'Serious violations' found in review of state agency
By Jim Dooley
Advertiser Staff Writer
U.S. officials have issued another scathing review of Hawai'i's public housing agency and its executive director, finding what it called "serious violations" of federal laws and regulations in how the agency awarded millions of dollars worth of contracts paid for by the federal government.
The U.S. Department of Housing and Urban Development's findings center on two contract awards by Sharyn Miyashiro, the state agency's executive director, to companies partly owned by brothers Dennis and Dwight Mitsunaga. Dennis Mitsunaga is Miyashiro's former husband. Dwight is her former brother-in-law.
Miyashiro awarded a $768,000 sole-source, nonbid contract in September 2000 to Punaluu Builders, a company founded and partly owned by Dennis Mitsunaga.
HUD officials who reviewed the state's files last month found the contract award never should been awarded without competitive bids, and that no documentation or cost analysis existed to justify the selection. Even if Punaluu did meet the criteria for a nonbid award, Miyashiro failed to obtain advance approval from HUD officials, reviewers found.
The contract also improperly combined design with construction work that should have been kept separate, according to the report. Combining the contracts kept competing companies from submitting bids, even though a number showed interest in the job when it was originally advertised, the report found.
"As a result of HCDCH's improper method of procurement, HCDCH received no proposals" and Miyashiro ordered her staff to negotiate the contract directly with Punaluu Builders "without any consideration given to any other prospective bidders from the original bid list," the HUD report said.
Without mentioning Miyashiro or naming the company, HUD investigators found that HCDCH officials had "failed to disclose financial or other interests in a firm selected for award by HCDCH."
Reviewers said Miyashiro's signed statement on the contract indicating she had no "immediate family or business relationship with principals" in the company "may not be completely accurate."
Family connections
The Advertiser previously reported that Miyashiro and Dennis Mitsunaga were divorced 21 years ago but still own a condominium together. The terms of the divorce required Mitsunaga to continue paying the mortgage and repair bills on the home and to supply Miyashiro with a car until she remarried, which she has not done. The two have declined to say if the terms of the divorce agreement are still in force.
Mitsunaga is a close friend and chief political fund-raiser for Gov. Ben Cayetano. The governor has said he believes Mitsunaga covered the mortgage until it was paid off, "about two years ago."
HUD also criticized a second state contract awarded in April 2001 to Pacific Architects Inc., a company headed by Miyashiro's former brother-in-law, Dwight Mitsunaga. Although the original cost of the contract was $687,054, Miyashiro later went to the HCDCH board and received approval for additional work that raised the cost to $1,081,159.
"Increasing the cost by 57 percent by change order/modification is clearly outside the scope of the original contract and a violation of the full and open competition provisions" of federal procurement regulations , the HUD report said.
"Had the additional work been disclosed during the solicitation, more firms may have competed for the contract and HCDCH may have received a better price," the report said.
Adding so much work to the contract demonstrated "insufficient advance procurement planning," another violation of federal procurement requirements, the HUD reviewers said.
Records missing
The Advertiser reported last week that crucial public records are missing from HCDCH files — including the Pacific Architects contract file — and agency personnel don't know where they are or who removed them.
The Pacific Architects contract was to design the second phase of renovation of the Kalihi Valley Homes housing project off Likelike Highway on O'ahu. The company that designed the award-winning first phase of the renovation, Group 70 International Inc., competed for the phase two work, but Miyashiro selected Pacific Architects for the contract.
Public records that would justify that selection are missing from the contract file. The records — including qualifications of competing firms, evaluations and score sheets from an HCDCH screening committee, and records of fee negotiations — "are standard procurement records that by law must be included in every contract file," said Aaron Fujioka, state chief procurement officer.
Questions of accountability
HUD's findings are contained in an Oct. 10 letter from assistant secretary Michael Liu to Wesley Segawa, HCDCH's chairman of the board.
Liu, a former Hawai'i state legislator and unsuccessful candidate for lieutenant governor in 1998, said in an interview Friday that HUD personnel also had run into problems locating records in HCDCH files.
"There has to be accountability and a better-managed organization," Liu said, noting that in the last five years the federal government had given some $140 million to HCDCH for housing-related programs. "By any measurement, that's a lot of money, and people have to pay attention to how it's spent."
Liu's letter to Segawa noted that a new group of federal auditors — a five-member team from Washington — was continuing to go over HCDCH's books and "certain anomalies and irregularities have surfaced." He declined to elaborate.
Segawa, a second cousin of Dennis and Dwight Mitsunaga, could not be reached for comment last week.
Miyashiro and Gov. Cayetano also were unavailable for comment.
Ronald Lim, Cayetano's special assistant for housing and a board member of HCDCH, said last week he had only just learned of Liu's letter "and I haven't had time to digest it."
Reach Jim Dooley at 535-2447 or jdooley@honoluluadvertiser.com.
