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The Honolulu Advertiser
Posted on: Wednesday, May 3, 2006

Theft charged in city contracts

By Jim Dooley
Advertiser Staff Writer

The operator of a company providing janitorial and landscaping services to the city "stole from the City and County and the taxpayers," a prosecutor said yesterday after Nelson Aguinaldo was indicted on six counts of theft, racketeering and money laundering.

"I have no comment," said Aguinaldo, president of Diversified Janitorial Services Inc., in a brief telephone interview.

Circuit Judge Derrick Chan issued a bench warrant for Aguinaldo's arrest on $100,000 bail after Deputy Prosecuting Attorney Chris Van Marter said Aguinaldo is considered a possible flight risk.

Allegations that a city employee who was best man at Aguinaldo's 2004 wedding may have helped the contractor land city jobs are still under investigation, Van Marter said. That employee, Chang Yoo of the city Facility Maintenance Department, could not be reached for comment yesterday.

The Honolulu Police Department began a criminal investigation of Diversified's contracts in December 2004 after The Advertiser reported on Aguinaldo's friendship with Yoo and on allegations that the company underpaid its employees and understaffed its city maintenance jobs.

The company has continued to bid for, and receive, new city maintenance contracts while the investigation has been under way.

Van Marter referred questions about new contract awards to the city Budget and Fiscal Services Department.

City spokesman Bill Brennan said, "The fact that a company or a person associated with a company may be under investigation does not allow the city or the state to exclude that person or company from bidding for or being awarded government contracts."

Brennan said no information was available yesterday afternoon on how many contracts Diversified Janitorial has received or their value.

COMPANY'S LOW BIDS

In late March, Diversified submitted the low bid of $129,300 for a one-year contract to clean the new Honolulu Fire Department headquarters on South Street, according to online city purchasing records.

Only two other bidders competed for the job and their price offers were substantially higher than Diversified's $176,985 and $211,500 the records show. It could not be determined yesterday if the contract has been finalized.

City records also show that Diversified was the sole bidder last year for another one-year contract, to provide landscaping services at the Police Department's Kahuku station, at a price of $33,901.

The company was also low-bidder last October on another contract to provide janitorial services at the Kahuku police station, at a cost of $21,720. The company last month also offered the low bid, $5,100, on a contract to landscape the grounds outside the city medical examiner's office.

The Advertiser reported in November 2004 that the company had received more than two dozen city contracts since 1999 worth at least $461,000.

ALLEGED ACTIVITIES

Yesterday's indictment charged Aguinaldo with four counts of felony theft, one of racketeering and one of money laundering.

Van Marter told Judge Chan that Aguinaldo failed to provide the contractually required number of janitorial workers on cleaning jobs at the HPD Kapolei station and the HPD Training Center complex in Waipahu.

But Aguinaldo charged the city the full contract price and kept the difference, Van Marter charged, estimating the loss to the city at $22,203.

Aguinaldo also allegedly failed to pay his employees contractually required wage rates, Van Marter said.

He "paid substantially less and in effect pocketed the difference," the prosecutor said, estimating the value of the lost wages at more than $64,000.

And Aguinaldo took supplies of paper products he received from the city for use at city facilities and sold them to another company, Van Marter said, estimating the value of the stolen supplies to be between $300 and $20,000.

The United Public Workers Union, which represents city blue-collar workers, has complained in the past that the city failed to enforce the prevailing wage requirement when it outsourced janitorial and landscaping jobs to the private sector.

EX-WIFE COMPLAINED

Aguinaldo's ex-wife, Mary Lantano, complained repeatedly to city officials in 2003 and 2004 about Diversified's activities.

When city personnel questioned the accuracy of Diversified's payroll records in late 2004 and sought proof that the company was paying its employees correct wages, Aguinaldo acknowledged that some employees had been underpaid and said he suspected that Lantano, "who was responsible for preparing the company payroll," had caused the problem.

Lantano alleged that Chang Yoo accompanied the Aguinaldos on a 2002 trip to the Philippines and supplied photographs to prove the allegation. She said Yoo paid his own airfare, but the Aguinaldos paid his ground expenses, estimating their value to be $500 to $700.

Lantano claimed that Aguinaldo purposely befriended Yoo to improve Diversified's business dealings with the city.

On at least five of Diversified's city contracts, Yoo was the city official who met with interested bidders at the job sites and discussed contract specifications with them, city records show. Yoo also directly recommended award of at least two of the contracts to Diversified and recommended that other contracts the company held be extended.

Reach Jim Dooley at jdooley@honoluluadvertiser.com.