On the chilly but clear day of December 2, 2016, around 10:30 in the morning, the building housing the old Copper Lounge in downtown Sioux Falls, South Dakota, collapsed. A contractor working on the first floor had removed two load-bearing walls that separated the bar from Skelly’s Pub, another closed watering hole.
One worker perished in the rubble. As OSHA inspectors dryly reported, “while removing two load-bearing walls of two buildings that were going to be made into one, the entire structure collapsed on top of the employee. The employee was killed by blunt force trauma to the chest along with asphyxia due to the amount of material that had trapped him in the rubble of the building.” A young woman whose family lived above the worksite was trapped in the debris for hours. She survived, but suffered serious injuries.
In the days and months that followed, it emerged that no fewer than 29 separate violations of federal Occupational Safety and Health Administration standards had taken place at the worksite, including two that were willful. The agency proposed a fine just shy of $100,000 for the non-willful violations, and another just over $100,000 for the two willful ones. Eventually, the contractor pleaded guilty to the willful violations of OSHA standards, causing the worker’s death. But, as the sentencing judge, Karen Schreier, pointed out in December 2019, “in light of the fact that [the company] has gone through bankruptcy and has no assets, and it’s an LLC so there’s not someone that I can put into prison, this court has very little that it can do at this point.” A $50 assessment against the company was the result.
That wasn’t the end of the investigations. Six weeks before the collapse, the contractor had removed asbestos from the building basement. Asbestos removal, done correctly, is expensive and time-consuming. Specially trained workers are supervised by a certified asbestos contractor. Asbestos disposal must be made at a designated and licensed facility.
None of that was done. According to the state’s Department of Environment and Natural Resources, which enforces hazardous materials removal, some 380 linear feet of friable asbestos-containing pipe wrap and insulating cement were removed from the basement by the contractor’s workers, including the one who was killed when the building later collapsed. The asbestos materials were simply placed into black plastic garbage bags and hauled to the Sioux Falls municipal landfill, constituting another violation.
The contractor had been put on notice as early as September, shortly after it began work on the site, about the need to comply with state laws concerning asbestos removal.
When the state completed its investigation, it issued a notice of violation to the contractor and another company that was involved in the work. A $20,000 fine was imposed on Hultgren Construction, LLC.
The Hawai‘i Connection
Less than a year after Judge Schreier voiced her frustration over the lack of meaningful punitive options available to her in sentencing Hultgren Construction, the owner of that company, Aaron Hultgren, had signed on as the chief financial officer of a company that has received Hawai‘i County’s blessing to develop 112 affordable housing units in Kona.
Last September, the Hawai‘i County Council approved a resolution that granted certain waivers from county zoning requirements and permit fees to the company, Honua‘ula LLC. An affordable housing agreement had already been signed six months earlier by the county’s Office of Housing and Community Development, without any input from the council and little from the public.
OHCD administrator Susan Akiyama Kunz attached to the resolution a 700-plus page addendum that included much of the documentation prepared by Honua‘ula. Among the items was a questionnaire that probed the background of the contractor’s principals: CFO Hultgren, now residing in Texas, CEO Bruce Beard, of Washington state, and chief operating officer Carlo Mireles, of Kealakekua.
In a section headed “regulatory actions,” question five asked if the applicant or any of its “partners, joint venture(s), corporate officers, or guarantors [had] ever been named in any governmental or private injunctive, preventive, or other administrative proceedings, actions, or litigations involving hazardous waste, toxic substances, hazardous materials, or any other environmental issues?”
The “No” box was checked.
Technically, that answer may be correct. After all, it was the LLC, and not Hultgren himself, that was found to have violated South Dakota’s hazardous waste laws. But Hultgren was the principal of that company and responsible for the actions of his workers.
Even if the “Yes” box had been ticked, it might not have meant automatic disqualification. In that event, the questionnaire asked that an explanation of the incident be provided.
Environment Hawai‘i asked Kunz about the level of scrutiny that OHCD gives to prospective affordable housing developers. “If OHCD is developing the housing project a thorough vetting of the developer is conducted,” she replied. “If the affordable housing project is done by a private developer, OHCD does not have control or have involvement in selection of the development or developers of affordable housing projects.”
More Legal Trouble
The addendum also contains a long report prepared by Mireles, Honua‘ula’s chief operating officer, on how the day-to-day operations of the housing project would be conducted. Among other things, Mireles would be in charge of collecting the rents, keeping tenant files, safeguarding security deposits, and handling other revenue, including the coin-op laundry machines on the premises. Gross rental income is expected to start at $1.8 million for the first year of occupancy up to about $2.2 million in the eighth year, according to projections given to the county.
Yet Mireles is a convicted felon. In 2003, he and Darryl Scott Poll were accused of having made millions through the sale of cable television descramblers. A press release from the U.S. attorney for the Eastern District of California stated that Poll and Mireles “operated a business which manufactured and sold cable television descramblers allowing illicit access to cable programming. Defendants advertised the descramblers extensively through a series of websites on the internet and also through national magazines… The devices were specifically modified and/or designed to allow consumers to receive premium and pay-per-view cable television programming without the knowledge or authorization of cable operators. … It is believed that defendants sold approximately 100,000 illicit descramblers and received over $12 million in revenue from these sales. The court determined that the ‘infringement amount,’ a reasonable estimate of the pecuniary harm caused to cable operators through loss of programming revenue, was over $7 million.”
In 2004, Mireles pleaded guilty to seven counts, including conspiracy to commit mail fraud, mail fraud, aiding and abetting in the unlawful interception of cable services, and conspiracy to commit money laundering. He was sentenced in 2007 to 16 months on each charge, to be served concurrently, followed by three years of supervised release.
In connection with the charges, the U.S. government seized assets of Mireles, including a Las Vegas home worth $102,000, around $20,000 for his share of property in Kealakekua, and a 2003 Harley Davidson Springer Softail bike, valued at more than $10,000.
Yet to Come?
The property in Kona that is being leased by Honua‘ula is owned by West View Developments, LLC, an entity registered with the state in 2014. Its manager is Rajesh Budhabhatti of Pahoa. In the company’s 2020 filing, he was still listed as the sole manager, but the address had shifted to a post office box in Kona, one that is shared with Alan Rudo, a former employee of the county housing office. West View did not file the required annual report for 2021 and the state’s Business Registration Division considers the company to be not in good standing.
Budhabhatti is also the sole named member of Luna Loa Developments, LLC, which, like West View, is not in good standing for failure to file annual reports with the state for at least three years.
Over the last year, Budhabhatti has sought legal help from the federal public defender in Honolulu. In an August 30 letter to Magistrate Kenneth Mansfield of the Honolulu District Court, Salina Kanai, the federal public defender, stated that Budhabhatti “is a subject of a public corruption/wire fraud case,” asking for approval of his request for her office’s help.
Mansfield granted the request.
— Patricia Tummons
Loves to Dance?
Aaron Hultgren, chief financial officer of Honua‘ula, LLC, is a mere 39 years old, according to his website. Yet the Dallas-area resident has started up more companies in his relatively short career than most others do in a lifetime. At present, some two dozen companies scattered across at least three states have been organized by Hultgren.
Recently he has taken to naming his LLC’s after Latin dances: Tango Development Services, Cumbia Real Estate Holdings, Capoeira Real Estate Holdings, and Rumba Real Estate Holdings.
Little can be found online about most of the dance-named entities. But Tango Development has an elaborate website (tangocre.com). Among other things, the site solicits investors in several developments, including Honua‘ula. “We target a 7-9% current pay monthly preferred return with a full cycle internal rate of return (IRR) of 11%-15% based on project type and risk,” the website states.
— Patricia Tummons
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