David C. Farmer, Successor-Trustee vs. Harmon
(Formerly Woo vs. Harmon & Nicholson vs. Harmon)
CV05-00030 DAE KSC
U.S. District Court For the District of Hawaii
Judges: David A. Ezra; Kevin S. Chang
WILLIAM A. McCORRISTON
Founding partner in the law firm of McCorriston Miho Miller Mukai (now McCorriston Miller Mukai MacKinnon); attorney for Sukamto Sia, Kamehameha Schools’ trustees, John Waihee, etc.
This firm’s clients include Kamehameha Schools/Bishop Estate; Hawaii Insurance Commissioner; Office of Hawaiian Affairs (OHA); Christian Wolffer; John Waihee; Mayor Jeremy Harris; James Pflueger; Hyatt Regency Waikoloa; The Long-Term Credit Bank of Japan, Ltd; Mitsubishi Bank; State of Hawaii; University of Hawaii; Kahala Hilton Hotel; Hyatt Regency Hotels; Ala Moana Hotel; Waikiki Beachcomber; Kona Village Resort; Westin Maui; Kapalua Bay Hotel; Maui Marriott; Kaanapali Embassy Suites Hotel; Outrigger Prince Kuhio Hotel; AIG Hawaii Insurance Company, Inc.; American International Adjustment; The Home Insurance Company; Kemper Insurance; Liberty Mutual; Massachusetts Casualty Insurance Company; National Union Fire Insurance Company of Pittsburgh Pennsylvania (AIG); PEMCO Insurance Companies; Scottsdale Insurance Company; and State Farm Insurance Company.
Five Waterfront Plaza, 4th Floor
500 Ala Moana Blvd.
Honolulu, HI 96813
* * * * *
NEW DISCOVERY (11-30-08):
THE BEST GOVERNMENT MONEY CAN BUY
* * * * *
NEW UPDATE 02/05/08:
July 3, 2005
faces criminal probe
'Wall' keeps criminal, civil probes separate
By Jim Dooley, Advertiser Staff Writer
The state Attorney General's office is conducting a criminal investigation of the purchase and operation of the RightStar group of funeral and cemetery companies in Hawai'i, according to state officials and private attorneys familiar with the investigation.
The criminal probe is separate from a civil lawsuit filed last year by the Attorney General's office that accuses RightStar officials and four local lawyers, including former Gov. John Waihee, of mismanaging more than $20 million in RightStar funds held in trust for thousands of Hawai'i customers who purchased "pre-need" funeral services and cemetery plots.
RightStar owns and operates four cemeteries: Valley of the Temples on O'ahu, Maui Memorial Park on the Valley Isle, and Homelani and Kona Memorial Parks on the Big Island.
The company purchased the cemeteries and related mortuary and funeral plan trust assets in 2001, and the state licensed RightStar to operate them in November 2001.
William McCorriston, attorney for Waihee and the other three lawyers who acted as trustees of the RightStar customers' trust funds, said he does not believe his clients are targets of the criminal investigation.
"We have informed the Attorney General of irregularities and delinquencies which had concerned us," McCorriston said. "We believe our information was the genesis of their investigation."
Waihee could not be reached for comment.
Attorneys for RightStar officials and Vestin Mortgage Inc., a Las Vegas-based lender that financed RightStar's purchase of the companies and filed a mortgage foreclosure lawsuit against RightStar for failure to repay $34 million in loans, said their clients have done nothing wrong. They said company officials are cooperating in the criminal and civil probes conducted by the Attorney General.
State Attorney General Mark Bennett and Deputy Attorney General Lawrence Goya confirmed the criminal investigation but would not elaborate on details of the case.
RightStar's financial problems have spawned a welter of lawsuits in state and federal court here, and involved the companies and its officials in at least one other ongoing criminal investigation, according to court records.
Most of the civil cases center on how the companies and trustees managed trust-fund assets.
The trust funds contain money from cemetery plot and funeral plan buyers that is supposed to be held in trust for the customers until they die. The funds also contain money set aside for "perpetual care" of the cemeteries.
According to state figures, the value of the trust funds stood at $63.2 million when RightStar took control of them. A year later, the value dropped to $40 million.
The foreclosure lawsuit filed by Vestin Mortgage claims that RightStar defaulted on loans that were used to purchase the companies. A state judge handling that case has appointed an independent receiver, Guido Giacometti, to run the cemeteries and funeral businesses and protect the rights of customers while the competing claims from numerous parties are sorted out.
In his two most recent monthly reports filed with the court, Giacometti said the companies have a "critical need" for additional money and are attempting to develop new cemetery plots and sell new funeral plans to increase cash flow.
"We're doing OK — sales volumes are relatively consistent," Giacometti said. "We'd like them to be higher but we inherited a company that had not reinvested in itself. There are a limited number of cemetery plots available, so we're working toward development of future areas."
Local resident John Quinores bought four burial plots for himself and his family at Valley of the Temples in the 1960s and said he's worried about his investment. After agreeing to buy the cemetery plots, Quinores later supplemented that purchase with "pre-need" plans designed to provide funeral services when he dies.
"I'm still paying," Quinores said. "I called the company a couple of months ago with some questions but the lady that answered was vague and defensive."
Giacometti said he has made customer service a top priority and also is dealing with a variety of other pressing issues, including satisfying a dozen consumer complaints filed with the state Regulated Industries Complaints Office. Also unresolved are numerous other complaints about RightStar's decision last year to sell burial plots and funeral services contracts at a discount to a company called Alternative Debt Portfolios.
That sale was an effort by previous RightStar management to raise funds, Giacometti said.
"About 2,100 cemetery plot contracts were sold, but some of the contracts had already been paid in full and should not have been included in the deal," Giacometti said. "There are also some questions about who is responsible for the funeral services that are included in some of the other contracts."
Giacometti said he's cooperating in state and federal tax investigations of RightStar as well as a separate FBI investigation of Funding Solutions Inc., a company in Stamford, Conn., to which RightStar turned for financial assistance in 2004.
RightStar "made a $250,000 payment to them in return for a loan commitment, but then never got the loan," Giacometti said.
When Giacometti asked the company for a refund, "we ran right into an FBI investigation," he said. "They are investigating Funding Solutions and principals of the company and we are cooperating in that investigation."
According to federal court records, Funding Solutions executives Leonard Kalish and Joel Pondelik were charged with conspiracy to commit wire fraud in a criminal complaint filed by the U.S. Attorney's office in New York City in January.
A call to the company for comment was returned by Kalish's New York attorney, Martin Adelman, who said only that Kalish "will answer any and all official inquiries (about RightStar) when they are made."
A right to foreclose
Hawai'i Circuit Judge Sabrina McKenna ruled last month and again Friday that Vestin had the right to foreclose on RightStar, with the companies to be sold "to a licensed and qualified buyer" who would protect "the interests of consumers."
Attorney Grant Kidani, attorney for Alternative Debt Portfolios, had asked McKenna to delay foreclosure proceedings for 120 days, arguing that documents filed in another RightStar-related lawsuit, now pending in federal court here, showed both Vestin and RightStar had "unclean hands." Their relationship should be examined more closely before foreclosure takes place, he said.
The other federal court suit, first filed in U.S. Bankruptcy Court in Delaware and now pending before Hawai'i Federal Judge Helen Gillmor, alleges that Waihee and three other local attorneys who acted as RightStar funeral plan trustees were part of a fraudulent conspiracy to "strip the assets" of RightStar.
The suit was filed against RightStar by Alderwoods (Hawai'i) Inc., which purchased the assets of the cemetery and mortuary business in a Delaware bankruptcy court sale and then resold it to RightStar in 2001.
Charges in the suit are based in part on allegations from David Jackson, a former financial controller of RightStar Hawaii Management, who charged that Waihee used his "political influence" to smooth the company's dealings with state regulators.
McCorriston, Waihee's attorney, said Jackson's allegations "are part of an effort to besmirch Waihee's and the other trustees' reputations. RightStar has gone belly-up, so instead they're pointing their guns at the trustees."
Candace Ito, executive officer of the state Cemetery and Funeral Trusts Program, also denied Jackson's allegations, saying that "RightStar did not receive any special treatment" from the state.
RightStar President John Dooley said Waihee "did nothing improper while representing the company in the licensing process. He used his abilities to assist a private business attain licensing in the state of Hawai'i in much the same way that other former governors have assisted businesses in the past."
RightStar attorney James Wagner added, "Jackson is a disgruntled former employee who was fired for incompetence."
Attempts to reach attorneys for Jackson and Alderwoods were unsuccessful.
The state has charged in its civil suit against RightStar that the company and the former trustees improperly removed about $20 million in trust fund assets in 2002, transferring the money to RightStar's operational accounts. The state said the transfers should only have been made after a full accounting of the finances of the cemeteries and trust funds had been completed and filed with the state. Such financial statements have yet to be filed by RightStar, according to court records.
The Attorney General's suit also charged that the trustees removed another $20 million in trust fund assets and improperly invested the money in a Nevada real estate venture called Vestin Fund II. That fund is managed by Vestin Mortgage, the same company that financed RightStar's purchase of the cemeteries and trust funds in the first place.
An independent expert, John Candon, has been appointed by the court in the Attorney General's civil lawsuit to examine the finances and activities of RightStar and the trust funds and to make sure the money is properly accounted for and protected.
Last year, the U.S. Securities Exchange Commission revealed that it was investigating Vestin Fund II. Vestin called the SEC probe an "informal inquiry" that appears to focus on its financial reporting to the SEC.
Vestin attorney Paul Alston said the investment has yielded a return of 9 percent interest per year and is probably one of the best investments the trustees made."
And Alston said at least some of the blame for RightStar's problems belongs with the state. "It appears that the trusts were mishandled under the state's proverbial nose, and it is only because of Vestin's complaints ... that the state has stirred to action," Alston said in a letter to Judge McKenna.
In late May, state Deputy Attorney General James Paige said in a letter to Judge McKenna that the state had attempted unsuccessfully to recover $20 million in RightStar trust money from Vestin Fund II.
Under the terms of the investment, Paige said, the fund can give back no more than 10 percent of an investment per year. At that rate, the consumer trust funds that the state wants back will not be fully recovered "until approximately the year 2015," Paige wrote.
Class-action suit filed
Last week, a class-action lawsuit was added to the legal woes besetting RightStar. One plaintiff in the suit, Yahnina Hackney, repeated claims reported earlier by The Advertiser that RightStar improperly canceled her stepmother's funeral services contract after the elderly woman became sick and failed to make monthly payments to the company.
The company said in response that the cancellation was made by previous owners of the company and some of the disputed funds are still being held in trust.
Hackney said when her stepmother died, there was no money to pay for her burial. "I had to ask the state to do it," she said. "It was very sad. She was cremated. She didn't want that. I have her ashes at home."
She said she "would like to see everybody wake up and take a look at this issue. It's very important and it's something we all will have to face."
Reach Jim Dooley at 535-2447 or email@example.com.
~ ~ ~
July 3, 2005
'Wall' keeps criminal,
civil probes separate
By Jim Dooley, Advertiser Staff Writer
The Attorney General's office must keep its civil and criminal probes of RightStar separate and has taken steps to prevent any collaboration between the lawyers and staffers involved in two cases, attorneys said.
The separation is important because it is improper to use the threat of criminal action to advance a civil case, or vice versa.
Similar ethical barriers, informally called "Chinese walls," were erected inside the Attorney General's office when simultaneous civil and criminal investigations were conducted in the late 1990s of the Kamehameha Schools/Bishop Estate trustees and their management of the estate.
In fact, two lawsuits are still pending in state courts here — filed by former Bishop Estate trustee Richard "Dickie" Wong and his former brother-in-law, developer Jeffrey Stone — alleging that the Attorney General's office illegally used the separate civil and criminal probes as leverage to force Bishop trustees to resign.
Deputy Attorney General Lawrence Goya, who filed and later dropped criminal charges against Wong, Stone and former Bishop Estate trustee Henry Peters, is a defendant in both pending suits. One filed by Wong was dismissed by a Circuit Court judge, but that ruling is now under appeal before the state Supreme Court. The other, filed by Stone last year, is scheduled to go to trial next year.
Attorney William McCorriston, who represents four former RightStar trustees named as defendants in the attorney general's civil lawsuit said, "There's always a concern in a 'Chinese wall' situation, because there's an inherent tension between civil and criminal proceedings conducted by the same office."
Another ethical issue arises because Attorney General Mark Bennett and First Deputy Attorney General Lisa Ginoza are former partners in the McCorriston law firm.
Bennett said last week he departed from the firm long before it became involved in the RightStar case and thus has no conflict of interest in overseeing his office's RightStar-related activities.
Ginoza left the McCorriston firm in January of this year to join Bennett's staff and "has recused herself from any involvement" in the current cases, Bennett said.
"It wasn't clear that recusal was necessary but it was decided it was best for her to play no role," Bennett said.
For more, GO TO > > > Vampires in the Cemetery
~ ~ ~
October 19, 2001
Sia plans to
Change is part of a deal for
a lesser penalty, sources say
By Tim Ruel, Star-Bulletin
Troubled businessman Sukamto Sia, facing federal criminal charges including bank fraud, plans this morning to change his plea to guilty in exchange for a lesser punishment, sources said.
Sia was scheduled to appear before U.S. District Judge David A. Ezra at 11 a.m. His trial on charges of bankruptcy fraud, wire fraud, money laundering and other counts was supposed to start next month.
The FBI arrested Sia in August last year after the Indonesian businessman was indicted by a federal grand jury. Sia was later indicted two more times and was facing a total of 21 charges. Sia had pleaded innocent to all counts. It is unclear what charges the former Honolulu investor would plead guilty to or how much jail time or fines he may face.
It is also unclear how the guilty plea will affect the case against Sia's two younger brothers and girlfriend Kelly Randall, who were charged in May with being his accomplices. Mark Recktenwald, an assistant U.S. Attorney assigned to the case, confirmed that Sia would plead guilty, but declined comment about the specifics of Sia's change of plea. Sia's attorney David Minkin also declined comment.
Randall and Sia's two brothers, Suwardi Sukamto and Sumitro Sukamto, are named in 13 federal counts for allegedly helping Sia hide millions of dollars in assets from creditors and obtain illegal loans. Randall had not been charged in the previous indictments against Sia in exchange for her testimony before an October 2000 grand jury that returned Sia's second indictment, federal court records show. Randall's deal was later rescinded.
Sia, 42, filed for Chapter 11 bankruptcy in Hawaii in November 1998, a month after his arrest on charges of bouncing checks at Las Vegas casinos. At the time, Sia claimed he had $9.3 million in assets and more than $296 million in debts. Chapter 11, also known as reorganization bankruptcy, is used to restructure debt without the threat of lawsuits. The case was converted to Chapter 7 liquidation in 1999 and the trustee overseeing the bankruptcy accused Sia of hiding funds. Earlier this year, U.S. Bankruptcy Court auctioned a large portion of Sia's wine collection that he was said to have hidden.
The federal government's case against Sia took a turn in recent months, when assistant U.S. Attorney Omer Poirier unexpectedly left the case and was replaced by assistant U.S. attorneys Craig Nakamura and Recktenwald. After the change, the government asked the court last month to extend the beginning of the trial until February of next year. Ezra refused to grant the extension and pushed the trial back one month to Nov. 21.
Some of the charges pending against Sia relate to his tenure as former chairman and owner of the failed Bank of Honolulu. The government said that Sia double-pledged his stock in the bank to get two separate $40 million loans from banks in Asia.
Sia is alleged to have accomplished this by telling the bank's board of directors that he lost one set of shares. Sia's defense attorney William McCorriston has denied the claim. The Bank of Honolulu was seized last year by the Federal Deposit Insurance Corp., which sold the bank's assets to San Francisco's Bank of the Orient.
Originally jailed at Oahu Community Correctional Center, Sia was later allowed by the court to reside, under guard, at the Waikiki Landmark luxury condominium, a building Sia developed a decade ago.
~ ~ ~
William McCorriston is expected to testify regarding his business, professional and personal relationships with Kamehameha Schools/Bishop Estate; Margery Bronster; Evan Dobelle; Beverly Keever; William Tam; James Pflueger; Milton Holt; Robert Richards; Hamilton McCubbin; P&C Insurance Company, Inc.; Mark Bennett; Hugh Jones; Dorothy Sellers; Lawrence Goya; Jon Miho; Dan Inouye; Daniel Akaka; Jack Abramoff; James Baker; Robert Dole; Gale Norton; Linda Chu Takayama; Jerrold Chun; Hawaiian Electric Companies; Eric Yeaman; Don E. Carroll; Admiral Thomas Fargo; Constance Lau; Allen Hunter; The Hawaiian Insurance Group (HIG); Zephyr Insurance Co.; Colbert Matsumoto; Michael Tanoue; Robert Miller; Renton Nip; Calvin Say; John Waihee; Eric Martinson; Bruce Nakaoka; Marcia Diver; Laurian Childers; Christian Wolffer; Peter Young; Department of Land and Natural Resources; Robin Campaniano; American International Group (AIG); Bishop Museum; Mark Polivka; Gerard Jervis; Henry Peters; Richard Wong; Nathan Aipa; Colleen Wong; Louanne Kam; Sandra Wicklein; Wayne Chang; Howard Luke; Yukio Takemoto; Peter Savio; Guido Giacometti; Susan Tius; Sukamto Sia; Bank of Honolulu; Constance Lau; Rocco Sansone; Marsh & McLennan, Inc.; Federal Insurance Co. (Chubb Group); XL Insurance (Bermuda); Terry Mullen, John Mullen & Co.; Allan A. Smith; Grove Farm; Steve Case; Jeffrey Case, Aon Insurance Services; Mark Hastert; The Queen Emma Foundation; The Queen’s Medical Center; John D. Marshall, Judge James Duffy; Kenneth F. Brown; Melody MacKenzie; Dan Inouye; Daniel Akaka; Steve Case; Ed Case; Suzanne Case; The Nature Conservancy; Faye Kurren; Judge Barry Kurren; Bert Kobayashi; University of Hawaii; Judith Neustadter Fuqua; Edwina Clarke; Jas. W. Glover, Ltd.; David Black, Honolulu Star-Bulletin; George Ariyoshi; John Waihee; Renton Nip; Warren Price, III; Apollo Advisors; Leon Black; George Ruff; Judge Patrick Yim; Judge Kevin Chang; Judge David Ezra; Judge Robert G. Klein; Judge Samuel King; Judge Eden Elizabeth Hifo (fka Bambi Weil); Robert Katz; Brewer Environmental Industries (BEI); James Duca; Robert Kessner; Trinity Investments, LLC; Goldman Sachs; Blackstone Group; Maui Hyatt Regency Hotel; Charles Sweeney; Chris Hemmeter; Diane Plotts; Bill Mills; Maui Planning Commission; Sherry Broder; Judith Neustadter Fuqua; Jerrold Chun; David Fairbanks; Kea Lani Resort, Maui; Kona Beach Hotel; Azabu USA; Embassy Suites Kaanapali Resort, Maui; Harbor Court, Honolulu; Queen’s Court, Honolulu; John Snow, CSX Corporation; Rock Resorts; VMS Realty**; Prudential Securities**; Aloha Tower Marketplace; Sanford Murata; Michelle Tucker, Sterling & Tucker; Mitsui Trust & Banking; Wailea 670 and Palaupea Properties, Maui; Mark McConaghy; PricewaterhouseCoopers; Lee Henkle; McKenzie Methane; Marubeni Corporation; BNL; Linda Lingle; Bob Awana; Clayton Hee; Haunani Apoliona; Office of Hawaiian Affairs (OHA); John Goemans; Robert Kihune; Gil Tam; Sandwich Isles Communications; Summit Communications; Steven Guttman; Kitty Lagareta; Hill & Knowlton, Janet Hughes, Carol Muranaka, Malia Zimmerman, James Nicholson, David Farmer and others to be named upon discovery.
Originally posted January 1, 2005, by The Catbird
Latest update: March 12, 2009