LIHU‘E — A firestorm of public accusations made by Hawai‘i Food
Bank’s president in recent weeks has engulfed Kaua‘i Independent
Food Bank in Lihu‘e.
Editor’s note: The Garden Island has received numerous documents from Hawai‘i Food Bank and Kaua‘i Independent Food Bank and is in the process of reviewing them. This is the first article in a multi-part series investigating the recent public allegations against KIFB.
LIHU‘E — A firestorm of public accusations made by Hawai‘i Food Bank’s president in recent weeks has engulfed Kaua‘i Independent Food Bank in Lihu‘e.
Following the opening of a 5,000-square-foot HFB facility in Puhi and the publication of opinion pieces in a Kaua‘i weekly, HFB President Richard Grimm said his organization launched the competing food bank because he could no longer trust KIFB Executive Director Judy Lenthall or its board.
Of Grimm’s many allegations, one of the most alarming is that KIFB deliberately mismanaged a U.S. Department of Agriculture Senior Farmers’ Market Nutrition Program grant administered by the state Office of Community Services between 2001 and 2005 and, as a result, was ordered to return $779,393 to the USDA in program funding.
Grimm said KIFB misappropriated grant monies when KIFB purchased produce at a marked-up price from Kaua‘i Fresh, a KIFB for-profit program run by paid administrators. By marking up the produce prices, he said, KIFB “could hide administrators’ salaries.”
KIFB Board Director and former Chair Tom Lodico said Wednesday that Grimm’s allegations are “absolutely” false.
“This was a pilot program,” he said. “The language of the program was vague and the instructions were unclear.”
Grimm maintains that the USDA’s instructions were clear. “It did not allow for paid administrators,” he said.
The Kaua‘i Fresh business model was to purchase produce from local farmers with Kaua‘i Fresh funds, resell it to businesses and organizations at a marked-up price to cover the cost of operations and create a reserve for the future, Lenthall said. The price KIFB paid to Kaua‘i Fresh with grant funds was the same as every other buyer, she added.
“It was the normal mark-up for produce companies,” Lodico said. “The reserve was created because it was a pilot program and we didn’t know how long it would continue. We anticipated at some point the government would cut back.”
Lodico said the Kaua‘i Fresh program was designed for seniors and farmers.
“Our dream was to have a farmers campus where farmers could have a place to grow ag products,” he said. “Farmers didn’t have enough land and there was no central place (back then) where farmers could sell products.”
Lenthall said the Kaua‘i Fresh program was well received by USDA’s program creator, August Schumacher Jr., and her food bank was commended for its “social equity” efforts.
“The Kaua‘i Fresh model is both innovative and successful and responds to the legislative direction of the 2002 Farm Bill and the subsequent regulations for this program,” Schumacher wrote in a letter dated Nov. 8, 2005. “The Kaua‘i Food Bank — through its for-profit Kaua‘i Fresh community-based economic development program — is considered one of the nation’s impressive models in this regard.”
Years later and under a new administration, new USDA staff chose to better define the terms of its grant and informed KIFB that parts of its program were not in compliance. The USDA, which had provided KIFB $2.5 million in funding for the nutrition program, asked the food bank to return the unfunded portion totaling $779,393.
Kaua‘i Fresh ceased operations in 2006, Lenthall said, “because 40 days and 40 nights of rains caused severe flood damage to crops.”
In a July 24, 2007, letter from former OCS Executive Director Sam Aiona to Lenthall, Aiona writes: “According to the Notice to apply for the Senior Farmer’s Market Nutrition Program … it was clearly stated that grant funds may be used only to support the cost of food and that no administrative funding was available …
“There can be no question that (KIFB) agreed to comply with all state and federal laws. By charging disallowable markups, KFB violated applicable federal laws and is in breach of its obligations under its contracts with the (OCS),” the letter states, concluding with a demand that KIFB reimburse OCS the unqualified funds plus any accrued interest.
“Where did they get the money to pay money to pay this off?” Grimm asked in a phone interview Monday.
In January 2007, the BOD had agreed to release the total amount of Kaua‘i Fresh’s profits in its First Hawai‘i Bank account totaling $604,725 to OCS. That was the first payment, Lodico said. KIFB agreed to pay the remaining balance over the next two years.
“We agreed with the state attorney that we could pay it back in increments, and paid it back that way,” he said. “I think we promised to pay it back in September (2009) and did it by April.”
Lodico said the additional $175,000 was “already in the pot but was tied up in (Kaua‘i Fresh) CDs that were released as we went along.”
“The suggestion that the Kaua‘i Independent Food Bank deliberately misused funds is false, particularly since they voluntarily approached us to ensure that they were implementing the program correctly,” Aiona said in a statement Monday. “When USDA determined that there were some ineligible grant expenses over a period of several years, the Kaua‘i Independent Food Bank voluntarily returned any grant funds deemed to be ineligible. I have no reason to believe the allegation that there are damaging financial problems within the Kaua‘i Independent Food Bank as a result of this grant. This was not my experience during my tenure at OCS.”
On Tuesday, KIFB’s board approved a response to the allegations.
“It has come to our attention that a coordinated effort to discredit the Kaua‘i Independent Food Bank has been published in an O‘ahu-based publication,” the statement says in part. “Please understand that the Kaua‘i Independent Food Bank was neither contacted nor given the opportunity to respond to the allegations. As a result, the Kaua‘i Independent Food Bank Board of Directors wishes to set the record straight.”
Regarding the “Kaua‘i food bank misuses $779,000” headline for MidWeek Kaua‘i columnist Bob Jones’ Aug. 10 piece, the KIFB board said in its response: “From 2001 to 2005, (KIFB) provided quality produce, grown by Kaua‘i farmers and distributed it to low-income seniors under the name Kaua‘i Fresh. This was a department of KIFB. It was not a wholly owned for-profit subsidiary. We received a grant from a USDA pilot program to provide this service.
“The grant was administered through and monitored by the State of Hawai‘i via (OCS). After five years of operation, it was determined that there were certain ineligible expenses and (KIFB) returned the funds to USDA. The USDA accepted these funds without prejudice. None of these funds were cash donations. Kaua‘i Independent Food Bank continues to have an excellent partnership with the USDA for the benefit of Kaua‘i residents.”
The state Attorney General is considering subpoenaing KIFB documents, according to a trusted Garden Island source.
“I have no information that the Attorney General is going to serve us a subpoena, but if anybody anywhere wants to review information, we are happy to provide anything requested,” Lenthall said. “We are transparent and we are accountable.”
Grimm said the bottom line for him is that the $779,000 is money that should have gone to feed needy seniors.
“Why isn’t anybody talking about that?” he said.