The state auditor, citing "numerous and egregious acts," has recommended that Gov. Linda Lingle remove Ted Liu as director of the state Department of Business, Economic Development and Tourism.

In a draft audit, state auditor Marion Higa alleges the department filed false financial reports related to a federal grant, spent lavishly on a trade mission to China in 2005, and mishandled finances at overseas offices in Beijing and Taipei.
The Lingle administration disputes the accuracy of the draft audit and questions the timing. Lingle and Liu just returned from what the administration considers a successful trade and tourism promotion trip to China.
"The fact that this report is timed for release shortly after another successful state of Hawaii business mission to China only points to its political nature," Liu wrote in his response to the draft.
Liu disclosed the findings of the draft audit, which are supposed to be confidential, because he said he believes the conclusions are wrong.
Liu said one of the central findings of the audit — that the department misspent a federal grant — is based on an incorrect understanding of the grant's terms.
Higa's audit found that state spending did not match the objectives of the grant program. But under the grant, Liu said, the state was to spend the money first and then seek reimbursement from the federal government, so the state was free to spend the reimbursement money as it saw fit.
"We observed an environment where compliance with laws, rules and regulations has been compromised over a considerable period of time," the draft audit concluded.
Higa said she is reviewing the responses to the draft. "I basically can't comment until we issue our report," she said.
Lingle said the auditor's draft report suggests impropriety that did not occur.
“The legislative auditor’s report of DBEDT offers erroneous findings and demonstrates a lack of understanding and appreciation of the critical role Hawaii’s overseas offices in Beijing and Taipei play in the economic future of our state," the governor said in a statement.
Lingle defended Liu, describing him as "an exceptional leader and innovator in the fields of energy, the economy, and international relations."