Inaction since relocation scam worries council

By Robbie Dingeman
Advertiser City Hall Writer

City Council members expressed alarm yesterday that the city had completed only one of eight recommended changes to improve its financial procedures after the 'Ewa Villages embezzlement scandal.

Council Budget Chairwoman Ann Kobayashi said she was surprised so little progress had been made. "This is a serious matter," she said. "I'm kind of disappointed that more effort hadn't gone into this."

In the early 1990s, then-city housing official Michael Kahapea and others stole at least $5.8 million in city money used for moving businesses as part of the city's revitalization of plantation-era homes at 'Ewa Villages. Kahapea created phony invoices for moves that never happened, and got kickbacks from companies that received the money.

The progress report emerged yesterday from a City Council Budget Committee meeting. Kobayashi said she would schedule a followup.

Mike Hansen, internal auditor of the city's Department of Budget and Fiscal Services, said the city was working to change policies and procedures and has made some progress.

Councilman Duke Bainum, who had raised questions early in the scandal, said he was especially concerned the city had yet to complete fraud training to alert employees of potential problems.

"I would think that fraud training would have been fast-tracked," Bainum said. "We have six million reasons to fast-track fraud training."

Ivan Kaisan, an auditor for the Office of Council Services, presented the Budget Committee with an overview yesterday evaluating the city's response to Deloitte & Touche's Sept. 26, 2000, recommendations regarding the city's commercial relocation projects.

He indicated the city was still working on seven of the eight recommendations.

"That's disappointing and disturbing and must be corrected," Bainum replied.

Councilman Gary Okino asked if the lack of progress could allow another, similar scandal. Kaisan replied that while his office was evaluating the issue, "some key risks were still in existence."

Kaisan said he found the city had not started on a plan to explain relocation budgets in detail, compare budget to actual costs, or provide adequate justification of costs.

He said the city had restricted access to vendor checks, as it now mails the relocation checks directly to vendors.

Later yesterday, Hansen said the auditors had told him the city had improved its financial controls on relocation expenses.

The internal audit said the city did some anti-fraud training in 2000 for city managers and is planning more. "We are in the process of developing a fraud awareness program on a citywide basis."

City Budget and Fiscal Services Director Caroll Takahashi said city fiscal officers are more vigilant since the scandal and have focused on improvements. City relocation specialist Joe Nose said he had been tracking such projects from December 1997 until September.

Nose said the city moves people four or five times a year to make way for city projects. He said he was confident the system had vastly reduced the chance that mission would be subverted.

"The risk is almost zero," he said.