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City didn’t file
Ewa Villages tax
payment reports

The defense attorney tries
to show that city policies and
procedures were not followed

By Gordon Y.K. Pang
Star-Bulletin

The city failed to file tax reports to the Internal Revenue Service for $6.2 million in payments made to bogus moving companies in the relocation of companies from Ewa Villages, according to the city's top internal control officer.

Michael Hansen, chief of the Internal Control Branch, said under cross-examination by defense attorney Donald Wilkerson that he knew of no 1099 forms filed by the city Finance Department from 1993 to 1997 that were tied to Ewa Villages commercial relocations.

Wilkerson, representing Michael Kahapea, fired city employee and accused scheme ringleader, apparently is trying to establish that the city's financial policies and procedures were not followed and were outside Kahapea's responsibility.

"To my knowledge, I'm unaware that 1099s were issued," Hansen said, adding, "I don't know if they were required, even."

Federal law suggests that even when not required, those who hire contractors -- such as those that presumably moved businesses out of Ewa Villages -- file 1099 forms to ensure that the IRS knows of the payment made for work done and that the contractors report the income.

Prosecutors say Kahapea bilked $6.2 million from the Ewa Villages relocation fund by funneling money to moving companies, some of them bogus, owned by family and friends.

Wilkerson grilled Hansen about why annual, independent audits of city finances failed to pick up any of the discrepancies prosecutors had him describe to jurors in recent days.

But Hansen said the audits are designed to "render an opinion on the fairness of financial statements" and to ensure the viability of the overall city operating budget, not seek out discrepancies in any individual account.

Wilkerson wasn't satisfied with the answer, however. "I'm asking you are there any checks and balances," he said. "How can you come back to us five years later and tell us (the money) is missing?"

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City & County of Honolulu