Judge dissolves Wailuku Main Street

WAILUKU – The embattled nonprofit Wailuku Main Street Association Inc./Tri-Isle Main Street Resource Center was dissolved Wednesday morning by a 2nd Circuit judge.

Judge Joseph Cardoza granted a motion by state Deputy Attorney General Hugh Jones to judicially dissolve the 28-year-old organization, formed as a nonprofit to encourage revitalization of Maui’s small towns.

In court, Jones explained that the organization is no longer solvent.

The nonprofit’s county grant funding had been terminated, he said, and the organization has no office, no executive director and no board members.

Last year, Jones issued a preliminary report that said an investigation of the organization showed that WMSA might have violated federal tax requirements and that its board failed to follow its bylaws and failed to keep close tabs on its longtime former executive director, Jocelyn Perreira.

Jones told the court the state had tried to help the organization, but instead the organization backed out each time.

“We didn’t want to be here today. We were forced in this position,” Jones said.

But before Cardoza’s ruling, WMSA’s former board chairman, Thomas Cannon, asked Cardoza for a second chance for the organization.

“I ask that your honor consider allowing WMSA to reconstitute its board and continue its 28-year mission . . . the fruits of which have been such tremendous value to Maui and its residents,” said Cannon, who resigned as the WMSA chairman this past summer.

Cannon has been a staunch defender of the nonprofit, even as it underwent a Department of the Attorney General investigation led by Jones and after it was targeted as a defendant in lawsuits from Maui County and from a former landlord. Cannon has insisted the organization has done nothing wrong, and its finances had been reviewed annually and received clean audits.

“WMSA’s independent, squeaky-clean professional audits confirm the excellent financial accounting work of our former (executive director) and staff,” he said in an email Wednesday afternoon. “Every penny was appropriately accounted for, and to my knowledge no one has alleged otherwise.”

He maintained that the organization is not “insolvent” be cause it has more than $13,000 in the bank, and he has received a rebate check for $1,405 for WMSA, which he said he doesn’t know what to do with since he’s no longer a board member of the organization.

In addition, WMSA has accounts receivable of more than $182,000 for services rendered in good faith, he said. Prior to Jones’ “interruption” of WMSA, Cannon said, it was in the process of recovering the funds.

Cannon blamed the organization’s troubles on a disgruntled board member and the county. And he said it was unfairly targeted by Jones.

Cannon said that if Cardoza chose to dissolve the organization, a receiver who is familiar with the organization should be chosen – such as former board member and former judge Artemio Baxa or Don Hibbard, a former Hawaii state historic preservation head.

Cardoza noted that different points of view were given of the organization at the hearing, but he decided that dissolving it was necessary.

“When the court looks at the current status, there is only one conclusion. That is the motion should be granted,” he said.

Cardoza authorized the appointment of a receiver to marshal and distribute WMSA’s remaining assets. Anyone with assets must turn them over to the receiver within 30 days of the appointment of the receiver, he added.

In response to Cannon’s concerns about personal and confidential information being turned over to the county Planning Department, from where the county grants were given to WMSA, Cardoza ordered that information be “protected.”

Cardoza also denied a request from Cannon for, among other things, to have Jones be investigated by the Office of Disciplinary Counsel. Cannon alleged Jones made “false” statements to the court and to the media about not knowing where WMSA’s money was located.

Cannon said Jones was given copies of audits and other financial documents that showed where funds were.

Cardoza said Cannon could make his own request to the disciplinary counsel to investigate the matter.

According to court documents, Cannon had already requested help from the counsel last year, but it denied his alleged claim of “professional misconduct” by Jones.

Wednesday’s court action is the culmination of a series of events that began in 2012, with Jones’ scathing report about WMSA. That report charged the organization with engaging in nepotism, lobbying in violation of its grant contract, providing little evidence of program services and having a “terribly confused” governance structure.

In October, Maui County notified WMSA that it was terminating the association’s current $243,000 grant. That was the agency’s main source of funding. WMSA received about $60,000 of the grant.

WMSA has received more than $2.2 million in county funding in the last decade.

In December, the association’s former landlord went to court to seek nearly $10,000 in unpaid rent and other fees. The landlord has not collected his money.

In May, the county filed suit claiming the organization violated its county grant agreement and should return more than $11,000 worth of personal property bought with county funds and any remaining funds obtained under the grant.

Last year, a former attorney for WMSA said the organization was forced to downsize and laid off its entire staff, including its executive director. A court filing said the downsizing was primarily due to the state’s investigation.

(Via email, Cannon said the organization’s executive director and staff were laid off “due to WMSA’s desire to conserve funds only, and was not related to Jones’ investigation at all . . . We greatly regretted having to lay them off due to our lack of funds. They left with our highest recommendations and sincere heartfelt appreciation for many years of excellent work and dedication to our mission.”)

By June, all of WMSA’s directors, including Cannon had resigned.

Cannon said Wednesday that they were forced to resign after being shown a draft lawsuit against them if they did not resign.

In court and outside of court Wednesday, Cannon brought up allegations of why the organization was in court and blamed it on the county.

He said that Perreira was invited to meet with top county administrators to share her comments about the Planning Department. But following the meeting, the Planning Department came back with demands that were out of scope of the county’s agreement with the association.

The county had asked for information on WMSA clients that could involve information provided to the organization in confidence, he said.

Cannon also brought up old allegations of Jones picking on the organization and himself, and he charged that Jones did not speak to the board and “never got our side of the story.” He said Jones only listened to “disgruntled” board member and former Chairman Sam Clark, who sat in on the court hearing Wednesday.

Cannon stressed that no one followed up on a “point-by-point,” multiple-page response from WMSA to Jones’ earlier complaint.

Outside of court, Jones said the state “vigorously disputes Cannon’s allegations of harassment.”

“The attorney general’s office (has) bent over backwards to give it a way out of this situation and they reneged on every agreement,” he said.

Jones said the state asked the board to follow its bylaws as well as restructure itself following the investigation and report, but it was never done. Other plans such as a voluntary dissolution plan also were not followed.

“So simply we were forced to be here today to clean up the remaining assets of the public charity,” he said. “Everything Mr. Cannon has said in court today is purely hearsay and totally inadmissible.”

Jones said Clark was not a disgruntled board member and did not call for an investigation of WMSA.

Clark contacted the attorney general’s office while chairman to get direction and clarification on what documents he was allowed to see, Jones said, noting Clark was not able to see many documents that should be available to the board.

In response to Cannon’s allegations about the county, Maui County Communications Director Rod Antone said in an email: “The fact is the WMSA did not follow the terms of their agreement. They received county funds, but when we asked them to account for those funds they refused. Mayor Arakawa would like to thank Hugh Jones and the state Attorney General’s Office for proving that fact in court and for paving the way for the county to have its assets returned. Now, hopefully, we can all move on from this issue.”

Antone said the county will probably file a motion to dismiss its lawsuit against WMSA because essentially it is an organization that no longer exists.

Department of Planning Director Will Spence said after attending the hearing that the dissolving of WMSA is “sad” for a longtime organization.

But he added that, in the county’s case, the organization never provided information requested.

Spence added that when WMSA was formed it had a value.

“I’m not sure where things went wrong,” he said.

* Melissa Tanji can be reached at mtanji@maui news.com.