State Sen. Fred Hemmings' wife, Lydia, pleaded not guilty to felony theft charges yesterday and is free on $5,000 bail pending trial in July.

Lydia Hemmings, 52, had been the subject of a state attorney general criminal investigation into financial irregularities at Blueprint For Change, a nonprofit organization she headed from 2000 to 2006.

The investigation resulted in a three-count felony theft indictment of Hemmings last week.

She was convicted of forgery and theft offenses here in 1991, crimes that Fred Hemmings said his wife committed when she was battling alcoholism. They have been married for five years.

Lydia Hemmings had no comment for reporters after the brief court hearing but her husband said the charges are unfounded and resulted from bookkeeping problems at the charity that were resolved in 2007.

Despite her criminal past, Lydia Hemmings was hired last year by state Department of Human Services director Lillian Koller as an administrator in the department's Med-Quest office, which provides health benefits for Hawai'i residents who do not have health insurance.

Fred Hemmings said Koller said she knew about Lydia Hemmings' criminal record before hiring her and also knew about the attorney general's investigation that led to the most recent charges.

Koller referred questions to department spokeswoman Toni Schwartz, who said that Lydia Hemmings began working Aug. 4 as head of the Clinical Standards Office in Med-Quest.

"The job does not involve handling money," Schwartz said.

She would not discuss the circumstances of Lydia Hemmings' employment, saying they are confidential personnel matters.

"I can tell you that we do conduct criminal background checks" on prospective employees, Schwartz said.

Schwartz said she did not know if the criminal indictment will affect Lydia Hemmings' employment status at the department.

Commenting on the recent charges, Fred Hemmings said, "The attorney general talked to my wife, asked her some questions 2 1/2 years ago."

He added, "There was an audit done at the organization, the organization gave Lydia their blessing ... and everybody went their own way."

Fred Hemmings said his wife had unsuccessfully recommended that Blueprint For Change hire a treasurer to handle the organization's books.

Asked if his wife was required to pay back money to Blueprint For Change, Fred Hemmings said there was an "exchange" of money, with each side paying money to the other.

"It will all come out at the trial," he said.

CHARITY OPERATION

Blueprint For Change was founded in 1999 and operates a statewide network of "family strengthening centers" called Neighborhood Places, according to information filed with the state.

The walk-in facilities provide assistance to people at risk for child abuse and neglect.

Lydia Hemmings was executive director from 2000 through 2006, receiving an annual salary of $52,538, according to the nonprofit organization's 2006 tax return.

Stephen Morse, now executive director of Blueprint For Change, would not comment on the criminal charges against Hemmings.

State court records here show that Lydia Hemmings was convicted in 1991 of forgery and theft, charges first filed against her in 1987.

Under her maiden name of Lydia Hardie, she forged checks on the account of an attorney she was working for at the time, according to court files.

She initially entered a deferred acceptance of no contest plea in the case, a legal plea that results in no criminal record if the defendant avoids further legal trouble for a specified period of time.

The plea was accepted but later revoked after Hemmings abused alcohol and moved to Maryland, according to court files.

She served brief periods of time in jail and successfully completed a five-year probation sentence.

She stayed trouble-free until last week.

BEAT ALCOHOLISM

Fred Hemmings said his wife struggled for years to overcome alcoholism.

"I'm very proud of her and what she has overcome," he said.

"I love my wife and I stand by her in good times and bad."

Fred Hemmings blamed the criminal charges on a former Blueprint For Change employee, whom he did not name.

That individual complained to the attorney general's office about Lydia Hemmings years ago. The attorney general did not seek charges until last week, just before the statute of limitations was about to expire on one of the counts.

"I was quite stunned by it," Fred Hemmings said. "This has been quite devastating for my wife, her child, our family and loved ones," he continued.

"We're going to do everything we can to rectify it," he said.

The former Blueprint For Change employee who complained to authorities may have "a political agenda" against Fred Hemmings, the senator said.

Hemmings is a Republican who represents the 25th District (Kailua, Lanikai, Waimanalo and Hawai'i Kai). When asked why the attorney general in a Republican state administration would accommodate someone else's "political agenda" against a Republican senator, he shook his head and said he didn't know.

Deputy attorney general Christopher Young would not comment on the case after leaving court.

Lance Goto, head of the Criminal Justice Division in the attorney general's office, also declined comment on the case.

ROLE AT NONPROFITS

State records show that while Lydia Hemmings was running Blueprint For Change, she was also executive director of another nonprofit, the Hawaii Psychiatric Medical Association.

She still holds that position, which pays a nominal amount of money, Fred Hemmings said.

Asked if the outside job poses any conflict with her state job duties, Fred Hemmings said it does not.

Fred Hemmings' financial disclosure form for 2008, which must include income earned by both the senator and his spouse, does not list her job with the state.

He said that was an oversight and would be corrected.

Past disclosure forms said Lydia Hemmings was paid between $25,000 and $50,000 by the Hawaii Psychiatric Medical Association and between $50,000 and $100,000 by Blueprint for Change.