WAILUKU - Maui County filed a lawsuit against Wailuku Main Street Association Inc./Tri-Isle Main Street Resource Center on Monday afternoon claiming that the organization violated its county grant agreement and that the agency should return more than $11,000 worth of personal property bought with county funds and any remaining funding obtained under the agreement.
According to the lawsuit in 2nd Circuit Court, the county on Oct. 26 terminated its $243,000 grant agreement with the longtime nonprofit organization, whose mission is to encourage revitalization of Maui's small towns. The county said that the organization breached its contract signed Nov. 21, 2011, by refusing to provide information on how it was spending county funds.
The county is seeking the return of what it believes to be more than $11,000 worth of property purchased with county money. It also is seeking unspecified monetary losses in the lawsuit.
County Communications Director Rod Antone explained that the county cannot specify the amount of money it is seeking to recoup because the organization has never provided county officials with information on how much county money remains in WMSA's coffers.
Monday's lawsuit is yet another blow to the nearly 30-year-old nonprofit organization. WMSA faced an investigation by the state attorney general's office in 2012, and after a several-month inquiry, the attorney general's office issued a scathing report. Preliminary findings said the organization may have violated county grant agreements and federal tax requirements, failed to follow its by-laws and did not keep close tabs on its executive director, whom the report said should be fired.
Executive Director Jocelyn Perreira has since left the agency.
A former WMSA attorney and court documents say the state's investigation forced the organization to downsize, which included laying off its staff and its executive director.
This year, the attorney general continued to gather information and obtained a judicial order for WMSA Board Chairman Tom Cannon to submit further documents and to sit for a deposition.
In December, the organization's former landlord Starr Properties LLC sought nearly $10,000 of unpaid back rent and other fees after the organization moved out of its offices at 1942 Main St. in Wailuku. Landlord Jonathan Starr said he felt that the nonprofit did not give proper notice in vacating the lease.
Starr still is waiting for payment.
Cannon could not be reached for comment on the county lawsuit Monday afternoon.
But throughout the state investigation, Cannon has maintained that WMSA has done nothing wrong. He added that WMSA has had a record of clear annual independent audits.
Cannon defended Perreira, saying she had done nothing wrong and that she left the organization on good terms. He also said in a letter to The Maui News that "repeated false and misleading information is what is harming us."
In written statement Monday afternoon, county attorneys said that the termination of the grant meant that WMSA was required to return any grant funds it held at the time of the termination and any personal property acquired with grant funds.
The association failed to do so, county attorneys said.
"The county's suit seeks the return of these funds and property, as well as attorney's fees and costs," the statement said.
Hugh Jones, supervising state deputy attorney general in the Tax & Charities Division who is heading the state's investigation into WMSA, embraced the county's actions.
"The county has shown a great deal of patience with the organization before filing this lawsuit," he said Monday. "We are pleased they are enforcing the county grant requirement."
He added that his office is concerned about the solvency of WMSA.
"In addition to being sued by its former lessor for delinquent rent, and the shuttering of its office and dismissal of its staff, the county's filing demanding the return of all unspent grant money and property purchased with taxpayer funding, the attorney general remains concerned, as it was before, that WMSA is at the point of insolvency and no longer able to perform its tax-exempt charitable purpose," he said. "The attorney general stands by its initial findings and conclusions issued in September 2012."
WMSA's website said it was established in 1986 to foster economic revitalization as well as historic preservation of Wailuku and Maui's other small towns.
It has received more than $2.2 million in grants from Maui County since 2002.
In a letter on Oct. 26, the county told Cannon that WMSA's outstanding grant of $243,000 had been terminated. WMSA had received one-quarter of the $243,000 grant in December 2011, or about $60,000, but was informed in January 2012 that because of vague and inadequate financial accounting and a failure to provide requested information, the county did not have "an adequate understanding of how these county grant funds are being spent (and) therefore . . . will not approve your second quarter or future invoices for payment."
With grant funding diverted from WMSA, the county set aside WMSA's allocation for small town-planning services, which is what the organization was supposed to be providing, the county said.
The lawsuit was filed by Deputy Corporation Counsel Caleb P. Rowe for Maui County Corporation Counsel Patrick K. Wong.
* Melissa Tanji can be reached at firstname.lastname@example.org.