Wednesday, April 16, 2003

Suit forces sale
of golf courses

By Tim Ruel

In a settlement of a civil fraud lawsuit against bankrupt Japanese firm Sports Shinko Co., prominent local developer Bert A. Kobayashi has sold a Kauai golf course and nearby land that he bought from Sports Shinko.

Meanwhile, an investigation continues into the sale of the properties to Kobayashi.

Kobayashi bought the 18-hole Kiahuna Golf Club on Kauai and five development parcels from Sports Shinko in January 2002 for $2.8 million, as part of a package sale of Hawaii real estate. Shortly after, Osaka-based Sports Shinko entered reorganization bankruptcy under pressure from a Japanese debt-collection agency. Sports Shinko, a golf-course management company, reportedly faced $2.2 billion in debt.

An Oregon businessman, David Resnick, sued Sports Shinko and its Hawaii principal, saying he had a deal to buy the Kiahuna properties for $10 million. Resnick alleged Sports Shinko breached a contract and good faith and committed fraud and negligence. Kobayashi was not named in the lawsuit.

A settlement between Resnick and Sports Shinko was approved in federal court late last year. In keeping with the settlement, Kobayashi sold the properties last week to Resnick for $9.85 million, said Terry Kamen, a Kauai broker who handled the transaction.

Resnick then sold the properties to groups of investors for $11.4 million, taking a $1.55 million gain, said Kamen, a broker with Makai Properties on Kauai.

Resnick, 45, said he kept an interest in one of the development parcels, and he is working on plans for a 280-unit residential project.

Meanwhile, Keijiro Kimura, deputy trustee in Sports Shinko's bankruptcy proceeding, is seeking information in Hawaii to get a handle on Sports Shinko's assets.

Shortly before entering bankruptcy last year, Sports Shinko sold Kobayashi the Kauai properties, the Mililani Golf Club on Oahu and the Pukalani Country Club on Maui for a total of $12.4 million. Later, Kobayashi also bought two leasehold hotels in Waikiki from Sports Shinko, the Ocean Resort Hotel Waikiki for $5.5 million, and the Queen Kapiolani Hotel for $3.3 million.

In a court filing, one of Kimura's local attorneys said Kimura believes there may be claims related to the transfer of Sports Shinko's assets to Kobayashi's companies. Kimura is seeking a court order to enforce a subpoena on the law firm of McCorriston Miller Mukai MacKinnon for documents, materials and billing records related to the sales of properties. Kimura attorney Glenn T. Melchinger said the McCorriston firm is withholding information.

The filing points out that Frank Mukai, a McCorriston partner, is a former director of Sports Shinko and was counsel for a Kobayashi company. The McCorriston firm represented Sports Shinko during Resnick's lawsuit.

In response, the McCorriston firm said there is a potential issue of attorney-client privilege. The law firm also points out that that the Sports Shinko subsidiaries in Hawaii are distinct from the bankrupt parent company in Japan. The McCorriston firm acknowledged it had helped Sports Shinko sell the Hawaii properties to Kobayashi's company.

A hearing is scheduled for Monday in U.S. Bankruptcy Court in Honolulu before Judge Robert Faris.

A Kobayashi spokeswoman said the developer's firm has no plans to sell the other properties purchased from Sports Shinko. "They're not even feeling that they're a part of this," said spokeswoman Ruth Ann Becker.

For Resnick, who has waited more than a year to go through with his property deal on Kauai, the resolution of the legal matter has been satisfying, he said.

"It has been a long process getting here, but I'm glad we're here," Resnick said in a telephone interview yesterday while he was visiting Maui. Resnick said Kobayashi's firm has been honorable and cooperative in selling the Kauai properties.

Resnick had expected to get a higher gain off the sale of the properties, but he said his plans were set back when two California businessmen failed to secure funding for a joint venture. Resnick sued the men and a California company in Honolulu federal court last week, alleging breach of contract, misrepresentation and breach of good faith.

The Kiahuna Golf Club, in Poipu, is now owned by nine investors who live on the golf course. They have plans to improve the links. The owners of the five development parcels have formed a group, Kiahuna Mauka Partners LLC, and are working together on a long-term project for the area, said Resnick.

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