Hawai'i Attorney General Mark Bennett is removing his office from a review of whether state Department of Business, Economic Development and Tourism officials broke state procurement laws in awarding an $8.7 million contract for a hydrogen technology investment fund.

Instead, he has asked city Prosecuting Attorney Peter Carlisle to look into the issue that has generated headlines and a monthslong state Senate investigation that concluded DBEDT director Ted Liu sought to manipulate the procurement process and award the contract to the lowest-ranked bidder instead of the highest.

Last month the Senate committee asked that Bennett appoint a special counsel who would determine whether Liu and three DBEDT employees acted illegally. The committee noted an outside counsel was needed because Bennett's office had a conflict of interest in that it provided legal advice and represented state witnesses during some of the 56 hours of testimony given during committee hearings.

Bennett's office also had written to the Senate saying the investigative committee was not legally constituted and that certain of its proceedings were conducted in a manner contrary to law.

INTEGRITY THE ISSUE

Bennett yesterday issued a statement saying he decided to forward the issue to Carlisle's office because appointing a special counsel might not end conflict of interest questions, opening his office up to questions about flaws or bias in the appointment of an independent reviewer.

"The Honolulu Prosecuting Attorney's office is the largest prosecuting attorney's office in Hawai'i, with unquestioned independence, honesty, integrity and skill," Bennett said in a statement issued by his office.

"I am confident that referring this matter to that office for an independent determination of whether or not criminal charges are warranted with regard to the matters described in the Special Committee Report is appropriate."

Carlisle yesterday said his office and Bennett's sometimes refer cases to each other when conflicts occur.

"Simply put, he's got a case that he can't handle and he's going to look for the best place to send it in terms of capabilities," Carlisle said.

He said the case is being assigned to one of his office's divisions and that everything being submitted to it will be evaluated to determine the appropriate course of action. If further action is warranted his office could do more investigation, including bringing in forensic experts.

The investigative committee announced its findings last month after holding 13 hearings and reviewing 21,000 documents. The committee alleged Liu, along with staffers Ken Kitamura, Maurice Kaya and John Tantlinger deviated from DBEDT's standard practices in awarding contracts and that there was a reasonable belief that actions they took constituted a knowing and intentional violation of procurement laws.

Liu reacted to the report by reiterating that he did not knowingly or intentionally violate the procurement code and that he had made his decision on which bidder would be most advantageous to the state.

NOT DONE YET

The report also said Barry Wienman of H2 Energy LLC was allowed inappropriate access to the procurement process before his firm was picked and that Liu had dragged out the process of giving the contract to eventual winner Kolohala Holdings LLP even though he was told to do so by the state Procurement Office.

Yesterday Kolohala said it was still waiting for a limited partnership agreement with the state to be executed as part of the award of the fund management contract.

"We've been assured there's nothing catastrophic going on here," said Chenoa Farnsworth, a Kolohala partner. "The process is taking longer than anybody wanted, even DBEDT."

Ted Peck, DBEDT energy administrator, said the partnership agreement is under review by Bennett's office. He said the agreement is critical because it defines what rights the state has in the appropriated funding and that work with Kolohala has already begun with the state issuing to work orders involving about $1.5 million of funding.

"There is no slow rolling going on," Peck said. "It's just that it (the partnership agreement review) takes time."