Controversy shelves
Wahiawa health center bill

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By Richard Borreca and Pat Omandam
rborreca@starbulletin.com pomandam@starbulletin.com

State senators have shelved a bill to streamline the planning process for the proposed $300 million Pacific Health Center, which has raised questions of conflict of interest.

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Sen. Cal Kawamoto, chairman of the Transportation and Government Operations Committee, said: "It circumvents the county land-use process. There is a reason why we have it and we shouldn't ignore it."

Kawamoto (D, Waipahu) said he thinks the project is a good one and that it will help Wahiawa Hospital, but he objects to the bill because it bypasses all county zoning requirements. Kawamoto said he will hold the bill in committee.

The plan to "fast-track" the 210-acre health care development, which includes a replacement for Wahiawa Hospital, was introduced by Rep. Marcus Oshiro (D, Wahiawa).

Oshiro also introduced HB 551, which exempts a master-planned health care center and retirement community from the state certificate-of-need process.

Both Oshiro and Kawamoto are also on the board of directors of the Wahiawa Hospital Association.

Pacific Health Community Inc., the developer, is a for-profit arm of the nonprofit Wahiawa Hospital Association.

Kawamoto said his objections had nothing to do with the calls of conflict of interest that have been leveled against Oshiro.

During passage of the measure, HB 550, earlier this month, Oshiro gave a lengthy and passionate floor speech on why House members should support it.

He said Wahiawa Hospital has spent more than $6 million since January 1999 to get a new facility built, and the delays by the City Council Zoning Committee are hurting the hospital's future.

"Time is running out. ... If we don't get this thing going in two years, what will this mean? Four hundred fifty people will lose their jobs, $40 million to $60 million in health care businesses will disappear and accessibility for health care for over one-half of Oahu's population will be compromised," Oshiro said in his floor speech.

But Sen. Les Ihara said the Oshiro bill highlights the need for lawmakers to have better understanding of ethical questions.

During the vote, state Rep. Kirk Caldwell (D, Manoa) excused himself from the vote because he is a partner in a law firm that is the attorney for Pacific Health Systems. House Speaker Calvin Say excused Caldwell from the vote.

State Rep. Marilyn Lee (D, Mililani-Mililani Mauka) declared a conflict because she is a nursing supervisor at Wahiawa General Hospital. Say said she had no conflict because her work deals with patients and permitted her to vote.

Say, however, did not excuse Oshiro from the vote, even though he is board secretary to Wahiawa Hospital Association, Wahiawa General Hospital and Wahiawa Central Oahu Health Center.

Say said Oshiro serves as a director and as a volunteer is not being paid for it. With no monetary compensation at stake, there is no conflict, he said.

Nevertheless, 14 House Republicans voted against the bill. And 14 Democrats voted with reservations on it.

Although lawmakers are not covered by the state conflict-of-interest laws, because it is seen as a restraint on their ability to freely vote in the Legislature, Dan Mollway, state Ethics Commission director, said there is a conflict for state officials and employees who act on issues that affect their own nonprofit corporations.

Persons sitting on nonprofit boards have a fiduciary duty to protect the organization they represent, and they can be sued if they do not protect the financial well-being of the nonprofit, Mollway explained.

"A fiduciary duty under law is one of the strongest duties you can legally have," Mollway said.

So, he reasons, state employees and officials have a financial interest in a nonprofit organization when they sit on its board of directors.

Ihara says legislators should change House and Senate rules to forbid those with positions on nonprofit boards from introducing or voting on bills to help their nonprofit groups.

"I believe there are many more conflicts in the Legislature than we realize," Ihara said.

On March 13, Ihara asked Mollway if a conflict of interest exists if a state official or employee takes official action affecting a nonprofit on which the state official or employee sits as a board member.

Oshiro said a response letter sent to Ihara from Mollway does not apply to legislators, constitutional convention delegates, judges or justices because it specifically references Hawaii Revised Statutes Section 84-14(a), which bars a state official or employee, excluding legislators, from taking any action if they have a financial interest in a business.

Moreover, Oshiro said he received a letter from Mollway saying there was no conflict for him to vote the measure in question.

Oshiro said he had asked the Ethics Commission for a ruling on whether he was in conflict with these bills as a legislator and as a board member of a nonprofit group after concerns raised by other House members.

But Mollway explained he could not rule on the ethics question, but on the fact that legislators are exempted from the state conflict-of-interest law.

"The Constitution provides that when legislators are carrying out legislative functions, they are not answerable to any tribunal, so no agency could demand the recusal of a legislator," Mollway said.