Flying with the Bankruptcy Buzzards
Sightings from The Catbird Seat
~ o ~
April 17, 2009
Hawaiian Airlines CEO
earned $3.2M in ’08
Pacific Business News (Honolulu) - by Chad Blair
Mark Dunkerley earned $3.2 million in 2008 as president and CEO of Hawaiian Airlines, almost $1 million more than he received in 2007.
Dunkerley’s 2008 earnings included a $236,000 bonus and $1.2 million in stock awards. He received $2.3 million in total compensation in 2007.
His annual base salary increased $33,000 to $583,000.
The salary details for Hawaiian, owned by Hawaiian Holdings (Nasdaq: HA), comes from a notice of shareholders filing made Friday to the Securities and Exchange Commission.
Thomas Fargo, a former member of Hawaiian Holdings’ board of directors, received $61,000 from Hawaiian last year.
Fargo, who became president and CEO of Hawaii Superferry in late April 2008, resigned from the Hawaiian Holdings board Oct. 20 “due to personal reasons,” according to the SEC filing. Upon his resignation, he forfeited an unvested deferred stock option of $3,847.
Another member of Hawaiian Holdings board of directors, Bert Kobayashi Jr., received $106,000 in compensation. He is a senior partner with the Honolulu law firm Kobayashi Sugita & Goda.
Honolulu attorney Crystal Rose, a partner with Bay Deaver Lung Rose & Holma, received $116,000.
"By almost any measure, Hawaiian's performance in the face of enormous challenges in 2008 was remarkable. In a year when record fuel prices and the onset of recession led to large losses at most airlines, and forced other companies out of business or into bankruptcy, senior management made the right decisions and Hawaiian ended the year stronger than it started, to the benefit of all its employees, customers and shareholders," Lawrence S. Hershfield, chairman of the Hawaiian Holdings board, said in a statement.
On April 28, Hawaiian, Hawaii’s largest carrier, will report financial results for the three months ended March 31.
March 10, 2009
Hawaiian Air Upgrade
by Rick Daysog
Airline stocks may be reeling but one Wall Street analyst is recommending buying stock in Hawaiian Airlines' parent.
Morgan Stanley's William Greene said yesterday that “it’s time to buy the survivors among U.S. airlines,” including Hawaiian Holdings Inc., JetBlue Airways and Southwest Airlines.
Greene cited Hawaiian’s “near-monopoly” in the interisland market after last year’s shutdown of Aloha Airlines, and the company’s limited exposure to the downturn in the business and international markets.
The report gave a boost to Hawaiian shares, which rose 26 cents to close at $2.77 the Nasdaq market yesterday.
For the year, Hawaiian stock is off about 3.6 percent. It's down about 75 percent from its 52-week high of $11.10 on Sept. 15.
“Shares are pricing in an overly bearish scenario on fuel and ‘09 revenue,” Greene wrote. “In our view, it is difficult to justify HA’s valuation, particularly since they recently reaffirmed 1Q revenue guidance at their investor day.”
Tags: Airlines, Hawaiian Airlines, Morgan Stanley
May 8, 2008
Hawaiian CEO sells $2M in stock
By Rick Daysog, Advertiser Staff Writer
Hawaiian Airlines Chief Executive Officer Mark Dunkerley sold about $2 million in company stock this month, the company disclosed in a regulatory filing.
According to a filing with the Securities and Exchange Commission, Dunk-erley sold 200,000 shares at $8.59 a share on May 2 and another 33,570 at $8.45 per share that same day.
The company said Dunkerley continues to own a "significant amount of the company's equity."
The sale — Dunkerley's first since he joined the company in 2002 — leaves the CEO with 225,000 shares of restricted stock. He also has options to purchase another 1.6 million shares.
Hawaiian Holdings Inc., the airline's parent, said Dunkerley was restricted in his ability to sell shares of the company's common stock to specific trading windows, and he chose to do so now for personal financial-planning reasons.
The company said that most of the stock sold, or 200,000 shares, were obtained by Dunkerley after he exercised a stock option granted to him in 2002. Those options were part of an incentive package to retain the executive when the airline was under Chapter 11 bankruptcy protection, Hawaiian Holdings said.
The option allowed Dunkerley to buy the 200,000 shares at $2.10 each. In selling the shares for $8.59 each, Dunkerley netted $6.49 a share, or a total of about $1.3 million.
Hawaiian's shares closed at $7.10, down 33 cents yesterday on the American Stock Exchange.
April 13, 2008
Hawaii CEOs average $2.3M in pay
By Rick Daysog, Advertiser Staff Writer
It's getting more expensive to send off a CEO than to keep one.
The abrupt resignations of the top executives of Central Pacific Financial Corp. and Hawaiian Telcom Inc. this year is going to cost those companies hundreds of thousand of dollars more than what they paid the CEOs last year.
Despite losing $5.8 million last year because of problem loans to California homebuilders, Central Pacific said it will pay CEO Clint Arnoldus $5 million, or more than five times his 2007 pay of $983,149, when he retires at year's end.
Hawaiian Telcom Inc. gave ousted CEO Michael Ruley a $1.2 million severance package, which includes $20,000 for personal travel, $22,000 for his family's health coverage and reimbursement of up to 6 percent for the real estate broker commission on the sale of his Kahala home. During Ruley's tenure, the company lost tens of millions of dollars and thousands of residential telephone customers, and is being investigated by the state Public Utilities Commission for poor service.
"This has nothing to do with the circumstances of their leaving," said Linda Lampkin, research director with ERI Economic Research Institute, which conducts executive pay and cost-of-living studies for employers. "Even though they may be leaving on less than ideal situations, the companies are bound by what the executives' contracts say."
The severance packages for Ruley and Arnoldus were among the key highlights of an Advertiser review of the pay policies of Hawai'i's publicly traded companies. The study, based on filings with the Securities and Exchange Commission by Hawai'i's eight largest companies, found that the average pay for a local CEO rose nearly 4.5 percent to $2.3 million last year from $2.2 million in 2006.
The 2007 average was equivalent to $6,525 per day and is more than 29 times the state's median household income.
Five of the 10 CEOs in this year's survey received pay raises but just two received a bonus last year. The bulk of the pay increases came in the form of stock options and other forms of compensation that aim to tie the executives' pay to company performance.
To be sure, the state's top bosses earned far less than their Mainland counterparts. According to ERI, CEOs of the nation's largest publicly traded companies saw their compensation increase by 20.5 percent last year to $18.8 million. The pay increase came as the companies' revenues grew by just 2.8 percent, ERI said.
For the third year in a row, Alexander & Baldwin's Allen Doane was the highest paid executive in Hawai'i, with a pay package of $8.6 million. That was up about 12.4 percent from his 2006 pay of $7.6 million.
Most of Doane's increase was performance-based as the company's stock price increased 19 percent and its earnings jumped 16 percent. A&B added that it returned $81 million to its shareholders last year in the form of dividends (non-taxable, thanks to Bush baby?) and stock buybacks.
Doane was followed by David Cole, CEO of Maui Land & Pineapple Co., whose 2007 pay more than doubled to $4.1 million. In its proxy statement, Maui Pine said its board gave Cole more than a $1 million to compensate him for the loss in value of his stock options.
Most companies would not comment on their CEO's pay and referred The Advertiser to filings with the SEC. Here's a snapshot of what those filings say:
Bank of Hawaii Corp. Chief Executive Allan Landon took home $2.6 million last year, which was up 15.9 percent from the previous year. Under Landon's stewardship, the company enjoyed healthy growth increase and benefited from its cost-cutting efforts.
Hawaiian Electric Industries Inc.'s CEO Constance Lau's 2007 compensation fell 53.7 percent to $1.7 million. But her 2006 package was skewed by a $2.2 million, one-time gain she received when she transferred her pension plan from HEI's American Saving Bank subsidiary to the parent company's plan.
Morton Kinzler, Barnwell Industries Inc.'s longtime CEO, saw his pay decline by 21.2 percent to $1.2 million while Dustin Shindo, chief executive of startup Hoku Scientific Inc., earned $745,462, which represents a 41.2 percent raise from the previous year.
Hawaiian Airlines Inc. CEO Mark Dunkerley saw his pay decrease by 5.8 percent to $2.3 million in a year in which Hawaiian won an $80 million judgment against go! airlines and signed a $4.4 billion deal to acquire 24 Airbus wide-body jets over the next 15 years.
The Honolulu Advertiser
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.
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.
Please don't go, go! We need the "reasonable" fares to stay. Hawaiian and Aloha were gouging us for too long!
I think it is fair considering Mesa came in to put either Hawaiian or Aloha out of business using confidential information.
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.
September 29, 2007
Consultant reaches deal with Hawaiian
By Dave Segal, Star-Bulletin
Hawaiian Airlines has settled its lawsuit against its former consultant yesterday ahead of a high-stakes trial that could force Mesa Air Group's go! out of the interisland market.
Mo Garfinkle, chairman and chief executive of GCW Consulting, was accused by Hawaiian of providing confidential information to Mesa. Garfinkle was hired as a consultant for Mesa several months after he finished consulting for Hawaiian Airlines' parent, Hawaiian Holdings, during Hawaiian's bankruptcy.
Hawaiian is seeking $173 million in damages, plus interest and attorney fees, and an injunction to prevent go! from selling tickets for one year.
The airline consultant accused by Hawaiian Airlines of misusing confidential information in connection with Mesa Air Group's entry into the Hawaii market settled his part of the case yesterday, before the start of a high-stakes trial that could determine the future of Mesa's interisland carrier, go!....
The settlement held up the start of the federal Bankruptcy Court trial for four hours yesterday.
Afterward, Hawaiian attorney Sidney Levinson said that in light of the confidentiality agreement, he would agree not to question Mesa on any information provided to it by Garfinkle's company.
Garfinkle was a consultant for Hawaiian Airlines' parent, Hawaiian Holdings, from late 2003 to late 2004 during the airline's bankruptcy. He began working as a consultant for Mesa in spring 2005, continuing through go!'s launch in June 2006.
Garfinkle was accused by Hawaiian of using confidential information acquired during his work for the local carrier in his subsequent work with Mesa. Garfinkle has denied this.
Mesa attorney Maxwell Blecher characterized Garfinkle's settlement as "helpful" for Mesa....
Mark Dunkerley, president and CEO of Hawaiian, described the settlement as being in the best interest of Hawaiian, but would not elaborate further...
The trial follows a three-day pretrial evidentiary hearing in which Bankruptcy Judge Robert Faris ruled that:
» Mesa kept whatever confidential information it got from Hawaiian and did not return or destroy it as the confidentiality agreement required.
» Mesa misused any confidential information it got from Hawaiian when deciding whether to enter into the Hawaii market.
» The misuse of any such confidential information was a substantial factor in Mesa's decision to enter the market.
Faris, though, left open the issue of deciding whether, and to what extent, the information that Hawaiian gave to Mesa was generally available to the public. If the information is found to be publicly available, then the damages imposed by Faris upon Mesa would be reduced...
March 15, 2007
Hyatt gets OK to buy flagship
property in Waikiki
The Hyatt Regency Waikiki will be sold
to Hyatt Corp. for $445 million
By Kristen Consillio, Star-Bulletin
Hyatt Corp. got court approval yesterday to buy its flagship Waikiki hotel for $445 million from bankrupt Azabu Buildings Co. Ltd.
U.S. Bankruptcy Judge Robert Faris confirmed the sale of the Hyatt Regency Waikiki Resort & Spa to Hyatt, which has managed the property since it opened in 1974.
The sale includes the King's Village Shopping Center, which is owned by Azabu Buildings' wholly owned subsidiary, Azabu USA Corp. Azabu went into bankruptcy in February 2006.
Hyatt was the sole qualified bidder, having put down a $25 million deposit for the property as of the March 6 deadline for competing bids.
A second offer for $5.1 billion in cash or $9 billion in stock from Ade Ogunjobi, founder, chairman and CEO of TC Co./Toks Inc. was rejected by the court, which disqualified his bid because he couldn't post the required $25 million deposit.
Toks and Ogunjobi were sued by the U.S. Securities and Exchange Commission in August 2003 for offering fraudulent promissory notes over the Internet in a bid to raise billions of dollars to acquire more than a dozen of the world's largest corporations, though the company had no assets, sales or revenue.
In December 2003, Toks, which said it had relocated to Honolulu from Los Angeles, submitted a motion and application to acquire Hawaiian Holdings Inc., parent company of Hawaiian Airlines, through an exchange tender offer for $1 billion in stock and assumption of all of the airline's debt.
An auction set for yesterday was called off because there were no other qualified bids.
Hyatt is required to increase its deposit to $44.5 million, or 10 percent of the sales price, three business days after confirmation of the transaction.
Hyatt is taking control of the hotel by purchasing the stock of Azabu Buildings.
Meanwhile, Azabu and the committee of unsecured creditors have filed a suit against Azabu's Japan-based lender Chuo Mitsui Trust & Banking Co. Ltd., Waikiki First Finance Corp. and Waikiki S.F. Corp.
Waikiki First and Waikiki S.F. -- both owned by Honolulu-based Trinity Investments -- hold the first and second mortgages on the hotel, which total $330 million.
Azabu and the creditors assert that the lender's claims and the mortgages should either be rejected or reduced in priority. Chuo Mitsui's claims total $192 million.
Paul Alston, attorney for Chuo Mitsui and the two mortgage lenders that Trinity acquired, said his clients deny there is any merit to the claims made by Azabu and the creditor's committee.
Hyatt's general manager, Michael Jokovich, didn't return calls for comment yesterday.
"The property has substantial strategic value to Hyatt so the bid price is fairly aggressive," said tourism consultant Joseph Toy of Hospitality Advisors LLC. "Given its strategic value to Hyatt they certainly are willing to pay that premium."
June 30, 2006
WHO IS BANKRUPTING AMERICA?
Felix Rohatyn’s “al-Qaeda” Destroyed American Industry
by EIR Staff
What international investment bank has consulted in the disappearance of every formerly major American steel company?
Felix Rohatyn’s Lazard Freres.
What investment bank set up the infamous United Airlines employee ownership plan of 1994 – which lost each employee’s every dollar of stock – and had “consulted,” altogether, seven major airlines into bankruptcy and/or liquidation?
What investment bank put together the mergers that created, and then advised, the monster Enron?
What investment bank has been the strategic advisor to each of the big auto supply companies with has gone into bankruptcy; has advised both GM/Ford and the UAW on the ongoing shutdowns of auto plants and jobs; and developed the strategic bankruptcy plan for Delphi Corp., the worst industrial outsourcing in U.S. corporate history?
Rohatyn’s Lazard Freres, again.
And, in the case of the Delphi outsourcing plan, the crime was done by Felix Rohatyn personally.
But don’t get the idea that this is a project by one greedy individual. Rohatyn himself is simply the front-man for a tightly-knit network of private financier institutions – investment houses, commercial banks, and their allied law firms and consulting firms – that have systematically moved to shut down the entire industrial base of the United States over the past 30 years, and have now nearly succeeded in wiping it out altogether.
They have implemented globalization-through-fraud, taking advantage of a corrupt rewriting of America’s bankruptcy laws, which, in effect, hands life-or-death decision-making power over to this financial cartel, and a new generation of thieves they’ve created, like Delphi Chief Steve Miller, and “former” Rothschild agent Wilber Ross.
In effect, what has occured is a foreign take-down of the United States, led by an international Synarchist network which has always hated the United States, and set out to destroy the legacy of Franklin Delano Roosevelt as soon as his heart stopped beating in 1945....
AIRLINES AND AEROSPACE
Overall results: Aerospace employment in the United States fell from a peak of 900,000 during the late 1980s to 550,000 now, a 40% drop; 60 million square feet of aerospace/defense capacity was shut down from 1990-97 alone, and its machinery sold off at auctions.
The Case of Joshua Gotbaum
During the 198s, there were about 20 prime military contractors, and more than 130,000 scientists and engineers working on aerospace research and development, according to the Aerospace Industries Association. With the end of the Cold War as the pretext, there took place a drastic downsizing of both the high-technology, machine-tool-rich defense/aerospace industry and U.S. military forces, initiated by Dick Cheney, when he was Secretary of Defense from 1989 through January 1993.
Today, there are only five major prime military contractors, and only about 30,000 scientists and engineers working on aerospace R&D.
In the mid-1990s, the downsizing and dismantling of the defense/aerospace sector was led by the little-known Joshua Gotbaum, a protege of Frlix Rohatyn at Lazard Freres, and the son of New York City labor leader Victor Gotbaum, himself a close collaborator with Rohatyn in the razing of New York City public services in the 1970s under “Big MAC” – the bankers’ Municipal Assistance Corporation.
During 1975-82, Rohatyn, with the indispensable cooperation of the senior Gotbaum, brutally cut vital public services – fire, police, hospitals., and transit – by 15% to 40%, driving out much of the city’s poorer population in the process. As a reward for his father’s collaboration, Joshua Gotbaum was made a banker by Lazard Freres in 1981. By 1990 he was a general partner, and was entrusted to serve as the Managing Director of Lazard’s London office from 1989-92.
In 1994, Joshua Gotbaum was suddenly named to a newly created Pentagon position, assistant Secretary of Defense for Economic Security, with a 260-person staff and considerable powers. At a time when defense expenditures were being slashed, Gotbaum applied pressure to shut down aerospace factories. During the 1990s, more that 250,000 aerospace production workers were axed, and more than one-third of the aerospace sector was liquidated in the process of “consolidation.” With it, went much of the industry’s irreplaceable advanced machine-tool capacity....
Gotbaum also pushed to implement Cheney’s 1992-initiated policy of outsourcing and privatizing military functions....
Airlines Shot Out of the Sky
Closely related to the aerospace industry, is the commercial airline sector, whose destruction was also crafted and facilitated by Lazard Freres and Joshua Gotbaum.
Listen to the description in the Jan 7, 2004 Honolulu Star-Bulletin: “Gotbaum was an investment banker with Lazaard Freres & Co., in New York and London, providing advice to airlines on mergers, acquisitions, bankruptcies, and restructuring. He consulted with Eastern, Braniff, Pan American, British Airways and Air France.”
This is quite a record: Eastern, Braniff, and Pan American each went bankrupt and was eventually liquidated.
In addition, in 2003 Gotbaum was appointed the operating Trustee for Hawaiian Airlines, after it filed for reorganization under Chapter 11. His was an extremely rare position; normally, the existing management continues to operate a company (as “debtor-in-possession”) in a Chapter 11. Hawaiian was not bankrupt; its reason for filing bankruptcy was to force concessions from its employee unions and to renegotiate it aircraft leases with Boeing. The head of the Air Lines Pilots Association correctly called it a “sham bankruptcy.”
The outcome, for which Gotbaum demanded almost $10 million in fees, was that 2) creditors got paid in full (very unusual); 2) shareholders saw their stock actually increase in value, instead of being wiped out, as is normal; 3) employees made concessions and give-backs in wages, benefits, and work-rules; and 4) pilots had their pensions frozen and revamped.
That’s only part of the picture. Overall, there were at least nine airlines to which Lazard and Gotbaum were consultants. Seven of the nine ended up in bankruptcy, most of which included “restructuring” consulting by Lazard....
Read the complete article at: www.kycbs.net/Bankrupting-America.pdf
September 16, 2005
Hawaiian Airlines trustee's
fee request challenged
by Prabha Natarajan, Pacific Business News
The Office of the United States Trustee, the federal agency that appointed Joshua Gotbaum to oversee Hawaiian Airlines during its bankruptcy, is objecting to his request for an $8 million success fee.
It's recommending a $1.15 million bonus instead.
In a filing with the U.S. Bankruptcy Court Wednesday, the agency called Gotbaum's proposed compensation "unreasonable" and supported only a "100 percent lodestar bonus" of $1.15 million or less.
In a August filing, Gotbaum sought $9.15 million in fees, which includes an $8 million success fee and $1.15 million in interim compensation.
Gotbaum showed how he spent 4,995 hours on the bankruptcy case -- including time spent at dinners, award ceremonies and 120 hours in preparing the application for compensation -- and wants $1,832.50 per hour.
After expressing initial shock and outrage at the amount, the airline's pilots and flight attendants filed their opposition to the claim. The airline and its parent company, Hawaiian Holdings, were also expected to file protests to the Gotbaum claim.
Meanwhile, in the Office of the Trustee's filing, U.S. Trustee Steve Jay Katzman laid the groundwork to establish Gotbaum's tendencies toward seeking high compensation and Katzman's efforts in curbing the compensation.
For instance, Gotbaum negotiated $70,000-per-month pay plus reasonable expenses without any cap on the latter amount.
"The U.S. Trustee informed [Gotbaum] of its objection to the proposed interim compensation," the filing stated. "The U.S. Trustee again discussed compensation with the trustee and emphasized the fiduciary role that the trustee played."
At the end of the day, the court approved a $50,000 monthly compensation and $10,000 in expenses. This was in addition to his health and free flight benefits as an employee of the airline.
The filing adds that Gotbaum surrounded himself with a coterie of experts, consultants and lawyers, many of whom billed several hundred dollars per hour and large bonuses.
According to the filing, the total fees incurred by all the trustee's professionals -- 18 firms -- from June 2003 until the airline exited bankruptcy June 2, onward adds up to $30.2 million.
Katzman argued that Judge Robert Faris, who will hear the case on Sept. 29, should consider not only the trustee's achievement in getting the airline out of bankruptcy but should temper his proposed claim for compensation given his use of consultants and the fact that he didn't have any overhead expenses.
"With the trustee charging the estate even for small personal items such as cold medicines, it is clear that he has not hesitated to claim all possible expenses for reimbursement," the filing said. "In fact, much of the credit for the list of accomplishments cited by [Gotbaum] in his application should go to those professionals. In determining a reasonable fee for the trustee, the court should consider the magnitude of high-priced assistance the trustee enjoyed."
August 10, 2005
Former Hawaiian Air trustee
seeks $8M success fee
A union representative calls
the request ‘ridiculous’
By David Segal, Honolulu Star-Bulletin
Former Hawaiian Airlines trustee Joshua Gotbaum, who helped fashion a reorganization plan that repaid creditors in full and allowed existing stockholders to keep their shares, is seeking an $8 million success fee for piloting the company through a 26-month-old bankruptcy.
Gotbaum’s long-awaited request, filed in federal Bankruptcy Court late Monday night, comes on top of a $1.75 million success fee authorized by Gotbaum that is being sought by airline consultant Simat, Helliesen & Eichner Inc.
The combined $9.75 million in success-fee requests drew a firestorm of opposition from the company’s labor unions, who gave $15 million in concessions in early 2003 before the airline filed for Chapter 11 and then renegotiated their contracts again to keep costs flat and help the airline emerge from bankruptcy. A hearing on those success-fee applications and final compensation for all professionals is scheduled for Sept. 21.
As trustee, Gotbaum earned a salary of $50,000 a month and $10,000 a month for living expenses. In January 2004, Bankruptcy Judge Robert Faris postponed ruling on a success fee until after Hawaiian emerged from reorganization.
Including other compensation Gotbaum already has received for his services, his total compensation would amount to nearly $9.2 million through his hiring date of July 3, 2003, until the day the airline emerged from bankruptcy on June 2, 2005. The company filed for bankruptcy on March 21, 2003.
In addition, Gotbaum said his total expenses were more than $276,000, of which nearly $259,000 have been paid. He also is seeking undetermined relocation expenses for moving back to Washington, D.C., which is where he lived before assuming his Hawaiian duties.
Gotbaum, who returned to Washington on Aug. 1, said in an interview yesterday morning that the Hawaiian Airlines bankruptcy was “extraordinarily successful.”
“The creditors were repaid in full, the shareholders saw the value of their stock rise instead of being wiped out and the employees got contracts that for the first time put them at or above United and American,” he said from Washington. “Now the question is: What’s fair compensation for the trustee?...”
But Kirk McBride, master executive council chairman of the Air Line Pilots Association Hawaiian Airlines unit, called the $8 million success fee request “reprehensible.”
“You have labor making significant changes in their collective-bargaining agreement in order to ensure the company is a viable success going forward, and then we’re seeing others in the case (Gotbaum and SH&E) believing that they deserve large sums of money from the corporation,” he said.
Larry Hershfield, chairman of the airline’s parent, Hawaiian Holdings Inc., and the head of the majority investor group, criticized both fee requests....
As expected, the combined $9.75 million in success-fee requests drew fierce criticism yesterday from the company’s labor unions.
“It’s ridiculous,” said Dave Figueira, who represents the International Association of Machinists and Aerospace Workers District 142. “I think he should get a very, very small success fee. I think he was highly compensated for a job that he had little or no experience for, which was running an airline.”
Sharon Soper, president of the Hawaiian unit of the Association of Flight Attendants, called Gotbaum’s new pay request “unconscionable.”
But airline analyst Robert Mann, who also served as a consultant to Gotbaum’s Los Angeles-based lawyers, said Gotbaum’s request was justifiable....
Gotbaum acknowledged that what he ultimately receives will be left up to Faris....
It has been anything but a smooth ride for Gotbaum, who had to endure sometimes contentious negotiations with the company’s six labor groups, including a court showdown with the pilots in which Gotbaum sought to impose a contract on the group. In the end, the pilots approved a contract that froze their pension plan and converted their defined-benefit plan to a defined-contribution plan.
“I believe that Josh Gotbaum was very well compensated for serving as a trustee of an estate, and to me the word ‘trustee’ means something, McBride said. “It means you have the estate’s best interest at heart, not your own.”
Gotbaum also persevered through drawn-out negotiations with Boeing Capital Corp., the airline’s primary aircraft lessor which owns more than half of Hawaiian’s fleet....
August 9, 2005
Hawaiian Airlines Pilots Blast Trustee’s
“Success Fee” Request
HONOLULU, HAWAII - A move by Hawaiian Airlines’ former bankruptcy trustee to squeeze million more dollars from the airline is ludicrous, according to the head of the union representing Hawaiian Airlines pilots.
Hawaiian Airlines Bankruptcy Trustee Joshua Gotbaum filed a motion in federal bankruptcy court late Monday seeking an $8 million “success fee” now that the airline has exited bankruptcy....
“This alleged ‘success fee’ is an outrage,” said Capt. Kirk McBride, chairman of the Hawaiian airlines unit of the Air Line Pilots Association, International (ALPA).
“It showcases everything that is wrong about the abuse of the bankruptcy process in the airline industry.”
“Hawaiian was – and is – a profitable airline. The Hawaiian Airlines bankruptcy only happened because of a corporate strategy to strong-arm aircraft manufacturers. It was called a sham bankruptcy by the President of ALPA, it didn’t need to happen. Josh Gotbaum added nothing to the outcome except more delays and a siphoning off of millions of dollars that would otherwise have been invested in making a better airline,” McBride said.
“The Trustee has already been over-compensated for his time here, including free travel and health care, and other lavish corporate perks. This ridiculous fee request represents more than 20 percent of the yearly pilot payroll for our 300 pilots. It should be denied by the bankruptcy court as another unconscionable raid on the Company treasury. If anything, we believe Mr. Gotbaum owes Hawaiian Airlines a refund rather than a success fee, based on the fact that the bankruptcy court authorized Mr. Gotbaum’s salary as interim pay,” McBride argued.
“Hawaiian Airlines’ success in coming out of bankruptcy is due to the millions of dollars that pilots and other employees have forfeited in pay, benefits, work rules and quality of life. We are confident that the judge will not permit the pockets of every Hawaiian employee to be picked for another undeserved bonus to Mr. Gotbaum. We will still be here, serving the airline and its customers, long after he has packed his bags and moved back to New York.”...
ALPA CONTACT: Capt. Kirk McBride, (808) 836-2572; Rusty Ayers, (773) 284-4910.
The Wise Old Owl asks: Who-o-o is this Gotbaum, and why is he asking for so much money for so little work?
From the Harvard University website:
Chief Executive Officer
The September 11th Fund
Joshua Gotbaum became the first Chief Executive Officer of the September 11th Fund in October 2001. He is responsible for developing the organization and staff of the Fund, as well as the grant programs by which it will distribute almost $500 million in contributions. The September 11th Fund was established by The New York Community Trust and United Way of New York City to meet both the immediate and long term needs of the victims, families and communities affected by the terrorist attacks.
Josh worked on counter-terrorism and domestic preparedness in the US government. He served in the US Office of Management and Budget from 1997-2001, first as Executive Associate Director and then adding the job of Controller. During this period, he was for several years responsible for managing the counter-terrorism budget. Prior to joining OMB, Mr. Gotbaum was Assistant Secretary of Treasury for Economic Policy, serving then-Secretary Robert Rubin and then-Deputy Secretary Laurence Summers. He served as assistant Secretary of Defense from 1994-1995.
Prior to joining the Department of Defense, Mr. Gotbaum was a partner and managing director of the New York investment bank of Lazard Freres & Co. He was affiliated with the firm, both in New York and London, from 1981-1994, providing advice in mergers and acquisition, corporate finance, bankruptcies and restructuring.
During 1977-1981, Josh held various positions in the Carter Administration, both in the White House and the US Department of Energy....
For more, GO TO > > > The Eagle Hooded: The 9-11 Coverup
U.S. Department of Justice
Executive Office for United States Trustees
Office of Research and Planning
For Immediate Release
October 30, 2001
U.S. TRUSTEE PROGRAM LAUNCHES
BANKRUPTCY CIVIL ENFORCEMENT INITIATIVE
WASHINGTON, D.C.--The United States Trustee Program has launched an initiative to more aggressively use existing civil enforcement methods to curb abuse of the bankruptcy system, Martha Davis, Acting Director of the Executive Office for United States Trustees, announced today.
"Effective case administration is vital to ensure the American public that the bankruptcy system provides relief for honest but unfortunate debtors overcome by serious financial difficulties," Davis stated. "The Civil Enforcement Initiative emanates from the U.S. Trustee Program's long-standing commitment to enforce the Nation's bankruptcy laws and explore other meaningful strategies to bolster public confidence in the integrity and effectiveness of the bankruptcy system."
"The priorities of the initiative will require a concerted effort nationwide to use existing tools in a way that best accomplishes tangible results and improvements for case administration," Davis continued. "Many of our offices use such strategies today and we hope to build upon their experience. By focusing our resources on these priorities, we also seek to address some of the concerns that have been at the forefront of debate in recent years both before Congress and in other public venues. In the end, this is very much a community effort that will require communication and cooperation with private bankruptcy trustees and with the bankruptcy bench and bar."
These are the priorities of the Civil Enforcement Initiative:
Ensuring that Chapter 7 is not abused and that Chapter 7 debtors are held accountable.
Chapter 7 debtors who do not comply with the law will have their cases converted or dismissed, or their bankruptcy discharges denied or revoked. Enforcement measures include motions to dismiss Chapter 7 cases under 11 U.S.C. §§ 707(a) and 707(b), and complaints to bar or defer discharge under 11 U.S.C. § 727.
Protecting consumer debtors, creditors, and others who are victimized by those who mislead or misinform debtors, make false representations in connection with a bankruptcy case, or otherwise abuse the bankruptcy process.
Attorneys and bankruptcy petition preparers (non-attorneys who prepare bankruptcy documents for a fee) must engage in full disclosure, be free of conflicts of interest, and engage in ethical practices. Enforcement measures include motions for sanctions, contempt of court, and disgorgement under 11 U.S.C. § 329 for misconduct by attorneys, and complaints and motions under 11 U.S.C. § 110 for misconduct by bankruptcy petition preparers....
Fighting fraud and abuse by making criminal referrals and assisting United States Attorneys in criminal prosecutions.
The U.S. Trustee Program is a component of the Justice Department that oversees the administration of bankruptcy cases and intervenes in court to enforce the bankruptcy laws. There are 21 regions in the Program, each headed by a U.S. Trustee appointed by the Attorney General.
The Civil Enforcement Initiative took effect Oct. 1, 2001, with the start of the federal government's 2002 fiscal year. Previous U.S. Trustee Program initiatives have focused on issues such as enhancing the supervision of private trustees who administer Chapter 7 bankruptcy cases, increasing the efficiency and speed of Chapter 7 case administration....
Jane Limprecht, Public Information Officer
Executive Office for U.S. Trustees
March 12, 2005
Airline's chief pledges stability
By Dan Nakaso, Honolulu Advertiser
Lawrence Hershfield knows that Hawaiian Airlines' 3,300 employees have been through a lot in the past few years and he understands why they want assurances of stability from the new owners.
"We certainly are aware that prior owners and management have disappointed the workforce," Hershfield said yesterday in his first interview since a U.S. Bankruptcy Court judge conditionally approved turning Hawaiian over to Hershfield's control on April 1 after two years of federal bankruptcy protection.
"I would say on behalf of the new board and on behalf of Ranch Capital, we are committed to being the sorts of owners that make folks happy to be a part of this company."
In June, Hershfield's San Diego-based Ranch Capital LLC spent $41.4 million to purchase 10 million shares of 28.4 million shares outstanding of Hawaiian Holdings Inc., the parent company of Hawai'i's largest airline.
Hershfield then became president and CEO of Hawaiian Holdings and devoted himself to a reorganization plan by a Ranch subsidiary, RC Aviation LLC, to bring Hawaiian out of bankruptcy.
Hershfield and his partner, Randall Jenson, founded Ranch Capital in 2002 to pursue investments in undervalued or distressed assets of companies.
Before the Hawaiian Holdings stock purchase, Ranch Capital was involved in two other deals: buying the debt of a seismic data company called Seitel, and a 2002 agreement with billionaire Warren Buffett to provide $215 million in debtor-in-possession financing for mobile-home manufacturer Oakwood Homes Corp....
While other investors may decide to sell their shares after Hawaiian emerges from bankruptcy, Hershfield said he plans to hold on to his and continue to run the company for the foreseeable future....
Yesterday, Hawaiian Holdings announced the selection to its board of Adm. Thomas Fargo, 56, who recently retired as leader of the U.S. Pacific Command, with headquarters in Hawai'i.
Fargo, who relinquished his command Feb. 26, also sits on the board of directors of Hawaiian Electric Industries.
Hawaiian Holdings' board now also includes Hershfield, 48, as its chairman; former American Airlines chief executive Don Carty; and Bert Kobayashi, former chairman of the University of Hawai'i Board of Regents and current president of the UH Athletic Foundation....
Hershfield disputed a television report that Hawaiian's court-appointed bankruptcy trustee, Josh Gotbaum, will stay on as a Hawaiian Airlines consultant after Hawaiian emerges from bankruptcy.
Gotbaum oversaw Hawaiian through successive months of profits and an on-time performance that has led the airline industry for 15 straight months. But Gotbaum also has angered many Hawaiian employees, starting with one of his first acts to temporarily freeze contributions to the pilots pension fund.
"Josh's role with the company will be completed when we emerge," Hershfield said. "Josh won't be a consultant, nor an employee, nor a director. His job will be finished."
Gotbaum's future with Hawaiian has been one of the consistent questions Hershfield has been asked whenever he has met with groups of Hawaiian employees. They also frequently want to know about the role of Mark Dunkerley, Hawaiian's current president and chief operating officer.
Dunkerley, who will become CEO and will also have a seat on the board of directors, "will run the company on a day-to-day basis," Hershfield said. "I think Mark is a terrific executive. The airline is lucky to have him."...
January 4, 2005
Aloha Airlines in first
Pacific Business News
Federal bankruptcy judge Robert Faris, now handling the bankruptcies of both Hawaiian Airlines and Aloha Airlines, said at Aloha's hearing Monday that he will take care to see that neither airline is put at a disadvantage by his rulings concerning the other.
That promise by Faris will reassure Aloha CEO David Banmiller, who has said he filed for Chapter 11 bankruptcy last Thursday in part because receivership had allowed Hawaiian to obtain a cost edge by renegotiating leases and other contracts.
Companies in Chapter 11 have the power to back out of contracts. The implicit threat of this allows them to renegotiate agreements with lenders and vendors, obtaining better terms. Outside of bankruptcy, a contract is a contract. Hawaiian has won new terms for jet leases, while Aloha has been locked into much higher rates.
Aloha is privately held by two local families, descendants of Hung Wo Ching and Sheridan Ing, and the airline revealed Monday that the families had offered to lend the airline $3 million in operating cash.
The parallel bankruptcies put Faris in the position of having unique access to operating information about the rival airlines. Ordinarily the airlines would not share such information with other. Both airlines operate a combination of interisland short-haul and trans-Pacific long-haul flights, though Aloha has more of the former and Hawaiian has more of the latter.
IN THE SUPREME COURT OF THE STATE OF HAWAI`I
ALVIN J. CORREA, Respondent/Claimant-Appellee,
HAWAIIAN AIRLINES, INC. and KEMPER INSURANCE COMPANY,
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CASE NO. AB 2000-120(M)(7-99-02490)
ORDER DENYING APPLICATION FOR WRIT OF CERTIORARI
(By: Duffy, J. for the court )
Petitioner/Employer/Insurance Carrier-Appellant's application for writ of certiorari filed on August 10, 2004, is hereby denied. (1)
DATED: Honolulu, Hawai`i, August 23, 2004.
James N. Duca, and
Muriel M. Taira,
(Kessner Duca Umebayashi
Bain & Matsunaga) for
carrier-appellant on the
1. Considered by: Moon, C.J., Levinson, Nakayama, Acoba, and Duffy, JJ.
July 8, 2004
Hawaiian Air owes $129M, IRS claims
The airline's bill for more than two years of underpayments
includes $40.5 million in penalties
By Dave Segal, Star-Bulletin
The Internal Revenue Service is seeking nearly $129 million from Hawaiian Airlines for the underpayment of federal excise and corporate income taxes over more than two years.
The IRS claim, filed in federal Bankruptcy Court, seeks $84.1 million in taxes, $4.3 million in interest and $40.5 million in penalties. The airline industry excise taxes, which cover such areas as fuel and transportation, are for 2001 and 2002 and the first two quarters of 2003. The corporate income tax claims are for $43.1 million in 2001 and $19.7 million in 2002.
Most of the claim covers time before the airline's Chapter 11 reorganization filing on March 21, 2003, when John Adams was chairman and chief executive of the company. He was removed two months later by Bankruptcy Court Judge Robert Faris for financial decisions he made involving the airline's $25 million stock tender offer in 2002.
Hawaiian Airlines had been aware that the federal agency was conducting an audit for 2001 and 2002, but airline trustee Joshua Gotbaum, who took over the company in July 2003, called the magnitude of the claim "unjustified."
"We believe the estimate is substantially overstated and expect the claim will be greatly reduced by the bankruptcy court," Gotbaum said. "Hawaiian Airlines has been providing detailed information and cooperating fully with the IRS over the past year."
The state Department of Taxation also has filed a claim with Bankruptcy Court but lists the amount it is seeking as "unknown."
State Tax Director Kurt Kawafuchi said he does not know how much the state might seek from the airline in back taxes.
"We definitely will follow up on it and will do whatever we can to protect the state's interest," Kawafuchi said. "We need to look into what the IRS was making as claims to see if we have parallel state adjustments, and if we do, we'll do whatever steps we can to protect the state's rights."
Hawaiian Airlines, which expects to emerge from bankruptcy this fall, has received claims in excess of $500 million since filing for reorganization. Insiders connected with the case expect the number of legitimate claims to end up around $300 million.
The IRS claim is the largest so far in the case, just ahead of a $110 million claim by aircraft lessor Ansett Worldwide.
Insiders say the amount that Hawaiian ultimately pays likely will be considerably less than what the IRS is seeking.
For example, the IRS initially sought $138 million from bankrupt Hawaii retailer Liberty House but ended up settling $103 million of that claim for $4.2 million and capped the remainder at $14 million.
Carol Muranaka, special assistant U.S. attorney, said the two cases cannot be compared because they are different taxpayers. She declined to discuss any details about the Hawaiian Airlines case due to privacy issues.
"The government always tries to determine the correct amount of tax," Muranaka said. "We filed the proof of claim because we believe we have determined the correct amount of tax that is due."
June 27, 2004
Acrimonious labor relations at Hawaiian
Hawaiian Airlines bankruptcy trustee
was kicked off a Hawaiian flight by its pilot.
A Hawaiian Airlines pilot asked bankruptcy trustee Josh Gotbaum to get off a plane preparing for takeoff Thursday, saying he was angry about Gotbaum’s policies and could not safely fly the Boeing 767-300 with the trustee aboard.
Gotbaum agreed to leave rather than delay the takeoff, an airline spokesman said yesterday.
“The pilot told him he wasn’t happy to have him on the flight,” said Hawaiian spokesman Keoni Wagner. “Rather than delay the flight by discussing it at that point, he decided to take another flight.”
The pilot, Capt. Craig Kobayashi, said yesterday: “So many employees are so emotional about him after all of the things Gotbaum has done, such as freezing our pension plan.”
I wouldn’t want to be a passenger on a flight where the pilot claims to be so easily rattled as to compromise safety. For the ongoing benefit of passengers, this pilot should be immediately placed on leave.
May 4, 2000
Investor group may ditch
Hawaiian Airlines posts first-quarter
net loss of $2.6 million
By Frank Cho and Michele Kayal, Honolulu Advertiser
The Mainland investor group that bailed Hawaiian Airlines Inc. out of its financial troubles more than four years ago is negotiating a deal to sell its controlling 45 percent interest in the company.
Smith Management LLC of New York, the airline’s majority shareholder, and a new investor group have been reviewing financial information about the airline, but have not settled on a price, according to people familiar with the deal.
Hawaiian Airlines yesterday said it has hired Lazard Freres & Co. of New York as its financial adviser to help the airline find potential buyers or investors.
A Washington attorney for the new investor group confirmed yesterday that negotiations are in progress but declined to identify the parties or say when a deal might be ready.
"I can’t really comment on the transaction," said Joseph Manson, co-chairman at Verner Liipfert Bernhard McPherson and Hand. "Right now my clients have not made any decision as to whether they’re going to proceed."
The law firm has a long history in Hawaii and counts among its members former Hawaii Gov. John Waihee and Jared Jossem, a former chairman of Hawaii’s Republican Party.
News of Lazard’s hiring sent Hawaiian’s shares up more than 12 percent yesterday, to 2 5/16 on the American Stock Exchange. Before, the shares had fallen 23 percent in the past year.
For months, Hawaiian has been struggling with rising fuel costs, reinstated landing fees in Hawaii, unsettled labor negotiations and a relatively flat stock price.
But the new investor group sees a lot of growth potential in Hawaiian, according to people familiar with the negotiations. They pointed to the carrier’s recently approved routes to Japan, its large share of the West Coast-Hawaii travel market, and a stock price that has not responded to some of the positive changes taking place at the airline.
‘Responding to inquiries’
Executives at the company said their benefactors are not necessarily eager to sell, but are simply responding to inquiries.
"The company has hired a financial adviser to help the company assess its strategic alternatives. However, no decision has been made by the company on these matters, including what action may be appropriate after this process has been completed," Hawaiian said yesterday.
Paul Casey, Hawaiian’s chief executive officer, declined to comment last night, an airline spokesman said. A spokesman for Lazard Freres & Co., Hawaiian’s financial adviser, could not be reached. Smith Management President John Adams did not respond to a request for comment yesterday.
New York-based Smith Management, through its Airline Investors Partnership, rescued a foundering Hawaiian Airlines in January 1996 with a cash infusion of $20 million in exchange for 18.2 million shares of stock. Hawaiian Airlines, which had emerged from bankruptcy two years earlier, was short of cash and faced a shutdown if it could not find new investors.
But to make the deal work, Hawaiian’s unions were asked to give up promised pay raises for several years while the company got on its feet. They did, and the company recovered. The carrier had a record year in 1998, posting a $17.4 million operating profit and distributing its first-ever employee profit-sharing. Last year was less spectacular, and the airline disappointed Wall Street with a net loss of $29.3 million, mostly because of costs associated with a planned $430 million replacement of its aging interisland fleet of DC-9 aircraft.
Smith Management paid about $1 a share in January 1996 for its 18.2 million shares. Since then, the stock price has fluctuated roughly between $2 and $3 a share, with a one-day peak in June 1996 of almost $7. Analysts yesterday suggested Smith could be willing to sell if it is tired of its investment and ready to take its earnings.
"This is just Smith Management saying we invested and now we want to take our money out and invest somewhere else," said Glenn Engel, an airline analyst for Goldman Sachs in New York. "The investor always bought it to sell it."
"It’s an opportunity," said Michael Boyd, president of The Boyd Group, an Evergreen, Colo.-based aviation consulting firm. "They’re in this to make money. If you can buy it at $1 and sell it at $2, then you do. They’re not in the business of managing an airline long term. But you don’t want this misread as a firesale to get out of it."
Shareholders would vote
A sale of Smith Management’s shares would represent a change in control of the company and would require shareholder approval, experts said. People familiar with the negotiations said yesterday that the new investor group has enlisted several Hawaii-based investors, who have put up little or no money, to make the group more attractive for shareholder approval. Among the company’s largest shareholders after the Smith controlled Airline Investors Partnership are its union members and two large Mainland fund management companies.
It was unclear yesterday how the potential entry of a new investor might affect union contract talks now under way. Engel and others said they do not expect the unions to be in the same position they were in during 1996. The airline has more cash and does not have to take the first deal that walks through the door.
"If you’re the pilots, last time you needed to attract an investor to keep you afloat," Engel said. "Here you’re not talking about an investor putting new money in. You’re talking about changing one investor for another. That’s a very different story. It also means that it’s not a desperate seller. Smith Management wants to sell it for a good price."
Stock buy-back to continue
Members of three of Hawaiian’s unions who have been negotiating with management since December did not return calls for comment yesterday. Two other unions are set to begin their negotiations with the airline by the end of the year.
The company also said yesterday that it intends to continue its stock-buy-back program announced in March.
Analysts yesterday agreed that Hawaiian could be attractive to a buyer if the conditions are right. But how much an investor might be willing to pay is up for debate.
"The financial investor who would take a company as a stand-alone investment would not pay as much of a premium as a strategic investor, such as another airline, who would realize other savings from the deal," said Richard Dole, private-equity banker with Dole Capital LLC in Hawaii.
~ ~ ~
CORRECTION: In this story posted on Thursday, May 4, about the possible sale of Hawaiian Airlines, Joseph Manson, co-chairman of law firm Verner Liipfert Bernhard McPherson and Hand, said: "I can’t really comment on the transaction. Right now my clients have not made any decision as to whether they’re going to proceed." The Advertiser incorrectly interpreted the comment as confirmation that negotiations are under way between a new investor group and Hawaiian Airlines. In the same story, the status of Jared Jossem, a former chairman of Hawaii’s Republican Party, was reported incorrectly. He no longer is a member of the firm.
Program Manager Interviews
ASSISTANT SECRETARY OF DEFENSE FOR ECONOMIC SECURITY
Which Defense Firms Will Survive – Meet the
Man Who Helps the Pentagon Decide
A large white banner is first thing you notice upon entering the reception area of Joshua Gotbaum’s third-floor Pentagon office.
In foot-high red letters, it reads: “Please Mr. Gotbaum, Save Natick [Mass.] Labs” - (referring to the Base Realignment and Closure [BRAC] recommendation to close Natick),
Secretary Gotbaum, a former Wall Street investment banker, achieved the status of Washington insider in 1 short year. He is respected both by the Pentagon brass and defense industry officials. He influences key decisions ranging from BRAC to which defense industries will survive...
~ ~ ~
For more, GO TO > > > The Boyd Group; The Bribes & Boondoggles of Boeing; Nests in The Pentagon
From The Great Divide, by John Sperling, others:
Energy: The Economics
of Corporate Welfare
The Political Power of Extraction Industries
In the decade 1991-2001, Metro America paid $1.6 trillion more in taxes that Retro America, and Retro America received $0.8 trillion more in federal payments than it paid in federal taxes. ...
Much of this $0.8 trillion goes to Retro America in the form of the lion’s share of subsidies and tax breaks to the energy industry – oil, gas, and coal.
The primary reason these noneconomic subsidies continue to flow decade after decade is the political power of the extraction industries, a power that has been wielded in both Republican and Democratic administrations but has been greatly magnified under the Bush administration. During the Clinton administration, the extraction industries had limited influence: We have been able to identify only two cabinet, subcabinet, and White House staff members with extraction industry connections.
In contrast, we have identified 53 members of the Bush administration with close ties to the extraction industries....
Clinton’s two extraction industry appointees were Thomas F. (Mack) McLarty III - a childhood friend whom the president appointed as his Chief of staff – and Joshua Gotbaum, whom he appointed to the subcabinet post of Executive Associate Director and Controller of the Office of Management and Budget.
Prior to joining the White House, McLarty was the chairman and chief executive officer of Arkla Inc., a natural gas company.
Mr. Gotbaum was a partner in Lazard Freres and Co., specializing in energy-related products....
President Bush and the Bush family have strong ties to the oil industry going back to John D. Rockefeller and the early days of the industry. George W. Bush’s great-grandfather, Samuel Bush, was an associate of John D. Rockefeller and ran Buckeye Steel Castings in the early 20th century. The daughter of George Herbert Walker, the financier and associate of the Harrimans, married Samuel’s son, Prescott Bush, investment banker, U.S. senator, and father of George Herbert Walker Bush (Bush senior).
President Bush Junior and his closest advisers have heavy ties to oil. Bush’s own oil venture was unsuccessful, but because of his family ties, he sat on the board of directors of Harken Oil, which saved him from bankruptcy by buying his company...
January 11, 2002
Anzai recuses self in airlines merger
The attorney general's wife is counsel for Hawaiian Airlines
By Lyn Danninger, Star-Bulletin
State attorney general Earl Anzai said yesterday he has completely recused himself from oversight of the proposed merger of Hawaii's airlines because his wife is legal counsel for Hawaiian Airlines and worked on the merger.
“It was done at the very beginning. I'm not that stupid," he said. "I have not been in a single meeting or seen a single document."
As vice president, general counsel and corporate secretary for Hawaiian Airlines, Anzai's wife, Lyn, would have played a key role in the due diligence phase and other activities related the merger.
But she has not had any direct role in negotiations with the Attorney General's office, spokesman for Hawaiian Airlines Keoni Wagner said.
The state Attorney General's office will likely play a bigger role in any approval of the Hawaiian-Aloha merger than federal regulators.
Anzai said potential conflicts of interest are not unusual and he has always recused himself from past cases in order to avoid any appearance of a conflict.
Questions regarding potential conflicts of interest were first raised as far back as Anzai's legislative confirmation hearing to become attorney general. At one time, his wife had also worked as an in-house attorney for Kamehameha School which was then under investigation by the Attorney General's office.
September 3, 1997
Bishop Estate swings for the fences
Some investments have been home runs;
others, disappointing strikeouts
By Rick Daysog, Honolulu Star-Bulletin
When Hawaiian Airlines flew into financial turbulence several years ago, it cost Kamehameha Schools/Bishop Estate about $700,000.
Bishop Estate had quietly owned about 1 percent of Hawaiian Air through a private investment fund, but the shares lost nearly all their value after the carrier filed for bankruptcy reorganization in 1993, said the fund’s manager, George McCown.
“They weren’t happy campers,” said McCown, partner and founder of Menlo Park, Calif-based McCown de Leeuw & Co., which teamed up with former major league baseball Commissioner Peter Ueberroth in the 1989 buyout of Hawaiian Air.
In many ways, the Hawaiian Air losses underscore Bishop Estate’s swing-for-the-fences investment strategy that has produced its share of home runs as well as a few disappointing whiffs...
Mergers are big hits
The estate also has become an active player in mergers and initial public offerings. Many of its recent big hits have come from those arenas:
> Four years ago, Bishop Estate invested $30 million in Mid Ocean Reinsurance Co. with partners J.P. Morgan & Co., Marsh & McLennan Co. and Texas deal maker Richard Rainwater. The estate’s 5.36 percent stake in the Bermuda-based reinsurance company, which went public in late 1993, today is worth about $106 million. Last year, the estate’s Mid Ocean dividends amounted to about $2.5 million.
> BankAmerica Corp.’s 1992 purchase of Honfed Bank for about $165 million netted a $40 million profit on the estate’s $50 million investment in the local thrift, according to [Henry] Peters....
> > > FAST FORWARD TO THE CURRENT BANKRUPTCY > > >
March 10, 2005
Hawaiian Air plan hits
A financier's arrest rocks a competing proposal
to revamp the bankrupt airline
By David Segal, Star-Bulletin
One of the principals in an outside group's reorganization plan for Hawaiian Airlines said he intends to withdraw his proposal after a key financial supporter was arrested for allegedly attempting to bribe an undercover FBI agent.
Hawaiian Airlines pilot Robert Konop said yesterday the developments surrounding St. Louis businessman Paul Boghosian's arrest on the eve of the airline's confirmation hearing necessitates pulling the only competing proposal to a company-backed plan for Hawaiian.
All three attorneys connected with the outside group's plan also withdrew from the case yesterday.
Boghosian, president and chief executive of the Barron Group Ltd., had agreed to pay a $500,000 bribe to the agent, who was masquerading as a hedge fund manager, in return for a loan of approximately $2.5 million, according to U.S. Attorney David Kelley in New York City.
The 50-year-old Boghosian was charged with conspiracy to commit bankruptcy fraud and commercial bribery. Each count carries a maximum penalty of five years in prison.
His arrest was announced yesterday by Kelley, U.S. attorney for the Southern District of New York.
The surprising turn of events will likely give a boost to the company-backed reorganization plan that is supported by Hawaiian Airlines trustee Joshua Gotbaum, the airline's unsecured creditors' committee and investor group RC Aviation LLC.
A two-day hearing to confirm the plan begins at 9:30 a.m. today in federal Bankruptcy Court. The company intends to ask for conditional approval of its reorganization plan, pending votes of Hawaiian's pilots and flight attendants on labor contracts.
"I think this makes it clear that there is only one plan of reorganization for Hawaiian Airlines," Gotbaum said.
Konop, though, said he still objects to the trustee-backed plan because he said it will leave the company with too much debt and too little cash. Konop said he intends to argue his points himself in court today.
Boghosian controls Hawaiian Investment Partners Group LLC, which together with the Hawaiian Reorganization Committee LLC and Konop had filed a reorganization plan to bring the carrier out of bankruptcy.
In mid-January, Boghosian attempted to buy RC Aviation's stake in Hawaiian Airlines parent Hawaiian Holdings Inc. for $25 million, then doubled his offer to $50 million, according to court filings. Both offers were rejected by Hawaiian Holdings Chief Executive Larry Hershfield, who also is the managing director of RC Aviation.
Timothy Philipp, Boghosian's personal attorney, said he would not discuss his client's arrest.
"I have no comment until things are resolved -- whatever the current situation is," he said.
Randal Yoshida, the local counsel for the competing group, said he was "disappointed" to hear about the arrest but declined further comment.
Later yesterday, Philipp, Yoshida and New York attorney Eliot Bloom, who was going to handle some of the group's depositions, withdrew from the case.
Konop said yesterday that he did not have much of a reaction to Boghosian's arrest, but suggested Boghosian was set up following a deposition that Boghosian gave to Hawaiian Airlines attorneys on Friday.
"I had no reason to believe he wasn't sincere in what he was saying and what he was trying to accomplish," Konop said. "He put a lot of work into it, and his sole goal was to make sure the Hawaiian reorganization worked out properly."
Ken Elsey, a former principal of Hawaiian Investment Partners, was stunned yesterday by Boghosian's arrest. Elsey said he sold the entity to Boghosian last month for "a token" $10.
"No kidding. Oh, my God. That's a shocker," Elsey said. "I never would have believed it from this guy. That's truly amazing."
Elsey said the financial declarations he saw regarding Boghosian's funding "appeared to be in order."
"I thought (selling Hawaiian Investment Partners to Boghosian) would be a prudent move on my part to allow him to participate in the deal directly as a party of interest since he was providing the money, and all I was primarily doing was trying to seek out some money sources for the project," Elsey said. "If this (alleged fraud) is true, then I was certainly hoodwinked."
In November, Boghosian submitted a declaration to federal Bankruptcy Court testifying that he had access to $300 million needed to fund the plan. Court approval for that plan to be sent to creditors was delayed several times, though, so that the Gotbaum-backed plan could be considered by Bankruptcy Court.
On Monday night, Gotbaum, Hawaiian Holdings and RC Aviation said in court papers that the competing plan was a "hoax" and should be disqualified. The papers also said that Boghosian associate William Spencer, who controls E&M Trust, had refused to answer substantive questions about two $500 million deposits the trust allegedly had in ABN-Amro banks in Taiwan and the Netherlands. The criminal complaint filed against Boghosian yesterday said that ABN-Amro account numbers listed in documents submitted to the Bankruptcy Court were not valid.
The complaint against Boghosian also alleges that in January he solicited funds from the undercover agent's hedge fund by requesting $2 million in "mobilization funds" to cover, among other things, legal expenses related to the Hawaiian Airlines reorganization.
Boghosian allegedly told the agent that he had commitments for additional funding but that the funds had not been transmitted.
Later, the complaint alleges, Boghosian asked whether the agent's hedge fund would provide approximately $200 million required for the Hawaiian Investment Partners plan. On Feb. 21 the agent and Boghosian met in Manhattan where the agent allegedly told Boghosian that the supporting documents submitted to Bankruptcy Court on behalf of Hawaiian Investment Partners were bogus.
The agent, according to the complaint, warned Boghosian that the Hawaiian Airlines deal would collapse because there was no real funding and that for the agent to get his hedge fund to make a loan, the agent wanted a kickback of about $500,000 from the loan proceeds.
From the Hawaiian Airlines Chapter 11 Claims Administration Website:
Some of the interesting listed creditors:
ACE American Insurance Co., San Diego, CA
AIG Aviation Inc., Atlanta, GA
AIG Hawaii Insurance Co., Honolulu, HI
AIG Law Dept-Bankruptcy, Attn: David A. Levin, Esq., New York, NY
AIGAMAUA AVEGALIO, Pago Pago
Lyn Anzai, 1645 Bertram St., Honolulu, HI 96816
Aon Consulting, Inc., Honolulu, HI
AIU Insurance Co., Japan
Allstate Insurance Co., Roanoke, VA
American Family Insurance Group, Kansas City, MO
Amica Mutual Insurance Co., Costa Mesa, CA
Aviation Insurance Agency, Atlanta, GA
Aviation Insurance Services Pacific, Inc., Las Vegas, NV
AXA Corporate Solutions Insurance Co, Paris, France
Cal Farm Insurance, Sacramento, CA
Chubb Group of Insurance Co., New York, NY
CIGNA Group Insurance, Philadelphia, PA
CNA Insurance Companies, Des Moines, IA
Employers Insurance Co. of Nevada, Reno, NV
Federal Insurance Company, c/o Chubb Group, San Francisco, CA
Federal Insurance Company, c/o Marsh USA, Inc., Seattle, WA
Fireman’s Fund Insurance Co., Honolulu, HI
Hartford Fire Insurance Co., Hartford, CT
Hawaiian Insurance Consultants, Honolulu, HI
Insurance Ltd Fortis, United Kingdom
Internal Revenue Service: Kailua-Kona, HI; Seattle, WA; Fresno, CA; Wailuku, Maui; Memphis, TN; Ogden, UT; Monterey Park, CA; Cincinnati, OH; Honolulu, HI; Washington, DC.
Island Insurance Co. Ltd., Honolulu, HI
Marr Hipp Jones & Pepper, LLP, Honolulu, HI
National Pacific Insurance Co., Pago Pago
National Union Fire Insurance Co. of PA (AIG), New York, NY
New York Life Insurance Co., Honolulu, HI
Prudential Insurance Company, Florham Park, NJ
RLI Insurance Company, Houston, TX
Royal Insurance Company, c/o Hobbs Group, San Diego, CA
Rush Moore Craven Sutton Morry & Beh, Attn: Susan Tius, Honolulu, HI
Steven Guttman, Kessner Duca Umebayashi ..., Honolulu, Hawaii
State Compensation Insurance Fund, San Francisco, CA
Tokio Marine & Fire Insurance Co., Japan
Transamerica Insurance Finance Corp, Williamsville, NY
Travelers Insurance Co., San Diego, CA
United States Aircraft Insurance Group, New York
United States Fire Insurance Group, c/o Crum & Forster, San Francisco
XL Specialty Insurance, Greenwich, CT
Zurich American Insurance Co., Schaumburg, IL
... ‘Nuff said?
If not, for more, GO TO > > > Allianz (Fireman’s Fund); Claims By Harmon; Looking for Crumbs at Crum & Forster; The Bankruptcy Buzzards in Liberty House; Predators in Paradise; RICO in Paradise; Woo vs. Harmon Witness List; Witness: Judge Robert Faris; The Vampires at Zenith Insurance; The Vultures on Kaneohe Ranch
January 31, 2004
Ex-HAL execs file $1.5 mil in claims
Paul Casey, former chief of bankrupt Hawaiian airlines
is seeking nearly $1 million
By Dave Segal, Honolulu Star-Bulletin
Two former high-ranking Hawaiian Airlines officers who worked with ousted Chairman and Chief Executive John Adams have filed claims with U.S. Bankruptcy Court totaling more than $1.5 million.
The amounts, which provide a glimpse at how lucrative some executives’ severance packages can be, were among hundreds of claims that poured in just before - or in some cases after - Monday’s filing deadline.
Paul Casey, the vice-chairman, president and CEO who left the airline on June 30, 2002, is seeking $993,705. Bob Zeller, the former president and chief operating officer who left the company April 15, 2002, put in a claim for $508,936.51.
The last-minute rush of claims coincided with a Bankruptcy Court hearing yesterday in which parent company Hawaiian Holdings Inc. received a mixed ruling on a discovery motion. Bankruptcy Judge Robert Faris lifted his stay on discovery to enable Hawaiian Holdings to receive financial information it has been requesting from Hawaiian Airlines. However, Faris limited the ruling by keeping in place a stay on discovery as related to the suspension of a $4.25 million payment to the Hawaiian pilots’ pension plan.
Faris, at the request of trustee attorney Bruce Bennett and the Air Line Pilots Association, also delayed a scheduled Feb. 27 rulling on the pension payment for approximately one month, or until March 29, so that the two sides can continue discussions.
Hawaiian Holdings attorney Guy Neal, who said the parent company has now received a copy of trustee Joshua Gotbaum’s business plan, argued that Hawaiian Holdings had been attempting to secure certain financial information from Gotbaum since September so that it can prepare a possible reorganization plan.
But Bennett argued it was “distractive and expensive” to conduct the discovery that Hawaiian Holdings was seeking. Bennett also said it was premature until the trustee and the pilots union come to some type of decision regarding the pension plan....
Lyn Flanigan Anzai, the former vice president for legal and government affairs, is seeking $271,669.04 based on her employment and separation agreement...
Among other notable claims:
>> More than $236 million from the Pension Benefit Guaranty Corp., a federal agency that pays retirement benefits when a company’s pension plan fails, for unpaid minimum funding contributions and benefit liabilities, Internal Revenue Service taxes and penalties, and other amounts to be determined...
>> $6.4 million from Bank of Hawaii, which provides general banking services...
>> $1.3 million from the Association of Flight Attendants...
>> $1.1 million from the state of Hawaii for amounts paid for air transportation ticket coupons...
Other claims that previously have been announced include $110.1 million from aircraft lessor Ansett Worldwide; $40.4 million from aircraft lessor Boeing Capital Corp ... and Hawaiian Airlines pilot Robert Konop, who has a $40 million claim for unlawful access to his Web site as well as similar claims for other issues....
< < < ANOTHER FLASHBACK < < <
April 4, 2002
Advocates Of Casinos Spent Big On Lobbying
Mainland investors who want to open two casinos on O'ahu spent more money touting their agenda before lawmakers at the start of this legislative session than any other group, state Ethics Commission records show.
Marketing Resource Group, of Lansing, Mich., reported spending $108,679 on lobbying through January and February, the period covered by lobbyist expenditure reports due at the commission yesterday.
The company is a public relations firm employed by investors in a Detroit casino called MotorCity, and last year set up an organization of supporters here called Holomua Hawai'i, named after the Hawaiian word for progress.
The casino investors include Marian Illitch, whose family owns the Detroit Tigers baseball team and Little Caesars pizza chain. They want to build casinos in Waikiki and Leeward O'ahu, and Holomua Hawai'i collected petition signatures from 25,000 Hawai'i residents who support gambling.
The group also produced a video in which economists and others argue that gambling would create jobs, provide more government revenue, and boost the state economy.
But others said they fear gambling could increase crime and corruption, and lawmakers roundly rejected a bill that would authorize the casinos, leaving it very unlikely that the state will legalize gambling this year.
Marketing Resource Group could also be fined for failing to disclose its lobbying activities to the Ethics Commission for the previous reporting period, from May to December.
Commission executive director Dan Mollway said organizations that employ lobbyists and refuse to file reports could be fined up to $500, but most comply voluntarily. [Catbird: Guess that’s the high cost of doing business in Hawaii!]
Marketing Resource Group could not be reached for comment yesterday. The firm's Hawai'i lobbyist, John Radcliffe, said he did not know why the report was missing, but that it had been lost in a Michigan snow storm when it was first mailed. The report was due at the commission by the end of January.
Another group that wants to legalize gambling, the Coalition for Economic Diversity, reported spending $9,832 lobbying during the previous period and said it spent less than $10,000 in January and February.
The group is backed by Sun International Hotels Ltd., which wants to build a $1 billion resort and casino at Ko Olina in Leeward O'ahu.
Hawaiian Airlines reported spending $8,300 on lobbying during January and February. Hawaiian, which sought to merge with rival Aloha Airlines, had reported spending more than $140,000 on lobbying during the previous period.
But Hawaiian later said it had mistakenly inflated that figure by including payments for work other than lobbying. In an amended report, Hawaiian said it really spent only $8,250 on lobbying during the May-December period.
The company had initially reported paying more than $83,000 to lobbyist Lyn Anzai, wife of state Attorney General Earl Anzai, whose office was investigating whether the merger would be legal.
The amended report reflects no lobbyist payments between May and December to Lyn Anzai, who is also Hawaiian's general counsel. The report for January and February said Anzai was paid $2,043 for lobbying during that period....
For more on Lyn Anzai, GO TO > > > Buzzards of Paradise; Claims By Harmon; Harmon’s Claim Letter to Kessner Duca; Dirty Money, Dirty Politics & Bishop Estate; The Firing of Evan Dobelle; The Grand (and dirty) Ko Olina; RICO in Paradise
February 5, 2003
Hawaiian Air looking for
$30 million in cost cuts
Pilots are being asked to accept $8 million
of that in contract concessions
By Dave Segal, Honolulu Star-Bulletin
Hawaiian Airlines pilots are being asked to accept $8 million in concessions as part of an overall $30 million in savings that the carrier is seeking in order to return to profitability.
The company, which has given its unions until Feb. 20 to meet its request for $15 million in wage reductions, also is seeking $15 million in leasing concessions, most of which is from Boeing Co. The unions have been meeting to discuss their options and whether to go forward with the concessions, which can include measures besides pay cuts....
The airline, which has warned that additional layoffs are likely, shook up its management ranks Friday by accepting the resignation of four key executives.
John Happ, senior vice president for marketing and sales; Lyn Anzai, vice president for legal and government affairs; Brian Hermansader, vice president for maintenance and engineering; and John Solomito, senior director of U.S. mainland stations, all have left the company, according to a Jan. 31 memo Adams sent to employees....
Although Hawaiian earned $6.4 million in the third quarter, it lost $43.2 million in the first nine months of 2002. The company is scheduled to report its fourth-quarter and full-year 2002 earnings next month....
March 21, 2003
Hawaiian Airlines files
for bankruptcy protection
Russ Lynch, Honolulu Star-Bulletin
Hawaiian Airlines today filed for bankruptcy court protection from its creditors, in a Chapter 11 proceeding that is aimed at letting existing management run the company while it tries to work out its problems.
Little information was immediately available.
Hawaiian has been seeking $15 million labor cost cuts from its unions and another $15 million in trims on the lease expenses for its aircraft, in an effort to avoid bankruptcy but filed today in the U.S. Bankruptcy Court in Honolulu.
Trading was halted on the American Stock Exchange for the shares of the airline’s parent company, Hawaiian Holdings Inc.
Hawaiian has been through a Chapter 11 reorganization before, filing in 1993 and emerging from bankruptcy about a year later.
Hawaiian Holdings has yet to report its results for all of 2002.
It lost $43.2 million in the first nine months of the year. The airline has more than 3,300 employees....
February 4, 2003
Shake up at
Four top execs are let go as the airline asks employees
for $15 million in wage concessions
By Dave Segal, Honolulu Star-Bulletin
Hawaiian Airlines, seeking ways to cut costs amid a turbulent environment for the aviation industry, has asked for $15 million in wage concessions from its employees and has shaken up its management by letting go four top executives and reassigning responsibilities.
John Happ, senior vice president for marketing and sales; Lyn Anzai, vice president for legal and government affairs and the wife of Hawaii's former attorney general; Brian Hermansader, vice president for maintenance and engineering; and John Solomito, senior director of U.S. mainland stations, were all released, according to a Feb. 1 memo to employees by Chairman and Chief Executive Officer John Adams.
The wage concessions, which were not mentioned in the memo obtained by the Star-Bulletin, were confirmed by a person close to the situation. The airline has about 3,500 employees....
Mark Dunkerley, the company's newly hired president and chief operating officer, will assume direct responsibility for marketing and sales while Adams will oversee the legal department. Wagner, the vice president of public affairs, will be in charge of a new public affairs division with government affairs being consolidated with media relations, community relations and internal communications.
In addition, Norm Davies, executive vice president for operations, has taken over direct responsibility for the maintenance and engineering division until Thursday, when John Judge will join the company and assume those duties as interim vice president of maintenance and engineering. Judge recently retired from American Airlines as managing director of aircraft maintenance for American's Dallas-Fort Worth hub and its southern division.
Adams also said in the memo that Blaine Miyasato, vice president for customer services, will head up an evaluation of the structure and systems of the customer services division. Miyasato's expanded role resulted in Solomito losing his position, the memo indicated.
In addition to these changes, 12 other noncontract or management positions are being eliminated, restructured or reassigned, the memo said....
Hawaiian, which lost $43.2 million in the first nine months of 2002, earned $6.4 million in the third quarter....
March 17, 2002
Dead air deal rankles Aloha
By Susan Hooper, Honolulu Advertiser
The proposed merger between the state's two local airlines foundered because Hawaiian Airlines wanted to change the terms of the agreement, including eliminating the Houston consulting firm coordinating the deal, the chief executive of Aloha Airlines said in a statement today.
Hawaiian's proposal also would have given Hawaiian chairman John Adams the top spots in the merged airline, eliminating Greg Brenneman, the TurnWorks executive who had been orchestrating the merger, according to Glenn Zander, Aloha's president and chief executive officer.
"Aloha could not accept Hawaiian's new proposal because in our judgment, it was not in the best interest of the state, the traveling public or Aloha's shareholders and employees," Zander said.
The details emerged a day after Hawaiian said it was pulling out of the deal because it did not wish to extend what it called an April 18 "outside date for completing the merger." It said increasing costs and risks of the deal were factors.
The announcement surprised many in the state, including employees of both airlines and state legislators who as late as last Tuesday had held a hearing on the merger.
Today, Zander said Hawaiian's action was "regrettable" and said members of Aloha's board of directors voted unanimously to reject Hawaiian's proposal. He also praised Brenneman and TurnWorks for their work on the merger.
Hawaiian spokesman Keoni Wagner said tonight, "We don't necessarily agree with Aloha's characterization of the negotiations, but we also choose not to discuss publicly what would otherwise be private conversations."
The apparent power grab by Adams came even though he and his affiliated companies would have been the financial winners if the merger had gone through. Adams stood to receive assets valued at about $109 million. Adams, his companies and other Hawaiian shareholders also would have held a 52 percent stake in the new airline.
Under terms of the original merger, the shareholders of privately owned Aloha Airlines — many of them relatives of the company founders — would have gotten 28 percent of the merged airline, worth an estimated $56 million.
TurnWorks would have received a 20 percent stake in the company.
For more than a year, Aloha and its consultant have viewed TurnWorks and Brenneman as essential to the success of the merger, according to documents filed with the Securities and Exchange Commission last month that outlined how the merger came about.
Aloha's consultant, Mercer Management, initially approached Brenneman in February 2001 asking whether he wanted to invest in the airline. In July, Brenneman, a former top executive with Continental Airlines, met further with Mercer to discuss a possible investment and subsequent merger with Hawaiian.
Hawaiian officials, contacted in August, initially appeared cool to the idea but after the Sept. 11 terrorist attacks, and subsequent downturn in travel, they agreed to "discuss a possible merger involving the two airlines and TurnWorks," according to the documents.
On Sept. 22, according to the documents, Mercer and senior management officials of Aloha and Hawaiian met and Mercer proposed that both airlines should continue to include Brenneman and TurnWorks in the merger discussions as Brenneman "was likely to be an important factor in creating an agreement between the two airlines, leading the integration efforts, and running the combined carrier and in generating maximum value for shareholders of both companies."
On Sept. 25, the documents say, all parties agreed to proceed with merger talks. They also agreed "that the involvement of TurnWorks and Brenneman would be an important factor in consummating a deal, as past efforts to combine the two airlines were not successful."
TurnWorks officials said in a statement today, "We were surprised and disappointed (by Hawaiian's decision) ... The failure to extend the timetable essentially precludes completing this complex transaction....
The abrupt end to the merger, which was announced Dec. 19, leaves the future of the two airlines and of Hawai'i's interisland airline market uncertain. In announcing the deal three months ago, executives with both airlines said they needed to merge because conditions in the airline industry — and in the interisland market in particular — had made it impossible for them to survive separately.
After the Sept. 11 attacks, both airlines lost tens of thousands of dollars a day and furloughed hundreds of workers. In recent weeks, as the Mainland economy has recovered, there have been signs of improvement in the local airline market.
Still, documents filed with the Securities and Exchange Commission show that Aloha is financially more vulnerable than Hawaiian. The privately held airline has more debt on its books and reported a $1.25 million loss at the end of the third quarter Sept. 30. The airline also has smaller and older aircraft and fewer flights to the Mainland.
Today Zander said Aloha has its own business plan to move ahead "on a stand-alone basis." Aloha spokesman Stu Glauberman said Zander will be meeting with Aloha's employees' union executives tomorrow.
Before the announcements over the weekend, the two airlines had been working on a joint application to take advantage of a special antitrust exemption granted by Congress last November to cooperate on some operations, such as routes, scheduling and pricing....
Gov. Ben Cayetano had been a supporter of the merger and said today, "The failure of the merger had nothing to do with the U.S. Department of Justice, the state Legislature or public opposition. This was a business decision that we will have to accept. The state administration will do its best to try to assure that Hawai'i will continue to have two viable interisland carriers."
State Sen. Ron Menor, D-18th (Mililani, Waipahu, Crestview), chairman of the Senate Commerce, Consumer Protection and Housing Committee, had opposed the merger and his committee took part in statewide hearings....
The mood among workers at Honolulu's interisland terminal was split between the two airlines today, with Aloha employees grim-faced and in no mood to talk about the failed merger, and Hawaiian employees buoyant.
Baggage handlers outside the Hawaiian half of the terminal this afternoon burst into ebullient giggles when asked how they and their co-workers felt about the merger being called off.
"We still have our jobs!" said Thad Estrada, one of the Hawaiian handlers. "Everybody is pretty happy right now. There had been a lot of stress lately, and then today, even though all the schedules and everything are still the same, everybody is smiling. It sure makes the day go better."
On the Aloha side, employees waved off questions, shook their heads and looked at the ground or referred questions to an airline spokeswoman.
Outside the terminal, Tammy Castro of Mililani and Diane Halemano of Makakilo grew tired of driving around the airport while waiting to pick up relatives, and parked in a lot to talk until their cell phones rang.
"Did you see about the merger?" Castro said. "Oh, I am so happy."
Castro said she'd signed a petition earlier, asking that the merger be stopped.
"They'd have a monopoly on the fares, and we'd have no one else to go to," she said. "We need a choice. People would lose their jobs and we already have enough unemployment. Besides," she added. "No offense, but I just love Aloha."
512 U.S. 246
114 S.Ct. 2239
129 L.Ed.2d 203
HAWAIIAN AIRLINES, INC., Petitioner,
Grant T. NORRIS. Paul J. FINAZZO, Howard Ogden, Hatsuo Honma, Petitioners, v. Grant T. NORRIS.
Supreme Court of the United States
Argued April 28, 1994.
Decided June 20, 1994.
Respondent Norris was terminated from his job as an aircraft mechanic by petitioner Hawaiian Airlines, Inc. (HAL), after refusing to sign a maintenance record, as required by his collective-bargaining agreement (CBA), for a plane he considered unsafe, and reporting his concerns to the Federal Aviation Administration.
In separate state-court suits against HAL and its officers, also petitioners, he alleged, inter alia, that he had been wrongfully discharged in violation of the public policy expressed in the Federal Aviation Act and implementing regulations and in violation of Hawaii's Whistleblower Protection Act.
The court dismissed these tort claims as pre-empted by the Railway Labor Act's (RLA's) mandatory arbitral mechanism for so-called "minor" disputes, which grow "out of grievances or out of the interpretation and application of agreements concerning [pay rates], rules, or working conditions," 45 U.S.C. § 153 First (i). The State Supreme Court reversed, concluding that § 153 First (i)'s plain language does not support pre-emption of disputes independent of a labor agreement, and interpreting the opinion in Consolidated Rail Corp. v. Railway Labor Executives' Assn., 491 U.S. 299, 109 S.Ct. 2477, 105 L.Ed.2d 250, to limit RLA pre-emption to disputes involving contractually defined rights.
The court rejected petitioners' argument that the claims were pre-empted because resort to the CBA was necessary to determine whether Norris was discharged for insubordination, pointing to Lingle v. Norge Division of Magic Chef, Inc., 486 U.S. 399, 108 S.Ct. 1877, 100 L.Ed.2d 410, in which this Court held that the Labor Management Relations Act, 1947 (LMRA), pre-empts state law only if a state-law claim is dependent on the interpretation of a CBA, and that purely factual questions about an employee's conduct and the employer's conduct and motives do not require interpreting such an agreement's terms.
Held: The RLA does not pre-empt Norris' state-law causes of action.....
74 Haw. 648, 847 P.2d 263 (1993) (first case), and 74 Haw. 235, 842 P.2d 634 (1992) (second case), affirmed.
BLACKMUN, J., delivered the opinion for a unanimous Court.
Kenneth B. Hipp, Honolulu, HI, argued for petitioners.
Susan Oki Mollway, Honolulu, HI, argued for respondent.
Richard H. Seamon, Washington, DC, argued for the U.S. as amicus curiae, by special leave of the Court.
Justice BLACKMUN delivered the opinion of the Court....
# # #
MORE TO COME
Meanwhile, you can peruse more buzzard poop by flying to....
Aloha, Harken Energy
The Bankruptcy Buzzards
The Boyd Group
The Bankruptcy Buzzards in Liberty House
The Buzzards in the East-West Center
Buzzards of Paradise
Dirty Gold in Goldman Sachs
The Vultures on Kaneohe Ranch
Looking for Crumbs at Crum & Forster
Marsh & McLennan: The Marsh Birds
Marsh & McLennan’s Mercer Consulting
More Claims by Harmon: Kessner Duca
Office of the U.S. Trustee vs Harmon
Scampering With Kemper Insurance
The Lizards at Lazard Freres
Tinkering With eToys
Pan Am Airlines
Predators in Paradise
The Puna Connection
The Vampires at Zenith Insurance Co.
The Vultures on Kaneohe Ranch
Who’s Guarding the Henhut?
# # #
For Sidney Skolnick’s excellent series entitled
The Bankruptcy Bordello, see...
~ ~ ~
TO FLY TO THE TOP OF THE TREE!
The Catbird Seat
~ o ~
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Last Update July 15, 2009, by The Catbird