COMMENTARY
Con games disguise real scandal of Felix

By Bob Rees
Honolulu free-lance writer

The real scam surrounding implementation of the 1994 Felix consent decree is not the short list of petty theft dribbled out by the state attorney general's office, and it's not the larceny continually alluded to but never revealed by the Senate-House Felix investigative committee.

Attorney General Earl Anzai

Chief U.S. District Judge David Ezra

Former Gov. Ben Cayetano

U.S. Rep. Ed Case Advertiser library photos

Hawai'i's approach has been reminiscent of a "Saturday Night Live" parody of "Mission Impossible": A well-trained crew blueprints its plans, develops special explosives, arms itself and dons disguises — all to break into a pay toilet.

Con artists will tell you that the best "mark" or victim is someone willing and even eager to be misdirected from reality toward fantasy. Apparently, the members of Hawai'i's officialdom have found in each other, and in us, the perfect marks.

Typical of state officials' diversionary approach is the sequence of events leading up to the attorney general's recent legal settlement with Hawai'i Pacific Health, formerly known as Kapiolani Health. This sequence began on Oct. 1, 1996, when the state Department of Health hired Kapiolani to administer a Big Island pilot project for Felix-class kids.

Only 15 months later, according to a legislative auditor's report, Kapiolani had been overpaid by nearly $3.5 million. This number was subsequently revised downward to $2.5 million and then to $1.5 million based on "late billings" from Kapiolani.

Concluded the audit, "The (Department of Health) has disregarded its fiscal responsibilities by making payments without proper support and not ensuring that Kapiolani follows fiscal requirements."

It wasn't until May 15, 2002, that we got the first public hint of an investigation into the alleged overpayments. When the attorney general's office and the Senate-House Felix investigative committee held a news conference to proclaim (in a Felix case not related to Kapiolani) that a single therapeutic aide had been indicted for billing $1,800 for services not performed, they took the opportunity to allude to other wrongdoing.

Deputy Attorney General Dewey Kim, head of the fraud unit in the Medicaid investigations division, told reporters that the $1,800 was just the "tip of the iceberg." Attorney General Earl Anzai added that his office was investigating no less than six other fraud cases.

On the day after the "Tip of the Iceberg" news conference, Kim called the federal court special master overseeing the Felix consent decree to express what the master described as vehement concerns about "widespread fraud ... and programmatic issues."

The special master took Kim's phone call to be proscribed ex-parte communication — legal jargon for improper contact with a judge or special master by one party involved in a dispute that is under litigation — and so informed the court. According to those present, Chief U.S. District Judge David Ezra was taken aback. After all, the attorney general's office had been telling him all was well. This new information could screw up everything.

Attorney General Anzai and then-Gov. Ben Cayetano immediately wrote to Ezra to disclaim Kim's views, and a short time later, Kim was transferred to torts. The attorney general's office stated that the removal of Kim was because of confidential "personnel matters."

Maybe so, but we know that Kim was on the trail of the money paid to Kapiolani. A witness who was interviewed by Kim reports that Kim was zeroing in on the relationship between the Department of Health and Kapiolani. This witness flatly stated to Kim that the Department of Health hadn't bothered to scrutinize the charges from Kapiolani.

A short time later, on Nov. 19, 2002 — three months after Kim's transfer — the attorney general's office entered into a "million-dollar" settlement with Kapiolani. Its provisions give new meaning to the term "amicable."

The settlement provides Kapiolani with civil and criminal releases, and promises not to refer the case to any other state agency. The cash payment of $1 million is itself a shell game. If Kapiolani lives up to the agreement, half that amount will be waived. Kapiolani need pay only $500,000 spread over three years, and only $250,000 of that to benefit the children. The other $250,000 will go to the attorney general's office.

Overall, because the Legislature approved sale of special-purpose revenue bonds on Kapiolani's behalf in 2002, Kapiolani will come out ahead, financially speaking, or close to it.

The Senate-House Felix investigative committee only belatedly learned of the deal.

The committee asked the attorney general's office to review the agreement with the committee in a closed-door meeting that took place on Feb. 1. At that meeting, nobody inquired about or said anything about Kim's transfer and subsequent departure or about what Kim thought he had unearthed.

Instead, the committee got sucked in and conned, based on a fantasy of vindication for its work. On Feb. 5, the committee held a news conference to announce that the settlement — of which it had only just learned and with which it had had nothing to do — was justification of its purpose and function.

In summary, the evolution of the con games went as follows: Kapiolani got the Department of Health to pay for services not rendered; the Department of Health misdirected the attorney general's office away from the health department's negligence; the attorney general's office persuaded the Senate-House investigative committee that it had struck a terrific settlement with Kapiolani; and the committee then stuck it to the rest of us by telling us all this was proof of the committee's own prowess.

There is no end in sight. The Legislature, with a joint resolution, has extended the life of the Senate-House investigative committee for another year, until June 30, 2004. And the committee seems bent on more show business.

In March of this year, the committee met in closed-door session with the legislative auditor's staff to talk about possible witnesses. It agreed to appeal to the 9th U.S. Circuit Court of Appeals the ruling of District Judge Ezra concerning the immunity of federal-court agents from state inquiry.

This appeal is a bit of a sham, an attempt to establish an excuse for the committee's lack of meaningful inquiry.

Meanwhile, the real Felix crime continues. The parents of Felix-class children, and particularly parents of difficult-to-handle autistic children, contend they are still treated with deliberate indifference. The number of contested hearings on individual programs, a key indicator of state abuse of Felix-class children, has increased.

The only gleam of light is that the U.S. Supreme Court has refused to participate in the con game. At the end of this February, that court rejected the pleas of Hawai'i's attorney general that Hawai'i be immune, on 11th Amendment grounds, from lawsuits for punitive damages by disabled children who have suffered the deliberate indifference of state officials. (The 11th Amendment of the U.S. Constitution, as extended by the Supreme Court, limits lawsuits against a state by its own residents.)

Almost as if in reaction to the U.S. Supreme Court's ruling and to the increase in contested hearings, there is a new plan that will reduce the availability of good lawyers willing to fight for the Felix children.

Rep. Ed Case, D-Hawai'i, partially at the urging of Hawai'i's superintendent of schools, has proposed an amendment to the re-authorization of the Individuals with Disabilities Education Act. This amendment will permit Hawai'i's governor, a defendant in these cases, to determine fees awarded to attorneys for the plaintiffs.