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The Honolulu Advertiser
Posted on: Wednesday, June 7, 2006

Former senator faces FBI, IRS inquiry

By Rick Daysog
Advertiser Staff Writer

Cal Kawamoto

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Former state Sen. Cal Kawamoto, already the subject of a state criminal inquiry, is also the target of a federal criminal investigation into alleged personal use of campaign funds.

The FBI and the Internal Revenue Service are investigating possible tax violations that carry criminal penalties relating to the former lawmaker's operation of a Waipahu nonprofit he founded, according to two people familiar with the investigation.

Agents with the FBI and IRS subpoenaed bank records of the tax-exempt Waipahu Community Adult Day Health Center and Youth Day Care Center within the past several months, according to one person familiar with the federal probe.

Kawamoto set up the nonprofit in 2003 and transferred $130,000 of his campaign funds to it after losing a re-election bid, according to state Campaign Spending Commission records. The Waipahu nonprofit doesn't run any programs of its own but rents out its 9,000-square-foot center on Hikimoe Street to other nonprofits, according to its most recent filing with the IRS.

The center was constructed largely with city money on state land leased for $1 a year. Kawamoto's nonprofit reported $42,000 in rental income in its last fiscal year, according to the IRS filing. It reported $105,000 in expenses for that year and listed as its primary purpose "to develop and operate facilities." Kawamoto is listed on the filing as the person in charge of the nonprofit's accounts.

Kawamoto who lost his Senate seat in 2004 after 10 years in office declined comment yesterday. Kawamoto's lawyer, former state Attorney General Earl Anzai, said he was not aware of the federal investigation and could not comment further. Isaac Ocenar, the Waipahu center's president, did not return calls yesterday.

The two people familiar with the federal probe agreed to discuss details of the inquiries but asked not to be identified because the investigation is pending.

Brandon Simpson, an FBI spokesman in Honolulu, declined comment and a spokeswoman with the IRS did not return calls.

The federal probe comes as state Attorney General Mark Bennett is conducting a separate criminal investigation into Kawamoto's dealings with the Waipahu center.

State campaign laws require politicians to return all surplus campaign funds to original donors. If the donors can't be located, the money can be given to a nonprofit organization so long as it is not connected to the politician.

In August, Kawamoto said that his reading of the law allows him to donate left over campaign funds to any nonprofit organization regardless of its affiliations. He added that the Waipahu center is an independent entity that's governed by an outside board of directors.

The FBI and IRS agents met with state Campaign Spending Commission officials several weeks ago to discuss the Kawamoto investigations, according to one person familiar with the federal investigation.

The federal investigators told state campaign officials that they were looking into Kawamoto's transfer of the ownership of a Subaru Baja sport utility vehicle and two Segway human transporters from his campaign to the Waipahu center, according to the person.

The Subaru was purchased with $20,000 of Kawamoto's campaign money. A copy of the Subaru's certificate of registration shows that ownership of the vehicle was transferred from Kawamoto's campaign to both the center and Kawamoto.

Federal tax law bars an officer of a nonprofit from using the organization's assets for private benefit.

In a separate case, Kawamoto paid a $21,000 fine and returned $30,000 to his campaign two years ago to settle an investigation by the state Campaign Spending Commission into alleged failure to report contributions and alleged personal use of campaign funds. As part of the settlement, Kawamoto did not admit to any violations.

A prolific campaign fundraiser, Kawamoto was chairman of the Senate transportation committee before losing his seat to retired school vice principal Clarence Nishihara in 2004.

Kawamoto attracted criticism during the 2004 legislative session for introducing a measure giving the state Legislature the power to hire and fire the state Campaign Spending Commission's executive director, who at the time was investigating Kawamoto.

The Waipahu Center whose construction was financed by a $2.7 million city grant and a $245,000 gift from the nonprofit Harry & Jeanette Weinberg Foundation operates on state land under a 30-year lease agreement with the Housing and Community Development Corp. of Hawaii, which receives $1 a year in rent from the organization.

The center currently leases space to Oahu Head Start, which provides early childcare services, and to Health For All Inc., a Sacramento, Calif.-based nonprofit operator of senior healthcare centers.

According to its filings with the IRS, the Waipahu center received about $160,000 in revenue in the year ending June 30.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.