State extends DFS
payment deadline

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By Russ Lynch
rlynch@starbulletin.com

The state has given DFS Hawaii and its parent LVMH Moet Hennessy Louis Vuitton Inc. another week to pay a $49 million debt.

The amount represents the states' accounting of past-due rent payments owed by the duty-free sales business for the exclusive right to sell tax-free goods to outbound international travelers.

Mark Bennett, state attorney general, announced Monday that the state had issued a formal demand for that much in unpaid concession fees. If DFS didn't pay by the end of the day yesterday, the state would seek to cash in a $45 million performance bond DFS had to post to get its five-year contract that runs through May 2006, Bennett said.

Sharon Weiner, group vice president of DFS Hawaii, said yesterday that the state has extended the deadline to next Friday.

The attorney general's office confirmed that the one-week extension had been granted, but Bennett was not available for comment.

DFS has not been paying the $60 million a year that it bid as a minimum return to the state for the right to sell imported in-bond goods, items such as Scotch whisky and French brandy and perfumes, to foreign travelers without the goods officially entering the United States.

The goods, mostly ordered at a DFS shop in Waikiki but also at Honolulu Airport, are delivered to international travelers as they leave, when they are outside the U.S. Customs jurisdiction and don't incur import duties or taxes.

DFS said its sales have plummeted because of the downturn in international travel, particularly from Japan, that followed the Sept. 11 2001 terrorist attacks in the United States.

In addition to seeking immediate payment of the $49 million it says it is owed, the state sued DFS parent LVMH and its subsidiaries, claiming that a $100 million payment DFS Group headquarters made to LVMH last year was a fraudulent transfer. Because DFS was insolvent in Hawaii and not paying its bills, the money should not have been moved, the state said.