September 26, 2002

Mr. Dan Mollway, Director
Hawaii State Ethics Commission
Transmitted by em to ethics@hawaiiethics.org

Dear Mr. Mollway;

We wish to file a complaint with your office regarding recent and past actions of Clyde Sonobe, Administrator of the Cable Television Division (CATV) under the State Department of Commerce and Consumer Affairs (DCCA) and others.  In our opinion, Sonobe and others may have breached their fiduciary duties to the citizens of Hawaii.

AFCR would ask that you investigate two questionable matters:

1) The DCCA process that approved and implemented the recent AOL/Time-Warner franchise agreements (D&Os) and those prior if deemed necessary, and
2) A possible conflict of interest by the State official who oversaw these recent cable franchise transfers.  CATV Director Clyde Sonobe’s wife is employed by another AOL/Time-Warner subsidiary in Hawaii, Time-Warner Communications.

With regard to the process:
 

• a change was made in the definition of "gross revenue" in D&O 261 (page 16) that reduced  monies due the state by approximately ten per cent (over $500,000 per year),

• and two community access TV channels were eliminated (D&O 261 page 20 - 21).  These are conservatively estimated to have a value of five hundred thousand dollars per year.

• The particularly disturbing lack of public process in these important matters.

The cable company that benefited from Sonobe's cable policy initiative is Hawaii's newest monopoly (July 12, 2002), Time Warner Cable and the telecom company that employs Sonobe’s wife, Time Warner Communications, shares the same AOL/Time-Warner parent corporation.  In both cases AOL/Time-Warner’s interest in State regulation of communication utilities is profound.  Yet, there is no indication that cable administrator Sonobe recused himself from participating in the franchise decisions and orders.  In fact, Sonobe's entire employment with the DCCA now revolves around regulating just that one company.

BACKGROUND
Apparently without consulting the State Cable Advisory Committee, Clyde Sonobe negotiated away public funds for Community Access Television and actually gave back valuable bandwidth designated for public use.  Sonobe inserted two small and specific changes into Decisions and Orders without due process: a change in the definition of “gross revenue” (D&O 261 page 16) reducing the calculation by approximately ten per cent (over $500,000 per year); and cutting two community access TV channels that were to be provided for community use (D&O 261 page 20 - 21).  The value of the two channels is conservatively estimated to be another $500,000 per year.  It is important to know that DCCA's appointed 'Olelo board director, (then) 'Olelo Board President Susan Au Doyle, neglected to represent or appoint someone to represent the public or 'Olelo at the hearings that resulted in these great losses.  Ms. Doyle should have known the value of public representation at these cable franchise transfer hearings as she was the past DCCA CATV administrator under DCCA director Robert Alm - who was also appointed as an 'Olelo board director by DCCA.

In the early 1990s DCCA director Alm inserted changes into Decisions and Orders without a proper hearing that gave approximately 20% of franchise fees to KHET Public Television, the only state in the country that has done so, and then once on 'Olelo's board, Alm attempted to merge the generously-funded 'Olelo and KHET.  Alm later wound up on KHET's board of directors before the ink on his 'Olelo board resignation papers had dried.  In 1999 current DCCA director Kathryn Matayoshi went to the legislature to remove a public protection law that was put into place by request of the state auditor in '93 due to the "large unencumbered balances" in the cable television division's account.  The auditor recommended these fees should be cut back to avoid excess funds in the future. Ms. Matayoshi ignored the recommendation and the law and continued overcharging the public for CATV's services and when her violation of the statute was brought to government officials' attention Ms. Matayoshi went to the State Legislature and had the law changed.

The disturbing lack of public process and the questionable history & practices of the DCCA and it's cable division are far too important to ignore.  Besides the potential for wrongful personal enrichment, the potential damage to the public interest is great.  Community access media, with their promise of free speech and free access to public information, cannot afford to suffer losses of such valuable and scarce resources without better justification and public understanding.  A complete audit of the DCCA Cable TV Division, ‘Olelo, and Oceanic Time-Warner Cable is needed to ensure that no ethical, legal or fiscal violations have occurred.

Sincerely,

Scott Foster