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A year and a half ago, Su Yong Yi wrote to the U.S. Small Business Administration charging that Nan Inc., a major contractor working on Honolulu’s $6.6 billion rail project, had defrauded the federal government out of millions of dollars by taking advantage of a program designed to help small, minority-owned companies get off the ground.

The allegations in Yi’s Oct. 2, 2014 letter were serious — as well as potentially criminal. They pointed a damning finger directly at Nan and its top executives, Patrick Shin and Fooney Freestone, who Yi said had victimized his own small business, Su-Mo Builders, in an attempt to rake in huge profits via lucrative construction contracts for government facilities.

The fraud allegations were born from a bitter legal dispute that played out in state and federal court between Nan and Su-Mo over money, with each side claiming it was owed millions of dollars for work it performed as part of a mentor-protege agreement under the .

The October letter also served as a confession of sorts for Yi and his business partner, Samuel Ho, both of whom had admitted to possible wrongdoing in their correspondence with the SBA. They had even hired a criminal defense attorney.

But now, Yi says it was all a big misunderstanding.

The two companies reached a confidential settlement agreement last month, and Yi sent another letter to the SBA recanting his previous accusations. He wrote that the letter also served as a “public apology” to Shin, Freestone and their employees.

“After further examination of the issues we raised, getting a better understanding of the law, regulations, and the conduct of the Parties over the past two years, we now realize that our accusations were in large part based on various mistakes and misunderstandings,” Yi wrote in the April 15 letter.

He added: “We hope this letter will ameliorate any damage the SBA Letter might have caused Mr. Shin’s, Mr. Freestone’s and Nan, Inc. employees’ reputations within the Hawaii community in general, as well as with the federal contracting community in Hawaii, especially in light of various media articles and publications that cited to our SBA Letter putting Mr. Shin, Mr. Freestone and Nan, Inc., in a bad light.”

Honolulu attorney Samuel King, who represented Nan, declined to comment on the recent settlement agreement in state court. Yi and Ho did not respond to a request for an interview. Their attorney in the civil case, Bert Kobayashi, also was unavailable for comment.

In addition to settling the state lawsuit, Nan and Su-Mo came to terms with Liberty Mutual Insurance in a related federal case in which the insurance giant was seeking reimbursement for more than $1.6 million it paid to subcontractors submitting claims for unpaid work performed at Tripler Army Medical Center.

The federal dispute centered on the terms of a performance bond issued by Liberty Mutual, guaranteeing that Nan and its joint-venture partner Su-Mo would complete all the required work at Tripler and pay for all materials and subcontracted labor.

Nan said it had agreed to pay the performance bond premium on behalf of the Sumo-Nan partnership, but did so only on the condition Su-Mo would be a party to the agreement, something Nan claimed hadn’t occurred. Nan counter-sued Su-Mo asking that it pay the lion’s share of any amount Liberty Mutual might receive if it won the case.

Records filed in federal court show Nan agreed to pay Liberty Mutual more than $1.8 million on behalf of the defendants in the case, which included Su-Mo. The settlement agreement also states that the companies still must resolve how to pay Liberty Mutual another $300,000 for interest and other fees.

But there’s still the outstanding issue of how the SBA will handle Yi’s two letters, and more specifically, the Oct. 2, 2014 correspondence that outlined the various allegations of fraud and deception.

Last summer, an SBA spokeswoman from the agency’s Washington, D.C. headquarters confirmed Yi’s letter had been forwarded to the Inspector General for investigation, although the Inspector General’s office said it could not confirm whether it had received the letter let alone launched an investigation.

A spokesman for the Inspector General told Civil Beat Wednesday, “It is our practice not to confirm or to deny any possible investigative activity by our office.”

You can read Yi’s April letter here:

Civil Beat special correspondent Bob Porterfield contributed to this report.