Saturday, June 9, 2001

Hawaii State Seal

State sues tech firm
to recoup losses

By Tim Ruel

The state is suing one of Hawaii's former high-tech star companies over an outstanding $810,000 government loan and is seeking to foreclose on the Oahu properties of the firm's founders.

The lawsuit, filed yesterday in First Circuit Court, is over a 1995 loan of $580,000 to WorldPoint Interactive Inc. under the Hawaii Capital Loan Program, which seeks to help businesses having trouble finding capital. Interest added $230,000 to the initial amount.

The state is suing to get whatever payment it can for the loan.

WorldPoint translates Web sites into different languages for companies.

Early on, WorldPoint made total payments of $10,787, but stopped sending checks in July 1996, the suit said.

During the last five years, the state and WorldPoint discussed converting WorldPoint's debt to an ownership stake for the state.

The talks dragged on, however, because of disagreements over WorldPoint's value as a company, especially after the Nasdaq stock market dropped below 1,700 points earlier this year from a March 2000 high of more than 5,000 points.

The venture capitalists that manage the state's investments were against the idea of investing in WorldPoint, a state official said at the time.

The company is privately held, although it had thought about going public before the high-tech bubble burst.

Meanwhile, WorldPoint obtained $14 million in private investments and moved its headquarters to the penthouse of 1132 Bishop St. from the state-run Manoa Innovation Center.

At an October 1999 banquet, WorldPoint received an award from City Bank for carving a niche in a billion-dollar high-tech industry.

However, in February of this year, WorldPoint announced it was firing the bulk of its employees and closing offices in Zurich, Dallas and Hong Kong.

WorldPoint President and Chief Executive Massimo Fuchs issued a statement yesterday that said, "If legal action cannot be avoided by the state, as it now appears it couldn't, which I personally regret, our objective is to resolve any such action as quickly as possible to the mutual satisfaction of all parties involved."

WorldPoint has paid $4.5 million in total wages in Hawaii and state taxes of $300,000, which should be seen as an excellent return on the state's investment, said Fuchs, a native Swiss banker who joined WorldPoint as chief financial officer in 1996.

The state's suit also names two of WorldPoint's founding directors, Larry Cross and Robert Peterson, who are alleged to have backed WorldPoint's loan with the equity in properties that they own on Oahu.

The state is seeking to foreclose on their homes to help pay off WorldPoint's loan.

Peterson, a local plastic surgeon whose property is located in Waialae Iki, was on the mainland and could not be reached for comment yesterday.

Cross, president and chief executive of the Economics Institute at the University of Colorado at Boulder, said yesterday he was surprised by the suit and that he was disappointed the matter was not resolved.

WorldPoint's board meets once a year to discuss strategy, Cross said, and he had been told that WorldPoint's debt would be converted to an equity stake without a problem.

"I'm sort of surprised and chagrined," Cross said. "For sure, it's not good news."

His property, located near Kalaheo High School in Kailua, was where he and his wife raised their four children.

"There's a lot of memories tied up with it," said Cross, who once was president of Hawaii Online, an Internet service provider now known as GST Hawaii OnLine.

Jerry Fuqua, who briefly worked for WorldPoint in 1995, was also surprised by the suit. The state is seeking to foreclose on the home where he lives in Kaneohe.

"This is amazing," Fuqua said, noting that he is frustrated both with WorldPoint and with the state. "Essentially, WorldPoint has not communicated with me or the other parties that had left."

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