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The Honolulu Advertiser
Posted on: Saturday, December 28, 2002

Contractor fighting HUD attempt to recover payment

By Jim Dooley
Advertiser Staff Writer

A company that was awarded a controversial $771,000 contract by a state public housing agency said yesterday it would fight attempts by state and federal officials to recover the money, because the contract was legally binding and the work was done satisfactorily.

An agreement signed between federal officials and Gov. Linda Lingle's administration requires the state to collect $771,000 "in unsupported costs" charged by Punalu'u Builders Inc. for termite repair damage at the Kau'iokalani Homes public housing project in Wai'anae, said Michael Liu, assistant secretary of U.S. Housing and Urban Development.

The contract came under scrutiny after it was reported by The Advertiser in July that Sharyn Miyashiro, then executive director of the Housing and Community Development Corp. (HCDCH) of Hawai'i, had awarded it without competitive bidding to a company founded and partly owned by her ex-husband, Dennis Mitsunaga.

Company president Dexter Sato said the plan to recover the money because of alleged price-gouging would not succeed, because the costs were reasonable, the work performed professionally and there were records to document it.

HCDCH yesterday released an "independent cost analysis" of Punalu'u Builders' work at Kau'iokalani, completed Dec. 8 by J. Uno & Associates, which pegged the value at $743,751 — about 4 percent lower than what the state paid.

HUD's Liu has said repeatedly that the Miyashiro-Mitsunaga relationship created "an appearance of impropriety," but former Gov. Ben Cayetano has accused the federal official of engaging in partisan politics when Liu demanded Nov. 1, three days before the general election, that the state return the $771,000 by Nov. 15.

Liu now says the state does not have to repay the money until and unless it is collected from Punalu'u.

Punalu'u's Sato accused him of playing politics.

"How is it that such a project needs to have a national investigation that supercedes a state investigation and pursuit of a contractor who fulfilled his contract?" he said in a written statement. "Could the governor and HUD be looking for a scapegoat?

"When we were interviewed by the HUD investigators," Sato wrote, "we were told it was an investigation into possible wrongdoings by HCDCH ... and we had cooperated fully. Now that the governor has changed, so has the focus of their investigation."

Kau'iokalani Homes was built in 1995 by Kiewit Pacific Inc. By 1998, widespread termite damage was detected, according to public records. HCDCH hired Punalu'u in 2000 to repair the damage while gathering evidence for a possible lawsuit against the original contractor.

No lawsuit was filed against Kiewit Pacific, but Sato said yesterday that a representative of the attorney general's office kept close track of Punalu'u's repair work, taking pictures before and after.

"The attorney general's office had closely monitored this project, and has kept a photo file to show exactly what was done," Sato said.

HCDCH spokesman Darrell Young said yesterday that the agency had boxes of material from the attorney general's office's analysis of the project, but he did not know whether HUD investigators reviewed them. Nor did he know the status of any possible claim by the state against Kiewit Pacific.

Kiewit Pacific earlier denied any wrongdoing and promised to cooperate with the state.

Liu declined comment yesterday on the status of any FBI criminal investigation of HCDCH. He said Miyashiro "was receiving financial benefits" from Mitsunaga when she awarded the contract to Punalu'u, declining to elaborate. He said the matter is the subject of an ongoing investigation.

Miyashiro, who retired this month under pressure from Liu, has denied any wrongdoing and refused to comment on her financial relationship with Mitsunaga, saying it is a private matter. A one-month investigation of the contract award by the attorney general's office ordered by Cayetano in mid-October found no evidence of criminal wrongdoing.

Reach Jim Dooley at 535-2447 or jdooley@honoluluadvertiser.com.