WorldPoint U.S. Bankruptcy Court yesterday ordered the liquidation of WorldPoint Interactive Inc. to pay the high-tech company's creditors, marking the beginning of the end of a peculiar legal saga.
ordered liquidated
U.S. Bankruptcy Court requires
the high-tech firm's assets
to be used to pay creditorsBy Tim Ruel
truel@starbulletin.comWorldPoint's largest investor, Japanese businessman Hiroshi Teramachi, sued in March to force WorldPoint into Chapter 7 bankruptcy. Teramachi claims his family is owed $4.9 million by WorldPoint for convertible promissory notes that have become due.
U.S. Bankruptcy Judge Lloyd King yesterday ruled WorldPoint will be liquidated because the company failed to respond to Teramachi's suit within a court deadline of 20 days.
A year ago, WorldPoint closed its worldwide operations, including its Honolulu headquarters in the penthouse of 1132 Bishop St., and laid off 70 employees, making it one of the larger dot-coms in Hawaii to fail. The company's main business was translating Web sites into foreign languages.
Massimo Fuchs has been running WorldPoint virtually from his home at the Harbor Court downtown condominium for the past several months.
Fuchs was served with the bankruptcy lawsuit March 12 and contacted attorney Bradley R. Tamm more than two weeks later, on March 28. Tamm missed the April 1 deadline, and WorldPoint was placed into bankruptcy by the court. A hearing yesterday gave Tamm the chance to argue for an extension of the answer period, which would have released the company from bankruptcy.
In court filings, Tamm said he was late in answering the suit because of an electronic communications breakdown when Tamm moved his offices on the weekend of March 30. Shortly before ruling against Tamm, King noted the lawyer was aware of the court's deadlines.
Meanwhile, Tamm has asked the court that he be allowed to withdraw as attorney for WorldPoint, because a third party failed to pay his retainer, records show.
Tamm declined comment yesterday. Fuchs could not be reached for comment.
It's not clear exactly how much WorldPoint has in terms of assets and debts. The company has until the end of the month to file a financial statement with the court. Attorney Mary Lou Woo has been appointed to round up the company's assets and dispense payments.
But there's a hitch in dealing with WorldPoint: The company has two conflicting boards of directors, one led by Fuchs and another led by company co-founder Larry Cross, according to a court filing. The firm's May 7 meeting of creditors was postponed because Cross lives in Colorado and Fuchs didn't show up. Cross supported putting WorldPoint into bankruptcy, while Fuchs opposed it.
"Whether Mr. Fuchs even has the authority to act for (WorldPoint) is a point of debate," said an April court statement signed by Jim Evers, former attorney for WorldPoint.
WorldPoint assets include $100,000 that has been sitting in an escrow account after some of the firm's office items were auctioned last year. Other office items and company records have been stored in a Sand Island warehouse for several months because of a lawsuit filed by the company hired to do the auction. Mark Glen Auctions said it sued after Fuchs removed equipment from WorldPoint's offices before the auction could take place. The auction yielded less than $100,000.
Much of the money recovered from WorldPoint's bankruptcy will go to the lawyers who have been dealing with the company's legal troubles, observers said. Wagner Choi & Evers, WorldPoint's former law firm, has a superior claim for payment of its legal fees, which total more than $100,000, according to a filing by Wagner Choi & Evers. Plus, money will be needed to pay for Woo's expense of administering the bankruptcy estate.
As such, the liquidation may lead to little payment for many creditors, including the state of Hawaii, which sued last year to recoup $800,000 outstanding from a loan to WorldPoint. The state has received some payment of its claim by reaching settlements with WorldPoint officers who had backed the loan with their Hawaii properties. Critics, including Fuchs, say the state Department of Business, Economic Development and Tourism dropped the ball by failing to deal with the loan when it went past due in 1996. The state then drove up legal expenses by fighting with Wagner Choi & Evers over claim to WorldPoint's assets.
More than 70 people, including Teramachi, invested a total of $13.5 million into WorldPoint through convertible notes, the company has said.
Fuchs claims the bankruptcy suit was Teramachi's attempt at revenge after Teramachi was forced by a state court to return a $20,000 rental deposit to Fuchs. Two years ago, Fuchs lived in Teramachi's beachfront home in Aina Haina for a monthly rent of $6,500, records show. The two fell on bad terms. Teramachi sued to evict Fuchs and Fuchs countersued, alleging, among other things, that Teramachi's family had defamed his character. Fuchs later moved out of the home.