Monthly Archives: September 2011

Potential conflict in review of rail contractor

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Don Horner, chairman and CEO of First Hawaiian Bank, last week put on his other hat as chair of the Honolulu Authority for Rapid Transit’s finance committee and pronounced himself more than satisfied with the financial health of the company selected to build and operate the trains for the city’s proposed rail line.

In March, the city awarded a contract valued at $1.1 billion to Ansaldo Honolulu Joint Venture, made up of Ansaldo STS and AnsaldoBreda, both owned by the Italian conglomerate, Finmeccanica Group. Later questions about the companies’ finances prompted a review by HART directors.

Following a videoconference with Finmeccanica officials conducted from the First Hawaiian offices, Horner and other HART members praised the companies and their ability to carry out their part of the rail project.

Pacific Business News reported:

Don Horner, chairman of HART’s finance committee and CEO of First Hawaiian Bank, said he was satisfied that Ansaldo’s finances are in order and the city can proceed with negotiating a contract with the firm. He said he it also gave him “strong comfort” to hear Finmeccanica’s commitment to the project.

“Overall, and I can speak as a banker, I was very impressed with the substantial amount of profitability, the liquidity, the history, and the commitment from the parent company,” Horner said. “I am very pleased with the progress that we made today.”

But Horner failed to mention the long-standing business relationships between First Hawaiian’s parent company, the French banking giant PNB Paribas, and Finmeccanica. Earlier this year, for example, PNB Paribas was one of three banks underwriting a $900 million loan package to finance the sale of Ansaldo Energia SpA, Finmeccanica SpA’s power-plant construction unit, to private equity-investor First Reserve Corp.

A 2010 Ansaldo STS report noted its banking relationships:

Good and well-established relationships with the banks represent a corner stone of the strategy of Ansaldo STS. This objective is achieved through a multi-product approach in terms of management of:
• activities related to exchange rates (FX, Derivatives, etc.);
• bonding (guarantee management);
• treasury (management of receipts, payment of taxes, cash pooling, etc.);
• liquidity (deposits, current account overdrafts);
• investment banking (M&A, structured finance);
…The Ansaldo STS Group maintains relationships with the major banks worldwide, such as BancaIntesa, Unicredit, CitiGroup, ING, Calyon, BNP Paribas, JP Morgan Chase, HSBC, Nordea.

PNB Paribas and several other French banks have been under unusual pressure recently because of their extensive investments in Greece. Profits have been impacted, and a story published last week reported Moody’s Investors Service this month is again considering lowering the credit rating of PNB Paribas.

Questions about how the crisis in Greece will impact PNB have trickled down to First Hawaiian. In June 2011, Moody’s put First Hawaiian’s credit rating “on review for possible downgrade” due to the issues surrounding PNB’s exposure in Greece.

Similarly, the review of First Hawaiian’s stand-alone BFSR was prompted by the rating agency’s view that if Bank of the West’s ratings no longer benefit from the support of BNP Paribas, First Hawaiian could then be more likely to be called upon to support Bank of the West.

Moody’s does not believe that BNP Paribas’s willingness to provide support to these two entities has changed — it remains very high. However, Moody’s assessment of the parent’s ability to provide that support would decline if the stand-alone BFSR of BNP Paribas is downgraded.

The actual extent of the financial ties between PNB Paribas, Finmeccanica/Ansaldo, and First Hawaiian, and whether those financial ties are enough to have created a conflict for Horner, trigger disclosure requirements, or affect his judgement concerning Ansaldo’s health, is difficult to assess, in part because his public financial disclosure filed with the State Ethics Commission does not report any personal investments or stockholdings valued at more than the legal disclosure threshold of $5,000. Horner does report being a director of BancWest Corporation, in addition to his direct duties as CEO of First Hawaiian, and a FHB salary of more than $1 million.

1894 Congressional has contemporary testimony about Hawaiian “revolution”

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Ken Conklin emailed this comment yesterday after running into trouble getting through my spam filter. It points to some interesting information, and I thought it worth sharing. The links to the Morgan Report lead to contemporary accounts of the events of 1893 taken during testimony given under oath before a U.S. Senate committee.

Hi, Ken Stokes. I still remember you from a meeting about 13-14 years ago at Kekuni’s house, at a time when I was leaning in the direction of supporting the independence movement; and another one or two at UH.

Ken, you wrote “there was nothing ‘internal’ about it.” [the Hawaiian revolution of 1893]. Oh yes there was. And the U.S. Senate said so after a two month investigation under oath and cross examination. That little thing you wrote is typical of the historical half-truth zingers put out there by sovereignty activists. Unfortunately it requires considerable information to disprove it, and of course I need to provide lots of footnotes since otherwise you’ll just say I’m making it all up.

As you point out, Willis’ letter to Dole in December 1893 makes clear that Cleveland was blaming America for the overthrow of the monarchy. At roughly the same time, Cleveland sent the Blount Report to Congress along with Cleveland’s strongly worded message blaming the U.S. for the overthrow and turning the matter over to Congress for further action. It’s my own belief, although I cannot prove it, that Cleveland wanted Congress to approve sending troops to overthrow Dole and put Liliuokalani back on the throne.

But then something very interesting happened. The U.S. Senate Committee on Foreign Affairs held a hearing about the Hawaiian revolution. The hearing ran for two months (January and February 1894), open to the public (unlike Blount’s “investigation” which was done in secret; worse than Abercrombie; Ian take note!) with testimony under oath and severe cross examination (unlike Blount who administered no oath and was eager to believe all the royalists he spoke with).

In late February the committee published its 808-page report including its conclusions and the transcripts of what the witnesses had said. The committee concluded that the U.S. peacekeepers did not take over any buildings, did not patrol the streets, spent their time in barracks waiting to be called but never needed, did not enter the Palace grounds nor point their guns at the Palace, did not give any food or ammunition or any other assistance to the local revolutionaries.

Among the interesting facts about the committee report are the fact that the Senate was controlled by the Democrats (Cleveland’s own party), and of course the chairman of the committee, Senator Morgan, was also a Democrat. The committee totally repudiated the Blount Report. There was even testimony under oath from men who had been interviewed by Blount in Honolulu, who told the committee that Blount had falsely reported them in the Blount Report as having said things opposite to what they had actually told Blount (i.e., Blount was a liar).

The committee took testimony from several of the U.S. peacekeepers including enlisted men, officers at several ranks, the captain of the ship, Minister Stevens, etc. always asking them “Exactly what happened? What day? What time of day? Who gave the orders?” etc. It also took testimony from several highly respected native-born subjects of the Kingdom who had served for many years as department heads under several monarchs and were not involved in the revolution.

Shortly after publishing the Morgan Report, the Senate passed a resolution that basically slapped Cleveland in the face, telling the U.S. to keep its hands off the internal affairs of Hawaii. And remember, the committee chair and a majority of the Senate were Democrats, same as Cleveland.

I am very proud to have served as co-editor of the Morgan Report webpage. After several years when the sovereignty activists had scanned the Blount Report using government money, but conveniently ran out of money before they could get around to the Morgan Report, Jere Krischel and I worked together (with zero money but lots of respect for history) to put Morgan on the internet so everyone can read it easily. Jere did the scanning and OCR work from the original document; he and I both did the proofreading and editing to correct OCR errors, and we both (mostly I) wrote summaries of all the testimonies and special sub-pages pulling together information on specific topics from throughout the report.

See especially the “Outline of Topics” and the “Morgan’s Gems” linked on the right-hand side of the front page at
http://morganreport.org.

Abercrombie clings to secrecy while Chicago opens its records

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Hawaii gets to enjoy Governor Abercrombie’s refusal to disclose the names of judicial nominees forwarded to him by the Judicial Selection Commission, and his administration’s somewhat lame defense of his position put forward in court this week. Meanwhile, in Chicago, long thought of as the Mecca of back room deals, its a new era of openness.

Starting Wednesday, millions of crime statistics dating to 2001 will be posted online in a searchable database. It will be updated daily, providing fodder for residents to evaluate their own neighborhoods, academics to study crime and techie types to create websites or apps.

The release is the latest attempt by the administration of Mayor Rahm Emanuel, who took office in May, to make city dealings more open and counter Chicago’s reputation for entrenched systemic corruption and backroom deals. Chicago officials recently posted online the salaries of city employees, city contracts and lobbying data, with more information expected in coming months.

“It’s a whole new era of openness and transparency,” said Brett Goldstein, the city’s chief data officer and former police officer. “You determine your own analysis.”

Did you catch that? Contracts online. Scanned copies.

Awarded Contracts

To search for and view scanned copies of awarded contracts (2003 to date), please search the Contract Award & Vendor Database.

Our governor needs some coaching from Rahm Emanuel on the political benefits of this kind of openness, as does Honolulu’s mayor.