Conflict alleged in Big Island pact
By Kevin Dayton
Advertiser Big Island Bureau
HILO, Hawai'i — A Hawai'i County contract potentially worth hundreds of thousands of dollars is being challenged in court after the work went to a business whose majority owner is a manager in the county department that oversees the job.
Losing bidder Eckard Brandes Inc. is asking the Hilo Circuit Court to review the award, charging that it is a conflict of interest for Kama'aina Pumping Inc. to hold the contract to clean drywells and drainage culverts on the Big Island.
The company's majority owner is Randell A. Riley, who is a division head in the Department of Public Works.
The county Board of Ethics initially ruled Riley had a conflict of interest because employees subordinate to him in the department's Highway Maintenance Division were responsible for inspecting work done by his company, according to board records.
The Ethics Board then reversed itself in a second ruling in May and said the arrangement is not a conflict as long as the work done by Kama'aina Pumping is inspected by county Highway Superintendent Stanley Nakasone.
Since that ruling, Riley has been promoted out of the Highway Maintenance Division and is now automotive superintendent in another Public Works division.
Jeff Higbee, a director of Eckard Brandes Inc., which used to have the county contract, contends the Kama'aina contract is a conflict of interest, despite the ethics ruling.
"It's basically that you have an agent of the buyer owning 51 percent of the seller," Higbee said. "I would love to be an agent for all of my customers."
Riley would not comment on the dispute.
Bill Gray, the county purchasing agent, said that the contract sets a price for the drainage system cleaning and that the volume of work orders depends on how much money is available. Gray estimated the county has spent an average of about $250,000 a year on the work.
According to court records and ethics panel filings, Kama'aina Pumping underbid Eckard Brandes in 1996 — when Riley was not employed by the county — to win the contract for cleaning road drainage systems and has held the contract ever since.
The dispute arose when Riley was hired by the county last May as a Kona District road overseer, which placed him in charge of county workers responsible for inspecting the work done by Kama'aina Pumping in Kona.
Riley told the Ethics Board that he asked Assistant Corporation Counsel Gerald Takase if there was a problem with the arrangement and was told it was OK because Riley's company had the contract before he was hired.
Riley told the board that as a county worker, he never inspected or signed off on any work done by his company.
When the contract was put out for competitive bid earlier this year, Gray required that Riley get clearance from the ethics panel.
Riley did so, and Gray noted Kama'aina Pumping's bid price was one-half to one-third the price bid by Eckard Brandes, the only other bidder.
"My key is the ethics commission in a situation like this," Gray said. "If they say it's OK, then it's OK. If it's not, it's not."
Eckard Brandes' challenge to the new contract award was rejected by county Finance Director William Takaba and also by a state Department of Commerce and Consumer Affairs administrative hearings officer because it was filed after the required deadline.
Eckard Brandes is asking the courts to reinstate the challenge.
Apart from the conflict-of-interest issue, Higbee said awarding the contract to Kama'aina violates a "fairness" statement that all bidders are required to sign when they submit their proposals.
The statement, which was signed by Kama'aina Vice President Lee Kunimitsu, says: "This proposal is in all respects fair and is made without collusion on the part of any person, firm or corporation, and no official or employee of the government has any illegal interest in the offer or any portion of the profits thereof."
Gray said the statement prohibits government employees from any "illegal" profits in connection with the bidding, but does not prohibit them from bidding on county work and making a profit.
In fact, Gray said, the county ethics code specifically sets out requirements for county workers who want to establish outside businesses and seek county contracts. The ethics codes for Maui and Honolulu contain similar language, according to officials in those counties.
The Hawai'i County ethics code requires either that contract awards to companies owned by county employees be made through competitive bidding or that the county notify the Ethics Board if it plans to award a contract to an employee's company without competitive bidding.
Reach Kevin Dayton at (808) 935-3916 or kdayton@honoluluadvertiser.com.
