EXCLUSIVE: Former tax director: Lingle stopped online tax case

HONOLULU (HawaiiNewsNow) - A former director of the Hawaii tax department spoke out for the first time about ex-Gov. Linda Lingle's alleged role in quashing a multi-million dollar tax case against the nation's largest online travel companies.

Kurt Kawafuchi testified in August that Lingle ordered to drop the case against Expedia.com and a dozen other Internet companies. The move came after Lingle and members of her staff met behind closed doors in the governor's office with the firms.

In a telephone interview from his Beverly Hills, Calif. office, Kawafuchi again insisted Lingle had the final say in the tax matter. He said that was the first and last time that Lingle got involved in a tax case.

"I stand by my testimony in the deposition, which was taken under oath," Kawafuchi said.

"Generally, I was left alone to handle tax cases."

Gov. Neil Abercrombie's administration has since revived the case. The state now says that the online firms owe more than $500 million in back taxes and penalties, making it the state's largest-ever tax case.

Lingle has emphatically denied the charge, saying it was Kawafuchi's decision alone to drop the matter.

"He made the decision," Lingle said last week.

"I had a hands-off policy on all tax issues. whether it was a personal friend or an industry I was supportive of, I never got involved in tax matters."

State Sen. Donna Mercado Kim recalled urging the state to pursue the case several years ago when she was chair of the senate ways and means committee.

"It would have helped a lot, we were going through furloughs," she said.

"The upside was so great so I just find that odd that we wouldn't follow through on any possibility of getting more tax dollars to the state."

The online firms are fighting the tax case. The dispute is likely to go to trial next year.