A legal dispute over the property is now prompting questions about the appropriate use of the memorial site and whether the nonprofits are properly reporting the wedding revenue and abiding by building and zoning laws.

Roy Wiginton, a vice commander of DAV Chapter One on Oahu, said veterans groups cannot even use the chapels or the land for their own events because the wedding area is fenced off.

"I was told we have nothing to do with that area," Wiginton said. "If you have a beautiful chapel, why not make it available for vets?"

No rent for site

Roy Wiginton, of Kane'ohe, says veterans cannot use the memorial site at Ke'ehi Lagoon because the wedding area is fenced off. Rebecca Breyer • The Honolulu Advertiser

The veterans groups pay no rent to the state for the site, which is under the control of the state Department of Land and Natural Resources' parks division.

Daniel Quinn, head of the division, said the nonprofits hold a "gratis lease" for the property. The agreement doesn't require payments to the state but obligates the groups to generate their own revenue to manage and maintain the property.

Mari Bereday, president of La Mariage, said she first approached the groups to use the property for Japanese visitors' wedding ceremonies in the early 1990s.

With rental income and contributions from Bereday's company, the veterans groups have developed the shoreland portion of the site into a popular, money-making location for oceanfront weddings. The location features two chapels, three gazebolike "wedding pavilions" and other related ceremony amenities.

Revenues from the wedding operation are used to operate a fleet of vans in all counties that transport disabled veterans to and from medical appointments, a DAV official said.

But the mutually beneficial arrangement between the groups and La Mariage has recently dissolved into a bitter legal dispute.

The DAV concluded it wasn't getting enough money from La Mariage and entertained offers for use of the site from several competing commercial wedding companies. It granted Best Bridal Hawaii Inc. the exclusive rights to use the oceanside site for weddings.

Best Bridal agreed to pay up to $25,000 per month in rent to the DAV, according to business and court records and a La Mariage official. Best Bridal also agreed to pay $1.3 million to La Mariage for the site improvements and to settle La Mariage's claims that it still has the right to use the property.

But La Mariage's Bereday has balked at accepting the settlement and has sued the DAV over use of the property. Meanwhile, the $1.3 million payment from Best Bridal has been deposited in escrow accounts and Best Bridal has exclusive use of the memorial site for weddings.

Buildings lack permits

Art Forcier, head of the DAV Hawaii, called the lack of building permits "a mistake."

"We are in the process of getting after-the-fact building permits," he said. "All the structures were built to code."

The city is looking into the property's lack of building permits, said Henry Eng, head of the Department of Planning and Permitting, but no citations have been issued.

Because the site is owned by the state, Eng said, "we do not cite the occupants for building violations. We let the state know about the potential violation and let them take care of it."

Generally, anyone building on state leased land would have to get approval from the state, said Quinn of the state parks division. "That apparently hasn't happened here," he said.

Tommy Kakesako, head of the Keehi Memorial Organization, said much of the building work was done by volunteers and "maybe sometimes they were overzealous."

The area was originally a mangrove swamp and DAV volunteers cleared it, he said. Volunteers still visit the DAV site twice a week to help with groundskeeping, he said.

Road named for Inouye

Bereday said La Mariage-paid improvements at the memorial site include a new entry gate made about four years ago, roads and a sign naming the main memorial roadway after U.S. Sen. Daniel Inouye.

In 1996, Inouye contacted state officials at Kakesako's request after unidentified opponents of the weddings complained to the state Land Board that using the memorial site for the wedding business was improper, according to state records.

Then-Land Board chairman Michael Wilson wrote back to Inouye, stating the wedding activities were "generally consistent" with the law. He said the DAV should update its plans for the site to include both the improvements already made and those planned.

No update was ever filed with the state, and additional improvements were made since Wilson's letter without building permits and notification to the state, land board records show.

In 1997, state Land Agent Cecil Santos recommended to Wilson that the DAV be required to file annual financial statements "so that the source of their revenue and expenditures will be open" to the public. No financial statements were ever submitted, based on land board files.

Quinn said he didn't know why the state never required the DAV to file financial statements or an updated master plan.

Rental income

From July 2001 through December 2003, when the number of weddings staged annually at the Ke'ehi Lagoon site dropped dramatically following the Sept. 11, 2001, terrorist attacks, La Mariage still paid $182,000 in rent to the veterans groups.

But neither of the two nonprofits reported any rental income from La Mariage nor paid any taxes during that period, according to court records and federal tax returns.

Forcier said the DAV reported no rental income nor paid any taxes because "we're tax-exempt."

Jeffrey Ono, attorney for both the DAV Hawaii and Keehi Memorial, said the money paid by La Mariage was reported as contributions on DAV's federal tax returns. The DAV also did not pay any state excise taxes on the money, Ono said.

State Tax Department official Frank Ruff said generally, most nonprofits including churches must pay excise taxes on income derived from Japanese tourist weddings.

He referred to a 1997 tax advisory that says, "If the weddings are arranged, packaged and conducted through a commercial entity ... the 'wedding' activity will be considered fundraising in nature" and subject to taxation.

If the two veterans groups had paid state excise taxes on their chapel rental income, the total payments would have totaled some $20,000, not including any penalty or interest charges.

Two churches contacted by The Advertiser said that to stay within the law, they report and pay excise taxes on all wedding income.

Patrick Zukemura, financial secretary at Harris United Methodist Church, said because his church has a Japanese language ministry, provides couples with Bibles and tries to follow up with the couples in Japan, "my feeling is that we probably could make a case that the wedding income should be tax-exempt."

But Zukemura said there are so many reports to fill out to justify tax-exemption, "it's just easier for us to pay the 4 percent (excise tax), so that's what we do."

Don Hardaway, a lay official with Calvary By-The-Sea Church, a popular Japanese wedding venue in 'Aina Haina, also said the church pays excise taxes on its wedding revenue.

Honolulu certified public accountant David Carr, who specializes in nonprofit tax issues, declined to discuss the DAV situation specifically, but said as a general rule, rental income to a nonprofit is considered tax-exempt by the IRS.

Charitable donations

In addition to La Mariage's monthly rental payments, the company claimed it gave $140,000 in charitable donations to the two veterans groups from 1998 to 2000 and paid more than $50,000 directly to officials of the nonprofits for construction of the chapels, landscaping, and other services, court records show.

According to publicly posted copies of Keehi Memorial Organization's federal tax returns, the nonprofit reported receipt of $65,500 in contributions from La Mariage from 1998 to 2000.

It isn't known if DAV Hawaii reported receipt of the other $74,500 in charitable contributions that La Mariage reported making in the two-year period. Tax returns before 2001 tax returns for the nonprofit were not available, and Ono said he didn't know if the donations were actually made or how they were reported on tax returns.

Wiginton of the DAV Chapter One said he believes a "full accounting" of the wedding revenues should be made.

"I would like to see where the money went, what it was used for," he said. "Was it used for the benefit of disabled veterans? I don't know."

The DAV's Forcier said he has no concerns about the appropriateness of using the memorial site for commercial purposes.