“This is crazy. It’s a crazy amount of money. It’s like $2 million dollars.”
Wendy Gady, executive director of the state Agribusiness Development Corporation, was describing the legal charges her agency had already incurred and those it was likely to face in the future as it contested terms of a National Pollutant Discharge Elimination System permit set by another state agency, the Department of Health, governing the ADC’s discharge of runoff into the ocean in West Kauaʻi.
At the time of the remarks, made at the ADC board’s April 30 meeting, both Gady and board members were expressing their frustration over the invoices from Alston & Bird, a large multinational firm. One year earlier, Kevin Minoli, a partner at the firm, had been selected by a team of lawyers at the Department of Attorney General as special deputy attorney general to advocate for the ADC in contesting the terms of the draft NPDES permit, which the ADC had been advised by its consultants as being far too restrictive.
Under the contract, Minoli would charge $1,535 an hour for his services, with other attorneys charging $800 an hour. Legal assistants and paralegals would bill at an hourly rate of $500.
The contract was capped at $150,000, broken down as follows: a $135,000 cap for fees; $10,000 cap for expenses; and $5,000 cap for insurance to cover errors and omissions. This was expected to cover all obligations for the two years following the effective date of the contract, April 18, 2025.
But by the end of September, charges from Alston & Bird for fees alone already totaled $147,766, speeding past the $135,000 ceiling on fees and just $2,234 shy of the total contract amount – or, to put it another way, at this point, the ADC could afford less than another hour and a half of Minoli’s time.
Yet no one at the ADC seems to have raised an alarm over this. Minoli and his associates continued working on challenges to the NPDES permit terms. Those associates, by the way, were not charging the $800 rate called for in the contract. No. Associates Meaghan Boyd and Ke Zhang were charging $1,505 an hour and $1,170 an hour, respectively.
The invoice to ADC for work in October came to $111,582. The ADC had no money to cover this.
And the billings continued. November charges came to $145,449. December: $161,879. January: $156,291. February: $197,136. March: $47,217. April: $26,060.
By May, just the first three months of invoices had been paid by the ADC. The unpaid balance stood at $845,617. In late June, yet another invoice was received for $3,428.50, bringing the unpaid total to $849,045.50.
Breaking the Ceiling
The matter of the outstanding obligations was first raised in public at the January meeting of the ADC board. Gady was asking the board to give her authority to enter into a supplemental contract for legal services, which was granted.
As Gady explained it, the initial $150,000 ceiling set in the contract “was expended in paying for legal counsel to rebut the draft permit. Since then, we’ve gone into an accelerated timetable for filing a contested case. So the supplemental contract would be for filing the contested case and then additional counsel as needed or requested by the board.”
Beyond the initial $150,000, she said, “there was about $400, a little bit over $400,000, used to file the contested case.”
ADC Chair Jayson Watts: “Wow! We’re at half a million dollars? … What’s the plan? How are we going to address the funds, moving forward?”
“The tentative plan,” Gady answered, “is to use funds that have been paid to us by the operation and maintenance of the PMRF pumps.” (The Navy’s Pacific Missile Range Facility relies on state-owned pumps to keep its land from flooding.)
Using these funds would still leave the ADC around $60,000 short, she said. “We have not isolated where that would come from, but it would most likely come from the revolving fund, land rent.”
Watts warned that an emergency appropriations request to the Legislature likely wouldn’t be of much help. Even if it were approved, he said, “the Leg wouldn’t adjourn until April, May. The governor doesn’t sign until July, August, September, right? We’re going to have to think about our ability to pay in that gap.
“So, half a million. And then what? What do you think your ask is going to be? I know you got to negotiate with the AG and stuff, but what do you think?”
“We’re not the ones negotiating,” Gady answered. “That’s actually the AG’s office. We’re just the ones signing the check. The estimate at this point would probably be another $500,000.”
At its April 30 meeting, the ADC board received an update from Gady on the status of the NPDES permit.
“We have three items that are unfunded liabilities,” she said, even though they were requested by ADC in course of preparing its budget last fall. “The first is a line item for $100,000 to develop the NPDES plan, a condition of the permit. The second is approximately $650,000 for monitoring – and by monitoring, that is sampling, testing (meaning shipping it to a lab on the mainland) and then recording results and providing reporting, monthly in some cases, to the Department of Health and the EPA. And the last item is the legal costs associated.”
“Can we get the numbers?” Watts asked.
Development of a compliance plan would probably cost $100,000, Gady said, with around $650,000 for monitoring, but “hopefully we can recover those costs.”
“And,” she added, “our current legal bill is about $800,000. In addition to the $150,000. The $150,000 has been paid.”
Referring to the existing outstanding balance plus anticipated costs of litigating the NPDES permit to conclusion, Gady said the cost could go as high as $2 million – “a crazy amount of money.”
Watts noted that the ADC board was charged with fiduciary responsibility for the agency’s finances. “I want members to understand that this is a lot of money. … In January of this year, you came to us saying you wanted to execute a supplemental contract. The discussion then was around $1.1 million.
“Then on March 9, the deputy AG let me know that we are at like, $1.5, $1.6 million! The lawyers are now asking for payment. ADC can’t make payment?”
“We cannot,” Gady said.
Watts was growing angry at this point. “All these numbers without a budget. It’s a running tab. The Leg is already adjourning and there’s no appropriation for this at all. The lawyers are asking for payment. I kind of want to get more guidance as to what the plan is and what that light at the end of the tunnel looks like.”
Gady said she had asked about emergency appropriations but was told this wasn’t an option, then said she was told that there could be an option of contingency funds that the Department of Budget and Finance holds back for the Department of Business, Economic Development, and Tourism, the department in which the ADC is housed. “And another possibility was that it would just get put into the budget,” she concluded.
“But that did not happen,” Watts said.
Gady said she had not heard whether or not the funds were included in the ADC’s budget.
Watts asked Gady to look into that. “Let us know. I want to make sure we can cover all this,” he said. “As soon as possible get something to the Administration Committee. They can help put together a budget.”
Dane Wicker, deputy director of DBEDT and vice chair of the ADC, said that when Gady asked for the emergency appropriation, DBEDT asked for details, “So we could justify these expenses. They were very high when they first came in. And again, in the [emergency appropriation] process, we couldn’t justify the request. We asked ADC for details and haven’t received it. It’s hard for us to support any request if we can’t justify what they’re going for. … We’ve been asking since last summer.”
AG to the Rescue
By late June, Gady and the Department of Attorney General – which, remember, had selected Alston & Bird and had agreed to Minoli’s hourly rate – had come to an agreement. Drawing on funds from its litigation budget, the AG would sign an amendment to the original contract with Alston & Bird, raising the ceiling to $1 million, and then pay off the balance owed. The ADC would then reimburse the AG the unpaid balance, amounting to around $850,000, plus 10 percent annual interest.
This arrangement was brought before the ADC’s Administration Committee on June 26. David Hinazumi, committee chair, interrupted a presentation by ADC assistant executive director Mark Takemoto on a proposed budget for the 2028-29 biennium. Takemoto had displayed a table relating to expenses for the Kekaha ADC properties that showed $469,089 in legal fees each year for the two years of the biennium budget. In other words, the amount needed to repay the AG loan, plus interest.
Hinazumi stopped him. “Before you continue,” he said, “we need a bit more discussion … backing up, yeah, to the legal fees. We need to figure out a way of how we’re going to be paying for these expenses.”
ADC Chair Jayson Watts explained his understanding of the arrangement. “The AG is going to bail us out, pay for the bill, and we’ll pay it back. … The AG has funds in their budget and is willing to cover us.”
Takemoto said the ADC would have to make a request for an appropriation to repay the AG. “Failing that, we have to come up with a way to pay the Attorney General back using our own revenue.”
Watts responded that the ADC executive director has said that ADC does not have the funds. “We’ll need an appropriation of about a million dollars” to reimburse the AG, he said.
Gady joined in: “ADC did in fact in the fiscal year ʻ27 budget submission, ADC did request legal –”
“No, no. You requested it,” Watts said. “You guys put a budget together that was never voted on.”
“Why wasn’t this done earlier?” he asked Gady. “Why didn’t you find a path earlier?”
Wicker then accused Gady of “continuously working around DBEDT and the board. It causes confusion and it makes everybody look uncoordinated. Going straight to the governor’s staff circumvents the board and DBEDT. Meanwhile, the AG reached out, saying we’re going to pay the bill but can DBEDT come in and pay us back.”
The financial tables Takemoto was presenting, Watts said, show that you can pay this off in two years, right?
“Yes,” Gady replied.
Watts: “On the assumption of no further legal expenses?”
“Correct,” Gady said.
“But you still need to have some kind of legal fund on the side,” Watts said. “Even if we conclude today, if residual things are happening, some other things could get tacked on.”
Hinazumi noted that the fiscal plan put before them shows no way of paying back the AG. “We will be almost 100 percent reliant on getting some kind of appropriation. I appreciate the ideas of how to see where we can reduce expenses and make assessments to cover these kinds of costs, but it’s unlikely we’ll be able to drum up a million dollars plus in the next year.”
Once the financial presentation finished (showing a rather disheartening deficit of $2 million for the biennium), the committee turned its attention once more to the agreement with the Attorney General.
Gady repeated that the $1 million is for legal fees already incurred, adding that she was unaware of any pending additional lawsuits that would require funding beyond this.
Hinazumi asked whether any bills have come in recently that might add to the $845,617 balance. Gady said she would check on that, but added that since the last billing the ADC had received, there had been no additional engagement with Alston & Bird.
“We need to know what additional liability we’re looking at,” Hinazumi said. “You mentioned this got remanded back to the Department of Health to review the permit. So are we going to need … or at least potentially need legal services during that further discussion with DOH? Do we have any idea what that might be?”
“We’re in a period when the Department of Health is actively reviewing” the permit, Gady said. “They’re trying to address a nine-page response that ADC provided. … Mid-August is the deadline for the Department of Health to issue a potential revision. … We are in a holding pattern.” Alston & Bird had not provided any estimate or budget for future work, she added.
Hinazumi: “We need that as well.” Also, he said, any future expenditures would need to be approved by the board.
Wicker suggested that instead of directing legal questions to Alston & Bird, they go first to the deputy attorney general assigned to the ADC. “Every inquiry generates a fee,” he noted.
Watts agreed. “The AG can engage the special deputy as they need,” he said.
Wicker asked about the law firm’s billings from November 4 to May 5, reflected in the unpaid balance. “What’s behind this? … Could any of these charges have been mitigated or reduced if we went through our AG first, our deputy AG? … Was this generated mainly through just direct contact between you and the special deputy?”
“It was a combination,” Gady replied. “Some of the charges are attributed to other parties reaching out directly to Alston & Bird without going through ADC or without going through the AG’s office.
Watts suggested that some of the costs could have been avoided if the deputy AG assigned to the ADC had been consulted first and asked that this procedure be followed in the future.
“Understood,” Gady replied.
Shortly before noon the Administration Committee approved a motion to recommend the full ADC board consent to the loan arrangement with the Attorney General and to instruct the ADC executive director to discuss any matter related to the NPDES permit with the deputy AG assigned to ADC first and have the Attorney General’s office determine the next courses of action, if any, with special counsel.
In late July, the Administration Committee considered an updated biennium budget, which now showed the debt to the Attorney General being paid off in one year ($929,500 in fiscal 2028), plus anticipated expenses of $240,000 for “specialized legal services associated with compliance, permitting, enforcement defense, and regulatory proceedings related to the West Kauaʻi NPDES Permit.” Both expenses are anticipated to come from general funds.
Final Approval
On June 26, the same day the ADC’s Administration Committee was meeting, Attorney General Anne Lopez signed the supplemental agreement with Alston & Bird, committing it to paying the full balance owed for work related to the NPDES permit.
But not until June 29 was the MOA with the Attorney General presented to the full ADC board. In the three days since the Administration Committee meeting, Gady said, she had received another bill from Alston & Bird for $3,428.50. “We’re still awaiting a budget for the balance of the contested case,” she added.
Ciara Kahahane, an ex officio member of the ADC board by virtue of her position as head of the Commission on Water Resource Management, asked whether the board would have a chance to review any proposed budget for services from Alston & Bird.
Kelcie Nagata, the deputy attorney general advising ADC this day, noted that the MOA contains a provision that for future work. “Our office will work directly with Alston to see what remains to be done for the remainder of the contested case,” she said. “We reserve the right to cancel the contract…. For now, the biggest goal for the MOA is to get the work completed by A&B paid.”
The full board approved the agreement.
On July 9, Gady and Attorney General Lopez signed the memorandum of agreement. The AG, it says, “shall pay ADC’s outstanding attorney fees and costs to Alston, in the amount of … $845,617.00” and “will work with Alston to supplement the initial contract and resolve outstanding attorney’s fees and other related issues.”
The ADC is to reimburse the Attorney General “in the amount of the Lump Sum Payment” within 30 days of the ADC receiving an appropriation and release of funds from the Department of Budget and Finance. “The reimbursement obligation shall also bear interest of ten percent per year.”
If the Legislature approves an appropriation to the Attorney General repaying the loan amount on behalf of the ADC, then the Attorney General and the ADC “shall execute an additional agreement reflecting that the outstanding amount under this agreement has been paid in full.”
— Patricia Tummons
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