Liu broke bid law, Senate panel says

An investigation of Hawaii's state business director will conclude that he broke the law in awarding a contract to a company that wasn't the highest-ranked bidder, senators say.

The violations involving a management contract for a new hydrogen energy investment fund could lead to removal from office, fines and misdemeanor criminal charges against Ted Liu, director of the Department of Business, Economic Development and Tourism, said Sen. Donna Mercado Kim, Democratic chairwoman of the investigative committee.

But officials in Republican Gov. Linda Lingle's administration say Liu won't be removed, and any criminal charges would have to come from the Attorney General's Office, which has opposed the Senate's investigation because state attorneys believe the combative hearings are unfair.

Liu, a former international investment banker, has been a member of Lingle's Cabinet since she took office in 2003. He has admitted making mistakes in deciding what company would manage the $8.7 million hydrogen fund when he picked a company that was rated third-best, but he denied accusations that he showed favoritism or knowingly did anything wrong.

Kim said evidence presented to the committee indicates that employees in the department tried to cover for Liu's unilateral decision to give the contract, worth up to $385,000, to H2 Energy LLC even though his own evaluation committee ranked Kolohala Holdings LLP as the most qualified company. The bidding didn't involve the cost of the contract; it was to be awarded based on the qualifications of the bidder to manage the fund.

The hydrogen energy investment fund was created in 2006 to boost companies developing clean-burning hydrogen fuel from renewable sources in Hawaii.

"We contend he is in violation," said Kim (D, Kalihi Valley-Halawa). "We're saying they did it intentionally because they knew he couldn't pick H2, and they're covering it up."

Liu's choice of H2 Energy last August was later reversed after the state Procurement Office determined that the contract should have been given to the most qualified company, which was Kolohala.

"I operated under procedures I understood to be correct based on advice received and on what I understood to be past practice in this department," Liu said in a statement yesterday. "As far as I am concerned, the error has been corrected and we are moving forward to accelerate Hawaii's development of renewable energy sources."

Liu has said the companies were closely rated, and that he chose H2 Energy because it more closely fit with the state's strategic goals.

The five-member Senate investigative committee -- made up of four Democrats and one Republican -- has been reviewing the case in at least 10 public hearings since September.

All the senators agree that Liu broke the law, but there's no evidence he did it for personal gain, said Sen. Sam Slom (R, Diamond Head-Hawaii Kai).

"Either there is a tremendous, wide-ranging conspiracy to allow the director to violate the law for whatever purpose, or you've got a bunch of high-profile and low-profile employees that really were moronic in their actions and their responsibilities," Slom said. "I believe they were morons."