2 charged
in alleged
kickback schemeThey fraudulently won $4 million
in airport contracts, officials say
A federal grand jury has charged two local contractors with rigging the bidding process that awarded them about $4 million in maintenance and repair jobs at Honolulu Airport.
Michael Furukawa and Wesley Uemura were charged yesterday with conspiracy and mail fraud in a 33-count indictment involving the alleged kickback scheme at Honolulu Airport, which has been under investigation for several years. They are scheduled to be arraigned Tuesday in federal court.
U.S. Attorney Ed Kubo said both men circumvented the state procurement process to repeatedly win airport construction, repair and maintenance projects.
Both men face multiple counts of mail fraud -- 18 for Furukawa and 14 for Uemura -- because they allegedly sent "fraudulently inflated contract proposals" via the U.S. mail from 1998 to 2001. Mail fraud carries a maximum sentence of 20 years in prison. For the conspiracy count, both men face up to five years in prison and a $250,000 fine.
"These fraudulent acts constituted a conspiracy to cheat the state of Hawaii, and the defendants obtained very profitable payments from the state through U.S. mail," Kubo said yesterday at a news conference.
"It not only undermines public confidence in our system ... it also results in unfair and illegal profits for white-collar criminals at the expense of taxpayers," he said.
State Attorney General Mark Bennett, whose office is jointly investigating the alleged kickback scheme with the U.S. attorney's office, estimated that Furukawa and Uemura received about $4 million in airport contract funds between fiscal years 1998 to 2000.
Bennett said those charged yesterday are just the first involving the federal prosecution.
"This is not the end, but merely the beginning of the second phase of this case," Bennett said. "There are a substantial number of individuals and companies that remain under investigation."
In the last two years, the state attorney general's office has had six people plead guilty to theft charges in the airport investigation. The six, who have not been sentenced, are Roy Yoshida, of Yoshida Auto Paint Shop; Herbert Hirota, president of Hirota Painting Co.; Bert Shiosaki, of CBS Electric; Harry Shibuya, a former supervising inspector at the airport's maintenance section; and local contractors Arthur Inada and Roy Shimotsukawa.
The alleged bid-rigging scheme involves construction contracts of $25,000 or less. Unlike larger state and city contracts, the process of selecting small construction, repair and maintenance contracts does not require sealed bids, but instead involves a review of proposals from at least three bidders on a list of approved contractors.
Kubo said both Furukawa and Uemura would "deliberately provide the state with a fraudulent bid for an airport job" that consisted of a "highly overestimated value of the work to be done."
The fraudulent bid was followed up with two "complimentary bids" by one of six companies that were either owned and operated by the defendants, including MF Masonry, Argent Construction, KenLee LLC, Gothic Builders, Wes' Contracting or Hammer Jammers, according to prosecutors.
The defendants also allegedly submitted blank quote forms with the letterhead of other companies, which were referred to in the indictment as SEI, BBI, HCI, TTI and BUI, prosecutors said. These complimentary bids gave an appearance that three quotes were properly obtained for each airport job to be awarded, Kubo said.
"However, these other two quotes or bids the defendants would deliberately exceed the first submitted bid, thereby securing that the first highly inflated bid would be accepted by the state for the work to be done," Kubo said.
According to the indictment, payments to the defendants ranged between $5,500 and $14,475, but investigators would not say exactly how much the state was overcharged.
"The general pattern seems to be that the estimates were well in excess of what the state should have paid," said Deputy Attorney General Larry Goya, who assisted the U.S. attorney's office. "In many cases they were many times what the true value of the work should have been."
Furukawa was also named in a lawsuit filed by the state against nine local contractors and two former Honolulu Airport employees to recover more than $1.2 million from the alleged scheme. Furukawa is a cousin of Richard Okada, former administrator of the Visitors Information Program at the airport.
In 2002, Michael and Frances Furukawa were arrested for suspicion of theft, conspiracy to commit theft and forgery. State Attorney General officials froze bank and investment accounts of one or more of the Furukawas' companies. The officials said they believed the accounts contained funds obtained from the small-purchase contracts under investigation. Yesterday, Goya said those funds amounted to more than $1 million and could be used for restitution.