Suit claims state delaying RightStar foreclosure
A Nevada finance company has asked a Hawaii judge to force the state attorney general's office to butt out of its foreclosure action against Hawaii's largest funeral services company.
A lawsuit filed yesterday by Vestin Mortgage Inc. said the state has unlawfully delayed its 2004 action against RightStar Hawaii Management Inc. for allegedly defaulting on a $34 million loan.
Vestin accused the state of failing in its regulatory duty, claiming that "as a direct result of the state's negligence, RightStar's trusts were looted over a period of years and currently face a shortfall of approximately $20 million."
Mark Recktenwald, director of the state Department of Commerce and Consumer Affairs, said in a statement that Vestin is attempting "to divert attention from its own responsibility for RightStar's problems."
He also said the company is trying "to force the state to accept a settlement that would not be in the best interests of consumers."
Recktenwald said Vestin has backtracked on a settlement offer discussed earlier this week.
"Vestin was responsible for inducing the improper diversion of more than $20 million in RightStar trust funds to a Vestin investment fund," he said.
The new complaint is the fourth lawsuit generated by financial questions about RightStar, which owns 13 funeral businesses and cemeteries including Valley of the Temples, Maui Memorial Park and Homelani Memorial Park on the Big Island.
In 2004 the state attorney general's office sued RightStar and its former trustees, who include former Gov. John Waihee. The suit claimed that the company has not properly accounted for $20 million that was supposed to be kept in a trust for customers who had purchased funeral plans. It claimed that RightStar has used trust withdrawals to invest in Vestin Fund II LLC, which is managed by Vestin Mortgage.
Last June, a class-action suit was filed on behalf of RightStar customers claiming that former officers and trustees improperly withdrew more than $9 million in trust funds since 2002.
State law requires the company to deposit 70 percent of purchasers' investments into trust accounts. By law the trust funds can be used for only two purposes: to pay for the funeral or interment services, or to issue refunds.
The Vestin foreclosure action is before Circuit Judge Sabrina McKenna, who has appointed a receiver, Guido Giacometti, to run the cemeteries' daily operations.