WorldPoint The leader of a Honolulu high-tech firm sued by the state over a government loan is in a separate legal battle with the landlord of his beachfront Aina Haina residence.
chief in court on
home front
Massimo Fuchs, already in a
dispute with the state, is on both
ends of a suit with his landlordBy Tim Ruel
truel@starbulletin.comMassimo F. Fuchs, chief executive of WorldPoint Interactive Inc., is scheduled to go to court next month in a rent dispute with the owner of the 1.4-acre property at 5403 Kalanianaole Highway. Fuchs has lived at the home, below Hawaii Loa Ridge, since 1997, and once used the property to house former employees of WorldPoint. The landlord, a Japanese businessman, says Fuchs owes $14,800 in rent. Fuchs said he stopped paying rent only because the landlord, WorldPoint's largest investor, owes him money.
Fuchs is also taking the state government to task over its suit, claiming that the state is trying to cover its tracks after failing to resolve the 1995 loan for the past six years.
Fuchs' inch-thick countersuit against the landlord shows that the state may have a fight on its hands.
The state sued WorldPoint in June, saying the company failed to make payments on a $580,000 government loan issued in 1995. WorldPoint recently closed its offices at 1132 Bishop St. and will auction about $1.5 million in assets on Saturday. Fuchs has not countered the state's suit, but has hired attorney James Wagner, who specializes in corporate debt and bankruptcy.
Liquidating WorldPoint is an option, Fuchs said, though he would rather keep the company alive. In Switzerland, where WorldPoint once had a sales office, the company filed for bankruptcy liquidation in April. The bankruptcy has no effect on U.S. assets, Fuchs said, though the state of Hawaii is welcome to make a claim on proceeds from the liquidation. A hearing is scheduled in Switzerland for September on the bankruptcy.
Fuchs is now living and working out of the home in Aina Haina, though he says he has no desire to stay there much longer.
The owner, Hiroshi Teramachi, claims Fuchs hasn't paid the monthly $3,500 rent since March and sued in June to evict Fuchs. Teramachi bought the property for $17.5 million in 1990.
Fuchs countersued Teramachi, saying that he is owed $120,000 for a deposit on a separate rental agreement at the same property and rent while the owner was in town, as well as $50,000 for improvements he paid for. Among the improvements were $2,800 for a gas line and tiki torches and $2,648 for a gas heater and spa filter.
Fuchs is also seeking to move the case to Circuit Court from District Court to allow for a jury trial and the amount of his countersuit.
Fuchs started renting a cottage on the property for $2,500 a month in 1997. Last year, Teramachi offered to let Fuchs live in the 12,000-square-foot main house, for $6,500 a month. Fuchs signed a new rental agreement, which specified that Teramachi, a citizen of Japan, would give 60 days notice if he wanted to occupy the main house.
But last year, Fuchs said, Teramachi's wife moved into the house for much of the year, without any notice.
"They think they can do whatever they want," Fuchs said. "A written agreement in Japan isn't worth much."
An attorney representing the Teramachis declined to comment.
The troubles began, Fuchs said, after Teramachi invested $3 million in WorldPoint by purchasing convertible notes, which turn into stock after they become due. Later, Teramachi, facing financial trouble in Japan, approached WorldPoint for a $3 million loan. Fuchs refused. "We're not a bank," he said.
Teramachi was once well known in Japan as the chairman of Tokyo industrial giant THK Co. In 1997, Teramachi resigned amid speculation over a pump-and-dump stock scheme.
After Teramachi's wife moved into the Aina Haina house last year, Fuchs said he terminated the new rental agreement and asked for his deposit back. The owners refused, so Fuchs stopped paying monthly rent on the cottage.
Fuchs, a native Swiss banker, is also seeking damages for defamation of his character, after the owners accused him in May of hiding WorldPoint's assets in Switzerland. "Being a Swiss banker, I stashed all the money in a bank in Switzerland," Fuchs said facetiously.
Fuchs also plans to countersue the state for interfering with WorldPoint's business. He claims WorldPoint doesn't owe a penny for the loan.
The state furnished the loan to WorldPoint's predecessor firm before Fuchs joined as chief financial officer in July 1996. In February 1996, the company had already spent the money, Fuchs said. When he joined, he began discussions with the state, which was very interested in converting the debt to stock, so the state could benefit from an increase in value.
The state agreed to let WorldPoint stop making payments. Over the next five years, however, no agreement was reached. The state had never put together such a deal before. The loan program also has only one administrative officer.
Late last year, long after WorldPoint had taken on nearly $13 million from investors including Teramachi, Fuchs was still in discussions with the state. In September, when WorldPoint backed off its plan to publicly offer its stock, the state gave Fuchs notice that it wanted to close on the deal and move on. A month later, he wrote back, offering cash. The state rejected the offer, and in November offered Fuchs until May of this year to find venture capitalists willing to shoulder the risk of converting the debt to stock. At the time, WorldPoint owed $789,000 with interest.
Then the technology-driven Nasdaq stock market tanked, reducing the value of WorldPoint's shares and scaring away investors.
The state then wanted cash, Fuchs said. That demand killed the state's claim to the loan, at least from a moral perspective, Fuchs said.
"You cannot change your mind every two minutes. You have to say what you want," he said.
Investors can't sue their broker because their stock has lost value. He insists on paying the state with stock, as agreed to last year. The value of the stock, ironically, depends on whether WorldPoint survives, Fuchs said.
The state declined to comment on Fuchs' claims. He has until the end of August to answer the state's suit, and says he would rather settle it out of court. WorldPoint currently owes $810,000, the state says. Fuchs says the company doesn't owe a penny, at least, not in cash.
Regardless of what happens, Fuchs said he wants to continue pursuing high-tech ventures in Hawaii. "There's no need to run away from it," he said.