Lingle administration officials yesterday defended how they raised and spent more than $268,000 in private-sector money to underwrite a trade mission to China and South Korea last summer.

It was the second time this month that Gov. Linda Lingle's top economic aide was called to the Capitol to answer questions from lawmakers about potential ethical and procurement lapses involving the 10-day trip led by Lingle.

After an hour-and-a-half debate on the issue, a joint Senate committee passed a resolution calling on the state Procurement Office and the state Ethics Commission to review the issue and report back to the Legislature by Sept. 1. Among the concerns raised during the hearing was whether Lingle aides violated state procurement laws by selecting, without a bidding process, a nonprofit organization to provide financial services for the trip to China.

During yesterday's hearing Lingle's top economic aide, Ted Liu, defended the China trade mission and the selection of the nonprofit Pacific and Asian Affairs Council without bidding.

"At that time, no competitive bidding was required," Liu said. "Should there now or in the future be a different determination of the legality of the structure, I will accept full responsibility."

Unlike a state agency, the Pacific and Asian Affairs Council is not subject to state procurement law. That means the council could pay for services provided to the state without competitive bidding. Also, a nonprofit is not required to report certain details of contributions and expenditures.

Liu, director of the state Department of Business, Economic Development and Tourism, said the attorney general and the state procurement office approved of the use of the Pacific and Asian Affairs Council as a financial conduit for money raised and spent on the trip. However, Liu also said he had no written proof of such advice.

The nonprofit acted at the direction of DBEDT and received nearly $7,000 for its work.

Senate Vice President Donna Mercado Kim, D-14th (Halawa, Moanalua, Kamehameha Heights), asked why there was no contract between DBEDT and the Pacific and Asian Affairs Council, even though the council handled $268,000 in private sponsorships for DBEDT. Kim asked whether the lack of a contract was deliberate.

"The procurement law revolves around contracts, so it just seems that this was crafted together so that there would be no contract, so there would be no violation of procurement," Kim said. "So it's just interesting that it was handled in this manner."

Liu said the lack of a contract was not a deliberate attempt to sidestep procurement laws.

"That was not the intent," he said. "It didn't occur to us that (a contract) was necessary."

Kim went on to ask a representative of the Pacific and Asian Affairs Council what it would have done if DBEDT did not allow the council to collect its $7,000 fee, since there was no contract.

"We didn't really consider that," said Lisa Maruyama, executive director of the Pacific and Asian Affairs Council. "It was trust-based. We didn't feel it was necessary."

The Lingle administration's reliance on private-sector sponsorships has been much greater than prior administrations. Liu said the large sponsorships were needed because the Legislature cut his marketing budget but did not narrow his mission.

The Lingle administration has said it raised nearly $1 million in cash and in-kind contributions from Hawai'i businesses and organizations since 2003 to cover costs related to several overseas trade missions. Sponsors include DFS Hawaii, Ko Olina Resort and Marina, and NCL America. The donations were used to pay for trip extras such as the travel expenses and honorariums for Island entertainers who accompanied the governor. In addition to any donations, business participants were required to pay their own travel expenses and a fee for joining the mission.

In addition to providing support for the China mission, money given to the Pacific and Asian Affairs Council was used to pay for expenses incurred in Hawai'i after the China mission was concluded. That included $15,780 spent on a reception at Washington Place last October for the governor of China's Guangdong province, along with $1,705 spent for a July reception for Chinese State Councilor Tang Jiaxuan at Ko Olina Resort and Marina.

Maruyama said those payments were made at the direction of DBEDT.

In addition to the Senate probe into the matter, the House Finance Committee advanced a bill Monday calling for the state auditor to look into the financing of the trade missions.

Reach Sean Hao at shao@honoluluadvertiser.com.