More arrests
imminent in city
housing fraud

So far, 27 have been arrested
in connection with misuse of funds
in several city projects

By Gordon Y.K. Pang
Star-Bulletin

As many as four more arrests are expected later this week for fraudulent use of city housing relocation funds, according to police.

A 53-year-old man was arrested yesterday and a 55-year-old man was arrested last week in connection with fraud at the sites of the West Loch Estates and TheBus headquarters on Middle Street.

The arrests were the first involving alleged misuse of city funds at West Loch.

Most of the 25 other people arrested in the city fraud investigation have been tied to misdoings at the Ewa Villages Revitalization Project.

The others arrested were connected to the Middle Street site, now home of TheBus facilities.

Yesterday's arrest was of an owner of a recycling business in Pearl City.

He was booked for racketeering, two counts of first-degree theft, two counts of money laundering and two counts of bribery.

According to a police report, the suspect allegedly "submitted fictitious invoices to the city and benefited from the proceeds obtained to relocate commercial tenants" for the two projects.

The man arrested last week is being investigated on two counts of racketeering, two counts of money laundering, two counts of first-degree theft and two counts of bribery, according to Police Lt. Dan Hanagami of the white-collar crime unit.

The man was released pending investigation.

Hanagami said the suspect is believed to have received relocation funds for "technical work such as maintenance" that was either not done or done for an exorbitant amount.

The alleged misdoings at Middle Street and West Loch occurred from 1988 to 1992, he said.

Previous investigations centered on payment for the moving of businesses not done or done at extremely high costs at Ewa Villages and Middle Street.

Prosecutors believe millions were stolen at Ewa Villages.

Eight people, including Michael Kahapea, a former city housing official who has been fired, were indicted and face a trial expected next summer.

---

City gets more criticism
concerning Ewa Villages

By Gordon Y.K. Pang
Star-Bulletin

Recommendations on improving management of Ewa Villages and other projects in the Housing Development Special Fund are not being followed by the administration of Mayor Jeremy Harris.

That is the conclusion of the Office of Council Services, the research arm of the City Council.

Ivan Kaisan, legislative auditor, said responses to queries by Budget Director Malcolm Tom suggest that the administration either "ignored or missed the point" of recommendations made by KPMG Peat Marwick LLP in its October 1997 report to the Council.

Tom was out of town yesterday and could not be reached for comment.

The KPMG report covered problems encountered by the special fund and, in particular, how its money was used as part of the Ewa Villages Revitalization project.

KPMG said the housing fund stood to lose as much as $26.6 million, partly as a result of being too optimistic on projected sales, underreported potential costs and mismanaged plans. The administration, at the time, objected to the report's release and suggested that KPMG redo it.

Kaisan noted in a memo last Friday that he had asked the administration for an update on implementation of the KPMG recommendations on May 11 but did not get Tom's response until Oct. 19.

Kaisan said the administration ignored a KPMG recommendation to prepare financial forecasts for each capital project on a quarterly basis and to update them as needed.

Tom, in a memorandum dated Oct. 14, said several of the projects are being developed by private parties. Forecasts for other city housing projects are revised annually as part of budget process, Tom said. Ewa Villages is monitored by the Department of Design and Construction and an updated financial forecast for Ewa Villages was completed in July, he said.

Kaisan said the administration also ignored a KPMG recommendation to update revenue and expenditure assumptions for factors affecting housing projects and submit reports to the Council.

Tom said monthly reports are prepared for housing projects. But according to Kaisan, reports are only submitted for completed and occupied city-related projects, not those under development, which were the concern of KPMG. KPMG also said the administration should reconcile revenues and expenses for projects under the fund more frequently.

Tom said the Department of Budget and Fiscal Services has been responsible for reconciliation reports. Kaisan said Tom has provided no evidence of regular reconciliations.

KPMG also recommended that a person from the Housing Department who manages projects be responsible for overall management and reporting of special fund activities, rather than the finance director.

Tom said the finance director needs to oversee the fund to ensure it meets its objectives.