Woo vs. Harmon - Witness Rockne Freitas

James B. Nicholson, Trustee vs. Harmon

(Formerly Woo vs. Harmon)

CV05-00030 DAE KSC

U.S. District Court For the District of Hawaii

Judges: David A. Ezra; Kevin S. Chang

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HEARING ON MOTION FOR CONTEMPT OF COURT

DATE: January 16, 2007, 10:30 AM

(Cancelled without notice)

JUDGE: Hon. David Ezra

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DEFENDANT’S WITNESS

ROCKNE FREITAS

Hawaii Community College
200 W. Kawili St.
Hilo, HI 96720-4091

Rockne Freitas is Chancellor of Hawaii Community College in Hilo; Executive Director of Ke Alii Pauahi Foundation; former Office of Hawaiian Affairs (OHA) trustee; former Vice-President, Kamehameha Schools; former Vice-President and Associate Athletic Director at the University of Hawaii.

According to his Hawaii State Ethics Commission Disclosure of Financial Interests, signed by Rockne Freitas on 12/21/04, his INCOME FOR SERVICES RENDERED FOR PRECEDING CALENDAR YEAR was “None”; his OWNERSHIP OR BENEFICIAL INTERESTS IN BUSINESSES was “None”; his OFFICERSHIPS, DIRECTORSHIPS, TRUSTEESHIPS was “None”; and his INTERESTS IN REAL PROPERTY HELD IN THE STATE was “None”.

For an individual of Mr. Freitas’ standing in the community, this Disclosure of Financial Interests appeared highly unusual to me. However, upon further investigation, I discovered that reporter Ian Lind had caught this earlier and wrote in his column:

“Annual financial disclosures by public officials, including all elected officials, are due today. A quick check at the Ethics Commission web site shows that a number of the 2006 updates have not yet been filed. One item of interest. Back on December 21, 2005, I questioned why the disclosure filed by UH Hilo Chancellor Rockne Freitas failed to list real property or other interests. Freitas filed an amended disclosure form on May 1, 2006, which adds significant information, including several properties and previous sources of income. The amended form is a bit confusing, since at the bottom it bears the date 12/21/04.

“But on closer inspection it appears Freitas has simply added the previously omitted info onto a copy of the disclosure filed in December 2004, which now bears two time stamps from the Ethics Commission.

“Why this information was not disclosed the first time around is not explained.”

On his amended Disclosure form, Mr. Freitas lists Income from the State of Hawaii - DOE, and Kamehameha Schools. For Ownership or Beneficial Interests in Businesses, he lists GRG Enterprises, ½ owner. For Creditors he lists Bank of Hawaii. For Officerships, he shows Ke Alu Pauahi Foundation, VP. For Interests in Real Property Held in the State, he shows three separate properties. Why this information was not disclosed originally, as Ian Lind points out, is still a mystery. (How do you forget that you had employment income, owned a half interest in a business, and three real estate properties in Hawaii - until four months later?)

GRG Enterprises made news headlines on October 22, 1997, when this Star-Bulletin story, by reporter, guess who, hit the news racks:

Company headed
by Kamehameha V.P.
gets lucrative break

GRG Enterprise gains rent waiver
on top of ‘sandwich profits’
from harbor-front land

By Ian Lind, Star-Bulletin

State transportation officials have waived $360,000 of deferred rent due from a company controlled by a top Kamehameha Schools official.

The company, GRG Enterprise Inc., will also keep hundreds of thousands of dollars in "sandwich profits" made by subleasing the harbor-front property.

The moves came as the state concluded negotiations over a rent increase for the remaining years of the company's lease, which expires in 2000.

GRG President Rockne C. Freitas, also vice president of Kamehameha Schools, said he is not familiar with specific terms of the new lease but intends to meet the company's obligations to the state.

The company leases two acres on the Ewa side of Kewalo Basin where it sells gas, diesel fuel and ice to fishing boats.

The company then subleases space to several other fishing-related businesses, including United Fishing Agency, which operates Honolulu's fish auction.

GRG has paid the state $39,924 annually since 1980, but recent financial statements show it took in a total of $898,407.55 in sublease rents over the past three years.

The state had previously believed the company took in only about $85,000 a year from subleases.

George Perry Jr., a former city waste-water employee who has been an associate of prominent Big Island businessman Larry Mehau, is vice president of GRG, according to business registration records. Former service station operator George Inamura, who has run the dockside fueling operation, is listed as secretary and treasurer.

Freitas is also a longtime friend of Mehau, whose firm, Hawaii Protective Association, took over security duties at Kamehameha Schools several years ago and was paid more than $31,000 a month during 1995-96, according to documents filed with the estate's most recent annual report....

What appraisals say

GRG's deferred rent began to accrue when the fixed-rent period of its lease ended in December 1990, and a renegotiated rent based on "fair market value" was to begin.

An appraisal done by the state at that time set the fair market rent at $164,104 per year, which Freitas rejected, records show....

The property is now assessed by the city for tax purposes at $4.2 million, which would suggest annual rent of $293,286 according to the state's formula, which calls for the state to get a 7 percent return on the market value of the land.

The key decision

But in July 1997, Transportation Director Kazu Hayashida directed that rent be set at $111,839 per year from the start of 1996, effectively waiving $360,000 of deferred rent for the years 1990-1995....

Harbors Division Administrator Thomas T. Fujikawa offered no explanation for the state's decision to drop claims for deferred rent but said sublease income had been considered....

Freitas said last week he has few details about the lease deal.

"I haven't had much time; we're fighting other battles up here," Freitas said, referring to public criticism and legal scrutiny that have hit Kamehameha Schools and Bishop Estate trustees.

Freitas was appointed to the Kamehameha post in mid-1995 and immediately put in charge of day-to-day operations of the school, once handled by Principal Michael Chun. The move has been cited as a key factor in claims of mismanagement at the schools.

Freitas is one of Bishop Estate's five highest-paid employees, apart from trustees, according to the estate's tax return.

During the 1995-96 fiscal year, Freitas was paid $135,772, plus a $5,700 expense allowance and $18,023 for deferred compensation or other employee benefits....

< END OF QUOTATION >

Rockne Freitas is expected to testify regarding his business, professional, and personal relationships with James B. Nicholson, George Ariyoshi, University of Hawaii Board of Regents, Linda Lingle, Bob Awana, Mark J. Bennett, Mark Recktenwald, Peter T. Young, Department of Land & Natural Resources, Cecil Santos, Evan Dobelle, Lokelani Lindsey, Michael Chun, Douglas Ing, Milton Holt, Robert Herkes, Kazu Hayashida, Judge Barry Kurren, Faye Kurren, Colbert Matsumoto, John Waihee, Guy Lam, Mary Lou Woo, Hamilton McCubbin, Dee Jay Mailer, Nathan Aipa, Colleen Wong, Louanne Kam, Robert Kihune, William S. Richardson, Wayne Chang, Judge Robert Faris, Judge Robert Klein, Larry Mehau, Hawaii Protective Association, GRG Enterprises, Gary Rodrigues, Office of Hawaiian Affairs (OHA), Clayton Hee, Haunani Apoliona, Daniel Akaka, Ed Case, Gilbert Tam, Sandwich Isles Communications, Summit Communications, Christian Holmes, Daniel Farmer, and others to be named upon discovery.