Settlement will put RightStar cemetery firms up for sale
Valley of the Temples on Oahu, Homelani and Kona memorial parks on the Big Island and Maui Memorial Park are affected
The troubled RightStar companies, Hawaii's largest funeral services and cemetery business, will be sold as part of a deal to settle lawsuits between the state and RightStar's major creditor.
The state and Nevada-based Vestin Mortgage Inc. have agreed to sell RightStar's assets to a new operator at auction for a minimum $25 million. RightStar companies own Valley of the Temples on Oahu, Homelani and Kona memorial parks on the Big Island and Maui Memorial Park.
Vestin will receive $16 million from the proceeds of the sale. The other $9 million will go into the "pre-need and "perpetual care" trust funds for customers who purchased funeral plans, according to the agreement, which must be approved by state Circuit Judge Sabrina McKenna.
A court-appointed trustee has been running the RightStar companies since November 2004. A condition of the sale requires the new operator to honor all valid consumer contracts made with RightStar or its predecessors.
"This is an excellent agreement that will help protect Hawaii consumers," state Attorney General Mark Bennett said in a written statement.
State Department of Commerce and Consumer Affairs Director Lawrence Reifurth said the agreement "helps the consumers get precisely what they paid for."
Should the state recover more than $25 million from the sale and other litigation, 75 percent, up to $11 million, will go to the trusts. The rest will go to Vestin, to which the agreement says RightStar owes $50 million.
Any additional proceeds will be evenly split between Vestin and the trusts after Vestin recovers $50 million.
In 2004 the state sued RightStar and its trustees, including former Gov. John Waihee, to figure out what happened to $20 million that was missing from the funeral services trusts. A few days later, Vestin, a finance company, sued to foreclose on RightStar's holdings for failing to repay a $34 million loan RightStar used to buy the properties three years earlier.
In April 2006, Vestin sued the state for delaying the foreclosure and said the state is responsible for the missing $20 million because it failed to properly monitor the trusts.
A few days later, the state responded with a lawsuit against RightStar's officers and Vestin. The state claimed the RightStar officers placed the missing $20 million in an investment fund run by Vestin to secure the $34 million loan and that Vestin knew or should have known from where the money came.