David C. Farmer, Trustee vs. Harmon - Witness David Banmiller

THE UNITED STATES DEPARTMENT OF JUSTICE

OFFICE OF THE U.S. TRUSTEE

David C. Farmer, Successor Trustee
vs.
Bobby N. Harmon

(Formerly Mary Lou Woo vs. Harmon and James Nicholson vs. Harmon)

CV05-00030 DAE/KSC

United States District Court, District of Hawaii

Judges: David A. Ezra; Kevin S. Chang

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DEFENDANT’S WITNESS

DAVID BANMILLER

David Banmiller is a former President and CEO of Aloha Airlines.

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NEW DISCOVERY (03-15-09): More factual evidence of fraud, bad faith, and undisclosed professional and financial conflicts of interest of Trustee David C. Farmer, Ron Sakamoto, Gerard Jervis, Kamehameha Schools, Hung Wo Ching, Louise Ing, Aloha Airlines, David Banmiller, Ron Burkle, Yucaipa, Bill Clinton, Judge Robert Faris, etc.:

March 15, 2009

Bill Clinton severs ties with Yucaipa: report

NEW YORK (Reuters) – Former President Bill Clinton has severed his connections to Ronald Burkle's Yucaipa Cos. and will not receive a payment once estimated to be up to $20 million, the Wall Street Journal reported on Sunday, citing a person familiar with the matter.

The Journal said Clinton decided not to claim additional money from Yucaipa earlier this year.

It said people familiar with the matter had thought last year that the payment could have been as much as $20 million. However, the size of the possible payment might have fallen because of the recent economic turmoil.

Clinton started distancing himself from Yucaipa, a private equity firm run by his friend Burkle, in 2007 because Hillary Clinton was planning a run for the Democratic presidential nomination, according to the report.

Hillary Clinton won U.S. Senate approval as secretary of state in January despite renewed Republican concerns about potential conflicts of interest created by her husband's foreign fund-raising.

Spokesmen for Clinton and Yucaipa could not be immediately reached for comment.

(Reporting by Michael Erman; Editing by Kim Coghill)

http://news.yahoo.com/s/nm/20090316/pl_nm/us_clinton_yucaipa_1

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NEW DISCOVERY (02-25-09): More factual evidence of fraud, bad faith, and undisclosed professional and financial conflicts of interest of Trustee David C. Farmer and Ron Sakamoto, Gerard Jervis, Kamehameha Schools, Hung Wo Ching, Louise Ing, Aloha Airlines, David Banmiller, Ron Burkle, Yucaipa, Bill Clinton, Judge Robert Faris, etc.

Aloha CEO Banmiller's statement to Bankruptcy Court

Editor's note: Here is the statement that David Banmiller, president and chief executive officer of Aloha Airlines, read to the federal Bankruptcy Court on Tuesday after the company's reorganization plan was confirmed by Judge Robert Faris:

THANK YOU, Your Honor, for allowing me this opportunity to address the court. If you perceive a softness in my tone, and perhaps a slip of the tongue here and there, it relates in part to a lack of sleep -- due in part to Your Honor's challenging words of yesterday. I must say, though, that sleep is overrated.

I will not take up much of the court's time, Your Honor, but the significance of this moment in the evolution of Aloha Airlines deserves comment.

In the 60-year history of this fine company, Aloha and its employees have never faced greater challenges: an industry in chaos, 50 percent of U.S. airlines in bankruptcy, unbridled competition, and oil at unprecedented levels.

The employees and local ownership of Aloha have continuously stepped forward, making contribution after contribution for its very survival. Had it not been for such efforts, we would not be standing before you today.

AS YOU KNOW, I am a relative newcomer and have been through a few "economic Vietnams" in this industry, but none as challenging, certainly sometimes frustrating, but on the whole no more satisfying than this experience, and I have enormous respect for everyone involved.

It is always risky to highlight certain individuals and situations in such a case, but I have chosen to take the risk because this accomplishment is all about teamwork, sensitivity when needed, and most of all, focus on the end game with extraordinary people.

We have asked our employees and their union leaders three times in the last several years to step up to tough stuff. In every instance, they made the tough decisions. Their willingness to make sacrifices while maintaining top-quality service to our valued customers, says volumes about the Aloha spirit within the heart and soul of these fine people.

I particularly wish to thank:

» Dave Bird, chairman of (the master executive council for the Air Line Pilots Association);

» Peggy Gordon, president of (the Association of Flight Attendants/Communications Workers of America);

» Randy Kauhane, assistant general chairman of (the International Association of Machinists and Aerospace Workers 141);

» Ken Boon, assistant general chairman of IAM 142;

» David Durkin, president of (the Transport Workers Union).

» The shareholders, and in particular the Chings and Ings, have a long and cherished history with this company. When I joined, I asked to be given the latitude to make the tough decisions without undue influence or avoidance of the myriad of business decisions that had to be made.

The shareholders were true to their word, and allowed the management team to execute, and they put cash behind their words.

» Our management team, some new but with an outstanding support staff comprised of a team of veterans in this business, many who are residents of this state, hung in there, put up with my idiosyncrasies and saw the ranks of VPs dwindle, dynamically increasing their workload -- with never a complaint.

» Hawaii's federal-, state- and county-elected officials, and all of our vendors, who have reached out during this past year. ... Without their support, we also would not have succeeded in getting this far. To them we owe thanks.

» Our customers, for their loyalty bringing cash in the door with every ticket sale. They provided the hope for our company to get through each day.

» Our team of professionals, led by Paul Singerman of Berger Singerman; Char Sakamoto Ishii Lum & Ching led by Betty Ishii; the Giuliani Group led by Marc Bilbao; our lead banker First Hawaiian Bank led by Don Horner; our local counsels Don Gelber and David Farmer; the unsecured creditors' committee chaired by Capt. Michael Feeney and guided by lead counsel Brett Miller; and Sheldon Kline of Thelen Reid.

» And many, many more who made this happen, we thank you.

MY COMMENTS would be far from complete without recognizing the presence of both Richard d'Abo of Yucaipa and Willie Gault of Aloha Aviation Investment Group. Without their financial commitment and support, this company would not be here, especially considering the rejections we faced in the investment community. I personally thank them, as well as Ron Burkle, for their confidence in the employees of this fine company.

And finally, Your Honor, you, too, have made the tough calls, sprinkling wisdom and experience with at times a level of common sense, humor and sensitivity that does your profession honor. You should take great pride, Your Honor, if I am permitted to say, in what has gone on this past year. Hopefully, this will be your last airline case in the islands.

And now, I assume you can renew your AlohaPass membership and continue to be one of our most-valued customers.

God bless.

www.archives.starbulletin.com/2005/12/04/business/story03.html ~ ~ ~

NEW DISCOVERY (10-11-08): Additional facts regarding conflicts of interests between Steven Guttman and numerous parties related to this case:

www.kycbs.net/Google-Steven-Guttman.htm

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NEW DISCOVERY (07-10-08): Undisclosed professional and financial conflicts of interest of Trustee David C. Farmer and attorney Steven Guttman with Cerberus International; Kamehameha Schools; Goldman Sachs; Blackstone Group; David Banmiller, Judge Robert Faris, Judge David Ezra, Dane Field, Stuart Ho, etc., through his legal representation of Aloha Airlines:

December 4, 2005

Quiet firm rules
Waikiki gems

By Rick Daysog, Advertiser Staff Writer

Few people in Hawai'i have ever heard of Cerberus Capital Management LP, yet in the past year, the New York-based hedge fund has become a top hotel owner in the state and major lender to the state's No. 2 airline.

Cerberus took control of Waikiki's crown jewels — the Sheraton Waikiki, the Royal Hawaiian and the Sheraton Moana Surfrider — when it bought a 65 percent interest in the hotels' owner, Japan-based Kokusai Kogyo KK, for $2.4 billion in November 2004.

Cerberus is now acquiring a 30-percent interest in Japan-based Seibu Holdings Inc., which owns the Hawaii Prince Hotel Waikiki, the Hapuna Beach Prince Hotel, the Maui Prince and the Mauna Kea Beach Hotel.

"These properties are worth billions of dollars, making them (Cerberus) one of the biggest hotel owners in Hawai'i," said Mike Hamasu, director of consulting and research at Colliers Monroe Friedlander Inc.

The company also played a pivotal role in Aloha Airlines' reorganization. In March, Ableco Finance LLC, Cerberus' lending arm, teamed up with Goldman Sachs Credit Partners LP to provide up to $65 million in financing to help the bankrupt carrier continue operating.

The rapid rise of Cerberus on the Hawai'i business landscape comes amid a resurgence of investment from Mainland companies.

They include:

The Carlyle Group, based in Washington, D.C., which purchased Verizon Hawaii last year for $1.65 billion.

New York-based Cendant Corp., which in addition to running Avis, Budget, Century 21 and Cheap Tickets, bought the local Coldwell Banker residential real-estate franchise last month.

HRPT Properties Trust, based in Newton, Mass., which paid nearly $600 million to acquire more than 400 acres of industrial properties owned by the Damon Estate and the Campbell Estate.

While much of the outside investment in Hawai'i in the 1990s involved businesses that bought cheap, added improvements and sold three to five years later, today's investor is taking a more hands-on management approach and may end up waiting a decade before they see a big payoff.

"They're much more patient, and they're much more willing to take much more complex risk," said Jon Miho, co-founder of local real-estate investor Trinity Investment LLC, whose affiliate is purchasing the Kahala Mandarin Oriental Hawaii hotel.

Cerberus, a major global player with over $16 billion invested worldwide, declined to comment on its Hawai'i strategy for this story. Local executives who have dealt with the company say its record in the state is mixed.

Managers of the Sheraton chain say that Cerberus is committed to improving its Hawai'i properties, while representatives of Aloha Airlines paint a picture of a demanding lender keeping a close eye on all operations.

Keith Vieira, senior vice president and director of Hawai'i operations for Starwood Hotels & Resorts, which manages the five Sheraton hotels controlled by Cerberus, said Starwood had preliminary discussions with Cerberus about renovating its local properties.

He noted that Kamehameha Schools' $84 million facelift of the nearby Royal Hawaiian Shopping Center has prompted Starwood and Cerberus to consider upgrading the properties.

"We think they're going to be a good owner of our hotels in Hawai'i," Vieira said.

David McNeil, a spokesman for Prince Hotels, said the chain's Japan-based owners haven't planned any changes at this time.

Unlike the mid-1990s "vulture" investors like Colony Capital and the Blackstone Group that bought distressed Hawai'i real estate for as little as 25 cents on the dollar, Cerberus is paying nearly the full value of the properties.

"They're not buying on a huge discounted basis; they're buying on value," said Joseph Toy, president of the local consulting firm Hospitality Advisors LLC.

With Aloha Airlines, Cerberus has been much more hands-on.

In July, Ableco, Cerberus' lending arm, abruptly increased the interest rate on its multimillion-dollar loan to Aloha from 11.25 percent to 14.25 percent, Aloha said in Bankruptcy Court documents.

The following month, Ableco stopped lending money to Aloha until management agreed to hire a chief restructuring officer and reach an agreement to sell the airline. Aloha attorney Charles Dyke stated during a Bankruptcy Court hearing in October that Ableco and Goldman Sachs would consider liquidating Aloha if a deal to sell it fell through.

Aloha, which is being sold to a group headed by California billionaire Ron Burkle and former football star Willie Gault, won approval from Bankruptcy Court last week for its reorganization plan. Aloha could emerge from bankruptcy as soon as Dec. 15.

In a recent Bankruptcy Court filing, Jeffrey Kessler, Aloha's interim chief financial officer, described the pressure Cerberus put on the airline.

"For several days, funds were withheld as the lenders made daily sweeps of cash revenues from (Aloha's) accounts while refusing to re-advance the monies so swept," Kessler said.

"The lenders began demanding, as a condition to each daily advance under the loan, a daily 'deal report' detailing the company's progress in obtaining a transaction sufficient to repay the loan," Kessler added. "They further informed the company that financing would be cut off by Oct. 15, 2005, if a signed letter of intent from an investor were not secured by then."

Cerberus has been involved in a controversy in Japan over its planned investment in the parent of the Prince Hotels.

Cerberus' investment in financially troubled Seibu, one of Japan's largest real-estate firms and owner of the Seibu Railway, has led to legal action by the sons of the company's founder, Yasujiro Tsutsumi.

The brothers, Yuji and Seiji Tsutsumi, recently lost an appeal to Tokyo's high court to essentially block Cerberus' investment and Seibu's restructuring plan. The two brothers recently filed suit in Hawai'i Circuit Court, seeking to be recognized as the rightful owners of the Prince Hotels in Hawai'i.

Founded in 1992 by Stephen Feinberg, a former Drexel Burnham Lambert manager, Cerberus began as a vulture fund specializing in bankrupt and distressed companies. The name, Cerberus, comes from the mythical three-headed dog that guarded the gates of the ancient Greek underworld.

In recent years, the company, whose executives include former Vice President Dan Quayle, has branched out to lending and investing in less-risky companies, says the Wall Street Journal.

The closely held company shies away from publicity, preferring to work in the background. It has no local office or employees based in Hawai'i.

The firm has invested in a broad range of companies, including Mervyn's department stores, building products maker Formica Corp., Italian sportswear maker Fila and DaimlerChrysler's former aircraft leasing business, according to BusinessWeek.

In more recent years, the firm has taken huge bets in troubled companies in Japan, where restrictions on foreign ownership have relaxed in recent years.

Before its investment in Kokusai Kogyo, the company paid $850 million for a controlling stake in Aozora Bank Ltd., formerly known as Nippon Credit Bank Ltd. before it was taken over by Japanese regulators in 1998.

Kevin Aucello, senior vice president at CB Richard Ellis Hawaii who worked with Cerberus Japan executives in the mid-1990s, said that Cerberus' combined ownership stake in the local Sheraton and Prince hotels has advantages.

Owning several high-end hotels in Hawai'i means Cerberus can leverage the advertising, marketing and managing efforts. "It's much more efficient to manage a larger portfolio," Aucello said.

honoluluadvertiser.com

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NEW DISCOVERY (06-24-08):

Final Decree entered

Date: Tuesday, June 24, 2008 8:17 PM

From: "Steven Guttman" <sguttman@kdubm.com>

To: "Bobby Harmon" <bobby_n_harmon@yahoo.com>, "David Farmer" <farmerd001@hawaii.rr.com>, "Michael Mukasey" <AskDOJ@usdoj.gov>, "Kevin Chang" <sa@hid.uscourts.gov>, "Robert Faris" <hib@hib.uscourts.gov>, "Barry M. Kurren" <richlyn_young@hid.uscourts.gov>, "Carol K. Muranaka" <ustp.region15@usdoj.gov>, "J P Schmidt" <insurance@dcca.hawaii.gov>, "Janet Kamerman" <HONOLULU@FBI.GOV>, "Mark Bennett" <hawaiiag@hawaii.gov>, "Hugh Jones" <hugh.r.jones@hawaii.gov>, "Linda Lingle" <governor.lingle@hawaii.gov>

Cc:

"Mediation Center of The Pacific" <mcp@mediatehawaii.org>, "Sheryl Nicholson" <office@acluhawaii.org>, "Robert Bruce Graham" <bgraham@awlaw.com>, "James Wriston" <jwriston@awlaw.com>, "Andrew Winer" <winer@pacificlaw.com>, "James Cribley" <jcribley@caselombardi.com>, "Lawrence Goya" <hawaiiag@hawaii.gov>, "Pension Benefit Guaranty Association" <participant.pro@pbgc.gov>, "James B Nicholson" <jamesbnicholson@aol.com>, "Executive Office for U.S. Trustees" <ustrustee.program@usdoj.gov>, "Office of Inspector General US Dept of Justice" <oig.hotline@usdoj.gov>, "George Will" <georgewill@washpost.com>, "Haunani Apoliona" <info@oha.org>, "Leroy Colombe" <lcolombe@ckdbw.com>, "Scott Helman" <shelman@globe.com>, "Bob Nichols" <bob.bobnichols@gmail.com>, "Laura Thielen" <dlnr@hawaii.gov>, "Barry Taniguchi" <communications@hcf-hawaii.org>, "Paul Achitoff" <honoluluoffice@earthjustice.org>, "Laurie Bennett" <info@muckety.com>, "Dave Shapiro" <volcanicash@gmail.com>, "Gail Kim-Moe" <Gkim.moe@gmail.com>, "Marshall Chriswell" <mc@whistleblowers.org>, "Greg Palast" <palast@gregpalast.com>, "Dee Jay Mailer" <ksinfo@ksbe.edu>, "Laser Haas" <laserhaas@msn.com>, "Michael Moore" <mike@michaelmoore.com>, "Texas Observer" <editors@texasobserver.org>, "Brian W. Bisignani" <bbisignani@postschell.com>, "Aon Insurance Managers" <mike_coulter@agl.aon.com>, "William Burgess" <hwburgess@hawaii.rr.com>, "Brian E. Schatz" <teamschatz@gmail.com>, "Patricia Case" <pattycase@aol.com>, "Cheryl Nakamura" <CNakamura@rmhawaii.com>, "Bill Yuen" <billyuen@cymlaw.com>, "Randall W. Wulff" <rwulff@wqsadr.com>, "Karen Spiller" <karen.spiller@baesystems.com>, "Andrew Killgore" <akillgore@wrmea.com>, "Patrick Leahy" <senator_leahy@leahy.senate.gov>, "Pamela A. McCullough" <HONOLULU@FBI.GOV>, "James Duke Aiona" <ltgov@hawaii.gov>, "Ken Conklin" <ken_conklin@yahoo.com>, "William H. Donaldson" <enforcement@sec.gov>, "Ian Lind" <diary@ilind.net>, "Jim Terrack" <tnthawaii@aol.com>, "Andrew Walden" <hfpeditor@email.com>, "All Senators" <sens@Capitol.hawaii.gov>, "All Representatives" <reps@Capitol.hawaii.gov>, "Thomas Fitton" <info@judicialwatch.org>, "Stew Webb" <stewwebb@stewwebb.com>, "Judson Witham" <jurisnot@yahoo.com>, "J C Shannon" <Hapa1234@aol.com>, "Jeff Biener" <jeffandmary@ozarkopathy.org>, "V K Durham" <vkdtdht@pionet.net>, "Richard Grove" <Richard@8thEstate.com>, "Bradley Tamm" <btamm@hawaii.rr.com>, "Susan Tius" <STius@rmhawaii.com>, "Paul Alston" <palston@ahfi.com>, "John Goemans" <wip@kamuela.com>, "William K Slate" <Websitemail@adr.org>, "Lissa Andrews" <landrews@rmhawaii.com>, "John D. Finnegan" <info@chubb.com>, "Terry Mullen" <tmullen@johnmullen.com>, "Margery Bronster" <info@bchlaw.net>, "Michael N. Tanoue" <mtanoue@paclawgroup.com>, "Neil Ambercrombie" <Neil.Abercrombie@mail.house.gov>, "Lyn Flanigan Anzai" <lflanigan@hsba.org>, "Lorraine Inouye" <seninouye@Capitol.hawaii.gov>, "Samuel P. King" <leslie_sai@hid.uscourts.gov>, "Arthur Rath" <imua@spamarrest.com>, "Randall Roth" <rroth@hawaii.edu>, "Rick Daysog" <rdaysog@honoluluadvertiser.com>, "Jim Dooley" <jdooley@honoluluadvertiser.com>, "Robin Campaniano" <aigh001@aighawaii.com>, "Blossom Tong" <blossom.d.tong@marsh.com>, "Sammye Richardson" <sammyerichardson@yahoo.com>, "Daniel Hopsicker" <madcownews@gmail.com>, "Richard L Righter" <righterwmx@aol.com>, "Dirk Kempthorne" <webteam@ios.doi.gov>, "Jeffrey Sia" <Jeff.Sia@excite.com>, "Jim Babka" <downsizer-dispatch@downsizedc.org>, "Truth" <truth@grandecom.net>, "J. C. Jones" <JCJJONES@aol.com>, "Dane Field" <danefl@gucl.com>, "Jeffrey Watanabe" <jwatanabe@wik.com>

Message contains attachments

LT var 6-24-08.pdf (112KB)

Please see attachment

STEVEN GUTTMAN

Kessner Umebayashi Bain & Matsunaga
220 South King Street, Suite 1900
Honolulu, Hawaii 96813

Tel. 808.536-1900

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NEW DISCOVERY - 06/13/08: DAVID FARMER HAS UNDISCLOSED CONFLICTS OF INTEREST WITH THE ALOHA AIRLINES BANKRUPTCY CASE, JUDGE LLOYD KING, JUDGE ROBERT FARIS, DAVID BANMILLER, JEFFREY KESSLER, DANE FIELD, CAROL MURANAKA, others...:

June 13, 2008

No $600,000 bonus
for Aloha's ex-CEO

Judge rejects request, saying airline's
collapse doesn't merit windfall

BY RICK DAYSOG, Advertiser Staff Writer

U.S. Bankruptcy Judge Lloyd King yesterday rejected a bonus request of up to $600,000 for former Aloha Airlines CEO David Banmiller, saying Banmiller should not "make a windfall off a collapse of the company."

Aloha, the state's No. 2 carrier, shut down its passenger service on March 31 and laid off 1,900 workers with little prior warning.

When an attorney argued it would be fair to pay a bonus to Banmiller and former Aloha Chief Financial Officer Jeffrey Kessler as they work to sell parts of the company, King said:

"I don't think fairness is an appropriate thing to discuss unless you want to talk about fairness to people who lost their jobs on virtually no notice (and) the hardship that has been imposed upon thousands of people. Now we have the top insiders potentially making a big score on this case. I think that's a very ugly aspect of this motion.

"It simply looks bad when the people who are with the company can make more money when it's going out of business than when it is a going concern."

Last month, the airline's court-appointed bankruptcy trustee, Dane Field, proposed paying Banmiller and Kessler incentives for helping sell off the carrier's assets. Under the plan, the two would get $50,000 each if the sale of Aloha's air cargo operations, contract services division and other assets fetches $19.25 million or more.

The two could receive as much as $600,000 each if the sale of Aloha's remaining assets fetches more than $26.5 million.

Those payments would be made by Aloha's chief lender GMAC Commercial Finance LLC from the proceeds of the asset sales.

The bonuses are on top of the $500 an hour that Banmiller and Kessler are now being paid to help the airline sell off its assets. The hourly pay is capped at $25,000 a month.

Prior to the bankruptcy, Banmiller received $500,000 a year in base salary as Aloha's CEO. When hired as Aloha's CFO in 2005, Kessler and his Atlanta-based firm Tatum CFO Partners received $3,000 a week, or $156,000 a year.

When reached by phone yesterday, Banmiller and Kessler declined to comment.

Others fared poorly

During yesterday's hearing, King questioned why Banmiller and Kessler should receive a bonus when they were already being paid $500 an hour. He also asked why other airline industry consultants couldn't have been hired to do the same work.

"Should Mr. Banmiller and Mr. Kessler be singled out for such favorable treatment in a Chapter 7 (bankruptcy) case where the other employees of the company have come out so poorly?" King said.

Jim Wagner, attorney for Field, said his client played an important role in selling Aloha's cargo and contract services units, which saved more than 1,400 jobs and preserved a business that handles more than 85 percent of all air freight between O'ahu and the Neighbor Islands.

'working very hard'

Aloha Cargo was sold to Seattle-based Saltchuk Resources Inc. for $10.5 million and the contract services unit was sold to Los Angeles-based Pacific Air Cargo for $2.05 million.

"I think Mr. Banmiller or Mr. Kessler have been working very hard in good faith toward liquidating the estate's assets," Wagner said.

Douglas Lipke, an attorney for GMAC Commercial Finance LLC, said Banmiller's and Kessler's institutional memory are invaluable. They have extensive contacts in the airline industry and have the best handle on the value of assets, such as the company's receivables, Lipke said.

Former Aloha pilot John Riddel said the judge did the right thing in rejecting the bonus plan. Riddel said that many of the pilots who continued to fly Aloha's cargo planes after March 31 have not yet received their full pay.

Some are still owed about half their pay, Riddel said.

"We were improperly underpaid," he said.

The Honolulu Advertiser

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DAVID BANMILLER HAS NO ALOHA

http://www.youtube.com/watch?v=NzkZwk0UWlQ

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NEW DISCOVERY - 05/20/08 - DAVID FARMER HAS UNDISCLOSED CONFLICTS OF INTEREST WITH THE ALOHA AIRLINES BANKRUPTCY CASE, JUDGE LLOYD KING, JUDGE ROBERT FARIS, DAVID BANMILLER, DANE FIELD, AND CAROL MURANAKA:

May 20, 2008

Aloha executives may
receive hefty bonuses

By RICK DAYSOG, Advertiser Staff Writer

Former Aloha Airlines Chief Executive Officer David Banmiller and Chief Financial Officer Jeffrey Kessler could each receive a bonus for helping sell off the bankrupt airline's assets.

Both executives are eligible for a $50,000 payout if the sale of Aloha's air cargo operations, contract services division and other assets fetches $19.25 million or more, under an agreement with Aloha's chief lender GMAC Commercial Finance LLC.

But Banmiller and Kessler could pocket more than $1.1 million each if the sale of Aloha's non-passenger service assets generates more than $26.5 million.

"It's disgusting," said former pilot John Riddel, who lost his job after 23 years when Aloha shut down its passenger operations. "I find it despicable that this management, which was at the helm of a 62-year-old institution and allowed it to be run into the ground, now wants to reward itself for a job well done."

The bonus plan, which was outlined in a filing last week by Aloha's court-appointed trustee Dane Field, requires the approval of U.S. Bankruptcy Judge Lloyd King.

Banmiller and Kessler could not be reached for immediate comment.

But Field defended the proposal, saying Banmiller and Kessler played an important role in selling Aloha's cargo and its contract services units, which saved more than 1,400 jobs and preserved a business that handles more than 85 percent of all air freight between O'ahu and the Neighbor Islands.

The deals include the $10.5 million sale of Aloha Cargo to Seattle-based Saltchuk Resources Inc. and the $2.05 million sale of contract services to Los Angeles-based Pacific Air Cargo.

Although the combined amount is below the $19.25 million minimum threshold for a bonus, Aloha still has considerable assets to sell. Field's filing last week noted that the airline must liquidate its company-owned aircraft, jet engines, its receivables and its intellectual property, which includes Aloha's trademarks and brand name.

The airline also holds the rights to its lawsuit against the Phoenix-based owner of go! airlines, Mesa Air Group, which Aloha accuses of using anti-competitive measures to drive it out of business. A similar suit by Hawaiian Airlines was settled with Mesa agreeing to pay $52.5 million.

"Without these guys (Banmiller and Kessler), we wouldn't be able to figure out how to get rid of everything," Field said.

"They know what equipment Aloha has, they know its values, they know where it's located and they know its approximate value."

The bonus would be on top of Banmiller's $500,000-a-year base salary. When they were hired as Aloha's CFO in 2005, Kessler and his Atlanta-based firm Tatum CFO Partners received $13,000-a-month, or $156,000 a year.

Aloha shut down its passenger service on May 31 and terminated 1,900 workers. The closure came 11 days after the carrier filed for bankruptcy reorganization.

The proposed bonuses for Banmiller and Kessler are modest compared to the so-called $8 million "success fee" sought by Joshua Gotbaum, the former bankruptcy trustee appointed in the Hawaiian Airlines bankruptcy.

In October 2005, Federal Bankruptcy Judge Robert Faris cut Gotbaum's bonus request to $250,000, saying it would be difficult to justify an excessive payment to Gotbaum given the concessions made by Hawaiian's employees during the airline's three-year bankruptcy.

Riddel, the Aloha pilot, believes that Aloha could put the money to better use giving it to the people who need it the most: the employees.

When Aloha shut down its passenger service, many employees were left without any severance and healthcare coverage, he said.

"As the captain, I would have been the last one who left the ship. I would want to make sure that it went to the people who (were) struggling," Riddel said.

The Honolulu Advertiser

~ ~ ~

May 3, 2008

Trustee asks judge to reject
Aloha's union contracts

AOL News, AP

HONOLULU (AP) - The new trustee of Aloha Airlines has asked a federal bankruptcy court to reject all six of the company's union labor contracts as Aloha moves forward with plans to liquidate and stop its business operations.

The demand from trustee Dane Field, which has been criticized by Aloha's pilots union, comes as the airline is expected to complete the sale of its cargo unit to Seattle-based Saltchuk Resources Inc. on May 14.

Saltchuk, meanwhile, has met with representatives of the International Association of Machinists and Aerospace Workers union. The group represents Aloha's cargo and supply agents.

Assistant Chairman of IAM District 141 Randy Kauhane says Saltchuk has been willing to negotiate and is not anti-union.

~ ~ ~

April 3, 2008

Most creditors of Aloha
likely to receive ‘squat’

The sale of assets and a pending lawsuit will generate
funds, but the airline owes too much

By Dave Segal, Star-Bulletin

Aloha Airlines' unsecured creditors, who received one-hundredth of a cent on the dollar after the company's last bankruptcy three years ago, likely will receive nothing this time around.

The unsecured creditors include all those who paid for Aloha tickets using cash or checks -- people whom Aloha's Web site advises to file claims with the U.S. Bankruptcy Court.

"Between you and me, the unsecureds are not going to get squat," said one insider close to the case.

All the money that Aloha receives from the sales of its cargo division, aviation services unit and the company's intellectual property, such as the Aloha name and logo, will go first to its primary lender, General Motors Acceptance Corp., and then -- if anything is left over -- to its majority investor, Yucaipa Cos. LLC.

Aloha owes GMAC $44 million of principal, plus an additional $4.9 million for letters of credit that the lender issued on behalf of Aloha, while Yucaipa is owed $106.7 million.

Aloha reported in its March 20 bankruptcy filing that it has in excess of 4,000 creditors. On Monday the 61-year-old airline shut down its passenger operations.

"We have major concerns that this is essentially being operated for the benefit of the secured lenders rather than for the creditors and the people of Hawaii," said attorney Christopher Prince, who represents the unsecured creditors committee.

Under federal Bankruptcy Law, secured creditors -- those with collateral -- get paid first from the proceeds of any sales. Administrative claims, such as attorney fees, are paid next, while unsecured claims are last in the pecking order.

In a case where there is little money available, attorneys can get paid through "carve-outs" in which the secured creditors set aside money to pay the attorneys and other professionals for the debtor -- in this case, Aloha -- and the unsecured creditors committee.

The one wild card for creditors is Aloha's lawsuit against Mesa Air Group, which is scheduled to be heard in federal District Court in October. Aloha is alleging that Mesa used predatory pricing and confidential information obtained as a potential investor during Aloha's bankruptcy to gain a competitive advantage in entering the Hawaii market.

A federal Bankruptcy Court judge already has awarded Hawaiian Airlines more than $80 million in a separate lawsuit with some of the same allegations. Aloha President and Chief Executive David Banmiller thinks the damages award could be even higher if Aloha prevails in its suit.

Banmiller said the shutdown of Aloha's passenger operations increases the amount of damages it could seek from Mesa in the lawsuit.

But the next turning point for Aloha's creditors comes today, at a court hearing over the potential sale of the cargo unit.

Cargo, the airline's most profitable division, flies 85 percent of the state's goods as well as all the U.S. mail to Maui and the Big Island. The unit has generated earnings before interest, taxes, depreciation and amortization of more than $6 million annually in recent years.

A dispute over pilot seniority and the company's fears of a walkout that could scuttle the cargo unit's sale prompted Aloha to file a motion Tuesday in Bankruptcy Court seeking a temporary restraining order against the Air Line Pilots Association. Bankruptcy Judge Lloyd King put off making a decision on the motion to give the sides time to talk. A status conference on those talks is scheduled for today.

Prince said he is concerned that there is a "rush to judgment to sell these assets piecemeal and deny the state of Hawaii the business that it's enjoyed for the last 61 years."

But Banmiller said there was no rush to sell the cargo unit at all.

"I've been trying for at least a year to sell Aloha Airlines -- the entire entity -- because I think it has great value," Banmiller said. "The problem is, the realities that are out there today are frankly different. Fuel has dramatically increased the bet on trans-Pac and interisland because most of the fuel goes to that. So when you talk about a doubling of fuel, it really affects interisland and trans-Pac and not cargo, because the cargo cost fuel surcharge is passed on. Contract services just handle other carriers, so the economics is different for those two.

"Go! trashed the environment interisland, but not cargo. Fuel did the same for trans-Pac and interisland. So we woke up one day and everybody is saying, 'I'd like to buy this but not the entire entity.' So as a responsible debtor, I have to listen to the marketplace, and we have a lot of interest in cargo."

Also on the docket today is a motion by Aloha to reject 14 of its 27 aircraft leases. The remaining aircraft are either cargo planes or aircraft already owned by Aloha.

http://starbulletin.com/2008/04/03/news/story02.html

http://www.kycbs.net/Aloha-Air-Creditors.mht

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NEW DISCOVERY - 04/06/08 - DAVID FARMER AND JUDGE ROBERT FARIS’ UNDISCLOSED CONFLICTS OF INTEREST WITH AON CONSULTING IN THE ALOHA AIRLINES BANKRUPTCY CASE:

Docket No 181 - 4/4/2008 - Notice of Appearance by Brian W. Bisignani and Request for Notice. Filed by Brian W. Bisignani on behalf of Aon Consulting (LL)

http://www.postschell.com/attorney.cfm?attorney_id=301

http://chapter11.epiqsystems.com/clientdefault.aspx

http://chapter11.epiqsystems.com/docket/docketlist.aspx

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NEW DISCOVERY (03/30/08):

March 30, 2008

Aloha Airlines shutting down;
Monday last day of operations

Advertiser Staff

Aloha Airlines announced today that it will be shutting its inter-island and trans-Pacific passenger flight operations. Aloha's last day of operations will be Monday.

On that day Aloha will operate its schedule with the exception of flights from Hawaii to the West Coast and flights from Orange County to Reno and Sacramento and Oakland to Las Vegas.

Effective immediately, Aloha will stop selling tickets for travel beyond tomorrow.

The shutdown will affect about 1,800 employees.

"This is an incredibly dark day for Hawaii," said David Benmiller [sic], Aloha's president and chief executive officer.

"Despite the groundswell of support from the community and our elected officials, we simply ran out of time to find a qualified buyer or secure continued financing for our passenger business. We had no choice but to take this action."

www.honoluluadvertiser.com

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< < < FLASHBACKS < < <

January 3, 2005

Shaking things up at
bankrupt Aloha Air

The isle carrier’s new president
comes with a can-do reputation

By Allison Schaefers, Star-Bulletin

When new executives take over a company, they often choose to quietly watch before making waves.

And then there's David A. Banmiller, the new president and chief executive of Aloha Airlines, who will lead the struggling carrier through the Chapter 11 bankruptcy organization it filed Thursday.

The privately held company, which had a $1.3 million profit in 2002 after four straight years of losses, began its recent string of quarterly losses with a $3.2 million loss in the fourth quarter of 2003. The airline lost another $6 million in the third quarter of this year.

Banmiller has been on a cost-cutting mission since joining the company in mid-November.

"He's known as a mover and a shaker by the whole industry," said Thom Nulty, Aloha's new senior vice president of marketing and sales. "He doesn't let moss grow on any rocks."

Nulty, former president of Navigant International Inc., who came out of retirement to join Aloha in December, first crossed paths with Banmiller 20 years ago at Air Cal.

Banmiller, who started as senior vice president of marketing for Air Cal, went on to become the company's president.

"He was constantly in the L.A. Times then and was known for his ability to stir things up in a positive way," Nulty said.

Banmiller has more than 30 years of experience in air travel and has held senior airline industry positions in the United States, Europe, South America, Mexico and the Far East. He most recently served as Air Jamaica's executive vice president and chief operating officer.

He also has served as president and CEO for Sun Country Airlines, Pan American World Airways, Sun Jet and as vice president of American Airlines' international division.

At his former companies, Banmiller earned a reputation as the guy who can get quick concessions from employees and take a carrier through bankruptcy, said Aloha pilot John Riddel.

"Certainly the board considered (Banmiller's) background with bankruptcies when they hired him," Nulty said. "However, they also considered his experience and his track record of being able to attract good people and get high visibility."

Banmiller took Aloha's reins at a turbulent time in the airline industry, when few carriers are making money and many are restructuring, including Hawaiian Airlines.

"Today our industry is in chaos. Every legacy carrier is fighting to survive in the midst of attempts to compete against low-cost carriers and grab market share," Banmiller said in a December memo to employees.

With less than one month's time on the job, Banmiller reduced the company's top management by 36 percent, firing some employees and freezing open management positions.

http://starbulletin.com/2005/01/03/business/story2.html

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July 22, 2005

Aloha Airlines chief
to earn $497,400

By Rick Daysog, Advertiser Staff Writer

Aloha Airlines Inc. CEO David Banmiller will earn about $500,000 this year and could receive up to $1 million in severance should the airline emerge from bankruptcy under new ownership, according to documents filed in U.S. Bankruptcy Court.

Banmiller will receive an annual base salary of $455,400 plus annual housing expenses of at least $42,000, the airline said in documents filed Wednesday.

Aloha's filing — which provides the first public glimpse into the pay of the airline's top executive — revealed that Banmiller owns 5 percent of the privately held airline and could receive more than $1 million in severance pay over two years should Aloha emerge from bankruptcy under new investors. As a privately held company, Aloha has not been required to report such information in public filings with the Securities and Exchange Commission.

Aloha also said Banmiller could seek a success fee when the company completes its reorganization. A success fee, the details of which are yet to be determined, would be subject to the bankruptcy court's review.

Banmiller's compensation package was contained in a filing seeking bankruptcy court approval for his employment contract. The airline negotiated Banmiller's contract in October but needs court approval to assume his contract.

Bankruptcy Judge Robert Faris has scheduled a hearing Tuesday on Banmiller's contract.

Aloha said Banmiller's compensation was reasonable, given his experience in the airline business and his expertise in restructuring distressed companies.

Banmiller, who was named Aloha's chief executive officer in November, has more than three decades of experience in the airline industry. He previously served as president and CEO of Sun Country Airlines and Pan American World Airways. He also was president and chief operating officer of Air Cal before the company was acquired by American Airlines.

Aloha said Banmiller and other top executives have seen their pay reduced by 20 percent since the bankruptcy and added that its chief executive likely would lose his post should the company emerge from bankruptcy under new investors.

"Mr. Banmiller's contract is reasonable for an executive of his caliber," said Stephanie Ackerman, Aloha's senior vice president for public relations and government affairs.

In its filing, Aloha said Banmiller's annual compensation is well below that of his peers on the Mainland, including the chief executives of United Airlines and American Airlines who each received more than $1 million last year.

The airline also compared Banmiller's pay with that of his predecessor, Glenn Zander, who was paid $500,000 a year in salary and housing allowance, and former Hawaiian Airlines bankruptcy trustee Joshua Gotbaum, who received $720,000 in annual salary, housing and living expenses.

Gotbaum's pay figures did not include a success fee, which he is entitled to seek for steering Hawaiian out of bankruptcy. He has not yet applied for the fee but has until next month to do so.

Hawaiian, which emerged from bankruptcy protection in June, had no immediate comment on Aloha's filing.

Aloha, the state's second largest airline with more than 3,600 employees, filed for bankruptcy protection in December. The company is searching for new investors that will help it get out of bankruptcy.

Banmiller's pay, along with the compensation of other top executives, has been a sore point for the airline's unionized workers, who say they have made significant concessions during the past year.

Daniel Katz, attorney for the Air Line Pilots Association, said he plans to file an objection to Banmiller's contract later today. The pilots, who have given up more than $20 million in concessions, previously criticized the executive packages as extravagant.

"We object to these benefits for executives while the rank and file are getting cuts in pay," Katz said.

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A picture says a thousand words...

http://starbulletin.com/2006/11/09/news/berger.html

http://starbulletin.com/2006/11/09/news/artb5x.jpg

www.kycbs.net/Aloha-Air-Bankruptcy.mht

www.kycbs.net/Exhibit-HA.htm

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NEW DISCOVERY (03-2-08):

David C. Farmer is the potential co-counsel for Debtor in the NEW Aloha Airlines bankruptcy, providing further evidence of conflicts of interest with numerous entities and witnesses in this case:

www.kycbs.net/Aloha-Air-Bankruptcy.mht

www.kycbs.net/Aloha-Air.htm

www.kycbs.net/Exhibit-HA.htm

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NEW DISCOVERY (03-29-08):

March 29, 2008

Lawmakers consider
bailing out Aloha Air

Loan guarantees, tax exemption
will be voted on next week

By Rick Daysog, Advertiser Staff Writer

A state government bailout of Aloha Airlines is gaining momentum as key lawmakers and hundreds of employees voiced their support yesterday.

At a state Capitol rally yesterday, House Speaker Calvin Say and Senate Ways and Means Chairwoman Rosalyn Baker pledged to support the airline, which filed for bankruptcy last week for the second time in about three years.

"We would not be doing our jobs if we didn't make an effort to assist a company that has as much reach and impact in the community," said Baker, D-5th (W. Maui, S. Maui).

At least one leading airline industry analyst said the state could be wasting its money.

"Putting more money into this company is like giving a transfusion without trying to stop the bleeding," said Bob McAdoo, senior research analyst with Nashville, Tenn.-based Avondale Partners LLC.

On Monday, the state Senate will vote on a House measure that will exempt local carriers from paying the general excise tax on the millions of dollars in jet fuel that they use every year. The Senate Ways and Means Committee will hold a hearing on Tuesday on a bill that would provide loan guarantees for Aloha.

Aloha, the state's No. 2 carrier, filed for Chapter 11 reorganization last week after losing more than $120 million in the past two years. Aloha, which is down to about $3.8 million in cash, blamed its bankruptcy on soaring fuel prices and "predatory pricing" by its interisland competitor go!

Lowell Kalapa, executive director of the nonprofit Tax Foundation of Hawaii Inc., said there's precedent for providing financial assistance to the airline industry.

In 1993, the state issued about $14 million worth of loan guarantees to Hawaiian Airlines, which was experiencing financial troubles at the time.

Four years later, the state provided Continental Airlines $2 million in tax incentives, more than $25 million in revenue bonds and a $1.2 million general excise tax break to build a $24 million, state-of-the-art jumbo-jet maintenance hangar at Honolulu International Airport.

Kalapa said he opposed the 1993 loan guarantees for Hawaiian because he thought that government shouldn't guarantee the debt of a private company. But since the state has already granted Hawaiian a loan guarantee, it would only be fair to give its competitor a similar loan guarantee, Kalapa said.

"If they can bail out Hawaiian, the only fair thing to do is to bail these guys out, too," Kalapa said.

Kalapa added that the state provides tax credits and other incentives to high-tech and film industries, so it can provide similar breaks for the airline industry, which plays a more vital role in the state's economy.

Problems will linger

Airline industry analyst McAdoo believes that Hawai'i taxpayers may wind up paying for Aloha's loan guarantees should the company wind up closing its doors.

McAdoo said loan guarantees have been used in the airline industry when a company has a temporary problem and has a business plan that will "stop the bleeding."

He noted that the federal loan guarantee program enacted shortly after the Sept. 11 tragedy included a rigorous evaluation process and required the airlines to provide the government with protections against default.

In Aloha's case, the fare war and high fuel prices aren't problems that are going to go away in the short term but are part of the carrier's everyday business environment....

~ ~ ~

NEW DISCOVERY (03-21-08):

March 21, 2008

Aloha Airlines in talks to sell
all or parts of company

Rick Daysog, Advertiser Staff Writer

Aloha Airlines today said it is in discussions with several parties to sell the entire airline or parts of it.

Aloha, the state's second-largest carrier, filed for Chapter 11 bankruptcy protection yesterday with assets and liabilities both in excess of $100 million. Aloha also blamed unfair competition by low-cost carrier go!.

In a hearing in U.S. Bankruptcy Court this morning, Aloha said it was down to $3.5 million in cash and that its expenses over the next 10 days would eat away about $2.3 million of that.

Aloha said its main investor, Yucaipa Co., had plowed more than $110 million in the airlines since it emerged from bankruptcy in February 2006. Yucaipa said it is unwilling to provide further financing.

During the hearing, U.S. Bankruptcy Judge Lloyd King granted Aloha permission to pay some of its daily operating costs, such as utility bills and wages. King will hold further hearings this afternoon on Aloha's agreement with lenders to secure more financing.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.

The Honolulu Advertiser

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< < < FLASHBACK < < <

starbulletin.com/2006/11/09/news/berger.html

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http://starbulletin.com/2006/11/09/news/artb5x.jpg

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NEW DISCOVERY (03/12/08): Undisclosed conflicts of interests between Judge Robert Faris, David Farmer (Attorney for Aloha Airlines), Judge Michael Seabright, David Banmiller, and other witnesses, relating to the bankruptcies of Hawaiian Airlines and Aloha Airlines:

October 31, 2007

Hawaii air fares may rise
after $80M ruling

By Rick Daysog. Advertiser Staff Writer

Interisland airline go!, whose low prices started a fare war, has lost a court ruling that might prompt it to leave Hawai'i, industry analysts said.

If go! leaves, interisland airfares will likely rise, the analysts predicted.

A judge yesterday ruled that go!'s parent, Mesa Air Group, must pay $80 million to Hawaiian Airlines for misusing confidential business information.

But U.S. Bankruptcy Judge Robert Faris rejected Hawaiian's request to bar go! from selling interisland tickets for one year.

Mesa said it will likely appeal the decision and said it remained committed to the Hawai'i market. But analysts said that if the ruling stands, it will likely affect whether go! continues to offer $19, $29 and $39 one-way fares, or operate at all in Hawai'i.

"This definitely hurts Mesa," said Nick Capuano, managing director and head of equity research at Los Angeles-based Imperial Capital LLC, whose firm follows Hawaiian.

"It's now less likely that they will slug it out in a money-losing market."

The $80 million judgment is more than double the $34 million that Mesa earned for all of 2006 and is equivalent to about $2.78 for each outstanding share of Mesa's stock.

Since the June 2006 launch of go!, Mesa's cash holdings have fallen from about $345 million to about $198 million, according to a recent filing with the Securities and Exchange Commission.

Local airline industry historian Peter Forman said he believes the ruling will likely hasten Mesa's exodus from Hawai'i.

"I would think that this puts more pressure on Mesa to look at finding a settlement with Hawaiian for an exit strategy," Forman said.

The judge said Mesa used proprietary information it obtained from Hawaiian Airlines to "gain a competitive advantage ... to enter the market for Hawai'i interisland air transportation services."

"In this case, the award of money damages adequately redresses the harm suffered by (Hawaiian Airlines) as a result of Mesa's breach of the confidentiality agreement," Faris wrote in a 14-page finding accompanying his ruling.

REACTIONS TO RULING

Mark Dunkerley, Hawaiian's president and CEO, welcomed the judge's decision.

"Today's ruling is a triumph for fair competition and ethics over dishonesty and illegal behavior," he said.

"Nobody benefits when a company like Mesa misuses confidential information to gain an unfair competitive advantage, then lies about it and destroys evidence."

Jonathan Ornstein, Mesa's chief executive officer, said the likelihood of an appeal "is very high."

Ornstein said his company remains "more committed" to the interisland market in light of yesterday's ruling.

But should Mesa decide to leave Hawai'i in the future, Faris' ruling could cost consumers "hundreds of millions of dollars," Ornstein said.

He said Faris "basically ruled that the actions of one person were enough to punish" Mesa, its 5,000 employees and Hawai'i's residents and visitors.

He was referring to Mesa Chief Financial Officer Peter Murnane, who downloaded thousands of pages of proprietary information about Hawaiian's business, then destroyed the records, saying he thought he was deleting pornography from his work computers.

Murnane has since been placed on a 90-day leave of absence by Mesa's board.

"We are extremely disappointed, and that judge has put the interest of Hawaiian above the interests of the people of Hawai'i," Ornstein said.

Hawaiian sued Phoenix-based Mesa last year for $173 million in damages, alleging that Mesa used confidential financial data from Hawaiian to set up go! airline.

POSSIBILITY OF APPEAL

The ruling came after yesterday's close of the stock market. Mesa's stock closed at $5.10 on the Nasdaq market yesterday, up 16 cents. Shares of Hawaiian rose 61 cents to $5 per share on the American Stock Exchange in after-hours trading yesterday.

Mesa has up to 10 days to appeal Faris' decision with the U.S. District Court or with the bankruptcy appellate panel of the 9th U.S. Circuit Court of Appeals in California.

Such an appeal would require Mesa to post a bond for the full $80 million, unless Faris were to grant Mesa a stay pending the outcome of such an appeal.

Besides Hawaiian's lawsuit, Aloha Airlines has filed an antitrust lawsuit in U.S District Court against Mesa, alleging that Mesa used confidential information to drive it out of business.

"Aloha believes it is important for all companies serving the people of Hawai'i to conduct their business affairs with the highest ethical and legal standards, and the court today found that Mesa did not meet that standard of conduct," said David Banmiller, Aloha's president and chief executive officer.

"Contrary to what Mesa has been saying, today the court confirmed what we have been saying all along, that Mesa's actions as a new entrant have been inconsistent with fair play."

In its February 2006 lawsuit, Hawaiian alleged that Mesa received more than 2,000 pages of confidential financial information when Mesa expressed an interest in acquiring Hawaiian in 2004 while Hawaiian was in bankruptcy.

Mesa, whose bid was rejected, was supposed to return the documents or destroy them but didn't, Hawaiian alleged. Hawaiian emerged from bankruptcy protection in June 2005 under the ownership of California-based Ranch Capital LLC.

Mesa previously has argued that losses suffered by Hawaiian after go!'s entry were largely self-inflicted because the local airline increased capacity in response to go!'s entry.

Mesa also has said that Hawaiian wants go! out of the market so it can increase fares.

Yesterday's ruling comes after two weeks of court hearings from Sept. 25 to Oct. 4.

A 'MISADVENTURE'

During a pretrial hearing, Faris found that Mesa kept confidential information it was supposed to return or destroy; Mesa misused information it kept, and that was a substantial factor in Mesa's decision to enter the Hawai'i market.

In his findings of facts and conclusion of law, Faris cited about a half dozen confidential documents that Mesa misappropriated to start go! They include:

> Internal projections on Hawaiian Airlines' future operations and financial performance;

> Lists of contracts with the local airline's third-party vendors;

> Details of Hawaiian's expansion plans;

> The company's strategy for marketing to wholesale tour operators;

> Documents spelling out Hawaiian's contracts with its codeshare partners like American Airlines, Continental Airlines, Northwest Airlines and US Airways;

> Pricing policies, frequent flier programs and credit card alliances.

"A skilled and experienced expert in the airline business might have been able to make an 'educated guess' about some of these topics by drawing inferences from publicly available information," Faris wrote.

"These inferences would not have been as accurate and reliable as the information, which Mesa obtained directly from HA."

Scott Hamilton, a Washington state-based aviation industry consultant, called go! a "misadventure from the beginning."

RISING FARES PREDICTED

Hamilton said the interisland market could not sustain more than two major players, especially when fares are as low as $29 or $19.

He predicted that fares will return to where they were in 2005 when the local carriers were charging more than $79 each way if go! leaves the market.

"If indeed Mesa does decide to withdraw and shuts down go!, fares will go up the day go! shuts down, if not before," Hamilton said.

"There is no incentive to keep fares at present levels without go! in the market," he said.

Faris alluded to that prospect when he wrote:

"This situation cannot continue indefinitely; eventually fares must increase to a level that eliminates the market-wide losses. (It is highly unlikely that any of the three carriers could reduce its costs enough to eliminate its losses.)

"It is impossible to say with any decree of certainty, however, when this will occur or what the new fare level will be. It is also possible that another carrier could enter the market, holding fares down."

HOW EVENTS UNFOLDED

March 2003: Hawaiian Airlines files for bankruptcy protection.

April 2004: The federal bankruptcy court allows potential investors to study Hawaiian's books under a confidentiality agreement.

April to May 2004: Mesa downloads more than 60 documents, including more than 2,000 pages of proprietary information about Hawaiian's financial performance, projections and business strategy.

May 2004: Mesa is eliminated as a bidder for Hawaiian.

December 2004: Aloha Airlines files for bankruptcy protection.

April 2005: Mesa starts looking into acquiring or forming a business alliance with Aloha. Mesa retains GCW Consulting, an Arlington, Va.-based aviation consulting firm, to "look at a possible acquisition or some other structure for entry into the Hawai'i market."

June 2005: Hawaiian Airlines exits bankruptcy protection under the ownership of California-based Ranch Capital LLC.

January 2006: Mesa's Chief Executive Officer Jonathan Ornstein tells investors that Mesa's decision to enter the interisland market was based on its review of Hawaiian and Aloha Airlines during their bankruptcy cases.

February 2006: Hawaiian sues Mesa to bar the company from operating in the interisland market for two years. Hawaiian alleges Mesa improperly used confidential data it received when Hawaiian was in bankruptcy. Hawaiian later reduces the length of the ban it seeks to one year.

March 2006: Mesa begins selling tickets for its June 9 launch of interisland carrier go!

March 2006: Mesa files countersuit, accusing Hawaiian of trying to illegally block competition.

June 2006: Mesa launches go!

September 2006: Hawaiian alleges Mesa tried to drive Aloha out of business and cites e-mails by Mesa Chief Financial Officer Peter Murnane. One e-mail says: "If we assume Aloha stays in market and in business forever, this project makes no sense. We definitely don't want to wait for them to die, rather we should be the ones who give them the last push."

October 2006: U.S. Bankruptcy Judge Robert Faris rejects Hawaiian's request for a ban but says Mesa "probably breached the confidentiality agreement" by failing to return or destroy material it received. Faris also concludes that "at one time, Mesa hoped to drive Aloha out of business."

October 2006: Aloha sues Mesa, alleging that it misused confidential information in an attempt to drive Aloha out of business.

December 2006: Faris throws out Mesa's countersuit against Hawaiian.

August 2007: Hawaiian accuses Mesa CFO Murnane of destroying several computer files that included confidential Hawaiian material.

Yesterday: Faris orders Mesa to pay Hawaiian $80 million in damages for misusing confidential business information.

• • •

Postings at www.honoluluadvertiser.com

This is a representative sampling of comments posted at honoluluadvertiser.com after the go! airline ruling was announced:

go! just wanted to drive out Aloha or Hawaiian, then it would have raised prices for sure.

Dan, Honolulu

Please don't go, go! We need the "reasonable" fares to stay. Hawaiian and Aloha were gouging us for too long!

RCM, Honolulu

I think it is fair considering Mesa came in to put either Hawaiian or Aloha out of business using confidential information.

Nate

Mesa will go buh-bye,
Hawaii Superferry will go buh-bye,
Hawai'i consumers will suffer once again,
And the "ol' boy network" will live happily ever after.

Largo, Honolulu

http://the.honoluluadvertiser.com/article/2007/Oct/31/

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NEW DISCOVERY (December 23, 2007):

November 9, 2006

ON THE SCENE

by John Berger, Honolulu Star-Bulletin

David Banmiller, center [photo], president and CEO of Aloha Airlines, was congratulated Saturday by Honolulu attorney David Farmer and his wife, Loren, at the 11th Annual March of Dimes Governors' Ball at the Hilton Hawaiian Village. "60 Years of Aloha" was the theme as Banmiller accepted the Franklin Delano Roosevelt Award for Distinguished Community Service, on behalf of "the men and women of Aloha Airlines."

http://starbulletin.com/2006/11/09/news/berger.html

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April 22, 2005

Law firm quits from Aloha Air bankruptcy

The Gelber firm was at the center of a dispute
between the carrier and its lenders

By Dave Segal, Starbulletin

Aloha Airlines' lead legal firm, which has represented the carrier during its four-month bankruptcy, is withdrawing from the case.

The Honolulu firm Gelber, Gelber, Ingersoll & Klevansky didn't offer any specific reasons for its decision. However, earlier this month, Aloha went to court after having a dispute with the company's new lenders over whether the Gelber firm's Aloha Airlines trust account was vulnerable if the lenders were to collect on a lien.

The Gelber firm's Aloha trust account contains the firm's pre-bankruptcy retainer, which has a balance of $250,000, plus additional money for legal services that were deposited in keeping with court procedures.

Don Gelber, partner in the Gelber law firm, declined to comment on reasons for withdrawing as counsel. However, the firm said in its motion that it was an opportune time because the withdrawal would eliminate any question concerning a conflict of interest between the firm and the airline, many of the company's legal problems have already been addressed and the firm's withdrawal probably would reduce Aloha's legal expenses.

People familiar with the case said fee issues and a difference of opinion over the bankruptcy process prompted the Gelber firm's decision to want out.

The move to pull out comes as Aloha is entering a new chapter in its bankruptcy.

Earlier this week, the company's mechanics and inspectors union became the last of the airline's five unions to ratify a labor contract that has concessions. The new pact will allow the outsourcing of heavy-machinery work, which will result in 79 positions being lost.

In addition, Aloha sent letters to its flight attendants last week requesting volunteers to take three-month unpaid vacations.

Al Pattison, the company's senior vice president of human resources, said about 40 jobs will be affected and that the airline will be forced to lay off flight attendants if it doesn't get enough volunteers. The airline won't need as many flight attendants because a new contract provision reduces the number of attendants on trans-Pacific flights from four to three.

Aloha already has laid off 24 pilots since the start of the year.

David Banmiller, president and chief executive of Aloha, said the company has made "monumental progress" during its reorganization. He cited new aircraft leases, paying off more than $20 million in federally guaranteed loans, paying off another $20 million in commercial loans, obtaining a new $65 million loan and securing the new labor contracts.

"We are now at a new juncture that places great emphasis on the capitalization of the company and its emergence from bankruptcy," Banmiller said.

Berger Singerman, a Miami-based law firm that has been acting as the airline's special transaction counsel, will replace the Gelber firm as the lead attorneys. Hawaii lawyer David Farmer, a former president of the bankruptcy law section of the Hawaii State Bar Association, will join Berger Singerman's legal team as the local co-counsel.

Paul Singerman said the Gelber firm has done "a great job" but declined to comment on why the firm decided to pull out.

"A development of this kind is not a particularly common occurrence in a Chapter 11 case," Singerman said.

http://starbulletin.com/2005/04/22/business/story1.html

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March 14, 2007

Hawaii Superferry will sail between
Oahu, Maui & Kauai

By Rosemary McClure, Los Angeles Times

Madge Schaefer, a Maui resident, can't wait for the Hawaii Superferry (www.hawaiisuperferry.com) to sail into her future.

"No one from Maui wants to live in Honolulu because it's so crowded. But we want to be able to go there to shop or see a show," said Schaefer, a former Ventura County supervisor. "I can't think of a better way to do it than by ferry — and get a relaxing mini-cruise out of the trip."

The Superferry, a football field-sized catamaran, is scheduled to begin daily runs between Honolulu on Oahu, Kahului on Maui and Lihue on Kauai in July, carrying passengers and vehicles. It will be the only service of its kind in the islands....

The project has been six years in the making and will cost nearly $200 million by the time the second ship is launched. Passengers will pay $42 to $60 one way; passenger vehicles will cost $55 to $65 extra...

The new service will present more competition for inter-island airlines, which are currently slugging it out in a price war, with fares as low as $19 one way.

"We anticipate that the ferry will be costly, slow, bumpy and not much use to our customers," said David A. Banmiller, president and chief executive of Aloha Airlines. Flights between Honolulu and Maui or Kauai take less than 30 minutes, excluding airport and security line waiting time.

Environmental groups have also attacked the plan, saying the ferry will endanger the humpback whales that migrate into the area in winter and will spread invasive species from island to island. Ferry developers say they have worked with community and environmental groups to create a whale avoidance plan and will screen vehicles to avoid spreading invasive species....

http://travel.latimes.com/articles/la-trw-ferry18mar18

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October 5, 2007

Superferry can’t wait
for report, says CEO

'I can't guarantee the vessel will
return if it leaves the state'

By Wendy Osher, Special to the Star-Bulletin

WAILUKU » The Hawaii Superferry would transfer its vessel "elsewhere to generate revenue" if it cannot operate while an environmental study is prepared, President and Chief Executive Officer John Garibaldi testified in court yesterday.

"I can't guarantee the vessel will return if it leaves the state," said Garibaldi, adding that the Superferry is losing about $650,000 a week because its vessel, the Alakai, sits idle.

Garibaldi was called to testify yesterday in a Circuit Court hearing on an injunction to stop the company from operating at Kahului Harbor while an environmental assessment is conducted.

In August the Hawaii Supreme Court ruled that the state should have done an environmental assessment for Kahului Harbor improvements....

Garibaldi said the events of Sept. 11, 2001, "brought home the fact that we were relying on one mode of transportation." ...

Garibaldi pointed to his experience as an executive with Aloha Airlines in 1985 and later with Hawaiian Air in concluding that "the establishment of the Hawaii Superferry meets the needs of providing a public purpose."

When asked about previous testimony from other witnesses on invasive species, Garibaldi agreed that occasional random high-intensity inspections of vehicles utilizing the ferry service would not be objectionable....

Garibaldi said 12 meetings were called for, but they conducted 22 statewide, with seven of them on Maui.

Isaac Hall, the attorney for environmental groups seeking the injunction, objected to the line of inquiry, saying, "Any public involvement is irrelevant to the argument because the Hawaii Supreme Court has already ruled that the public was deprived of their participation rights by the failure to prepare an EA (environmental assessment)."

Judge Joseph Cardoza overruled the objection because the two sides will later argue the information's relevance.

http://starbulletin.com/2007/10/05/news/story01.html

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David Banmiller is expected to testify regarding his business, professional, political and personal relationships with David C. Farmer, John Garibaldi, Hawaiian Airlines, Aloha Airlines, Brian Bisignani, Linda Lingle, Rudy Giuliani, Jeffrey Case, Judge Alan Kay, Judge David Ezra, Daniel Case, Steve Case, Stephanie Case, The Nature Conservancy, Judge Barry Kurren, Faye Kurren, John Marshall ,Colbert Matsumoto, Earl Anzai, Lyn Anzai, Bob Awana, Henry Paulson, Goldman Sachs, James Nicholson, Carol Muranaka, Larry Price, Howard Luke, GECC, John Waihee, Steven Guttman, Mary Lou Woo, James Aiona, Judge Samuel King, Randall Roth, Jerrold Gubin, Cutter Ford, Governor Linda Lingle, June Jones, Larry Price, Joshua Gotbaum, Ben Cayetano, George Ariyoshi, Walter Dods, First Hawaiian Bank, Cobert Kalama, Dee Jay Mailer, Evan Dobelle, University of Hawaii, Judge Robert Faris, Judge Lloyd King, James Wriston, Judge Ronald Moon, Rosemary Fazio, Lawrence Johnson, Kirk Caldwell, Donna Tanoue, Bank of Hawaii, Harold Johnston, Grant Johnston, Frank Tokioka, Island Insurance Holdings, Michael Tanoue, Richard Ing, Louise Ing, Paul Alston, Judith Neustadter Fuqua, Stuart Ho, Ron Sakamoto, and other entities to be named upon discovery.