Vampires in the Cemetery
Sightings from The Catbird Seat
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March 19, 2008
RightStar auction fails to draw
a qualified bid
By Jim Dooley, Honolulu Advertiser
A sales auction of the debt-ridden RightStar group of cemetery and funeral home companies did not produce a single qualified bid, but the companies' financial health is improving and they will be re-auctioned, a state judge was told yesterday.
All 50,000 customers holding funeral and/or burial service contracts with the companies will have their contracts honored, various attorneys involved in the RightStar foreclosure case told Circuit Judge Sabrina McKenna in a briefing on the status of the case.
RightStar, a start-up company incorporated in Nevada, purchased Valley of the Temples Memorial Park on O'ahu, Homelani and Kona Memorial Parks on the Big Island and Maui Memorial Park in 2001.
The previous owner was in bankruptcy proceedings in Delaware.
RightStar also purchased numerous Hawai'i pre-need funeral plan providers, including 50th State Funeral Plan.
Las Vegas-based Vestin Mortgage, RightStar's principal lender, filed a mortgage foreclosure suit here in 2004, alleging it was owed more than $36 million. McKenna appointed Guido Giacometti as receiver to run the companies while the foreclosure suit is pending.
Giacometti's attorney, Diane Hastert, yesterday balked at briefing McKenna in open court about the results of the RightStar auction and asked to submit the information to the judge under seal.
McKenna, however, ordered some information to be placed on the record, saying, "I do consider this a public matter and the public needs to be informed about what's going on."
Hastert then told the judge that two "non-conforming bids" from qualified buyers were received by the Feb. 29 auction deadline.
It's believed that the bids were less than the $25 million minimum price set last year by the state attorney general's office and Vestin.
Deputy Attorney General C. Bryan Fitzgerald told McKenna that a third bid was also received but it was "unacceptable."
He indicated that the third bidder offered more money but could not have received a state license to operate a funeral home or cemetery.
"The amount was correct but the bidder was not license-able," Fitzgerald said.
A new sales auction may be scheduled or sales conditions may be amended, McKenna was told.
Fitzgerald said that Giacometti has "dramatically improved" the financial condition of RightStar.
"I'm not discouraged," McKenna told various attorneys involved in the long-running case.
She said she was pleased to hear that an "interim business management team" is being brought in to "improve the market value" of the companies.
The state is pursuing other litigation against the former owners of RightStar, alleging that they fraudulently removed some $20 million the company held in trust for the benefit of RightStar customers.
That suit alleges that four trustees responsible for protecting the funds, including former Gov. John Waihee, should have stopped the improper removal of funds.
The former RightStar owners and former trustees have denied wrongdoing.
Former RightStar executive John Dooley was indicted on a theft charge in December 2006, but authorities have been unable to locate him.
Reach Jim Dooley at jdooley@honoluluadvertiser.com.
July 3, 2005
Cemetery operator 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.
Legal quagmire
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."
Consumers caught
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.
Transfers questioned
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 jdooley@honoluluadvertiser.com.
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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.
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See also: www.kycbs.net/EXHIBIT-Dooley-HA-7-3-5.htm
May 10, 2007
Cemeteries dispute settled
By Jim Dooley , Advertiser Staff Writer
After accusing each other of fraud and ineptitude, the state Attorney General's Office and Las Vegas-based lender Vestin Mortgage Inc. have agreed to settle their differences and move forward with an auction of the assets of the scandal-plagued RightStar group of cemetery and funeral services companies here.
The agreement, which ends a complex legal dispute between the parties which began in 2004, sets a minimum auction price of $25 million and requires that at least $9 million of the proceeds go toward restoring "pre-need" and "perpetual care" trust funds maintained by the RightStar companies for the benefit of an estimated 50,000 customers.
Another $11 million would go back into the trusts if it is recovered from continuing litigation against other parties, according to the agreement.
The state has previously alleged that between $20 million and $30 million was improperly removed from the RightStar trusts by company officials after they bought the companies in 2001.
Vestin financed that purchase and filed a foreclosure action against the Rightstar companies in 2004 after they defaulted on payment of more than $40 million in loans. Yesterday's agreement said Vestin is now owed nearly $50 million.
Attorney General Mark Bennett filed another suit in 2004, accusing RightStar owners and others, including former Hawa'ii Gov. John Waihee, of improperly allowing the removal of tens of millions of dollars from the trust funds. Bennett's office later accused Vestin of misconduct for requiring, as a condition of their loan, that another $21 million in RightStar trust funds be placed in a real-estate investment program operated by Vestin.
Yesterday's agreement stipulates that the $21 million investment will remain with Vestin until it matures. Bennett said yesterday that the investment has lost approximately 20 percent of its value, although Vestin officials have previously noted that the investment has been regularly paying dividends.
In a press release, Bennett said the agreement "will help secure the financial stability of the funeral and cemetery trust funds" at RightStar.
The agreement "requires that any new operator must honor all valid consumers contracts" at RightStar as well as providing necessary "perpetual care" of the cemetery properties, Bennett said.
The RightStar group, which has been operated by a court-appointed official since November 2004, includes Valley of the Temples Memorial Park on O'ahu, Homelani and Kona memorial parks on the Big Island and Maui Memorial Park on the Valley Isle.
RightStar also controls numerous pre-need funeral plan providers, including 50th State Funeral Plan.
Waihee was one of four trustees who were charged with overseeing the more than $70 million in customers' funds held by RightStar to pay for future funeral services.
Waihee and the other three trustees denied any wrongdoing, as did former RightStar principals John Dooley, his wife, Katheryn Hoover and Los Angeles businessman Richard Bricka.
The agreement announced yesterday does not "release any officers, directors, employees, trustees or agents of RightStar from any claims of any type."
Giacometti, the court-appointed official who has been operating the RightStar businesses since 2004, recently completed an exhaustive analysis of RightStar's financial records, but details of those findings, including the precise amounts of shortfalls in the trust accounts, have not been made public.
Bennett declined to discuss specifics of the trust accounts yesterday.
The agreement and subsequent auction still must be approved by Circuit Judge Sabrina McKenna.
February 19, 2003
Pagoda demolition
put on hold
Honolulu Memorial will try
to form a new plan that
could save the landmark
By Debra Barayuga., Star-Bulletin
Plot and niche owners at Honolulu Memorial Park won a round yesterday in federal Bankruptcy Court to stave off demolition of a deteriorating pagoda.
A bankruptcy judge gave the Richards family, owners of Honolulu Memorial Park, until March 21 to come up with an amended bankruptcy reorganization plan that may include renovating the cemetery's pagoda, which contains niches.
Bankruptcy Judge Robert Faris granted the cemetery owners' request to withdraw their latest plan, which included demolishing the pagoda, after their attorney indicated that the votes from owners of plots and niches was "negative."
Jerrold Guben, attorney for the Richards family, said he hopes to meet Friday with creditors, city and state officials and an organized group of niche and plot owners so a new plan can be developed.
"After 30 days, we hope to have a decision to go forward with an amended plan of reorganization or other alternative," Guben told the judge yesterday.
Faris expressed his belief that the debtors can hammer out a reorganization that will be a win-win situation for all.
"I won't dismiss the bankruptcy case until I'm absolutely convinced there is no chance of reorganization," he said.
The cemetery owners filed for Chapter 11 bankruptcy in December 2001, and more than 4,300 individuals who had purchased niches and plots at the Nuuanu cemetery had until Feb. 11 to accept or reject the latest reorganization plan.
Guben said he didn't have a final tally on the votes, which included support for the plan, because they were still coming in. But by yesterday, he had not received the requisite two-thirds approval to enable him to present the plan to the court for confirmation.
Wayne Kotomori, one of the most vocal opponents of the pagoda's demolition, who has been unable to inter the remains of his father who died in December, objected to the continuance and asked the court to dismiss the bankruptcy action.
"People have spoken by their vote," he told the court. "We're here to confirm or not confirm -- and their vote is to reject."
Kotomori, who, like several others at the hearing, wore a T-shirt with an image of the pagoda and the words, "Save the Pagoda," said the structure should be placed on the national Register of Historic Places for not only the owners of the plots and niches to enjoy, but for the entire state.
David Farmer, the attorney representing a group of concerned plot and niche owners separate from Kotomori's, had filed objections to the latest plan and will be participating in the upcoming meeting. Farmer could not be reached for comment.
Guben said a new plan may include going forward with the demolition, which the owners earlier said would cost about $200,000.
When later asked if the owners would consider saving the pagoda, Guben replied, "It's certainly an alternative if someone comes up with a reasonable price."
http://starbulletin.com/2003/02/19/news/story4.html
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TO BE CONTINUED...
Meanwhile, back in The Catbird Seat you can check out more vampires in the following nests...
AIG: THE AMERICAN IDOL OF GREED!
ALOHA AIRLINES: FLYING WITH THE BANKRUPTCY BUZZARDS
ARTHUR ANDERSEN AND THE PHOENIX PROJECT
CARLYLE GROUP: BIRDS THAT DRINK FROM CESSPOOLS
CITIGROUP: VAMPIRES IN THE CITY
CONFESSIONS OF A WHISTLEBLOWER
THE DEADLY BREW AT DOW CHEMICAL
DIRTY MONEY, DIRTY POLITICS & BISHOP ESTATE
THE GRAND (AND DIRTY) KO OLINA
MARSH & MCLENNAN: THE MARSH BIRDS
NESTS OF THE INSURANCE VAMPIRES
THE OFFICE OF HAWAIIAN AFFAIRS
PRUDENTIAL: A NEST ON SHAKY GROUND
THE VULTURES IN MAUNAWILI VALLEY
THE VAMPIRES ON JUPITER ISLAND
VULTURES ON HAWAIIAN HOME LANDS
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Originally posted: October 9, 2007
Last Update March 29, 2009, by The Catbird