Sandwich Isles Communications violated state laws and its obligations to its customers when it cut telephone and broadband services earlier this month without ample warning and is likely to face penalties for abandoning its services, according to testimony Monday before the Hawaii Public Utilities Commission.

Sandwich Isles’ President Al Hee was in the hot seat for much of Monday’s six-hour hearing to determine if the company broke the law when it gave its customers just a week’s notice that service could be terminated in late May. Its customers were given even less notice when services were actually cut in early June.

State and federal laws as well as Sandwich Isles’ certificate of authority, which allow it to operate in the state, require at least 30 days notice.

“There’s no doubt that we did not conform with the certificate of authority,” Hee said in his closing arguments.

The impact to Hawaiian homeland beneficiaries in Kahikinui on Maui and Puukapu on Hawaii island were particularly significant. They are far from areas that have cell service, and the shutdown of telephone services presented safety issues when households were unable to contact emergency services.

Hee argued that state and federal authorities should have been aware of the impending shutdown because Sandwich Isles has been losing money for at least the last four years. He blamed decisions made by the state Department of Hawaiian Home Lands to allow other carriers to operate on homesteads, thereby shrinking Sandwich Isles’ customer base.

State regulators and attorneys for the consumer advocate didn’t seem to buy that.

“There’s a lot of finger pointing going on, but I don’t hear a lot of accountability for this error,” Scott Boone, a state attorney representing the consumer advocate, said.

The PUC is expected to issue a written order that lays out what penalties, if any, Sandwich Isles will face and what the next steps will be to address the ongoing service disruption, PUC Chairman Leo Asuncion said.

Hee argued that the Hawaiian Homes Commission, and not the PUC, has jurisdiction in a case like this involving a provider on Hawaiian homelands. He also contended that the rules the commission was operating under didn’t apply to a company like Sandwich Isles, which was initially created to be the only company that serviced homesteads in rural areas.

But over the years, DHHL opened the way for other telephone and broadband providers to hook up people on homelands. Hee believes that lead to the financial ruin of his company.

The company defaulted on more than $130 million in federal loans, and a federal court entered a monetary judgment against it in 2020. That same year, the Federal Communications Commission fined Hee $50 million for violations related to fraud, charges that sent Hee to federal prison in 2016.

But what really did in Sandwich Isles, according Hee, was a recent bid by Hawaiian Telcom to acquire the conduits that bring connectivity to homes without also acquiring the equipment necessary to actually plug in those households. Because that equipment is still owned by Sandwich Isles, the company had a duty to provide services to its customers despite its financial straits.

Waimana Enterprises, Sandwich Isles’ parent company, also put in a bid for the conduits but lost to Hawaiian Telcom. Under questioning by commissioners, Hee implied that Sandwich Isles and Waimana are no longer responsible for people on homelands.

“If no one is truly interested in doing it other than Sandwich Isles and Waimana, that’s not our kuleana,” Hee said. “We’re not the people responsible for those Hawaiians out there that don’t have services. We were the solution.”

Boone’s questions focused on public safety concerns DHHL raised in written responses to the PUC’s subpoenas. Some households may not be able to dial 911 because their landlines and internet are down and they are out of the range of cell service.

Boone asked Hee if anyone at Sandwich Isles researched which of their customers would still have access to internet if their phone lines were cut. Hee said the company had not.

“We terminated service because we ran out of money. We didn’t research anything,” Hee said.

Hee said several times during the hearing that he wasn’t able to provide specific answers because he did not participate in the day-to-day operations of Sandwich Isles. All of its remaining 25 to 30 employees were terminated June 1, according to Hee.

Under questioning from Boone, Hee said the areas he knew that had lost voice services included Kahikinui on Maui, Puukapu on Hawaii island, parts of Molokai, and areas of Kauai. Hee also said that DHHL offices as well as Sandwich Isles’ other clients like the U.S. Coast Guard and Target still have service because of contractural obligations with those entities.

Caroline Ishida, the PUC’s chief counsel, wanted more specifics on where there are service outages, as well as where households may still have connectivity because they were not automatically disconnected yet.

“Does anyone out in the world know where those services are if you don’t know?” Ishida asked.

“I don’t know,” Hee said.

Ishida also asked if Sandwich Isles would refund customers who still paid their bills even while their services were down.

“Absolutely, no question about it,” Hee said.

The interactions between Hee and the PUC heated up once the commissioners had their turn to ask questions.

In one exchange, Hee said Sandwich Isles could restart services if the PUC could ensure it starts gaining revenue.

“If we order you to restart service, do you have the financial and personnel and technical capacity to perform that restart of service?” Commissioner Colin Yost asked.

“As long as that order has money attached to it, yes,” Hee said.

Commissioner Naomi Kuwaye pressed Hee on how much financial assistance Sandwich Isles’ parent company, Waimana Enterprises, is able to provide the beleaguered telecommunications company. Hee said Waimana’s financial support has already been in the millions.

Both Kuwaye and Yost asked repeatedly why Sandwich Isles did not notify its customers in advance that they would lose service, and asked Hee if he understood that Sandwich Isles’ certificate of authority required that.

“That’s what you got, and there are rules established that govern what happens under a COA. You are not disputing that,” Yost said.

“I am not disputing that,” Hee replied.