Rob Perez

Raising Cane

By Rob Perez

Financial, legal troubles
catch up to Hiram Fong

These are supposed to be his golden years. After an illustrious career in business and politics, Hiram L. Fong, 96, one of the key figures in the development of postwar Hawaii, should be putting the finishing shine on his rags-to-riches legacy.

A self-made millionaire.

A former U.S. senator and state legislator.

A business legend.

He has stood at the top of his game, revered by many, especially those from the generation that led Hawaii to economic prosperity before and after statehood. In his heyday, Fong was considered one of Hawaii's wealthiest individuals.

But now parts of his world are crashing down around him. It is a collapse that is as sad as it is stunning, particularly in the context of Fong's age and his lifetime of accomplishments.

The last few years especially have been a financial and legal nightmare, one that could tarnish the Horatio Alger-like story of this son of poor Chinese immigrants who rose from the Kalihi slums to become a Harvard University law school graduate and successful Republican politician and businessman.

Consider these blows:

One of Fong's sons, Marvin, last month sued Fong and his wife over a dispute related to control of Market City Ltd., a family business that includes Market City Shopping Center in Kaimuki.

Another son, Hiram Jr., was forced into bankruptcy last year in a financial mess that entangled his father. At one court session, the elder Fong sat in the front row and glumly watched in silence as his son was grilled by creditor lawyers and a bankruptcy trustee.

Related to that case, the elder Fong still is dealing with a 1994 lawsuit that accused him, his wife and others of fraudulently conveying Hiram Jr.'s assets to defraud the son's creditors.

Fong also was sued recently by Bank of Hawaii and N. Harwood Street Partners of Texas in unrelated lawsuits. Each company alleged that Fong and other family members defaulted on hundreds of thousands of dollars in debt. The Fongs could lose their Senator Fong's Plantation & Gardens, a popular tourist attraction in Kahaluu, if the bank prevails in its foreclosure lawsuit.

Fong, who still regularly works at his downtown office weekday mornings, didn't respond to requests for comment Thursday and Friday. His attorney, Harrison Chung, declined comment.

Adding to the ongoing nightmare, Fong last year had to turn over ownership of a Kahaluu home to Grand Pacific Life Insurance -- a company he helped found -- because of mortgage problems.

Grand Pacific was sold two years ago as regulators were raising questions about loans the insurer made to company insiders, including Fong, according to state records. Fong was a director of Grand Pacific.

The insurer was counting the insider loans (two were to Fong trusts) as assets even though the loans were in arrears and efforts weren't being made to collect on them in a timely fashion, the state records show.

Fong also was director and chairman of Finance Enterprises when federal regulators in 2000 cracked down on Finance Factors, a wholly owned subsidiary, for allegedly conducting unsound banking practices, according to state and federal records.

The Federal Deposit Insurance Corp. issued a cease-and-desist order accusing the company of violating federal law or regulations. Among the deficiencies cited: inadequate management, lax lending practices, a large volume of poor quality loans, and operating without sufficient equity capital and reserves.

The FDIC order was lifted last year after Finance Factors said it improved its internal loan policies, increased its reserves, decreased its share of bad loans and appointed new outside board members.

Marvin Fong, who filed the lawsuit against his parents and describes his relationship with the family as estranged, said his father is so deeply in debt that he no longer can get banks to lend him money.

"It's very serious," he said of his father's financial predicament.

Marvin Fong attributed much of that predicament to what he said was his father's tendency to borrow money to help Hiram Jr., the eldest son, out of financial jams. Chinese custom typically places great importance on the first son.

"Instead of holding my brother accountable, he just goes and bails him out and gets into trouble himself," Marvin Fong said. "We (my wife and I) tried to steer him away from all this borrowing, but he just wouldn't listen to us."

Hiram Jr., a former city councilman and attorney, could not be reached for comment. The Star-Bulletin left two messages for him at Senator Fong's Plantation, where he spends some of his time.

Hiram Jr. was forced into Chapter 7 bankruptcy by a family who won a legal malpractice judgment against him in 1993 but never got paid, according to bankruptcy court records. The judgment totaled more than $1.8 million with interest as of late last year, the records show.

Joel Pahk and other members of the Pahk family filed the Chapter 7 petition against Hiram Jr. early last year to try to obtain payment on the judgment.

The bankruptcy case was only the latest of Hiram Jr.'s troubles.

In 1995, the FDIC ruled that he engaged in violations of law, unsafe or unsound banking practices, and breaches of his fiduciary duty as a director of Liberty Bank. The ruling did not cite details, and an agency spokesman said he couldn't elaborate.

As a result of those findings, the FDIC board permanently banned Hiram Jr. from participating in the affairs of any federally insured financial institution without the prior consent of federal regulators.

Hiram Jr. is one of Hiram Sr. and Ellyn Fong's three sons. They also have a daughter.

The type of family problems the elder Fong has had with his business is not completely unheard of for family-run operations, some say.

In a 1998 interview with Hawaii Business magazine, in fact, Fong voiced a few concerns about family-run businesses and said he shouldn't have given his children unrestricted access to their inheritances. He also noted that there were many successful businesses in which the children didn't follow in their father's footsteps.

"Many children think that since their father left them so much money, 'Why work?'" Fong said. "If my father left me a lot of money, I probably never would have been a senator or gone into business. I would have taken it a bit easier. Maybe I would be studying Greek!"

Marvin Fong, when asked about details of his lawsuit against his parents, declined comment, citing a confidentiality agreement involving Market City. The actual complaint contains few details and part of the court documents are filed under seal.

"I never wanted it to come to this," Marvin Fong said. "He just forced us to. He wouldn't listen to anything."

One longtime friend of the elder Fong said he was saddened and surprised by the recent turn of events.

"It's very unfortunate," said senior U.S. District Judge Samuel King, 86, who was appointed to the federal bench in 1972 by former President Nixon at the urging of Fong, then a U.S. senator.

"You couldn't have a friend better than Hiram Fong," King said. "His word is absolutely good."

Unfortunately for Fong, his word won't be good enough to make all his legal and financial problems disappear.

Star-Bulletin columnist Rob Perez writes on issues
and events affecting Hawaii. Fax 529-4750, or write to
Honolulu Star-Bulletin, 500 Ala Moana Blvd., No. 7-210,
Honolulu 96813. He can also be reached
by e-mail at:

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