Bid-rigging charged in airport kickback plot
A contractor submitted four separate bids under $25,000 for a Honolulu Airport boathouse renovation project to skirt formal bidding procedures required of bigger contracts, federal prosecutors allege.
Walter Y. Arakaki, 66, president of Walter Y. Arakaki, General Contractor Inc., based at Sand Island, pleaded not guilty yesterday before U.S. Magistrate Judge Barry Kurren to a four-count indictment charging him with mail fraud. The Sept. 29, 2004, indictment was unsealed yesterday.
Arakaki is accused of receiving four payments in amounts just under the $25,000 threshold for small purchase contracts for the renovation of Honolulu Airport's fireboat house in 1999. The amounts that he allegedly charged in the contracts were also inflated, the indictment said. Arakaki, on behalf of his attorney, Keith Kaneshiro, declined comment on the charges.
The charges stem from a joint state and federal investigation into a bid-rigging scandal that allegedly involved state airport officials awarding contracts to friends and associates in exchange for kickbacks. The scheme has been described as the state's largest waste of taxpayer dollars and likely to surpass the $5.5 million in the Ewa Villages relocation scandal.
Two airport officials and two contractors indicted in July 2004 are scheduled to go to trial this week in the kickback scheme, which also involved inflated bids.
Small purchase contracts for repair and maintenance projects under $25,000 require at least three quotes from private contractors. The lowest bidder is awarded the contract.
The practice referred to as parceling involves dividing large construction or repair projects into smaller purchase contracts under $25,000 to circumvent procurement requirements for larger contracts. Projects costing more than $25,000 require a more formal award process that includes public notice and sealed bids from qualified contractors.
According to the Arakaki indictment, an airport official identified only by the initials D.H. bypassed contracting procedures by directing staff in the airport maintenance office to solicit quotes from only one contractor -- not three, as required by law.
Not only did Arakaki allegedly submit bids, he is also believed to have submitted, or arranged to have submitted, two other noncompetitive bids from other contractors to make it appear that the process was in compliance. The maintenance staff was directed to accept these "complimentary bids" instead of getting quotes from two other contractors, the indictment said.
Trial for Arakaki is set for Nov. 21.