Rep. Micah Aiu and others say there’s no conflict of interest, but the lawmaker must tread carefully in his role as a lawyer for Nan Inc.

In a state in which construction and development interests wield strong influence, first-term state Rep. Micah Aiu’s job outside the Legislature could be seen as problematic.

Aiu works as an in-house lawyer for Nan Inc., a major construction company that competes aggressively for state jobs. Since last summer alone, Nan was awarded eight state contracts worth $325 million, according to state procurement records.

Aiu also sits on the House Finance Committee, which plays an outsized role in developing the state budget and the list of construction projects the state will fund each year. Freshmen lawmakers are routinely assigned to that committee to help them absorb the nuances of the state budget process.

House Speaker Scott Saiki says he can understand why the public might question that scenario, but none of it amounts to a “conflict of interest” in the legal sense of the term. It does not violate any state ethics laws or any House rules on conflicts, he said.

Rep. Micah Aiu during a House floor session last week. Aiu is in-house legal counsel for contractor Nan Inc., which does a great deal of business with the state. (David Croxford/Civil Beat/2023)

Instead, Saiki said Aiu’s dual role as a state lawmaker and a lawyer for a firm with state contracts is a feature of Hawaii’s part-time citizen legislature as it was created under the Hawaii State Constitution.

Lawmakers are expected to hold outside employment, and the state benefits from the job experience and knowledge they bring to the State Capitol, Saiki said. He also noted that the Legislature is not involved in awarding construction contracts. That is primarily a function of the state executive branch.

Voters ‘Know Where I Came From And My Background’

For his part, Aiu said he campaigned for election last year on his job experience, in part because affordable housing is one of the top issues in his House district, which includes Moanalua and portions of Halawa and Aiea. His constituents won’t be surprised to learn what he does for a living, he said.

“As long as I’m representing my community, I think some of these other issues fall away because they elected me to represent them, and they know where I came from and my background, and I grew up in Moanalua,” he said.

Last week, he voted in favor of a proposed state budget that would fund nearly $3.9 billion in construction work over the next two years, including projects that may one day be built by Nan Inc.

John Pelissero, an expert on government ethics, said it is common for lawmakers at part-time Legislatures to encounter issues in their government jobs that relate to their private employment. Legally speaking, Aiu’s situation is not a conflict of interest, he agreed.

“The issue here really is one of perception,” said Pelissero, who is a senior scholar in government ethics at the Markkula Center for Applied Ethics at Santa Clara University.

“There’s the appearance of a conflict of interest here if the representative is initiating or supporting legislation that would benefit the company that he works for, which is in the business of getting contracts with state government,” Pelissero said.

That may be true even if “everything can be done above board by the laws and procedures of the state,” he said. And that is where the ethical issue comes into play, he said.

“It’s not that what goes on isn’t legal. It’s that it appears that the individual may be serving a private or a political interest rather than the public’s interest in the way they are conducting themselves as a state legislator,” Pelissero said.

The prudent response is for elected officials to recuse themselves from voting or initiating legislation that potentially benefits their employers. Another option is for a lawmaker to publicly flag any vote that may benefit his employer to promote transparency, Pelissero said.

House Speaker Scott Saiki said that if a particular bill directly benefits a lawmakers’s employer, “then in my mind, there is a conflict.” He said in that situation the representative should recuse himself or herself. (David Croxford/Civil Beat/2023)

He qualified that by saying that voting on a huge omnibus budget bill such as House Bill 300 — as Aiu did last week — would probably be acceptable to most people. But lawmakers should probably abstain from voting in cases where more limited appropriations bills benefit their employers.

An Issue Of Perception

Aiu said he consulted with the House attorney about the issue and was told that “a lot of legislation that we’re passing applies to a class of people,” not to a particular company. He also noted that Nan competes for contracts that are awarded to the lowest bidders.

“To the extent that we’re approving money for capital projects or whatever, I don’t see it as a conflict because I’m not directing money specifically to Nan,” Aiu said.

Aiu submitted a bill this year seeking funding for construction projects at five schools in his district including Moanalua Elementary and Moanalua Middle School, and he acknowledged Nan could end up bidding on those projects or building them if they are actually funded.

“It’s not that what goes on isn’t legal. It’s that it appears that the individual may be serving a private or a political interest rather than the public’s interest.”

John Pelissero, expert on government ethics

But he met with the school principals who explained the importance of each project. “I think I’m just representing my district, and the schools that are in my district,” he said.

“The procurement code is pretty clear, and it’s that the lowest bid wins, and there’s sealed bidding, and a bunch of other contractors can bid on these contracts, and I’m not part of the agency that issues the bids … and my role in the company is not the decider on those projects,” he said.

According to his financial disclosure with the state Ethics Commission, Aiu makes $100,000 to $150,000 a year in his job with Nan.

His work there mostly involves supervising outside attorneys that Nan hires to handle litigation, reviewing the language in agreements with subcontractors and offering advice on personnel and other legal issues, he said.

The Rail Factor

He is not involved in preparing the bids Nan submits to compete for state or other jobs, and does not negotiate with state agencies over the terms of any contracts or change orders, he said.

One other wrinkle is Nan’s status as a major contractor on the $10 billion Honolulu rail project, because state lawmakers including Aiu may be asked to authorize additional funding for that project.

Lawmakers established an excise tax surcharge in 2005 that is the primary source of funding for rail construction, and the Legislature revisited the issue in 2015 and again in 2017 to extend the tax when the rail project needed more money.

Rep. Micah Aiu’s employer is Nan Inc., which won a contract last year worth nearly $500 million to relocate utilities along Dillingham Boulevard as part of the Honolulu rail project. Aiu and the Legislature may one day be asked to extend the excise surcharge to help fund rail. (David Croxford/Civil Beat/2023)

If lawmakers are asked in the years ahead to authorize yet another tax extension for rail, Aiu said he would consult with the House leadership and House attorney on the issue.

Need For Disclosure

Pelissero said that would be an example of a situation in which it would be “prudent” for Aiu to abstain from voting on it.

Saiki agreed, saying that any particular piece of legislation that would clearly impact Nan would pose a conflict, including a potential future excise tax bill to help finance rail.

Aiu “should probably recuse himself if it’s pretty clear that it’s going to benefit Nan, if it’s going to benefit his employer,” Saiki said.

“The most important thing about a conflict of interest is disclosure, and whether or not a member will disclose a potential conflict,” he said. “Where there is no disclosure, that is where the problem lies.”

In fact, Aiu did recuse himself this year from House Bill 1355, which dealt with trespassing.

Aiu is listed as a co-sponsor of that measure, but he said he notified Saiki and recused himself when he realized the bill would affect incidents in which construction cranes are accused of “trespassing” in the airspace above other properties.

The bill was prospective, meaning it would only affect future disputes, but Nan is currently involved in a legal dispute in such a case, Aiu said. The bill later died for the year.

Pelissero said such overlap between lawmakers’ private interests and their roles in government can be corrosive to public confidence in the lawmaking process unless lawmakers tread carefully.

“That is the biggest risk associated with allowing these kinds of relationships to continue, is that it will erode the public’s confidence and trust, not only in the representatives but in state government in general,” he said.

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