1

          1

          2

          3             SENATE/HOUSE OF REPRESENTATIVES

          4                  THE 21ST LEGISLATURE

          5                     INTERIM OF 2001

          6

          7

          8

          9   JOINT SENATE-HOUSE INVESTIGATIVE COMMITTEE HEARING

         10                     OCTOBER 5, 2001

         11

         12

         13

         14  Taken at the State Capitol, 415 South Beretania,

         15  Conference Room 325, Honolulu, Hawaii commencing at

         16  1:13 p.m. on Friday, October 5, 2001.

         17

         18

         19

         20  BEFORE:   MYRLA R. SEGAWA, CSR No. 397

         21            Notary Public, State of Hawaii

         22

         23

         24

         25






                                                               2

          1  APPEARANCES:

          2

          3  Senate-House Investigative Committee:

          4                  Co-Chair Senator Colleen Hanabusa

          5                  Co-Chair Representative Scott Saiki

          6                  Vice-Chair Senator Russell Kokubun

          7                  Vice-Chair Representative Blake Oshiro

          8                  Senator Jan Yahi Buen

          9                  Representative Ken Ito

         10                  Representative Bertha Kawakami

         11                  Representative Bertha Leong

         12                  Representative Barbara Marumoto

         13                  Senator Norman Sakamoto

         14                  Senator Sam Slom

         15

         16  Also Present:

         17                  Special Counsel James Kawashima

         18                  Gary M. Slovin

         19

         20

         21

         22

         23

         24

         25






                                                               3

          1                        I N D E X

          2

          3  WITNESS:  KAREN ERHORN

          4  EXAMINATION BY:                              PAGE

          5       SPECIAL COUNSEL KAWASHIMA.................6

          6       VICE-CHAIR SENATOR KOKUBUN...............50

          7       VICE-CHAIR REPRESENTATIVE OSHIRO.........52

          8       SENATOR BUEN.............................60

          9       REPRESENTATIVE ITO.......................66

         10       REPRESENTATIVE KAWAKAMI..................68

         11       REPRESENTATIVE LEONG.....................73

         12       SENATOR SAKAMOTO.........................75

         13       REPRESENTATIVE MARUMOTO..................85

         14       SENATOR SLOM.............................89

         15       CO-CHAIR REPRESENTATIVE SAIKI...........100

         16       CO-CHAIR SENATOR HANABUSA...............102

         17       SPECIAL COUNSEL KAWASHIMA...............123

         18       SENATOR SAKAMOTO........................124

         19       VICE-CHAIR OSHIRO.......................128

         20       REPRESENTATIVE MARUMOTO.................130

         21       CO-CHAIR SENATOR HANABUSA...............132

         22

         23

         24

         25






                                                               4

          1                  P R O C E E D I N G S

          2              CO-CHAIR REPRESENTATIVE SAIKI:  Good

          3  afternoon.  I'd like to call to order our Joint

          4  Senate-House Investigative Committee to investigate

          5  the State's efforts to comply with the Felix Consent

          6  Decree.  I'd like to take a roll call.

          7              CO-CHAIR SENATOR HANABUSA:  Co-Chair

          8  Saiki?

          9              CO-CHAIR REPRESENTATIVE SAIKI:  Here.

         10              CO-CHAIR SENATOR HANABUSA:  Vice-Chair

         11  Kokubun?

         12              VICE-CHAIR SENATOR KOKUBUN:  Here.

         13              CO-CHAIR SENATOR HANABUSA:  Vice-Chair

         14  Oshiro?

         15              VICE-CHAIR REPRESENTATIVE OSHIRO:  Here.

         16              CO-CHAIR SENATOR HANABUSA:  Senator Buen?

         17              SENATOR BUEN:  Here.

         18              CO-CHAIR SENATOR HANABUSA:

         19  Representative Ito?

         20              REPRESENTATIVE ITO:  Here.

         21              CO-CHAIR SENATOR HANABUSA:

         22  Representative Kawakami?

         23              REPRESENTATIVE KAWAKAMI:  Present.

         24              CO-CHAIR SENATOR HANABUSA:

         25  Representative Leong?






                                                               5

          1              REPRESENTATIVE LEONG:  Here.

          2              CO-CHAIR SENATOR HANABUSA:

          3  Representative Marumoto?  Senator Matsuura is excused.

          4  Senator Sakamoto?

          5              SENATOR SAKAMOTO:  Here.

          6              CO-CHAIR SENATOR HANABUSA:  Senator Slom?

          7              SENATOR SLOM:  Here.

          8              CO-CHAIR SENATOR HANABUSA:  Co-Chair

          9  Saiki, you have the floor.

         10              CO-CHAIR REPRESENTATIVE SAIKI:  Thank you

         11  very much.  Members, we just have one witness on our

         12  agenda today.  This committee subpoenaed Karen Erhorn

         13  who I believe is seated at the table.  We'd like to

         14  administer the oath at this time.

         15              CO-CHAIR SENATOR HANABUSA:  Ms. Erhorn,

         16  do you solemnly swear or affirm that the testimony

         17  you are about to give will be the truth, the whole

         18  truth and nothing but the truth?

         19              KAREN ERHORN:  I do.

         20              CO-CHAIR SENATOR HANABUSA:  Thank you

         21  very much.

         22              Members, we will be following the usual

         23  procedure.  We will begin the committee's questioning

         24  by way of our legal counsel followed by all of you.

         25  If you have any questions, the ten-minute rule as to






                                                               6

          1  the committee members will be instituted.

          2  Mr. Kawashima.

          3              SPECIAL COUNSEL KAWASHIMA:  Thank you,

          4  Madam Chair.

          5                       EXAMINATION

          6  BY SPECIAL COUNSEL KAWASHIMA:

          7       Q.     Please state your full name and address.

          8       A.     Karen Marie Erhorn.  My home address is

          9  254 Kaha Street, Kailua, Hawaii.

         10       Q.     And ma'am, who is your employer?

         11       A.     Pacific Resources for Education and

         12  Learning.

         13       Q.     And what position do you hold at Pacific

         14  Resources for Education and Learning?

         15       A.     I'm the chief financial officer.

         16       Q.     Ma'am, so that we don't have to say that

         17  over and over again, I don't anyway, your

         18  organization has an acronym PREL, does it not?

         19       A.     Yes, it does.

         20       Q.     And I also note that you have your

         21  counsel Mr. Slovin with you today?

         22       A.     Yes, sir.

         23       Q.     As you have a right to do.  Now, in your

         24  position, ma'am, as chief financial officer, can you

         25  briefly tell us what your duties and responsibilities






                                                               7

          1  are?

          2       A.     My responsibilities entail the financial

          3  reporting and recording of financial transactions for

          4  PREL including their tax, contract compliance,

          5  internal controls, establishing and maintaining, some

          6  risk management, cash management, most any other

          7  areas that touches the financial transaction.

          8       Q.     All right.  And how long have you served

          9  in that capacity with PREL, ma'am?

         10       A.     I've been with PREL for about seven

         11  years.

         12       Q.     And before that may I ask with whom you

         13  served?

         14       A.     Before that I was at home basically

         15  taking care of my daughter, and before that -- and at

         16  one time I owned a travel agency, part-time owner of

         17  a travel agency.

         18       Q.     All right.  Now, as the chief financial

         19  officer for PREL, ma'am, are you responsible for the

         20  processing of payments that PREL makes to someone who

         21  is subcontracted with PREL?

         22       A.     Yes.

         23       Q.     For example, if a subcontractor with PREL

         24  incurs an expenditure and sends an invoice to you,

         25  you would be the one to review it at least ultimately






                                                               8

          1  be possible for reviewing that invoice and

          2  determining whether or not, as you say, it complied

          3  with the contract that was involved and then to

          4  approve payment?

          5       A.     My responsibility would be to determine

          6  that the invoice was properly processed and reviewed

          7  by those in PREL as well as myself as processing and

          8  finalizing the invoice.

          9       Q.     Thank you.  Now, perhaps you might assist

         10  us, ma'am, by giving us background on what PREL is.

         11       A.     PREL is a non-profit 501-C3 corporation

         12  established in the State of Hawaii whose board of

         13  directors consists of the chief state school officers

         14  of the region we serve as well as constituent members

         15  of parents, teachers, business members and community

         16  members.

         17              The region we serve includes Hawaii,

         18  American Samoa, Guam, Federated States of Micronesia,

         19  the Common Wealth of Northern Mariana Islands,

         20  Republic of Palau and Republic of the Marshall

         21  Islands.

         22       Q.     I see.  And how long, ma'am, has PREL

         23  been in existence?

         24       A.     I think last year we celebrated 10 years.

         25       Q.     Congratulations.






                                                               9

          1       A.     Thank you.

          2       Q.     Now, PREL in the course of its work does

          3  contract with the Department of Education, the Hawaii

          4  state Department of Education, does it not?

          5       A.     It has, yes.

          6       Q.     Does it have, for example, contracts

          7  without telling me specifically what they are, does

          8  it presently have contracts with the State of Hawaii

          9  Department of Education?

         10       A.     I'm sure we do, yes.

         11       Q.     As far as presently the nature of how

         12  many contracts -- I understand we didn't prepare you

         13  for this, but could you tell me how many or give me

         14  an estimate of how many such contracts you might have

         15  right now current?

         16       A.     I don't think more than five.

         17       Q.     Now, is it a usual practice if we might

         18  just focus on the State of Hawaii Department of

         19  Education not only the existing about five contracts,

         20  but contracts you've had in the past, is it a normal

         21  practice to utilize the services of subcontractors?

         22       A.     My familiarity with each Department of

         23  Education contract -- I'd like to answer that broadly

         24  that yes, we do often have contracts in which we use

         25  subcontractors.  I can't remember the other contracts






                                                               10

          1  with the Department of Education which we would have,

          2  but I'm not sure.

          3       Q.     I see.  In the ones that you do recall

          4  that you utilize the services of subcontractors,

          5  ma'am, is there a policy or procedure that your

          6  company follows in identifying which organizations or

          7  people would qualify first of all to be a

          8  subcontractor and then go through another policy or

          9  process whereby ultimately a person or an

         10  organization is actually selected to be the

         11  subcontractor in that job?

         12       A.     I think a lot depends on the way it was

         13  initiated.  PREL is a federal contractor and grant

         14  holder primarily.  So much of my experience I would

         15  be relying relates to that experience, and the way we

         16  process transactions and enter into grant and

         17  contracts with the federal government.

         18              Often times with the federal government

         19  they do -- we put in proposals that have specified

         20  contractors of partners or collaborators that we use

         21  to do a program of work, and often times this is at

         22  the federal government's -- we propose with these

         23  people and they're part of our work, and then the

         24  subcontract ensues once we're given the award.

         25              So there are those instances in which,






                                                               11

          1  yes, they're established up front.  There are other

          2  instances which it might not be.

          3       Q.     All right.  I'm not sure if you're aware

          4  of this, ma'am, but the reason we subpoenaed you here

          5  today was to ask you some questions about specific

          6  contracts that I think you're aware of that, ma'am.

          7       A.     Yes.

          8       Q.     And I'd like to ask you questions about

          9  them, but before I do, is it a typical situation

         10  where you might enter into a contract with the

         11  Department of Education, for example, yet have that

         12  contract funded not necessarily by the State of

         13  Hawaii but by the federal government?

         14       A.     I can't say we've had very many contracts

         15  with the Department of Education; so if you're

         16  talking about the specific ones, probably unusual

         17  because I don't think the others were or at least

         18  they didn't specify where the funding came from.

         19       Q.     All right.

         20       A.     So I wouldn't know.

         21       Q.     In other words if, in fact, the funding

         22  came from impact aid, that would be -- your

         23  understanding would be that it was federal funds,

         24  right?

         25       A.     Right.






                                                               12

          1       Q.     And maybe we ought to clarify, ma'am.

          2  What we're saying is that the federal government

          3  provides impact aid to the State of Hawaii Department

          4  of Education who then uses those funds to fund, for

          5  example, a contract with an organization like PREL

          6  which is what happened in this case, right?

          7       A.     Yes.

          8       Q.     All right.  Now, let me ask you then,

          9  ma'am, in terms of contracts of this nature, you, of

         10  course, are involved in the process in reviewing them

         11  before anyone at PREL in a position of authority to

         12  do so signs these contracts?

         13       A.     Yes.

         14       Q.     So that you have at least some

         15  familiarization with the terms of the contract, do

         16  you not?

         17       A.     Yes.

         18       Q.     These types of contracts, yes?

         19       A.     Yes.

         20       Q.     And normally in the case of contracts

         21  like the one we're talking about, are you also

         22  responsible for reviewing or having someone else make

         23  sure that the people involved with the contract

         24  comply with the terms of the contract?

         25       A.     As far as -- yes, yes.






                                                               13

          1       Q.     All right.  Would it be fair to say, or

          2  if you could identify them since you know what they

          3  are, and we're going to have them marked as exhibits

          4  for everyone to look at, but you have familiarity

          5  with the terms of these contracts we're talking

          6  about, do you not?

          7       A.     Yes.

          8       Q.     Were you involved with the negotiations

          9  that ended up in these contracts being signed?

         10       A.     Yes.

         11       Q.     All right.  So that I'm going to have the

         12  court reporter hand you first of all what we've

         13  marked as Exhibit 1 to this legislative hearing and

         14  will you briefly describe that document to us, ma'am?

         15       A.     It's an agreement for non-bid services

         16  from the State of Hawaii to PREL for our assistance

         17  on the Felix consent decree compliance work.

         18       Q.     And just so we know what we're talking

         19  about for the other members of the committee, we're

         20  talking about a document that's entitled "State of

         21  Hawaii Agreement for non-bid Purchase of Goods and

         22  Services."  It has an effective date of August 15,

         23  2000, and it is between the Department of Education

         24  and PREL; is that correct?

         25       A.     Correct.






                                                               14

          1       Q.     And then let me have the reporter hand

          2  you what we're going to mark as Exhibit 2 for the

          3  purposes of this Joint Senate-House Investigative

          4  Committee hearing and ask you to identify that.

          5       A.     This is a copy of a fax that I sent to

          6  someone at Hawaii State Department of Education as

          7  requested -- upon their request which is a copy of

          8  PREL's contract with Kaniu 1 referred to as Na Laukoa

          9  Program and the modification thereto.

         10       Q.     All right.

         11       A.     And extension.

         12       Q.     So again, it's a shorter document with

         13  this fax transmittal page under your organization's

         14  letterhead addressed to Ms. Laurel Johnston who is,

         15  as you know, with the Department of Education?

         16       A.     Correct.

         17       Q.     And it comes from you, and it's

         18  transmitting a copy of a contract that is between

         19  PREL and it says Kaniu, I guess, Roman I and Hawaii

         20  Limited Liability Company.  Am I correct?

         21       A.     Correct.

         22       Q.     And then Exhibit 3 is a shorter document.

         23  Will you identify that for us?

         24       A.     This is an internal document that PREL

         25  uses whenever a contract is developed, and it's






                                                               15

          1  called "Worksheet for preparation of Contracts,

          2  Memorandum of Understanding, et cetera."

          3       Q.     All right.  Now, you also are familiar

          4  with that document, are you not?

          5       A.     Yes.

          6       Q.     Now, if I might ask you -- before I go

          7  on, I meant to ask you a few other questions, ma'am.

          8              Other than to your conversations with

          9  your attorney, ma'am, which are privileged, have you

         10  been contacted by anyone from the Department of

         11  Education or any representative of that person

         12  regarding your testimony today?

         13       A.     No.

         14       Q.     No one from the Department or appearing

         15  to represent a member of the Department has discussed

         16  any matters related to these exhibits that we

         17  produced today, that we've marked today, has that not

         18  happened?

         19       A.     That has not happened.

         20       Q.     All right.  Now, if we might look at

         21  these two exhibits, ma'am, Exhibit 1, then, the

         22  thicker document is the actual contract between the

         23  DOE and PREL, is it not?

         24       A.     Yes.

         25       Q.     And it is in an amount of $2,320,611.00?






                                                               16

          1       A.     Correct.

          2       Q.     And it is, as we can see from the face

          3  page, funding that would be provided by impact aid

          4  which we understand to be federal funds?

          5       A.     Yes.

          6       Q.     And it also on the first page indicates

          7  that the agreement is a procurement expenditure of

          8  public funds for goods and services and that it goes

          9  on to describe the fact that it was considered exempt

         10  from the state procurement laws and such because of

         11  an order issued by the United States District Court

         12  for the District of Hawaii; is that correct?

         13       A.     Correct.

         14       Q.     And it has an order issued pursuant to

         15  the Felix vs. Cayetano consent decree also it appears

         16  to say, right?

         17       A.     Right.

         18       Q.     And you understand that the State of

         19  Hawaii does have specific procurement laws that apply

         20  to contracts of this nature?

         21       A.     Yes, I understand that, yes.

         22       Q.     Without knowing -- I'm not asking you,

         23  ma'am, the exact provisions of the law just generally

         24  because PREL does from time to time contract with the

         25  State of Hawaii whether it be the Department of






                                                               17

          1  Education or otherwise, you know that there are

          2  specific procurement laws by which people who

          3  contract with the State are governed?

          4       A.     Yes.

          5       Q.     All right.  Now in this case, though, you

          6  understood that these procurement laws didn't apply

          7  to this transaction?

          8       A.     Correct.

          9       Q.     Now, do you recall going back to the

         10  point in time of the summer of 2000 what the

         11  circumstances were under which PREL, in fact,

         12  contracted with the State of Hawaii Department of

         13  Education for this contract that we've identified as

         14  Exhibit 1?

         15       A.     (Witness nods head.)

         16       Q.     You're nodding your head.  Take as long

         17  as you like.

         18       A.     I was not -- let me try to say.  In

         19  August we were advised or became aware -- at least I

         20  became aware.  I can't speak for others -- of the

         21  desire for the State of Hawaii Department of

         22  Education to secure PREL's services for assistance on

         23  the Felix consent decree.

         24              At that time PREL followed its normal

         25  procedures to review and go through some of the --






                                                               18

          1  execute the contract.

          2       Q.     Sure.  Do you recall what your

          3  involvement was, though, in the steps that led up to

          4  the signing of this contract?

          5       A.     I participated on a team that PREL put

          6  together as it does for all contracts that come up.

          7  We put together a team of individuals who are

          8  familiar with the consent area that services are

          9  being requested or specialists in that.

         10              Some planning and evaluation personnel

         11  assisted and our management assisted, and I provide

         12  the contractual and financial information or review

         13  of a contract.  So we've met, and there were

         14  discussions about this work.

         15       Q.     All right.  There was no formal bid

         16  process with this contract, was there?

         17       A.     No, there was not.

         18       Q.     There were discussions for people on the

         19  Department of Education's side on the one hand and

         20  PREL on the other hand as a result of which this

         21  contract was entered into?

         22       A.     Correct.

         23       Q.     Who was it under the DOE's side, ma'am,

         24  that represented the department in these

         25  negotiations?






                                                               19

          1       A.     Dr. LaMehieu.

          2       Q.     Dr. LaMehieu himself?

          3       A.     Yes.

          4       Q.     Was there anyone else to your

          5  recollection that was involved in that -- in those

          6  discussions?

          7       A.     If I can go back and qualify it a little

          8  bit, I had contact with Dr. LaMehieu but probably no

          9  doubt were others involved but I really don't know.

         10       Q.     I see.  I understand what you're saying.

         11  What you're saying is you as the PREL representative

         12  negotiated with Dr. LaMehieu as the DOE

         13  representative?

         14       A.     But the negotiation on PREL's behalf was

         15  also not just me.  It was also a team that was doing

         16  it.

         17       Q.     I see.

         18       A.     And they may have talked to other people

         19  and engaged others, but Dr. LaMehieu was the one I

         20  talked to.

         21       Q.     All right.  Would it be fair to say,

         22  ma'am, that you were the person of the highest

         23  administrative position at PREL who negotiated with

         24  the State on this contract?

         25       A.     I'd like to say so, but no, I was not.






                                                               20

          1       Q.     I see a Don Burger signed the contract

          2  also?

          3       A.     Don Burger, no, his name is not on the

          4  contract.

          5       Q.     You're right.  I think his name is on one

          6  of the worksheets, perhaps?

          7       A.     Right.  Don Burger was the program

          8  manager.

          9       Q.     Sure.  I think Mr. or Dr. Kofel,

         10  K-O-F-E-L signed on behalf of PREL?

         11       A.     Correct.

         12       Q.     Was he involved with the negotiations

         13  also?

         14       A.     He was familiar with it.  I'm not sure if

         15  he was around at the time that some of the

         16  conversations were going back and forth.

         17       Q.     Okay.  This -- then it would have been,

         18  of course, standard procedure for Mr. Kofel as the

         19  president and C.E.O. of PREL to sign on behalf of

         20  PREL?

         21       A.     Definitely.  He did sign the contract.

         22       Q.     But you did the negotiations, though?

         23       A.     Only part of it.  I participated in it.

         24  There were conversations with others, and you see the

         25  chief program officer there is -- also participated.






                                                               21

          1       Q.     Who would that have been?

          2       A.     Dr. Tom Barlow.

          3       Q.     I'm sorry?

          4       A.     Dr. Tom Barlow.

          5       Q.     Barlow?

          6       A.     Yes.

          7       Q.     All right.  Now, in looking at the

          8  contract, ma'am, without going into very specific

          9  detail, you understand that the department was

         10  looking for services related to what they call

         11  targeted technical assistance?

         12       A.     Correct.

         13       Q.     And after your working was put together

         14  and discussed, what was being asked for in terms of

         15  services from PREL, PREL felt confident that it could

         16  provide the services in this area of targeted

         17  technical assistance?

         18       A.     Yes.

         19       Q.     And if I may ask, ma'am, looking at what

         20  was required under this contract, would it be fair to

         21  say that PREL and PREL alone without the assistance

         22  of any other organization or person or subcontractor

         23  or they could be all the same, that PREL had the

         24  people with the skills and ability to handle this

         25  contract alone?






                                                               22

          1       A.     That's probably way beyond my ability

          2  about the skills of others.  I can volunteer that

          3  PREL normally collaborates and works with others as a

          4  team on a major piece of work.  So we have very few

          5  federal programs in which PREL is just doing it

          6  itself.

          7       Q.     I see.

          8       A.     It's normal for us to have another

          9  organization whether it be a university or other

         10  assistance provider to participate.

         11       Q.     And how do you -- if I might ask you

         12  generally, ma'am, how do you go about, then,

         13  identifying this organization or institution or

         14  person that you are going to have work in conjunction

         15  with you to fulfill the terms of the contract?

         16       A.     Again, it goes back.  Many times it's in

         17  our bid with the federal government to say that or

         18  somebody will advise us of someone like the federal

         19  government primarily, but the selection of

         20  subcontractors when it has to do with a technical

         21  area in education I'm generally not -- I'm not one of

         22  those making those decisions.

         23       Q.     You do have knowledge, though, ma'am, in

         24  this case of these two contracts, Exhibits 1 and 2,

         25  you do have knowledge as to how the subcontractor was






                                                               23

          1  selected though, don't you?

          2       A.     Yes, definitely.

          3       Q.     And what I might ask you to do if you

          4  might look at these contracts side by side look at

          5  first Exhibit 1 and then Exhibit 2.  If you thumb

          6  through Exhibit 1 maybe three quarters of the way

          7  through, there is a page entitled "Scope of

          8  Services."

          9       A.     Yes.

         10       Q.     You're familiar with that, are you not?

         11       A.     Yes, I am.

         12       Q.     And what those two pages do is they --

         13  maybe more than two.  What those four pages do is

         14  define the work that PREL would need to complete to

         15  comply with the terms of that agreement.

         16       A.     Correct.

         17       Q.     And then if we look at Exhibit 2, then,

         18  ma'am, the contract -- the subcontract I guess we

         19  might call it between PREL and Na Laukoa which was

         20  entered into after Exhibit 1 of course and the scope

         21  of services we see the exact same four pages?

         22       A.     Correct.

         23       Q.     In fact, I could be wrong, but there is

         24  not a word that is different in the four pages

         25  entitled "Scope of Services" in Exhibit 1 with the






                                                               24

          1  four pages entitled "Scope of Services" in Exhibit 2?

          2       A.     They are the same document.

          3       Q.     And so that if we look at either one of

          4  them, let's look at Exhibit 1 first what the scope of

          5  services does, then, is it already tells us that Na

          6  Laukoa is involved in the contract?

          7       A.     Correct.

          8       Q.     And am I to understand, then, the way

          9  this came to you -- to you meaning PREL -- was that

         10  someone in the Department of Education wrote up

         11  agreement 1 of course without the handwriting and

         12  presented it to you with a section entitled "Scope of

         13  Services" as is exactly contained in Exhibit 1?

         14       A.     I think Exhibit 1 was a joint effort

         15  where we helped develop those scope of services based

         16  on what we perceived their needs were and then went

         17  back and forth where additions and whatever went.

         18       Q.     All right.  However, this scope of

         19  services that would be contained in both agreements

         20  as far as the naming of Na Laukoa is concerned --

         21       A.     Yes.

         22       Q.     -- that was not PREL's doing though, was

         23  it?

         24       A.     No, it was part of the contract.

         25       Q.     Well, when you say no, it was part of the






                                                               25

          1  contract, am I to understand, ma'am, that when the

          2  scope of services section was negotiated in Exhibit 1

          3  which then became the exact same thing in Exhibit 2,

          4  that essentially PREL was told that Na Laukoa would

          5  be named in this section to be involved with that

          6  contract?

          7       A.     Yes, we took the contract with the

          8  understanding that Na Laukoa absolutely would be a

          9  partner or a subcontractor in the project.

         10       Q.     And the knowledge you got that Na Laukoa

         11  would absolutely be a subcontractor on the contract

         12  that information was provided to you by Dr. LaMehieu,

         13  was it not?

         14       A.     Correct.

         15       Q.     And directly and specifically from

         16  Dr. LaMehieu, was it not?

         17       A.     As far as I know.

         18       Q.     Now, were you aware, ma'am, at this point

         19  in time that even prior to your negotiations with

         20  Dr. LaMehieu that Dr. LaMehieu had attempted to get

         21  the State Department of Education to contract

         22  directly with Na Laukoa for pretty much the same

         23  services that your contract provides for?

         24       A.     Yes, I've heard that, yes.

         25       Q.     You've heard that.  What I'm asking you






                                                               26

          1  is did you know when you were negotiating it?

          2       A.     Yes, yes.

          3       Q.     And how did you obtain that information?

          4       A.     I think it was explained to us in a

          5  meeting when the history of this work was presented,

          6  and I think it was a meeting with the Department of

          7  Education personnel.

          8       Q.     Not Dr. LaMehieu?

          9       A.     He was there too.

         10       Q.     And did -- strike that.  And in this

         11  meeting with the Department of Education personnel,

         12  do you recall who they were?

         13       A.     No, I don't.

         14       Q.     And do you recall what information was

         15  imparted to you by the Department of Education

         16  personnel?

         17       A.     No, but it sounded similar to what you

         18  were mentioning earlier that there was a history

         19  behind --

         20       Q.     I see.

         21       A.     -- where we were coming to.

         22       Q.     Well, maybe I'd ask you this way, ma'am.

         23  At the time that you were negotiating for this

         24  contract and before you signed it, any time before

         25  you signed it on behalf of PREL you and Dr. Kofel,






                                                               27

          1  were you aware that personnel in the Department of

          2  Education, fairly high administrative personnel, were

          3  against Na Laukoa being involved in any way in this

          4  type of contract?

          5       A.     Personally, no.

          6       Q.     You came to learn that later of course?

          7       A.     Yes.

          8       Q.     But at that time you had no knowledge

          9  that there were specific complaints made by not only

         10  those in the Department of Education but also the

         11  Department of Health as to the ability of Na Laukoa

         12  to provide the type of services and the quality of

         13  services that were required?

         14       A.     No, I didn't have any personal knowledge

         15  of that.

         16       Q.     All right.  And by the way, if you know,

         17  ma'am, I'm not trying to have you answer questions

         18  you don't know about, but did you understand that a

         19  contract such as this because it was being funded by

         20  Federal Impact Aid would avoid the scrutiny of the

         21  state legislature because it was federal funds versus

         22  state funds?

         23       A.     No, I did not know that.

         24       Q.     And do you know, ma'am, at the time you

         25  negotiated this contract that because of the manner






                                                               28

          1  in which this contract was entered into, in other

          2  words, with PREL as opposed to Na Laukoa that the

          3  Board of Education which would have had to supervise

          4  I should say approve this type of contract would not

          5  practically know that the contract, in effect, had

          6  provided for a substantial part of work to be done by

          7  Na Laukoa, not PREL.  Were you aware of that?

          8              MR. SLOVIN:  Excuse me.  That's a very

          9  long complex question.  Perhaps you can break it up

         10  because it also assumes that she understands the

         11  working relationships between the board and its

         12  authorities with respect to contracts.

         13              SPECIAL COUNSEL KAWASHIMA:  That's well

         14  taken.  Let me rephrase that.

         15       Q.     (By Special Counsel Kawashima)  Are you

         16  aware of the relationship between the Board of

         17  Education and the Department of Education with regard

         18  to the entering into of contracts?

         19       A.     No, I'm not.

         20       Q.     All right.  That makes it easy.  Now, so

         21  that now we look at this contract that Dr. LaMehieu

         22  requires that Na Laukoa be involved in the contract,

         23  did they, in fact, provide services -- did Na Laukoa

         24  provide services?

         25       A.     Yes.






                                                               29

          1       Q.     And what type of services did Na Laukoa

          2  provide?

          3       A.     I think it's somewhat described in that

          4  attachment, and I'll try to explain it.  They were --

          5  let me think because I'm not on the program side; so

          6  I'm trying to say.

          7              MR. SLOVIN:  Let me just interpose.  You

          8  have subpoenaed Don Burger who's a program manager,

          9  and I think Karen Erhorn will try to answer the best

         10  as possible, but he's probably in a better position

         11  to give you more information on that.

         12              KAREN ERHORN:  Definitely.

         13              SPECIAL COUNSEL KAWASHIMA:  I understand.

         14  That.  We actually have tried to have Mr. Burger

         15  appear here for reasons, I'm sure good and valid,

         16  reasons he was not able to be served.

         17              MR. SLOVIN:  He was in Saipan at the

         18  time.

         19              SPECIAL COUNSEL KAWASHIMA:  Good reason.

         20       Q.     (By Special Counsel Kawashima)  But,

         21  ma'am, just to the best of your ability we appreciate

         22  it if you can, we may or may not have the time to

         23  have Dr. Burger come here.

         24       A.     Na Laukoa provided some mental health

         25  side component, knowledge and experience and capacity






                                                               30

          1  that PREL -- that's not our expertise is more on

          2  education.  They provided personnel to individual --

          3  to oversee some of the, in fact, all of the technical

          4  assistance coordinators and to fulfill the services

          5  as outlined in the attachment.

          6       Q.     What mental health services, do you know

          7  what type of services they were, ma'am?

          8       A.     No, I don't.

          9       Q.     Not at all?

         10       A.     I know it had to do with children and

         11  something after school help that they had done before

         12  and probably are still doing.

         13       Q.     With children?

         14       A.     I would assume, but I don't know.

         15       Q.     All right.  All right.  How about the

         16  technical assistance coordinators, by whom were they

         17  hired by the way?

         18       A.     PREL was -- they were contracted for by

         19  PREL as outlined in the attachment work.  There was a

         20  whole process followed for soliciting and engaging

         21  these technical assistance coordinators of which Na

         22  Laukoa participated.

         23       Q.     And to what extent did they participate?

         24       A.     They were part of the team to help

         25  solicit, you know, there was an advertisement that






                                                               31

          1  were not technical assistance coordinators and they

          2  help review the r�sum�s, made selections,

          3  recommendations, et cetera.

          4       Q.     In your mind, ma'am, from what you know

          5  about the contract and only what you know, did it

          6  appear that what PREL ultimately was doing was to be

          7  training the personnel from Na Laukoa as to the

          8  requirements of the contract or things that had to be

          9  done under the contract?

         10       A.     I think PREL naturally does that, and we

         11  do it with almost all -- it's not unexpected.

         12  Capacity building is part of our forte so to speak.

         13  So we did -- we do that with everyone we work with in

         14  certain areas.  We certainly did it with Na Laukoa

         15  and -- but in other areas I don't -- probably not

         16  when it comes to the program side.

         17       Q.     Well, on the side of obtaining technical

         18  assistance coordinators and by the way these types of

         19  technical assistance coordinators were a very

         20  important part of this contract, were they not?

         21       A.     Yes.

         22       Q.     On that side, ma'am, in terms of the

         23  soliciting and obtaining and hiring of these

         24  individuals, as you say they provided assistance, did

         25  they not?






                                                               32

          1       A.     Yes.

          2       Q.     But that type of assistance that they

          3  provided, ma'am, PREL would have been quite capable

          4  of providing those services themselves without the

          5  assistance of anyone from Na Laukoa; is that correct?

          6              MR. SLOVIN:  Mr. Kawashima, I think the

          7  problem that I'm concerned about here is you have

          8  subpoenaed Don Burger who is scheduled to testify

          9  next Friday who is pretty clearly based on the

         10  qualifications that he's in a much better position to

         11  answer that kind of question.

         12              SPECIAL COUNSEL KAWASHIMA:  Well --

         13              MR. SLOVIN:  Ms. Erhorn will help as much

         14  as possible.  What I am concerned about is that you

         15  won't get a clear picture of what actually occurred.

         16              SPECIAL COUNSEL KAWASHIMA:  No, I

         17  understand that we intend to get as clear a picture

         18  as possible, Mr. Slovin, but I believe that she was

         19  going to answer the question, and I think she can to

         20  the extent of her knowledge.  And I'm not attempting

         21  to get her to say something she doesn't know about,

         22  first of all; or second, to get her to say anything

         23  that might contradict Mr. Burger.  I really am not.

         24  But I think she has some knowledge in this area which

         25  is a fairly ministerial area I might say in terms of






                                                               33

          1  hiring technical assistance coordinators.  We're not

          2  talking about high level --

          3              MR. SLOVIN:  Well, it's not ministerial.

          4  I think that's one of the concerns.  I'm not

          5  objecting to your asking the question, but I just

          6  think that the way the question is being asked -- and

          7  it's not an unfair question -- but it's really being

          8  asked to the chief financial officer who doesn't have

          9  the same program involvement in this that Mr. Burger

         10  does.

         11              SPECIAL COUNSEL KAWASHIMA:  I understand.

         12  I appreciate that, but I think she also testified

         13  earlier, Gary, that she has knowledge of these

         14  contracts by virtue of her position in terms of

         15  making sure there's compliance; and by virtue of

         16  that, would have a bit of information and knowledge

         17  about the contract that perhaps someone in a lower

         18  administrative position might not have, and that's

         19  all I'm asking.

         20              MR. SLOVIN:  Okay.

         21              SPECIAL COUNSEL KAWASHIMA:  Just to the

         22  extent that she knows.

         23              KAREN ERHORN:  What was the question?

         24       Q.     (By Special Counsel Kawashima)  Ma'am,

         25  don't ask me to ask it again.






                                                               34

          1       A.     I think it was could PREL have recruited,

          2  solicited, engaged those --

          3       Q.     Just alone without necessarily having any

          4  assistance from anyone from Na Laukoa.

          5       A.     At the time -- there was a lot of

          6  manpower needed at the time.  We didn't anticipate --

          7  that was not in our contract to do that work.  That

          8  was the recruitment as you'll see as No. 1 in the

          9  contract of the management team.  That was their

         10  responsibility.

         11              When you found that it wasn't happening,

         12  then it was into each benchmarks -- and like I said

         13  Don Burger can talk a lot better about this -- it

         14  became a real race to start engaging that -- start

         15  engaging in the solicitation and recruitment.  And

         16  whether we could -- I think technically at any point

         17  in time we probably could do that, yes.  Given the

         18  circumstances under that time frame, I'm not sure I

         19  could say yes.

         20       Q.     Well, the contracts provided for Na

         21  Laukoa to be paid under your subcontract a certain

         22  amount; is that correct?

         23       A.     Correct.

         24       Q.     And that amount was what, ma'am, do you

         25  recall?






                                                               35

          1       A.     I think the contract with Na Laukoa was

          2  around $688,000.  I can look right here and see it.

          3       Q.     Yeah.  I see a figure of $688,245?

          4       A.     Correct.

          5       Q.     Total contract amount that Na Laukoa paid

          6  to -- I'm sorry, PREL paid to Na Laukoa pursuant to

          7  these two agreements?

          8       A.     PREL has not paid that to Na Laukoa.

          9  That was the contract amount.

         10       Q.     Was that amount paid?

         11       A.     No.

         12       Q.     Why not?

         13       A.     This is a cost reimbursement contract,

         14  and also you'll see we're also holding back, like,

         15  $40,000 and we intend to do so at some point in time.

         16       Q.     All right.  When you say cost

         17  reimbursement, what you're saying is that the

         18  appropriate paperwork hasn't been provided yet for

         19  you to pay it all other than the $40,000?

         20       A.     Correct.  They'd have to submit invoices

         21  with the cost, they get approved and then upon that

         22  we make payment or final payment.

         23       Q.     In fact, this contract that was entered

         24  into with Na Laukoa in the year 2000 for a period I

         25  believe that went through June 30, 2001 of this year.






                                                               36

          1  That contract has been extended, has it not?

          2       A.     Correct.

          3       Q.     And it has been extended by that letter

          4  from Laurel Johnston to you up to and including

          5  August 31 of this year?

          6       A.     Correct.

          7       Q.     Has that contract been completed, then,

          8  to your knowledge and recollection?

          9       A.     Completed?  We have not extended it, but

         10  we intend to or we're expecting to.

         11       Q.     Whose decision was it to extend that

         12  contract?

         13       A.     To extend it to August 31?

         14       Q.     Yes.

         15       A.     Again, it was a joint decision of

         16  primarily the program people I guess.

         17       Q.     Well, let me ask this:  Whose decision

         18  was to include Na Laukoa in the process of this

         19  contract extension of being involved in the contract

         20  extension?

         21       A.     The work still called -- continued

         22  through June.  Our contract with the State Department

         23  of Education went through September 1.  We drafted --

         24  Na Laukoa is just till June we just did.  And so when

         25  the work continued in the summer, they continued as a






                                                               37

          1  partner in the summer.

          2       Q.     By whose choice?

          3       A.     Our choice.

          4       Q.     And was this another matter to your

          5  knowledge that was directed to PREL by Dr. LaMehieu?

          6       A.     No, I don't remember any discussion on

          7  that.

          8       Q.     You don't remember any discussion you had

          9  with Dr. LaMehieu on that?

         10       A.     No.

         11       Q.     Although in the first instance it was

         12  Dr. LaMehieu who specifically instructed PREL that Na

         13  Laukoa would be a part of that contract?

         14       A.     Asked PREL to participate in the contract

         15  with Na Laukoa, yes.

         16       Q.     In other words, to your knowledge, ma'am,

         17  if PREL had not agreed to include Na Laukoa as a

         18  subcontractor to this Exhibit 1, in all likelihood

         19  PREL would not have received that contract?

         20       A.     I really don't know.

         21       Q.     Was Dr. LaMehieu at that time in August

         22  of 2000 a member of the board of directors of PREL?

         23       A.     In August of 2000, correct.

         24       Q.     He had been a member of the board of

         25  directors of PREL for sometime before that though?






                                                               38

          1       A.     Correct.

          2       Q.     And the fact that he was a member of the

          3  board of directors of PREL and then awarded this

          4  contract to PREL caused some consternation among the

          5  public, did it not?

          6       A.     It appears to have, yes.

          7       Q.     There were newspaper articles written.

          8  I'm not suggesting anything was wrong on PREL's part,

          9  but I am saying that there were complaints voiced

         10  publicly by a number of people and organizations,

         11  were there not?

         12       A.     A number in the public?

         13       Q.     Yes.

         14       A.     Yes, I read those articles.

         15       Q.     You read those articles.  Well, you know,

         16  interestingly one of those articles, ma'am, out of

         17  the whole Advertiser when it discussed or I should

         18  say reported this matter indicated that the Board of

         19  Education after considering Dr. LaMehieu's being a

         20  member of your board -- and again, I'm not suggesting

         21  anything wrong on PREL's part -- but ruled that

         22  Dr. LaMehieu should no longer be a member of your

         23  Board of Directors.  Were you aware of that?

         24       A.     Yes.

         25       Q.     And in that very same article dated






                                                               39

          1  May 13, 2001 in quotes that the reporter obtained

          2  from Dr. LaMehieu in terms of what Na Laukoa had done

          3  or could do with regard to this contract we're

          4  talking about, Dr. LaMehieu was quoted as saying,

          5  "They -- meaning Na Laukoa -- "have never done this

          6  before.  That's the true statement.  But here's an

          7  important thing to realize, if you only give

          8  contracts to people who have done it before, then no

          9  one new will ever learn to do it and the Big Island

         10  will never have the capacity."

         11              Now, were you aware that Na Laukoa had

         12  never done this before, "this" meaning what the

         13  contract Exhibit 1 called for before you entered into

         14  that contract?

         15       A.     I remember hearing that statement, yes,

         16  yes.

         17       Q.     Thank you.  You remember hearing that

         18  statement.  Were you aware, though, before you

         19  entered into the contract which was before the

         20  article was written, that Na Laukoa had never done

         21  that before?

         22       A.     I'm sorry.  I think I heard Dr. LaMehieu

         23  say that before too that this was -- and that's one

         24  of the requests he had of PREL was to help mentor a

         25  Native Hawaiian organization and to grow capacity on






                                                               40

          1  the Big Island.  So all was clearly understood before

          2  we entered into the contract.

          3       Q.     So when you entered into this contract,

          4  then, part of the contract was for you, PREL, to

          5  train the people at Na Laukoa to some degree, right?

          6       A.     To build capacity as best.

          7       Q.     And to train them to do the job that they

          8  were supposed to do under that contract, right?

          9       A.     There's a lot of areas of training.

         10       Q.     Sure.

         11       A.     I'm not sure -- they certainly had -- and

         12  again this goes to the program's side -- but they

         13  certainly had personnel there who were capable to do

         14  it, to do the work.

         15       Q.     You know that from the program side?

         16       A.     Pardon?

         17       Q.     Do you know that from the program side

         18  you're saying?

         19       A.     Yes.

         20       Q.     So you have some knowledge of the program

         21  side then?

         22       A.     I know some -- I've seen r�sum�s, and

         23  they looked good.

         24       Q.     I'm not criticizing you, ma'am, but is

         25  that the extent of your knowledge of the program side






                                                               41

          1  having seen r�sum�s?

          2       A.     No.  Of course I've sat in some meetings,

          3  and I have more knowledge on that but.

          4       Q.     Sure.  Well, what do you think

          5  Dr. LaMehieu was referring to, then, when they say

          6  they, Na Laukoa, have never done this before, never

          7  done what before?

          8       A.     The way I read it never administered a

          9  large contract.

         10       Q.     And so that part of your contract, then,

         11  would require PREL to train Na Laukoa as to how to

         12  administer a large contract?

         13       A.     That's the way I read it.

         14       Q.     All right.  And that's part of what PREL

         15  was paid to do to train Na Laukoa to do that?

         16       A.     That's part of what we were tasked to do

         17  which is again fairly normal with what we do almost

         18  on a daily basis.

         19       Q.     Do you understand, ma'am, that with

         20  regard to the carrying out of this contract in terms

         21  of whether it be program or administrative work that

         22  essentially in the end PREL did all the work and all

         23  Na Laukoa provided was essentially secretarial

         24  services?

         25       A.     Absolutely not.






                                                               42

          1       Q.     What did they do, then, specifically that

          2  you're aware of other than secretarial services and

          3  other than assisting in locating and hiring technical

          4  assistance coordinators?

          5       A.     Their responsibility was with the

          6  technical assistance coordinators to oversight

          7  review, manage, answer their questions, help schedule

          8  them get into doors.  I mean, that was quite a few

          9  TACs to administer.

         10       Q.     I understand what you're saying as to

         11  what their responsibility should have been.  What I'm

         12  asking you, ma'am, is did they specifically carry out

         13  those responsibilities?

         14       A.     As far as I know, yes.

         15       Q.     Well, when you say as far as you know --

         16              MR. SLOVIN:  Well, we already indicated

         17  that she's not the program person who monitors this.

         18              SPECIAL COUNSEL KAWASHIMA:  That's why

         19  I'm asking if she's answering the question as if she

         20  knew.

         21       Q.     (By Special Counsel Kawashima)  Do you

         22  know if they carried out these responsibilities on

         23  the program side or not, ma'am?

         24       A.     Yes.

         25       Q.     Tell me what they did specifically then?






                                                               43

          1  Ma'am, if you don't know, please tell me.

          2       A.     I really don't.  I did not attend those

          3  meetings.  I was not part of the management team

          4  meetings.  I did not attend the TAC meetings, but I

          5  know those things were held, and all the processes

          6  were held.  But I didn't attend the meetings to be

          7  able to say specifically what they said at the

          8  meeting or what they did.

          9       Q.     Sure.  In terms of what happened in those

         10  meetings, who participated in them, who really, for

         11  example, ran the meetings, and whether or not Na

         12  Laukoa and their personnel had any part of carrying

         13  out that meeting you don't know that, do you?  You

         14  have to answer.

         15       A.     No.

         16       Q.     All right.  And as far as whether or not

         17  Na Laukoa did the tasks that they were required to do

         18  under the contract, in terms of program you do not

         19  have the ability to answer those questions, do you?

         20       A.     I think Dr. Burger would be much better.

         21       Q.     Sure.  You were not involved in the

         22  program side?

         23       A.     Yes.

         24       Q.     All right.  Were you contacted by any

         25  Department of Education personnel about this contract






                                                               44

          1  with the department before you signed it other than

          2  Dr. LaMehieu?

          3       A.     I can't remember anyone else.

          4       Q.     And oh, let me get back to one thing.

          5  When you had that discussion -- those discussions

          6  with Dr. LaMehieu, you among others at PREL that

          7  ended up in the entering into of agreement of this

          8  agreement Exhibit 1, did he ever mention the name of

          9  a person named by the name of Dr. Golden?

         10       A.     I've heard the name.  Whether it was

         11  mentioned at that time, I really couldn't remember.

         12       Q.     Do you know Dr. Golden yourself?

         13       A.     Yes, yes.  Well, no, I've never met.  I'm

         14  sorry.  I just heard the name.

         15       Q.     Sure.  Thank you.  And did Dr. LaMehieu

         16  mention to you or tell you or anyone else at PREL at

         17  that time whether or not there had been a discussion

         18  with Dr. Golden, Robert Golden there had been

         19  communications, written communication back and forth

         20  where Dr. Golden opposed, vehemently opposed

         21  contracting with Na Laukoa to provide these types of

         22  services?

         23       A.     I understand that that happened, and I

         24  did hear about that personally later on after the

         25  contract was executed.






                                                               45

          1       Q.     I see.

          2       A.     But I personally did not beforehand.

          3       Q.     You did not.  You did not personally hear

          4  that beforehand from Dr. LaMehieu?

          5       A.     No.

          6       Q.     Who did you hear it from later, ma'am?

          7       A.     Sometime afterwards we heard -- and I

          8  don't even know if this is factual about some

          9  lawsuit, and maybe Bob Golden's name was associated

         10  with it.

         11       Q.     Was there the name of an Albert Yoshii

         12  also?

         13       A.     Yes.

         14       Q.     And that's what you heard?

         15       A.     Yes.

         16       Q.     There was another individual who opposed

         17  that contract with Na Laukoa and ultimately became a

         18  subcontract with PREL?

         19       A.     Yes.

         20              SPECIAL COUNSEL KAWASHIMA:  Thank you,

         21  ma'am.  No further questions.

         22              CO-CHAIR SENATOR HANABUSA:  Members,

         23  instead of starting and then taking a break, we will

         24  take the break for the court reporter at this time

         25  and we ask that you return in a minute -- I mean,






                                                               46

          1  five minutes.  When I say minute, you'll probably

          2  come in five minutes; so we'll be taking a recess at

          3  this time.

          4              (Recess from 2:00 p.m. to 2:10 p.m.)

          5              CO-CHAIR SENATOR HANABUSA:  Members, back

          6  in session.  Before we proceed, Ms. Erhorn, this is

          7  the first time that the committee has had a witness

          8  represented by counsel, and what I'd like to remind

          9  the committee members and also Mr. Slovin is that the

         10  committee has enacted rules as permitted and as

         11  required under Chapter 21 of the Hawaii Revised

         12  Statues.

         13              Specifically Rule 3.1 the witness's

         14  counsel may advise the witness as to his or her right

         15  subject to reasonable limitation which the committee

         16  may prescribe to prevent obstruction of or

         17  interference with the order and conduct of the

         18  hearing.  And if there is an issue as to whether your

         19  testimony is required, it is the Co-Chairs who will

         20  either order you to answer or not to answer.

         21              So, Members, since we've never been faced

         22  with this situation before, I'm calling our rules to

         23  your attention.  You've never had a witness with an

         24  attorney present.  So we should all understand what

         25  the parameters of both the witness's rights, the






                                                               47

          1  attorney's rights and your rights are.

          2              So remember the ultimate decision as to

          3  any question as to the relevancy relies with your

          4  Co-Chairs and then you as the committee depending on

          5  how that goes will have the decision as to if, for

          6  example, it would be necessary to compel the

          7  testimony by going to court or any further action.

          8              So review your rules and with that we

          9  will continue.  Mr. Kawashima I understand has some

         10  other questions.

         11              SPECIAL COUNSEL KAWASHIMA:  Thank you.

         12       Q.     (By Special Counsel Kawashima)  I'm

         13  sorry, ma'am.  I forgot to ask you a few more.  I

         14  notice from Exhibit 2 that there is a budget summary

         15  that Na Laukoa provided breaking down the items that

         16  or items for which they would be seeking payment

         17  and/or reimbursement.  You see that, don't you?

         18       A.     Yes, I do.

         19       Q.     I assume PREL keeps accurate records of

         20  all payments made to Na Laukoa as in the case of this

         21  subcontract?

         22       A.     Yes.

         23       Q.     You do have those records?

         24       A.     Yes.

         25       Q.     Would you agree to or through your






                                                               48

          1  counsel provide copies of those records through this

          2  committee at your earliest convenience?

          3       A.     Yes.

          4       Q.     Thank you.  Do those records show how

          5  much Na Laukoa was paid or reimbursed for travel, for

          6  example?

          7       A.     Yes.  If I could explain, there's a

          8  $230,000 advance up front and then after that they

          9  invoiced and paid against that advance.  So we do

         10  have their invoices.

         11       Q.     How about for that first $200,000,

         12  though, do you recall if any backup pay, any receipts

         13  or anything of that nature was paid to justify that

         14  $200,000?

         15       A.     No, that's a typical type of advance that

         16  is given on contracts at least in our experience

         17  between with the federal government.  The Department

         18  of Education advance PREL funds, and we in turn

         19  advance funds to Na Laukoa to initiate the contract

         20  and the work.

         21       Q.     I understand.  But is there some manner

         22  or form of accountability, though, for those

         23  $200,000?

         24       A.     Definitely, definitely.

         25       Q.     And what is it?






                                                               49

          1       A.     Well, the amounts paid and you compare

          2  the amounts paid whether it be through an advance or

          3  through payment of an invoice against the total

          4  amount of the invoice is the detail.  So it might be

          5  different.  It might pay one and invoices might be

          6  more; invoices might be less.

          7       Q.     But the amount of the $230,000 advance

          8  would be accounted for in some fashion, though?

          9       A.     Absolutely.

         10       Q.     All right.  And then last area in terms

         11  of the travel expenses that were estimated to be

         12  $116,576 for travel interisland which to some extent

         13  would seem justified but also to the mainland, do you

         14  know what that travel was for to the mainland for Na

         15  Laukoa?

         16       A.     There was no mainland travel.

         17       Q.     I notice under the budget portion,

         18  though, to which is attached some sheets you see

         19  where they have section such as personnel, travel and

         20  so forth?

         21       A.     Yes, yes.

         22       Q.     You see where under travel for staff it

         23  says to the mainland for observations?

         24       A.     I'm sorry.  I answered your question

         25  incorrectly.  I was referring to the billings.  I






                                                               50

          1  think that was some plan initially in the contract

          2  that personnel would look, go to some other school or

          3  complex or departments of education and see how

          4  they're operating.  And that's just a mainland visit

          5  to look at other departments of education.

          6       Q.     You say that never took place?

          7       A.     No, it did not.

          8       Q.     And do you know why it never took place?

          9       A.     I guess they felt it wasn't necessary.

         10              SPECIAL COUNSEL KAWASHIMA:  All right.

         11  That's all I have.  Thank you.

         12              CO-CHAIR SENATOR HANABUSA:  Thank you

         13  very much.  We will begin with Vice-Chair Kokubun

         14  followed by Vice-Chair Oshiro.

         15              VICE-CHAIR SENATOR KOKUBUN:  Thank you,

         16  Madam Co-Chair.

         17                       EXAMINATION

         18  BY VICE-CHAIR SENATOR KOKUBUN:

         19       Q.     Ms. Erhorn, I wanted to talk about

         20  Exhibit 2 a little bit and just to help me.  Now,

         21  that's dated fairly recently September 12 informing

         22  the DOE with the assistance of Laurel Johnston that

         23  there is a modification for the time period for the

         24  contract, correct?

         25       A.     This exhibit and documents were presented






                                                               51

          1  to the department as requested.  They had requested a

          2  copy of the contract, and we provided a copy of the

          3  contract along with the modification.

          4       Q.     Okay.  And that modification request to

          5  extend the time period came from who?

          6       A.     Na Laukoa requested it, PREL reviewed it

          7  and PREL did it.

          8       Q.     Okay.  So the extension you indicated the

          9  extension was granted in time without any

         10  accompanying appropriation or allocation funds?

         11       A.     No.  You're correct, there's no

         12  additional funds necessary.

         13       Q.     Okay.  We had a previous witness Debra

         14  Farmer who was here, and she indicated that the

         15  contract for Na Laukoa was actually extended until

         16  October.  Are you familiar with that at all?

         17       A.     I'm not familiar with Debra Farmer saying

         18  that.  Am I familiar with the contract for Na Laukoa

         19  being extended to October?  Yes, there's a request in

         20  for us to extend the contract to October.

         21       Q.     And the approval is still pending?

         22       A.     It's still pending.

         23       Q.     With respect to that extension, was there

         24  any appropriation among your allocation of money?

         25       A.     No, it would be a no cost extension.






                                                               52

          1       Q.     You're not aware that additional monies

          2  that may be provided maybe you have another source

          3  other than the PREL contract for that extension?

          4       A.     No, no.  It would come out of our

          5  contract.

          6              VICE-CHAIR SENATOR KOKUBUN:  Okay.

          7  That's all.

          8              CO-CHAIR SENATOR HANABUSA:  Thank you.

          9  Representative Vice-Chair Oshiro followed by Senator

         10  Buen.

         11              VICE-CHAIR REPRESENTATIVE OSHIRO:  Thank

         12  you, Co-Chair Hanabusa.

         13                       EXAMINATION

         14  BY VICE-CHAIR REPRESENTATIVE OSHIRO:

         15       Q.     I just wanted to get some clarification

         16  on the partner in process that you had talked about

         17  earlier.  I think when Mr. Kawashima was initially

         18  asking you about how you determine who PREL will

         19  subcontract with, I think you had said something

         20  about sometimes the federal agency may advise or

         21  there may be outside experts giving advice; is that

         22  correct?

         23       A.     When we're proposing on a major piece of

         24  work, yes.

         25       Q.     Okay.  And then -- but in the end it's






                                                               53

          1  somebody actually you said someone else other than

          2  you but someone at PREL would actually do some kind

          3  of assessment as to who a proper subcontractor would

          4  be?

          5       A.     Yes.

          6       Q.     Okay.  But later on in your questioning,

          7  I do recall you saying that you attended a meeting

          8  where you -- essentially Superintendent LaMehieu said

          9  that the subcontractor was going to be Na Laukoa; is

         10  that correct?

         11       A.     Yes.

         12       Q.     Okay.  And do you recall approximately

         13  when this meeting was?  If the contract was entered

         14  into according to the date of it on August 15, 2000,

         15  do you recall about when this meeting occurred?

         16       A.     It was close to that time, and it was --

         17  if I put it in context, the normal meeting in which

         18  we were going over the scope of services and what was

         19  to be expected as I remember it.

         20       Q.     So when you folks were meeting to

         21  negotiate this contract, was there a lot of dispute

         22  over the terms of the contract or was it fairly

         23  smooth going?

         24       A.     It was smooth.

         25       Q.     Do you happen to remember about how long






                                                               54

          1  before the contract was entered?  Was it one week or

          2  two weeks or is there any kind of estimate you can

          3  provide?

          4       A.     It couldn't have been much more than two

          5  weeks before.

          6       Q.     Okay.  And at that meeting do you recall

          7  anyone -- you said that there was Department of

          8  Education personnel and yourself from PREL?

          9       A.     Yes.

         10       Q.     Okay.  Was there anybody else from PREL

         11  that was also present at this meeting?

         12       A.     Yes.

         13       Q.     Who else was that?

         14       A.     Dr. Burger was there, Dr. Barlow was

         15  there, Dr. Hammond was there, I think.

         16       Q.     Okay.  And besides the DOE personnel and

         17  the people from PREL, do you know if there was any

         18  other people there such as somebody from Na Laukoa?

         19       A.     I really can't remember.

         20       Q.     Okay.  And at that meeting do you recall

         21  if there were any questions raised as to why Na

         22  Laukoa was going to be the designated subcontractor?

         23       A.     PREL certainly discussed taking on or

         24  working in collaborating with Na Laukoa and certainly

         25  asked questions about it and about them and we got --






                                                               55

          1  so it was collaborative too.  It wasn't -- I don't

          2  think as specific as you might say.

          3       Q.     But there were some discussions as to why

          4  Na Laukoa was being the designated contract

          5  subcontractor?

          6       A.     Definitely, definitely.

          7       Q.     And according to Exhibit 2, the

          8  subcontract actually got entered into on September 6

          9  of 2000; is that correct?

         10       A.     Correct.

         11       Q.     Okay.  So there actually wasn't a

         12  significant time either between the time that PREL

         13  was contracted with this Department of Education and

         14  the time that PREL subcontracted with --

         15       A.     Correct.

         16       Q.     -- Na Laukoa.  I also had another

         17  question regarding Exhibit 3 and that's the worksheet

         18  for preparation of contracts, memorandums of

         19  understanding, et cetera.  Who is in charge of

         20  preparing this document?

         21       A.     Whenever a program wants to enter into a

         22  contract with whoever, programs generally, personnel

         23  will initiate this form.

         24       Q.     Okay.  So who is it at PREL that actually

         25  prepares this form?






                                                               56

          1       A.     This form is prepared.  We have many

          2  programs; so this form is prepared by many people.

          3  In this specific instance it was by Don Burger.

          4       Q.     Okay.  So when the -- under the first

          5  section of determination of contractor when it says,

          6  "Directed by Hawaii DOE to use Na Laukoa program to

          7  work on to provide technical assistance to Felix,"

          8  that was actually written by Mr. Burger?

          9       A.     I would assume so or a secretary helped

         10  him prepare it; but yes.

         11       Q.     Okay, okay.  And I also had another

         12  question.  So I see there that the total for the

         13  subcontract is $688,245; is that correct?

         14       A.     Correct.

         15       Q.     Okay.  But I assume to recall the

         16  contract with the Department of Education between

         17  Department of Education and PREL was actually for

         18  $2,320,611.00?

         19       A.     Correct.

         20       Q.     What is the justification for the

         21  difference in the contract and the subcontract

         22  pricing?

         23       A.     Well, PREL performed services for this

         24  work, and that's for PREL services.

         25       Q.     Okay.  And I guess that sort of gets me






                                                               57

          1  to my next question which is the scope of services

          2  for attachment one.  So you are familiar with this

          3  document, the scope of services?

          4       A.     Yes, I am.

          5       Q.     Okay.  I see under the first part that

          6  there is something called a Felix consent decree

          7  management team which consists of DOE and Department

          8  of Health personnel; is that correct?

          9       A.     Yes.

         10       Q.     So this management team is exclusively

         11  made up of just essentially the state people?

         12       A.     As I understand, yes.

         13       Q.     Okay.  And in looking at the actual

         14  duties or what the management team is required to do,

         15  I don't see anything specifically requiring them to

         16  train the actual TACs or to train the Na Laukoa

         17  program.  Do you recall if there was anything like

         18  that?

         19       A.     No, I don't see it, no.

         20       Q.     So if someone came -- an earlier

         21  testifier came in and said that she ended up having

         22  to actually train the Na Laukoa Program and she was

         23  on the management team and that was just what she

         24  understood she had to do, as you look through the

         25  scope of services that's something that's beyond what






                                                               58

          1  is in this contract for this scope?

          2       A.     Depends what training it is.  It just

          3  depends on what it is you're talking about as far as

          4  training.  So being familiar with state operations,

          5  being familiar with whatever, they have to be --

          6  people have to be familiar with -- you would expect a

          7  management team or any organization to help with the

          8  consultants.

          9       Q.     Okay.  But if the actual training had to

         10  more or less hypothetically of course because you

         11  don't actually know what happened, but hypothetically

         12  if the training actually had to do with the substance

         13  of the work let's say in actually teaching these

         14  people how to essentially perform their functions as

         15  technical assistance coordinators in the IDEA or

         16  under Chapter 56 Administrative Process, that's the

         17  type of training that had to be provided substantive.

         18  That isn't necessarily listed in the scope of

         19  services though?

         20       A.     Probably not.  I don't know.

         21       Q.     And when I look under the description for

         22  what PREL was supposed to provide under the scope of

         23  services, I don't really see them having any duty to

         24  train the TACs or the Na Laukoa Program either on the

         25  substantive issues that I just talked about; is that






                                                               59

          1  correct?

          2       A.     I don't see the word "train."

          3       Q.     Okay.  So earlier when Mr. Kawashima was

          4  talking, I recall him using the word "training" when

          5  he was questioning you, and I was a little confused

          6  because it seemed that he was talking about this

          7  statement you had heard that Na Laukoa had never done

          8  this before.  And later on in further clarification

          9  you said they had no knowledge of how to administer a

         10  large contract; is that correct?

         11       A.     I said my interpretation of some of that

         12  was that their experience in administering a large

         13  contract like this, but I really didn't know that.

         14       Q.     Okay.  Okay.  It's just because later on

         15  he asked you about the duty of PREL to quote, unquote

         16  "train" Na Laukoa and you said that you believed that

         17  there was some kind of quote, unquote "training" that

         18  was involved?

         19       A.     We often times mentor most every

         20  organization we come as other organizations mentor

         21  us; so that was definitely a component of this.

         22       Q.     Okay.  But again, the training you're

         23  talking about isn't really the substantive part of

         24  this?

         25       A.     No.






                                                               60

          1       Q.     It's more the administrative or the

          2  implementation part of it actually?

          3       A.     The administrative.

          4       Q.     Okay.  Okay.  I'm sorry.  Getting back to

          5  the scope of services, so basically the scope of

          6  services specifically lays out the responsibilities

          7  of the management team, the responsibilities of the

          8  TACs, the responsibilities of Na Laukoa and the

          9  responsibilities of PREL, but therein I don't really

         10  see anyone designated with the responsibility to

         11  train Na Laukoa as to what they are to do.  Is that

         12  correct?

         13       A.     I think you're correct.  There is no

         14  training.

         15       Q.     Would the general assumption be sort of

         16  that they know what they're supposed to do so no one

         17  really needs to train them how to do it; is that

         18  correct?

         19       A.     Yes.

         20              VICE-CHAIR REPRESENTATIVE OSHIRO:  Okay.

         21  Thank you.  I have no further questions.

         22              CO-CHAIR SENATOR HANABUSA:  Thank you,

         23  Vice-Chair Oshiro.  Senator Buen followed by

         24  Representative Ito.

         25              SENATOR BUEN:  Thank you, Co-Chair






                                                               61

          1  Hanabusa.

          2                       EXAMINATION

          3  BY SENATOR BUEN:

          4       Q.     Ms. Erhorn, I believe you had said that

          5  Na Laukoa provides technical services and mental

          6  health to children?

          7       A.     As I understand, yes.

          8       Q.     Okay.  In Exhibit 2, Attachment 3 budget

          9  summary, there is a cost itemization of personnel,

         10  $162,400; fringe benefits, $45,472; travel and

         11  there's supplies, contractual and under others you

         12  have facilities, meetings and conferences, printing

         13  and duplication, communication and other services and

         14  then you have the total direct costs and indirect

         15  costs.

         16              Can you explain or identify, give us some

         17  kind of brief explanation of these items.  I don't

         18  see anything in here as Na Laukoa providing technical

         19  services.  Is it somewhere in here that I don't see

         20  as providing technical services?

         21       A.     The document you're looking at is just a

         22  budget and it doesn't give the explanation associated

         23  to, let's say, the personnel that are listed there or

         24  the travel or whatever.

         25              This is the budget to go with the scope






                                                               62

          1  of services.  So this is Na Laukoa's budget for their

          2  personnel and whatever to provide the services and

          3  the scope of work.

          4       Q.     Is there anywhere in any of the exhibits

          5  that has been provided that would explain that?

          6  Would they -- I would think that Na Laukoa would

          7  provide a statement of expenses to be paid.

          8              Now, is there any, as a C.F.O. for PREL,

          9  would you have that kind of information in here?

         10       A.     Yes, in the contract itself that was just

         11  the budget.  We don't pay off of budget.  We'll pay

         12  off of invoices in the contract and one of the --

         13       Q.     Where can I find that in the exhibit?

         14       A.     I think it's 3.5 in the contract.

         15       Q.     So that would be pay Na Laukoa Program

         16  $688,245 and then -- is that correct?

         17       A.     As follows, yes.

         18       Q.     As follows.  Other than that, it doesn't

         19  give me -- it doesn't tell me anything in detail of

         20  this.  Is there anything more?

         21       A.     This is your budget, your estimate before

         22  the work begins; so I understand it's perhaps not

         23  explanatory of the cost actually incurred.

         24       Q.     And you -- PREL has paid out how much to

         25  date to Na Laukoa?






                                                               63

          1       A.     I think the number is around $450,000.

          2       Q.     Okay.  In paying that amount out, Na

          3  Laukoa would give you a statement of expenses to get

          4  paid.  Did you have anything like that that would

          5  explain the technical services the mental health

          6  followed?

          7       A.     We receive their invoices to which

          8  explain -- which lays out the costs that they have

          9  incurred, the services being performed.  There's

         10  other documents for that, too, that program people

         11  look at when they approve the invoice.

         12       Q.     Okay.

         13       A.     There is a monthly report that they

         14  provide so that people -- program people review that,

         15  look at the invoice and then we'd process it.

         16       Q.     I see.  So have you seen that?

         17       A.     Yes.  I don't review them per se, but I

         18  do see them.

         19       Q.     Can you provide that to the committee, to

         20  the Co-Chair's?

         21              MR. SLOVIN:  Sure.

         22              SENATOR BUEN:  The other question that I

         23  have --

         24              MR. SLOVIN:  Could you tell us what -- so

         25  you only want monthly reports related to Na Laukoa?






                                                               64

          1  Is that what you're asking?  You're asking all of the

          2  monthly reports related to Na Laukoa services?  Is

          3  that what you want?

          4              SENATOR BUEN:  Can that be provided?

          5              MR. SLOVIN:  Yes.

          6       Q.     (By Senator Buen)  As far as the $40,000

          7  in the final payment to Na Laukoa now, that is -- I

          8  understand that 2.6 provides billings to PREL for

          9  reimbursement of costs incurred to date not to exceed

         10  contract price and the $40,000 will be withheld until

         11  satisfactory completion of the work.  How is that

         12  $40,000 arrived at?

         13       A.     That was just my guess when we did the

         14  contract that I would say we were going to withhold

         15  that amount.

         16       Q.     Okay.  So what is the definition of

         17  satisfactory completion of work?

         18       A.     It's like with any other expenditure PREL

         19  does particularly with their services.  The people

         20  who are engaged in those services review them and

         21  approve an invoice or approve the expense.

         22       Q.     So there's some criteria that you have

         23  to --

         24       A.     That the work -- the goods were received

         25  and the services were performed.






                                                               65

          1       Q.     I have just one more question.  You may

          2  have answered it already, but when Counsel or when

          3  Mr. Kawashima had asked you about the travel expenses

          4  to the mainland, the visiting advisors did you say

          5  that didn't take place or was that something else on

          6  mainland travel?

          7       A.     I don't believe --

          8       Q.     Didn't that take place the visiting

          9  advisors to --

         10       A.     I don't believe I've noticed that in the

         11  billings.

         12       Q.     In the Exhibit No. 2 attachment page 3 on

         13  the bottom other travel you have visiting advisors

         14  and there is a cost of $3,600, lodging and then air

         15  travel, $4,800.

         16       A.     Uh-huh.

         17       Q.     You have staff, number of staff or trips

         18  you have six there.  Did this take place?

         19       A.     The term cost this is a budget or

         20  expected cost, but it would not be cost.

         21       Q.     Okay.  I understand.

         22       A.     So this is the budget they anticipated

         23  that the program work would require.

         24       Q.     Do you know if this had taken place?

         25       A.     Whether the mainland travel took place, I






                                                               66

          1  don't believe it did because I don't remember seeing

          2  it in the invoice.

          3              SENATOR BUEN:  Thank you.  I have no

          4  further questions.

          5              CO-CHAIR SENATOR HANABUSA:  Thank you.

          6  Representative Ito followed by Representative

          7  Kawakami.

          8              REPRESENTATIVE ITO:  Thank you, Madam

          9  Co-Chair.

         10                       EXAMINATION

         11  BY REPRESENTATIVE ITO:

         12       Q.     Good afternoon.

         13       A.     Good afternoon.

         14       Q.     You know, under attachment 3, you know,

         15  you have over here charter school coordinator.  And

         16  what does a charter school coordinator do?

         17       A.     I really don't know.

         18       Q.     You don't know?

         19       A.     No.  When the contract was developed,

         20  you'll see the list there's 15 complexes and there's

         21  some charter schools that were listed there.  Charter

         22  schools we never got.  There was an anticipation that

         23  some work would be performed with the charter

         24  schools.  I'm not sure that the clarity or the

         25  direction was provided to give those services.






                                                               67

          1       Q.     The charter schools are the ones located

          2  on the Big Island?

          3       A.     They're some of the ones located.  There

          4  are other complexes on the Big Island too.  I think

          5  the charter schools are on the Big Island.  I don't

          6  know.

          7       Q.     Do you know the names of the charter

          8  schools?

          9       A.     It's just attached to the contract where

         10  they have the list of the 15 complexes, and then

         11  there's some charter schools there like Connections.

         12  I think these are charter schools.  I'm really not --

         13  and some other ones, Waters of Life.

         14       Q.     You know, we're having some problems with

         15  that charter school and usually the charter school

         16  have their own budget, you know, to do whatever that

         17  needs to be done because they allocated per people

         18  allocation; so that's the reason why I'm asking why,

         19  you know, the charter school's included.

         20       A.     There's some consideration whether they

         21  were subject to requirements, the Felix and the

         22  compliance.

         23       Q.     Okay.  You know on Exhibit B it states

         24  personnel cost $174,420.  Is this what a one-person

         25  pay the salary it makes $174,000?






                                                               68

          1       A.     Oh, no, no, no.

          2       Q.     What's that?

          3       A.     That would be just the cost of the

          4  personnel that would be working on this job

          5  whether -- many personnel.

          6       Q.     Oh, many personnel.  It's not one then?

          7       A.     No.

          8       Q.     Okay.  You know PREL, you folks do a lot

          9  of good work in research.

         10       A.     Thank you.

         11       Q.     Are you folks going to get all these

         12  materials and documents and put it into a book form

         13  and share this with the rest of the Department of

         14  Education?

         15       A.     We certainly hope so.  There's a lot of

         16  learning that's gone on and it's a fact that we want

         17  to do.  It's our intent.

         18              REPRESENTATIVE ITO:  Thank you very much,

         19  Madam Co-Chair.

         20              CO-CHAIR SENATOR HANABUSA:

         21  Representative Kawakami followed by Representative Leong.

         22              REPRESENTATIVE KAWAKAMI:  Thank you very

         23  much, Co-Chair Hanabusa.

         24                       EXAMINATION

         25  BY REPRESENTATIVE KAWAKAMI:






                                                               69

          1       Q.     I'd like to start by asking you what are

          2  your responsibilities as a C.F.O?

          3       A.     My prior responsibilities anything with

          4  the fiscal aspects of PREL, financial reporting,

          5  recording, internal controls, contractual, some risk

          6  management, cash management.  Those are my primary

          7  duties and responsibilities.

          8       Q.     So actually all of the monies were

          9  controlled through you?

         10       A.     They go through me, yes.

         11       Q.     Then let me go on to say now Dr. LaMehieu

         12  was a member of the board and everybody knew this?

         13       A.     Uh-huh.

         14       Q.     Was there at no time any question raised

         15  about a conflict of interest because he was

         16  presenting this contract for the Department?

         17       A.     If I can explain a little bit further,

         18  PREL holds the Regional Educational Laboratory

         19  contract with the U.S. Department of Education.  As a

         20  Regional Education Laboratory, the federal government

         21  U.S. Department of Education requests and almost

         22  requires us to have this broad participation on our

         23  board, and the Chief State School Officer sits on the

         24  board of each educational laboratory in the nation

         25  for each of the states that they serve.  So it was






                                                               70

          1  common practice.  In fact, now is -- we're the

          2  exception and the reason for it is common practice.

          3       Q.     So other chief executive officers,

          4  et cetera, from other states sit on the board as

          5  Dr. LaMehieu, do they make the presentations when

          6  they want a certain group or organization to get a

          7  contract?

          8       A.     It's not unusual for the chief state

          9  school officers to ask for PREL's assistance

         10  particularly in educational services in a variety of

         11  forms.

         12       Q.     In this case --

         13       A.     Just a variety of forms.

         14       Q.     Thank you.  In this case, he made the

         15  total presentation for Na Laukoa?

         16       A.     We were in contact with Na Laukoa before

         17  we entered into the contract.

         18       Q.     No, but I'm asking that specific when

         19  that meeting was held to put this contract forward,

         20  who did the presentation?

         21       A.     There was a meeting in which it was a

         22  discussion group; so it wasn't like a presentation.

         23  I'm thinking like a training with boards and stuff.

         24  We just all sat down at the table and talked, and it

         25  was with Dr. LaMehieu.






                                                               71

          1       Q.     Okay.  But who was making the

          2  presentation?  Somebody must have been giving the

          3  data, et cetera, why they were going to be good at

          4  it, why they would, you know, you need to hire them,

          5  et cetera?

          6       A.     Dr. LaMehieu.

          7       Q.     Okay.  That's what I wanted to know.

          8       A.     Sorry.

          9       Q.     The management team according to the

         10  scope of services met monthly with PREL.  Am I

         11  correct?

         12       A.     Correct.

         13       Q.     And these were held every month?

         14       A.     As far as I know, yes.

         15       Q.     Okay.  Were you at those meetings?

         16       A.     No, I was not.

         17       Q.     You're not privy to the information?

         18       A.     It's not my area where I spend my time.

         19  If I wanted to look in it, I probably could.  But

         20  it's not -- I do not participate in them.

         21       Q.     What I was trying to get at is if there

         22  were complaints and those kinds of things came

         23  through at that management meeting and you had to pay

         24  a contract and you weren't -- you're just going to

         25  pay it you don't know?






                                                               72

          1       A.     Oh, no.  I do not pay a contract any

          2  payment without the program person responsible

          3  directly working with whatever it happens to be that

          4  signs off that says yes, it's appropriate to pay.

          5       Q.     Okay.  But you take their word for it?

          6       A.     Yes.

          7       Q.     Okay.  So who's double checking or who's

          8  monitoring that kind of thing before payment is made?

          9       A.     The program person.

         10       Q.     Before you sign off?

         11       A.     The program person signs off, the program

         12  manager.

         13       Q.     And that program manager is whom?

         14       A.     Dr. Burger.

         15       Q.     Dr. Burger.  And his name has come up

         16  several times, okay.  Let's see.  The technical

         17  assistance coordinators, okay, there was one for each

         18  of the complexes; so you had 15 complexes.  You had

         19  one per?

         20       A.     I'm pretty sure that's the way it worked

         21  out.

         22       Q.     That's the way it worked, okay.  And

         23  those were all hired by you people with the consent

         24  of DOE or?

         25       A.     Okay.






                                                               73

          1       Q.     So those names were given to you from

          2  DOE?

          3       A.     There was an extensive process in place

          4  for the selection, identity, recruitment and

          5  selection and qualifications, and everything having

          6  to do with those technical assistance coordinators

          7  which involved the management team which was DOH,

          8  PREL, Na Laukoa.  It was the whole team effort.

          9       Q.     The last question I wanted to ask did

         10  Mr. Yoshii sit on this management team as the

         11  personnel director for the DOE?

         12       A.     I don't believe he did.

         13              REPRESENTATIVE KAWAKAMI:  Okay.  That's

         14  all I want to know.  Thank you very much.  Thank you.

         15              CO-CHAIR SENATOR HANABUSA:  Thank you.

         16  Representative Leong followed by Senator Sakamoto.

         17              REPRESENTATIVE LEONG:  Thank you, Chair

         18  Hanabusa.

         19                       EXAMINATION

         20  BY REPRESENTATIVE LEONG:

         21       Q.     I just have a question, couple of

         22  questions.  As you're chief financial officer, had

         23  you before this contract was instituted had you heard

         24  anything about Na Laukoa, had you had any concerns

         25  about it?






                                                               74

          1       A.     I didn't know anything particular about

          2  Na Laukoa, but that's not unusual for when a contract

          3  comes up.  I may not know something about the various

          4  contractors we work with.  The questions were asked,

          5  the consideration was given about engaging into a

          6  contract with Na Laukoa just like we would have the

          7  questions and consideration given for any contractor.

          8  So there was consideration saying do we know these

          9  people and why don't we do it.

         10       Q.     And so as far as the contract when as far

         11  as understanding the accomplishment of this group,

         12  you felt comfortable in awarding them the contract?

         13       A.     From my perspective, I have no problems

         14  also walking away from a contract.  If it doesn't

         15  work, we have been known to not discontinue it.

         16       Q.     What would make you want to walk away

         17  from such a contract, what would be some evidence?

         18       A.     We have had contracts with let's say

         19  educational institutions in which perhaps our point

         20  of view or their timeliness or some other

         21  collaboration effort, and this again goes back to

         22  programs makes the decision, not me.

         23              They might say no, we don't want to

         24  continue this.  This isn't fruitful for all of us,

         25  and there's a variety of reasons.  We do it






                                                               75

          1  infrequently, but certainly I always have the

          2  contention.  It's not a problem if we have to.

          3       Q.     In your previous testimony, and I just

          4  wanted clarification on it, did you -- were you able

          5  to delve into some of these and find out whether the

          6  success of the program, whether everything was

          7  working all right according to what your scope was?

          8       A.     Regarding PREL's contract and services?

          9       Q.     Yes.

         10       A.     Yes.

         11       Q.     And also as related to Na Laukoa?

         12       A.     Yes.  Delve into, I'm not sure.  I read a

         13  lot of -- things came across, but I didn't

         14  participate in any of those meetings.

         15       Q.     I just want to know that because the

         16  contract was so large is that how much involvement or

         17  how do you know how positive it is?

         18       A.     I've heard lots of positive things about

         19  the results of this contract; so from that

         20  perspective it sounds good, and I didn't hear the

         21  negative.

         22              REPRESENTATIVE LEONG:  Thank you.  Thank

         23  you, Chair.

         24              CO-CHAIR SENATOR HANABUSA:  Thank you

         25  very much.  Senator Sakamoto followed by






                                                               76

          1  Representative Marumoto.

          2              SENATOR SAKAMOTO:  Thank you.

          3                       EXAMINATION

          4  BY SENATOR SAKAMOTO:

          5       Q.     I have a number of questions.  Most of

          6  them deal with your area of expertise of the

          7  contracts, the money; so it's, I guess, in looking at

          8  the documents that you provided, the DOE contract

          9  with PREL, the $2.3 million dated August 28 a few

         10  days after that the Na Laukoa contract $688,000 dated

         11  September 6 both 2000.  So their contract about

         12  30 percent of the general contract?

         13       A.     Correct.

         14       Q.     On the budget summary that's in your

         15  contract PREL, under contractual it lists -- includes

         16  $612,307 for Na Laukoa.  Why is it different from the

         17  $688,000?

         18       A.     I don't know.  I think that at that time

         19  there were budgets and estimates put down, and I

         20  really don't know where that number came from, but it

         21  probably was an earlier budget.

         22       Q.     Okay.  And so that's already $76,000

         23  different.  And in looking at your other worksheet

         24  document, their contract is $688,000 is cost

         25  reimbursement plus 17 percent overhead, plus






                                                               77

          1  4.167 percent GTE; so does that mean 688 plus 17 plus

          2  4.167?

          3       A.     No, it's to a maximum of 688.

          4       Q.     I was just looking at your worksheet;

          5  so --

          6       A.     Oh, the worksheet probably -- the

          7  contract is a better document to look at than the

          8  worksheet.

          9       Q.     Okay.  So this may be erroneous?

         10       A.     Yes.

         11       Q.     Because your contract includes overhead,

         12  includes tax?

         13       A.     Yes, it does.

         14       Q.     So hopefully that's wrong; so it's not

         15  688, plus, plus?

         16       A.     It's not.

         17       Q.     On your budget summary, you have

         18  personnel costs of $174,000 and other costs.  On

         19  their budget summary it has personnel costs of

         20  $162,000 and other costs.

         21              Can you explain the -- is it duplicative,

         22  is it parallel?

         23       A.     The cost for Na Laukoa's budget is for Na

         24  Laukoa's staff and their activities.

         25       Q.     Okay.






                                                               78

          1       A.     PREL's budget is for PREL's staff and

          2  PREL's activities.

          3       Q.     Okay.

          4       A.     And so the personnel number would cover

          5  the cost of PREL personnel participating in the

          6  project.

          7       Q.     Okay.  And I'm a general building

          8  contractor and if I hire subcontractors, normally the

          9  contract that I issue to them would be different than

         10  the contract that the owner issues to me.  But in

         11  this specific case, it looks like the contract you

         12  issued to your subcontractor is identical to the

         13  contract the owner issued to you or the other

         14  parties.  So why is that?

         15       A.     It was done on purpose.  It was to

         16  provide -- to make sure there was a clear

         17  understanding of everyone's role in this project and

         18  rather than just perhaps excerpt the pieces that just

         19  had to do with Na Laukoa, we wanted to show them the

         20  whole responsibilities of all the parties.  And so

         21  instead of doing that, it was easier just to take the

         22  same contract, scope of services and put it in there.

         23              Similarly the scope of services for

         24  PREL's contract includes work for the management

         25  team, you know.  This scope of service is pretty






                                                               79

          1  broad.

          2       Q.     So as the work progressed with the 15

          3  complexes plus a number of charter schools, I heard

          4  you say earlier perhaps none of the charter schools

          5  were addressed before?

          6       A.     Charter schools was a question throughout

          7  the contract, and it's better Dr. Burger could

          8  explain what that question was and what was provided.

          9       Q.     Okay.  Of the 15 complexes since the

         10  general PREL and the sub Na Laukoa had the same scope

         11  of work, how was that divided from September through

         12  June and then subsequently through August?

         13       A.     The scope of work for PREL was different

         14  than the scope of work for Na Laukoa.

         15       Q.     Okay.  How did you segregate if they were

         16  doing their part and you were paying their part?

         17       A.     Na Laukoa would submit progress reports

         18  like we were talking about earlier.  PREL -- maybe

         19  you can ask the question again.

         20       Q.     Okay.  Maybe Dr. Burger or whoever else

         21  whether PREL had 1 through 6 and Na Laukoa had 7

         22  through 15 or in terms of who did what?

         23       A.     Well, PREL had its own under D is PREL's

         24  responsibilities.  So PREL, for example, contracted

         25  with the TACs, PREL contracted with Na Laukoa.  We






                                                               80

          1  monitored the performance of TACs and Na Laukoa

          2  Program.  We helped develop procedures with Na

          3  Laukoa, helped interface with school complexes,

          4  et cetera, and approve payments to TACs.  So that

          5  PREL had 13 steps as outlined on that scope of

          6  services.

          7       Q.     But that's the same, yeah.

          8       A.     I understand.  I understand.

          9       Q.     Well, another point, then, or another

         10  area that maybe you can clarify.  I guess in the past

         11  a previous testifier seemed to indicate maybe

         12  salaries of $117,000 were paid or some high amount.

         13              On the budget from Na Laukoa on their

         14  preliminary breakdown, they list lead coordinator,

         15  full-time equivalent for two months $14,000; so

         16  that's $7,000 a month.  And they list for the Phase 2

         17  ten months lead coordinator 1.01 full-time FTE which

         18  I'm not sure and then $84,000.  So is that two lead

         19  coordinators because you only had nine months so the

         20  1.01 is a nine-month person and a three-month person?

         21       A.     I think that's where it was anticipated.

         22  Again, we went across -- payments was according to

         23  what they actually spent.

         24       Q.     Okay.

         25       A.     So the budget sometimes was different.






                                                               81

          1       Q.     Okay.  So if they send a billing in for

          2  lead coordinator instead of $46.00, $67.00, they sent

          3  a billing in for $32.00 or $89.00 so be it.  This was

          4  just for some guesstimation?

          5       A.     Right.  Best estimate at the time as to

          6  what the cost might be.  The personnel change, like

          7  in PREL sometimes the personnel change, cost rates

          8  change, other things change.

          9       Q.     Then whether a full year was paid at

         10  $170,000 to a person, can you sort of clarify what

         11  indeed did occur because that was a previous issue?

         12       A.     No one was -- we have not been billed

         13  $170,000 that's a number for an individual, no.  The

         14  billings have been significantly less for Na Laukoa's

         15  personnel.

         16       Q.     Okay.  On theirs on the contractual on

         17  their estimate it says Phase 1 advisor or advisors,

         18  45 days at $800 a day.  Phase 2 advisors, 190 days at

         19  $800 a day.  Who's that advisor?

         20       A.     I'm not sure what was anticipated at the

         21  beginning of the project that there might be some

         22  services needed of some advisors to provide some

         23  services.  Again, we had -- go ahead.

         24       Q.     I'm sorry.  I guess I'm not clear.

         25  There's PREL, there is Na Laukoa and now you mean so






                                                               82

          1  they may not know something so instead of coming back

          2  to PREL which had 70 percent of the contract they

          3  would scurrilously hire somebody for $800 a day as a

          4  sub sub?

          5       A.     I can tell you they didn't.

          6       Q.     They didn't?

          7       A.     They did not because early on in the

          8  contract most any subcontracting would be done by

          9  PREL.  So this was anticipated by somebody at the

         10  beginning of the project that these might be services

         11  needed and whether PREL was to provide it or Na

         12  Laukoa would be.

         13       Q.     Well, help clarify, you know, as a

         14  general and sub subs again that we work with, the

         15  owner or the architect or the lawyer for the owner

         16  doesn't want duplication of overhead, and it's -- so

         17  if every time you subcontract you add in overhead and

         18  profit, you end up with a big stack of bills as

         19  opposed to less tiers.

         20              So can you address their overheard on top

         21  of your overhead because you're percentaging on their

         22  percentage what was done to reduce cost?

         23       A.     Our percentage was not on top of their

         24  percentage.  We're not billing any percentages on top

         25  of their contract amount, and it wasn't budgeted as






                                                               83

          1  such.  Does that answer it?

          2       Q.     Well, I guess when I look at your budget

          3  summary it goes down direct cost from personnel on

          4  down including contractual which includes PREL.  It

          5  goes to total direct cost $2,051,000.  Then it says

          6  direct/indirect overhead cost 19.75, $269,000.  So

          7  I'm not interested in profit.  I'm just trying to

          8  clarify what we've paid and where we're paying.

          9       A.     I'm sorry.  I may have misinterpreted

         10  your question.  If you compute that indirect and

         11  overhead on that number, it doesn't work out at 19.75

         12  of the total.  It's 19.75 of the total less the

         13  amount of Na Laukoa contracts.  So there is no --

         14  it's not top and top of others.

         15       Q.     Then the presentation could have been --

         16       A.     Yes.

         17       Q.     -- PREL's work direct and indirect,

         18  subcontractual x-amount total cost?

         19       A.     Correct.

         20       Q.     So there wouldn't be a duplication of at

         21  least overhead?

         22       A.     Yes.

         23       Q.     So when you bill the DOE, they don't --

         24  you bill directly, here's Na Laukoa's cost with their

         25  backup billings?






                                                               84

          1       A.     When I bill the DOE, PREL bills the DOE.

          2       Q.     Yeah, PREL.  When PREL bills Na Laukoa

          3  say $8,000 for my lead coordinator for month six, you

          4  receive their bill so you attach it to your cost

          5  reimbursement bill to the DOE?

          6       A.     No.

          7       Q.     No.

          8       A.     We just -- PREL submits a billing to the

          9  DOE.  We do not submit documentation of other costs

         10  that we might have incurred whether it be

         11  subcontractors.

         12       Q.     Well, then maybe you can clarify.  The

         13  compensation contractor shall be compensated in a

         14  total amount not to exceed the $2,320,000 including

         15  approve costs incurred and taxes.  Is it a cost-plus

         16  contract or is it lump sum but cost to be paid as the

         17  costs are incurred and ending up with a lump sum?

         18       A.     I'm not totally sure.  Let me explain.

         19  PREL operates almost all our work is based on a cost

         20  work basis where it's just primarily cost in which is

         21  the basis for our billings.

         22              When we receive this contract, I wasn't

         23  sure but PREL was going to treat it the same way as

         24  we have any other contract which is on a cost basis.

         25  And for that reason we have not billed the Department






                                                               85

          1  of Education the total contract price.  It's because

          2  we're billing based on cost incurred.  Did that help?

          3       Q.     Well, as a contractor, we sometimes do

          4  get $2.3 million not to exceed and we bill cost plus

          5  basis.  But I'm not clear in your case and -- well,

          6  I'll leave the other questions to our other members.

          7  So who's going to clarify if it is indeed lump sum or

          8  cost plus not to exceed?

          9       A.     The issue for PREL -- and I can just say

         10  for PREL -- PREL will bill based on costs incurred

         11  and will not bill more than the contract and may bill

         12  less than the contract because that's just the way we

         13  will do it.  We just wouldn't do it any other way.

         14       Q.     And Na Laukoa's contract was extended.

         15  Was PREL's contract extended?

         16       A.     Yes.

         17       Q.     With the same date ending August?

         18       A.     No, our initial contract went through

         19  September 1, 2001, and we have an understanding that

         20  the contract extended to October 31, PREL's contract.

         21       Q.     So it continues on?

         22       A.     Yes, till October 31.

         23       Q.     And Na Laukoa effectively is done even

         24  with the extension?

         25       A.     Na Laukoa's contract with PREL was






                                                               86

          1  extended through August 31.  We will execute -- we

          2  intend to execute an extension until October 31, but

          3  I am awaiting certain information quite formally

          4  before we formally execute that.

          5       Q.     With the same guaranteed maximum cost?

          6       A.     Absolutely.

          7              SENATOR SAKAMOTO:  Thank you.  Thank you,

          8  Chair.

          9              CO-CHAIR SENATOR HANABUSA:  Thank you.

         10  Representative Marumoto followed by Senator Slom.

         11              REPRESENTATIVE MARUMOTO:  Thank you,

         12  Madam Chair.

         13                       EXAMINATION

         14  BY REPRESENTATIVE MARUMOTO:

         15       Q.     I might have missed this information

         16  earlier, but does PREL have other contracts with the

         17  Department of Education here in this State?

         18       A.     Yes, PREL has had other contracts and

         19  some may still be in effect.

         20       Q.     Do you generally work with a person whose

         21  job is to administer these contracts?

         22       A.     Most of the contracts come through

         23  programs and many times it's a school that calls us

         24  that needs technical assistance.  So it will come

         25  from a school or a district to provide specific






                                                               87

          1  services.

          2       Q.     A school on its own can request or has

          3  the funding to develop a contract with you?

          4       A.     Many of these are PO's, but I don't know.

          5  But it is the school -- the school requests -- the

          6  request come in often times from the school or a

          7  district.

          8       Q.     Anyway, would there be any other

          9  contracts that would be drawn directly with the

         10  superintendent that you know of?

         11       A.     I can't remember.  Most of the contracts

         12  like there have only been a few.

         13       Q.     There have only been a few --

         14       A.     I'm sorry.  I didn't mean to interrupt.

         15  When you say with the superintendent --

         16       Q.     Directly written with the superintendent?

         17       A.     Generally there was one recently.  There

         18  was a PO for some data entry services or assistance

         19  to the schools.  There was some scoring.

         20       Q.     That was negotiated directly with the

         21  superintendent?

         22       A.     No, it wasn't.  It was negotiated with

         23  perhaps people in this office.  I'm not sure who the

         24  personnel and their titles are.

         25       Q.     Who had assigned the contract?






                                                               88

          1       A.     That was issued through a purchase order

          2  to PREL, and I don't remember who signed it.

          3       Q.     Isn't it more the usual course of

          4  business to work with someone who is empowered to

          5  negotiate these contracts like, for instance,

          6  somebody like Mr. Golden for special education

          7  contracts?

          8       A.     I really don't know.  That's -- most of

          9  this would come through programs.

         10       Q.     Okay.  Let's see.  If I understand

         11  Senator Sakamoto right, PREL got two-thirds of the

         12  $2.3 million on this particular contract before us?

         13       A.     The bill -- that's the contract amount.

         14  PREL's contract amounts for $2.3 million.

         15       Q.     Of which $688,000 went to Na Laukoa?

         16       A.     Those are the budgets, and those are the

         17  contracts.  Those are not the payments.

         18       Q.     So the rest ostensibly goes to your

         19  organization?

         20       A.     If we incur the cost and we bill them and

         21  they're accepted, yes.  We have not billed -- I guess

         22  I get confused when you say it went to PREL.  PREL

         23  has not billed for the full contract amount.

         24       Q.     Okay.

         25       A.     And may not.






                                                               89

          1       Q.     May not.  Well, it seems to me from

          2  looking at the scope of services that there isn't

          3  that much for PREL to do to warrant billing

          4  $1.6 million.  You contract the TACs to do the work

          5  and in fact it says here the school complexes shall

          6  drop the plan.  So it's some nice work if you could

          7  get it.

          8       A.     I can tell you that the work that PREL

          9  provided was very extensive and included in

         10  $1.6 million are all the payments to the TACs which

         11  is a good portion of it also.  So all the 15 service

         12  providers, technical assistant service providers came

         13  out of that, our contract.

         14       Q.     I see.

         15       A.     So it wasn't just PREL personnel.  In

         16  fact, most was not.

         17       Q.     Okay.  So the TACs are separate from Na

         18  Laukoa?

         19       A.     They are subcontractors of PREL.  We

         20  entered into contracts with these individuals.

         21       Q.     Okay.  I see.  How much went to the TACs,

         22  would you happen to know offhand?

         23       A.     I should.  It's a number I should have

         24  right offhand, but it was a good portion of the --

         25  oh, I know.  If you go to the difference primarily in






                                                               90

          1  the budget which we have a line item for contractual

          2  $688,000 is Na Laukoa and primarily most of the rest

          3  are technical assistance coordinators.

          4              I think there was other items on the

          5  budget having to do with, again, a thought that

          6  perhaps there might be other assistance needed either

          7  PREL participated with other regional educational

          8  laboratories that might have some assistance that

          9  could be provided, but most of the difference were

         10  the TACs.

         11              REPRESENTATIVE MARUMOTO:  Okay.  Thank

         12  you.  I think we have a lot more questions for the

         13  program person.

         14              KAREN ERHORN:  Yeah, I think so.

         15              CO-CHAIR SENATOR HANABUSA:  Senator Slom.

         16              SENATOR SLOM:  Thank you, Madam Chair.

         17                       EXAMINATION

         18  BY SENATOR SLOM:

         19       Q.     Ms. Erhorn, you said that PREL has been

         20  around for 10 years now.  How long have you been with

         21  PREL?

         22       A.     About seven years.

         23       Q.     And how long have you been the C.F.O.?

         24       A.     I've had the title for, I think, two

         25  years.  Before that I was director of finance.






                                                               91

          1       Q.     And prior to PREL what was your financial

          2  experience?

          3       A.     My initial financial experience was I was

          4  with 11 years with Coopers & Lybrandt.  I left

          5  Coopers & Lybrandt as a manager in their audit

          6  division -- excuse me, in their consulting division

          7  but I also was a manager in the audit division.

          8       Q.     Thank you.  This question about the

          9  superintendent's position on the board of directors,

         10  you had mentioned that it actually was a request but

         11  not a demand by the federal government.  Is that

         12  correct, is that a fair statement?

         13       A.     Yes, I don't think the federal government

         14  can make it happen.

         15       Q.     Right.  And how many members are there on

         16  your board?

         17       A.     Approximately 20.

         18       Q.     Is the superintendent ex officio or is he

         19  a voting member?

         20       A.     No, voting member.

         21       Q.     He's a voting member.  Are the directors

         22  paid in any way?

         23       A.     No compensation is provided.

         24       Q.     No compensation, no fees?

         25       A.     No.






                                                               92

          1       Q.     And subsequently when did the

          2  superintendent resign his board position?

          3       A.     I think it was July, or I don't know the

          4  exact date.

          5       Q.     Of this year?

          6       A.     I think so.

          7       Q.     But as you mentioned previously, there

          8  was an indication and an understanding of at least a

          9  possible or potential conflict of interest?

         10       A.     Between who?

         11       Q.     Between having the superintendent or the

         12  chief educational officer on a board who specifically

         13  makes recommendations to that board and to the

         14  organization for purchase?

         15       A.     The information -- it's so normal for the

         16  regional educational laboratories to have that.  I

         17  guess maybe perhaps we don't think of it in that

         18  terms.  We think of it more as an opportunity for the

         19  state to get the services of a regional educational

         20  laboratory and help direct their work of a regional

         21  educational laboratory to assist the state.

         22              Also our annual report has a footnote

         23  disclosure regarding that which talks about that too.

         24       Q.     Okay.  I'm a little confused on the time

         25  line here.  I thought that when Mr. Kawashima had






                                                               93

          1  first asked you if you were aware of any criticism

          2  about Na Laukoa that you said that it was after the

          3  contract had been signed and some period afterwards.

          4              But then I thought that when

          5  Representative Oshiro had asked you basically the

          6  same kind of question you mentioned that there was

          7  discussion at that meeting about it and possible

          8  criticism.  Could you clarify that for me?

          9       A.     I'd be happy to.  The response to the

         10  first question I thought was a response to did I know

         11  about some lawsuit or something more serious that

         12  Mr. Golden and Mr. Yoshii and that's where I did hear

         13  about that after the contract was entered into.

         14              The first when we talked about I was

         15  trying to convey that when we take a contract with

         16  any subcontractor we do have a discussion about their

         17  participation, their background, whatever to say make

         18  a decision among us, are we going to do that and, you

         19  know, does that answer?

         20       Q.     Well, I think the first -- the initial

         21  question didn't really have anything to do with the

         22  lawsuit or anything else.  It was basically did you

         23  have any knowledge or was there any reason for you to

         24  believe that there was criticism or that there might

         25  be a potential problem with Na Laukoa?






                                                               94

          1              MR. SLOVIN:  At the time of the contract?

          2              SENATOR SLOM:  Prior to signing the

          3  contract, yes.

          4              KAREN ERHORN:  I think the discussions

          5  were and I think somebody quoted what Dr. LaMehieu

          6  had said and I think it's what I've heard too that we

          7  did know the history that Na Laukoa was considered

          8  and involved earlier but I don't know anything

          9  specific, but definitely there was probably some

         10  concern.

         11       Q.     (By Senator Slom)  On your Exhibit 3 the

         12  worksheet for preparation of contracts, under the

         13  area of determination of contractor it says sole

         14  source and it says attach r�sum�.  What were the

         15  contents or what were the contents of that r�sum�

         16  that was attached?

         17       A.     I didn't have a r�sum� attached except

         18  perhaps we did of -- and I don't know for a fact, but

         19  I know we looked at the r�sum� of Dr. Alameda from Na

         20  Laukoa.

         21       Q.     But does the r�sum� usually if it's a

         22  sole source contract does that refer to a person or

         23  does it refer to the organization that you're

         24  subcontracting with?

         25       A.     Generally this refers to a person.  We do






                                                               95

          1  sole contracts with an individual.  We always -- and

          2  r�sum� would refer to a person.

          3       Q.     And you're not sure whether or not there

          4  was a r�sum� attached to this as required by your

          5  worksheet?

          6       A.     I can't remember.  This was not with a

          7  person.  So they probably didn't even think about

          8  doing it.  When we contract with an individual, we do

          9  require a r�sum�.

         10       Q.     About how long after the contract was

         11  signed did you really begin hearing about or becoming

         12  aware of the serious criticisms that occurred?

         13  Within a couple of weeks or longer?

         14       A.     I can't remember.  It had to do with that

         15  lawsuit that I heard about.

         16       Q.     You didn't hear anything prior to

         17  information about the lawsuit?

         18       A.     Nothing specific, no.

         19       Q.     Okay.  And when you did hear about the

         20  lawsuit and the seriousness of it, what, if anything,

         21  did you do?

         22       A.     As I understood -- I don't know the

         23  particulars of the lawsuit, and I didn't know whether

         24  the lawsuit had to do with the qualifications of Na

         25  Laukoa particularly.  I thought it had to do with






                                                               96

          1  some personnel action of Dr. LaMehieu that probably

          2  Na Laukoa was connected in there for some reason, but

          3  I didn't research the lawsuit to know.

          4       Q.     Because I think you had responded to

          5  Representative Kawakami in terms of what you do and

          6  one of the things you mentioned was risk management

          7  as a function.  So you didn't after hearing this or

          8  becoming aware of it you didn't explore it or

          9  research it further?

         10       A.     We certainly have had discussions, and we

         11  found no reason on the contract that we were working

         12  on to have a problem.

         13       Q.     Okay.  I'm a little troubled as was

         14  Senator Sakamoto about the differences in the

         15  numbers.  I note that looking at Exhibits 1 and

         16  Exhibit 2, your subject summary is dated August 28,

         17  2000 and the Na Laukoa is just five days later or

         18  eight days later on September 5, and yet there seems

         19  to be a wide discrepancy in a number of the

         20  individual components.  And I think you testified

         21  that some of those things may have been mistakes in

         22  terms of the numbers?

         23       A.     What was the going discrepancy that was

         24  brought up was this 617,000 versus the 688.

         25       Q.     Well, no, I believe he went over specific






                                                               97

          1  items like personnel.  You had $174,420 and Na Laukoa

          2  had $162,400.  Right down the line the numbers are

          3  different.

          4       A.     They're different budgets.  If I can

          5  explain here.

          6       Q.     Yeah.

          7       A.     PREL's budget the 174 is for PREL

          8  personnel to provide the services under this

          9  contract, and PREL's budget includes all the

         10  technical assistance coordinators.  That does not --

         11  Na Laukoa's budget was for anticipated cost for Na

         12  Laukoa Program that would be incurred.  So they

         13  wouldn't agree.

         14       Q.     Okay.  This $2.3 million total budget is

         15  that -- how does that compare with other budgets that

         16  you've worked with in the past other programs?  Is it

         17  high or low or average or what?

         18       A.     It's probably about average.

         19       Q.     About average.  And you had testified

         20  earlier that to date you have paid approximately

         21  $450,000 to Na Laukoa?

         22       A.     Correct.

         23       Q.     Leaving them a balance of about $238,000

         24  of which $40,000 would not be paid until final

         25  completion; is that correct?






                                                               98

          1       A.     Correct.

          2       Q.     Okay.  So when you were asked questions

          3  about mainland travel, you said that you had not

          4  received any disbursements for mainland travel, but

          5  there's still approximately $238,000 less; so is it

          6  possible that mainland travel and other items might

          7  appear in those disbursements?

          8       A.     I don't think that they would.  Na

          9  Laukoa's Program of work was reviewed by PREL and

         10  directed by PREL in many respects.  Unless PREL said

         11  yes, we agree, go ahead, you need to take a mainland

         12  trip, then we would.

         13       Q.     But I didn't think you were watching

         14  their activities that closely.  That's why I'm a

         15  little confused.

         16       A.     Well, in the scope of services our

         17  requirement is to monitor Na Laukoa Program just like

         18  monitor the TAC and we monitor them just as we do any

         19  subcontractor.

         20       Q.     And is that your function or Dr. Burger's

         21  function?

         22       A.     It is Dr. Burger's function for this

         23  contract to monitor.

         24       Q.     Okay.  You also mentioned that in terms

         25  of the $1.6 million that is the portion for PREL that






                                                               99

          1  you have not billed for that amount to date.  How

          2  much has PREL billed?

          3       A.     PREL has billed $1,850,000.

          4       Q.     Excuse me?

          5       A.     $1,850,000.

          6       Q.     I thought that your share was

          7  $1.6 million?

          8       A.     Our billings include all our payments to

          9  Na Laukoa.

         10       Q.     I see.  Okay.  All right.  But how much

         11  would be for PREL, then, of that $1.8?

         12       A.     They take $450,000 out of that; so $1.4.

         13  Remember that includes the technical assistance

         14  coordinators.  It's not just the PREL personnel.

         15       Q.     Okay.  And in terms of the training you

         16  said that it's not unusual that you do provide

         17  training and so forth for the subcontractors.  You

         18  use the term several times quote, "to build capacity"

         19  unquote.  Could you define that for me?

         20       A.     Many of our federal government grants we

         21  propose and they support us billing capacity in the

         22  region we serve, and that's one of the roles I think

         23  of the regional educational laboratory and other

         24  grants.  So we, unlike many other consultants --

         25  well, I think we work with our clients and our






                                                               100

          1  constituents.  We do not go in and generally just do

          2  it ourselves.  To build capacity, we work with them

          3  to help train them so that they -- when we are gone,

          4  they have the capacity to go forward.

          5       Q.     I see.  And finally Ms. Erhorn, the

          6  question was asked I think by Representative Kawakami

          7  about how you knew that Na Laukoa was doing or had

          8  been doing a good job, and I think your response was

          9  you heard lots of positive comments about the

         10  program.  Who did you hear the positive comments

         11  from?

         12       A.     I know the positive results of the

         13  project.  In my mind generally I look at the bottom

         14  line to see the results as far as we get the monthly

         15  progress reports from Na Laukoa and nothing to

         16  believe otherwise.

         17       Q.     So basically your belief that they were

         18  doing a good job was based on the reports that they

         19  sent you?

         20       A.     Again, we work as a team.  I didn't hear

         21  anything otherwise.

         22              SENATOR SLOM:  Thank you, Ms. Erhorn.

         23  Thank you, Co-Chair.

         24              CO-CHAIR SENATOR HANABUSA:  Okay.

         25  Members, we will break for a short five-minute recess






                                                               101

          1  and resume hopefully at 3:30.

          2              (Recess from 3:24 p.m. to 3:35 p.m.)

          3              CO-CHAIR SENATOR HANABUSA:  Members, we

          4  are reconvened.  Co-Chair Saiki.

          5              CO-CHAIR REPRESENTATIVE SAIKI:  Thank you

          6  very much.

          7                       EXAMINATION

          8  BY CO-CHAIR REPRESENTATIVE SAIKI:

          9       Q.     Mr. Erhorn, I just have a few questions.

         10  First of all, are you familiar with the Felix

         11  monitoring team, the court monitor in particular Ivor

         12  Groves?

         13       A.     I've never met him.

         14       Q.     Do you know if he was involved with the

         15  contract that was awarded to PREL whether it's in

         16  negotiations or through a selection of Na Laukoa?

         17       A.     I do not know.

         18       Q.     Are you familiar with someone named

         19  Lenore Behar, Lenore Behar?

         20       A.     No, I'm not.

         21       Q.     Are you related to someone named Judith

         22  Schrag?

         23       A.     No.

         24       Q.     You know, I just had another question

         25  attached to both PREL's contract and to the






                                                               102

          1  subcontract there is a scope of services.

          2       A.     Uh-huh.

          3       Q.     Do you know when was the scope of

          4  services drafted?

          5       A.     In August.

          6       Q.     And that was before you had entered into

          7  the contract -- before PREL had entered into the

          8  contract with the DOE?

          9       A.     No, the scope of services was developed

         10  in conjunction with the DOE.

         11       Q.     So I noticed that in the scope of

         12  services Na Laukoa is specifically identified as a

         13  recipient of a contract?

         14       A.     Yes.

         15       Q.     Has PREL contracted with any other entity

         16  aside from Na Laukoa to deliver any of the services

         17  required by this master contract?

         18       A.     Just the technical assistance

         19  coordinators.

         20       Q.     Are those entities or individuals?

         21       A.     Individuals, right.

         22       Q.     So I guess because the scope of services

         23  was drafted in conjunction with the drafting of the

         24  master contract between PREL and DOE, it was pretty

         25  clear to PREL that there was requirement that Na






                                                               103

          1  Laukoa be subcontracted?

          2       A.     Yes.

          3       Q.     Do you know if PREL had not agreed to

          4  subcontract Na Laukoa, do you know whether or not

          5  PREL would have received this master contract?

          6       A.     No.

          7       Q.     You don't know?

          8       A.     No.  Would have received this contract,

          9  no.  I don't know whether your question is -- if the

         10  answer is whether do I know whether PREL would have,

         11  no, I do not know.

         12       Q.     But based on your discussions with

         13  superintendent or other DOE officials with respect to

         14  Na Laukoa, do you have any understanding or

         15  familiarness as to whether or not PREL would have

         16  received the master contract if it had refused to

         17  agree to subcontract Na Laukoa based on the

         18  negotiations leading up to the master contract?

         19       A.     No, I don't know.

         20              CO-CHAIR REPRESENTATIVE SAIKI:  Okay.

         21  Thank you very much.

         22                       EXAMINATION

         23  BY CO-CHAIR SENATOR HANABUSA:

         24       Q.     Ms. Erhorn, I have some questions of you

         25  as well.  Prior to the contract that we're discussing






                                                               104

          1  here today, has PREL done any work for the Department

          2  of Education related to the Felix consent decree?

          3       A.     PREL's work with the Department of

          4  Education in the past has been relatively small

          5  purchase orders and some evaluation work primarily.

          6  As far as work particularly with the Felix consent

          7  decree, maybe periphery in special education we have

          8  definitely provided some services.

          9       Q.     When you said your contracts with the DOE

         10  have been small, when you use the word "small," what

         11  do you mean?

         12       A.     I think most of them -- most of them have

         13  been assistance to schools which are under PO's and

         14  evaluation contracts which are evaluating generally a

         15  federal program or assisting in the evaluation.

         16  Evaluation contracts generally are higher than just

         17  technical assistance to a school.

         18       Q.     It's our understanding from prior

         19  testimony that the PO limit in schools were not very

         20  high.  It was like $25,000.  Are we in about --

         21       A.     Oh, definitely.

         22       Q.     So it's --

         23       A.     Sometimes they were $1,500.

         24       Q.     Okay.  So this is probably your largest

         25  contract with the Department of Education?






                                                               105

          1       A.     Definitely.

          2       Q.     Prior to that with all of the various

          3  other places for lack of a better description of

          4  PREL's services, have you done anything relating to

          5  IDEA compliance?

          6       A.     Probably Dr. Burger could answer because

          7  somebody had -- if one of our contracts had done

          8  that, he'd know which one it was.

          9       Q.     But as you sit here today nothing comes

         10  to your mind?

         11       A.     IDEA compliance, no, nothing comes to

         12  mind but I know Dr. Burger has worked with the

         13  Department of Education on special education.

         14  Whether it's IDEA or some other area, I'm not sure.

         15       Q.     Has Dr. Burger ever mentioned to you what

         16  a particular contract is for the Felix consent decree

         17  or the Felix vs. Cayetano?

         18       A.     No.  I know we did this scoring

         19  assistance recently which was to get in compliance

         20  with some reading tests for some students, and I

         21  think that was a periphery and it had something to do

         22  with that contract.

         23       Q.     When you say recently, is that after the

         24  PREL/Na Laukoa contract?

         25       A.     I think it was in May of this year.






                                                               106

          1       Q.     This year.  Thank you.  Do you know a

          2  person by the name of a Kaniu Kinimaka-Stocksdale

          3  prior to the PREL/Na Laukoa contract?

          4       A.     No, I didn't.

          5       Q.     In your discussions with Dr. LaMehieu

          6  over this contract that we're discussing here today,

          7  did Dr. LaMehieu ever represent to you that he was a

          8  very good friend of Kaniu Kinimaka-Stocksdale?

          9       A.     I don't remember him saying that.

         10       Q.     In the review of your contract looking --

         11  this is Exhibit 1 -- the standards of conduct

         12  declaration that's attached to the State of Hawaii

         13  form, it just happens that the contractor is was

         14  originally circled and then crossed out.  This is No.

         15  1, "A legislator or an employee or a business in

         16  which a legislator or an employee has a controlling

         17  interest."  And there's an asterisk next to that.

         18              Do you know why is may have been circled

         19  and then crossed out?

         20       A.     No, I don't.

         21       Q.     You've executed contracts like this

         22  before with the State of Hawaii?

         23       A.     Not many.  I perhaps -- I don't remember

         24  many.  I do remember an evaluation contract that was

         25  over a limit that required that.






                                                               107

          1       Q.     Has PREL as an entity, a corporate entity

          2  established any kind of policy given the fact that

          3  you have on your board employees of various states

          4  and whether it's Guam and whatever else that you

          5  would be very careful or watch the conflict of

          6  interest by the statements like this, do you have a

          7  policy on that?

          8       A.     I'm pretty sure we have a conflict of

          9  interest of policy that the board has established,

         10  but I can't remember it offhand.

         11       Q.     You testified, I believe, to Senator

         12  Slom's question that no fee is even paid to your

         13  board members.

         14       A.     Correct.

         15       Q.     So they don't have directors' fees, any

         16  kind of reimbursement for travel, anything like that?

         17       A.     We do pay for their travel to attend

         18  board meetings.

         19       Q.     Are your board meetings always held in

         20  Honolulu?

         21       A.     No.  Because our boards are made up of

         22  constituents from throughout the region, the board

         23  meeting moves from each locale.  Sometimes it's in

         24  Chuuk, sometimes it's in Ponape, American Samoa,

         25  wherever.






                                                               108

          1       Q.     So say let's take Dr. LaMehieu, for

          2  example, if he goes to any of these meetings, his

          3  travel, would he be given a per diem?

          4       A.     Yes.

          5       Q.     So that would come from PREL?

          6       A.     Yes, it would.

          7       Q.     I notice the last page is a tax clearance

          8  application, and this is standard for anyone doing

          9  business with the State of Hawaii and/or receiving

         10  federal grants.  Is this something that you attached

         11  to all your contracts?

         12       A.     No, it's only with the State.  The State

         13  every once in a while will alert us we need this, and

         14  I don't know the requirements of it but when they ask

         15  for it, we get it.

         16       Q.     Did anyone ask you for a tax clearance

         17  for Na Laukoa?

         18       A.     No.

         19       Q.     Do you know if you needed to provide a

         20  tax clearance for Na Laukoa as a subcontractor to

         21  you?

         22       A.     No.

         23       Q.     You're not aware of that?

         24       A.     No.

         25       Q.     In dealing with your other grants,






                                                               109

          1  federal grants, have you had to provide tax

          2  clearances for your other subcontractors?

          3       A.     No.

          4       Q.     You have not.  Because most of your money

          5  are federal funds, are there specific types of forms

          6  that you must complete for the federal government?

          7       A.     To get payment?

          8       Q.     Yes.

          9       A.     No.

         10       Q.     Not at all?

         11       A.     No.

         12       Q.     So how do you get paid from them?

         13  Invoicing them?

         14       A.     We have a large contract in which we do

         15  invoice, and it's monthly invoices we do provide and

         16  that's on our regional educational laboratory

         17  contract.  On our others, all our grants, those are

         18  on a GAP system which we go on the Internet, the web

         19  and we draw down against our contract or excuse me,

         20  against the grant and it gets wired to our account.

         21       Q.     In this particular contract which really

         22  involves federal impact aid monies and basically

         23  federal money, did the DOE inform you that there are

         24  certain kinds of procedures you must follow to

         25  receive the monies?






                                                               110

          1       A.     No, no.

          2       Q.     So you handled it like you did that other

          3  big contract, you would invoice the DOE?

          4       A.     We invoiced it according to the payment

          5  terms, invoicing payment terms in the contract.

          6       Q.     The Phase 1, Phase 2 and so forth?

          7       A.     Somewhat, yes.

          8       Q.     I'm looking at your Exhibit B of that

          9  contract with the State, and I'm just curious because

         10  there was a comment made in a prior testimony.  The

         11  $2,320,611.00 is the total contract amount, correct?

         12       A.     Correct.

         13       Q.     And the contractual amount which you said

         14  includes the TACs, the technical assistance

         15  coordinators as well as Na Laukoa is about

         16  $1,683,000, correct?

         17       A.     Correct.

         18       Q.     And the difference is just under

         19  $700,000, correct?

         20       A.     Correct.

         21       Q.     The $700,000 which is the difference is

         22  actually the monies that went to PREL, correct, or

         23  could go to PREL?

         24       A.     The difference -- all the non-subcontract

         25  stuff, yes, contractual stuff.






                                                               111

          1       Q.     So you mentioned that you've already

          2  billed or received about $1,850,000; is that correct?

          3       A.     Correct.

          4       Q.     Out of that, how much money is to PREL,

          5  not the subcontracting amount?

          6       A.     I can get you that information.  I have

          7  to go back to the cost records to figure it out to

          8  give you an accurate number if you don't mind.

          9       Q.     Okay.  That's fine.  But you said that

         10  you've paid Na Laukoa about $450,000; is that

         11  correct?

         12       A.     That's correct.

         13       Q.     Do you have any recollection as to how

         14  much -- what's the neighborhood of payments you made

         15  to the technical assistance coordinators?

         16       A.     It's a very easy number to get in our

         17  accounting system.  It's significant.  It's got to be

         18  over half a million dollars, but I don't have it

         19  right now.  I'd have to go look it up specifically.

         20       Q.     That's fine.  Do you know if you have --

         21  in essence, when I say you, I mean PREL -- has been

         22  paid most of the, if not all of the personnel cost,

         23  the fringe benefits, travel, supplies, other, this

         24  category called other, and the indirect overhead

         25  costs and the total direct costs, have you been paid






                                                               112

          1  most of this amount here, do you remember?

          2       A.     The $2.3 million?

          3       Q.     No, the categories other than the

          4  contractual, have you received that?

          5       A.     We billed $1.8 million of which includes

          6  Na Laukoa and the TACs and the difference is $2.3

          7  minus $1.8 equals $500,000 difference we haven't

          8  billed.

          9       Q.     You haven't billed.  I know you haven't

         10  billed, that's right.  And Na Laukoa is due about

         11  230-something?

         12       A.     Well, when you say due, their contract

         13  amount is that amount.  Whether they ever get it is

         14  another question.

         15       Q.     Have they made a demand upon you or upon

         16  PREL for that 200 and some odd thousand dollars?

         17       A.     Oh, no, no.  They just submit invoices

         18  like the contract calls for.

         19       Q.     They have not submitted any invoices to

         20  reflect that amount?

         21       A.     No.

         22       Q.     So you are withholding under the terms of

         23  the contract $40,000, correct?

         24       A.     Yes.

         25       Q.     And that's money that they have already






                                                               113

          1  earned per se?

          2       A.     They have already billed.

          3       Q.     They have already billed for that.  So

          4  right now if you were to pay them, it would be an

          5  additional $40,000; is that correct?

          6       A.     Yes.

          7       Q.     Are there still things ongoing that would

          8  or could result with Na Laukoa billing the difference

          9  which would be almost $200,000?

         10       A.     I can't imagine, no, and I doubt -- no.

         11  My answer is no.

         12       Q.     So as we sit here today, then, the -- I

         13  guess the responsibilities of this contract and the

         14  creation of the TACs that that's over, it's been

         15  completed?

         16       A.     Through October 31.  It's still ongoing.

         17       Q.     And after that it's over?

         18       A.     Yes.

         19       Q.     So if it's still ongoing, Na Laukoa no

         20  longer has any role.  Is that why they would not be

         21  billing anything from when they last billed to now?

         22       A.     Na Laukoa I expect a billing for

         23  September.  We have not gotten a billing for

         24  September.  It's pretty close afterwards.  They had

         25  billed through August, and further services in






                                                               114

          1  October I expect we'll probably get a billing.

          2       Q.     So it could be more than the $450,000

          3  that you've been billed for today?

          4       A.     Correct.

          5       Q.     And you don't know what that amount is?

          6       A.     We have a budget.  We have an estimate.

          7  We anticipate it.  We have a ballpark.

          8       Q.     Excuse me.  What is the estimate?

          9       A.     I think the estimate is like 500 and some

         10  thousand, $600,000 in total.

         11       Q.     In total.  So till the end of October?

         12       A.     Correct.

         13       Q.     So Na Laukoa out of the 680-some odd

         14  thousand could end up with about $600,000 at the end

         15  of October?

         16       A.     Correct.

         17       Q.     Is that correct.  I was just kind of

         18  curious what is capital L-A-N capital W-A-N cost?

         19       A.     Local area network, wide area network

         20  cost.

         21       Q.     Okay.  And your indirect/overhead cost of

         22  19.75 you've already explained that that's not a

         23  double billing.  It's a substantial amount of money

         24  though it's $269,000.  What is that?  Is that like

         25  what we call administrative overhead?






                                                               115

          1       A.     Again, I'll have to refer to our federal

          2  contracts and grants.  Under the federal contracts

          3  and grants, we negotiate or are required to negotiate

          4  an indirect rate with the federal government in which

          5  we must apply to federal work, and the intent is that

          6  the federal government we would never bill the

          7  federal government more than we would bill anybody

          8  else.

          9              So it is a rate -- an indirect rate is

         10  established to determine the amount of cost for those

         11  kind of indirect costs, and indirect costs are

         12  generally payroll, reception, human resources,

         13  accounting, those kind of costs that are very hard to

         14  directly charge to a grant; so the difference between

         15  a direct charge which is a direct benefit person

         16  serving on and somebody processing a payroll check.

         17  So the indirect rate is the method that we use and we

         18  are required to use.

         19       Q.     So if I'm hearing you correctly, the

         20  reason it's 19.75 is because you've told the federal

         21  government that you will charge 19.75 to everyone?

         22       A.     No, excuse me.  I'm sorry.  There is an

         23  indirect rate, and I rarely tell the federal

         24  government anything.  This is negotiated.  They

         25  review all our costs, and they determine it on an






                                                               116

          1  annual basis what your indirect rate will be for the

          2  next year.  They give you a provisional rate, and

          3  then they also give a final rate.  So it's an ongoing

          4  process and it's definitely a negotiation.

          5       Q.     Did you hire any additional staff as a

          6  result of this contract which would fall in the

          7  indirect overhead cost that you can think of now?

          8       A.     Yes.

          9       Q.     For this specific contract with the

         10  Department of Education?

         11       A.     Is your question regarding my unit or is

         12  it regarding the program's side?

         13       Q.     The program's side.  The total cost,

         14  whatever would fall into indirect/overhead cost?

         15       A.     Oh, indirect, excuse me.  Yes, we did a

         16  lot of tempts we used and a lot of my time was spent

         17  on it.

         18       Q.     And your time would not be attributed to

         19  personnel or any of the other categories?

         20       A.     Very little of it.  Almost all my time is

         21  an indirect.

         22       Q.     Indirect?

         23       A.     Correct.  And everyone in my unit is an

         24  indirect.

         25       Q.     Is an indirect cost.  But then you have






                                                               117

          1  other contracts at the same time, correct?

          2       A.     Oh, yes.

          3       Q.     So other federal contracts are also being

          4  assessed the 19.75?

          5       A.     The 19.75 has a component of indirect

          6  cost plus a fee.  So the indirect costs are being --

          7  are applied to all federal contracts and grants, yes,

          8  and this one also has a fee component.

          9       Q.     What's the total amount you can give me

         10  your best guesstimate if that's what it comes down to

         11  that PREL receives today in a year for indirect and

         12  overhead costs for all your grants?

         13       A.     I do know the number.  I'm trying to --

         14  it is kind of a competitive advantage our indirect

         15  rate, but our number is I think it's about

         16  $1.2 million or $1.4 million somewhere around there.

         17       Q.     And that's indirect/overhead cost?

         18       A.     Correct, and that includes our Board of

         19  Directors' costs.  Our government's costs.

         20       Q.     Your government?

         21       A.     Well, we call the Board of Directors

         22  governments.

         23       Q.     Oh, I see.

         24       A.     Kind of parallel.

         25       Q.     Oh, that's for their per diems and things






                                                               118

          1  like that?

          2       A.     Correct, and their ward books, any costs

          3  that the board might incur.

          4       Q.     That's interesting.  Part of the contract

          5  require DOE/DOH supervisors, and that's part of this

          6  scope of service.  I think they call themselves the

          7  management team.  Do you remember that?

          8       A.     Oh, definitely, yes.

          9       Q.     Do you remember who made up the

         10  management team?

         11       A.     I know I've seen a list, but I don't

         12  know.  I never attended the management team meeting.

         13  As I understand, the management team was in effect

         14  before the contract was in effect.

         15       Q.     And did PREL have to compensate any of

         16  the management team members?

         17       A.     No.

         18       Q.     Okay.  Do you know if Dr. Burger knew

         19  Dr. LaMehieu before Dr. LaMehieu became a member of

         20  your Board of Directors?

         21       A.     No, I don't know.

         22       Q.     You don't know?

         23       A.     No.

         24       Q.     You said something very interesting and I

         25  think this was in -- I mean, response to questions by






                                                               119

          1  Dr. Slom.  Dr. Slom was asking you about the fact

          2  that they appeared to be -- I'm sorry, Senator Slom.

          3  He'll pay me for that.

          4              That there were concerns about Na Laukoa

          5  and this was something that you had discussed, and it

          6  was earlier in the process before the contract, I

          7  believe, was entered into.  Did I recall that

          8  correctly?

          9       A.     Yes, I think so.

         10       Q.     What were the concerns?

         11       A.     We didn't know them.  We weren't as

         12  familiar with them.

         13       Q.     Do you do or does PREL do, as a matter of

         14  course, some kind of preliminary investigation like

         15  checking references, who they work for, you know, how

         16  successful they have been in the conclusion of their

         17  contract.  Is there some kind of procedure like that

         18  in PREL's contracting process?

         19       A.     Maybe perhaps not as formal as that but,

         20  yes, the consideration is given.

         21       Q.     And do you know if PREL did something

         22  like that when it came to Na Laukoa?

         23       A.     I think there were questions asked and

         24  answers received that were sufficient for it.

         25       Q.     Do you remember who asked those






                                                               120

          1  questions?

          2       A.     It was part of our team of Dr. LaMehieu

          3  primarily.

          4       Q.     So Dr. LaMehieu asked questions about Na

          5  Laukoa?

          6       A.     Excuse me.  No, part of PREL's team ask

          7  the questions.

          8       Q.     Okay.  And they ask the questions of

          9  Dr. LaMehieu?

         10       A.     Correct.

         11       Q.     Did PREL ask for like a r�sum� of jobs

         12  that Na Laukoa did prior to the decision to enter to

         13  contract with them?

         14       A.     I don't remember that.  I don't remember

         15  that, no.

         16       Q.     Who makes the final decision that PREL

         17  will enter into the contract?

         18       A.     It's a joint decision.  As you see on the

         19  contract worksheet, we all have to sign off on that,

         20  and we all have our aspects to provide to it.

         21       Q.     Is that Exhibit 3?

         22       A.     Correct.

         23       Q.     If you would look at Exhibit 3, there's

         24  some handwritten notes and it says note and it goes

         25  on.  It looks like KE at the end.  Is that you?






                                                               121

          1       A.     Correct.

          2       Q.     Can you read that to me?

          3       A.     I'm pretty sure I can.  I said, "Note:

          4  Reviewed and okay'd by Tom."  And I probably had the

          5  date, and I can't even read my date.

          6       Q.     8/30/00.  Who is Tom?

          7       A.     Tom Barlow is our chief

          8  financial officer -- excuse me, chief operating

          9  officer.

         10       Q.     And with this approval, the contract can

         11  be entered into?

         12       A.     Correct.

         13       Q.     It doesn't need the board's approval?

         14       A.     PREL's board of directors -- all the

         15  contracts are presented to the board of directors.

         16  I'm trying to think.  Anyway, it's presented to the

         17  board.  I can't remember if we presented it as

         18  information only or as ratification, but -- oh, no.

         19  This one would have been a revenue contract, and it

         20  is for the ratification.

         21              So it is presented to the board.  Not

         22  prior to because sometimes our board meetings are

         23  only three times a year.  So it may have been

         24  subsequent.

         25       Q.     For ratification by the board?






                                                               122

          1       A.     Yeah.

          2       Q.     And do you recall if Dr. LaMehieu also

          3  voted on a ratification of this contract?

          4       A.     I don't know.  I don't know if he

          5  attended that meeting or which meeting it was.

          6       Q.     I kept this PREL publication that you

          7  sent to me, and I think you have it there and this is

          8  one dated April, 2001 and one of the inside articles

          9  is PREL and Na Laukoa assist HIDOE -- I think it's

         10  Hawaii DOE -- to comply with Felix consent decree.

         11       A.     Yes, that's what we have.

         12       Q.     That's what you have, right.  And is this

         13  your newsletter?

         14       A.     It's one of our newsletters, yes.

         15       Q.     And how many times a year is this

         16  published?

         17       A.     I think updates might be sometimes two,

         18  sometimes three, sometimes four.

         19       Q.     So it's not like it comes out every

         20  quarter or something?

         21       A.     I think it was designed to come out

         22  quarterly, but I think we cut back perhaps on doing

         23  it less frequently.

         24       Q.     It says -- and I don't know if you know

         25  this because I notice you were not one of those who






                                                               123

          1  wrote it -- do you review any of this?

          2       A.     No, I don't review it.

          3       Q.     Have you even read it?

          4       A.     I've scanned it, but I sometimes don't

          5  read them.

          6       Q.     I was just curious because one of the

          7  statements is Na Laukoa and PREL have complimentary

          8  skills in the field of education, and one of the

          9  statements you made previously was that PREL had the

         10  skill in education and Na Laukoa apparently had the

         11  skill in mental health.  That was your understanding,

         12  correct?

         13       A.     Correct.

         14       Q.     So do you know if Na Laukoa had developed

         15  any skills in education?

         16       A.     I don't know whether that article was

         17  supposed -- no, I don't know.

         18       Q.     It's basically like a PR piece?

         19       A.     It's an informative piece.  To that we

         20  try to inform our constituents what we are doing and

         21  what we're engaged in, and we're very proud of the

         22  work we've done and the process we've gone through.

         23       Q.     It says the publication was produced from

         24  funds from the Office of Education and Research and

         25  Improvement, OERI, the U.S. Department of Education






                                                               124

          1  and under the Regional Educational Laboratory Program

          2  and there is a contract number.

          3              Are those basically your major sources of

          4  funding, PREL's major sources of funding?

          5       A.     The Regional Educational Laboratory

          6  contract is about a third or 30 percent of our

          7  funding.  Federal funds is probably at least

          8  90 percent of our funding if not more if not 95 or

          9  98.

         10       Q.     And it was your understanding that this

         11  particular contract that we're talking about here was

         12  actually funded federally as well with federal impact

         13  aid?

         14       A.     Yes, it's different kinds of funds than

         15  what we normally deal with.

         16              CO-CHAIR SENATOR HANABUSA:  Thank you

         17  very much.  I have nothing further.  Is there any

         18  follow-up questions, Mr. Kawashima?

         19              SPECIAL COUNSEL KAWASHIMA:  Just a

         20  request, Madam Chair.

         21                   FURTHER EXAMINATION

         22  BY SPECIAL COUNSEL KAWASHIMA:

         23       Q.     Ms. Erhorn, in addition to the documents

         24  that you've agreed to provide through your counsel,

         25  would you please provide for us the copy of the






                                                               125

          1  minutes of the board meeting in which this agreement

          2  Exhibit 1 was ratified and if there are any

          3  proprietary matters, feel free to redact those.  Any

          4  privacy issues, feel free to redact those.  All we're

          5  concerned about is whether or not Dr. LaMehieu as a

          6  member of the board of PREL approved this contract,

          7  abstained from voting or whatever.  Do you understand

          8  my request?

          9       A.     Yes.

         10              SPECIAL COUNSEL KAWASHIMA:  Thank you.

         11              CO-CHAIR SENATOR HANABUSA:  Senator

         12  Sakamoto.

         13              SENATOR SAKAMOTO:  Thank you.

         14                   FURTHER EXAMINATION

         15  BY SENATOR SAKAMOTO:

         16       Q.     Just for my clarification.  Maybe you

         17  said it before but let me just clarify Na Laukoa's

         18  contract you got $200,000 initially; in PREL's

         19  contract you have, at least the way the contract

         20  document states, $580,000 initially.

         21       A.     Correct.

         22       Q.     Then -- and because these are cost plus

         23  or cost reimbursement contracts, then is it that Na

         24  Laukoa would receive their $200,000 plus one dollar

         25  after incurring $200,000 of expenses sent in or when






                                                               126

          1  it is that they would receive the next dollar?

          2       A.     The process isn't necessarily established

          3  right up front.  They received it sometime -- I can't

          4  remember when we paid some other bills, but we paid

          5  some other bills also.

          6       Q.     Well, let me -- I guess the way I read

          7  the contract if Na Laukoa or my subcontractor and we

          8  had this kind of wording, I would have paid them the

          9  $200,000 and until they gave me invoices for $240,000

         10  I would not have paid them one more dollar because

         11  the $40,000 they would have incurred but we would

         12  have withheld until they performed satisfactorily.

         13              Would that be the way it could be read or

         14  should be read?

         15       A.     The performance of satisfactory

         16  performance was always there.  So when I looked -- if

         17  we're talking just about the administrative side and

         18  processing the invoice, yes, it could be looked at

         19  that way.  We -- I'm pretty sure I did not do it that

         20  way.

         21       Q.     Okay.  So at this point in time you've

         22  paid them $450,000 or so you, you anticipate they'll

         23  come up to $560,000 more so.  When will you start

         24  saying we now are capturing $40,000 and not pay?

         25       A.     They haven't been paid since April or I






                                                               127

          1  think May; so we have not paid even though we

          2  received invoices because now they're at the point

          3  where they have expended more than we've advanced.

          4       Q.     Okay.  Let me clarify.  The $450,000 is

          5  costs they incurred or amounts you've paid?

          6       A.     Amounts we've paid.

          7       Q.     Okay.  So you've paid 450.  With the

          8  contract you have a right to hold 450 plus 40,

          9  $490,000 bona fide costs.  You have the right not to

         10  pay them any more because the contract says you can

         11  hold $40,000, right?

         12       A.     Right, right, right.

         13       Q.     So at some point I'm wondering that's my

         14  question now as we are finishing the contract when --

         15  what is going to trigger you saying I'm holding this

         16  $40,000 till some date and time?

         17       A.     Right now.

         18       Q.     Okay.  So you will start to say?

         19       A.     We have said that and they submitted

         20  invoices, and we have not paid those invoices because

         21  we're at the end of the contract and this is the time

         22  we've anticipated and planned that we would do in

         23  review of all those invoices.

         24       Q.     So their billing might say $500,000 and

         25  here's our backup or the backup we've previously sent






                                                               128

          1  less $40,000, amount previously paid $450,000, now

          2  due whatever that balance is?

          3       A.     Their invoices were just for that month's

          4  expenses.

          5       Q.     Okay.  So then you as the financial

          6  officer would say --

          7       A.     Yes, we'd do that.

          8       Q.     Cost to date $500,000?

          9       A.     Keep track.

         10       Q.     Validated invoices $500,000, paid to date

         11  $450,000 meaning, potentially $50,000 due, less

         12  $40,000 till completion, here's your check $10,000?

         13       A.     Yeah, I might do that.

         14       Q.     Okay.

         15       A.     Or I just might not pay them until I'm

         16  totally satisfied.

         17       Q.     Second question.  Almost done, Chair.

         18              So the last question I guess when you

         19  talk about not doing your overhead or your indirect

         20  and overhead on Na Laukoa which is part of the

         21  contractual, you're saying it was a sub.  As far as

         22  the tax, is there an indirect and overhead on them or

         23  they are not indirect either?

         24       A.     No, the indirect and overhead is computed

         25  on the tax.






                                                               129

          1       Q.     Just not on Na Laukoa?

          2       A.     Not just on Na Laukoa a significant

          3  contract amount, yes.

          4              SENATOR SAKAMOTO:  Okay.  Thank you.

          5              CO-CHAIR SENATOR HANABUSA:  Any other

          6  follow-up questions?

          7              VICE-CHAIR REPRESENTATIVE OSHIRO:  Yes,

          8  Chair.

          9              CO-CHAIR SENATOR HANABUSA:  Vice-Chair

         10  Oshiro.

         11              VICE-CHAIR REPRESENTATIVE OSHIRO:  Thank

         12  you, Senator Hanabusa.

         13                   FURTHER EXAMINATION

         14  BY VICE-CHAIR OSHIRO:

         15       Q.     Just one more area of clarification.

         16  Senator Hanabusa raised an interesting point.

         17  Normally when somebody subcontracts essentially as I

         18  understand that what they're doing is taking over

         19  maybe part of the duties or obligations of the main

         20  contractor and thereby, you know, you pay them their

         21  share; is that correct?

         22       A.     Correct.

         23       Q.     Okay.  And as I understand it, part of

         24  the requirements by the State is that when they

         25  contract with you, you need to have that tax






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          1  clearance certificate from the Department of Tax

          2  which is the attachment you stated, correct?

          3       A.     That's what the State asked us for, and

          4  we gave it to them.

          5       Q.     Okay.  Okay.  I was wondering on

          6  Exhibit 1 if you could turn to page 3, paragraph 6

          7  when it talks about the subcontracts and

          8  assignments -- I'm sorry, page 3 of the general

          9  conditions.

         10              When it talks about subcontracts, it

         11  says, "The contractor shall not assign or subcontract

         12  any of the contractor's duties."  It goes on,

         13  "Unless" -- and then small ii says, "The contractor's

         14  assignee or subcontractor submits to the State a tax

         15  clearance to figure out from the Department of

         16  Taxation."

         17              So under this provision of the contract,

         18  if you were to subcontract with somebody, they would

         19  herein have to get a tax clearance; is that correct?

         20       A.     It appears to be.

         21       Q.     Okay.  But interestingly enough because

         22  the scope of this contract actually already included

         23  Na Laukoa, in a way they never had to get this tax

         24  clearance because you're not subcontracting any part

         25  of your obligations because their obligation is






                                                               131

          1  already part of the contract.  Does that make sense?

          2              So normally -- what I'm trying to say is

          3  normally if you were to subcontract with somebody

          4  let's say Na Laukoa was no part of this general

          5  contract and you decided to subcontract with someone,

          6  you would have to make sure that you comply with this

          7  provision and make sure that they have a tax

          8  clearance.

          9       A.     Uh-huh.

         10       Q.     But interestingly enough because Na

         11  Laukoa is actually in this general contract and

         12  you're not really assigning part of your duties to

         13  them, they never had to get any tax clearance through

         14  the State?

         15       A.     It sounds like a legal question.  I just

         16  don't know.  We did not ask Na Laukoa for a tax

         17  clearance.  Perhaps it was an oversight.  I'm not

         18  familiar with the State contracting as perhaps I am

         19  with federal contracting.

         20       Q.     Okay.  But as far as you know --

         21       A.     And that might make sense what you said,

         22  yes.

         23       Q.     But as far as you know, Na Laukoa -- you

         24  never required them to?

         25       A.     I never asked them for it, no.






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          1              VICE-CHAIR REPRESENTATIVE OSHIRO:  Okay.

          2  Thank you.

          3              CO-CHAIR SENATOR HANABUSA:

          4  Representative Marumoto.

          5              REPRESENTATIVE MARUMOTO:  Thank you.

          6                   FURTHER EXAMINATION

          7  BY REPRESENTATIVE MARUMOTO:

          8       Q.     Just briefly I was looking at the front

          9  of the contract and at the bottom it says money

         10  available to this agreement pursuant to impact aid

         11  and that's federal money.

         12              Does that mean anything to you?  Is it

         13  more restrictions on that type of money as opposed to

         14  private or state money?

         15       A.     PREL is very familiar with dealing with

         16  federal funds and the requirements with federal

         17  funds, and one of the requirements whenever PREL

         18  enters into a contract or subcontract is this issue

         19  of flow down of federal requirements where we

         20  actually specify in our contract this comes from

         21  grant from the federal government, how much and that

         22  the subcontractor must comply with certain federal

         23  requirements and compliance.

         24              This contract does not have or does not

         25  state any of those flow down requirements; so it may






                                                               133

          1  be -- I'm not familiar.  I have not dealt -- PREL

          2  does not deal with impact aid, and federal grants and

          3  contracts and monies all have different requirements

          4  as I understand.

          5       Q.     So does it flow down any way even though

          6  it doesn't specify?

          7       A.     I think you're required to put it in the

          8  contract at least we are required to any time that we

          9  give a subcontract a federal fund to specify these

         10  are federal funds and these are the requirements that

         11  must flow down to you.

         12       Q.     So why is it not in this contract?

         13       A.     I'm not familiar with impact aid, and if

         14  that's -- those requirements follow impact aid funds,

         15  I don't know.

         16              REPRESENTATIVE MARUMOTO:  Well, thank

         17  you.  We'll look into that.

         18              CO-CHAIR SENATOR HANABUSA:  Any other

         19  follow ups?  I have just one question.

         20                   FURTHER EXAMINATION

         21  BY CO-CHAIR SENATOR HANABUSA:

         22       Q.     Do you do an audit at any time of your

         23  subcontractors on a regular basis or part of your

         24  procedure?

         25       A.     No, we don't audit.






                                                               134

          1       Q.     Are you auditing Na Laukoa at this time?

          2       A.     When I think of the work audit, I think

          3  of a professional audit from a CPA firm.  It's not in

          4  our budget, and we are not going to engage an outside

          5  auditor to.  I don't think it's necessary.

          6       Q.     Well, let's not use such a restrictive

          7  definition of audit.  Do you or in terms of Na Laukoa

          8  in particular, are you asking for backup materials

          9  from them seeing whether what they have billed you is

         10  actually for the work performed, are you doing any

         11  kind of oversight or monitoring of that nature?

         12       A.     Absolutely.  It's ongoing, and it has

         13  been from the beginning.

         14       Q.     And through this monitoring or whatever

         15  we want to call it, are you looking at the billing

         16  and making decisions as to whether from the financial

         17  part that it's properly billed, properly earned and

         18  so forth?

         19       A.     Correct, we are.

         20       Q.     Someone asked you earlier about the

         21  amount of money being paid to the -- I don't know

         22  whether you want to call her the liaison or anyway,

         23  Ms. Kaniu Kinimaka-Stocksdale, how do you know how

         24  much money she's actually receiving?

         25       A.     By the billings.  I know how much she has






                                                               135

          1  billed PREL under this contract.

          2       Q.     So is there a line item for herself

          3  personally?

          4       A.     Yes.

          5       Q.     And is there also a line item for things

          6  like overhead or other items?

          7       A.     Yes.

          8       Q.     Do you audit when you go in and audit

          9  using it very loosely, do you ensure or do you look

         10  at their books and decide, in fact, that the

         11  audited -- I mean, the amounts attributed to, for

         12  example, overhead or other kinds of items are, in

         13  fact, not being converted somehow to salaries or

         14  anything like that which may increase the amount of

         15  quote "income" she may be receiving off of this

         16  particular contract?

         17       A.     We have not looked at the books, and I

         18  don't know whether that would be necessary.  We've

         19  given them guidance on how you are to bill cost.  The

         20  cost is your payroll cost, your actual cost and cost

         21  is based on the time you spend on this project

         22  whether that time be 10 percent or 100 percent.

         23              So we have been working with them on

         24  their billings to prepare them in such a way that it

         25  makes it very easy to see this which is -- PREL is






                                                               136

          1  used to doing this and we're trying to pass that

          2  experience on.

          3              I don't have -- if that answers your

          4  question.  We haven't looked at your books, but you

          5  can see how much times somebody is billing for you.

          6       Q.     So what you're actually doing is more

          7  receiving -- ensuring that the paper route that comes

          8  to you is in the form that's friendly to your

          9  purpose?

         10       A.     That tells you what you're paying for.

         11       Q.     But there is no check between what the

         12  paper reflects as coming to you and what's actually

         13  done in terms of --

         14       A.     Oh, there's -- no, there is a check.

         15  PREL does not make a payment without knowing that the

         16  services have been provided or the goods received.

         17  That's again on the program side.  They get all kinds

         18  of working with Na Laukoa on a daily basis, they're

         19  attending meetings, they get reports.  All the normal

         20  way whether they do it on a federal program or any

         21  other of our subcontracts.  It's the same procedures.

         22       Q.     So if Mr. Burger was to come before us,

         23  he would be able to tell us what is done to ensure to

         24  you that the work is actually performed on the

         25  program's side?






                                                               137

          1       A.     Yes.

          2       Q.     Are you aware of whether any other

          3  governmental entity is auditing Na Laukoa, have you

          4  been contacted by anyone else?

          5       A.     No.

          6              CO-CHAIR SENATOR HANABUSA:  Thank you.

          7  Anyone else?  Thank you.  Co-Chair Saiki?

          8              CO-CHAIR REPRESENTATIVE SAIKI:  Thank you

          9  very much, Ms. Erhorn, for your testimony.  That

         10  concludes your testimony.

         11              KAREN ERHORN:  Thank you.

         12              CO-CHAIR REPRESENTATIVE SAIKI:  Members,

         13  at this point we'd like to make a motion for your

         14  consideration to go into executive session to discuss

         15  three topics.  First, the witnesses scheduled for

         16  tomorrow's hearing.  Second, to be briefed by our

         17  counsel on the status of our investigation; and

         18  third, to consider the issuance of further subpoenas,

         19  potential further subpoenas.  Is there any

         20  discussion?  If not, we'll take a role call vote.

         21              CO-CHAIR SENATOR HANABUSA:  Co-Chair

         22  Saiki?

         23              CO-CHAIR REPRESENTATIVE SAIKI:  I.

         24              CO-CHAIR SENATOR HANABUSA:  Vice-Chair

         25  Kokubun?






                                                               138

          1              VICE-CHAIR SENATOR KOKUBUN:  I.

          2              CO-CHAIR SENATOR HANABUSA:  Vice-Chair

          3  Oshiro?

          4              VICE-CHAIR REPRESENTATIVE OSHIRO:  I.

          5              CO-CHAIR SENATOR HANABUSA:  Senator Buen?

          6              SENATOR BUEN:  I.

          7              CO-CHAIR SENATOR HANABUSA:

          8  Representative Ito?

          9              REPRESENTATIVE ITO:  I.

         10              CO-CHAIR SENATOR HANABUSA:

         11  Representative Kawakami?

         12              REPRESENTATIVE KAWAKAMI:  I.

         13              CO-CHAIR SENATOR HANABUSA:

         14  Representative Leong?

         15              REPRESENTATIVE LEONG:  I.

         16              CO-CHAIR SENATOR HANABUSA:

         17  Representative Marumoto?

         18              REPRESENTATIVE MARUMOTO:  I.

         19              CO-CHAIR SENATOR HANABUSA:  Senator

         20  Sakamoto?

         21              SENATOR SAKAMOTO:  I.

         22              CO-CHAIR SENATOR HANABUSA:  Senator Slom?

         23              SENATOR SLOM:  I.

         24              CO-CHAIR SENATOR HANABUSA:  Co-Chair

         25  Hanabusa is I.  We're in agreement.






                                                               139

          1              CO-CHAIR REPRESENTATIVE SAIKI:  Thank

          2  you, Members.  We'll recess for 30 minutes.

          3              (Recess from 4:22 p.m. to 5:20 p.m.)

          4              CO-CHAIR REPRESENTATIVE SAIKI:  Members,

          5  I would like to reconvene our hearing and we just

          6  have one last item which is the recommendation to

          7  authorize the subpoena to be issued against Terry Lee

          8  from the Department of Health.  Is there any

          9  discussion?  If not, we'll take a roll call vote.

         10              CO-CHAIR SENATOR HANABUSA:  Co-Chair

         11  Saiki?

         12              CO-CHAIR REPRESENTATIVE SAIKI:  Yes.

         13              CO-CHAIR SENATOR HANABUSA:  Vice-Chair

         14  Kokubun?

         15              VICE-CHAIR SENATOR KOKUBUN:  I.

         16              CO-CHAIR SENATOR HANABUSA:  Vice-Chair

         17  Oshiro?

         18              VICE-CHAIR REPRESENTATIVE OSHIRO:  I.

         19              CO-CHAIR SENATOR HANABUSA:  Senator Buen?

         20              SENATOR BUEN:  I.

         21              CO-CHAIR SENATOR HANABUSA:

         22  Representative Ito?

         23              REPRESENTATIVE ITO:  I.

         24              CO-CHAIR SENATOR HANABUSA:

         25  Representative Kawakami?






                                                               140

          1              REPRESENTATIVE KAWAKAMI:  I.

          2              CO-CHAIR SENATOR HANABUSA:

          3  Representative Leong?

          4              REPRESENTATIVE LEONG:  I.

          5              CO-CHAIR SENATOR HANABUSA:

          6  Representative Marumoto?

          7              REPRESENTATIVE MARUMOTO:  I.

          8              CO-CHAIR SENATOR HANABUSA:  Senator

          9  Sakamoto?

         10              SENATOR SAKAMOTO:  I.

         11              CO-CHAIR SENATOR HANABUSA:  Senator Slom?

         12              SENATOR SLOM:  I.

         13              CO-CHAIR SENATOR HANABUSA:  Co-Chair

         14  Hanabusa is I.  It is authorized.

         15              CO-CHAIR REPRESENTATIVE SAIKI:  Thank

         16  you, Members, and don't forget our next hearing is

         17  tomorrow morning at 9:00 a.m.

         18              (Hearing adjourned at 5:25 p.m.)

         19

         20

         21

         22

         23

         24

         25






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          1                  C E R T I F I C A T E

          2  STATE OF HAWAII             )
                                         )  SS:
          3  CITY AND COUNTY OF HONOLULU )

          4            I, MYRLA R. SEGAWA, Notary Public, State of

          5  Hawaii, do hereby certify:

          6            That on Friday, October 5, 2001, at

          7  1:13 p.m., the hearing was taken down by me in

          8  machine shorthand and was thereafter reduced to

          9  typewriting under my supervision; that the foregoing

         10  represents, to the best of my ability, a true and

         11  correct transcript of the proceedings had in the

         12  foregoing matter.

         13            I further certify that I am not an attorney

         14  for any of the parties hereto, nor in any way

         15  concerned with the cause.

         16            DATED this  22nd day of  OCTOBER 2001, in

         17  Honolulu, Hawaii.

         18

         19

         20

         21
                                    ______________________________
         22                         MYRLA R. SEGAWA, CSR No. 397
                                    Notary Public, State of Hawaii
         23                         My Commission Exp:  1-27-2005

         24

         25