I SING THE
Sightings from The Catbird Seat
~ o ~
March 18 2009
by Rick Daysog
It's proxy season so executive pay figures for 2008 are beginning to trickle out.
At the top of the list, Allen Doane earned nearly $5 million last year as CEO and
chairman of Alexander & Baldwin Inc. But Doane's 2008 compensation was down
sharply from his 2007 pay of $8.6 billion.
Hawaiian Electric Industries Inc. CEO Constance Lau received a $2 million pay
increase, upping her 2008 pay package to nearly $3.9 million.
Lau's increase came in a year the company experience significant challenges, including
lower earnings at its American Savings Bank unit and a Dec. 26 islandwide outage
that cut off power to Hawaiian Electric Co.'s 294,000 customers on Oahu.
Rounding out the list, Bank of Hawaii CEO Allan Landon earned about $2.5 million
last year, which was down about $100,000 from his 2007 pay.
Look for updates to this list as more local companies file their proxies with the
Securities and Exchange Commission. In the future, I'll publish a more listing in the
Honolulu Advertiser newspaper once all of the proxies are filed.
Tags: Alexander & Baldwin Inc., Bank of Hawaii Corp., CEO pay, Hawaiian Electric
November 30, 2007
Former American Savings Bank
Assistant Manager Indicted on 10
Counts of Theft, Embezzlement and
Ewa Beach Resident Marilyn DeMotta Is Being
Apprehended by Federal Agents in Las Vegas
By Malia Zimmerman
Hawaii’s U.S. Attorney Ed Kubo today announced the indictment of Marilyn DeMotta,
41, a former operations manager at American Savings Bank accused by a bank
security manager in 2004 of stealing more than $1 million from 91-year-old bank
customer Ada Lim.
DeMotta, a resident of Ewa Beach, was indicted in Hawaii’s U.S. District Court on Nov.
15, 2007, on 10 counts including bank fraud, embezzlement by a bank employee, and
theft of public funds, but the indictment was sealed until she could be located and
apprehended in Las Vegas, Nevada, where she also has a home.
The 18-page indictment alleges that DeMotta:
> Became involved with the personal financial affairs of Lim (referred to in the
indictment as “A.L.”);
> Used her position with the bank to access the accounts of Lim and move funds
belonging to Lim into other accounts at American Savings as well as other financial
> Used a variety of financial transactions to redirect Lim’s funds into accounts, which
DeMotta controlled at American Savings Bank as well as other financial institutions;
> Altered checks belonging to Lim, so that the money was deposited into DeMotta’s
father’s account, which DeMotta had opened;
Falsely endorsed the reverse side of the cashier’s checks as “refunded to customer”
which were to be used for Lim’s payment of federal and state tax.
Spokesperson for the U.S. Attorney's office, Larry Butrick, says the federal agents are
speaking with DeMotta’s attorney to determine whether she will surrender on her own or
if a warrant will be issued for her arrest. Either way, DeMotta will be brought back to
Hawaii so she can be arraigned next week.
DeMotta Took Advantage of Her Position
As Hawaii Kai Branch operations manager for American Savings Bank, DeMotta could
easily befriend Lim, a frail elderly widow living in an East Oahu retirement home. Lim
had no reason to distrust DeMotta when in 2003, the polite bank employee offered to
help her with her finances.
Despite declaring bankruptcy in 2001, DeMotta offered to manage the upcoming sale of
Lim’s $1.4 million property in Wahiawa, to prepare Lim’s federal and state tax forms,
and to act as her “financial manager.” DeMotta even told Lim to get rid of her
accountant because he was “too expensive.”
Lim allowed DeMotta to take control of the $668,000 netted from the sale of the
property previously rented to Zippy’s Restaurant for $7,000 a month and to prepare her
2003 tax forms. Signing blank checks, Lim gave her banker full access to those funds
and more totaling $900,000.
Alarmed at DeMotta's actions, Dennis Kohara, Lim’s long-time accountant, told Hawaii
Reporter that he twice took his concerns to an American Savings Bank branch manager
who he knew personally, because he believed an investigation was in the best interest
of his client and the bank. Angie Ho, Lim’s Realtor, says she also was worried because
Lim had a simple lifestyle with few expenses, but her money was rapidly being
Meanwhile, DeMotta continued as the bank’s assistant manager.
In late 2004, DeMotta allegedly used Lim’s money to open an I-Plan account at the
Hawaii Kai Bank Branch under her own father’s name.
The indictment alleges that this money was supposed to go to the Internal Revenue
Service and State Tax Collector to pay Lim’s taxes.
But instead, DeMotta allegedly deposited more than $200,000 from the money into an
American Savings I-Plan account.
As a result, DeMotta’s Hawaii Kai Branch won a company-wide competition in
December 2004, and employees and management personnel subsequently
received bonuses of $1,000 and $5,000 each.
Bank Security Manager Bert Corniel pushed for the bank’s senior management to
aggressively pursue an investigation into DeMotta and to reimburse Lim the full
amount that was stolen.
Instead, the bank’s senior officials claimed they believed DeMotta’s claim that she
borrowed the money and that it had all been repaid.
American Savings management wanted to make sure it was on record that DeMotta
“borrowed” the money from Lim.
On February 2005, DeMotta picked up three bank employees from the legal and human
resources departments and took them to meet with Lim.
Bank general counsel Stanley Chong, who suggested the meeting, went along in
hopes that Lim would sign a statement saying she had in fact lent DeMotta the money.
With big smiles, and candy and flowers in hand, the four bank employees arrived at
Lim’s home with the release. She signed it.
“Mrs. Lim was in no condition to turn them down. She would have agreed to anything to
anyone who was nice to her,” attorney Lyle Hosoda said about his client Ada Lim,
maintaining his client was improperly manipulated.
DeMotta was fired from the bank in 2005, but was able to secure a job with a local
Corniel filed a complaint with the FBI in 2005 saying DeMotta alleged stole more
than $1 million from Lim between 2003 and 2005. It was his report that triggered a
federal investigation by four federal agencies.
Corniel was fired from the bank in June 2006.
Two Lawsuits Filed Against Bank Aug. 2, 2006
Corniel filed a lawsuit on Aug. 2, 2006, in First Circuit Court, alleging that he was fired in
retaliation for blowing the whistle on the cover-up of DeMotta’s theft by the bank’s
top senior officials.
Ten days after Corniel was fired, FBI agents seized his computer and files from the
American Savings Bank security headquarters. Sources say federal agencies
investigating the case feared evidence might be lost or destroyed. Hawaii Reporter
broke that story on Aug. 12, 2006.
Federal agents also issued at least a half-dozen subpoenas in the fall of 2006 to
American Savings Bank senior management officials in preparation for a grand jury
proceeding at Hawaii’s U.S. District Court.
Federal agents from at least four departments have been involved in the case, including
the FBI, U.S. Attorney, Office of Inspector General for Tax Administration and
Department of the Treasury. U.S. Attorney Ed Kubo says in his Nov. 30 release that
these federal agencies continue their investigation.
Corniel’s lawsuit against American Savings was settled in 2007 for an undisclosed
sum on the condition that Corniel agree to strict confidence in terms of the
settlement and what he uncovered during his investigation while at the bank.
Meanwhile, Lim also sued American Savings Bank, filing her lawsuit on Aug. 2, 2006 --
the same day as Corniel’s in First Circuit Court.
Lim’s attorney, Lyle Hosoda, said that American Savings, which had been notified
twice about DeMotta before she took Lim’s money, did not take action to stop her -- at
least not in time, and as a result, DeMotta transferred Lim’s money to a series of
accounts benefiting DeMotta and her family members.
Specifically, Lim’s lawsuit alleged that $304,000 went to DeMotta’s account at the Bank
of Hawaii; $212,000 went into DeMotta’s father’s retirement fund in American Savings;
$110,000 in cash was used to purchase a condo in Waipahu in DeMotta’s own name.
In addition, records show another $57,000 going to pay DeMotta’s credit card debt, and
several thousand dollars both transferred to the Philippines and set up in a local
account for DeMotta’s children.
Hosoda says the bottom line is Lim’s money disappeared within a few months and the
91-year-old is penniless. She once made $9,000 a month from rent and social
security and believed she was set financially for life. But Lim was left unable to afford
the rent in the East Oahu elderly care home and was forced to move out into low-income housing in Red Hill.
Worse, Lim’s taxes were not even paid, even though she believed the $304,000 was
going to pay her taxes and signed cashiers checks prepared by DeMotta for that
amount. Today, Lim owes nearly $500,000 in back taxes and penalties for the sale of
the property and at this point, has no way to pay the government.
Bank president and Chief Executive Officer Constance Lau, who also serves as
president of the Hawaii Bankers Association, and was named by U. S. Banker
magazine as one of the top 25 most powerful women in banking and “Business Leader
of the Year” in 2004 by Pacific Business News, did not speak publicly about either the
civil lawsuits or criminal federal investigations into American Savings Bank.
But in a series of press releases, Lau adamantly denied American Savings Bank
has done anything illegal.
On Tuesday, Aug. 22, 2006, American Savings asked the state’s First Circuit Court to
dismiss the two lawsuits against the $6.9 billion financial institution and subsidiary of
the state’s second largest company, Hawaiian Electric Industries.
In a 10-page filing, the bank attorneys maintained “there have never been any actions
by American Savings Bank to conceal any improprieties by bank personnel." The filing
also states former security manager Corniel was never coerced or kept from submitting
any reports required by law.
After considerable negative press in the local and national trade press, however,
American Savings Bank, in a dramatic turn, agreed to a settlement with Lim.
Neither Lim’s attorney, nor the bank, would discuss the terms of the arrangement,
which was announced on Sept. 18, 2006, but her settlement is reportedly more than $1
Bank Hires Top Guns, Fights Federal Inquiry
American Savings Bank, Hawaii’s 3rd largest bank with $6.7 billion in assets, retained
Washington D.C.-based law firm of Fried, Frank, Harris, Shriver & Jacobson LLP to
defend the bank during the federal inquiry.
One of the attorneys hired was former U.S. Department of Justice Inspector General
Michael Bromwich, who since entering private practice 7 years ago, has defended
both financial and other corporations under investigation by government agencies.
While working with the Department of Justice, he attempted to prosecute Oliver
North during the Iran-Contra controversy in the late 1980s and investigated
government agencies for their management of such crises as Oklahoma City bombing
and the 1993 terrorist attack on World Trade Center.
Bromwich’s experience and that of his co-counsel, Thomas Vartanian, who is an
expert in banking law, makes the firm the ideal one to defend the bank against any
criminal or civil charges, sources say.
Behind the scenes, the bank’s board and attorneys brokered a deal with the
federal U.S. Attorney’s office to delay any indictments while the bank conducted
its own audit.
After the bank’s audit was completed and turned over to the U.S. Attorney, key bank
employees involved with this case suddenly left the bank.
That includes Abel Malczon, senior vice president of operations, who was considered
one of the bank’s most powerful and politically connected officers; and Stanley
Chong, general counsel for the bank, who sent the delegation of four employees
including DeMotta to get Lim’s signature on the form that stated DeMotta had borrowed
the money from her. Wilson Ho, the bank branch manager supervising DeMotta during
her alleged crime spree, was transferred to another branch and ultimately demoted.
Ken Newman, brought in to replace Corniel when he was fired, also left the bank in
Financial experts familiar with the case say the federal investigation could lead to
criminal charges against bank officers, and if they are proven serious enough, the bank
could lose its federal charter.
DeMotta Maintains Her Innocence
All along, DeMotta has dismissed any allegations of wrongdoing.
In an interview with Hawaii Reporter in the fall of 2006, DeMotta explained that she was
not responsible for Lim losing nearly $1 million.
DeMotta says that she befriended Lim while Lim lived in a Hawaii Kai elderly care home
and “became like family.”
DeMotta told Hawaii Reporter that she did not steal any of Lim’s money. She says she
merely "borrowed" $304,000 from Lim to “help her out” and paid her back on time and
in full. She admits she put $212,000 in her father’s retirement account during a related
bank promotion, but she says that money was part of the $304,000.
“Mrs. Lim wanted me to invest her money and I could not find anything that was good in
the short-term so I borrowed it and gave her 2 percent interest. I did not need the
money. I have plenty of my own.”
DeMotta says she took the $110,000 from the Lim family for a Waipahu condo
purchase. DeMotta bought the condo in her name, even though she says she did so as
an investment on behalf of the Lims. They were repaid $125,000, DeMotta maintains,
saying she kept the additional $55,000 in profit from the condo resale of $180,000
because “she earned it.”
She says she realizes now that she probably should not have borrowed money from a
customer, or volunteered to help her with her finances or tax preparation, but that she
was not responsible for Lim being forced to move from her Hawaii Kai elderly care
home into a low-income housing complex in Red Hill.
DeMotta blamed Lim’s daughter and granddaughter for financially taking advantage of
Lim to the point where the senior citizen was impoverished.
But public records show DeMotta emerged from bankruptcy in 2003. She told Hawaii
Reporter she was on the financial rebound after her parents’ Waimanalo home was
sold. Public records shows the Waimanalo home was sold in 2005, however, not in
Under bank rules, DeMotta was not allowed to represent herself as a financial planner
and tax specialist or to even touch the client’s money. Despite this mandate, DeMotta
says she was only going out of her way to make sure Lim was a "satisfied bank
“American Savings is a family-oriented bank, which encouraged employees to go out of
their way to help customers,” DeMotta told Hawaii Reporter.
Saddened that she was fired from the bank in 2005 for "unrelated reasons," DeMotta
says she realizes that she should not have “helped” Lim with her finances, even though
she was only doing so out of the goodness of her heart.
She says because she was generous to Lim, her own family is suffering.
American Savings Bank’s public relations officials did not return calls or emails to
Hawaii Reporter by press time to comment on this indictment.
Federal officials would not comment on whether other bank officials will be charged in
this case, and would only say the investigation involving four federal agencies is
Malia Zimmerman, editor and president of Hawaii Reporter, can be reached via email at
April 1, 2007
Big bucks for the bosses
By Rick Daysog, Advertiser Staff Writer
The average pay for Hawai'i's top bosses grew more than 27 percent last year due in
part to new federal rules on reporting of stock option awards and other incentive pay.
An Advertiser study of company filings at the U.S. Securities and Exchange
Commission found the chief executive officers of Hawai'i's seven largest publicly
traded companies earned an average of $2.6 million in 2006, which was up from the
year-earlier's $1.8 million.
The pay was equivalent to about $7,420 per day and was more than 59 times the
median household income in Hawai'i....
U.S. CEOS AVERAGE $4.9M
ERI said the total cash compensation for U.S. chief executives — which includes
figures for the heads of large U.S corporations like Microsoft Corp. — averaged out at
$4.9 million, which was up from the year-earlier's $3.9 million.
In Hawai'i, only one CEO topped the $5 million mark: Alexander & Baldwin Inc.'s CEO
According to A&B's proxy, Doane received $7.6 million in total compensation last year,
which was up 55.6 percent from his 2005 pay of $4.9 million....
The Advertiser survey only includes pay figures for publicly traded companies and
doesn't include compensation figures for such companies as Castle & Cooke Inc. and
First Hawaiian Bank that are no longer publicly traded.
They also don't include figures for large nonprofit companies like the Hawai'i Medical
Service Association, which paid its CEO Robert Hiam $1.1 million in salary and
bonus last year.
Six of Hawai'i's seven CEOs received $1 million or more last year. Only two saw their
pay drop from the previous year. Here's a snapshot:
Constance Lau, Hawaiian Electric Industries Inc.'s chief executive officer, earned
$3.7 million. Lau, who was named HEI's top executive in May 2006 after heading the
company's American Savings Bank subsidiary, received $680,667 in base pay.
She didn't get a bonus but was paid $370,204 in options, stock awards and other cash-based compensation and perks.
Lau's total compensation package was skewed by a $2.2 million, one-time gain when
she switched from an American Savings' pension plan to one for HEI executives.
Allan Landon, Bank of Hawaii Corp.'s chairman and chief executive officer, saw his
pay package drop from about $4 million in 2005 to $2.3 million last year.
David Cole, Maui Land & Pineapple Co.'s CEO, also saw a drop in pay last year.
Cole's 2006 compensation as head of the local pineapple grower and real estate
company was $1.5 million, which was down 6 percent from the year-earlier's $1.6
Central Pacific Financial Corp. CEO Clint Arnoldus earned nearly $1.4 million last
year, which was up 36.5 percent from the $1 million he received in 2005.
Figures for Hawaiian Airlines CEO Mark Dunkerley were not available. The company
said it expects to file with proxy with the SEC later this month....
During the past five years, revenue at Alexander & Baldwin's real estate division has
grown at a 14 percent annual compounded rate. In 2006, the division's operating profit
hit the $100 million level for the first time, even as the local real estate market began to
The company's shipping unit, Matson Navigation Co., lost a profitable shipping
alliance to Guam last year but Matson's performance still topped goals set for it....
August 16, 2006
FBI probes bank over
alleged fraud cover-up
By Rick Daysog, Honolulu Advertiser
The FBI is investigating claims that American Savings Bank officials tried to cover up
theft, including one case in which a bank employee allegedly took several hundred
thousand dollars from a 91-year-old customer.
FBI agents interviewed the bank's former security director Bert Corniel yesterday after
he charged in a lawsuit that the bank asked him to stop reporting fraud cases to
federal and state officials, said John Perkin, Corniel's attorney.
Assistant U.S. Attorney Ron Johnson, who prosecutes federal crimes in Hawai'i, said
yesterday he could not confirm or deny that an investigation is under way. A person at
the Honolulu FBI office said late yesterday the bureau had no immediate comment.
The bank said the charges are false and it is cooperating with the FBI investigation.
"Although we cannot comment on the investigation, we can say that we have and will
continue to cooperate and provide investigators with all the relevant information as it is
requested," said American Savings Bank in a written statement. "Mr. Corniel's concerns
... were thoroughly investigated and found to be without merit."
Corniel and bank customer Ada Lim, 91, alleged in separate lawsuits filed on Aug. 2
that a manager at a bank branch took hundreds of thousands of dollars from Lim.
Lim deposited more than $600,000 into her American Savings account in 2004, only to
have most of the money siphoned out of her account by the bank employee, who was
helping to manage Lim's finances, the lawsuits allege. The bank employee opened an
account with Bank of Hawaii and deposited various sums from Lim totalling $304,000,
according to Lim's lawsuit. The bank employee bought a condominium using $110,000
of Lim's money, the suit claims.
Corniel said in January 2005, when he was investigating the Lim case, the bank
employee confessed to him that she took the money. American Savings officials said
the transfer was a loan from Lim to the employee, Corniel said.
Corniel said American Savings officials told him not to report the fraud as required by
law to federal regulators and law enforcement agencies such as the FBI, Office of
Thrift Supervision and the Federal Deposit Insurance Corp.
Several American Savings employees went to Lim's house in February 2005 with gifts
and to get her to sign a document exonerating the bank, according to the lawsuits.
Lyle Hosoda, Lim's attorney, said the bank returned most of Lim's money but still owes
her about $200,000. No criminal charges have been filed against the bank employee,
but Hosoda said an Internal Revenue Service investigation of the employee is under
Craig Togami, American Savings marketing and communications director, said
yesterday the bank would not respond to specific allegations in the two lawsuits.
Togami said he could not comment beyond what it said in the written statement.
"American Savings Bank believes that this entire lawsuit is without merit," the statement
said. "There are many factual errors in the complaint. ... We look forward to telling our
side of the story more fully at the appropriate time."
The bank's statement also cast doubt on the motivation of Corniel. In June, Corniel
resigned from the bank, saying he was pushed out.
"To understand what truly happened, there are some facts to keep in mind: Security
today goes well beyond physical security, and so the bank decided to emphasize
protection of security of information systems and computers; Mr. Corniel, whose
background is in physical security, was not selected for the newly created position of
VP Security; Mr. Corniel voluntarily resigned after repeated efforts by the Bank to have
him stay," the statement said.
Corniel's lawsuit also charges that Constance Lau, the president of the bank, asked
him to "recharacterize" the bank's fraud losses as "potential losses" in his reports to
Lau became chief executive of American Savings' parent company, Hawaiian Electric
Industries Inc., in May. Togami said Lau was traveling and could not be reached for
FBI agents seized Corniel's computer at American Savings' downtown headquarters on
Friday in search of e-mails and other electronic records, which could demonstrate
Corniel's allegations, according to Perkin, Corniel's attorney.
Corniel is a retired Honolulu police officer and a former investigator with the city
prosecutor's office who was hired as American Savings' security director in 2000.
In his lawsuit, Corniel mentions a second incident, involving two bank tellers and a
customer who allegedly defrauded the bank of $256,000 in April and May 2005. Corniel
said he filed reports with federal regulators and law enforcement officials, including the
FBI, the Office of Thrift Supervision and the Federal Deposit Insurance Corp.
But bank officials recharacterized the losses as expenses or charge-offs and his
immediate supervisor told Corniel that his filings with federal authorities could cost him
his job, the lawsuit claimed.
For more, GO TO > > > Behind the Blinds at American Savings
June 26, 2006
Just say 'no' to HECO's addiction to oil
Commentary by Cynthia Thielen, The Honolulu Advertiser
Hawaiian Electric Co. is asking the Public Utilities Commission for authority to build
another fossil fuel-fired plant (Honolulu Advertiser, June 19). And a June 21 editorial
says this should be the last one.
Hawai'i's consumers lose if HECO is allowed to build this oil-driven power station.
Because HECO has dragged its heels on moving to renewable sources of energy, it
now cries "wolf" and claims it needs this new fossil fuel plant to provide power to O'ahu
residents and businesses.
Wait a minute! What about the vast amount of renewable energy we have in Hawai'i?
Wave, wind, solar, and the list goes on.
Do we "reward" HECO for not aggressively pursuing those non-polluting energy
technologies by allowing it to stay mired in fossil fuel? Or do we say it is past time for it
to stop its oil addiction?
We know the stakes are high. Time magazine's April 3 cover on global warming
headlined to readers: "Be Worried. Be Very Worried." Fossil fuel power stations burning
oil emit large quantities of greenhouse gases that contribute greatly to global warming.
It is irresponsible and, yes, even criminal to let HECO continue to add to this world
Let's talk about renewable options: The most powerful and commercially available
systems use the movements of the ocean to generate power. Called wave energy, this
technology is vastly more powerful than wind and solar (but both of the latter still
must belong in HECO's renewable portfolio).
Companies from all over the world are looking into this technology and have found that
wave energy is the future.
A Portuguese consortium (including a utility company), led by the renewable-energy
company Enersis, has contracted with the Scotland-based Ocean Power Delivery for
its "Pelamis" wave-energy converters to build the initial phase of the world's first
commercial wave farm to generate renewable electricity from ocean forces. Once
completed, these wave-energy converters are expected to meet the demands of more
than 15,000 Portuguese households, which will lead to the displacing of more than
60,000 tons per year of global warming-producing carbon dioxide emissions from
conventional generating plants.
In Denmark, they are working on the Wave Dragon, a slack-moored wave-energy
converter that can be deployed in 25-yard water depth. With 15,600 hours of
experience, it soon will provide electricity for 40,000 to 60,000 homes, using only seven
HECO should now partner with these companies to bring this technology to Hawaiian
waters. The economics could work for the companies, as state tax credits exist for
investment in non-fossil fuel energy, which is a qualified high-tech business.
The potential for this technology in Hawai'i is enormous. The Electric Power Research
Institute in Palo Alto, Calif., has identified Hawai'i as a leading site for wave-energy
development and says that coastal wave energy has nine to 10 times the energy
provided by U.S. hydroelectric dams. Furthermore, studies have found that wave
energy could provide 80 percent of the power on O'ahu and all the needed power
on the Neighbor Islands at a cheaper price.
Wave energy can help solve the problem of high energy costs. Once a wave project is
developed and in place, it can provide power at under 10 cents per kw hour. HECO's
cost to consumers on O'ahu is 20.5 cents per kw hour, and on Moloka'i, the cost is 28.8
cents. The low costs associated with the price of wave energy would be a welcome
relief to consumers struggling to pay their bills.
Unfortunately, HECO refuses to move forward in developing wave technology because
using oil is easier.
We have already seen some success in developing this technology in Hawai'i. A power-generating buoy anchored near Kane'ohe was able to produce electricity despite
relatively calm waters during testing in September 2005 before it was brought ashore
Now is not the time to invest in another costly oil-driven power plant that will only make
us even more dependent on fossil fuels. As each day goes by, our further dependence
on fossil fuels places our livelihood, our economy and our environment in further
The PUC should say "no" to HECO's request to build yet another fossil fuel-fired plant.
There are better ways to solve this problem. The seas that surround us can provide a
clean, plentiful, reliable and cheap source of energy that can serve as a solution to our
energy problem without adding to the global warming crisis.
Let's ride the tide of ocean energy.
Rep. Cynthia Thielen, R-50th, represents Kailua and Mokapu in the state Legislature.
She wrote this commentary for The Advertiser.
February 10, 2006
Clarke stepping down at HEI;
Constance Lau gets 2 top jobs
David Segal, Honolulu Star-Bulletin
Hawaiian Electric Industries Inc. announced today that Robert Clarke, its longtime
chairman, president and chief executive, will retire at the company’s annual
shareholders meeting on May 2.
He will be replaced as president and CEO by Constance Lau, 53, who will retain her
position as president and CEO of HEI subsidiary American Savings Bank. Lau also
will become chairman of subsidiary Hawaiian Electric Co. and will add the title of
chairman of the bank’s board. She also will be nominated to be elected a director of
Jeffrey Watanabe, 63, a senior partner of his law firm, Watanabe Ing & Komeiji, was
named nonexecutive chairman of HEI. Watanabe has been a director with the holding
company since 1987. Watanabe also is a director of Oahu Publications Inc., publisher
of the Honolulu Star-Bulletin and MidWeek.
Clarke, 63, joined HEI in 1987 as vice president-strategic planning and was promoted to
group vice president-diversified companies in 1988. He was elevated to president and
CEO in 1991, and became chairman in 1998.
For more, GO TO > > > Office of the United States Trustee vs. Harmon: Witness
January 13, 2005
HECO under fire at hearing
By Deborah Adamson, Honolulu Advertiser
Residents voiced their concerns to state officials last night about Hawaiian Electric Co.'s
proposed 7.3 percent rate increase, bringing up issues ranging from its effect on the
elderly and the poor to better scrutiny of how the utility would spend the money.
"Where will the elderly and the poor be able to get the extra 7.3 percent?" said Caron
Wilberts of Kaimuki. "It really would hurt the people of Hawai'i — 7.3 percent out of the
elderly's Social Security is a great increase."
About 65 people attended the public hearing before the state Public Utilities
Commission at the auditorium of Kaimuki High School. The commission is considering
HECO's proposal to increase rates and will render a final decision within 10 months....
Honolulu users already pay one of the highest electric rates in the country, about
14.4 cents per kilowatt hour. The average rate nationwide is about 8 cents per kilowatt
hour, according to the U.S. Department of Energy.
HECO filed for a rate increase in November, the first such request by the company
since 1995. The utility said the higher rate, which is expected to bring in $74.2 million
in additional revenue, is necessary to meet growing electricity demands across O'ahu
as the economy improves....
HECO would formally request a 9.9 percent base rate increase, but that amount
includes the transfer of an existing surcharge for conservation programs to the base
rate. So the net increase on electric bills would be 7.3 percent.
Kenwynn Goo, a Kailua resident, bristled at the request for the rate increase.
"Why should HECO actually implement a rate increase?" he said at the hearing. "HECO
had revenues of $410 million in the third quarter of 2004 and net income was also up by
28 percent to $26.2 million."
To support his assertion that HECO doesn't need to raise rates, Goo cited public
comments made by Robert Clarke, chief executive of HECO parent Hawaiian Electric
Industries, that a robust economy in Hawai'i should increase the utility's revenues.
"If Hawaiian Electric's own chief executive is making a statement that he foresees
increased revenues collected due to a robust economy ... then HECO doesn't need a
rate increase," Goo said.
"HECO's absolute power is corrupting absolutely."...
For more, GO TO > > > The Power Vampires & The Ghost of Ken Lay
March 11, 2004
Trust Plans $9M in HECO Office Repairs
The utility leases the downtown
space from Kamehameha Schools
By Rick Daysog, Honolulu Star-Bulletin
Kamehameha Schools plans to spend $9 million to renovate Hawaiian Electric
Co.’s downtown headquarters.
Under the terms of a proposed 20-year lease, Kamehameha Schools will spend $5
million over the next year to upgrade the historic Richards Street building, people
familiar with the negotiations said.
The $6 billion charitable trust - which owns the 40,000-square-foot structure and the
land beneath it - will add $2 million in tenant improvements in the next several years
and another $2 million in the 11th year of the lease.
The deal underscores the interlocking relationships between the two organizations, but
Kamehameha Schools officials said that trustees who also hold positions at HECO and
its affiliated companies are playing no role in the lease negotiations.
Kamehameha Schools trustee Constance Lau heads HECO’s sister company
American Savings Bank, and trustee Diane Plotts is a director of HECO’s parent
Hawaiian Electric Industries Inc.
A third Kamehameha Schools trustee, attorney Douglas Ing, is a partner in the
Watanabe Ing Kawashima & Komeiji law firm, which represents HECO on regulatory
Kamehameha Schools’ internal policies require board approval on all construction
projects valued at $1 million or more. But people familiar with the deal said the HECO
lease has not yet gone to Kamehameha Schools’ board for review.
Under the Probate Court-mandated conflict-of-interest policy for the estate, trustees
Ing, Lau and Plotts may have to recluse themselves if the lease goes to the board,
leaving the five-member board without a quorum, people familiar with the trust said.
The estate’s board will then have to petition the Probate Court for instructions on
handling the matter.
HECO, which has occupied the Richards Street offices since 1927, said its current
lease will expire in November.
Lynne Unemori, HECO’s director of corporate communications, said HEI’s board
played no role in the negotiations. One person familiar with the talks said Lau, Ing and
Plotts were not involved in any of HEI’s discussions on the matter....
People familiar with the negotiations said HECO’s rent payments, currently set at
$650,000 a year, will increase to $775,000 a year during the first five years of the lease.
That annual rent will increase every five years to about $1.3 million during the final five-year period covered by the lease.
During the next 20 years, Kamehameha Schools stands to receive about $18 million in
rent payments, or double the amount in planned tenant improvements.
HECO said its building requires significant repairs to its ventilation system and
elevators. The building also requires major construction to comply with federal
guidelines of the Americans with Disabilities Act, according to one person familiar with
Kamehameha Schools’ links to HEI are not limited to the boardroom.
HEI Chief Executive Robert Clarke’s wife, Edwina, is Kamehameha Schools’ treasurer,
and HEI Chief Financial Officer Eric Yeaman previously served as Kamehameha
Schools’ chief financial officer.
HEI board member Oswald Stender is a former Kamehameha Schools trustee, while
Ing’s law partner Jeffrey Watanabe is an HEI director.
Watanabe also is a board member of Oahu Publications Inc., the parent company of
the Honolulu Star-Bulletin.
March 19, 2003
Advertiser Staff and News Services
as PUC chairman
Gov. Linda Lingle has appointed Honolulu attorney Carlito Caliboso to serve as
chairman of the Public Utilities Commission.
Caliboso, whose appointment is subject to confirmation by the state Senate, is a
partner with the Honolulu law firm of Catalani Nakanishi & Caliboso, and has focused
his law practice in business and transactional matters, including real estate
transactions, land use and commercial finance and leasing.
He is a graduate of Mililani High School, the University of Hawai'i College of Business
Administration and William S. Richardson School of Law.
"Carl's experience in the business, legal and government arenas gives him a broad
perspective and good foundation for serving on the PUC," said Lingle. "He will make
an outstanding chairman who will serve the public with integrity, fairness and
February 25, 2000 < < < (Note the Date!)
HEI Power makes Philippine deal
By Frank Cho, Honolulu Advertiser
HEI Power Group, a subsidiary of Hawaiian Electric Industries Inc., yesterday agreed
to pay $87 million for a 46 percent stake in a Philippine power company, significantly
expanding its international holdings.
East Asia Power Resources Corp., a publicly traded company with five power-generating facilities in Manila and Cebu, produces about 390 megawatts of electricity
for the national power company of the Philippines.
The deal was part of a joint venture between HEI and El Paso Energy International to
acquire a controlling interest in the Philippine power company.
Our partnership with El Paso Energy International strengthens our position to
participate in the anticipated privatization of the National Power Corp.,” said Robert
Clarke, Hawaiian Electric Industries chairman, president and chief executive officer.
The deal is expected to provide HEI Power Group, which already owns minority stakes
in Philippine-based Cagayan Electric Power & Light Co. Inc., immediate revenues as
the plants are already operating. It also calls for up to $6 million in contingent
This is a significant investment for us,” said Edwina Kawamoto, Hawaiian Electric
HEI Power Group has made investments in China and Guam. The company has a 75
percent interest in a joint venture to construct and operate a 200-megawatt coal-fired
power plant in Mongolia for $110 million. In Guam, the company is operating a 50-megawatt plant for the Guam Power Authority.
HEI Power Group has invested $49 million and committed another $179 million to
power projects in Asia, the company said. None of the funds will come from Hawaiian
Electric Industries’ other utilities or its American Savings Bank subsidiary.
Kawamoto said the company will finance the investment with short-term debt. Last year,
HEI Power Group reported a loss from continuing operations of $5.1 million.
“We have been focusing on Asia, particularly China and the Philippines for a long
time. This will position us for the anticipated privatization of the National Power
Corp. in the Philippines,” Kawamoto said.
Gov. Ben Cayetano led a delegation of Hawaii business leaders, including HEI Power
Group, to the Philippines several years ago to explore business opportunities.
“I believe there are many opportunities for Hawaii firms to export their services and
expertise to Asia and Pacific Rim countries,” Cayetano said.
$ $ $
March 14, 2003 < < < (Note the Date!)
EX-NEA CHIEF SAYS GMA ORDERED
P470M BRIBES TO CONGRESSMEN
Manila - The former chief of the National Electrification Administration on Thursday
alleged that President Macapagal-Arroyo telephoned him twice two years ago, to
order him to personally distribute 470 million pesos to at least a hundred congressmen.
Former NEA Administrator Manuel Luis Sanchez said the money, which came from
the National Power Corp., constituted a payola to ensure passage of the controversial
Electric Power Industry Reform Bill.
Sanchez told the Inquirer Thursday that the first call came at around 11 a.m. during the
opening of the special congressional session called in May 2001.
"She asked me if I already (had) the check from Napocor," he recalled. "I said, 'Ma'am, I
don't have it yet but I'm checking it now.'"
He said many members of the House were to receive 2.5 million pesos each.
The following day, Sanchez said he received another call from the President. He
informed her that the checks were ready. "Her specific instruction was for me to deliver
them to Congress."
He said he subsequently received a list of congressmen who stood to receive the
money. The list included check numbers and the officials' respective districts, he
Among those who personally received their share, Sanchez alleged, was former
Baguio Rep. Bernardo Vergara, now the city's mayor.
Sanchez said he would reveal the alleged payola list in a Senate or congressional
Asked whether he was ready to tell everything, Sanchez said: "I am prepared for that. I
have all the names in a list, everything is documented."...
November 22, 1999
Suit Filed Over HEI China Plant
By Jacob Kamhis, Pacific Business News
Hawaiian Electric Industries Inc. is mired in a lawsuit over a $100 million power plant in
Inner Mongolia, China.
United Power Pacific Co. Ltc., Finrich Ltd. and Brightwise Ltd. have sued HEI and
its subsidiary, HEI Power Corp., according to a 1st Circuit Court complaint.
Allegations include HEI’s unauthorized change in contractor and its breaches of a
shareholders’ agreement that render plaintiffs’ investments worthless.
Hong Kong-based United Power Pacific and Virgin Islands-based affiliates Finrich and
Brightwise seek general, special and punitive damages.
HEI is a Hawaii-based publicly held company in energy and banking. In the last few
years, it has seen little growth in Hawaii’s sluggish business climate and has invested in
the Philippines, Guam and China.
The gas-and-coal-fired electrical power plant in China was to be completed in 2000.
But now it’s less clear when the lights will be switched on.
Prior to 1994, United Power Pacific and state-owned Baotou Iron and Steel Co. Ltd
formed the Baotou Tianjiao Power Co. Ltd, a joint venture 75 percent owned by
United Power Pacific and 25 percent by the steel company.
The venture obtained government permits and negotiated contracts for design,
construction and sale of electrical output.
In April 1998, United Power Pacific contacted HEI about participating. The condition,
however, was for United Power Pacific to manage and control “the delicate, and at
times political, relationships” with contractors, the steel company and the Chinese
A shareholders’ agreement was signed with HEI China a “special purpose” company
HEI set up. The partners formed a venture and based it in Mauritius, an Indian Ocean
island nation east of Madagascar.
By July 1998, Brightwise became construction manager. It was to appoint contractors,
advisers and expedite development. But delays in the project required an extension of
development and HEI and HEI Power began violating the shareholders’ agreement,
according to the suit.
Around late March, HEI China and United Power Pacific began negotiating a buyout
of United Power Pacific’s interest in the venture. But HEI Power and HEI China
eventually informed United Power Pacific it could not close the deal due to “legal
Brightwise alleges it is owed $490,438. The construction management contract was
suspended in June and plaintiffs have received nothing in return, according to the suit.
Meanwhile, HEI China has hired another contractor to furnish certain services and
labor for the venture.
Richard McQuain, president and chief executive officer of HEI Power, says the
company does not believe the suit has any merit and it will vigorously counter the
John Y. Yamano, plaintiff’s attorney with McCorriston Miho Miller Mukai, declined
For more, GO TO > > > Buzzards of Paradise; Predators in Paradise
IN THE SUPREME COURT OF THE STATE OF HAWAI`I
FOUR STAR INSURANCE AGENCY, INC.; J.D. JENKINS & CO., INC.; INSURANCE
HAWAII, INC.; BIG ISLAND INSURANCE AGENCY, INC.; and PYRAMID
INSURANCE, Plaintiffs-Appellants, v. HAWAIIAN ELECTRIC INDUSTRIES, INC.; HEI
DIVERSIFIED, INC.; THE HAWAIIAN INSURANCE & GUARANTY COMPANY,
LIMITED; UNITED NATIONAL INSURANCE COMPANY, LIMITED; HAWAIIAN
UNDERWRITERS INSURANCE CO., LTD.; ROBERT F. CLARKE; EDWARD J.
BLACKBURN; THOMAS S. ADAMS; GARY L. KIRBY; DAVID L. WARD; NEAL H.
KUNDE; ROBERT F. MOUGEOT; REYNALDO D. GRAULTY, only in his capacity as
Insurance Commissioner of the State of Hawai`i and Rehabilitator and/or Liquidator of
Hawaiian Insurance & Guaranty Company, Limited, United National Insurance
Company, Ltd. and Hawaiian Underwriters Insurance Co., Ltd., Defendants-Appellees,
and DOES 1 through 100, Defendants
APPEAL FROM THE FIRST CIRCUIT COURT
(CIV. NO. 94-4555-12)
FEBRUARY 26, 1999
MOON, CJ, KLEIN, LEVINSON, NAKAYAMA, AND RAMIL, JJ.
OPINION OF THE COURT BY RAMIL, J.
This appeal arises from the rehabilitation of defendant-appellee The Hawaiian
Insurance & Guaranty Company, Ltd. (HIGC), and the liquidation of defendants-appellees Hawaiian Underwriters Insurance Co., Ltd. (HUI) and United National
Insurance Company, Limited (UNICO). Shortly after the insolvency of HIGC, HUI, and
UNICO, the Insurance Commissioner (the Commissioner) seized the assets of HIGC,
HUI, and UNICO, and eventually settled all claims against HIGC, HUI, UNICO. The
Commissioner also obtained a thirty-two million dollar cash settlement against
defendant-appellee Hawaiian Electric Industries, Inc. (HEI), the parent company of
HIGC, HUI, and UNICO. Thereafter, plaintiffs-appellants Four Star Insurance Agency,
Inc., et al. (collectively, Plaintiffs) brought their own action against HIGC, HUI, UNICO,
HEI, and various directors and officers (collectively, Defendants) for alleged unpaid
commissions. The circuit court granted Defendants' motions for summary judgment and
entered judgment in favor of Defendants.
From this judgment, Plaintiffs appealed.
On appeal, Plaintiffs contend, inter alia, that the Commissioner did not have authority to
settle their claims because: (1) the claims were "unique and personal" to Plaintiffs; and
(2) the unpaid commissions were held "in trust" for Plaintiffs. Because we hold that the
Commissioner had exclusive standing to assert Plaintiffs' claims arising out of the
insolvency of HIGC, HUI, and UNICO, we affirm the circuit court's judgment filed April
A. The Parties
Defendants HIG, HUI, and UNICO were insurance companies in Hawai`i that sold
property insurance, vehicle insurance, general casualty insurance, and other types of
insurance policies. Defendants HIGC, HUI, and UNICO operated collectively as The
Hawaiian Insurance Group (HIG). HIGC, HUI, and UNICO were wholly owned
subsidiaries of defendant-appellee HEI Diversified, Inc. (HEIDI). In turn, HEIDI was a
wholly owned subsidiary of HEI.(2)
Plaintiffs are independent insurance agents that serviced HIG's customers.(3) Plaintiffs
had a "direct billing" arrangement with HIG. Under this arrangement, Plaintiffs would
sell HIG's policies. HIG would then bill its customers directly and collect premiums
accordingly. In turn, HIG would then pay Plaintiffs a specified percentage of the
collected premiums as Plaintiffs' earned commissions.
B. Hurricane Iniki
On September 11, 1992, Hurricane Iniki caused major property damage to the Island of
Kaua`i and parts of O`ahu. As a result of the hurricane, homeowners and property
owners flooded HIG and other insurance companies with hurricane-related damage
claims. Eventually, the claims overwhelmed HIG's financial resources. In response to
these damage claims, on December 3, 1992, HEI announced that it would not
contribute additional capital to HIG.
C. The HIG Lawsuit & the Reorganization/Liquidation Plan
On December 18, 1992, the circuit court granted then-Insurance Commissioner Linda
Chu Takayama's (the Commissioner) motion to take possession and control of all of
HIG's assets. On December 24, 1992, the circuit court placed HIG in rehabilitation and
appointed the Commissioner as rehabilitator. As rehabilitator, the Commissioner was
directed to take possession of and administer HIG's assets under the court's
On April 12, 1993, the Commissioner, in her capacity as rehabilitator, filed a motion for
approval of a plan for reorganization of HIGC and for liquidation of UNICO and HUI (the
plan) in a special proceeding entitled Takayama v. The Hawaiian Insurance & Guaranty
Company, Ltd., et al. (the HIG lawsuit). The circuit court approved the plan, which set
forth an exclusive procedure whereby policyholders, claimants and creditors of HIG
could file proofs of claim for resolution and payment of any monies allegedly due.
The plan gave creditors three options. Under the first option, the creditor would
participate in the plan and be entitled to receive twenty-five percent of its claim within
ninety days after filing a claim form. The balance of the claim would be paid if and when
such sums became available. Under the second option, the creditor would participate in
the plan and be entitled to receive fifty percent of its claim within 90 days after filing a
claim form. This payment would be paid "in full satisfaction of all sums due such
creditor." Under the third option, the creditor would not participate in the plan and be
entitled to receive a pro-rata payment only from such sums as may become available in
All of the Plaintiffs elected to participate in the plan by selecting either the first or
second option. None of the Plaintiffs selected the third option. Accordingly, each
Plaintiff was paid at least fifty percent of the amount claimed.
In addition to the three creditor payment options, the plan stated that the Commissioner
would commence and pursue a lawsuit against HEI, HEIDI, and some or all of the
officers and directors of HIGC. The plan also stated that the Commissioner could settle
such a lawsuit upon terms the Commissioner deemed appropriate, subject to court
D. The HEI Lawsuit
On April 12, 1993, the Commissioner, in her capacity as rehabilitator/liquidator, filed a
complaint entitled Takayama v. Hawaiian Electric Industries, Inc., et al. (the HEI
lawsuit). The Commissioner subsequently amended the HEI lawsuit to reflect that the
action was brought on behalf of all creditors, potential creditors, policyholders, and
claimants of HIG.
The HEI lawsuit consisted of thirteen causes of action and alleged, in relevant part, that
HEI, HEIDI, and a number of their corporate officers (the HEI defendants) had: (1)
misled HIG's creditors, policyholders and the public regarding HEI's and HEIDI's
financial support of HIG; and (2) mismanaged and drained financial assets from HIG.
On February 10, 1994, the Commissioner and the HEI defendants signed a global
settlement agreement and general release. Under this settlement, HEI agreed to
immediately pay thirty-two million dollars in cash to the Commissioner. The payment
was intended to help reduce an anticipated seventy million dollar deficit facing HIG. In
effect, the payment would be available for distribution to HIG's policyholders, creditors,
and claimants in accordance with the plan's claims settlement procedure. In exchange
for the immediate cash payment, the Commissioner, in her capacity as
rehabilitator/liquidator and on behalf of all the policyholders, claimants and creditors of
the HIG Group, agreed to release and discharge each of the HEI defendants.
On March 3, 1994, Insurance Commissioner Lawrence M. Reifurth, who succeeded
Commissioner Takayama, filed a motion for approval of the settlement agreement. Prior
to the hearing on the motion, notice of the court hearing on the settlement agreement
was addressed and sent to all known policyholders, claimants and creditors of HIG,
including Plaintiffs.(4) The notice stated that approval of the settlement agreement would
result in a release "of any and all claims held by the
Commissioner/Rehabilitator/Liquidator and by HIG in their representative capacities" on
behalf of the policyholders, claimants and creditors of HIG. On April 6, 1994, having
received no objections from Plaintiffs and there being no appearance by Plaintiffs at the
hearing, the circuit court granted Reifurth's motion for approval of the settlement
agreement finding that it was fair and reasonable. The court also found that [t]he
Settlement Agreement has been entered into in good faith, represents the compromise
of disputed claims, and the terms thereof are fair, reasonable and in the respective best
interests of the public, the past, present and future policyholders, claimants and
creditors . . . .
Consequently, the HEI lawsuit was later dismissed with prejudice.
E. Plaintiffs' Lawsuit Against The HEI Defendants
On December 2, 1994, after the HEI lawsuit had been settled and dismissed, Plaintiffs
filed a complaint against HEI, HEIDI, HIGC, UNICO, HUI, various officers and directors
of HIGC and HEI, and Insurance Commissioners Takayama and Reifurth (Plaintiffs'
lawsuit). Like the HEI lawsuit, Plaintiffs' lawsuit alleged, inter alia, that the HEI
Defendants had: (1) misled Plaintiffs regarding HEI's and HEIDI's financial support
of HIG; and (2) mismanaged and drained financial assets from HIG.
Defendants brought various motions for summary judgment. The circuit court granted
summary judgment in favor of all defendants named in Plaintiffs' suit and entered
judgment in favor of all defendants. From this judgment, Plaintiffs filed a timely appeal.
II. STANDARDS OF REVIEW
A. Summary Judgment
We review [a] circuit court's award of summary judgment de novo under the same
standard applied by the circuit court. Amfac, Inc. v. Waikiki Beachcomber Inv. Co., 74
Haw. 85, 104, 839 P.2d 10, 22, reconsideration denied, 74 Haw. 650, 843 P.2d 144
(1992) (citation omitted). As we have often articulated:
[s]ummary judgment is appropriate if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the moving party is entitled to
a judgment as a matter of law....
Defendants contend that the Commissioner, as liquidator under HRS § 431:15-310, had
exclusive standing to assert common claims on behalf of HIG, its policyholders and
creditors against third parties. We agree.
A. Applicable Rules of Statutory Construction
Although we obtain the intention of the legislature primarily from the language of the
statute itself, we have rejected an approach to statutory construction which limits us to
the words of a statute, for when aid to construction of the meaning of words, as used in
the statute, is available, there certainly can be no rule of law which forbids its use,
however clear the words may appear on superficial examination. Thus, the plain
language rule of statutory construction, does not preclude an examination of sources
other than the language of the statute itself even when the language appears clear
upon perfunctory review. Were this not the case, a court may be unable to adequately
discern the underlying policy which the legislature seeks to promulgate and, thus, would
be unable to determine if a literal construction would produce an absurd or unjust result,
inconsistent with the policies of the statute....
B. Scope of Insurance Commissioner's Authority
HRS § 431:15-310 is part of the Insurers Supervision, Rehabilitation and Liquidation
Act (ISRLA). See HRS ch. 431:15 (1993). HRS § 431:15-310(a) provides in relevant
The liquidator shall have the power to:
. . . .
(13) Prosecute any action which may exist on behalf of the creditors, members,
policyholders or shareholders of the insurer against any officer of the insurer, or any
. . . .
(19) Exercise and enforce all the rights, remedies, and powers of any creditor,
shareholder, policyholder, or member, including any power to avoid any transfer or lien
that may be given by the general law and that is not included with section 431:15-315
through section 431:15-317; [and]
. . . .
(22) Exercise all powers now held or hereafter conferred upon receivers by the laws of
this State not inconsistent with the provisions of this article.
(Emphases added.) Likewise, HRS § 431:15-313(b) (1993) provides in relevant part:
The liquidator may, upon or after an order for liquidation, within two years or such time
in addition to two years as applicable law may permit, institute an action or proceeding
on behalf of the estate of the insurer upon any cause of action against which the period
of limitation fixed by applicable law has not expired at the time of the filing of the petition
upon which such order is entered.
(Emphases added.) Based upon the plain language of HRS §§ 431:15-310 and 431:15-313, the Commissioner, as liquidator of an insurer undergoing liquidation, has the
power to prosecute any and all lawsuits on behalf of the insurer and all creditors,
shareholders, policyholders, or members of the insurer....
Given the factual similarity between this case and Corcoran, we hold as a matter of law
that the Commissioner in this case had exclusive standing to assert all claims arising
out of HIG's liquidation and rehabilitation on behalf of not only HIG, but also its
creditors, including Plaintiffs.(9) Because Defendants were entitled to judgment as a
matter of law and there being no genuine issues of material fact, the circuit court
properly granted summary judgment in favor of Defendants.
For the reasons discussed above, we affirm the circuit court's judgment filed April 25,
On the briefs:
David K. Lum and Keith S.
Agena, of Char, Sakamoto,
Ishii, Lum & Ching; Philip
Borowsky, pro hac vice, of
San Francisco; Jani Iwamoto,
pro hac vice, of San Francisco
Four Star Insurance Agency,
Inc.; J.D. Jenkins & Co., Inc.;
Insurance Hawaii, Inc.; Big
Island Insurance Agency, Inc.;
and Pyramid Insurance Agency
Jeffrey S. Portnoy and
Mitchell C. Sockett, of Cades
Schutte Fleming & Wright, for
Electric Industries, Inc; HEI
Diversified, Inc.; Robert F.
Clarke and Robert F. Mougeot
Clifford K. Higa, Joseph N.
Kiyose, Rod S. Aoki, John A.
Kodachi, of Kobayashi, Sugita
& Goda, for Defendants-
Appellees United National
Insurance Company, Limited,
and Hawaiian Underwriters
Insurance Co., Ltd.
George W. Playdon, Jr. and
Kelvin H. Kaneshiro, of
Reinwald, O'Connor & Playdon,
Thomas S. Adams, Gary L. Kirby,
David L. Ward, and Neal H. Kunde
Deborah Day Emerson and
David A. Webber, Deputy
Attorneys General, for
Defendant-Appellee Reynaldo D.
Graulty, only in his capacity
as Insurance Commission of
the State of Hawai`i
Jerrold Y. Chun, of Chun
Chipchase Takayama Nagatani,
Linda Chu Takayama and
Lawrence M. Reifurth, in their
respective capacities as
Liquidators of the Hawaiian
Insurance & Guaranty Company,
Limited, United National
Insurance Company, Ltd., and
Hawaiian Underwriters Insurance
Co., Ltd, join answering brief
of Defendants-Appellees United
National Insurance Company,
Limited and Hawaiian Underwriters
Insurance Co., Ltd.
1. Linda Chu Takayama and Lawrence M. Reifurth are no longer in the position of
Insurance Commisioner, Department of Commerce and Consumer Affairs of the State
of Hawai`i. Pursuant to Hawai`i Rules of Appellate Procedure (HRAP) Rule 43(c)(1),
Reynaldo D. Graulty has been substituted automatically in this case.
2. In addition to HIGC, HUI, UNICO, HEIDI, and HEI, the other defendants in this case
are Robert Clarke, Robert Mougeot, Thomas Adams, Gary Kirby, David Ward, and Neal
Kunde. Robert Clarke is the president and CEO of HEI and was HIGC's former
chairman and director. Robert Mougeot is HEI's Financial Vice-President and was a
former HIGC director. Thomas Adams, Gary Kirby, David Ward, and Neal Kunde were
former HIGC officers.
3. The Plaintiffs in this appeal are: (1) Four Star Insurance Agency, (2) J.D. Jenkins &
Company, Insurance Hawaii, (3) Big Island Insurance Agency, and (4) Pyramid
4. Although Plaintiffs contend that they never received notice of the hearing on the
Commissioner's motion for approval of the settlement agreement, the circuit court
specifically found that appropriate notices were mailed to all policyholders, claimants,
and creditors of HIG. In addition, notice of the hearing was published in a newspaper of
8. Plaintiffs assert that the Commissioner had no authority to retain the "earned"
commissions that were "vested" in Plaintiffs and held in "trust" by the Commissioner.
Plaintiffs assertion is without merit and is not relevant to the issue of whether Plaintiffs
had standing to bring an action against the parent company of HIG.
HRS § 431:15-103(a)(8) defines "general assets" as "all property, real, personal, or
otherwise, not specifically mortgaged, pledged, deposited, or otherwise encumbered for
the security or benefit of specified persons or classes of persons." (Emphasis added.)
In this case, the record indicates that the premiums paid by the insureds were paid
directly to HIG and were the property of HIG. In turn, HIG would pay Plaintiffs a
commission based on a percentage of the amount of premiums collected. Because the
premiums collected by HIG were not specifically set aside (i.e., encumbered) for the
benefit of the Plaintiffs, the commissions collected were part of HIG's general assets. In
addition, Plaintiffs have not cited to any section of HRS ch. 431:15 that would support
their contention that earned commissions of agents are to be treated differently from
general assets. Therefore, inasmuch as the Commissioner takes possession of the
assets of the insurer and administers them under the general supervision of the court
once the liquidation order is filed, we reject Plaintiffs' contention that part of the
premiums collected by HIG were earned commissions held in trust for the benefit of
9. In addition, Plaintiffs argue that the Commissioner did not have authority to settle
their claims against HEI because: (1) the Commissioner lacked authority to file
Plaintiffs' alter ego claims against the HEI defendants; and (2) the Commissioner had
authority to prosecute and settle only "common" claims, as opposed to "unique and
personal" claims. However, inasmuch as the plain language of HRS §§ 431:15-310(a)(13) and (19) expressly state that the liquidator has the power to "[p]rosecute any
action which may exist on behalf of the creditors" and "exercise and enforce all the
rights, remedies, and powers of any creditor," we reject Plaintiffs' argument that the
Commissioner did not have authority to file alter ego claims against the HEI. HRS §§
431:15-310(a)(13) and (19) (emphases added). In addition, because all of Plaintiffs'
claims against HEI stem from the insolvency of HIG, we reject Plaintiffs' contention that
their claims against HEI were "unique and personal" as compared to the claims of other
# # #
MORE TO COME
This is only a small branch from...
BIRDS ON THE POWER LINES
~ ~ ~
FOR MORE HAWAIIAN POWER CONNECTIONS
Aloha, Harken Energy!
American Savings: Behind the Blinds
The Blackstone Group
British Petroleum: Buzzards in the Pipelines
Buzzards in the Bank of Hawaii
The Carlyle Group: Birds that Drink from Cesspools
Claims By Harmon
Confessions of a Whistleblower
DIRTY MONEY, DIRTY POLITICS & BISHOP ESTATE
Part I - Part II - Part III - Part IV - Part V - Part VI - Part VII
The Hawaiian Insurance Companies
Investors Equity: Vultures in The Meadows
The Kissinger of Death
Marsh & McLennan: The Marsh Birds
The Myth & The Methane
Of Vampires and Daisies
The Power Vampires & The Ghost of Ken Lay
The Secret Lives of Duke and Dusty
The Silence of the Whistleblowers
Sukamto Sia: The Indonesian Connection
Vultures of the Sandwich Isles
The Rise & Fall of Summit Communications
Vultures up to their beaks in Tesoro Petroleum
William Simon Says
~ ~ ~
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