I heard from former Big Island blogger, Aaron Stene, several days ago concerning the agreement under which Hawaiian Telecom will pay $50 million for the undersea cable system of Paniolo Cable in a deal overseen by the federal bankruptcy court. Stene says the sale addresses two very different problems. First, it reserves some undersea cable capacity for use by Sandwich Isles Communications, which since 1995 has been the exclusive voice and data communications provider for residents and businesses on Department of Hawaiian Home Lands statewide. And, second, it puts control of the most modern undersea cable system serving the state of Hawaii into the hands of Hawaiian Telcom, which had been hampered by its own aging cable infrastructure.

Stene has previously warned that communications services to DHHL communities was at risk since the conviction of Al Hee on federal tax charges in 2016. Hee, the brother of former state senator and OHA trustee, Clayton Hee, was the owner of Waimana Enterprises, a holding company, and the architect of the web of affiliated companies, including Sandwich Isles Communications, the sole source provider to DHHL lands and Paniolo Cable, which owned the undersea cable system itself, controlled by Waimana, Hee, and other family members,

Hee was sentenced to 46 months in federal prison for tax fraud after being convicted of diverting more than $2 million in company funds to his own lavish lifestyle.

Albert S.N. Hee, 61, of Kailua, Hawaii, was sentenced by Senior U.S. District Judge Susan Oki Mollway of the District of Hawaii to serve 46 months in prison, to be followed by one year of supervised release. Hee was also ordered to pay a fine of $10,000 and restitution to the IRS in the amount of $431,793. In July following an 11-day jury trial, Hee was convicted of one count of corruptly endeavoring to obstruct the IRS and six counts of filing false individual income tax returns for the years 2007 to 2012.

According to court documents and the evidence introduced at trial, Hee owned Waimana Enterprises Inc., a telecommunications holding company based in Honolulu. Between 2002 and 2012, Hee caused Waimana to pay more than $2 million of his personal expenses. Hee then falsely characterized these personal expenditures as business expenses on Waimana’s corporate income tax returns. Hee also filed false individual income tax returns for 2002 to 2012 on which he failed to report the expenditures as income. Hee’s lavish spending included more than $90,000 for personal massages, which he deducted on the corporate tax returns as “consulting fees,” full-time salaries and benefits for his wife and children even though they performed little to no work for the company and more than $736,900 in college tuition, housing and other expenses for his children.

From Stene’s email:

Hawaiian Telcom made a huge acquisition of Paniolo Cable & SIC’s core network assets for 50 million dollars, beating out Pacific Network
Holdings LLC.

1. This addresses Hawaiian Telcom’s aging interisland submarine fiber-optic cable issue in a big way. Hawaii Inter- Island Cable System (HICS) only has 12 fiber pairs, and Hawaii Island Fibre Network (HIFN) 24 fiber pairs. These cables were put into service in 1994 and 1997 respectively.

Paniolo, on the other hand, was put into service in 2009 and has 48 fiber pairs.

2. This purchase doesn’t address the impending Federal foreclosure of SIC’s last mile (customer facing) assets.

3. Sandwich Isles, Waimana Enterprises, and the Paniolo Cable bankruptcy trustee reached an agreement earlier this year which preserved the
indefeasible right of use to two fiber pairs out of 48 for DHHL statewide connectivity. Whoever acquires SIC’s last mile assets will have to negotiate with Hawaiian Telcom for more bandwidth capacity between the islands.

This proposed deal, which is subject to government and court approval, helps Hawaiian Telcom in a big, big, big way. However, the future
voice/data connectivity of DHHL homesteaders remains unclear at this point.

The sale to Hawaiian Telcom reserves two fiber pairs for use by Sandwich Isles Communications (or its successor) at no cost, with an option to lease additional capacity subject to future negotiations. That seems to give Sandwich Isles a path forward.

It’s a very complex situation, and I hope Aaron will jump in to fill in all the blanks I’ve left.

If there’s interest, I’ll post some of the documents from the bankruptcy case that Aaron provided.