Senator Donna Mercado Kim: DBEDT Investigation

August 2010

Stories:
2010 Legislature: Highlights & Accomplishments
Senator Kim on the Hot Seat
Changes for 2010 Election
Commentary
2010 Award Recipients
Sen. Hydrogen Investigation Final Report
Response to DBEDT Investigation
Photos: Active and Involved

Senator requests reconsideration of decision by City Prosecutor

After the Special Senate investigative committee issued its final report on the state's mishandling of the $8.7 million hydrogen fund management contract, the members of the committee voted to recommend the investigation of criminal violation of the procurement code and rules.

The City Prosecutor's office concluded that there was evidence of "incompetence" in DBEDT's procurement practices but there was no evidence that form the basis of criminal charges based on current law.

The State Auditor cited DBEDT for violations of procurement practices. After receiving word of the Prosecutor's decision, Senator Kim wrote this response:

July 8, 2009

The Honorable Peter B. Carlisle
Department of the Prosecuting Attorney
City and County of Honolulu
Alii Place
1060 Richards Street
Honolulu, Hawaii 96813

Dear Mr. Carlisle:

Re: Recommendations of the Senate Special Investigative Committee On the Hydrogen Investment Capital Special Management Contract Award Established Pursuant to S.R. No. 2 (2008)

I am writing in response to your letter dated June 30, 2009 in which you express your decision that "[t]he evidence does not support a criminal prosecution for procurement violations" against DBEDT Director Theodore Liu, and members of his management team, Messrs. Kitamura, Kaya, and Tantlinger. Since our meeting, I have had some time to digest the justifications for your decision. I realize that it is doubtful that you would reconsider your decision; however, as I take exception to the justifications you have provided, I feel that it is necessary that I go on record to request a reconsideration of your decision.

The basis of your decision is set forth in the very first paragraph of your letter which states:

After a thorough and diligent review of the facts of this case, this office has concluded that there is insufficient evidence to prove beyond a reasonable doubt that the conduct warrants criminal charges. (Emphasis added.)

Your position that you must be able to prove a crime beyond a reasonable doubt in order to seek criminal charges is inconsistent with my understanding of the role of the Prosecutor in the criminal system. It is my understanding that to seek criminal charges, the Prosecutor’s burden is to establish that there is "probable cause" that a crime has been committed. Subsequently, in order to successfully prosecute a case, the Prosecutor’s obligation becomes to convince a judge or jury "beyond a reasonable doubt" that a crime has been committed. It is my understanding that "probable cause" is a much lower standard than "beyond a reasonable doubt" which is why there are occasions where a defendant is charged, but is subsequently acquitted when the higher standard cannot be met.

By using the standard of “beyond a reasonable doubt” to determine whether to seek a criminal charge, the Prosecutor changes its role from being part of the process, to being the entire process. While it is understandable that the Prosecutor would decline to seek criminal charges where there is no probable cause, to decline to seek criminal charges because you think it may be difficult to meet the “beyond a reasonable doubt” standard would appear to be a dereliction of your duties as Prosecutor and an infringement upon the duties of the office.

Should one accept your position that "beyond a reasonable doubt" is the appropriate standard for determining whether to bring a criminal charge, there would be no need for a criminal justice system since the Prosecutor would be able to serve the roles of grand juries, judges and juries. Given the criminal justice system that we do have, if one were in the Prosecutor’s position, there would never be an unsuccessful prosecution or reason to plea bargain since you are only seeking charges in cases that you predetermine that you can prove beyond a reasonable doubt.

I raise the following positions from your letter that I take exception to based on the existence of evidence received by the Special Investigative Committee ("SIC"):

1. You assert that there is insufficient evidence to establish an intentional violation of the procurement laws. In fact, Section 3-131-4, HAR, which you cite in your letter, provides for criminal penalties for a person who "intentionally or knowingly" violates the procurement code. There was voluminous evidence presented to the SIC to support that Messrs. Liu, Kitamura, Kaya, and Tantlinger “knowingly” violated the procurement code and rules. I believe that a judge or jury, much like the SIC, could find that there is sufficient evidence to find that there was an intentional and knowing violation.

During the SIC hearings, evidence was received that there were numerous irregularities in the processing of RFP 07-11-SID and even prior to the RFP. Testimony was received establishing that many of these irregularities were due to the direct acts or omissions of Mr. Liu and his management team. While Mr. Liu testified that his violations were unintentional, that testimony was determined to be lacking credibility since it was inconsistent with the totality of the evidence and obviously self-serving.

Furthermore, even after Mr. Liu was advised repeatedly that his selection of H2 Energy LLC as the successful bidder was in violation of the procurement code and rules, he continually refused to remedy the violation. In fact, Mr. Liu continued to argue for the selection of H2 Energy LLC well after he was ordered by the State's Chief Procurement Officer to award the contract to Kolohala Holding LLP, the highest ranked bidder. There is evidence that Mr. Liu went so far as to try to cancel the RFP rather than award the contract to Kolohala Holdings LLP.

2. You assert that you could not establish that Mr. Kitamura knowingly violated the procurement code. Mr. Kitamura testified that he had a mistaken belief that Mr. Liu could select the third ranked offer if he provided a justification for his decision. Mr. Kitamura could not provide any evidence to support that his belief was mistaken. Furthermore, evidence indicated that DBEDT did not even comply with the procurement requirements as Mr. Kitamura allegedly understood them to be. As with Mr. Liu’s testimony, the SIC concluded that Mr. Kitamura's testimony lacked credibility.

On the other hand, Mr. Kitamura’s own staff and a past director of DBEDT testified that Mr. Kitamura's position was inconsistent with DBEDT’s current and past procurement practices and procedures for the preceding twenty years. While you expressed to me that it is not criminal for DBEDT to violate its own established procedures, I would point out that DBEDT’s procedures specifically state that they are being immediately applied “[p]ursuant to the Hawaii Administrative Rules (HAR) Section 3-122 Subchapter 6.”

3. You assert that selecting the highest ranked proposal is not equivalent to a selection of the proposal which provides the best value to the State taking into consideration price and the evaluation criteria in the RFP. Your quotation of Section 3-122-57(a), HAR, in support of your position is incomplete and the omission is meaningful. The selected portion that you provide would appear to provide the director with significant discretion to determine which proposal provides the best value to the State. Contrary to your assertion, the complete language of Section 3-122-57(a), HAR, provides that the best value to the State must be determined by using the price and evaluation criteria set forth in the RFP; the director does not have the discretion to consider anything more. A complete quotation of Section 3-122-57(a), HAR, is as follows:

(a) The award shall be issued in writing to the responsible offeror whose proposal is determined in writing to provide the best value to the state taking into consideration price and the evaluation criteria in the request for proposals and posted pursuant to section 103D-701, HRS, for five working days. Other criteria may not be used in the evaluation. The contract file shall include the basis for selecting the successful offeror. (Emphasis added.)

The clear reading of this language is that the selection of the successful proposal must be limited to the price and the criteria specifically set forth in the RFP. As the proposals were scored using these criteria, there is no basis for the position that Mr. Liu was justified in believing that he had the discretion to ignore the scores and impose his own criteria (not included in the RFP) to award the contract.

Additionally, the evidence indicated that, as the Director, Mr. Liu did not include in the contract file for RFP 07-11-SID his basis for selecting H2 Energy LLC as the successful offeror. The evidence clearly indicated that the Director’s basis was only added to the contract file after the fact, and the credible evidence indicated that the basis was in fact prepared after the fact. This, in and of itself, was a violation of Section 3-122-57(a), HAR.

4. Your assertion that "[s]ince H2 Energy was ranked third, it is hard to argue that there was a plan to make them the successful offeror by the evaluation committee." I concede that it is difficult to argue that H2 Energy LLC was favored by the evaluation committee since they were ranked last; however, it is much more difficult to argue that they were not favored when they were ranked the lowest of the bidders yet were still selected as the successful bidder by Mr. Liu.

I could continue on with arguing that the evidence submitted to you strongly contradicts your justifications for not charging Mr. Liu and his management team; however, I believe that my point has been made.

I realize that this is a case where there may not be a smoking gun; however, the totality of the evidence paints a clear picture of what happened and a reasonable finder of fact could determine, just as the members of the SIC did unanimously, that there was sufficient evidence to show intentional or knowing violations of the procurement code and rules by Messrs. Liu, Kitamura, Kaya, and Tantlinger.

I believe that if you were to present the available evidence to a grand jury, that they would find sufficient evidence to meet the probable cause standard to bring criminal charges against Mr. Liu and his management team. More importantly, I believe that a reasonable judge or jury, reviewing the totality of the evidence would conclude that there was an intentional or knowing violation of the procurement code, just as the members of the SIC did.

As you are aware, the members of the SIC unanimously voted to adopt the Report recommending the investigation of alleged criminal violation of the procurement code and rules by Messrs. Liu, Kitamura, Kaya, and Tantlinger. I question your conclusion that there is no probable cause in this situation where five members of the SIC unanimously believed that it was appropriate to pursue further investigation into criminal charges. While you may not agree that a Senate Special Investigative Committee is equivalent to a grand jury, judge or jury, I would contend to you that the findings of the SIC reflect what another fact finder could also reasonably conclude.

Unfortunately, your decision is one that leaves no one satisfied and further justifies the public’s perception that our government is corrupt and that there is nothing the public can do about it. While I am sure that no one is surprised by your decision to not pursue criminal charges against Messrs. Liu, Kitamura, Kaya, and Tantlinger, it is disappointing that you would attempt to justify your decision with positions and assertions that are neither supported by the law or the record of evidence which the SIC has provided to you. I sincerely hope that you would reconsider your decision.

Sincerely,

Senator Donna Mercado Kim
Chair
Senate Special Investigative Committee on
the Hydrogen Investment Capital Special
Management Contract Award

cc:
Senator Gary Hooser
Senator Les Ihara, Jr.
Senator Clarence Nishihara
Senator Sam Slom
Senate President Colleen Hanabusa