Weinberg's Legacy The unassailable $2 billion Weinberg Foundation now wants $75 million of taxpayer money.
Ian Lind
Honolulu Weekly, May 22, 2002
A group of high-powered investors and developers marched into the governor’s office Monday, May 13, to press their case for $75 million in special-interest tax breaks for the Ko Olina resort. Two of the men in the group went unidentified in news accounts of the meeting.
The two were representatives of the deal’s landowner: the Harry & Jeanette Weinberg Foundation, best known for its extensive program of charitable grants in Hawai‘i and across the Mainland. It might seem unusual for one of the nation’s largest charitable foundations to be pleading with the Aloha State’s governor for big tax breaks for resort development, but the Weinberg Foundation also happens to be a major Hawai‘i landowner with an increasingly active interest in development.
The foundation operates in a milieu of big money, few rules, insider dealings and little public information — a potentially dangerous mix of philanthropy and deal-making, all within the protective cover of its generous charitable program.
The tax-credit plan, which would finance an aquarium and science center and, in theory, deliver the investors for new hotel and time-share projects at the sprawling resort, is being attacked by critics (reportedly including the state Department of Taxation and the Tax Foundation of Hawai‘i) as a dangerously precedent-setting bailout for Ko Olina master developer Jeff Stone and his partners, who took control of the property in 1998. Cayetano has stated that he is considering a veto of the measure. He has until June 24 to decide.
For the record, the Weinberg Foundation’s two representatives at the Cayetano meeting included foundation president Bernard Siegel, who traveled to Honolulu from the foundation’s main office in Baltimore, and board vice president Alvin Awaya, who directs the foundation’s activities in Hawai‘i from an office in Kaimukï. Last year, the foundation purchased significant but undisclosed acreage at Ko Olina on which the aquarium — as well as other projects — is proposed to be built.
Foundation officials could not be reached for comment regarding the meeting, but Sheila Donnelly, whose public relations firm represents the Ko Olina resort, called their presence "a serious thing.
"It shows the Weinberg Foundation is very much involved as the landowner and as a financier," Donnelly said. "They are partners in the resort."
Charity for the poor and developments for the wealthy at first glance appear an unlikely combination, but the Harry & Jeanette Weinberg Foundation is as unconventional as the maverick businessman who left his wealth, and his name, to benefit the poor — and perhaps to gall his enemies — in perpetuity.
In the works
The bid for Ko Olina tax credits is not the first controversial proposal to involve Weinberg lands. On Maui, a planned theme park called Maui Nui on 29 acres of prime Weinberg land at the entrance to Kïhei was to include an aquarium and marine-research facility strikingly similar to that proposed for Ko Olina. Animal-rights activists have attacked the Maui plan because it envisions research and public displays of captive dolphins, which, they claim, are simply a thin marketing veneer for an otherwise mundane tourist trap. Vocal opposition to the exhibition of dolphins has stalled the otherwise fully permitted project, which remains in limbo.
Two years ago, Weinberg purchased a large parcel including the Luana Hills golf course on the slopes of Olomana in Maunawili. The $12-million purchase has area residents wary. Formerly known as the Royal Hawaiian Country Club, the golf course nestles into some of the Windward Side’s most scenic and desirable land.
The foundation has opposed city efforts to purchase part of the property for future park use. Weinberg officials have been mum about their own long-term plans for the area and have declined to meet with representatives of the Maunawili Community Association, according to Donna Wong of Hawai‘i’s Thousand Friends.
Back in Maryland, the Weinberg Foundation took the lead in presenting a plan for redevelopment of its rundown section of Baltimore’s west side several years ago. Although stalled by community concerns, the plan illustrates the kinds of problems that can emerge as the foundation moves to develop or redevelop properties in its real-estate portfolio.
In a letter published in the Baltimore City Paper, attorney John C. Murphy described writing to the foundation on behalf of tenant Young Cho, operator of a small beauty parlor in a Weinberg-owned building the foundation planned to demolish.
Murphy, who represents several tenants in Weinberg-owned buildings in Baltimore, said it was Cho and other small business owners who moved in, made repairs and began providing neighborhood services, despite Weinberg’s failure to even slap a coat of paint on the buildings.
But Weinberg’s development plan, which envisioned demolishing hundreds of buildings in order to make way for gentrification and the development of high-priced housing and a slew of national retailers, had no room for the small businesses that had survived the neighborhood blight — blight that had been created by the foundation’s tight-fisted investment approach.
A legacy of controversy
Henry Weinberg, who died in 1990 at age 83 and left a fortune reportedly worth $900 million, was a Baltimore transplant who is perhaps best remembered in Honolulu as the "streetcar man" who grabbed control of Honolulu Rapid Transit Company, or HRT, the privately owned precursor to Honolulu’s TheBus system. (Wife Jeanette Weinberg passed away in 1989 at age 79.)
Taking over through a proxy battle around the time of Hawai‘i statehood, Weinberg repeated the game plan he had pulled off in Dallas, Texas, and Scranton, Pennsylvania. After taking control of the transit system, he plunged into a series of battles with the Teamsters, the Public Utilities Commission and the city, eventually forcing the government to buy him out and take over the system after a long bus strike in 1971.
Weinberg took the same tactics to corporate boardrooms as one of the original corporate raiders, buying blocks of a company’s stock and then creating such disruptions that the company would gladly buy him out at a profit.
He joined forces with a Los Angeles investor in the mid-1960s to take seats on Amfac’s board of directors, triggering a bitter battle for control and another profitable buyout, a game plan played out with some variations at Maui Land & Pine and Alexander & Baldwin.
Throughout his career, Weinberg also invested in distressed real estate in Hawai‘i and Baltimore. A self-described long-term investor, he bought commercial property when prices were low and held on.
"Weinberg had sort of a notorious reputation for being this guy who would never put a penny into his properties," attorney Murphy said in a telephone interview.
"He let them sit and would rent them for whatever he could rent them for," Murphy said. "People thought it was almost bizarre, not the conduct of a typical landlord, who would at least make minimal improvements."
In Baltimore, where Weinberg gradually bought up several blocks on the west side of the city, former Mayor William D. Schaeffer "pleaded with Weinberg to sell his properties so they could be rehabbed, but he never would sell," Murphy said.
In Hawai‘i, Weinberg continued his pattern of buying and holding commercial real estate. As a result, the Weinberg Foundation is now the third-largest private landowner in the state measured by total assessed values, according to a study published last year by Hawaii Business magazine. Only Kamehameha Schools and the Queen Emma Foundation own property with greater overall value.
Much of the foundation’s land is held by a series of companies it controls directly or indirectly, including HRT Ltd., Honolulu Limited, 3900 Corporation, Gutman Realty Company and 300 Corporation.
The Weinberg Foundation’s holdings include central Hilo’s decrepit Kaiko‘o Mall, which is being purchased by the state Judiciary for a new court complex; the Lahaina Shopping Center on Maui, several properties in downtown Lïhu‘e, Kaua‘i; and properties in different parts of O‘ahu, from the Hau‘ula Shopping Center to several parcels around the Mäkaha Valley Resort.
In addition to the Ko Olina land and Luana Hills golf course, the foundation purchased the Willows Restaurant site in Mö‘ili‘ili in 1998, and revived the restaurant as a monument to a previous era of casual island living.
Rewriting history
"They’ve had more impact locally in the past 10 years than any other foundation," said the Rev. Frank Chong, executive director of the Waikïkï Health Center, a recipient of several Weinberg grants.
In the 12 years since Weinberg’s death, the foundation’s assets have grown to more than $2 billion, according to last year’s 704-page tax return. The Weinberg Foundation ranks among the 25 largest private foundations in the country, both in terms of assets and grants given annually.
It has gotten the attention of local community leaders and activists alike by awarding an average of nearly $15 million in grants to organizations in Hawai‘i every year for the last decade. This makes up about 15-20 percent of the foundation’s total annual giving, tax records show.
Chong credits the Weinberg Foundation for investing heavily in organizations providing health and social services to the poor and elderly during the very tough economic conditions of the last several years.
Before he died, Weinberg restricted the foundation’s scope of giving. A portion of its funds goes to support Jewish charities, and the rest go to organizations benefiting the poor and underserved. Weinberg directed that no money be given to causes favored by the upper class, such as the symphony, art galleries, museums or colleges and universities.
Unlike most foundations, Weinberg gives large grants for construction, some of them valued at upwards of $1 million, according to Kelvin Taketa, executive director of the Hawai‘i Community Foundation.
"A lot of health and human service organizations can get contracts from the government to provide services, but government isn’t going to pay them to build the building they operate in," Taketa said. "It’s a terrific marriage."
Honolulu is peppered with buildings bearing the "Harry & Jeanette Weinberg Foundation" name. This ubiquity is driven by a foundation policy that requires any organization receiving more than $250,000 for a building fund to agree to name the building after the foundation.
A visitor driving around the island might pass a Weinberg YMCA building, a Weinberg Boys & Girls Clubs service center, a Weinberg cancer center, several Weinberg elderly housing projects — more than 80 buildings reportedly carry the name.
This has meant a virtual rewriting of history, one nonprofit administrator said. Like John D. Rockefeller, Andrew Carnegie, J.P. Morgan and the other robber barons of the 19th century, Weinberg was considered a ruthless businessman in life, but he then created a halo for himself that transformed his legacy.
"Local businessmen hated Harry Weinberg," Chong said. "But after he died, and it was clear where his money was going, that seems to have changed, at least for most people. The name Weinberg is now associated with health and human services, children and the elderly. He’s seen in a way that could never have been when he was alive."
"I think it’s a struggle for some of the old-time business types who had to deal with him," said Chong.
David Nakata, executive director of Boys and Girls Clubs of Hawai‘i, puts it bluntly: "I think for a lot of the nonprofit folks out there, we pretty much love him because he did so much to help us out," Nakata said. "Without the Weinberg’s help, we couldn’t have done what we did."
But like the hard-nosed, unpredictable and contentious Weinberg, the foundation that bears his name plays by no rules except its own.
Not your parents’ foundation
In the foundation world, the Weinberg Foundation is an aberration and somewhat of a mystery. Virtually all large foundations have a grants’ calendar or schedule, application forms, published rules, submission deadlines, annual reports and all manner of bureaucracy, while Weinberg functions with just common sense and a handshake, according to several former grant recipients.
Sometimes virtually no paperwork changes hands, they report.
"When you get a grant, an envelope arrives. It’s just a check," Chong said. "Other foundations send contracts. They want receipts, progress reports, and continued written assurances of how it will or is being spent. But I’ve never been asked for a report by Weinberg. They’re willing to go out on a limb with you."
And Weinberg is flexible enough to change its internal "rules" whenever they feel like it, adapting quickly to changing conditions and needs.
Local groups see it as a breath of fresh air in the otherwise well-meaning but stodgy world of big-time philanthropy. The foundation is considered very easy to work with, and credit is widely given to their local grants coordinator, Gailene Wong.
Wong works with agencies, screens potential projects and forwards recommendations to the foundation’s trustees, a process which grant recipients say works smoothly.
But in many other ways the foundation has inherited Harry Weinberg’s style, especially in its business dealings rather than its charitable activities. By all accounts, Weinberg went further than most donors in attempting to control the future course of his foundation by restricting its activities, limiting the causes it can support, leaving control in the hands of trusted insiders, even naming replacement trustees in advance who will take over from the original five.
One distinctive characteristic is the foundation’s penchant for secrecy. While most foundations promote their own public image, its officials rarely give interviews or publicly discuss foundation affairs.
"They’ve relied on the same old gang that was running Weinberg’s business interests," says attorney Murphy. "They don’t fit the foundation mold, and seem to be the old business people, only doing this."
Awaya, the trustee in charge of the foundation activities in Hawai‘i, was Weinberg’s accountant for two decades. Siegel, the foundation’s president, was Weinberg’s accountant in Baltimore. Honolulu attorney Reuben Wong represented Weinberg and continues to handle affairs of the foundation.
Tom Enomoto, a local developer and behind-the-scenes power broker in the administration of former Gov. John Waihe‘e, leased a number of properties from Weinberg, managed others and continues as a consultant to the foundation.
Some observers are perplexed by Weinberg’s apparent contradictions. They note that while gleaming new buildings go up bearing the Weinberg name, the foundation’s existing properties continue to languish, with minimal care.
The Weinberg-owned Hau‘ula Shopping Center on Windward O‘ahu, for example, is rundown in appearance, and some are concerned about its structural integrity after portions of the roof in one section collapsed several years ago.
"We’d all like the shopping center to be a source of pride for the community, but it is an embarrassment," one community leader commented.
But community groups who have or hope to benefit at some point from the Weinberg Foundation’s largess are unlikely to voice criticism due to a key foundation guideline.
According to documents filed with the IRS soon after Weinberg’s death: "If any charitable organization at any time challenges, directly or indirectly, (1) the manner in which the Trustees exercise their discretion on any subject, ..." [or challenges the will or any contract] …"such charitable organization shall forever be barred from receiving any distributions from the Corporation."
It isn’t known whether any groups have actually been cut for speaking critically, but few want to test the situation. This limiting of potential criticism could become increasingly significant as the foundation and its affiliates gear up to develop their properties and, in the process, increase their impacts on surrounding neighborhoods.
In the absence of public scrutiny, criticism and ongoing accountability, the business dealings of large charitable institutions are a fertile ground for abuse, as the Kamehameha Schools’ (formerly Bishop Estate) "broken trust" scandal so painfully demonstrated.
With the keen public interest in avoiding such abuses, close and careful public scrutiny of its operations should not in any way diminish the unusual legacy of the Harry & Jeanette Weinberg Foundation’s extensive and life saving charity.
Perhaps, in the process, the Weinberg Foundation’s real-estate investment and development efforts can break out of old molds to become as beneficial to the broader community as its charitable programs have been.