Ka Wai Ola - Office of Hawaiian Affairs, Volume 13, Number 8, 1 August 1996 — Good idea... bad investment [ARTICLE+ILLUSTRATION]

Good idea... bad investment

by Rowena Akana Trustee-at-large In Iast month's issue I wrote about the shenanigans surrounding a failed attempt by Trustee Aiona (Chairman of the

Budget, Finance and Policy Committee) to select a certain banking institution to manage OHA's short term investment account. Today, the behind-the-scenes wheeling and dealing continues. This lime it's a CD-ROM Hawaiian dictionary proposal that made a surprising rise to the top of Aiona's Budget Committee agenda (7/9/96

special meeting). The project is a risky venture capital "investment" seeking $700,000 of OHA trust funds. OHA has never entered into this type of investment before (there are serious finan-

eial and legal ramifications present in this type of investment). When Mānoa Interactive Productions (MIP) first brought this project to OHA last year, the business plan that was submitted lacked crucial information necessary for trustees to make

any informed decisions. Beginning in January . 1996, 1 requested that OHA's investment consultant, Martha Brown of Merrill Lynch, review the business plan submitted by MIP and provide us with a written opinion on whether this represents a sound investment for OHA. No written opinion was ever received. However, Ms.

Brown did refer the project to Venture Planning Associates for a preliminary review. I also asked OHA Board Attorney, Sherry Broder, for a legal opinion on this project. She waited nearly six

months before responding (her written opinion eame one day before the Budget Committee meeting was held). Ironically, moments after I made a direct inquiry to OHA's staff concerning the existence of any reports or evaluations of this project, copies of a written review were distributed. The materials included a detailed preliminary review of MIP's business plan. This review was, as expected, critical of MIP's financial data, including sales projections, production costs, price analysis, distribution, marketing, etc. The conclusion of this review was "substantial additional information would be required in order to reach an informed decision ... no definite determination ean be made until all of the information and due diligence are complete." The most alarming fact is, after more than nine months, no one has done a due diligence review (i.e., a review of MIP's financial records, stability of company,

viability of projecl success, etc.). Given the fact that OHA is being asked to fund 100 percent of the financial portion, the first eoneem would be to look at whether or not the eompany has the financial ability to complete this project and whether the company has a demon-

strated track record in the interactive multimedia industry. As a limited partner, OHA has no guarantee that a single CD-ROM would ever be produced. In addition, MIP would not have to pay any money back to OHA if the project fails. $700,000 is a lot to risk on one roll of the dice. Despite the severe laek of information concerning this project and the absence of any due diligence review, trustees are being asked to give $700,000 to a nonHawaiian, for-profit company. MIP's proposal is incomplete and lacking some of the most basic elements of a sound business plan. Yet, Chair Aiona called a speeial meeting of his Budget Committee to consider this single issue. Someone had to do some serious string pulling to get this one item on Aiona's agenda. No one disputes the fact that a mukimedia Hawaiian dictionary (made with existing data from the Pukui/Elbert Hawaiian Dictionary) would be an invaluable tooI for

leaming. However, the real question here is. is this venture capital deal a sound investment for OHA? Would we really double our money as promised or would we be throwing nearly three-quarters of a million dollars of our beneficiaries' money down a black hole? In my opinion, no matter how you look at it, this Hawaiian Dictionary proposal is a good idea, but a bad investment.