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The Honolulu Advertiser
Posted on: Wednesday, February 10, 2010

DBEDT director disputes state auditor's findings

BY Greg Wiles
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser

Ted Liu

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Embattled Hawai'i economic development director Ted Liu faces more questions from state senators after a hearing yesterday into his department's financial practices.

Liu, head of the state Department of Business, Economic Development and Tourism, needs to answer more questions about more than $200,000 of funding for a branch office in Beijing, said Sen. Donna Mercado Kim, chairwoman of the Ways and Means Committee.

Kim's comments came after a sometimes contentious hearing with Liu at which the findings of a state auditor's report calling for the director's removal were discussed. During the hearing, Liu said the report was filled with inaccuracies and drew conclusions from separate events taken out of context.

But Kim said more inquiry was warranted into how much state general fund money is being used to fund the China office and said she would seek further clarification on what the State Procurement Office was told about private funding for a 2005 trade mission.

She also said she may call for an ethics investigation into whether special treatment was requested as the state booked a lū'au for a visiting Chinese official.

Liu disputed the findings of the audit and noted there had been a string of investigations into his department suggesting somehow it had tried to circumvent rules and regulations.

"Bad motives did not exist," said Liu, who was rigorous in defending his actions. "There was no circumvention."

Liu said he agreed with certain constructive criticisms of the latest auditor report on his department, saying such things as following federal guidelines for trade missions.

He said the problems that the investigations have uncovered were more the result of his department trying to break new ground whether it was not being aware of all accounting issues with a federal grant, seeking private funding for a large trade mission to Taiwan and China, or trying to stake out a piece of hydrogen technology research and development with an investment fund.

Each of those projects have resulted in Senate inquiries and spawned two auditor reports. The latest, released last month, said Liu withheld or misrepresented information that should have been presented to the Legislature.

The report found that DBEDT didn't reimburse the state general fund for $399,500 when it received a federal grant for that amount. Some of those funds are now used to pay for the Beijing office used to promote trade and government relations with China, lawmakers were told yesterday.

State Auditor Marion Higa said some of the amounts being examined aren't that large in the scheme of things, but that there has been a "troubling pattern" of problems at DBEDT that warrant the removal of Liu.

Kim noted there had been a pattern of Liu saying he wasn't aware of certain rules and that incompetence was certainly "something that could lead to removal."

She said she wants more information about the number of accounts financing the China office and if they should be frozen. Kim noted Liu had elected to keep full funding of the office while chopping other operations because of state budget problems.

Liu said his department had not intentionally withheld information as has been alleged and that some of the findings of the audit were based on misinterpretations and inaccurate assumptions. He said the audit, for example, referenced a 2005 trade mission expenditure of 21 glasses of champagne for $30 per glass at one dinner. He said that was in reality 21 bottles for $31 a piece.