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The Honolulu Advertiser

Posted on: Friday, January 31, 2003

Campaign scheme admitted

By Johnny Brannon
Advertiser Staff Writer

SSFM International CEO Michael Matsumoto, right, changed his plea in state Circuit Court yesterday from not guilty to no contest. At left is his attorney Howard Luke.

Richard Ambo • The Honolulu Advertiser

The felony conviction of a key target in the investigation of illegal campaign contributions to Mayor Jeremy Harris is only the beginning of an ongoing criminal probe that will not be limited to Harris' campaign or supporters, Honolulu prosecutor Peter Carlisle said yesterday.

Hawai'i's political culture is headed for a new era in which there will be no tolerance for illegal campaign contributions or favoritism in the awarding of government contracts, and "a surprisingly large number" of other suspects will likely be charged soon, he said.

"The purpose of this work is very simple, and that is that this stuff, from this day on, stops going on," Carlisle said.

Michael Matsumoto, 57, pleaded no contest yesterday to felony and misdemeanor charges stemming from donations totaling nearly $140,000 that he illegally funneled to Harris' 2000 re-election campaign.

Matsumoto admitted giving the money to relatives and co-workers, who in turn gave it to Harris' campaign or to others who then made the donations.

He could have faced up to 10 years in prison for money laundering and another year for a lesser campaign contribution charge, as well as $27,000 in fines. He also could have been prosecuted for a felony theft charge connected to the money laundering, prosecutors said.

Under the terms of a plea bargain, Matsumoto agreed to tell investigators everything he knows about the campaign contribution "bundling" scheme — which Carlisle said involved at least 40 people — and about any related criminal activity.

In exchange, prosecutors will ask that Matsumoto be spared prison time and instead be placed on probation when he is sentenced in July. He also could still be fined, and he faces a separate investigation by the state Campaign Spending Commission that could lead to additional penalties.

City prosecutor Peter Carlisle, vowing to target illegal campaign contributions, said, "This stuff, from this day on, stops going on."

Richard Ambo • The Honolulu Advertiser

Carlisle said Matsumoto's conviction should "serve as a remarkable shot across the bow of anybody who thinks they're going to do this again."

Matsumoto is president and chief executive officer of SSFM International Inc., one of the state's largest engineering firms and a major city and state contractor. His attorney, Howard Luke, said Matsumoto would have cooperated with authorities regardless of the formal agreement to do so.

Luke said the case was too complex to quickly explain Matsumoto's side of the story but that he would give a detailed account at the July sentencing hearing. Luke has previously said that Harris never agreed to steer city contracts to SSFM in exchange for illegal contributions.

Harris declined to comment on the case. His attorney, William McCorriston, noted that Matsumoto's written plea agreement does not allege such a quid pro quo.

Carlisle would not directly state whether the investigation had turned up any evidence of contracting favoritism linked to campaign money, but he strongly suggested that was a problem.

"There are a bunch of people out there who play the game honestly, who don't try to give unfair sums of money to politicians," he said. "Those people should be given the same competitive advantage as somebody who's doing this, and we should have a system where contracts are awarded simply on the basis of merit, and merit alone. ..."

Chris Parsons, attorney for Harris' campaign committee, said the mayor had instructed his campaign officials to cooperate in the investigation, and that they would continue to do so.

"We never encouraged people to make illegal contributions, and as an organization we did not welcome them, but apparently they found their way to us anyway," Parsons said.

Political supporters can legally give no more than $4,000 to a candidate for mayor during a four-year election cycle.

"The reason for limiting campaign contributions is so that elections are decided by all citizens who vote, and not simply the wealthy and powerful few," said Carlisle, who characterized Matsumoto's contribution bundling as "premeditated, coordinated and deliberate."

"This is not the way politics should be conducted in the state of Hawai'i, and this office is going to do everything in its power to make sure that this in not the way things are going to occur in the future," he said.

Deputy prosecutor Randal Lee said that the amount of money Matsumoto gave to Harris "suggests that obviously there was something compelling to make that sizable donation."

Campaign Spending Commission director Robert Watada said investigators for his office had identified a total of nearly $500,000 that went from SSFM to several political candidates from 1996 to 2001. At least $200,000 went to the Harris campaign, and another $100,000 went to the campaign of former Gov. Ben Cayetano, he said.

Watada said at least 100 companies had made other illegal campaign contributions during that period and that the majority of the money went to Harris. "There's a very clear pattern of what they did," he said. "They gave the maximum, then gave money to their families and employees to make contributions."

The criminal probe began last January, after the commission uncovered what investigators believed was evidence that Harris' campaign committee falsified donation reports to hide the source of money.

Prosecutors subpoenaed campaign officials and members of the Harris administration Cabinet to appear before a grand jury last year, but neither the mayor nor his campaign leaders have been formally charged with any wrongdoing.

One witness who testified before the grand jury, Honolulu architect John Tatom, complained that there was a political system in place "that really defeats good architecture and good planning, rewards mediocrity generally and is worthy of Mississippi in 1940."

Carlisle recalled the quote and said, "I can guarantee you that this is the beginning of our office's effort to stop this kind of conduct and to clean up the political system that we have in the state right now."

Three other current and former SSFM executives, and the wife of a fourth, have also been charged with misdemeanor campaign violations for alleged illegal donations to Harris. Matsumoto's plea deal does not grant them immunity from prosecution.

Other companies whose officials were subpoenaed before the grand jury include R.M. Towill Corp., ParEn Inc./Park Engineering, and Thermal Engineering Corp. All contributed to Harris' campaigns, as did many company employees and their family members.

Honolulu Police Department Maj. Daniel Hanagami said investigators had sifted through more than 30,000 pages of bank statements and other records so far during the probe. Carlisle said investigators also tapped the talents of outside agencies, such as the San Francisco District Attorney's office, which helped obtain records for bank accounts of California residents connected to the case.

SSFM has been awarded city contracts worth at least $7,039,000 during Harris' tenure as mayor for work on projects such as the Ha'iku stairs renovation, Bus Rapid Transit corridor and Central O'ahu Regional Park, city records show.

Honolulu Corporation Counsel David Arakawa said in a written statement that "a review of city contracts indicates they have all been procured properly and that political contributions play no part in the awarding of city contracts."

Reach Johnny Brannon at jbrannon@honoluluadvertiser.com or 525-8070.