Union seeks
benefits payout
in hotel deal

The ILWU wants vacation
and severance included in the
Hawaiian Waikiki Beach
foreclosure sale

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By Russ Lynch
Star-Bulletin

The union representing 232 workers at the Hawaiian Waikiki Beach Hotel wants a state Circuit Court judge to make some $2 million in union vacation and severance pay a priority payout in a change of ownership for the 715-room hotel.

In a motion to be heard by Circuit Judge Karen Blondin June 5, the International Longshore & Warehouse Union has asked the court to take care of the union members who have a contract with the financially troubled owner, Otaka Inc.

Union members made their case public with a demonstration May 16 at a foreclosure auction on the Circuit Court patio. Hawaii Ventures LLC, a subsidiary of the hotel's lender, was the only bidder, offering $80 million for the hotel.

The deal, subject to Blondin's approval, would wipe out Otaka's debt and leave lender Leucadia National Corp. as the owner, through Hawaii Ventures.

When that happens, Aston Hotels & Resorts will take over management, the owners will spend some $30 million on renovations and the hotel will be launched on a "old Hawaii" theme.

But the union appears to be left out of the picture altogether, said ILWU Oahu district director Ray Camacho.

"What we're trying to do is appeal to the court that the severance and vacation pay pursuant to our contract should be considered a priority in the transaction," Camacho said.

The union, seeking to keep its contract and the jobs of the workers it says have kept the hotel alive through Otaka's financial troubles, wants to be a part of the transaction.

ILWU attorney, Rebecca Covert said the union's goal is to stay on at the hotel and it is making its point through the claim that its members are owed for unused vacation as well as severance for those who are let go. That could amount to about $2 million, she said.

"The lender's position is, 'we're only liable for the last eight months,'" the period of the foreclosure process, and that would amount to about $100,000, Covert said. She said Leucadia insists that anything else related to the union is Otaka's problem.

Susan Tius, attorney for Hawaii Ventures, could not be reached for comment.

Aston has declined to comment on the grounds that it is not yet the manager and will not manage the property until after the court approves the ownership change.

That leaves the union out of the discussion because the pending owner won't talk to it, Camacho said. Hawaii Ventures says it can't talk because it is not yet the owner, and Aston won't either, on grounds that it can't discuss anything until it is actually the manager.

The hotel was put up for sale because Mitsui Trust & banking Co., which had lent some $85 million to Otaka to buy the hotel in the Japanese investment "bubble" of the 1980s, sold the loan last year to Leucadia, a New York venture capital partnership, after Otaka defaulted on the loan. The court ordered a foreclosure sale, finding that Otaka improperly used funds from the Waikiki property to finance a money-loser on the Big Island.

Leucadia's purchase through Hawaii Ventures is scheduled for a confirmation hearing in Blondin's court June 7, two days after she will hear the labor union's request.