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OHA earns victory in ongoing lawsuit against State Auditor

by Thunda

First Circuit Judge Jeffrey P. Crabtree issued an order in favor of OHA yesterday, ruling that the redacted portions of the minutes of the executive sessions of OHA Board meetings that the State Auditor seeks to review are in fact protected by attorney client privilege.

“While yesterday’s ruling isn’t the end to this lawsuit, it is still a major victory for OHA,” said OHA Chair Colette Machado. “We believe this brings us closer to compelling the auditor to complete his long-overdue audit of OHA, so the state can release much-needed state general funds to the Native Hawaiian people during this pandemic.”

In his ruling, Judge Crabtree denied State Auditor Les Kondo’s motion to dismiss OHA’s lawsuit.  OHA originally filed the lawsuit against the State Auditor in February, asking the court to decide whether trustees must provide Kondo with attorney-client privileged information. OHA filed the lawsuit with the hope that a court decision would help clear the way for the completion of the suspended state audit of OHA, which is now nine months late. Without a finished audit, OHA cannot receive $3 million general funds for the current fiscal year.

“We are grateful that Judge Crabtree’s careful decision yesterday will allow OHA’s lawsuit to continue so that a conclusion can be reached on the merits,” said OHA Board Counsel Robert Klein, a former Hawaiʻi Supreme Court Justice.

Last year, the Legislature passed a law that conditioned the release of OHA’s $3 million in general funds for fiscal year 2021 on the State Auditor’s completion of a new audit of OHA. Shortly thereafter, Kondo informed OHA that he would be auditing the limited liability companies (LLCs) associated with OHA and requested 26 categories of information.

OHA and its associated LLCs fully cooperated with the state auditor, providing him with 937 documents, totaling many thousands of pages, within weeks of receiving his requests. OHA submitted all documents requested, including the minutes of 21 executive session Board meetings that included redactions to shield privileged legal advice, which is protected from disclosure by state law.

OHA Chief Executive Officer Sylvia Hussey said that OHA and the LLCs have been responsive to all of the information requested by the State Auditor.

“The documents and information the State Auditor requested were turned over, in the majority of instances, within the one-week response deadline,” said OHA CEO Hussey. “Any questions about specific financial transactions of the LLCs can be answered in the documents already submitted to Mr. Kondo’s office, including contract lists, grants received, check registers and meeting minutes of the LLC managers, none of which were redacted.”

On December 30, 2019, just around the time the audit was due to the Legislature, Mr. Kondo announced that he was suspending the audit indefinitely until OHA provides him with the unredacted meeting minutes.

When OHA filed its lawsuit in February, OHA’s attorney Klein said:

The state auditor is using an unprecedented interpretation of his powers to demand attorney-client privileged information that is protected by the law. Rather than subpoenaing OHA, which would result in a court reviewing his interpretation of his audit powers, the State Auditor has decided to suspend his legislatively-mandated audit and placed significant Native Hawaiian funds in jeopardy. We believe today’s action will resolve this legal dispute so these monies can be released.

In April, Kondo filed a motion asking the First Circuit Court to dismiss OHA’s lawsuit. He argued that the court lacks jurisdiction over the case because there is nothing the court could do to resolve the issues between OHA and the State Auditor. Kondo further represented that whether the court found the material to be protected by attorney-client privilege or not, he could or would not finish his audit without the redacted executive meeting minutes.

With Kondo’s motion dismissed, the case will now focus on whether the State Auditor’s legal powers allow him to review OHA’s Board executive session meeting minutes, which Judge Crabtree has now declared to be protected by attorney-client privilege.

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