=HAWAIIAN AIRLINES=
Flying with the Bankruptcy Buzzards
Sightings from The Catbird Seat
~ o ~
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.
October 31, 2007
Hawaii air fares may rise
after $80M ruling
By Rick Daysog. Advertiser Staff Writer
Interisland airline go!, whose low prices started a fare war, has lost a court ruling that might prompt it to leave Hawai'i, industry analysts said.
If go! leaves, interisland airfares will likely rise, the analysts predicted.
A judge yesterday ruled that go!'s parent, Mesa Air Group, must pay $80 million to Hawaiian Airlines for misusing confidential business information.
But U.S. Bankruptcy Judge Robert Faris rejected Hawaiian's request to bar go! from selling interisland tickets for one year.
Mesa said it will likely appeal the decision and said it remained committed to the Hawai'i market. But analysts said that if the ruling stands, it will likely affect whether go! continues to offer $19, $29 and $39 one-way fares, or operate at all in Hawai'i.
"This definitely hurts Mesa," said Nick Capuano, managing director and head of equity research at Los Angeles-based Imperial Capital LLC, whose firm follows Hawaiian.
"It's now less likely that they will slug it out in a money-losing market."
The $80 million judgment is more than double the $34 million that Mesa earned for all of 2006 and is equivalent to about $2.78 for each outstanding share of Mesa's stock.
Since the June 2006 launch of go!, Mesa's cash holdings have fallen from about $345 million to about $198 million, according to a recent filing with the Securities and Exchange Commission.
Local airline industry historian Peter Forman said he believes the ruling will likely hasten Mesa's exodus from Hawai'i.
"I would think that this puts more pressure on Mesa to look at finding a settlement with Hawaiian for an exit strategy," Forman said.
The judge said Mesa used proprietary information it obtained from Hawaiian Airlines to "gain a competitive advantage ... to enter the market for Hawai'i interisland air transportation services."
"In this case, the award of money damages adequately redresses the harm suffered by (Hawaiian Airlines) as a result of Mesa's breach of the confidentiality agreement," Faris wrote in a 14-page finding accompanying his ruling.
REACTIONS TO RULING
Mark Dunkerley, Hawaiian's president and CEO, welcomed the judge's decision.
"Today's ruling is a triumph for fair competition and ethics over dishonesty and illegal behavior," he said.
"Nobody benefits when a company like Mesa misuses confidential information to gain an unfair competitive advantage, then lies about it and destroys evidence."
Jonathan Ornstein, Mesa's chief executive officer, said the likelihood of an appeal "is very high."
Ornstein said his company remains "more committed" to the interisland market in light of yesterday's ruling.
But should Mesa decide to leave Hawai'i in the future, Faris' ruling could cost consumers "hundreds of millions of dollars," Ornstein said.
He said Faris "basically ruled that the actions of one person were enough to punish" Mesa, its 5,000 employees and Hawai'i's residents and visitors.
He was referring to Mesa Chief Financial Officer Peter Murnane, who downloaded thousands of pages of proprietary information about Hawaiian's business, then destroyed the records, saying he thought he was deleting pornography from his work computers.
Murnane has since been placed on a 90-day leave of absence by Mesa's board.
"We are extremely disappointed, and that judge has put the interest of Hawaiian above the interests of the people of Hawai'i," Ornstein said.
Hawaiian sued Phoenix-based Mesa last year for $173 million in damages, alleging that Mesa used confidential financial data from Hawaiian to set up go! airline.
POSSIBILITY OF APPEAL
The ruling came after yesterday's close of the stock market. Mesa's stock closed at $5.10 on the Nasdaq market yesterday, up 16 cents. Shares of Hawaiian rose 61 cents to $5 per share on the American Stock Exchange in after-hours trading yesterday.
Mesa has up to 10 days to appeal Faris' decision with the U.S. District Court or with the bankruptcy appellate panel of the 9th U.S. Circuit Court of Appeals in California.
Such an appeal would require Mesa to post a bond for the full $80 million, unless Faris were to grant Mesa a stay pending the outcome of such an appeal.
Besides Hawaiian's lawsuit, Aloha Airlines has filed an antitrust lawsuit in U.S District Court against Mesa, alleging that Mesa used confidential information to drive it out of business.
"Aloha believes it is important for all companies serving the people of Hawai'i to conduct their business affairs with the highest ethical and legal standards, and the court today found that Mesa did not meet that standard of conduct," said David Banmiller, Aloha's president and chief executive officer.
"Contrary to what Mesa has been saying, today the court confirmed what we have been saying all along, that Mesa's actions as a new entrant have been inconsistent with fair play."
In its February 2006 lawsuit, Hawaiian alleged that Mesa received more than 2,000 pages of confidential financial information when Mesa expressed an interest in acquiring Hawaiian in 2004 while Hawaiian was in bankruptcy.
Mesa, whose bid was rejected, was supposed to return the documents or destroy them but didn't, Hawaiian alleged. Hawaiian emerged from bankruptcy protection in June 2005 under the ownership of California-based Ranch Capital LLC.
Mesa previously has argued that losses suffered by Hawaiian after go!'s entry were largely self-inflicted because the local airline increased capacity in response to go!'s entry.
Mesa also has said that Hawaiian wants go! out of the market so it can increase fares.
Yesterday's ruling comes after two weeks of court hearings from Sept. 25 to Oct. 4.
A 'MISADVENTURE'
During a pretrial hearing, Faris found that Mesa kept confidential information it was supposed to return or destroy; Mesa misused information it kept, and that was a substantial factor in Mesa's decision to enter the Hawai'i market.
In his findings of facts and conclusion of law, Faris cited about a half dozen confidential documents that Mesa misappropriated to start go! They include:
> Internal projections on Hawaiian Airlines' future operations and financial performance;
> Lists of contracts with the local airline's third-party vendors;
> Details of Hawaiian's expansion plans;
> The company's strategy for marketing to wholesale tour operators;
> Documents spelling out Hawaiian's contracts with its codeshare partners like American Airlines, Continental Airlines, Northwest Airlines and US Airways;
> Pricing policies, frequent flier programs and credit card alliances.
"A skilled and experienced expert in the airline business might have been able to make an 'educated guess' about some of these topics by drawing inferences from publicly available information," Faris wrote.
"These inferences would not have been as accurate and reliable as the information, which Mesa obtained directly from HA."
Scott Hamilton, a Washington state-based aviation industry consultant, called go! a "misadventure from the beginning."
RISING FARES PREDICTED
Hamilton said the interisland market could not sustain more than two major players, especially when fares are as low as $29 or $19.
He predicted that fares will return to where they were in 2005 when the local carriers were charging more than $79 each way if go! leaves the market.
"If indeed Mesa does decide to withdraw and shuts down go!, fares will go up the day go! shuts down, if not before," Hamilton said.
"There is no incentive to keep fares at present levels without go! in the market," he said.
Faris alluded to that prospect when he wrote:
"This situation cannot continue indefinitely; eventually fares must increase to a level that eliminates the market-wide losses. (It is highly unlikely that any of the three carriers could reduce its costs enough to eliminate its losses.)
"It is impossible to say with any decree of certainty, however, when this will occur or what the new fare level will be. It is also possible that another carrier could enter the market, holding fares down."
HOW EVENTS UNFOLDED
March 2003: Hawaiian Airlines files for bankruptcy protection.
April 2004: The federal bankruptcy court allows potential investors to study
Hawaiian's books under a confidentiality agreement.
April to May 2004: Mesa downloads more than 60 documents, including
more than 2,000 pages of proprietary information about Hawaiian's financial
performance, projections and business strategy.
May 2004: Mesa is eliminated as a bidder for Hawaiian.
December 2004: Aloha Airlines files for bankruptcy protection.
April 2005: Mesa starts looking into acquiring or forming a business alliance
with Aloha. Mesa retains GCW Consulting, an Arlington, Va.-based aviation
consulting firm, to "look at a possible acquisition or some other structure for
entry into the Hawai'i market."
June 2005: Hawaiian Airlines exits bankruptcy protection under the
ownership of California-based Ranch Capital LLC.
January 2006: Mesa's Chief Executive Officer Jonathan Ornstein tells
investors that Mesa's decision to enter the interisland market was based on
its review of Hawaiian and Aloha Airlines during their bankruptcy cases.
February 2006: Hawaiian sues Mesa to bar the company from operating in
the interisland market for two years. Hawaiian alleges Mesa improperly used
confidential data it received when Hawaiian was in bankruptcy. Hawaiian later
reduces the length of the ban it seeks to one year.
March 2006: Mesa begins selling tickets for its June 9 launch of interisland
carrier go!
March 2006: Mesa files countersuit, accusing Hawaiian of trying to illegally
block competition.
June 2006: Mesa launches go!
September 2006: Hawaiian alleges Mesa tried to drive Aloha out of business
and cites e-mails by Mesa Chief Financial Officer Peter Murnane. One e-mail
says: "If we assume Aloha stays in market and in business forever, this
project makes no sense. We definitely don't want to wait for them to die,
rather we should be the ones who give them the last push."
October 2006: U.S. Bankruptcy Judge Robert Faris rejects Hawaiian's
request for a ban but says Mesa "probably breached the confidentiality
agreement" by failing to return or destroy material it received. Faris also
concludes that "at one time, Mesa hoped to drive Aloha out of business."
October 2006: Aloha sues Mesa, alleging that it misused confidential
information in an attempt to drive Aloha out of business.
December 2006: Faris throws out Mesa's countersuit against Hawaiian.
August 2007: Hawaiian accuses Mesa CFO Murnane of destroying several
computer files that included confidential Hawaiian material.
Yesterday: Faris orders Mesa to pay Hawaiian $80 million in damages for
misusing confidential business information.
• • •
Postings at www.honoluluadvertiser.com
This is a representative sampling of comments posted at
honoluluadvertiser.com after the go! airline ruling was announced:
go! just wanted to drive out Aloha or Hawaiian, then it would have raised
prices for sure.
Dan, Honolulu
Please don't go, go! We need the "reasonable" fares to stay. Hawaiian and
Aloha were gouging us for too long!
RCM, Honolulu
I think it is fair considering Mesa came in to put either Hawaiian or Aloha
out of business using confidential information.
Nate
Mesa will go buh-bye,
Hawaii Superferry will go buh-bye,
Hawai'i consumers will suffer once again,
And the "ol' boy network" will live happily ever after.
Largo, Honolulu
http://the.honoluluadvertiser.com/article/2007/Oct/31/
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...
http://starbulletin.com/2007/09/29/news/story02.html
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."
http://starbulletin.com/2007/03/15/business/story02.html
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?
Lazard Freres.
What investment bank put together the mergers that created, and then advised, the monster Enron?
Lazard.
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