Fraud at Olelo is a hard lesson for nonprofits

How two executives allegedly worked together to use their positions to hijack and defraud the government of over $ 1.3 million, including CARES Act grants, should serve as a cautionary tale for nonprofits. and government offices.

“If you are a board member of a nonprofit organization, you want to make sure that several eyes are involved in approving and reviewing expenses so that there is no misappropriation of funds. funds, ”warned Hugh Jones, a former senior deputy attorney general, who oversaw the State Attorney General’s Office’s Tax and Charities Division for more than a decade and taught nonprofit law at the University of Hawaii.

He said this is especially true with a nonprofit organization where income and expenses are significant, as in the recent case where they were in the millions.

The recent case involved Olelo Community Media, the operator of Oahu’s public cable channels.

Former Olelo human resources director Hanalei Aipoalani, 42, pleaded guilty to embezzlement in March and will be sentenced in June by a federal court judge. The maximum penalty is 20 years imprisonment. Aipoalani managed to carry out a scheme in Olelo that went undetected for 4-1 / 2 years.

Aipoalani also accepted a bribe in September as the temporary administrator of the CARES Act program for the city and county of Honolulu, according to the District of Columbia’s United States Attorney’s Office. The bribe was intended to help Stacy Higa, CEO of Na Leo TV, Olelo’s counterpart on the island of Hawaii, to apply for $ 850,000 in grants under the CARES Act, the office said. of the US attorney in court documents.

Higa, a former Hawaii County Councilor and 2020 mayoral candidate, has been on leave from Na Leo since April 1 to deal with allegations related to his role in the case. He did not respond to requests for comment on the allegations.

Both Olelo and Na Leo are public, educational and government access channel (PEG) operators, who receive millions of dollars collected from fees charged to cable subscribers and also apply for subsidies, as most do. non-profit organizations.

Former Olelo CEO Kealii Lopez, who hired Aipoalani in 2010 as director of his Waianae press center, said Aipoalani was later promoted by another CEO to director of human resources.

Lopez stressed the critical need for multiple checks and balances in a nonprofit like Olelo when hiring and supervising the best employees, especially those tasked with raising and distributing funds.

“The key is whether there had been any red flags ahead of time that Olelo may have been aware of,” and whether they were brought to the attention of management, Lopez said. “What you don’t want is a situation like this used against the organization.”

Aipoalani’s post under the CARES Act ended in November and he was charged on December 18 with embezzlement. Still, he got a job with Honolulu City Council in January. The Council was briefed by his lawyers on the charges after Aipoalani was hired, and he was given two weeks’ notice and left in February.

“Mr. Aipoalani’s actions were unacceptable and shattered public confidence,” said City Council Chairman Tommy Waters. “In the future, Council will invest in more comprehensive background checks that include information about arrests and ongoing investigations. It is also clear that we must continue to strengthen our ethics commission to have municipal government accountable to the public. “

Mayor Rick Blangiardi said, “We condemn the actions of any city employee who breaks the law and undermines public confidence. The public has the right to expect officials responsible for overseeing public funds to conduct themselves at all times in an ethical manner and within the limits of the law. There are no exceptions. Our administration is committed to being honest, transparent and accountable in serving the public. “

When Aipoalani was director of human resources at Olelo, he paid himself $ 527,000 of the money Olelo got from a federal government volunteer program in 2014 and 2019. Olelo received $ 935,242 in federal funds AmeriCorps program to pay volunteer allowances.

AmeriCorps, a volunteer service program funded by the federal government and private contributors, sends volunteers for extended periods to areas of great need in the United States. It is considered a national version of the Peace Corps.

Aipoalani kept AmeriCorp volunteers on his books, receiving stipends for them from the federal government, when they were no longer volunteering in Olelo.

Aipoalani’s wife Angelita Aipoalani also conspired to embezzle more than $ 69,000 to pay for AmeriCorps work that she didn’t do. She also received $ 11,505 to pay off her own student loans. His $ 80,505 is part of the $ 527,000 Hanalei Aipoalani admitted for embezzlement.

On April 1, Angelita Aipoalani pleaded guilty by videoconference in federal court in Washington, DC, to her role in the conspiracy. She faces a maximum jail term of five years, but she will likely receive six months to a year due to a plea deal and no previous criminal convictions.

Hanalei Aipoalani has signed a plea deal in which he will likely serve five to seven years and pay a restitution of $ 527,000.

The court is not bound by the plea agreements. The couple will be sentenced on June 24 by a federal judge in Washington.

Aipoalani unsuccessfully ran for Congress in 2006 and for State House District 44 representing Waianae in 2008 and 2012.

He funneled part of the $ 527,000 he paid for himself through Na Leo TV by creating fraudulent invoices from Na Leo to Olelo, claiming that Na Leo was entitled to reimbursement of allowances from AmeriCorps.

Aipoalani was paid to be Higa’s senior advisor at Na Leo from 2015 to 2017.

Aipoalani was banned in 2013 from any involvement in a federal grant or contract program, a year before the AmeriCorps program began, because he previously attempted to divert federal grant funds to his personal bank account, according to his statement. offense.

He was working for Olelo at the time, but it is unclear whether the ban was related to his work at Olelo and whether Olelo was aware of the ban.

Olelo said little about the case.

Its board of directors and former CEO and chairman Sanford Inouye, who promoted Hanalei Aipoalani to chief human resources officer, declined to answer questions related to the case. Inouye left Olelo on April 1.

“We conducted an internal investigation and quickly communicated our findings to federal authorities,” Olelo’s new CEO and Chairman Roger McKeague said in a written statement. “We have fully cooperated with these authorities throughout this process. At their request, we have kept and will continue to keep the details of our communications confidential. “

“When it is appropriate to provide additional information, of course we will,” McKeague told the Honolulu Star-Advertiser.

After leaving Olelo in May 2019, Aipoalani found a job at the non-profit Aloha United Way, where he led human resources before leaving in June 2020.

“While none of the charges against Mr. Aipoalani are related to work at Aloha United Way, the alleged activity detailed in the indictment is deeply troubling,” said AUW CEO John Fink . “We have already completed reviews of our financial and program files for the period that Mr. Aipoalani was employed with AUW.

“However, in light of new information recently released by the Justice Department on Mr. Aipoalani’s activities in other agencies, we are engaging outside professionals to conduct additional reviews of AUW’s books and records.”

Before hiring Aipoalani, AUW checked his criminal background and employment, as is the case with all new hires, AUW said in an email.

The US attorney’s office in Washington declined to say whether charges were pending against Higa, the president of Na Leo, and what sparked the investigation into Aipoalani.

Higa served as executive director of the organization that administers AmeriCorps programs in the state – the Hawaii Commission for National and Community Service – from 2011 until May 31, when he resigned to run for mayor of the big island.

University of Hawaii spokesman Dan Meisenzahl said steps have been taken with the commission, which is attached to UH, for more oversight.

UH has started an internal review of the AmeriCorps programs in Hawaii.

Aipoalani said in a court document that he expected to be paid $ 60,000 a year in return for helping Higa get last year’s approval for the CARES law funds, while Aipoalani was l temporary administrator of the CARES Act program for the city and county of Honolulu. Aipoalani helped Higa gain approval for two fraudulent CARES Act grants totaling $ 845,000.

Aipoalani, in the court document, said he and Higa discussed “opening LLCs in Oahu, using their wives as principles to launder money.”

In October, the FBI raided Na Leo’s offices in Hilo, but Higa retained his post, which he began on January 9, 2015.

Na Leo’s board chairman said he could not comment due to an ongoing investigation.

Higa’s hiring was approved by Na Leo’s board of directors, his deputy chief executive said.

About Christopher Easley

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