HONOLULU -- Most of Honolulu's liquor inspectors were charged Thursday with taking payoffs from local bars.

The federal prosecutor said the corruption was so widespread, the whole liquor enforcement system must by reformed.

Prosecutors said in March 2001, two inspectors, one working undercover for the FBI, collected about $1,000 from Club Rock-Za, officials said. In return, they either overlooked illegal sexual activity or liquor violations, authorities said.

The indictment named dozens of bars involved in the payoffs to more than half of the city's inspectors.

The indictment named eight inspectors, two of the supervisors. It listed 57 counts of bribery, extortion, racketeering and conspiracy -- all felonies worth up to 20 years in prison. A total of 45 bars were involved.

A night-shift inspector agreed to go undercover for the FBI after complaining about instances of bribery.

"These kinds of cases, public curruption cases, are only possible when you have people like this come forward," FBI agent Dan Dzwilewski said.

The undercover inspector wore an audio tape recorder documenting bribes of between $20 and $1,000 by eight other inspectors at 45 bars, officials said. The U.S. attorney said the money allowed the bars freedom to misbehave.

Kubo said the investigation is continuing and would not rule out charges against either the bar owners or other in the liquor commission.

An attorney for several bar owners who paid bribes said Thursday's indictment is creating a lot of fear in the hostess bar industry.

"They are terrified about being involved in the system. They are terrified about retribution, retaliation. It is all foreign to them and they are absolutely beside themselves," attorney Michael Green said.

Some of Green's clients have been assisting the investigation without any promise that they will not be charged. He expects more Liquor Commission employees may be indicted as the investigation moves ahead.

The federal prosecutor blasted the city for a liquor enforcement system that he said is not capable of doing its job. He called upon city leaders to make major changes.

The U.S. attorney is not saying whether any of the bar owners will be charged, but he placed some of the blame on the city's liquor control system.

"I definitely believe that the system that they have in place now the enforcement is useless. I think the system in place has proven itself to be so corrupt that it can no longer maintain the public trust," Hawaii U.S. Attorney Ed Kubo said.

Mayor Jeremy Harris and the the as Chairman of the Liquor Commission declined to be interviewed Thursday.