HUD calls for removal of state housing officials

By Jim Dooley
Advertiser Staff Writer

The U.S. Department of Housing and Urban Development yesterday called on the board members and top administrators of Hawai'i's public housing agency to resign or be replaced, saying the organization had mismanaged federal money, "exposing them to waste and abuse."

HUD Assistant Secretary Michael Liu also ordered the Housing and Community Development Corp. of Hawai'i to reimburse the federal government for $771,000 for a contract that its executive director awarded to her ex-husband without competitive bids.

The federal agency conducted an 11-day review last month, seeking to determine whether HCDCH was managing its programs and operations efficiently. The state agency, which oversees more than 10,000 state and federally subsidized housing units, has assets of $1.5 billion and employs more than 400 people.

Although the HCDCH has been the subject of critical reviews and audits during the past several years, the latest memo from Liu, released yesterday, personally assailed the agency's board of directors, executive director and executive assistant, saying they were "incapable of successfully managing and overseeing departmental monies allocated" to the corporation. He called on them to resign or to be removed from office by Dec. 31.

The state agency, the report said, jeopardized federal money "as a result of inconsistent and ineffective management practices, lax oversight and a failure to follow established procurement polices" including its own procedures.

Coming from Liu, a former Hawai'i Republican politician, just a few days before Tuesday's general election in a tightly contested gubernatorial race, the report drew a heated response from Gov. Ben Cayetano, who appointed the board members.

At a press conference, Cayetano angrily dismissed Liu's call for their resignations as "politically motivated" and charged that the HUD official had timed the controversy to influence the election.

The governor said he had no intention of asking for the housing panel or executive director Sharyn Miyashiro to resign, and instead called for Liu to quit and for HUD to take over Hawai'i's public housing system if Washington believes it can do a better job.

"If the federal government wants to take over the housing functions in this state, we will begin negotiations tomorrow with the federal government and they can try to do the job ... with the paltry sums of money that they give us," Cayetano said.

Calling for the state board and its executives to resign may be a moot point, however. Miyashiro has already announced her intention to retire by the end of the year and with a new administration taking office early next month, it is customary that board members would have submitted their resignations anyway.

Liu was unavailable for comment yesterday, but in the past has denied any political motivations in his increasingly hard-edged oversight of the HCDCH, pointing out that HUD criticism of the Hawai'i agency's poor performance dates back at least to 1995.

Board members criticized

The HUD report depicts the HCDCH board of directors as a detached governing body, with some members who don't consistently show up to meetings and one who was not sure of what her role was on the board. By contrast, board chairman Wesley R. Segawa is "highly engaged" in the agency's business, attending 23 meetings in 80 days during the summer, the report said. Segawa could not be reached for comment yesterday.

One board member, Ron Lim, Cayetano's special assistant for housing, was singled out for special criticism.

The report noted that more than 90 percent of Lim's salary at the governor's office actually comes out of HCDCH's budget, one-quarter of which comes from federal money, an arrangement which the HUD auditors called "improper" because a board member should not receive HCDCH money.

Lim could not be reached for comment yesterday, but he earlier defended the pay arrangement, which also applies to his secretary in the governor's office.

"The (HCDCH) board doesn't hire me, the governor hires me," Lim said. "My loyalty is to the governor."

The report also points out that agency employee Ed Morimoto, the "modernization coordinator" for HCDCH is part-owner of ACE Towing, which has a contract with the agency and the arrangement may be a "potential conflict of interest." Reached last month by The Advertiser, Morimoto said he was not involved in the solicitation or the award of the contract.

Much of the report focused on the $771,000 contract Miyashiro awarded two years ago on a non-bid, sole-source basis to a company partly owned by her ex-husband, Dennis Mitsunaga, and disclosed by The Advertiser in July. Mitsunaga is a major political fund-raiser for Cayetano and other Democrats, and the two men are close friends.

The HUD review attached to Liu's letter yesterday said the contract award "raises serious concerns about the objectivity of the procurement" because it was not competitively bid. The contract amount was "grossly higher than the value of the services provided indicates gross negligence."

HUD reviewers noted that neither Miyashiro nor executive assistant Robert Hall "could provide documentation for the selection of the contractor." They said both the board chairman and vice chairman, while defending the propriety of the contract award, had no idea that Miyashiro had given the work to Mitsunaga. Miyashiro and Hall did not return calls for comment yesterday.

Miyashiro awarded the contract to Mitsunaga's Punaluu Builders without an approved written justification that it not be competitively bid, without an independent cost estimate, without a written record of how the contract was to be negotiated or documentation as to how Punaluu Builders was selected.

Although the agency originally sought competitive bids, no bidder came forward. The agency was then required to document the evaluation process as well as the reasons for the lack of competition and to justify the decision to not solicit for proposals a second time. None of that was done, the report said.

The award, for termite treatment and repair of extensive termite damage at the Kauiokalani public housing project in Wai'anae was "unreasonably excessive" based on market comparisons and the amount allocated for the project was disclosed to the bidder before the cost proposal being submitted, the report added.

Liu set a Nov. 15 deadline for the $771,000 to be reimbursed to HUD's grant program and for a formal commitment that the board members and administrators resign or be removed by Dec. 31.

Cayetano, who has defended Miyashiro's handling of the contract, said yesterday that Liu had essentially taken one contract out of the $150 million that the agency had let during the past four years, "trying to blow it up and spin it for his party's own political purposes."

The HUD report also found numerous crucial public records missing from HCDCH consultant contract files, examining four contract files that had "contractor selection documentation" missing. The Advertiser first reported about the missing files last month.

"During a discussion with the project coordinator, it was confirmed that he did not know how the contractors were selected," the review said. "He was advised of the selection by the front office and told to begin negotiations."

Contract awards examined

One of the contracts examined went to Pacific Architects, Inc., which is headed by Dwight Mitsunaga, brother of Dennis Mitsunaga. Another went to TM Designers, Inc., which is headed by Teuane Tominaga, the former chief engineer for the state who is now the executive vice president of Dennis Mitsunaga's architectural/engineering firm, Mitsunaga & Associates Inc.

Another team of HUD auditors earlier criticized those contract awards, saying HCDCH improperly increased the Pacific Architects contract price by 57 percent from $687,054 to $1,081,159. And the earlier audit said the $357,155 contract award to TM Designers. to oversee an HCDCH construction project on the Big Island, showed "insufficient advance planning" because the contract had to be canceled "when the construction contract failed to attract sufficient bidders."

Cayetano strongly defended the HCDCH in his news conference yesterday, saying that his administration had built and placed more people in affordable rental units during the past eight years than all the other previous administrations combined since statehood.

He said it was unusual for someone in Liu's position to directly question a state housing agency's contracting record rather than regional or local HUD officials. The state was not given a fair opportunity to review HUD's findings and issue a response, he said.

"I don't think it's fair, I don't think it's right, and I think it's very political and Mike should be ashamed of himself," Cayetano said.

Staff Writer Johnny Brannon contributed to this report.

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

• • •

HCDCH board members and executives
Seiji Naya Director, Dept. of Business, Economic Dev. and Tourism	Wes Segawa Chairman, Board Member At Large	Ronald Lim Governor’s Special Assistant for Housing	Kurt Mitchell Vice Chairman, O‘ahu
Aipopo Aipopo Jr Board Member At Large	Leslie Kurosaki Chairwoman, Rental Housing Trust Fund	Sharyn Miyashiro Executive Director	Robert Hall Executive Assistant
Not pictured: Don S. Fujimoto, board member from Maui; Steven Nishimura, board member from Kaua‘i; Susan Chandler, director, Department of Human Services.