No jail in campaign plea

By Johnny Brannon
Advertiser Staff Writer

An engineering executive accused of running a slush fund to illegally bankroll Mayor Jeremy Harris' re-election campaign will serve no jail time or probation.

Michael Matsumoto underwent a polygraph examination and denied that his fundraising activities were tied to contract awards, his lawyer said. Advertiser library photo • Jan. 30, 2003

The ruling by Circuit Judge Karl Sakamoto — a deferred acceptance of plea — also requires Matsumoto to pay $15,000 to the Crime Victims Compensation Fund and perform 300 hours of community service.

Matsumoto, 57, was the first person to face criminal charges in a wide-ranging probe of illegal campaign activities that has led to a string of arrests in recent days.

He was charged in December with felony money laundering and a misdemeanor campaign-finance violation for allegedly funneling more than $140,000 to Harris under the names of employees and relatives.

Matsumoto pleaded no-contest in January, and faced a maximum penalty of 10 years in prison and a $25,000 fine for the felony, as well as one year in jail and a $2,000 fine for the misdemeanor.

Deputy City Prosecutor Randal Lee urged yesterday that Matsumoto be placed at least on probation because of the seriousness of the offenses.

"Because of the fact that he circumvented the electoral process, he should not have been able to wipe it clean from his record," Lee said. "He undermined the political process."

But Matsumoto's attorney, Howard Luke, argued that the money-laundering charge was improperly based on the theory that money was stolen from SSFM. Luke said the money was awarded as a bonus and that Matsumoto paid all state and federal taxes.

"Everything was on the books, so it was very easy for the prosecution to determine where the money went," Luke said. "There was no hiding of the payment by SSFM."

More than 60 people, from family members to a retired judge, wrote letters to the court in support of Matsumoto's character, Luke said.

"The refrain I heard over and over was that he is a man of extremely high integrity and the campaign-spending violations were inconsistent with the nature of the man," Luke said.

Matsumoto apologized to the court, his family and the people of Hawai'i. "I can assure you it won't happen again," he said, adding that he wanted to restore his company's reputation.

SSFM is among the state's top five engineering companies, and a major city and state contractor.

Investigators have questioned whether any contracts were awarded in exchange for campaign contributions, but have not alleged any such "quid pro quo" or filed charges in that regard.

Luke said Matsumoto underwent a polygraph examination Monday and denied that his fundraising activities were tied to contract awards, change orders or an attempt to gain unfair advantage. He said Matsumoto's answers were judged "nondeceptive and truthful."

Harris declined to comment on the investigation yesterday, but has insisted city contracting is free of corruption. His attorney, William McCorriston, said the mayor did not solicit or knowingly accept illegal donations, and the overall probe appears to have focused on him unfairly.

"This thing has dragged on forever, and I think the intention is to put the mayor out of business," McCorriston said. "People in Hawai'i should be incensed that a viable political candidate is being taken out of the picture."

Four other current or former top SSFM officials pleaded no-contest to misdemeanor campaign-finance violations this year and were each fined $1,000.

The investigation into donations made by others has led to a flurry of arrests this month, but no new charges. More than 600 subpoenas have been issued to a variety of companies and individuals for bank records and other documents.

Lee said "the investigation moves on," but declined to say how many people could be charged.

On Monday, police arrested Kendall Hee, president of Engineers Surveyors Hawaii Inc., on suspicion of money laundering and making a campaign contribution under a false name. He was released pending further investigation. Two others associated with the company also were arrested.

Three top employees of R.M. Towill Corp., another engineering firm, were arrested this month and released uncharged.

The former chairman of the Housing and Community Development Corp. of Hawai'i, Wesley Segawa, was arrested Friday and also released uncharged.

Segawa agreed in May to pay the state Campaign Spending Commission a $53,500 fine for making illegal donations to several politicians.

The probe began in January 2002 after the commission found what it believed was evidence that Harris' campaign had falsified contribution reports to evade the legal contribution limit of $4,000 per donor.