City Council Chairman Ernie Martin said he signed off on two documents tied to cancellation of $1.2 million in loans to the nonprofit Opportunities and Resources Inc., whose leader contributed $4,200 to his political campaign committee.
Martin said he does not believe there was a conflict of interest because he was not involved in the decision to forgive those loans. At the time he signed letters informing ORI of the city’s action, Martin was the city’s acting director of community services.
"What I remember signing were clearly transmittal documents," Martin told the Star-Advertiser on Tuesday night during a telephone conversation from the mainland where he is on a personal trip.
The discussion and decision to essentially convert the loans to grants so the money would not have to be repaid had already been made by others, he said, and his signature on the documents was done simply because he was the highest-ranking official left in the Department of Community Services during a brief period when then-Acting Mayor Kirk Caldwell’s administration was winding down and making way for then-newly elected Mayor Peter Carlisle.
"I was the only executive left who could have signed those documents," he said.
Martin’s comments came in response to the release late Tuesday of documents by the Department of Housing and Urban Development related to its investigation of ORI’s relationship with the city. The documents were requested by the news media seeking clarification of a 15-page HUD report given to the city last week after its investigation of the city’s relationship with ORI.
Among the documents are two ORI-related letters Martin signed. Martin told the Star-Advertiser he did nothing wrong.
The primary focus of the HUD investigation revolved around a separate $8 million federal Community Development Block Grant the city issued to ORI Anuenue Hale, a sister company of ORI. The report demands the city return the $8 million, citing noncompliance of grant rules by ORI Anuenue Hale and the city’s lack of enforcement.
HUD’s ORI report also looks into the loan cancellation and, without naming Martin, said the decision to forgive them came from city employees running for elected office who received campaign contributions from ORI executives.
The report called the cancellation unusual and said three other nonprofit companies were turned away when they made similar requests.
Martin received contributions from ORI founder Susanna Cheung four times, for a total of $4,200 from December 2009 through May 12, 2012, according to reports Martin’s election committee filed with the state Campaign Spending Commission.
The loans to ORI were for $350,000 and $812,718.50 and issued in 1995 and 1999, respectively.
A signed letter from Martin to Cheung dated Oct. 19, 2010, was sent with a copy of an agreement canceling the $350,000 loan. A similar letter transmitting a copy of the agreement canceling the $812,718.50 loan, dated Aug. 5, 2010, was signed by former Community Services Director Debbie Morikawa.
Martin, who served as Morikawa’s deputy director, said he was not involved in the decision-making on the loans because Morikawa excluded him.
Asked why she did so, Martin said, "I think because she felt it was a sensitive issue and the fact she knew that I was running for office at that time, and it would be best to exclude me from that process."
Morikawa, reached Tuesday night, declined to comment on the matter.
A second ORI loan-related document Martin signed, dated Nov. 16, 2010, was a memorandum to then-Acting Budget Director Michael Hansen forwarding the two ORI promissory notes "marked for cancellation."
"The city has agreed to convert these loans into grants, and the city and ORI have executed an Amendment, Agreement and Acknowledgement for each loan which specifies the terms and conditions under which the promissory notes would be cancelled," Martin wrote to Hansen.
Both Martin and Morikawa were political appointees of former Mayor Mufi Hannemann, who received $6,000 in campaign contributions from Cheung. Hannemann, who resigned as mayor on July 20, 2010, to run for governor, was replaced by his second-in-command, then-Managing Director Kirk Caldwell who himself received a $500 campaign contribution from Cheung.
It’s unclear from the documents HUD obtained how involved Hannemann and Caldwell were in the decision to forgive the loans.
Martin said he recalls there being a long-running debate about forgiving CDBG loans that had remained outstanding for a number of years, and that at least one other nonprofit had sought relief the way ORI did.
Memos HUD released Tuesday indicate there was an internal discussion in 2009 about whether CDBG and the Home Investments Partnership Program, referred to as the HOME loans, should be converted into grants, and that it wasn’t until May 2012 that the city submitted to HUD policies and procedures for CDBG loan conversions.
Hansen, a Carlisle appointee, signed the documents formally canceling both loans in March 2011.
Carlisle did not receive campaign donations from Cheung.
In an email last week, Carlisle told the Star-Advertiser that "the loans forgiven were part of old loans that had been on the books since the 1990s and should have been grants in the first place."
Caldwell has asked two top staffers to investigate HUD’s findings and has also enlisted the help of a private investigation agency. He said he does not recall signing off on any documents that forgave ORI loans.
Hannemann has been unavailable for comment.
Also among the documents HUD released Tuesday was a series of letters between various city officials and ORI’s Cheung in 2008-2009 that show Cheung asked the city to notify its auditors that the city had forgiven its loans when, in fact, the city had not yet done so.
"Our records contain correspondence in May and June 2000 between ORI and the city discussing modification of loan payments; however, we have no records indicating that the city had agreed to forgive the subject loans," Morikawa wrote to Cheung in April 2009.
