Hawaii bribery scandal casts a shadow over Lahaina’s ruins
HONOLULU — After a major contracting scandal broke out in Hawaii last year, the mayor of Maui County appeared on television to express outrage and announce a sweeping audit of contracts awarded to a corrupt business owner.
But no one told the county auditor, who said he only heard about the audit on the news. In the end, the audit was never completed, and the county’s flawed system for awarding contracts — a system marred by bribery and a lack of competition — remains largely the way it was.
Now, as Maui recovers from the devastating wildfires that swept across parts of the island in August and killed at least 99 people, millions of dollars will be spent on rebuilding critical infrastructure using the same flawed contract-monitoring system.
The bribery case involving the business owner, Milton Choy, prompted some county officials to begin phasing out the use of sole-source contracts — which are awarded without competitive bidding when officials determine that only one vendor is able to supply a particular good or service — but the practice is still in use in the county.
A look at Choy’s case reveals pitfalls in a procurement system that could confront the county as it prepares to handle millions of dollars in new spending. That very little has changed since the bribery scandal was revealed could leave the door open for some contractors to take advantage of the disaster or for government money to be wasted.
Maui County has already issued more than $3 million worth of contracts in the first several weeks after the fires, and millions more are expected.
Most of the money spent so far has gone to firms hired to clear debris from roads and to manage traffic in the burned area. Consultants were also hired to assess damage to Lahaina’s water system and to develop temporary holding facilities for toxic debris.
And most of the contracts awarded so far went through without competitive bidding.
Abuse of single-source contracts was at the heart of the scandal involving Choy, and while his company also won government contracts on Kauai and Oahu, Maui County is where he made the most money that way.
A computer analysis of publicly available county records shows that Choy’s company, H2O Process Systems, was awarded about $12.7 million in sole-source contracts by Maui County between 2015 and 2022 — more than any other vendor received, and more than 13% of the county’s total spending on such contracts. Federal prosecutors put the total amount of all contracts paid to H2O Process Systems by Maui County at around $19.3 million since 2012.
Maui County does much more of its spending through sole-source contracts than the state does. That type of contract accounts for less than 1% of spending by state agencies, but Maui County has used them for 7% of its contract awards since 2015.
It is a small universe of contracts and vendors, one with holes Choy and others were able to exploit. The process is so problematic that the agency in charge of Maui’s sewers halted its use of sole-source contracting this year. But the method is still in use countywide, and can be used for purchases related to disaster relief efforts.
The suspension of competitive bidding is not the only hole in a county contracting system that is about to handle millions of dollars in spending, as the state rebuilds from the wildfires, which caused at least $5 billion in damage.
The county purchasing office that checks agency requests for no-bid contracts has only a handful of employees — sometimes as few as two — who monitor purchases from the county’s 15 departments, according to former employees.
The Maui County Board of Ethics, which is responsible for investigating possible wrongdoing by public officials, has neither a dedicated budget nor the staff necessary to conduct investigations — even now, after two county officials and two state lawmakers from Maui who took bribes from Choy have been sent to prison.
Choy was charged with one count of bribery last year and sentenced to more than three years in prison. During his sentencing hearing, he apologized to his competitors, the people of Maui and most of all, he said, to his family for the harm his criminal acts caused them.
“My children were raised to be honest and law-abiding,” Choy said in court. “I pray I may be able to restore their trust and respect for their father.”
Wastewater king’s rise
Former associates of Choy recalled him as a charming salesperson who could deftly navigate his way to the people who would buy his products and services. He sold wastewater equipment from manufacturers on the mainland.
Introductions were often made and backroom deals hashed out over dinners, where Choy would occasionally flash a list of his contacts with direct lines to politicians and public officials.
Orders from the state health department and the U.S. Environmental Protection Agency in the 1990s to upgrade county wastewater infrastructure created business opportunities for Choy and his contemporaries.
Choy opened his own company, H2O Process Systems, in 2008. His business flourished. Competitors and former officials who dealt with him described a man adept at finding solutions to water processing issues and one who sold top-of-the-line equipment.
It also helped that he invited Hawaii officials and friends to soirees in Las Vegas, where the guests would be treated to stacks of gambling chips, food and drinks at Choy’s private suite in the Mirage, according to John Leslie, a former business partner in another venture who witnessed some of those parties.
Choy admitted to prosecutors that he received no-bid contracts in Maui facilitated through bribery payments for at least six years.
County governments in Hawaii rely on a finance director as the only review for contracts recommended by department heads, including sole-source purchases. That made it easy for Stewart Stant, the former head of the Maui County Environmental Management Department, to steer nearly $20 million in no-bid contracts to H2O Process Systems.
Choy bribed Stant — who was sentenced to 10 years in prison — with cash and perks totaling more than $2 million over six years.
The information justifying the solesource requests should have been checked by department officials, who are typically required to collect data on what other municipalities have paid for similar items and to vet any sole-source purchase.
That job would have fallen to Wilfredo Savella, a maintenance supervisor who received more than $40,000 from Choy. He pleaded guilty in December 2022 to taking cash bribes and first-class trips to Las Vegas in exchange for helping direct wastewater contracts to Choy’s business. Savella is serving a 16-month prison sentence.
The system in Maui County is unlike those of many U.S. city and county governments, which require approval from a local council for contracts over a certain size. For example, the city of Anchorage, Alaska, requires its assembly to approve all sole-source purchases over $30,000.
When Stant pleaded guilty last year, he admitted receiving more than $1.3 million in direct payments from Choy between 2012 and 2018, in addition to hundreds of thousands of dollars worth of goods and services, including Las Vegas gambling chips, according to court records. Stant did not report any of it on annual financial disclosure forms required by the Maui County Board of Ethics.
Little has changed
The bribery scheme involving Choy and Stant did not come to light until 2018, when several county wastewater employees raised concerns over procurement practices involving Stant. They took their concerns to Elle Cochran, who at the time was a Maui council member. Cochran’s staff met privately with wastewater employees to collect information about payments to H2O Process Systems and eventually turned what they had gathered over to the FBI.
Their tip eventually led to the arrests of Choy and Stant. Choy agreed to cooperate in an ongoing investigation into public corruption and was not charged in other bribery cases involving two state lawmakers.
His cooperation led the lawmakers — former state Sen. J. Kalani English and former state Rep. Ty Cullen — to plead guilty in February 2022 to bribery-related charges from their time in office. English was sentenced to more than three years in prison and Cullen was sentenced to two years.
Little has changed in Maui County’s system of accountability since the scandal broke, and there appears to be little will to change, even as the island’s attention focuses on rebuilding in the aftermath of the fires.
Lance Toguchi, the Maui County auditor, says he plans to review the county’s procurement practices with a particular eye toward how the county has spent emergency funds during the COVID-19 pandemic, “to see if there’s any kind of lessons that can be learned from it, and how we can do things better.”
Shayne Agawa, who now holds Stant’s former post as director of environmental management, started phasing out solesource contracts this year, but acknowledged that there were some rare instances where there truly was only one vendor for a particular good or service.
Agawa said that limiting the use of solesource contracting could “help or hurt” the county. But the way he sees it, making the procurement process more transparent and open to competition is better for the public in the long run.
“I’m not the same person that Mr. Stant was,” Agawa said. “Not to throw anybody under the bus, but my personal integrity wouldn’t allow me to allow what happened in the past to happen again.”
It also helped that (Choy) invited Hawaii officials and friends to soirees in Las Vegas, where the guests would be treated to stacks of gambling chips, food and drinks at Choy’s private suite in the Mirage, according to John Leslie, a former business partner in another venture who witnessed some of those parties.