Severe mismanagement at the state Bureau of Conveyances has hindered property recordings, led to lost revenue for the state and left the bureau vulnerable to potential exploitation by outside interests, according to a preliminary report released yesterday by a state House and Senate investigative committee.

The committee, which spent six months investigating bureau operations, recommends that a special master and an advisory council be appointed to oversee changes at the bureau.

The committee also recommends that the bureau streamline functions, add privacy safeguards for personal information contained in documents, and consider combining its land court and regular system branches into a single system for recording. The commission also urges more study into whether certain bureau functions should be privatized and whether the bureau should be moved under the wing of another state department instead of the state Department of Land and Natural Resources.

"From what this committee has seen, there are serious problems and dysfunction at the Bureau of Conveyances," said state Sen. Jill Tokuda, D-24th (Kailua, Kane'ohe), the co-chair of the committee. "For myself, that leads me to be extremely concerned for the residents of this state."

But the committee's key recommendation — the appointment of a special master — might be difficult to accomplish. The Lingle administration has raised separation-of-powers issues over the Legislature naming a special master to oversee an executive branch department. Tokuda said she doubted lawmakers would sacrifice other potential improvements at the bureau in a protracted fight with the administration.

Laura H. Thielen, the director of the state Department of Land and Natural Resources, said there is a clear line of accountability between the governor, the department and the bureau that could be undermined by a special master and advisory council.

Thielen said it would be "a very serious mistake for the bureau and a backward step and lead to a lot more chaos and finger-pointing and fighting, because I've never seen any successful example where you manage something by a committee."

The department has convened a working group of bureau, real estate, title insurance, legal and labor professionals to study how to simplify the recording process and improve customer service.

The bureau, which records hundreds of thousands of real estate documents each year, has struggled with internal factionalism and workload issues that have created significant backlogs.

Part of the complication is a dual recording system where some transactions are processed quickly through the regular system branch and some in land court, a more exacting system where the state legally guarantees certificate of title.

The working group has suggested that lawmakers allow property owners to voluntarily opt out of the land court system. The group also wants the bureau to be able to accept and maintain digital copies of records rather than paper and microfilmed documents. The group has proposed improving security by using only the last four digits of Social Security numbers for identification purposes on recorded documents.

The working group also wants people to be able to file and access documents through an online database.

State House Majority Leader Kirk Caldwell, D-24th (Manoa), said he would propose bills in the upcoming session to phase out the land court, promote electronic filing, and shift the bureau under the state Department of Commerce and Consumer Affairs, a regulatory agency with a reputation for better efficiency.

State Senate Minority Leader Fred Hemmings, R-25th (Kailua, Waimanalo, Hawai'i Kai), who served on the investigative committee, called it a "witch hunt" designed to embarrass the Lingle administration and justify the Senate's rejection last session of Peter Young for another term as director of the Department of Land and Natural Resources.

Hemmings said the committee neglected to explore the role of the Hawai'i Government Employees Association, the union which represents many bureau workers, in the poisonous working atmosphere that has plagued the bureau for years.

"Despite an exhausting series of hearings to pinpont the nature of the problems at the BOC, the committee neglected to promote a balanced inquiry," Hemmings concluded.

The investigative committee documented an absence of contracts and updated fee schedules for access to bureau documents that has cost the state an estimated $226,000 in lost revenue.

At the start of the investigation, lawmakers were presented with questions about computer security lapses, unexplained checks, and favoritism for certain title insurance companies. The state attorney general's office and the state Ethics Commission also are investigating the bureau.

While the security lapses, which involved the potential for outside access to bureau records, were apparently addressed shortly after they became known by the state, the committee did not confirm any fraud and learned that many of the allegations of favoritism were based on opinion or rumor. Some title insurance executives, particularly from Title Guaranty of Hawai'i, the industry leader, did appear to have disproportionate influence within the bureau, however.

The public will have the opportunity to comment on the report over the next two weeks before it is adopted in final form.

Reach Derrick DePledge at ddepledge@honoluluadvertiser.com.