In 2006, the Legislature created an $8.7 million fund for state investment into companies developing hydrogen as a renewable energy. The bill hasn't yet been implemented. Instead, it has been mired in scandal. A Senate panel investigated the matter and issued its report last month. The target of the investigation was Ted Liu, director of the Department of Business, Economic Development and Tourism.

At issue is the contract to manage the fund, a contract worth hundreds of thousands per year and which also gives the fund manager discretion to invest millions of taxpayer dollars.

The senate committee said Liu violated the state procurement code by improperly awarding that management contract to H2 Energy, a bidder involving Barry Weinman, who, according to the committee's report, was a major political contributor to Linda Lingle and the Republican Party.

Liu did not follow the customary DBEDT procedures for the procurement. He sidelined his regular contracting officer and removed her from participating in the process. When the DBEDT Evaluation Committee issued its ranking of the three top bidders, Liu took over the process, ignored that ranking, and awarded the contract to H2 Energy on the basis of a new rating system he made up for the occasion.

See the committee's report at www.capitol.hawaii.gov/site1/studies/commhic.asp and the testimony at www.youtube.com/results?search_query=ted+liu+investigation.

ONLY SILENCE FROM AG

In this investigation, scores of witnesses, including me, were subpoenaed to testify, and thousands of documents were produced. The committee ultimately found that Liu knowingly and intentionally violated the state procurement code and made a series of recommendations.

The committee also said the attorney general had a conflict of interest in that it represented Liu and other DBEDT witnesses in the investigation. The committee referred the matter to the attorney general to determine whether Liu should be prosecuted, but in view of this conflict the committee asked the attorney general to appoint an independent special counsel to make that determination.

The AG has not yet responded. Silence here is not golden. It perpetuates the odor the state Senate was looking into. It denies the public a full investigation, and it turns its back on accountability for violation of the law. Worst of all, it undermines public confidence in our state government.

2 YEARS AND COUNTING

After the Hydrogen Fund bill was passed in 2006, it was up to the administration to select an investment manager and transfer the funds. Liu did not make his award until August 2007. Why the holdup — we are trying to build a tech industry, aren't we? This is like so many other bills passed by the Legislature and later defeated not by veto but by a failure to implement. ConCon, where are you?

Liu would have had his way but for a story in The Advertiser followed by an inquiry in the Senate in August 2007. In September 2007, the state's chief procurement officer directed him to make the award to Kolohala instead. Liu ignored the directive — it was only after the Senate voted to investigate the matter in January 2008 that he complied. And it wasn't until just before the committee's report was issued in September 2008 that he executed the long-awaited contract with Kolohala.

The delays aren't over. It is nearly three years since the bill passed and Liu has not given Kolohala any of the money it was selected to manage. He has interposed roadblock after roadblock, and has been sitting on the implementation documents submitted to him by Kolohala, consistent with his earlier threats that he would never let Kolohala manage the fund. It will be a surprise if this gets done anytime soon.

Liu's recalcitrance suggests further disrespect for the state Senate, for Kolohala and for the rule of law, and further validates the committee's findings as to the intentional nature of his acts. It's hard to imagine Kolohala will have any cooperation from DBEDT under Liu or that the fund can succeed without that cooperation. Even assuming Kolohala can otherwise identify prospects in hydrogen, Liu's continuing delays put it at risk of losing those prospects.

ABOVE THE LAW?

The panel said Liu, who has a law degree, knowingly and intentionally violated the law. The administration has tried to discredit the committee as partisan (even though it included a Republican member), just as it had claimed the Senate's ethical criticism of Liu's China trip in 2005 was partisan. That's no excuse for stonewalling. If the law has been broken, something must be done.

Defending the questionable way he conducted the China trip, Liu likewise claimed unfamiliarity with the law. The other haunting similarity is that Barry Weinman also received special treatment from Liu on that trip and in Liu's failed China initiative in general. This suggests we are only seeing the tip of the iceberg.

Although the governor recently called for Rex Johnson's resignation as president and CEO of the Hawai'i Tourism Authority when he was found with salacious then racial material, she has not called for Liu's resignation, and after an extended absence he has returned to doing sound bites for her redoubled efforts at an energy policy. In fact, Liu's actions are in direct conflict with that policy — how can the administration pretend to support alternative energy when Liu is systematically derailing the state's hydrogen fund?

One of the selling points of the Lingle campaign was clean government. Whatever your affiliation, this is not clean government and it is not a good legacy. While the administration has otherwise required strict compliance with the procurement code, it has given Liu a pass on this and has been inexplicably tolerant of his manipulation of the procurement process.

However you look at it, this stinks. It is no small matter, and needs to be fully aired. Write to the attorney general — tell him you want him to appoint a special counsel. Write to the governor — tell her you want her to clean house at DBEDT. Write a letter to the editor — ask him for follow-up. Do your part. Hawai'i's self-respect may hang in the balance.

Jay Fidell is a business lawyer practicing in Honolulu. He has followed tech and tech policy closely and is a founder of ThinkTech Hawaii. Check out his blog at www.HonoluluAdvertiser.com/Blogs