State lawsuit over missing funeral funds expands
The state is suing the mortgage holder and officers of RightStar Hawaii Management Inc. over $20 million missing from a trust account used to pay for funeral services at cemeteries on Oahu, Maui and the Big Island.
The state added Nevada finance company Vestin Mortgage Inc., RightStar President John Dooley, company Secretary and Treasurer Kathy Hoover, and RightStar Director Richard Bricka yesterday to a lawsuit it filed in November 2004 seeking full accounting of all RightStar trust accounts.
Also named in the original lawsuit is RightStar's former trustees, including former Gov. John Waihee.
The state action is in response to a lawsuit filed Friday by Vestin alleging the state is blocking its attempts to foreclose on RightStar properties until it takes responsibility for the missing $20 million.
Vestin claims it is the state's fault the trust is short of the money because it failed to properly monitor RightStar's accounts and actions. RightStar properties include Valley of the Temples in Kaneohe, Homelani Memorial Park and Kona Memorial Park on the Big Island, and Maui Memorial Park.
The state claims Vestin knew or should have known that $20 million the former trustees invested in Vestin Fund II LLC, which is managed by Vestin Mortgage, came from RightStar's funeral services trust fund.
State law requires funeral service operators to deposit 70 percent of the money paid by customers into trust accounts. Disbursements are allowed only for funeral and interment services or for refunds.
"Every dime that Vestin Mortgage received was the result of distribution approved by the trustees, including former Gov. Waihee. Vestin never had any reason to believe the money it received was improperly paid," said Paul Alston, Vestin's attorney.
Alston said Vestin did not cause or engineer improper investments by RightStar.
The state lawsuit said Vestin required RightStar to make the $20 million investment to secure the $34 million loan to buy the company from the former owners.