Former Acting State Auditor Jan Yamane ran an office that had deteriorated into an “offensive work environment” characterized by low morale and favoritism, and the office produced “sensationalized” audit reports for the Legislature and the public, according to a lengthy 2016 investigation by the state Attorney General.

The scathing 556-page report on the investigation into Yamane’s office was finally made public last week after more than six years of court battles. Honolulu Civil Beat first demanded the document in the spring of 2016, but the Attorney General’s office launched a drawn-out fight to keep the document secret.

Civil Beat filed a lawsuit that eventually required two appeals to the state Supreme Court, which finally ordered release of a redacted version of the document in April. The court described the results of the investigation as “explosive,” and ruled the public had a right to review the allegations against Yamane and her top managers.

Right, State Auditor Jan Yamane and Jeff Kissell Executive Director of the Hawaii Health Connector answer questions after the auditor presented her report. 9 nov 2015. photograph Cory Lum/Civil Beat
The Attorney General’s investigation into the state Auditor’s office under Jan Yamane has finally been made public after a six-year court battle. Cory Lum/Civil Beat/2015

Still, it took the Attorney General’s office until last week to finally distribute redacted copies of the report to Civil Beat and others. The top management of the auditor’s office underwent an overhaul years ago.

The Legislature replaced Yamane with current state Auditor Les Kondo in 2016 — legislative leaders had seen the AG’s report by that time — and Yamane left state government. She was named executive director and legal counsel of the Honolulu Ethics Commission later that year, a position she still holds.

The top managers in the office under Yamane were Deputy Auditor Rachel Hibbard and Kathleen Racuya-Markrich, who was legal counsel and human resources manager. Racuya-Markrich and Hibbard both served at the pleasure of the auditor in appointed management positions, and both were dismissed by Kondo in his first week on the job.

The investigation was triggered by complaints starting in late 2014 by staff and former staff in the auditor’s office alleging a hostile work environment, harassment and discrimination. Yamane was acting auditor at the time, and staff told the investigator she was trying to convince lawmakers to appoint her to a full eight-year term as auditor.

The staff complaints were filed with then-Senate President Donna Mercado Kim, who asked then-Attorney General Doug Chin in spring of 2015 to launch an administrative investigation.

The final report by the Attorney General’s Special Agent Boyd Sakai focused on the management and actions of the three top managers at the auditor’s office at the time, who were Yamane, Hibbard and Racuya-Markrich.

Favoritism, Harassment, Sensationalized Audits

The redacted version of the 2016 report released to Civil Beat cited “low morale” in the office, with one employee observing that “the office under Yamane is going downhill badly and quickly.” Senior and experienced staff were leaving, which put severe strain on the remaining staff, according to the report.

Sakai also declared the top management in the office “is not competent due to their lack of knowledge and experience,” and questioned the work product of the office. The report concluded that “audit report findings are sensationalized, and the reports issued overly focus on negative findings.”

He cited comments by the directors of the Department of Health, Department of Human Services and the Hawaii Health Connector, who each raised concerns about “inflammatory language” in the summary pages of reports on their agencies. And Sakai cited similar concerns by the auditor’s own staff.

“Staff reported that the substance of the report was inconsistent with factual findings, with Yamane instructing staff to look for ‘problems’ when their initial field work did not find anything,” according to the report. “Managers and staff have related that the focus of the report is to garner media attention.”

One particular example cited by the auditing staff was an audit of procurement in the state Department of Health, which one manager in the auditor’s office described as “bullshit.” Another manager in the office was more circumspect, saying he “would not have written the summary” for that report the way it was finally written and published.

The report also questioned Yamane’s “inappropriate” decision to wear a sign that read “Hawaii Health Disconnector” at a 2014 Halloween costume party while an audit of the Hawaii Health Connector was underway.

“She agreed that if the picture had been disseminated to the general public, it would have reflected badly on the office and brought into question the fairness and objectivity of the office,” according to the report.

Yamane responded to a request for comment Tuesday with a brief email that explained: “I fully cooperated with the AG’s investigation and answered their questions.” However, she said the Attorney General’s Office never provided her with the final report.

Racuya-Markrich said none of the former top managers in the auditor’s office were given copies of the report until last week. She said she and Hibbard also cannot comment on it because they have not reviewed it.

However, Yamane did respond to some of the criticisms from the auditor’s staff in the investigation report itself.

Yamane denied she ever told staff to go back and “look for things that were wrong” after the initial review found nothing, and said that “going back after the fieldwork had been completed to find other problems never happened,” according to the report.

Yamane said she had no preconceived ideas about the Hawaii Health Connector, and when she was asked about the “Hawaii Health Disconnector” sign she wore at an office Halloween party, she denied the costume suggested to staff that the Health Connector operation “had problems.” She also said those pictures are not supposed to be made public.

Yamane said the auditor’s staffers “are not trying to sensationalize reports or attempting get media attention.” In fact, she said the part of the auditor’s job she dislikes is dealing with the media.

Vice Speaker Mizuno Les Kondo Speaker Souki, LRB Director Charlotte Carter-Yamauchi and right, Ombudsman Robin Matsunaga. 22 april 2016
State Auditor Les Kondo was surrounded by legislative leaders when he was appointed to replace Jan Yamane in 2016. Cory Lum/Civil Beat/2016

Sakai told Yamane during one interview that some staff and managers questioned how Yamane, Racuya-Markrich and Hibbard could edit drafts of reports when they could not produce those reports themselves, and some managers described the three of them as “incompetent.” Yamane replied that she was “outraged.”

Sakai’s report also concluded Yamane created an “offensive work environment” for one employee when she told other managers that the staffer “acts like a little boy” when she scolded him for shortcomings, and also for singling out another employee for sending multiple emails to another state office to check on one of his employee benefits.

The report found she offered “preferential treatment” to favored employees,  and targeted others who were not favored. In one example, she allowed Hibbard to make one employee put post-it notes on his chair when he left the office, which the investigator described as “harassment” since other employees were not required to do the same.

Other examples of an “offensive work environment” included Yamane’s decision to withhold bonuses from some employees, and to grant lower cost-of-living raises to some workers but not others. The report also noted that employees were required to file for vacation or sick leave when they arrived late, but Yamane did not do so herself.

The investigation also found Yamane violated a policy against disruptive behavior when she slammed a stack of papers on the desk of a worker in a dispute over uploading large amounts of information into the computer system, and failed to take corrective action when Hibbard jokingly called another worker a “pothead.”

Senate President Ron Kouchi has acknowledged he received a copy of the administrative investigation into the auditor’s office in 2016, but it is unclear how much influence the report had on the decision by lawmakers to remove Yamane and replace her with Kondo that year.

Kouchi did not respond to a request for comment Tuesday, and House Speaker Scott Saiki declined comment because he has not seen the report.

Read the full report here, on the Civil Beat Law Center for the Public Interest’s website.

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