In a press conference on problems at the Housing and Community Development Corp. of Hawaii, Lingle said a deputy in the Attorney General's office recommended that no further investigation of HCDCH be conducted. "I disagree with that recommendation," Lingle said.

Lingle said senior advisor Randy Roth has been negotiating with the U.S. Department of Housing and Urban Development (HUD) on how the new administration can address serious concerns the federal government has with management and financial problems at HCDCH.

The broad terms of a "memo of understanding" have been hammered out with HUD that include a state commitments to:

* Conduct a nationwide search for a new executive director of HCDCH. Former executive director Sharyn Miyashiro retired December 1 under a federal demand that she resign or be replaced. The executive director's salary, set by the Legislature, is $73,000 a year.

* Obtain prior approval from HUD officials before appointing members of the board of directors of HCDCH or hiring executive staff.

* Seek recovery of $771,000 in federal funds paid by HCDCH to Punalu'u Builders, a construction firm that received a non-bid contract from Miyashiro in 2000. HUD auditors have said the contract was improperly awarded and its prices inflated.

HUD Asst. Secretary Michael Liu has demanded that HCDCH refund the $771,000 by the end of the year or face cutoff of as much as $25 million a year Hawaii receives in federal public housing financial assistance.

Senior Linge advisor Roth said HUD officials don't want to wait for the state to collect the money from the contractor. They want the state to refund the money immediately, Roth said.

In a related development, outgoing members of the HCDCH board, who have said they will resign by the end of the year,this morning were deliberating on awarding a new, $1.2 million consultant contract for an exhaustive management study demanded by HUD officials.