8 nonprofits cited for making
illegal loans to their executives
Eight Hawaii nonprofit organizations violated state law between 1998 and 2001 when they loaned money to their executives, according to an inquiry by the state Attorney General's Office.
Deputy Attorney General Hugh Jones said yesterday the nonprofits apparently acted out of "an ignorance of the prohibition" and will not face any reprimand.
But, he said, their boards will be lectured on the law and follow-ups are possible.
"We don't have any evidence that they did this with the intention to violate the law," Jones said. "The next step is that we counsel the organizations involved."
State Attorney General Mark Bennett said in a statement that if the nonprofits make similar transactions in the future, they could be subject to "enforcement action."
Hawaii is one of 19 states that prohibits nonprofits from making loans to their directors or executives. Nonprofits are required to submit explanations of loans in Form 990 tax filings.
The attorney general's inquiry, completed earlier this week, looked into 10 organizations identified as in possible violation of the loans statute.
One turned out not to be a nonprofit. Another made a loan, but not to a director or officer.
Seven of the eight violators have since been repaid, Jones said.
One loan was made to a director or officer who has since died, Jones said.
In that case, he added, "we're trying to explore what should be done under the circumstances."
Earlier this year, the Attorney General's Office identified the nonprofits included in the inquiry as those highlighted in a Chronicle of Philanthropy article.
They were: the Bishop Museum, Kahilu Theatre Foundation, Scottish Rite Foundation, Wave Riders Against Drugs, Pacific American Foundation, Alphabetland Preschool and Kindergarten, Hui Malama Ola Na Oiwi, International Archaeological Research Institute and Wahiawa General Hospital.
Jones declined to say which nonprofits violated the law.