State law limits charitable contributions to prevent candidates from peppering the community with “goodwill” donations to buy votes.

On Wednesday, the commission postponed action on the amended complaint until Feb. 14, giving commission officials and attorneys for Arakawa, his wife and campaign treasurer time to negotiate a possible settlement, according to commission General Counsel Gary Kam.

In October, after a two-year staff investigation, the commission heard a complaint against Arakawa showing that, at least twice, his campaign had falsely described the purpose of campaign expenditures, reporting them as “advertising” expenditures (for which there are no spending limits) when they were actually donations.

Those contributions were to the American Cancer Society ($4,230) and the American Heart Association ($524). (In October, the commission reported those expenditures as $5,000 and $1,000, respectively, but the state agency now has amended the amounts downward to the “fair market value” of each contribution.)

In the first complaint — now superseded by the second — the commission staff reported reviewing Arakawa campaign spending reports from Nov. 4, 2014, to Dec. 31, 2016, and finding 57 suspect “advertising” expenditures to 41 nonprofit and community organizations amounting to more than $45,500. In the October meeting, the commission instructed staff members to investigate further.

Now, the amended complaint filed Dec. 8 charges a single count of “excess donations to charitable organizations.”

The complaint says the Arakawa campaign donated $16,532.14 to 14 charitable and community organizations for the election period. The earliest donation was to the American Heart Association on Nov. 6, 2014, and the most recent was to the Maui Sons and Daughters of Nisei Veterans ($119.80) on Dec. 27.

According to the complaint, the total amount of contributions exceeds the $8,000 limit for candidate donations by $8,532.14.

Commission Executive Director Kristin Izumi-Nitao called on the commission to make a preliminary determination that there’s probable cause to believe Hawaii campaign finance law has been violated by Arakawa; his wife, Ann, who also chairs the Friends of Alan Arakawa organization; and Friends treasurer Anthony Arakaki.

Izumi-Nitao recommended fining the Friends group $1,000 and ordering Arakawa to personally pay the fine if his campaign organization lacks sufficient funds, and she said Arakawa, his wife and Arakaki should be ordered to reimburse the campaign $8,532.14 from their personal funds as required by state law. She also recommended requiring the campaign to amend its reports to accurately reflect that the funds spent were donations to charitable organizations.

If those steps aren’t taken, Izumi-Nitao recommended that the commission refer the complaint to the Department of the Attorney General for criminal prosecution.

A footnote says that the “respondents may have recklessly, knowingly or intentionally violated the law by reporting the donations to be payments for advertising.” And, they may have falsified reports to deceive the commission, the complaint says.

In comments to The Maui News on Thursday, Arakawa conceded little. He said he’s fully aware of campaign spending limits and doesn’t want to “run afoul” of the rules.

“The American Cancer Society one is probably the only one we’re agreeing could be interpreted in that way (as a donation instead of as an advertising expense), and we’ll concede that, but we have letters from almost every organization that says ‘We agreed to buy advertising,’ “ Arakawa said.

He added that: “Every penny we spent has been reported. It’s a question of which box it should be in. That’s what this whole issue is about. Should it be in the donation or advertising category? They’re flagging it because we don’t have the donation category checked because we consciously have taken the position that we don’t want to donate out of the campaign.”

Arakawa said he prefers donating out of his personal funds and recently donated $1,000 to the Maui Food Bank. He said he tries to advertise his campaign with a number of private and nonprofit organizations to reach all members of the community.

“I’ve been a board member of God knows how many nonprofits,” he said, noting his involvement with the Maui Economic Development Board, Maui Economic Opportunity Inc. and others. “If I really wanted to get votes, being on the board is much stronger than writing a check.”

A footnote in the commission’s complaint says of Mrs. Arakawa: “Although Respondent A. Arakawa, as chairperson, is not a candidate or the treasurer of Respondent Friends, she was a participant in Respondents’ apparent scheme or pattern of getting the nonprofit organizations to agree to describe that Respondents were paying for advertising, rather than making donations.”

Arakawa said his wife was trying to comply with the commission’s request to gather more information from nonprofits.

“My wife was following the instructions,” he said. “First, they wanted us to call each group three times, but it was at their instructions we were doing this.”

The complaint detailed the 15 payments that were determined to be donations, although they had been reported as “advertising” in Arakawa campaign spending reports. In the order listed in the complaint, those 15 were:

• American Heart Association, $524, on Nov. 6, 2014.

• American Cancer Society, $4,230, on Aug. 17, 2015.

• Church on the Go, $500, on Nov. 25, 2014.

• Hale Hula O Keola Alii O Kekai, $100, on May 21, 2015.

• Kurt Suzuki Family Foundation, $500, Jan. 15, 2016.

• Rotary Club of Lahaina Sunset, $200, March 10, 2015.

• Southside Boxing Club of Maui Inc., $1,100, Sept. 14, 2015.

• Hawaii State Science Olympiad, $104.17.

• Ka Hale A Ke Ola Homeless Resource Centers Inc., $1,000, Jan. 14, 2015.

• Kiwanis Club of Kahului, $250, Aug. 17, 2015.

• Maui Police Activities League, April 30, 2015.

• Maui Sons and Daughters of Nisei Veterans, $104.17 on March 12, 2015, and $119.80 on Dec. 27.

• Tri-Isle RC&D, $5,000, April 23, 2016.

• Maui Adult Day Care Centers, $300, Feb. 27, 2015.

The complaint says 10 nonprofits that received payments from the campaign responded to a second inquiry letter from the commission seeking to explain the payments, “but staff could not determine from their responses if the payments were reported to the IRS or recorded internally as donations.”

Another eight nonprofits that received money from the Friends’ campaign did not respond to the second inquiry letter.

Contrary to Arakawa’s assertion about letters from organizations verifying that campaign payments were for advertising, the commission exhibits have letters from groups that report otherwise.

For example, a Nov. 1 letter from Iola Balubar of Halau Hula O Keola Alii Kekai refers to a $100 “donation” from Arakawa.

In a Oct. 26 letter under the letterhead of the Kurt Suzuki Family Foundation, Kimberly Crossett, senior vice president of MVP Sports Group, told the commission to “please note that all sponsorships for the Kurt Suzuki Baseball Clinic are considered donations.”

In an Oct. 31 letter, James Fahnestock, past president and membership director of the Rotary Club of Lahaina Sunset, told the commission that a $200 payment from Arakawa was a sponsorship and included a logo for “Mayor Arakawa, Getting It Done” in a mahalo advertisement in the Lahaina News.

The commission complaint reports that was a donation because “what was provided was not advertising nor was a substantial return benefit otherwise provided to (Friends of Alan Arakawa).”

The commission’s complaint notes that IRS guidelines provide that “advertising does not include acknowledgements.”

Also, Church on The Go President Joe Pluta told the commission that the payment received from Arakawa’s campaign in 2014 was included “in Line 1 as Direct Public Support (Line 1 Form 990ez), to be used specifically for advertising.”

However, Line 1 of that IRS form says “contributions, gifts, grants and similar amounts.”

And, the complaint says: “This payment was a donation.”

Arakawa’s second consecutive four-year term as mayor ends next year. In November, he reported “leaning very strongly” toward running for his former Kahului residency seat on the Maui County Council, but he did not rule out running for governor or lieutenant governor.

* Brian Perry can be reached at bperry@mauinews.com. Chris Sugidono can be reached at csugidono@mauinews.com.