson for her work on the Akaka bill.
Pacific Business News, May 30, 2004

Dawson Group wins naval clean-up contract

A Native Hawaiian-owned small business has won a Navy environmental contract that could be worth $30 million. Dawson Group Inc. of Honolulu has been awarded a contract for remedial action to excavate and remove contaminated soil, cap landfills, remove and maintain containment and piping systems, and treat soil and groundwater. The cost-plus-award-fee contract carries a guaranteed minimum ofd $60,000 and a $30 million ceiling for work in Hawaii or at other sites within the Pacific Division, Naval Facilities Engineering Command area of responsibility. That includes Guam, Japan, Okinawa, Johnston Atoll, Diego Garcia, and other areas in the Pacific and Indian oceans. The contract anticipates that 90 percent of the work will be in Hawaii, however. This contract was offered as a sole-source procurement to the U.S. Small Business Agency, Hawaii District Office, for a certified 8(a) firm owned by a Native Hawaiian Organization. The Naval Facilities Engineering Command, Pacific Division Environmental Contracts Office, Pearl Harbor, is the contracting activity.



The Office of Hawaiian Affairs has reportedly appropriated up to $9 Million to lobby for passage of the Native Hawaiian Recognition bill. At the time the lobbying budget was approved, Haunani Apoliona was Chairman of OHA, although Clayton Hee was formerly and is now again currently the Chairman. Here is an excerpt of a newspaper article from February 28, 2001 describing the lobbying effort:

"The Office of Hawaiian Affairs is poised to spend millions of dollars in what could rank as the state agency’s most ambitious publicity campaign to gain federal recognition for Hawaiians and deflect court challenges that threaten its very existence. Called the "Post-Rice Overall Strategy" in the aftermath of the landmark Rice vs. Cayetano case, the proposal amounts to a blitzkrieg of local and national public relations efforts intended to "protect Hawaiian rights and programs, protect Hawaiian assets and rebuild broad-based support for a Hawaiian agenda," according to a draft copy of the strategy. "It’s what OHA should have been working on all along," said Haunani Apoliona, the agency’s chairwoman. "It’s not about advancing OHA, it’s about advancing the interests of all Hawaiians." Though OHA trustees will not say what they expect the campaign to cost, unofficial estimates range from $2 million to $9 million. The agency has an investment portfolio worth more than $350 million. By a majority vote, its trustees have the final authority to spend money on projects they deem appropriate to fulfill the agency’s mandate."

Lobbying has continued ever since. On May 24, 2003 the Honolulu Advertiser reported that OHA has not only opened its own lobbying office in Washington D.C. but has also hired a high-profile major lobbying firm to push the bill through Congress in 2003 at a cost of $450,000.

Posted on: Saturday, May 24, 2003

OHA hires lobby firm to help push Akaka bill
By Vicki Viotti and Derrick DePledge

The Office of Hawaiian Affairs has hired a well-known law and lobbying firm in Washington to add muscle to its push for a bill that would give Hawaiians federal recognition.

The legislation — known as the "Akaka bill" after sponsor U.S. Sen. Daniel Akaka, D-Hawai'i — would create a formal process for Hawaiians to form their own sovereign government that would be recognized by the United States, much like American Indians and Native Alaskans. The Senate Indian Affairs Committee approved the bill last week, and it could now go to the full Senate for a vote.

OHA trustees on Thursday authorized a maximum of $450,000 for expenditures by Patton Boggs, LLP, an international law firm that the board hired after conducting interviews last week in Washington, said Clyde Namu'o, OHA administrator.

The trustees will receive weekly reports from the firm to monitor their spending and progress, Namu'o said. The firm's work will include the preparation of a report on the federal recognition campaign for the Bush administration, in the hopes of persuading the White House to support the bill, according to Namu'o. "There's a window of opportunity to get this bill passed, and we need to do everything we can do," he said.

Patton Boggs lobbies for such heavyweights as AOL Time Warner, Mars Corp. and Sony. Its roster of about 225 lobbying clients also includes major trade associations and state and local agencies. Thomas Hale Boggs Jr., one of its principals, is known as a prominent Democrat who has taken a personal interest in Hawaiian recognition. He is considered one of the capital's most well-connected and influential lobbyists.

Hawai'i's congressional delegation has made progress on Hawaiian recognition since Akaka first proposed the bill in 2000, but has not been able to overcome opposition from conservative Republicans. Republican Gov. Linda Lingle and her staff have approached the Bush administration for its support.

Sen. Dan Inouye, D-Hawai'i, has said that a White House endorsement is key. The Clinton administration supported a version of the bill in 2000, when it passed the House but stalled in the Senate. Last session, a version of the bill cleared the Senate Indian Affairs Committee and the House Resources Committee before being blocked.



During 2001 a massive sole-source contract came to public awareness, in which a developer will use federal funds to build and operate a massive money-losing fiber-optic cable network to link every parcel of Hawaiian Homelands on 203,000 acres of land throughout all the Hawaiian islands. The project is using money from the federal tax added to every American's phone bill to pay for helping remote, sparsely-populated rural areas get telephone service (however, many Hawaiian Homelands are not located in rural areas, and already have telephone service). The developer is the brother of OHA Chairman Clayton Hee, and his small company was assembled with most of its management employees having close relationships with OHA, Kamehameha School/Bishop Estate, the Hawai'i legislature, and the political establishment. Three articles were published about this scheme in the Honolulu Advertiser during 2001; and an excerpt is provided from the third one. The Honolulu Star-Bulletin published its own article on June 4, 2002, and ecxerpts from that article are also provided. An article from the Maui News of April 27, 2001 is also provided, because it shows that even sone Native Hawaiians recognize that this project is a boondoggle which might desecrate ancient burials in order to make a profit.
and, as excerpted below:

"Savvy developer wins federal money to wire homelands

"A local politically connected company is eligible for as much as $400 million in federal loans to weave fiber-optic cable through Hawaiian Home Lands on six islands, even though much of the land is undeveloped and lacks roads, water and electricity. "With the ability to draw on federal money rather than finding private investors to pay for the start-up, the project has the potential to be one of the most expansive high-tech ventures ever undertaken in Hawai'i.

"At the center of the project is Al Hee, who has hired a number of people with significant Democratic political connections and experience, including former legislators and several people connected with Kamehameha Schools. The foundation for Hee's Sandwich Isles Communications Inc. was laid in 1994, when the Hawaiian Homes Commission awarded him the exclusive right to provide telecommunications services on all Hawaiian Home Lands. The exclusive license was approved without any competition or bidding after Hee's plan was evaluated for the department by former state Sen. Mike Crozier. Crozier said he is friends with Hee and considers him "a genius," but that he evaluated the proposal fairly. With contract in hand, Hee applied for and received low-interest federal loans from the U.S. Department of Agriculture under a program designed to provide telecommunications services to sparsely populated rural communities that wouldn't otherwise get fiber-optic cable.

"Part of the reason Sandwich Isles Communications has attracted interest in Hawai'i political circles is that the company has ties to a variety of politicians and current or former executives involved with Kamehameha Schools, another politically influential local institution.

"Al Hee said his brother Clayton, chairman of the board of trustees of the Office of HawaiianAffairs, is not involved in the project. Sandwich Isles did hire Clayton Hee's wife, Lynne Waters, to produce videos for presentations to business leaders, homesteaders and others on the company's operations.

"Among the company's 22 employees are former Democratic House Majority Leader Tom Okamura and former state Rep. Devon Nekoba, who both carry the title of agency coordination officer. Hee said the two advise company executives on government policy matters.

"Ties to Kamehameha Schools, formerly known as the Bishop Estate, include Gil Tam, the company's vice president of government and community relations, formerly director of administration and interim chief executive officer for Bishop Estate; and Robert Kihune, chief executive officer, now a Kamehameha Schools trustee.

"The Hawaiian Homes Commission chairwoman in 1994, when the commission approved Hee's license, was Hoaliku Drake, the mother of former Bishop Estate trustee Henry Peters. Clayton Hee is a friend of Peters and was hired as a cultural affairs researcher for the Royal Hawaiian Shopping Center, a subsidiary of the former Bishop Estate/Kamehamaha Schools.

"The new fiber-optic network Hee is building may not be profitable by itself, but it qualifies for ongoing subsidies from the Federal Communications Commission. In effect, the FCC will cover the operating costs of the network and pay Sandwich Isles a profit based on the value of the telecommunications equipment installed, Hee said. Hee said he plans to borrow more than $400 million from the federal Rural Utilities Service to build what will eventually be a $500 million interisland fiber-optic network. He expects private money will be invested eventually, but no outside investors have been found so far.

"Hawaiian Home Lands are tracts available at low cost to Native Hawaiians for businesses and homes. Hee has promised to [use] the federal money to install the latest generation underground fiber-optic telecommunications network, wiring all 69 parcels of Hawaiian Home Lands, a total of 200,000 acres.

"Crozier said he "did the due diligence" and scrutinized Hee's proposal, then recommended the commission approve it. The commission agreed, and voted unanimously to grant Hee an exclusive license to provide telecommunications services on Hawaiian Home Lands. The license was awarded under a section of the Hawaiian Homes Commission Act usually used to grant utilities what amount to easements, giving them access to install wires, pipes, poles or other equipment.

"Francis Apoliona, spokesman for the Department of Hawaiian Home Lands, said that section of the act probably was not intended to grant monopolies to utilities, and the way the rule was used in this case is "unparalleled." There was no competitive process to decide who would get the license, but Hee points out the commission never has required utilities to compete for the right to provide services on Hawaiian Home Lands.

"The scope of the investment Hee is planning is huge. He said it will cost $60 million to string undersea fiber-optic cable links between the islands. Environmental reports for the project indicate it will cost the company another $100 million to dig trenches and bury cable on the Big Island; $35 million to install cable on Oahu; $30 million on Maui, Moloka'i and Lana'i; and $10 million on Kaua'i. When that money is spent, Hee will have wired together all Hawaiian Home Lands and built the state's third interisland fiberoptic network.

"Sandwich Isles is free to sell telecommunications services to non-Hawaiians, and some observers have speculated that may be how Hee plans to make money. But Hee said the system was designed as a rural service for Hawaiians, not as a telecom provider for the state. The planned system ... runs through Waikiki in a configuration that may help Sandwich Isles market its services to customers far from Hawaiian Home Lands. Hee's project is advancing at a time when similar privately financed businesses on the Mainland are struggling or collapsing because the demand for data transmission services hasn't been nearly as strong as experts predicted. Other industry observers are pessimistic that Sandwich Isles' enormous undertaking ever will lead to a profitable business independent of federal subsidies. Those analysts, who asked that their names not be used because they might want to do business with Sandwich Isles, said the company is spending astonishing sums to provide service to relatively few far-flung customers, which translates to high costs and low revenue. Roberta Purcell, assistant administrator of the telecommunications program of the U.S. Department of Agriculture's Rural Utilities Service, confirmed that the federal government will be covering the cost of Sandwich Isles' operations in its early years."

On June 4, 2002, the Honolulu Star-Bulletin published an article about the fiber-optic project. Some new details thus became public:

Work has begun on a privately owned $500 million fiber-optic cable telecommunications system ultimately linking all Department of Hawaiian Home Lands residents currently without telephone service. Even if it services all the homes possible, the price tag will be $25,000 per home. Of the total cost, $400 million will be paid through a loan from one federal agency that will be almost entirely repaid by another federal agency that assesses a fee on every telephone user in the United States.

The plan is to provide state-of-the-art telecommunications to 20,000 homes. But the 20,000 homes do not yet exist. The number represents the families who are on the Hawaiian Homes waiting list for new home. At the current rate of DHHL home construction (about 500 new homes per year), the 20,000 dwellings will not be completed for another 40 years. The initial service will reach less than 5 percent of the existing 5,400 DHHL homes statewide: only those that do not have existing service from Verizon.

Many of those who know about it think it is huge investment to provide services that will be rarely, if ever, used. "Someone spotted a big pot of federal money just sitting there and went out and grabbed it," said one Kauai official with extensive experience in applying for and receiving government grants. "The money isn't in operating the system, it is in building it." Neither Sandwich Isles nor the federal agencies providing the funding would say how much of the funding is for administrative costs and how much profit the company will be allowed on construction.

Sandwich Isles comes equipped with a high-profile political pedigree. Robert Kihune, retired vice admiral and recently appointed Kamehameha Schools trustee, is chief executive officer. Al Hee, brother of Office of Hawaiian Affairs Chairman Clayton Hee, is president. In 1995, it made an agreement with Hawaiian Homes to build the system. There was no bidding and the project costs the department nothing. Under the 1996 Federal Telecommunications Act, which encourages new companies, Sandwich Isles' rates will not be regulated by the state Public Utilities Commission.

The financing includes $400 million in loans from the U.S. Agriculture Department's Rural Utilities Service and perhaps another $100 million from unnamed "private investors." Most of the federal loan will be paid off by another federal agency, the Federal Communications Commission, through the Universal Service Fund, administered by the National Exchange Carriers Association. The money comes from a federal charge on every monthly bill for every telephone user in the United States. For a residential customer, it works out to about $10 a year.

"We have kind of a social mission," said Gil Tam, Sandwich Isles vice president for government and community relations. "We don't want to be a big telephone company like Verizon. Our mission is to serve Hawaiian Home Lands."

When the Star-Bulletin asked Roberta Purcell, administrator of the Telecommunications Division of the Rural Utilities Service (which is making the loan available) how much of the debt service would come from the Universal Service Fund, she responded: "Much of the information you are seeking is either proprietary or must be obtained directly from Sandwich Isles itself." Purcell refused to discuss the justification for spending a half billion dollars when there is no indication any significant number of Hawaiian Homes residents has been underserved by Verizon.

Asked how many of her acquaintances in Anahola currently lack service from Verizon, longtime Anahola resident Sondra Grace had to pause a minute. "I can think of one old guy who doesn't have a telephone and he lives out in an isolated valley," she said. "I'm not sure he'd want it even if it were available."

On April 27, 2001 an article in The Maui News had described a controversy within the Native Hawaiian community over this project. Some cultural practitioners and historians were concerned that greedy businessmen were moving forward without adequate archeological and environmental assessments. The project would be laying cable to a small, remote, uninhabited area in the interest of making huge profits, while ancient burials could be desecrated due to inadequate studies. The article as originally published included a detailed map of Maui. It should be noted that "cultural practitioner" Charles K. Maxwell is an unordained "reverend" without a church, who has been known to abuse Native Hawaiian cultural and spiritual claims as a way to intimidate people into giving money or power to himself or to favored local groups.

Burial Council questions need for fiber optics system

The Maui News
April 27, 2001
Staff Writer

WAILUKU — A proposed $500 million fiber optics cable system that would provide high-tech hookups to every parcel of Hawaiian Homes land on six islands was met with criticism – and suspicion – by the Maui/Lanai Islands Burial Council Thursday.

"These lines are telling a different story," said Leslie Kuloloio, a former member of the council who was testifying on his own behalf, as he pointed to a map covered with red lines over land and under the ocean that would connect the project. "These lines aren't geared for Hawaiian Homes – they're geared for a big picture 50 years from now," he said.

The system has been proposed by Sandwich Isle Communications, an Oahu-based public utility company certified as a rural telephone company by the state Public Utilities Commission and Federal Communications Commission. The company, formed in 1995, is owned and operated by Native Hawaiians. Although Sandwich Isle spokesman Gil Tam insisted the main purpose of the project was to offer state-of-the-art communications to Hawaiian homesteaders, the Native Hawaiians of the Burial Council feared their lands were being used to create a huge network for the public at large as well as commercial ventures and, possibly, the military.

"What about the Department of Defense? The Department of Energy?" wondered Kuloloio. "Are they another part of the big picture that we don't see? How many Hawaiians have computers and Microsoft? We're at the bottom. What we need is water. I'd like to see all these lines be waterlines."

Chairman Charles Kauluwehi Maxwell Sr. and Vice Chairwoman Dana Naone Hall were especially surprised that the cable would run all the way to LaPerouse Bay just to connect a small piece of Hawaiian Homes land that no one on the council even knew was part of the trust. "I'm shocked, I've never even heard of that being homelands," said Maxwell. "There's nothing there but lava. There's no water there. People won't be able to live there for at least 50 or 100 years." Maxwell pointed out that costs for the project will soar even more because of all the archaeological work that will be needed to address the expected concentration of ancient graves and historic sites through the South Maui corridor to connect LaPerouse. He said it would also needlessly disturb the bones of the ancestors. "How is this (project) practical?" he asked. "I can't see digging through intense, intense (layers) of archaeological sites and burials for (a community) that might not even occur."

Hall called the draft environmental assessment prepared for the project "premature," because the system would be built in phases and things would inevitably change over the years. She also called the archaeological assessment prepared by Cultural Surveys Hawaii Inc. of Oahu "extremely inadequate" in describing the minimal impacts on burials that would result from widespread trenching.

Maxwell said the Burial Council has "had a lot of problems" with work done by Cultural Surveys Hawaii in the past and suggested that Sandwich Isle hire a Maui firm. Kuloloio was also concerned that there had never been a public hearing about the system for Hawaiian homesteaders on Maui. Tam said the idea for the project came from Hoaliku Drake, a past chairwoman of the Hawaiian Homes Commission. He said $400 million of the needed money would come from a loan from Rural Utility Services in the U.S. Department of Agriculture. The other $100 million would come from private sources.

The public would end up helping Sandwich Isle pay back the federal loan through charges on monthly telephone bills. Tam said when AT&T broke up several years ago, a fund was created by Congress to enable rural areas to keep up with cities in terms of technology. At that time, the charge was $1 per customer each month. Current charges were not available.

Tam said those fees "help companies like ours to pay back the loan." No one on Hawaiian Homes land will be charged for any infrastructure. Individuals will only be expected to pay for their service. The installation for Maui County would come to $30 million, with most of that being spent for Maui island. Hall asked how Sandwich Isle would recoup its costs or ever make a profit considering that, in the near future, there probably will be barely 500 Native Hawaiian families on homestead lots across the island. Tam finally acknowledged that the general public will be the major subscribers of the project. After the meeting, he admitted that the users might include the military. "Anybody could" end up paying to tap into the network, he said.

Sandwich Isle hopes to obtain state or county permits to construct as many of the trenches as possible in public rights of way. The Burial Council voted unanimously to require the developer to revise the environmental assessment, particularly the archaeological assessment. Members also asked to be included as a consulting party in further discussions. Tam assured the panel that the company would not pursue a "finding of no significant impact" for the project and would remain in close communication with the Burial Council. "We really want to do the right thing," he said.

Forbes Magazine likes to make heroes out of entrepreneurs who ruthlessly or cleverly beat out their competitors and get wealthy. In the article excerpted below, Forbes admiringly praises Al Hee of Sandwich Isles Communications for his ingenious scheme to bilk the taxpayers out of hundreds of millions of dollars, using the excuse that he is providing telecommunications services to poor, downtrodden Native Hawaiians. The much longer, complete article can be seen at:

Dreaming & Scheming Hawaiian Style
Carleen Hawn, 10.28.02

While foolhardy telecom chiefs choked their companies with debt to fund broadband rollouts, Al Hee contrived to have the U.S. government subsidize his state-of-the-art network. Look out, Verizon.

This crowd is here to bless the newest leg of a $500 million fiber-optic network that will soon bring high-speed Internet access and cheap phone service to the 225 households at Laiopua, a government-subsidized site deemed too poor and too desolate to merit even basic service until now. But the broadband rollout won't come from Verizon, whose Hawaii unit has had a local monopoly here for most of 12 decades. It comes courtesy of the guy with the o'o stick, a native Hawaiian and first-time telecom entrepreneur named Albert S. N. Hee.

Hee, 48, is president of Sandwich Isles Communications, the rural carrier he founded in 1995 to serve the residents of Laiopua and 22,000 other native Hawaiians who inhabit the Home Lands, 200,586 acres of sparse, rugged terrain set aside by the federal government in 1921. "This isn't about making money, completely," says Hee. "I wanted to do something for my people, to change things for the community of Hawaiians."

By the time his buildout is complete in 2005, SIC's network will link Hawaii's six largest islands with 1,500 miles of underground and undersea cable filled with 48 strands of gleaming fiber-optic glass capable of transmitting 2.4 billion bits of data per second. It will have all the slick features of the multibillion-dollar pipes that bankrupted once-high-flying carriers like Global Crossing and WorldCom. The only difference is Al Hee didn't have to go into hock on Wall Street to build his network. Hee got the government to pay for it, more or less.

It gets better: While Hee landed federal largesse because he will serve underprivileged natives of Hawaii, he is also building out his network in Honolulu and other cities to compete with Verizon and other incumbents for higher-spending businesses and richer residential customers. "It's all about dreaming and scheming," says Hee, clad in his trademark Hawaiian shirt and Bermuda shorts and standing barefoot on the plush white rug in his glittering office. He gazes out 27 floors above the bustling business district of Honolulu and adds: "Idream up something and then scheme and scheme until I find a way to make it happen."

That irks his rivals. "We question the reasonableness of it," says Joel Matsunaga, vice president at Verizon's Hawaii unit. "They're getting loans from the government, then they're going to get other subsidies to pay off the loans. To compete with other providers in an open market just isn't fair."

SIC's network, because it targets underserved rural areas, is being financed with $400 million in long-term, low-interest loans from the Department of Agriculture's Rural Utilities Service (RUS). The agency has subsidized rural delivery of water and electricity since 1935, adding phone service in 1950. SIC, an RLEC (rural local exchange carrier) licensed to serve only rural communities, landed the largest grant the agency has ever made. The loans have a term of 20 years at 5% to 6% annual interest. The remaining $100 million of SIC's $500 million price tag will come from private funds, including some of Hee's own cash.

Hawaii's Home Lands, some 69 tracts on six islands, are overseen by the state's Department of Hawaiian Home Lands (DHHL), established in 1961 and tasked with developing affordable housing for native Hawaiians

For decades the Federal Communications Commission has used a Universal Service Fund to subsidize carriers to help provide affordable phone service to remote areas. But carriers are required to serve such "high-cost" areas only if they have networks in place to do so. The FCC can't require Verizon to extend to a new remote region that is unlikely to produce a profit.

SIC customers will pay no more than $20 a month for their phone service, as much as 20% less than what Verizon charges its subscribers. That owes in part to SIC's getting back-end subsidies from the Universal Service Fund. "That's not fair competition," Verizon's Matsunaga complains. But then, Al Hee is an opportunist.

In 1997 SIC broke ground near four rural homesteads on the north side of Oahu. By 1999 construction was under way for three more homesteads on Maui and Molokai. Two years later SIC had completed nearly 5% of its buildout and was serving 11% of the 22,539 residents on nine homesteads, including Laiopua.

In June 2002, following an open auction in which SIC was the only bidder, Al Hee and ClearCom were granted an exclusive license with Honolulu's Board of Water Supply to lease all of its abandoned water mains in perpetuity. ClearCom has agreed to pay an annual fee of $1 million, and when the network is complete ClearCom also will pay the board a dollar a year for every foot of pipe it uses. Hee will also deliver voice and data service to the water board itself at a 50% rebate.

So Al Hee uses government subsidies to build a telecom network for rural consumers and parlay it into profits by serving urban residents and businesses. This irritates his detractors, but he doesn't flinch. "My [SIC] license is dependent upon providing service to the Home Lands. As long as I do that, I'm good. Worst-case scenario, someone sues and it takes 10 to 15 years to work through the courts. By then my network will be built. Will they then tear it up? No way."



Here is information about the upscale housing development on Hawaiian Homelands overlooking downtown Honolulu. The development is known as "Kalawahine Streamside." The Department of Hawaiian Homelands has the slogan that it is "putting Hawaiians back on the land." Thus, we are led to imagine poor, downtrodden Hawaiians geting long-term $1-per-year leases for bucolic pastoral land where they can live in a small but decent house while doing subsistence taro farming or aquaculture. Instead, the perennially cash-short Department of Hawaiian Homelands has built Kalawahine Streamside, overlooking downtown Honolulu, where wealthy professionals get free land for homes worth up to $385,000. This excerpt is taken from The Honolulu Advertiser of Sunday, January 28, 2001:

"The $26 million Kalawahine Streamside project was developed by Kamehameha Investment Corp., a for-profit subsidiary of Kamehameha Schools Trust, for the Department of Hawaiian Home Lands.

" This unique upper-middle-class neighborhood on Hawaiian homestead land has 54 multilevel duplex units and 33 three-story single-family homes. Selections were made off the Hawaiian Home Lands waiting list, but the asking price of $174,900 to $196,100 for a duplex or $214,900 to $225,900 for a single-family unit made it unaffordable for most.

" "These are the most expensive homes ever offered to applicants, and the reason is the topography," project manager Elton Wong said. "The conditions were challenging from a design and construction standpoint. But for location, it’s a good deal. Schuler Homes sells a market product of the same size for around $385,000."

"Hiram deFries, Northwest region general manager for Equilon, formerly Shell Oil Co., graduated from Punahou with Ayau’s brother, Henry, and played baseball with Mendes, 29-year-old Tamar deFries said. Ayau, 58, waited 37 years for his entitlement opportunity. "I thought I’d never get it while I was alive," said Ayau, who is retired from GTE Hawaiian Tel. "Homesteads in Wai‘anae and Nanakuli were too far. "Eight years ago, I heard there might be something happening in the Punchbowl area so I waited."

"Ayau and his wife, the former Aulani Ching, sold their Kamehameha Heights home to move to Kalawahine Streamside. "To me, this is a one-of-a-kind project because of the town location and the quality of the homes," Ayau said.

"An upper-middle-class community is a welcome addition to the area, say Papakolea and Kewalo homestead leaders. "I like it," said Puni Kekauoha, president of the Papakolea Community Association. "It’s always nice to see our people coming up to another level of living."

"Kekauoha was impressed by the newcomers’ support in helping to organize representation from the three communities for the recent homestead rally-march to the State Capitol. [this rally-march was to protest a court case seeking to declare unconstitutional the racial entitlement programs of the Office of Hawaiian Affairs and the Department of Hawaiian Homelands]

"Among the Kalawahine residents are four Honolulu firefighters, including captains Richard Soo and Ed Simeona, and many professional people. "This neighborhood is setting a new standard," said Hee, the stockbroker and a senior vice president at Morgan Stanley Dean Witter. "There are professional, educated, hard-working Hawaiians who care about their community and take pride in living among our people here.

"This is a throwback to the old Hawai‘i neighborhoods where you knew everybody and nobody had to lock their doors," said stockbroker Mark Hee, who moved into a Kapahu Street duplex unit uphill from Ha‘alelea Place about a month ago. "It’s the kind of environment I had when I was growing up in Keolu Hills 30 years ago." "It’s like living in a mini San Francisco because of the hills," said Hee’s wife, Luana Alapa-Hee, a former Miss Hawai‘i. "This neighborhood is setting a new standard," said Hee, the stockbroker and a senior vice president at Morgan Stanley Dean Witter. "There are professional, educated, hard-working Hawaiians who care about their community and take pride in living among our people here. "That’s the real spirit I see at Kalawahine," added Hee. "We’re proud to be neighbors and happy with our environment." "

[It is unclear from the newspaper article whether stockbroker and Morgan-Stanley-Dean-Witter senior vice president Mark Hee, referred to above, is related to Clayton Hee, Chairman of the Office of Hawaiian Affairs; or to Al Hee, who is Clayton's brother and the Chairman of Sandwich Isles Communications Inc. which has a sole-source $400 Million federal contract to provide fiber-optic cable to the racially exclusionary 203,000 acres of Hawaiian Homelands throughout the Hawaiian islands]


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