The state attorney general and Department of Hawaiian Home Lands have hired a team of Washington, D.C., attorneys to sort out the legal tangle surrounding telecommunications company Sandwich Isles Communications. The company’s founder, Al Hee, was sent to prison after he was convicted of federal tax evasion earlier this year.
Sandwich Isles holds the exclusive license to provide telecommunications serv-ices on Hawaiian homelands, but the Federal Communications Commission last year suspended millions of dollars in federal subsidies to the company while it audits spending by Sandwich Isles.
The state Department of Hawaiian Home Lands announced last year that Hee’s conviction had prompted a “review and assessment” by the department to determine whether Hee’s legal problems could affect services for homesteaders, but the department never made public the results of that review.
Sandwich Isles provides services to about 3,600 residential and business customers on homelands, and Hawaiian Homes Commissioner William Kahele Richardson has said he is worried the company might not be financially viable.
The state contract with the Washington law firm Keller and Heckman LLP authorizes the firm to do up to $150,000 in legal work for Hawaiian Home Lands in connection with issues related to telecommunications and Sandwich Isles. The primary attorney listed in the contract is Albert J. Catalano.
Lawyers with the firm specialize in representing clients before the FCC in enforcement actions and other matters, and will be paid fees of up to $640 per hour, according to a fee schedule included in the contract.
The new contract also tasks the Keller law firm with evaluating and responding to companies seeking “Eligible Telecommunications Carrier” certifications to provide services on Hawaiian homelands.
Sandwich Isles CEO Janeen-Ann Olds told the Hawaiian Homes Commission earlier this year that Sandwich Isles must be certified in order to qualify for federal telecommunications subsidies from the Universal Service Fund.
Sandwich Isles’ primary source of income has been subsidies from the Universal Service Fund, which is financed by a small charge levied nationally on consumers’ phone bills. The fund has paid Sandwich Isles more than $242 million since 2003 to support its telephone and data networks, but in June 2015 the FCC suspended payments of about $1.4 million a month while it audits the company’s finances.
Certification of telecom companies is normally the responsibility of the state Public Utilities Commission, but the PUC last year refused to recertify Sandwich Isles as an eligible telecommunications carrier until the federal government completes its investigation into the company’s finances.
The Sovereign Councils of the Hawaiian Homeland Assembly have called on the PUC to recertify Sandwich Isles, and Sandwich Isles has also requested that the commission reconsider the issue of recertification.
This year Sandwich Isles asked the Hawaiian Homes Commission to certify it as an eligible telecommunications carrier so it will be legally positioned to accept federal subsidies if the FCC agrees to restore Universal Service Fund payments to the company.
However, Public Utilities Commission Chairman Randy Iwase said in an interview that only the PUC can certify that a company is eligible to receive subsidies from the Universal Service Fund. “They’ve got to come to us,” he said.
Hawaiian Homes spokeswoman Paula Aila and Hawaiian Homes Commission Chairwoman Jobie Masagatani declined to discuss the Keller contract or the status of Sandwich Isles’ operations. However, Aila issued a written statement saying that the department has been reviewing issues related to Sandwich Isles, and Catalano should “assist DHHL in its review and planning.”
The department’s “first and foremost concern is that Hawaiian home lands lessees continue to receive adequate telecommunications services,” Aila said in her statement.
Hee’s company, Waimana Enterprises Inc., won the exclusive license to provide telecommunications services to customers on Hawaiian homelands in 1995, and in 1996 Waimana partially assigned that authorization to its subsidiary, Sandwich Isles.
Over the years, Sandwich Isles paid millions of dollars in management and other fees to Waimana, money that made up much of Waimana’s income.
Assistant U.S. Attorney Lawrence Tong said at Hee’s sentencing that Hee used Waimana Enterprises Inc. as “his personal checkbook” for 10 years, spending
$2.9 million in company funds on personal expenses including $96,000 on massages that were deducted as “consulting fees.”
Hee also claimed as business expenses $1.6 million in salaries and benefits provided to his wife and children, who were not actually employees of the company, prosecutors said. In addition, he claimed $736,900 in college tuition, housing and other expenses for his children and more than $119,000 in personal credit card charges as business costs.
Those credit card charges included vacations for Hee’s family to Disney World, Tahiti, France and Switzerland, which Hee claimed were business-related. Hee also had Waimana pay $17,000 for a five-day family vacation at the Mauna Lani resort on Hawaii island which Hee claimed was a “stockholders meeting” even though he was the sole company shareholder.
Prosecutors also pointed out Hee bought a $1.3 million home in Santa Clara,
Calif., in 2008 with corporate money, and told his accountants the property would be used by employees of the company. Instead, Hee’s children lived in the home rent-free for four years while they attended nearby Santa Clara University.
Most of those expenses were claimed as business deductions on Waimana’s corporate income tax returns or were falsely characterized as “loans” from the company to Hee, prosecutors said. Hee did not report that money from the company as income on his personal income tax returns, and therefore did not pay taxes on it.
Hee, 62, was sentenced in January to 46 months in prison for seven federal tax convictions, and is being held at the Federal Bureau of Prisons’ Rochester Federal Medical Center in Minnesota.
