Funds frozen as groups grapple for control of Hawaiian Ranchos Road Maintenance Corporation

KAILUA-KONA — “Caution. Road Work Ahead.”

Signs like these have been conspicuously absent for weeks throughout the Hawaiian Ranchos subdivision in Ka’u as a battle for control of the nonprofit corporation responsible for maintenance of the private road system plods toward what is likely to end up a legal conclusion.

Any and all road maintenance has stalled in the community and the sitting Hawaiian Ranchos Road Maintenance Corporation (HRRMC) Board of Directors has been locked out of a bank account containing more than $200,000 for road work and repairs.

In turn, those board members have locked their would-be replacements out of the HRRMC headquarters, branding the group as “dissidents” and refusing to turn over the information and control necessary to bring road maintenance back to Ranchos.

Nancy Bondurant, a Ranchos resident and a leader in the attempt to replace the sitting HRRMC board in its entirety, said the catalyst for actions taken were several alleged violations by the board of bylaws and state statutes, as well as a lack of transparency that could indicate financial improprieties.

“When we started comparing the minutes and what was actually approved for spending versus what was spent, there are huge discrepancies,” Bondurant claimed.

Mats Fogelvik, former president of the HRRMC and a seven-year board member, responded that claims made by Bondurant’s group are irresponsible and unfounded.

“What they did is not going to stand up in court,” Fogelvik said. “We have to take them to court because this has to stop. It’s beyond ridiculous. We had to lay off three part-time workers and close our office because we don’t have any money.”

In the meantime, some Ranchos residents are concerned about the quality of their roads deteriorating while competing attorneys file motions and sift through bylaw interpretations on a case that falls under the jurisdiction of Hilo’s 3rd Circuit Court and Judge Greg Nakamura.

In an email to Keene Fujinaka, vice president and East Hawaii market manager at Bank of Hawaii, Ranchos resident Ann Bosted implored the bank to grant the original board access back into the road maintenance fund.

“The order that you ask for has not been made,” Bosted wrote to Fujinaka, referencing the bank’s request for a legal order in response to a motion for declaratory relief filed by an attorney representing the sitting HRRMC board.

“It may not be issued for several months, and maybe years, so waiting for that before unfreezing the HRRMC’s accounts would cause unnecessary delay and hardship,” Bosted continued.

How it happened

A group of Ranchos community members that included Bondurant executed a vote by Ranchos members at a special meeting convened in July to remove the sitting board immediately. Many of the ballots had to be mailed in, as several property owners spend time off island.

While there are over 1,200 lots in the subdivision that pay annual fees to the HRRMC, Bondurant said there are rarely more than 200 votes cast on any measure. The vote to remove the board on July 21 produced a 114-17 result in favor of the board’s removal, Bondurant said.

Immediately following the vote, the six interim board members went to the Bank of Hawaii with minutes from the special meeting along with other documentation and had the rights to the HRRMC account reassigned to them.

Based on bylaws, those interim members were chosen according to voting numbers from the previous year’s election. The six nominees who received the highest number of votes without actually being elected will comprise the interim board until the next election takes place.

Bank of Hawaii reviewed the documents and reassigned account privileges to the new members.

Fogelvik said the sitting board didn’t find out about the reassignment until a member called the bank for auditory purpose.

“I’m pretty shocked it happened, actually,” he said.

The resulting action taken by the sitting board was refusal to turn over management of HRRMC as well as refusal to recognize the results of the vote, citing procedural concerns its members say render the vote invalid.

According to bylaws, Bondurant needed 25 signatures to initiate the vote. She gathered 43. Fogelvik claims not all of those were legitimate, as some were duplicates and others came from nonpaying persons whose signatures shouldn’t count.

Beyond that, Fogelvik said while the group had a right to call the special meeting, it’s up to the sitting board to decide when the meeting is convened and what’s on the agenda.

Bondurant said it became clear soon after the vote that sitting board members never intended to convene the special meeting, namely in what she described as attempts made by those board members to stifle the vote and impede the process.

Thus, Bondurant and her group convened the meeting and called the vote themselves. Fogelvik said to do so was a clear violation of bylaws and is the basis for a lawsuit filed by the board to have access to the more than $200,000 returned to sitting members.

In response to Bosted’s inquiry with Bank of Hawaii, Fujinaka replied via email.

“I understand that the freezing of the HRRMC accounts has resulted in hardship; however, given the conflicting demands against this account, we cannot determine which persons are authorized to handle the Account and funds in question,” he wrote. “We also do not believe it appropriate for us to reach any legal conclusions based on the documentation presented to us.”

“Given the contested nature of control, we intend to communicate with the attorneys for both parties until the situation is resolved through the Court,” Fujinaka continued.

Bondurant said it’s her understanding that interim board members, who are currently locked out of HRRMC facilities, technically retain access to its monies. Thus, she believes they could tap into those funds and resume road work if they chose.

However, Bondurant said the interim board members’ decision has been to refrain from touching the money until the legal process has played out, based on the advice of legal counsel.

Effects of frozen funds

Both Bondurant and Fogelvik said at the moment, there are no large road projects or pending contracts in Ranchos, which has limited the impact of the power struggle for control of HRRMC.

Some uncashed checks remained in position of the sitting board, which they’ve used to pay utilities. However, part-time employees that mow easements and fix potholes have been temporarily laid off.

Things may get considerably more complicated in the next couple of weeks if the situation isn’t resolved.

Fogelvik said the sitting board tends to hold an election for three seats opening up at its annual meeting Dec. 15. But based on the July vote to remove the board that is currently being contested, all nine seats should be up for grabs.

Furthermore, fees will start flowing into HRRMC when the calender flips to 2019. Though not due until March, Bondurant said a significant number of the 1,227 paying lots will send their $150 payments in by January, likely creating a six-figure influx of cash that will eventually top out near $185,000.

Fogelvik said the sitting board plans to open another account at a separate bank with the money once it arrives, which could spur future lawsuits.

Back story

Bondurant and the rest of the group that initiated the removal process say a small number of residents have controlled the HRRMC board for years.

The group has alleged nepotism and cronyism, saying the board has awarded part-time, paid positions to family and has maneuvered to disqualify nominations of people for board seats of whom sitting members disapprove.

Bondurant also accused the board of obfuscation, saying it hasn’t conducted yearly audits as mandated and refused for months to make meeting minutes readily available to the public.

Fogelvik denied accusations of nepotism and any implications of financial misconduct, but did say the board wasn’t as forthcoming with meeting minutes initially.

“We gave them copies of all our minutes, but we were resisting doing it because we had a feeling that they were not operating in good faith and were going to try to use it against us,” he said. “And, sure enough, we were sued with a 250-page lawsuit six months later.”

Fogelvik added that the HRRMC board just conducted an audit and has posted it on the corporation’s website, ranchos-roads.org, which traces finances back to 1999.

Bondurant has also alleged over 200 bylaw violations, many of which Fogelvik dismissed out of hand.

“It was a lot of propaganda and false allegations, but they can’t prove anything,” asserted Fogelvik, while also admitting the possibility that the board may have made some mistakes. “Our bylaws are outdated and they need an upgrade. I don’t understand all the stuff. I am just volunteering to try and do a good job.”

The HRRMC board issues a yearly budget that lists annual income, operating expenses and administrative expenses. However, while the administrative expenses are itemized, operating expenses are only documented as lump sums spent on road maintenance and repairs. The budget does not specify what the money is being spent on or to whom it’s being paid.

“It could probably be formatted in a better way, but this is just how it’s always been done,” Fogelvik said. “It’s nothing criminal and nothing is missing and the books are open for inspection.”

Bondurant said she got a look at the books months back but was accompanied the entire time by a board member who restricted what she was allowed to see.

She added tensions have risen in the aftermath of the vote and conditions have turned ugly.

“We have been called dissidents (and worse) because we’re not going to allow this behavior,” Bondurant said.