State tightens
illegal gift penalty

Fined firms will not be allowed
to bid on government contracts

Companies fined for making illegal political donations will be barred from bidding on state and county contracts, a state board decided yesterday.

By a 4-0 vote with one member abstaining, the state Procurement Policy Board approved an administrative rule that would allow the state to initiate debarment proceedings against any contractor that is fined more than $5,000 for violating the state's campaign spending laws. The prohibition can last up to three years.

"What we are trying to do is send a message: The message is that if you violate campaign spending law beyond a certain dollar amount, we will start debarment proceedings," said state Comptroller Russell Saito. "The sooner we get that message out there, the better we are."

The rule will not go into effect for at least a month, and companies fined by the Campaign Spending Commission before it goes into effect are not subject to debarment proceedings.

The companies also have the right to an administrative hearing before the state Procurement Office to plead their case.

The new rule comes after the state Campaign Spending Commission has fined more than 60 state and city contractors more than $600,000 for making over-the-limit political donations or for laundering them under false names.

Many of those contractors have received millions of dollars in nonbid contracts from state and county agencies.

Under state law, a person or company can give no more than $4,000 for a mayoral race and $6,000 for a gubernatorial race during a four-year election period. A donor also is barred from giving money under a false name.

Bob Watada, executive director of the Campaign Spending Commission, said the new rule gives Gov. Linda Lingle's administration "a stick" to reform the state's contracting system and curb campaign finance abuses.

"The government is saying that if you show this unethical behavior, we're not going to continue to let you get taxpayer money," Watada said. "The public needs to be assured that if you violated the law that there are consequences, whether it's violations of campaign spending laws or state tax laws."

The five-member Procurement Policy Board reviews and interpret policies relating to Hawaii's procurement code. The board also has the authority to implement rules relating to the state's purchasing laws.

Yesterday's meeting of the procurement board was attended by representatives of several architecture and engineering trade organizations and by representatives of R.M. Towill Corp., Park Engineering and SSFM International Inc., which are targets of civil and criminal investigations by the Campaign Spending Commission and City Prosecutor Peter Carlisle.

In testimony submitted to the board, attorney Carl Varady argued that that the board does not have the authority to implement the rule change.

Varady, who represents three R.M. Towill employees who sued Honolulu police's top campaign finance investigator, Maj. Dan Hanagami, earlier this month, added that the new rule improperly assumes that there is a link between campaign activity and the awarding of state contracts.

Added Randy Chu, president of the 200-member Structural Engineers Association of Hawaii trade organization: "This rule implies that a campaign spending violations was committed to secure a contract, although we believe that this has never been proven."


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