BY JIM DOOLEY — The University of Hawaii has tentatively agreed to pay $2.5 million to settle a lawsuit that alleges cronyism played a role in the award of a key development contract at the $120 million Cancer Research Center of Hawaii, Hawaii Reporter has learned.
UH regents are scheduled to discuss the settlement in a board meeting Oct. 28, the same day a groundbreaking ceremony will be held for the massive Cancer Research Center project in the Kakaako area of Honolulu.
Townsend Capital, a Maryland firm, was selected as developer by the regents in 2005 but filed suit last year after it was ousted as developer and replaced by Kobayashi Group, a local firm with “close personal ties to university administrators and regents,” the suit alleged.
After skirmishing in court for a year over production of procurement records, the two sides recently reached a mediated settlement, which involves no admission of wrongdoing by the university.
“We’re very pleased to have this difficult litigation resolved and we look forward to the regents ratifying the settlement this month,” said Paul Alston, attorney for Townsend.
“Mediation of the dispute was successful. A settlement in principal will be presented to the regents this month,” said William McCorriston, attorney for the University.
Neither attorney would discuss the amount of the settlement but several sources privy to the talks confirmed the $2.5 million figure.
Townsend alleged in its suit that its development contract was cancelled after the University hired former Kobayashi Group employee Brian Minaai in 2008 to oversee the project.
After the suit was filed, Alston said the University used a “secret political process” to select Kobayashi Group as the new developer.
Kobayashi Group has “close personal ties to university administrators and regents” and was named CRCH project manager “after the University gave a lead role in managing the CRCH project to a former employee of the Kobayashi Group,” the Townsend suit alleged.
Minaai worked from 2002-2005 as a Kobayashi Group project manager. He previously served as deputy director and director of the state Transportation Department in Gov. Ben Cayetano’s administration.
In response to written questions, Minaai said he has retained no financial or personal ties to Kobayashi Group or its principals.
He said his past work at Kobayashi Group poses no conflict of interest with his official duties as UH associate vice president for capital improvements.
Kobayashi Group was founded by Bert A. Kobayashi Sr., a former member and past chairman of the UH board of regents.
In a separate procurement, the construction contract for the $120 million CRCH was awarded to Albert C. Kobayashi, Inc., one of the largest general contractors in the state, which was founded by Kobayashi family scion Albert Kobayashi, father of Bert Kobayashi Sr.
The construction firm was sold in 1993 by the Kobayashi family to longtime company employees.
Kobayashi Group and Albert C. Kobayashi, Inc., share common family origins but reportedly have no financial or managerial connections. The companies have not responded to requests for comment on this story.
The CRCH will be a six-story, 150,000-square-foot structure built on property adjacent to the John A. Burns School of Medicine near the Honolulu waterfront in Kakaako.
When Townsend was originally selected as developer in 2005, plans called for a larger facility that was to be built and ready for occupancy this year. But the project was beset by planning disputes and financing difficulties.
Much of the center’s financing comes from Hawaii’s tobacco tax and state legislators have threatened to raid that pot of unspent money to meet other pressing budgetary needs.
Townsend claimed in its suit that it worked for four years for the university on the CRCH project, performing “significant work” while only receiving partial reimbursement for expenses incurred.
When Minaai came on board at the university in 2009, he claimed that Townsend had never received an “enforceable contract” and issued a notice of termination to the company after the two sides could not agree on the terms of a formal agreement, according to court papers.
Kobayashi Group was then selected as the new manager for the project. It is being paid $5.4 million for its work, according to Minaai.
Kobayashi has partnered with Skyline Construction, a Mainland firm experienced in research laboratory developments, as project manager of the CRCH work.
The company had also partnered with a Mainland firm in 2004-2005 when it originally bid on the project but lost that competition to Townsend.
It won the job last year after Minaai asked for new proposals from project developers.
Albert C. Kobayashi Inc., partnered with a firm called Structuretone to win the construction contract in competition with nine other bidders, according to Minaai.
So far, agreements call for Kobayashi/Structuretone to be paid $163,000 for “preconstruction design and assist services.”
Kobayashi Group LLC “was involved in the technical interviewing” of the 10 proposals submitted for the construction contract, but did not have a vote in the final selection process, said Minaai.
Kobayashi Group will also oversee the work of Albert C. Kobayashi “via a third party construction management company,” said Tina Shelton, communications director for the university’s John A. Burns School of Medicine.
Given the past ties between Minaai, Kobayashi Group and Kobayashi Construction, the University was asked if it had formally determined that no real or apparent conflict of interest exists between any of the parties.
“No one knows at this point of anyone specifically seeking an opinion, or such being offered, on the question you ask,” Minaai said in a written response.
“The university has approved each of the processes along the way,” Minaai said
The university’s move to jettison Townsend from the CRCH project is the second controversy in recent years over development rights to a large Manoa campus public works project.
In 2005, regents rejected the selection by their own procurement specialists of a new developer for the Frear Hall student dormitory replacement project. State auditor Marion Higa later reported that the procurement process for the project was so flawed that the contract probably should have been cancelled and the $71 million price tag might have been $20 million too high, figures that University officials disputed.
The Townsend lawsuit also repeats allegations made in another civil case now pending in federal court that the University has purposely and repeatedly delayed production of records.
But University lawyer Kenneth Mansfield – a McCorriston partner – said in an affidavit filed late last month that Townsend has sought so much information that an outside “discovery” consultant was hired to help collect information in he case.
The consultant spent “countless hours” imaging hard drives, capturing e-mail data and preserving more than “1.7 terabytes of actual data,” said Mansfield.
The university and its UH Research Corporation spent more than $250,000 just on evidence gathering through September 27, according to Mansfield.
Jim Dooley is an investigative and Capitol reporter for Hawaii Reporter. He may be reached at email@example.com