A private security company that employs former Honolulu police Chief Lee Donohue has pulled out of negotiations for a $25,000 contract to conduct an internal investigation of the Honolulu Liquor Commission. The move follows the disclosure that one of the liquor inspectors whose actions would be scrutinized is a former employee of the company, Akal Security.

Donohue was police chief when suspended liquor commissioner and former Honolulu police officer James Rodenhurst worked for Akal. Yesterday, Donohue said he did not know Rodenhurst while he was in the police department.

"I certainly don't want to put any more controversy on this thing," said Donohue, who is chief of operations in Hawaii for Akal. "The investigation, whoever does it, has to have integrity, and there shouldn't be any hint of impropriety or perception of it."

Rodenhurst was placed on leave without pay on April 17.

Liquor Commission chairman Dewey Kim Jr., a former state deputy attorney general, said he has confidence in Donohue and Akal's ability to handle the internal investigation but said he needs to avoid even the appearance of a conflict.

"Of all the private investigation firms in Hawai'i, why select the one where he (Rodenhurst) used to work?" Kim said yesterday. "It's not anything against Akal or the chief."

Kim said he will continue to seek a private contractor to handle the investigation.

The commission learned that Rodenhurst was employed by Akal after receiving an anonymous tip from a caller claiming that Rodenhurst worked for Akal at Honolulu International Airport, possibly as a supervisor, Kim said.

Rodenhurst left Akal in 2002 before joining the Liquor Commission.

The internal investigation was called for after Rodenhurst and Herb Naone, former head of security at Aloha Stadium, were accused by the FBI of extorting money from the owner of two Honolulu nightclubs.

The case also called into question the activities of other liquor inspectors, who were not indicted but who were mentioned or referred to in transcripts of the wiretaps.

Reach Peter Boylan at pboylan@honoluluadvertiser.com.