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City reorganizes
in response to
Ewa Villages

Functions are separated and
employees undergo training,
city counsel says

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By Harold Morse
Star-Bulletin

The city has taken steps to change operations following a consultant's investigative report on the $5.8 million Ewa Villages scam, says city Corporation Counsel David Arakawa.

The 21-page report by the consultant firm Deloitte and Touche said: "Although the Ewa Villages Revitalization Project was a very large undertaking, there did not appear to be a detailed review of the internal control policies and procedures established for each of the project's activities or compliance testing with such policies and procedures."

The report was released yesterday after unsuccessful mayoral challenger Mufi Hannemann criticized Mayor Jeremy Harris last week for withholding information on the Ewa Villages project.

Harris said there was nothing to hide and the material would become public when the total package was complete.

"The city immediately took steps to change policies and procedures as soon as the criminal fraud was discovered," Arakawa said.

The city reorganized and separated the property management and relocation functions, Arakawa said. "The relocation function is handled by Budget and Fiscal Services right now, and the operating management function has been transferred to the Department of Facility Maintenance."

These two functions -- once handled by convicted Michael Kahapea and Norman Tam, another housing official believed a key accomplice -- are handled by separate agencies, Arakawa said. Tam died of natural causes Dec. 31, 1999, and Kahapea, a city housing supervisor, awaits sentencing after being found guilty Aug. 2 of stealing $5.8 million from the Ewa Villages relocation fund -- the biggest such fund theft in city history.

Funds were originally intended to help Ewa Villages businesses move as part of a city revitalization project.

"We've initiated specialized training for employees that handle relocation," Arakawa said, citing further corrective city action.

Highlights from the report include:

Kahapea and Tam sent bid requests to only a select group of hand-picked, prospective service providers for specific phase moves and did not issue public notices.

An apparent overreliance on staff resulted in no independent verification of actual moves or amounts of expenses incurred.

Kahapea manipulated the operation to prepare bid requests, solicit bids from selected movers, open bids in private, determine successful bidders, negotiate moves with displaced persons, approve invoices from movers, prepare claims vouchers and handle checks made payable to movers.

Staff did not appear to have proper training to process relocation documents.

Weak internal control and collusion with vendors enabled Kahapea to manage the cashing of checks and distribution of funds.

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City & County of Honolulu