Friday, February 19, 1999

Kailua business
with grand plans
faces creditors

But most are skeptical
Capital Resources can
pay off its debts

By Peter Wagner


It's a business with global aspirations involving $150 million in foreign capital and a plan to recover oil spilled in the former Soviet republic of Azerbaijan.

But first Capital Resources International Ltd., a company with little income and no employees operating out of a distressed shopping complex in Kailua since last year, must find the money to pay its rent.

Marjorie Bush, secretary and treasurer at Capital Resources, yesterday said the company hopes to repay the $239,729 it owes in rent and other delinquencies at Kailua Town Center with a loan from affiliated company Trans-Oceanic International next month.

"It is anticipated that $1 million will be transferred from Trans-Oceanic to Capital Resources," said Bush, appearing before creditors at a meeting in U.S. Bankruptcy Court. Meanwhile, she said, Capital Resources is expecting a $50,000 "Band-Aid" to arrive by March.

Capital Resources, one of several related companies headed by Kailua businessman Norman Frank, filed for Chapter 11 bankruptcy on Jan. 11 -- the day $180,000 in back rent was due to the Pacific Association of the Seventh-Day Adventist Church. The church, which holds the master lease from land owner Kaneohe Ranch Co., last March sub-leased the property to Capital Resources.

Few creditors, including Kaneohe Ranch, were satisfied yesterday with another promise of future payment from a company living rent-free since last March.

"We don't have any choice but to try and get them evicted from the property," said Randolf Moore, president of Kaneohe Ranch, after yesterday's meeting. The 100,475-square-foot property, on Hekili Street, lost its last major tenant last year when Foodland Super Market moved out, citing poor maintenance of the property.

The church, which filed suit against Capital Resources last September after the company missed its first semi-annual rent payment of $90,000, is now trying to regain the property in U.S. Bankruptcy Court. Under federal bankruptcy law, the filing of a bankruptcy petition automatically protects a debtor from creditors pending outcome of the case.

According to Bush, neither Capital Resources nor Trans-Oceanic have a source of revenue beyond "various and sundry" loans from undisclosed parties.

The church says Capital Resources filed for bankruptcy in bad faith because it hasn't paid rent or made repairs agreed to under its lease. The repairs, estimated at $600,000, include roof, building and parking lot work to have been done in the first six months of tenancy, the church said.

Bush, who appeared at yesterday's meeting in lieu of Frank, said Capital Resources was set up to administer 56 oil clean-up contracts in Azerbaijan negotiated by Trans-Oceanic with Socar, a "quasi-governmental" company there. The first of the contracts, she said, would gross $275 million from the sale of huge volumes of oil recovered from spills in the the far eastern country.

"There is extensive oil contamination," she said of the former republic, north of Iran and bordered by the Caspian Sea. "They were left with lakes and rivers of surface pollution."

Bush said the deal is a joint venture with Bogart Environmental Services, an oil clean-up company in Tennessee, in a limited liability company called Trans Pacific Enterprises, set up in Delaware.

She said Trans-Oceanic is close to obtaining $112 million in private financing from a consortium of lenders in New Zealand and $40 million from another lending group in London. And Bush said a buyer has been found for the as-yet unreclaimed petroleum.

But some of the company's creditors yesterday were incredulous.

"It's a fantastic scenario," said attorney Cuyler Shaw, representing the Pacific Union Association of Seventh-Day Adventist Church. "I think it's just a delay tactic."

In response to Shaw's questions, Bush said Capital Resources has made four or five loan applications for the deal in the past five years, none of which have yielded a written commitment. Bush also was asked about a financial statement submitted by Capital Resources to Kaneohe Ranch last year showing the company had more than $3 million in assets, including a $1.5 million bank account. She said the money was obtained in a Punaluu land deal in which Frank agreed to buy property at an inflated price in the future in return for an $1.8 million loan.

"It just doesn't make any sense to me," said Shaw. "And they used the $1.8 million to convince Kaneohe Ranch they were a financially solid company."

Frank, a former Honolulu police officer, was indicted by a Hawaii grand jury in 1994 on charges of theft, racketeering and unauthorized sale of securities by Trans-Oceanic Group Inc., another of his companies, in a land deal in North Carolina. He was convicted of racketeering in the case last year, sentenced to 10 years in prison and ordered to repay $393,000 to some Hawaii investors who lost money in the deal. But the Hawaii Supreme Court reversed the conviction, finding the jury inconsistent because it convicted Frank of racketeering while acquitting him of theft -- usually associated with racketeering. Frank did not return telephone calls to the Star-Bulletin.

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