Thousands of Hawaiians could lose phone and internet service in bankruptcy dispute

April 29, 2022

State regulators have launched an emergency investigation into Communications from the Sandwich Islands to determine if the company can provide telecommunications services to more than 3,000 households living on Hawaiian land and find alternatives if not.

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the public utility commissionwhich opened the case on March 11, fears that customers in the Sandwich Islands “will suddenly lose access to telecommunications services”, a situation which the panel considers “unacceptable”.

The investigation comes as Sandwich Isles apparently blocks access to its telecommunications infrastructure to another provider, Hawaiian Telecomalleging trespassing, filing police reports and endangering customers’ phone and internet service.

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Meanwhile, Hawaiian Telcom has alerted the Department of Hawaiian Home Lands, Federal Communications Commission, U.S. Department of Justice, Hawaii Attorney General and others that because of the dispute, the company is prepared to cut the access of the Sandwich Islands to its telecommunications network. before May 31.

The PUC said in a March 11 filing that it “cannot overstate the paramount importance of maintaining affordable and reliable telecommunications services to the state as a whole, and in particular to Hawaiian land customers.”

If customers lose basic telecommunications service, it could have serious health, safety, economic and educational consequences, according to the Hawaii consumer advocate, a party to the case.

Sandwich Isles Communications is an Oahu-based telephone company founded in 1995 with a mission to provide communications services to Native Hawaiians living on farms. In addition to landline and wireless services for residential and business customers, the company also offers broadband and Lifeline, a medical alert system.

With support from the federal government, the company built the Paniolo Network, a network of submarine and terrestrial fiber optic cables.

Between 1997 and 2001, the US Department of Agriculture loaned the company more than $166 million to build telecommunications infrastructure. From 2002 to 2015, he received over $27 million from the FCC to cover various telecommunications costs.

After the money started flowing, things got complicated.

In 2015, founder Albert Hee was convicted of a crime tax fraud. Federal prosecutors found that Hee transferred millions of dollars from the company to his personal accounts to pay for things like massages, tuition for his children, family vacations, a vehicle and a home in California, as well as wages and benefits for his wife. and children for work they did not perform. hey was sentenced in 2016 to 46 months in prison.

Then in 2020, the FCC Hee fined nearly $50 million for defrauding the Universal Services Fund which supports operators providing telecommunications services in high-cost areas of the country.

Sandwich Isles Communications defaulted on Department of Agriculture Rural Utilities Department loans and was slapped with a $138.5 million judgment in February 2020. To satisfy the judgment, a bankruptcy trustee ordered the sale of the Paniolo network to Hawaiian Telcom.

According to the PUC filing, Hawaiian Telcom then sent Sandwich Isles a letter noting the change in ownership. But to avoid disruption to customers, Hawaiian Telcom said Sandwich Isles may continue to use Paniolo’s facilities uninterrupted, temporarily, pending a more permanent agreement.

Things quickly changed.

Sandwich Isles failed to make required payments to Hawaiian Telcom for network use, according to correspondence reviewed by the commission.

Hawaiian Telcom said it was willing to negotiate, but if no agreement was reached by March 31, the company would revoke Sandwich Isles’ use of the network, potentially disrupting telecommunications services to customers of Hawaiian Home Lands. They have since extended the deadline until the end of next month.

But the situation continued to deteriorate seriously.

Correspondence between the two companies indicates that Sandwich Isles “barricaded interior doors and changed exterior locks to portions of the Paniolo Network facilities,” according to the commission.

In bankruptcy court papers, Hawaiian Telcom alleges that Sandwich Isles removed, destroyed or tampered with Hawaiian Telcom locks on the perimeter fences surrounding the buildings Hawaiian Telcom purchased. And that Sandwich Isles has installed its own locks and devices on buildings and premises owned by Hawaiian Telcom, as well as welded closed access doors. The company also claims that Sandwich Isles has made several false police reports alleging Hawaiian Telcom encroaching on its property.

Lynette Yoshida, Hawaiian Telcom’s operations manager, said in court papers that on January 26, she received a report from a Sandwich Islands employee that the company’s founder, Al Hee, was requesting that Hawaiian Telcom lock down his Paniolo building in Laiopua on the Big Island. Is returned, replaced. Otherwise, Hee said he would call the police.

Several similar incidents involving the police are detailed in court documents.

In a Jan. 12 email to Hawaiian Telcom, Hee said, “I have no intention of turning this into a trespassing issue unless you destroy our property. If you want to talk about a unescorted access, please let me know.”

Things got even uglier after that.

In a March 29 filing with the U.S. Bankruptcy Court for the District of Hawaii, Hawaiian Telcom asked the court to enforce the terms of the bankruptcy because the Sandwich Islands’ conduct is “not only reprehensible, but has gradually become detrimental and alarming”.

On Friday, the court ordered Sandwich Isles to immediately stop removing, destroying, modifying or otherwise tampering with Hawaiian Telcom’s locks, chains or other security features on its Paniolo buildings. He also found Sandwich Isles and its officers, managers and agents in deliberate contempt of court for its actions.

A phone call and email seeking comment this week to Lex Smith, a lawyer representing the Sandwich Islands, was not returned. A woman who answered the phone in Sandwich Isles on Wednesday said no one was available to speak to a reporter.

In a Sept. 11 letter to customers, Sandwich Isles blamed the situation on Hawaiian Telcom. As part of the bankruptcy, Sandwich Isles was allowed to temporarily continue to serve its customers by using part of the Paniolo network free of charge and paying a nominal amount for its equipment located in buildings now owned by Hawaiian Telcom, the letter said.

But Hawaiian Telcom “has since reneged on its obligation to purchase” and is demanding that Sandwich Isles pay market rates for network use and is threatening to cut service unless it does, according to the company.

Paying market rates would significantly increase customers’ telecommunications bills, the letter says.

In court documents filed April 11, the Department of Hawaiian Home Lands sided with Hawaiian Telcom. He said Sandwich Isles had lost any interest or right in the assets involved in the bankruptcy, including real estate.

Sandwich Isles faces $400 million in judgments, the department noted. It quotes the trustee in bankruptcy as saying the Sandwich Islands’ recent actions pose “a clear and present danger to the operations, safety and security of Paniolo’s cable network”.

The PUC reviewed Sandwich Isles’ recent annual reports and described the company’s financial situation as “catastrophic”.

A commission investigation to determine whether Sandwich Isles violated federal law is appropriate, according to the consumer advocate. If violations become evident and remedies cannot be easily found and implemented, the commission must decide whether the Sandwich Islands should be allowed to continue to operate.

It is of the utmost importance that services to Hawaiian Home Lands beneficiaries are not interrupted, said Dean Nishina, executive director of the Division of Consumer Advocacy, in an interview Thursday.

In May, parties to the docket will have the opportunity to request information from others. Sandwich Isles has until June 21 to submit its response.

“Reliable internet and phone service are more important than ever,” said Cedric Duarte, spokesperson for Hawaiian Home Lands.

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