Kalele Kai condo
deal at center of
Ironically, the complicated
transaction wound up making
money for the estate
Wong: I'll winBy Rick Daysog
Wong backers stand up;
Roth urges trustees to go
Of all the multimillion-dollar deals conducted by the Bishop Estate, none has generated as much controversy as the Kalele Kai condominium project in Hawaii Kai.
The 1995 lease-to-fee conversion has resulted in criminal theft charges against two of the most powerful members of the estate's board -- chairman Richard "Dickie" Wong and trustee Henry Peters -- and has contributed to the commercial bribery and conspiracy charges against a local estate partner, developer Jeffrey Stone, who also is Wong's brother-in-law.
Even Wong's wife, Mari, was indicted for conspiracy and hindering prosecution partly as a result of the deal.
The irony? Unlike previous high-risk, mainland deals in which the estate lost substantial money and attracted the scrutiny of federal or state investigators, the complicated Kalele Kai deal wound up making money for the estate.
The 219-unit Kalele Kai apartments were built as a leasehold condominium complex in 1993 by California builder Peter Bedford's Kapalele Associates. Kapalele later acquired the fee interest to the project when it signed a $21.9 million bank note with the estate that was secured by the fee land.
But when the local real estate slump hit in the early 1990s, Kapalele could sell only one of its 219 units, prompting it to sell its entire leasehold interest in the project to a partnership that included Stone's Pacific Northwest Ltd. and a mainland developer, National Housing Corp., for $36.5 million in 1995.
The partnership, known as One Keahole Partners, then acquired the fee interest to the project for $21.9 million in November 1995 by acquiring Kapalele's bank note.
According to the state, the Bishop Estate rewrote the original terms of Kapalele's bank note for One Keahole Partners by reducing the amount due on the loan, lowering the amount of collateral needed and setting the note's interest rate at a low 2.9 percent. The state has alleged that the restructured note gave Stone and his partner "millions of dollars of profit" at the expense of the trust's interest. Hence the so-called "sweetheart deal."
In exchange for this preferential treatment, the attorney general's office has alleged that Stone offered kickbacks worth more than $100,000 each to Peters and Wong when he bought their Makiki condos for inflated prices in 1996.
The estate, meanwhile, defended the Kalele Kai deal, saying it should be viewed in the context of the slumping real estate values in Hawaii. At the time of the 1995 deal, an independent appraiser valued the fee interest at $8.9 million, or nearly two-fifths of the price Stone and his partners paid for the fee interest to the property.
Wong, in recent court filings, has argued that there was no "sweetheart deal," since the buyers ended up paying the full $21.9 million price for the fee conversion and not $8.9 million. The restructuring of the note allowed One Keahole Partners to restart condo sales, according to Wong.
"By agreeing to forego the interest that had been added on to the original note, KSBE successfully substituted a solvent developer/sales agent for an insolvent one (and) upon that have, in fact, allowed the stalled project to proceed," Wong attorney Eric Seitz said in recent court filings.
Wong backers stand up;Star-Bulletin staff
Roth urges trustees to go
State Attorney General Margery Bronster has "severely wounded" Bishop Estate chairman Richard "Dickie" Wong and his family by pursuing criminal charges against them, a family member said.
"There is a climate of fear," said the Rev. Beverly Bates yesterday after an Oahu grand jury issued criminal indictments against Wong, his wife, Mari Stone Wong, and brother-in-law Jeffrey R. Stone.
Bates, Wong's mother-in-law, said: "This is unconscionable, that she (Bronster) can so abuse her power to take Richard's family hostage, to seek the ruination of his life.
"They'll never stop until they achieve their goal of controlling the Bishop Estate."
University of Hawaii law professor Randall Roth, one of the five "Broken Trust" authors, said: "I wouldn't wish what Dickie Wong and his family are going through on anybody. Everyone is entitled to the presumption of innocence.
"But it's increasingly obvious that these trustees are too preoccupied with their own legal problems to be of much good to the trust," said Roth. "It's high time for the trustees to do the right thing, which is to step aside and let someone else get the trust back on course."
It was the "Broken Trust" essay, published in the Honolulu Star-Bulletin in August 1997, and other criticisms of the trustees' administration of the Bishop Estate, that led Gov. Ben Cayetano to order the attorney general's investigation into the trust.
Former state Sen. Mamoru Yamasaki of Maui, a friend and supporter of Wong's when he was state Senate president, said: "I think they're going overboard.
"I don't know if this is some kind of vendetta. There are all kinds of possibilities," said Yamasaki, who was chairman of the Senate Ways and Means panel. Yamasaki wrote a letter to the editor calling Wong as "a great leader of our time."
"He stood for the rights of the individual," Yamasaki said yesterday, recalling that Wong joined 1960s civil-rights leader Martin Luther King Jr. in his voter-registration march in Birmingham, Ala. "I think he (Wong) is a truthful individual, a man of integrity."
Yamasaki recalled that Cayetano was one of six senators who challenged Wong's Senate leadership. In the struggle, the dissidents took Yamasaki to court trying to force access to the notes he made about finance issues that were bound for conference committee discussions with the state House.
"Dickie Wong supported me. He said: " 'You do what you think is right for the Senate'."
Yamasaki said that aside from his letter and comments of support, "I intend to keep away from it. The solution is in the hands of the court," he said.
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