‘Success’ bonus sparks criticism about use of taxpayer money

The board of the Hawaii Strategic Development Corp. approved a “success bonus” of at least $52,827 for the government agency’s outgoing President Karl Fooks in June, raising concerns in the Legislature as to whether the unusual payment for a public-sector worker was an appropriate use of government funds.

As part of the bonus, Fooks may have been paid another $28,740 — fringe benefits paid out in cash — but government officials said they weren’t sure.

“Whether you want to call it a performance-based bonus or severance — it almost seems like a severance bonus or some sort of payout — these types of things should not be happening in state government,” said House Finance Chairwoman Sylvia Luke.

Luke said the bonus raises concerns about whether the Legislature needs to be scrutinizing other state boards with such monetary authority over taxpayer money.

Fooks served as president of the HSDC, an agency attached to Hawaii’s Department of Business, Economic Development and Tourism, for a decade until it was dissolved by the Legislature at the end of June. The agency’s activities were statutorily transferred to the Hawaii Technology Development Corp., also an agency attached to DBEDT.

Lawmakers believed a single entity with the powers of both agencies could better pursue the state’s goals of boosting economic development in the technology sector. Luke said she expected Fooks’ position, which involved attracting private investment capital to Hawaii growth sectors, to be absorbed into HTDC.

However, Fooks, for reasons that remain unclear, did not join HTDC. He couldn’t be reached for comment for this story.

HTDC Executive Director Len Higashi wouldn’t say why Fooks didn’t land in a position at his agency.

“All I can say is HSDC was dissolved, and there were no new positions added to HTDC,” he said.

“The bill was passed and that was the outcome.”

Luke said that not making room for the venture capital function, the role HSDC served, within HTDC defeated the purpose of the legislation. Fooks was the only HSDC employee.

‘Success recognition’ bonus

On June 10, weeks before the Hawaii Strategic Development Corp. was to dissolve, the board of the agency met in executive session where they unanimously approved a bonus for Fooks for his “exemplary service” over the past 10 years, minutes of the board meeting show. The bonus included $50,000, plus fringe benefits. However, state officials wouldn’t explain what was meant by “fringe benefits.”

A spokeswoman for DBEDT suggested that fringe benefits, such as health benefits and taxes, were paid out in cash in the amount of $28,740. But she couldn’t confirm the breakdown or the total amount of the bonus paid to Fooks.

Luke said she too had tried to get clarity from Gov. David Ige’s administration on what the “fringe benefit” portion of the bonus entailed, but was also unsuccessful.

“Was it a cash payout?” said Luke. “They were very vague about it. There has to be transparency when dealing with these kinds of transactions.”

As part of the bonus, Fooks was also awarded a 5% increase to his base salary of $113,076, retroactive to the beginning of the year. The retroactive pay amounts to about $2,827.

Luke said the retroactive pay raise was also troubling as the Legislature had rejected HSDC’s request to raise Fooks salary earlier this year during the legislative session.

DBEDT Director Mike McCartney, who served on the HSDC board that approved Fooks’ bonus, didn’t respond directly to Luke’s criticism about the bonus payment.

He did note by email that by statute HSDC’s now defunct board set the salary of staff.

McCartney said Fooks’ “success recognition is based on years of service and performance.” He said he didn’t know of any other such bonus that was paid to Fooks during his time with the agency.

The 11-member board was composed primarily of people from Hawaii’s private sector and was chaired by Michael O’Malley, a partner at Honolulu law firm Goodsill Anderson Quinn & Stifel.

O’Malley and several other members of the board did not respond to questions and requests to comment about the bonus.

Luke said she hadn’t been able to get answers as to how the board came up with the amount of the bonus.

“They just claim that he did a terrific job. I mean, we expect every state employee to do a terrific job. This just sets up bad precedent,” she said. “I’m just very shocked that a corporation like this, which I respect and which we deal with and which we give the responsibility of growing our high-tech industry, would think that is an appropriate use of state funds.”