City leaders want to make the company that has managed Honolulu’s bus and paratransit fleet the past two decades more accountable with stricter ethics oversight. But getting that done isn’t proving to be easy.
Oahu Transit Services, a nonprofit corporation of 1,850 employees, has a noncompetitive contract to handle the 22nd most-used bus system in the nation, as well as Honolulu’s Handi-Vans, at a budget of about $224 million.
It also operates in a legal gray area — part city entity, part independent contractor.
That unique role with the city has confused officials for decades. This year, it has drawn scrutiny from Honolulu City Council members. They’ve proposed that the bus contract go out to bid, and that OTS’ board and managers be subject to the city’s ethics policy.
Despite those Council concerns, staff at the city Corporation Counsel Department say a new measure that would subject OTS to Honolulu’s ethics policies might violate the City Charter. Bill 32, introduced in May by Councilman Joey Manahan, might not be valid because OTS employees technically aren’t part of the city — even though they’re funded with taxpayer dollars.
Meanwhile, the Department of Transportation Services, which oversees OTS for the city, has an investigation underway into OTS based on information forwarded by the city Ethics Commission, according to DTS Director Michael Formby.
The information originally came from an anonymous complaint and was sent to DTS within the past two months, Formby said Friday. He declined to provide more details, but said he would report on the investigation’s findings to the managing director if needed.
The Ethics Commission has "received a number of complaints at the highest level" regarding OTS, and that the complaints involved "misuse of resources for somebody’s benefit," said Charles Totto, the commission’s executive director and legal counsel. The commission doesn’t have jurisdiction over OTS complaints. He did not specify further on the complaints received.
In recent weeks, OTS President and General Manager Roger Morton has repeatedly expressed support for a more rigid and comprehensive ethics policy.
"We’re a big company," Morton said Wednesday. "We try to be transparent — and everyone understands the need for stronger ethics oversight."
OTS employees are already required to follow several ethics rules laid out in the company’s standard rules of conduct or face disciplinary action and firing. They’re barred from soliciting or receiving gifts, using inside information, or using company time and equipment for personal gain, among other restrictions.
Those rules for OTS personnel are a good start — and many at the city didn’t even know they existed until last week, Totto said in an email Wednesday. Nonetheless, the rules aren’t as comprehensive as the city’s ethics policies, he added. For instance, they don’t include conflict-of-interest restrictions against financial interests that would impair an OTS employee’s independence and objectivity, he said.
Also, "most private companies now, especially those that have as much revenues and expenses as OTS," would include a compliance and ethics officer on their staff, Totto added.
Morton said such a full-time employee at OTS "would not have much to do, frankly." Formby said they could consider adding those responsibilities to an existing job position.
OTS spends public dollars to "fulfill a vital public service," Totto said during a recent Council meeting, arguing for more stringent oversight. "It’s a black hole. No one really knows what’s going on."
PREVIOUS SCANDAL
OTS took over TheBus in 1991 after scandal engulfed OTS’ predecessor, Mass Transit Lines. Officials there had used MTL employees to do repairs on their personal vehicles and homes, and a lengthy 1990 investigation by the city prosecutor found at least 38 areas of wrongdoing at MTL. It led to six MTL officials being charged with conspiracy and thefts related to the bus company. All of them pleaded guilty or no contest.
In 1987, as an MTL employee, Morton helped spark an internal investigation against one of the MTL executives eventually charged in the matter, Erwin Paschoal. Morton reported to the company president that he had seen an MTL car parked in front of Paschoal’s home. Paschoal went on trial for theft and pleaded guilty in Circuit Court. He was sentenced to five years’ probation and a $5,000 fine.
Meanwhile, Manahan’s measure, Bill 32, was passed on second reading last month by the committee on Executive Matters and Legal Affairs. The Council will take it up at its regular meeting this week, city officials say. If it’s found to violate the City Charter, OTS might draft its own ethics policy that mirrors the city’s as closely as possible.
"It’s definitely a work in progress," said Councilman Ron Menor, who heads the Executive Matters Committee. "There are some legal issues that have to be addressed."
Even Morton says he doesn’t fully get OTS’ status.
"It’s been the question for 40 years," he said Wednesday, referring to OTS and MTL. During both companies’ management of TheBus, Morton said, no lawyer has been able to answer the question for him satisfactorily.