RightStar loan
foreclosed
A Nevada lender moves
to seize the assets of a Hawaii
funeral firm being sued by the state
A Nevada mortgage company filed a foreclosure lawsuit against RightStar Hawaii Management Inc. yesterday, alleging that the isle funeral services operation has defaulted on a $34 million loan.
RightStar Hawaii owns and operates several funeral service businesses and cemeteries, including Valley of the Temples in Kaneohe, Maui Memorial Park and Homelani Memorial Park on the Big Island.
Vestin Mortgage Inc.'s suit, filed yesterday in state Circuit Court in Honolulu, seeks to foreclose on those properties and others. Company officials allege that RightStar has not paid its loan for the last three to four months.
"We filed for foreclosure because (of) our fiduciary responsibility to protect our investors," said Vestin spokesman Steven Stern. "We feel secure in our full recovery, as the loan is well collateralized."
Last week, RightStar Hawaii and its board of trustees, which includes former Gov. John Waihee, were sued by the state Attorney General's office, which alleged that the company has not properly accounted for $20 million that was supposed to be kept in a trust for customers who had purchased funeral plans.
According to state law, any entity selling "pre-need" interment or funeral services to a consumer is required to hold at least 70 percent of the price of its services in a trust to pay for upkeep and care of plots and other long-term needs.
The state's lawsuit calls into question "withdrawals" from RightStar's trusts, including an investment in Vestin Fund II LLC, which is managed by Vestin Mortgage.
The state's lawsuit against RightStar alleged that the company's trustees breached their "fiduciary duty" by investing an undisclosed amount of trust money with Vestin while it owed the Nevada company money.
Yesterday, however, Stern said that RightStar's debt to Vestin had nothing to do with the investment.
"The trust selected the Vestin Fund II because of its historical record of regular and solid returns," Stern said. "The trust has received an average of a 10 percent return annually. ... The (trust's) principal has remained strongly intact and secure.
"In this sense, Vestin is simply a vendor."
Attorney Bill McCorriston, who represents RightStar trustees, said his clients have been working with the state for months to clear up what he described as "a lack of accounting and other problems" at RightStar.
"Before the attorney general filed this action, (the trustees) were extremely concerned and put the freeze on the transfer of any funds to RightStar," McCorriston said yesterday. "RightStar then terminated the trustees and replaced them with a bank out of Michigan or Chicago."
He added, "Since that termination, we no longer have control over the trust funds."
The foreclosure lawsuit does not name its trustees as defendants, but the company's owners, John Dooley and Kathy Hoover, along with company shareholder Richard Bricka. An attorney for RightStar could not be reached for comment.
