HILO – On Wednesday, the Hawaii County Board of Ethics voted to defer any action concerning Mayor Billy Kenoi’s controversial spending practices.

Kapa’au resident Lanric Hyland filed two complaints following allegations that the mayor misused his county purchasing card for personal expenses – which Kenoi says he later paid back – and that the mayor failed to file gift disclosures for thousands of dollars in free travel that he received.

The mayor addressed the pCard allegations to the media on Oahu over a month ago.

Since that time he has gone silent on the issue. His lawyers are now doing the talking. Howard Luke, one of three Honolulu-based attorneys currently representing Kenoi, was present for the Ethics hearing on Wednesday.

In January, Finance Director Deanna Sako took over for the retired former director Nancy Crawford. Sako has retained attorney Brian DeLima, who argued that Sako should not even be a part of the complaint.

Our fundamental point is that (Sako) came on board as the finance director recently in the context of Mr. Kenoi’s tenure. There no dispute that the finance department has done its job recording all the monies that are spent, the records are there, she responded in the way that she has to respond to the freedom of information request… so really there is no merit to continuing Ms. Sako as a party to this case.Brian DeLima, attorney for Deanna Sako

The three members of the ethics board, chair Ku Kahakalau, Kenneth Goodenow, and Douglass Adams, said they didn’t want to interfere with a pending criminal investigation by the state Attorney General’s office. News reports say subpoenas have already gone out in connection with that investigation.

I will tell you (an attorney general investigation) is now underway. I’m not going to discuss what’s happening with respect to that this morning, I think its far outside the purview of this hearing. But I ask that you recognize that its generally accepted throughout the state of Hawaii that once a criminal investigation is underway – that doesn’t mean that this entire preceding be swept under the rug, we’re not asking for that – we just ask that the observance of due process occur and that Mr Kenoi be allowed to have the Attorney General investigation run its course”.Howard Luke, attorney for Mayor Kenoi

In the days prior to the meeting, the Hawaii County Council – which voted to approve bringing in special counsel from Maui for the occasion – wondered if the ethics board would be able to maintain quorum, in light of the possibility that members may choose to recuse themselves. Although the board members are approved by the council, nominations first come from the mayor’s office.

Although the ethics board decided not to take action Wednesday, the mayor’s attorney said the he would not oppose an ethics board investigation into the situation.

He’s told me in no ambiguous terms that he doesn’t want me to raise any objection at all to the integrity of your obtaining documents and information that might facilitation the just resolution of the issues before the board of ethics.”Howard Luke, attorney for Mayor Kenoi

After Wednesday’s meeting, we spoke to the petitioner over the phone. Lanric Hyland was not happy with how the proceeding was handled.

I feel like I got ripped off. I went in good faith to the Ethics Board thinking that I was going to get a fair and honest hearing and I didn’t. What happened was that they didnt listen to the citizen that filed the complaint, they listened to the lawyers representing the bureaucrats. They decided that they were just going to ignore the complaint.Lanric Hyland

Hyland shared his testimony with Big Island Video News. It is reprinted below.

TESTIMONY OF LANRIC HYLAND

Aloha Ethics Board Members:

First let me thank you very much for agreeing to accommodate my disability and permit me to testify from here in Kapa’au. It reflects well on you, and on the office of County Clerk Stewart Maeda, that I am able to appear before you from here. It is a sad day for the County of Hawai’i that our Mayor should have brought us to this point.

He brings shame upon us all.

But I am counting on you three to demonstrate to the Mayor the integrity he is so sadly lacking. A pono findings of fact and conclusions of law as reflected by your decision will go a long way to restoring a sense of honor to Hawai’i County politics. The rest is up to the County Council. And ultimately, of course, we voters.

My testimony will not be as brief as I might like it to be, but it is all directly on point. It is all directly applicable to my petition and to your deliberations. In fact, it is specifically structured to assist you in your deliberations. Thank you for considering my humble suggestions.

You will note that I have included crimes in my testimony. I do so not because I am asking you to find him guilty. That is for another forum, and hopefully the Attorney General and the courts and a jury of his peers will hold him accountable. But no, I cite and discuss these offenses because I believe that if by a simple preponderance of the evidence before you, you believe he may have committed such a crime, you can find also by a simple preponderance of the evidence (more yes than no) that he violated our County Code of ethical standards. That requires neither clear and convincing proof, nor proof beyond a reasonable doubt. Just more yes than no.

A. We don’t have a signed confession, so how does one show intent?

“It is an elementary principle of law that intent may be proved by circumstantial evidence; that the element of intent can rarely be shown by direct evidence; and it may be shown by a reasonable inference arising from the circumstances surrounding the act.” State v. Yabusaki (1977) 58 H. 404, 409; 570 P.2d 844 (emphasis added).

“You should consider both kinds of evidence. The law makes no distinction between the weight to be given to either direct or circumstantial evidence. It is for you to decide how much weight to give to any evidence.” Farmer v. Brennan (1994) 511 US 825, 841.

B. Purchasing card (p-Card) cardholder agreement

Let us now consider just what Mayor Kenoi actually signed. What he actually promised on his honor he would do. And keep in mind, three other Mayors have promised the same thing. But they have delivered! Other Mayors are honest.

QUOTE: “In return for the purchasing authority delegated to me and in consideration of my responsibility toproperly steward public resources, I agree to undertake the following responsibilities:

“… I understand that the use of the p-Card … to make personal purchases is strictly prohibited and unauthorized. I will not use the card, under any circumstances, for personal use…

That is what Billy Kenoi swore to uphold! Billy Kenoi is an attorney and he gave his sacred word of honor that he would abide by and obey these rules. He lied. He lied continuously for years. He lied even after Nancy Crawford warned him to not use his p-Card for personal purchases.

Billy Kenoi is a charming rogue, he is affable, he is charismatic – Unfortunately, he also has no respect for the law! When he is under oath to you, remember this and judge his credibility accordingly. I further believe that pursuant to Hawai’i Penal Code §710-1001, the personal property which he purchased using the P-card which is still in his possession (like his surfboard) should be forfeited to the State, subject to the requirements of Hawaii Penal Code Chapter 712A.

C. Now let’s look at Hawai’i Penal Code §708-874 . Misapplication of entrusted property.

The law reads: (1) A person commits the offense of misapplication of entrusted property if, with knowledge that he is misapplying property and that the misapplication involves substantial risk of loss or detriment to the owner of the property or to a person for whose benefit the property was entrusted, he misapplies or disposes of property that has been entrusted to him as a fiduciary or that is property of the government or a financial institution.

(2) “Fiduciary” includes a trustee, guardian, personal representative, receiver, or any other person acting in afiduciary capacity, or any person carrying on fiduciary functions on behalf of a corporation or other organization which is a fiduciary. “

(3) To “misapply property” means to deal with the property contrary to law or governmental regulation relating to the custody or disposition of that property; “governmental regulation” includes administrative and judicial rules and orders as well as statutes and ordinances.

(4) Misapplication of property is a misdemeanor. [L 1972, c 9, pt of §1; am L 1976, c 200, pt of §1]

Did Billy Kenoi sit as chair at senior cabinet meetings and warn others to not use their pCards for personal purchases? I bet he is arrogant enough to have done just that! For sure, he definitely misapplied property which had been entrusted to him as a fiduciary. Billy Kenoi signed an agreement: “I understand that to use the p-Card to make personal purchases is strictly prohibited” – then went ahead and over the next six years! did it anyway. THAT is misapplication.

Billy Kenoi was the fiduciary trustee of the $10,000.00 of public funds credited to his pCard.

Billy Kenoi was well aware that using pCard funds for personal purchases was a violation of government codes and ordinances. Specifically: State of Hawaii Purchasing Card Cardholder Agreement; as well as

Hawaii County Charter Code of Ethics §14-4(a) “All public property and equipment are to be treated as a public trust and are not to be used in a proprietary manner or for personal purposes …;” and

Hawai’i County Finance Dept Rules & Regulations Rule 4 §4. Petty Cash Funds … (c) … “The fund shall also not be used as a temporary borrowing medium or to cash checks or warrants.”

The commentary on §708-874 in the Hawaii Penal Code states:

“Misapplication in this context is not theft; there is no intent to permanently deprive the owner of the owner’s property.”

This section is intended to discourage both knowing violation of fiduciary obligations and knowing misapplication of property belonging to, in this case, county taxpayers. <u>In this context the misapplication is in terms of improper handling of assets, rather than of outright theft.</u>

Crawford and Sako were both Purchasing Card Administrators with a duty to reign Kenoi in. They both failed miserably in doing their duty. In fact, Ms. Crawford choose the least honorable path – she choose to resign and remain silent and just hope her misdeeds would never be revealed to the light of public knowledge. And then she had the timerity to put herself forward to serve on our county’s pension board, a position requiring integrity and trustworthiness. She has proven she has neither. Hawaii County Code §2-91.2(f)(2).

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D. §708-830 Theft.

“A person commits theft if the person does any of the following: “. . .
“(5) Diversion of Services. Having control over the disposition of services of another to which a person is not entitled, the person intentionally diverts those services to the person’s own benefit or to the benefit of a person not entitled thereto.”

Billy Kenoi had control over his disposition of services purchased with taxpayers’ money. He intentionally diverted those services to his own benefit. And he did so in collusion with Finance Director Nancy Crawfordand Finance Director Deanna Sako, which makes it a conspiracy. The amount of money involved in his personal purchases is in excess of $20,000, which makes the offense Theft in the First Degree.

“A person commits theft if the person does any of the following:

“. . .
“(6) Failure to make required disposition of funds.
“(a) A person intentionally obtains property from anyone upon an agreement, or subject to a known legal obligation, to make specified payment or other disposition, whether from the property or its proceeds or from the person’s own property reserved in equivalent amount, and deals with the property as the person’s own and fails to make the required payment or disposition. It does not matter that it is impossible to identify particular property as belonging to the victim at the time of the defendant’s failure to make the required payment or disposition. A person’s status as an officer or employee of the government … is prima facie evidence that the person knows the person’s legal obligations with respect to making payments and other dispositions. If the officer or employee fails to pay or account upon lawful demand, or if an audit reveals a falsification of accounts, it shall be prima facie evidence that the officer or employee has intentionally dealt with the property as the officer’s or employee’s own.” (Emphasis added.)

Billy Kenoi intentionally took taxpayers’ property as far back as 2009 and converted it to his own use. It wasnot until after the March 18, 2015 Uniform Information Practices Act request by Nancy Cook Lauer of West Hawai’i Today that the Mayor made reimbursements on many charges from the Jan 2009-Mar 2015 period.

An audit by Finance Director Sako revealed many such obligations and on March 31, 2015 Kenoi paid the county $7,500, which was certainly prima facie evidence of hidden wrongdoing. And not only is he an officer of the government, he is also an attorney who full well knew his legal obligations – first to not make personal purchases, but then also to make timely reimbursement!

E. Hawai’i County Code of Ethics, Sec. 14-2. Standards.

“It shall constitute a conflict of interest for employees or officers of the county to:
(a). . .
(b) Use their official position to secure special privileges, consideration, treatment or exemption to themselves or any person beyond that which is available to every other person.
(c) . . .
(d) Receive any compensation for their services as an officer or employee of the county from any other source than the county, except as otherwise provided by this charter or by law.

A further element against Mayor Kenoi is that he has charged air travel, hotels and rental cars to his p-Card account,and received tens of thousands of dollars of credit for that on his personal airline mileage accounts. This is using taxpayer money for his own personal benefit. A clear ethics violation. Since the frequent flyer miles are accrued using taxpayer funds to pay for the air travel, hotels, and cars, those frequent flyer miles cannot accrue to the employee or officer without it constituting a “special privilege” which is not “available to every other person,” i.e., other county citizens.

Additionally, per Hawai’i County Code (“HCC”) §2-82, “’compensation’ means any money, thing of value, or economic benefit conferred on or received by any person …” and HCC §2-83 Fair Treatment states: (a) Officers and employees of the County, while discharging their duties and dealing with the public, shall adhere to the following precepts: (1) All public property [e.g., p-Cards] and equipment are to be treated as a public trust and are not to be used in a proprietary manner or for personal purposes [e.g., your personal mileage account] without proper consent.”

If there were such a rule implied from §14-2, it would read as follows:

It shall be a conflict of interest for county employees to use their p-Card to purchase an airline ticket or hotel room or to rent a vehicle while on county business and to then convert the Hawaiian or United Airline Miles to their own personal account.

F. Finally, “Double Dipping” and Failure To Report Gifts

As Rick Daysong of Hawai’i News Now has pointed out in a couple of exclusives, Billy Kenoi was paid per diem for trips away from the Big Island and at the same time charged meals and other incidentals to his p-Card. This “double dipping” reflects the crassest type of criminal disregard for the taxpayers and decent government. We are not talking about manini money here (ironically: the “convict” fish!). Kenoi double dipped while receiving over some $4,000 in per diem.

Additionally, third party persons paid Billy Kenoi several “gifts” of travel costs, gifts that Kenoi was required by law to declare and file reports on. He did not do so. The fact that he ignored this law for so many years certainly puts Kenoi into the same category of miscreant as Romy Cachola, who was fined $50,000 by the Honolulu Ethics Commission for accepting and failing to disclose gifts from lobbyists and forfailing to disclose his conflicts of interest. I would hope your fine of Billy Kenoi is even larger, since the office of Mayor holds even greater trust than a legislative position.

Conclusion

William Kenoi deserves the harshest penalty you can recommend. He should resign. Ms. Sako should be removed from her position as an example to others and future employees and officers.

Respectfully submitted,

/s/ Lanric Hyland