Nearly six decades ago, a couple of recovering alcoholics in Honolulu wanted to create a refuge for others whose addictions had ripped apart their lives.

They found a ruined Army chapel on Sand Island, abandoned since World War II, on land so choked with undergrowth they had to hack their way into it, according to a 1969 article in the Sunday Honolulu Star-Bulletin & Advertiser.

The state, under Gov. John Burns, let them use the land for free. For a decade, the small staff worked without pay at Halfway House, run by a nonprofit called the Hawaii Alcoholism Foundation.

In the mid-1980s, Mason Henderson began working there and eventually became its executive director. The treatment center started to win government contracts and add beds. It employed almost 70 people to treat drug addiction as well as alcoholism. Courts referred defendants to the program.

It grew, fed largely by public money, benefiting from the tax breaks of being a nonprofit and operating for free on public land – without a lease.

So did the salaries of those who worked there – especially Henderson’s.

A Civil Beat investigation found that Sand Island Treatment Center, as it’s now known, has been paying Henderson an annual salary of as much as $500,000. That’s far beyond what other nonprofit drug treatment centers in Hawaii pay their top employees.

Cory Lum/Civil Beat

Habilitat, for instance, a residential treatment center in Kaneohe with a budget slightly smaller than Sand Island’s, paid its executive director $88,637 in 2016. Hina Mauka, another Oahu treatment facility, took in revenue two-and-a-half times Sand Island’s, but its director got base pay of only $116,920.

Sand Island has said for a decade that Henderson’s pay is based on the Betty Ford Center, the nationally known facility in California. But even before it merged with the Hazelden Foundation in 2014, the Betty Ford Center had several times the revenue. The merged operation has almost 50 times the income of Sand Island.

Henderson’s base pay has continued to go up, even as Sand Island’s revenues have dropped by about 40 percent since 2007.

The rehab center also has paid several people identified in its tax returns as “counselors” or “senior counselors” well into six figures.

They include a former Miss Hawaii who went to Sand Island after being arrested in a drug bust in 2005. Tiffini Limahai was paid $119,126 as a counselor in 2009. According to public records, she has lived recently in a house in the Rocky Mountains owned by Henderson.

The counselor salaries eclipse the going rate in Hawaii, where a substance abuse counselor in 2016 made an average of $42,760.

Pay is set by a nonprofit’s board of directors. Sand Island’s six-member board has for years included Henderson and one of his employees, the rehab’s chief financial officer Natividad Morin, despite nonprofit guidelines that warn of possible conflicts of interest from too many paid workers also acting as directors.

Because Sand Island’s meeting minutes are not public, Civil Beat could not determine which directors voted each year on Henderson’s pay — whether, for instance, employee Morin took part.

Now, in addition to $4.3 million in revenue from state contracts since the 2014 fiscal year, Sand Island is about to get another boost from taxpayers.

The city of Honolulu is expanding the Sand Island Wastewater Treatment Plant into the public land occupied by the rehab.

The city this month bought a new home for Sand Island Treatment Center for $9 million, and plans to lease it back to the rehab for a nominal amount, perhaps as little as $1 a year, reasoning that it provides an essential service to the community.

The city also is setting aside as much as $1 million to pay for the center’s moving costs, though it doesn’t expect to spend that amount.

Henderson, 66, declined a request for an interview.

A Sand Island spokesman said Henderson was on the mainland for a medical procedure and provided a written statement defending the salaries of Henderson and others.

“Our current Executive Director has been serving the People of Hawaii in his position for nearly 35 years,” the statement said. “We also have the longest serving clinical staff in the State with the average time on staff of nearly 20 years. Even though we have always sought to accept the toughest and most desperate cases we have the highest long-term success rate of any Treatment Center in the State of Hawaii.”

It continued, “The compensation of our Executive Director was established through an independent study conducted by an outside compensation specialist, based here in Hawaii, who is well acquainted with compensation levels for executives in our non-profit sector. The Board of Directors voted to accept this recommended compensation in recognition of the Director’s many years of service and given his outstanding administrative and programmatic achievements.”

Sand Island declined to answer any follow-up questions, such as the origins of the data showing the highest success rate or who conducted the “independent study” of compensation.

The treatment center’s statement said it treats 300 Hawaii residents a year, and that it provided more than $5 million services for free in the 2017 fiscal year alone.

Generous Public Support

In its statement, Sand Island says that Gov. Burns first granted it permission to use the land in 1960 and that successive state and city governments “have seen the value of our work and have continued to allow us to occupy the Sand Island property.”

The rehab pays for improvements and repairs on the property, according to the statement.

The land is owned by the state, and leased by the city for the wastewater treatment plant. Andrew Pereira, spokesman for Honolulu Mayor Kirk Caldwell, said Sand Island does not have a lease with the state or the city.

The rehab was a much different operation when it first got permission to use the land almost 60 years ago. The 1969 newspaper article said the roof had come off the old Army chapel, and it was infested with rats.

The nonprofit that runs Sand Island is the Kline-Welsh Behavioral Health Foundation, named for the two founders of the original halfway house, Sid Kline and attorney Richard Welsh.

A 1974 article in the Honolulu Advertiser described the approach to the halfway house. “You go down a rutted dirt road, past the wrecked cars and trucks, the discarded refrigerators and torn mattresses, and suddenly you run into an oasis,” it said. The article described the whitewashed chapel and a set of bells from Thailand.

Until 1971, the article said, the halfway house depended on the largesse of the community. Then the rehab started getting federal money for mental health treatment.

Over the years, the rehab added state money as well and grew. A 1994 public notice announced that it was applying to increase the facility’s capacity by 93 beds, from 30 to 123.

The center currently serves a mixture of patients, including those referred by courts who have not yet arranged for insurance to cover the costs, parolees and those diagnosed with both substance abuse disorder and mental illness, funded by the state Department of Health.

Over the years, Henderson became a go-to source for journalists reporting on addiction.

“Crystal meth is a really dirty drug with nasty side effects,” he told the Advertiser in 1998. “It’s the worst drug, because of its psychotic and violent effects.”

As for Sand Island, he told a reporter in 2003, “We help people get better. We treat them as if they’re members of our own family.”

According to Sand Island’s tax returns, he works a brutal schedule, putting in 70 hours a week.

Henderson, as an individual, has contributed almost $30,000 to political campaigns since 2007, according to the state’s Campaign Spending Commission database, including both Democrats and Republicans.

He gave a total of $6,000 to James “Duke” Aiona, the former judge and Republican lieutenant governor, in his unsuccessful run for governor in 2010. Democrat Romy Cachola got $4,000 from Henderson in his campaigns for the Hawaii House of Representatives, as did Republican Adrienne King in her unsuccessful run for lieutenant governor in 2010.

Henderson has given to other big names in Hawaii politics in various campaigns, including former governors Neil Abercrombie and Benjamin Cayetano, Rep. Colleen Hanabusa, Honolulu Mayor Kirk Caldwell and former mayor Mufi Hannemann.

Betty Ford Clinic-Level Pay

In an analysis of other nonprofits that provide addiction treatment, Henderson’s salary stands far ahead of the pack.

In 2016, Henderson received base pay and other benefits totaling $486,615. Six other nonprofits that provide drug treatment paid their top executives between $62,384 and $178,857. The highest of these salaries went to the chief executive of Aloha House on Maui, which in 2016 reported revenues of $11.2 million — almost triple Sand Island’s income.

The drug treatment programs differ in various ways — one treats adolescents, one focuses on traditional Hawaiian healing. Program structures vary.

Only Sand Island and Habilitat offer two-year residential programs, said Jeffrey Nash, Habilitat’s executive director. And unlike Habilitat, Sand Island provides medically assisted therapy.

But in the end, Nash said, “We’re all pulling from the same pool of clientele.”

Since 2008, Sand Island’s tax returns have stated that Henderson’s pay is pegged to the Betty Ford Clinic.

The rehab explained in 2008, “A salary study, including a review of the salary structure of the Betty Ford Center, has been accomplished… The foundation’s long-standing position on essential and effective staff retention is a key consideration in these deliberations.” The most recent tax return includes the same wording.

In 2008, when Sand Island first made that comparison, the Betty Ford Clinic in California had revenues of $27.9 million, about four-and-a-half times Sand Island’s. Its chief executive officer was paid $494,769 — about $200,000 more than Henderson made that year.

Since then, the Betty Ford Center, still cited in Sand Island’s returns, has merged with the Hazelden Foundation. The combined operation brings in almost 50 times the revenue of the Honolulu rehab. The foundation’s president and chief executive officer made a total of $676,898 in 2016, compared to Henderson’s $486,615.

One year, 2005, Henderson also made $60,940 as a “consultant” in addition to his pay that year of $213,835.

The generous pay extends to counselors and others at Sand Island.

Several counselors have made more than $100,000 annually. In 2006, Yma Hasegawa, listed on Sand Island’s tax return from that year as a counselor and “cncl sp” — perhaps clinical specialist — was paid more than $200,000.

Those kinds of extraordinary salaries have continued in recent years.

Cathy Ahana, listed as a counselor in most years, made $153,027 in base pay and other compensation in 2016, the year of Sand Islands’ most recent publicly available tax return.

The public record contains some contradictory information about how much Ahana actually makes. In a divorce case in June 2009, she stated that she made $6,294 per month, which would add up to an annual salary of $75,528. Yet Sand Island’s tax returns state that in 2009, she made $144,754.

Public records state that she has lived at a Mililani house owned by Henderson.

Big Pay Down The Ranks

In 2004, a former Miss Hawaii named Tiffini K. Limahai checked into Sand Island about a week after being arrested and charged with drug offenses. Police said they found $1,000 worth of methamphetamine in a backpack she threw out during a raid at a Kailua house, according to news accounts at the time.

Honolulu Advertiser

She pled guilty to possession but a judge deferred her sentence as long as she met court-ordered conditions, including drug treatment.

In Sand Island’s 2009 tax return, a “TK Limahai” is listed as one of the highest-paid workers, with a salary of $119,126 as a counselor. Because Sand Island would not answer follow-up questions, it was impossible to confirm that TK Limahai listed in the tax return was the 1998 Miss Hawaii who entered the program five years earlier, and she could not be reached for comment.

Public records show that a Tiffini K. Hercules – Limahai’s maiden name, which a court said she intended to start using again after a 2006 divorce — has lived in recent years in a small mountain town 30 miles west of Denver. The house, described by the website Zillow as a “spectacular 5 level custom mountain home in a picturesque setting,” is owned by Henderson.

Still another counselor, May Llewellyn, made as much as $129,403 in 2012. Public records show that she, too, has lived in Henderson’s house in Mililani.

These salaries outstrip what most counselors in Hawaii get. The average pay for a substance abuse counselor in Hawaii in 2006 was $37,940, according to the U.S. Bureau of Labor Statistics.

Nash, who heads Habilitat, said his clinical director, who has been there for 15 years, makes an annual salary of about $60,000. Brand new, unlicensed counselors can expect $35,000, he said, while more experienced ones pull in $40-$50,000.

The high pay at Sand Island isn’t just reserved for counselors.

Another worker whose salary is included in Sand Island’s tax returns is W.W. Johnson, listed simply as “maintenance.” A lawsuit filed against Sand Island in 2011 cited a maintenance worker named “Bill Johnson.”

According to the rehab’s tax returns, W.W. Johnson was paid $129,390 in 2011, and more than $100,000 in five other years. His salary has not been listed on the tax return since 2012.

The board of directors, responsible for approving Henderson’s pay and overall governance, has remained remarkably stable over the years.

Glenn Pang, a 78-year-old retired doctor, and Paul G. Ramos, 89, have served on the board at least since 1998, the earliest year that the rehab’s tax returns are included on the website Guidestar, which provides information on nonprofits.

Tad Sewell of Volcano has served on the board since 2003. According to her bio on the website of the Volcano Art Center, she came to Hawaii in her early teens when it was still a territory and graduated from the Punahou School before going to college on the mainland. She designed houses in the 1970s and started a catering business, and has served on the boards of hospitals.

Only one board member, Conrad Eyre, 76, is a recent arrival, appearing on the tax returns in 2016.

Henderson, the executive director, has been on the board since at least 1998, serving during some years as secretary.

The sixth member, Natividad Morin, was named to the board in 2003 and has served since then as its treasurer. Morin is also Sand Island’s operations director and one of its highest paid employees, reaching a peak of $141,583 in 2008.

Civil Beat was unable to reach any of the board members.

Sand Island states in its tax returns that all board members are “independent.” It’s unclear how that squares with IRS instructions. One of the conditions for a board member being independent is that they are not compensated as an employee.

In general, nonprofit watchdogs warn against giving paid employees too much influence on the board.

The Better Business Bureau, in its Standards for Charity Accountability, states that no more than one voting board member or ten percent of the board – whichever is greater — should be a “compensated person.” Henderson and Morin together make up 33 percent of the board.

Independent Sector, a national organization of nonprofits, foundations and corporations, says that at least two-thirds of the board should be independent, a definition that includes not being paid by the nonprofit. Sand Island’s board just meets this criteria.

“Board members who are not encumbered by having a personal financial interest in the organizations they oversee will generally find it easier to exercise their ‘duty of loyalty’ that requires that they put the interests of the organization above their personal interests and make decisions they believe are in the best interest of the organization,” according to the organization’s principles.

Among other Hawaii drug treatment nonprofits in 2016, two executive directors serve on their boards, but none of the boards include two paid workers, as Sand Island’s does. Three of the organizations do not even include the executive director on their boards, which consist only of unpaid directors.

The Internal Revenue Service faces a high bar in proving that a nonprofit executive is being paid too much if the pay falls within a certain range, said Seth Perlman, a New York City attorney whose firm specializes in non-profit law. The IRS considers the salary within a “safe harbor” if the nonprofit has done a salary survey of organizations of similar size and purpose in the same geographic area, and pays its executive a certain percentage above the median salary, he said.

A nonprofit can pay more, but must clearly state the reasons, Perlman said.

If the IRS does determine that a nonprofit has unjustifiably inflated the salary – a so-called “private benefit” – it can recover the excess, as well as penalties.

City Helping Sand Island Relocate

The state Department of Health, with $3.57 million in contracts with Sand Island since the 2014 fiscal year, said it does not have authority over a community organization’s salaries.

“This is a matter between the facility’s Board and the Director,” spokeswoman Janice Okubo wrote in an email.

In response to Civil Beat’s questions about outcomes at Sand Island, Okubo provided an October annual report from the rehab showing stellar results in a survey of former clients. None, for instance, had used in the 30 days before the survey. Okubo did not respond to questions about whether or how the health department verifies the outcome reports from a contractor such as Sand Island.

The Hawaii State Judiciary has paid Sand Island $434,650 since the 2016 fiscal year to temporarily cover the cost of treatment while defendants referred by the courts apply for insurance coverage. At least 188 defendants have been referred to the program in the past three years, spokeswoman Jan Kagehiro said.

In choosing a rehab for referral, judges and probation officers consider the results of a defendant’s substance abuse assessment. Sometimes the defendant asks to be sent to a certain program or may already be getting treatment there at the time of sentencing, Kagehiro said.

The department declined a request for an interview to discuss the Sand Island salaries.

The Department of Health Services, meanwhile, said it could not determine how much Medicaid money goes to Sand Island, as it would be processed through health care organizations.

Meanwhile, the city earlier in April finalized the purchase of a building at 524 Kaaahi Street for the relocation of Sand Island Treatment Center. The building had once been used to house former inmates about to re-enter the community.

The move is scheduled for September.

The city believes that if Sand Island ever leaves the building, it could be put to good use for housing close to the new rail line.

Pereira said Henderson’s pay is a question to be addressed by the funders of the program. The city, he said, was focused on the benefits of the program to addicts.

“If we did not find a new location it would cost the community much more,” he said, “not just in dollars, but the human equation.”