State auditor Les Kondo and office are subjects of House investigation

For the first time in his five-year tenure, state Auditor Les Kondo was subpoenaed to appear before a special state House Investigative Committee on Monday and testified under oath about separate audits that found two state entities bungled economic opportunities to better manage state lands.

At the beginning of more than an hour of testimony, Kondo told the House Investigative Committee that he was surprised to learn that he and his office were under investigation.

“We have nothing to hide,” he said. “We did our job and we did it well.”

Committee Chairwoman and House Majority Leader Della Au Bellati (D, Moiliili- Makiki-Tantalus) said the committee is reviewing more than 12,000 documents related to the audits of land management by the Agribusiness Development Corp. this year and the state Department of Land and Natural Resources in 2019.

The committee’s investigation is expected to stretch into October, and everyone who is called will testify under oath, Bellati told the Honolulu Star-Advertiser.

“We’re going to subpoena everybody,” she said. “We are casting our net widely.”

Bellati declined to describe her concerns or suspicions over the audits to the Star-Advertiser but said more information is likely to come out today when Suzanne Case, chairwoman of the Board of Land and Natural Resources, which oversees DLNR, and several other DLNR officials also have been subpoenaed to testify under oath before the committee.

None of the members of the House Investigative Committee on Monday made specific allegations regarding the handling of the audits.

Asked repeatedly how his office would deal with improper or illegal activity uncovered through an audit, Kondo said he would report it directly to legislators and to the head of the department being audited, as the office did in 2019 when it found cheating in the state’s recycling program, more commonly known as HI-5.

Bellati, an attorney like Kondo, asked a series of seemingly unrelated questions, such as whether Kondo’s office adhered to nationwide standard “Yellow Book” auditing procedures and practices (Kondo said it did); whether members of the state Board of Land and Natural Resources had relationships with any of the people who lease DLNR land (Kondo said he did not know but would not be surprised because of Hawaii’s small community); and whether any of his staff had worked for DLNR (two of them did).

Each member of an audit has to sign “statements of independence” and is objective, nonpartisan and unbiased, Kondo said. Any of his 21 employees who might have a potential conflict of interest is “firewalled” from an audit, he said.

When pressed by Bellati about two former DLNR employees on his staff, Kondo had had enough and said the DLNR audit was handled appropriately.

If not, Kondo said, “I want to hear it, because it didn’t happen. … It didn’t happen. If you think it did, let’s talk about it. … There’s no proof.”

After a pause, Bellati said, “We do have to ask tough questions. … This committee has only started its investigative work. … You will likely be called back.”

Although Kondo’s appearance Monday before the committee was unprecedented during his time as auditor, it’s hardly his first scrap with House leaders going back even before he was appointed to an eight-year term as state auditor, beginning May 1, 2016.

As then-executive director of the state Ethics Commission, Kondo drew the wrath of then-House Speaker Joe Souki in 2015 for new ethics rules for legislators that included limits on gifts they could accept.

Then on March 31, Kondo received a scathing 79-page audit of his office prompted by House Speaker Scott Saiki that concluded that Kondo created a dysfunctional workplace and is ill-suited to lead an office that missed audit deadlines.

Kondo, in turn, said the audit itself was the result of shoddy, biased and misleading work.

The three-member panel that produced the report for the House comprised former city Auditor Edwin Young, state Budget and Finance Director Wesley Machida, who used to work for Saiki, and former state Sen. and U.S. Rep. Colleen Hana­busa, who is now chairwoman of the Honolulu Authority for Rapid Transportation, which oversees the city’s troubled rail project.

In his response to legislators at the time, Kondo said, “The report is primarily a collection of opinions based on selective data, inaccurate assumptions and unattri­buted snippets of critical comments from former employees. It is slipshod and riddled with errors and omissions.”

Kondo on Monday did not respond to repeated requests for comment by the Star-Advertiser following his testimony.

Kondo previously was a member of the Hawaii Public Utilities Commission, which regulates utilities, and was director of the Office of Information Practices, which adminis­ters Hawaii’s Sunshine Law and public- records law.

The Legislature in 2017 ordered Kondo’s office to audit DLNR’s Special Land and Development Fund, and the office reported back in 2019 with three main findings:

>> “Without a strategic plan for its public lands, the Land Division’s management of leases and revocable permits defaults to maintaining the status quo rather than exploring higher and better use.”

>> “Lack of complete and coherent policies and procedures prevents the Land Division from adequately managing its leases and revocable permits.”

>> “Lack of transparency and accountability hinders the administration of the Special Land and Development Fund.”

Kondo’s more recent audit of the Agribusiness Development Corp., released in January, had similar themes.

>> “We found that ADC has done little — if anything — to facilitate the development of agricultural enterprises to replace the economic loss created by the demise of the sugar and pineapple industries,” according to the audit. “After almost 30 years, ADC has yet to develop an agribusiness plan — a plan required by statute — to define and establish goals, objectives, policies, and priority guidelines for its agribusiness development strategy or other short- and long-range strategic plans.”

>> “Instead of leading the State’s agricultural transformation, ADC primarily manages 4,257 acres of land it started acquiring in 2012 at the direction of the Legislature as well as the Waiahole Water System on O‘ahu. Yet, we found that the corporation struggles to manage its lands, challenged by the myriad duties required for effective land management. For instance, a preferred anchor tenant had occupied ADC land for years without a formal, written agreement.”