Perfect Title focus
of criminal probe

The state Attorney General's Office
is conducting the investigation

By Rob Perez

The state has started a criminal investigation of Perfect Title Co., a title research firm at the center of a growing ruckus in Hawaii's real estate industry.

Randy Young, a deputy attorney general, said the state Attorney General's Office is looking into whether Perfect Title has violated criminal statutes.

He wouldn't elaborate, nor would an attorney involved with the case.

Young said the investigation began after this year's legislative session ended but wouldn't say what triggered the inquiry or what the focus is.

Perfect Title has created chaos in Hawaii's real estate industry with its claims that current land titles are no good. The company reaches those conclusions using 19th century Hawaiian Kingdom law, which it says is still in effect, and by searching property records dating to the 1840s.

Even though the industry dismisses Perfect Title's work as worthless, the company's reports are filed at the state Bureau of Conveyances, casting clouds on ownership of hundreds of parcels throughout the islands. The reports have become costly headaches for lenders and others trying to get rid of the documents and have been cited by homeowners who stop paying their mortgages.

In starting the criminal investigation, the AG's office has switched gears from an earlier position when it viewed the Perfect Title controversy as a dispute between private parties.

Young said yesterday that circumstances have changed. "This isn't a static situation," he said. "When this first started, no one was aware of the scope of the problem."

Perfect Title officials said they didn't know what the state was investigating. But they welcomed the inquiry, saying they have nothing to hide and are doing everything according to Hawaiian law.

"What are we doing that's so criminal?" asked David Keanu Sai, the company's chief title investigator. "If we're as bad as everyone says we are, why are we still here?"

The company has been conducting title searches for about a year and a half.

Sai said a criminal investigator from the AG's office visited the company nearly a year ago, looking into a fraud complaint filed by the state Department of Hawaiian Home Lands. But nothing ever came of that, he said.

One area the state may be investigating is Perfect Title's refusal to file state tax returns and pay state general excise taxes. Perfect Title says it doesn't pay such taxes because it does business under kingdom law, subject only to kingdom taxes.

It doesn't recognize the state as a legal entity.

Stephen Hironaka, a Department of Taxation official, said a company that has at least $25,000 in income a year must file monthly returns and pay the excise tax monthly.

Failure to file such returns is a criminal violation, he said. Hironaka declined to say whether Perfect Title is being investigated by his department.

Perfect Title charges about $1,500 for each title search -- a third of the amount due upfront, and the remainder once the report is completed. The company says it has completed roughly 200, with about another 200 in the works.

Based on the $1,500 fee, that would generate $600,000 in revenue.

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