Ex-CEO Adams
to refund $500,000
to HawaiianThe money was intended
to cover costs associated with
Hawaiian Holdings' status
as a public entity
Hawaiian Holdings Inc., parent company of bankrupt Hawaiian Airlines, said yesterday it will return $500,000 it received from the airline before it filed for Chapter 11 bankruptcy protection last March.
"The money was never spent, by agreement with the trustee, and is being returned to put the issue at rest," Hawaiian Holdings Board Chairman and CEO John Adams said in a statement.
On Nov. 28 Hawaiian Airlines trustee Joshua Gotbaum filed suit seeking the return of $28 million from Adams and other shareholders whom he accused of concocting a scheme to siphon out money from the carrier.
Adams said the airline originally approved the $500,000 transfer to Hawaiian Holdings to pay expenses associated with the parent's status as a public company, such as franchise fees and audit fees.
Since it could cost more than $500,000 in legal fees to decide the issue in court, Adams said the $500,000 would be returned.
"We hope the trustee will take our lead in seeking a quick emergence from bankruptcy without wasting money and dragging out this relatively straightforward bankruptcy proceeding," said Adams in a prepared statement.
Gotbaum was hired as trustee for Hawaiian Airlines July 3 after Adams was ordered removed from office by U.S. Bankruptcy Judge Robert Faris.
Faris gave Gotbaum two mandates: One was to lead the airline out of reorganization, the other was to investigate management activities leading up to Hawaiian Airlines' bankruptcy.
In a statement released yesterday, Gotbaum was skeptical of the gesture.
"John Adams says that he might return less than 2 percent of the money he improperly diverted from Hawaiian Airlines. If he actually follows through, Hawaiian Airlines and its employees will be $500,000 better off, but it would be much better if he would return all of the more than $20 million he took."
Adams, while no longer involved with the operations of the airline, is still chairman and CEO of the parent company as well as the sole managing member of AIP LLC, Hawaiian Holdings' majority stockholder with 50.9 percent of the shares. He is also president of Smith Management LLC, which performed consulting work for the airline.
The $28 million Gotbaum and the airline seek to have returned comes from a pre-bankruptcy $25 million tender offer -- which was paid at a 31 percent premium to the stock price on the day the offer was announced -- and nearly $3 million that was paid to insiders and their interests for "purported consulting agreements and compensation," according to the lawsuit.