ResortQuest
says Tatibouet
mismanaged assets

The company is seeking to oust
hotelier Andre Tatibouet from
controlling his bankruptcy case

Andre Tatibouet, a Hawaii hotelier who built the Aston hotel chain and later sold most of it, is in a fight to maintain control of the last remnant of his former empire.

A creditor is trying to oust Tatibouet from overseeing his own bankruptcy case and replace him with a trustee.

ResortQuest Hawaii LLC, which manages Tatibouet's Coral Reef Hotel in Waikiki, has filed a request in U.S. Bankruptcy Court to appoint a trustee to take over Tatibouet's bankruptcy estate, which consists of the 247-room hotel and Tatibouet's 12,700-square-foot home near Diamond Head.

Tatibouet sold Aston to ResortQuest in 1998 for $30 million, but ResortQuest is now a creditor of Tatibouet, owed more than $5 million secured by Tatibouet's hotel and home. ResortQuest claims Tatibouet has grossly mismanaged the bankruptcy estate by spending money on a lawsuit he has little chance of winning and by seeking to replace ResortQuest with another management firm that plans to use a marketing strategy that ResortQuest claims is risky.

Tatibouet has countered by trying to make ResortQuest's request irrelevant.

He has asked the court's permission to secure a $37.4 million loan from Canyon Capital Realty Advisors LLC to pay debts owed to ResortQuest and other creditors, who hold liens totaling $27.3 million against the hotel and home.

By wiping out ResortQuest's debt, the loan would remove ResortQuest's standing as a creditor, making moot its request for a trustee, Tatibouet said. Tatibouet declined to comment further on the matter and referred questions to his attorney, James Wagner, who did not return calls.

Documents filed by Tatibouet make clear that the loan from Canyon Capital is not a sure thing, "subject to, among other things, Canyon's due diligence and valuation."

A hearing on Tatibouet's loan request is scheduled for Monday and a hearing on ResortQuest's motion to appoint a trustee is set for Tuesday.

Simon Klevansky, an attorney for ResortQuest, declined to comment, but a 27-page memo supporting the request to remove Tatibouet spells out the company's rationale. One allegation involves a suit Tatibouet has filed against the Queen Emma Foundation, which owns the land under the Coral Reef Hotel. Tatibouet has sought to convert the property into a condominium hotel, but Queen Emma has not allowed it and a state court sided with the foundation. Queen Emma now has a $500,000 claim against Tatibouet for legal fees related to that lawsuit. Since filing for bankruptcy protection in April, Tatibouet has sued Queen Emma a second time over the same issue.

Given the previous failure in court, ResortQuest maintains that Tatibouet's chances of "success in this litigation appear to be exceedingly remote." ResortQuest said the suit will do little more than chalk up more legal fees for the estate and could tie the hotel up in litigation for years, creating uncertainty for lienholders.

In addition, ResortQuest claims Tatibouet has mismanaged the estate by trying to remove ResortQuest as the hotel's manager and hire Aqua Hotels & Resorts LLC to run the property. ResortQuest says Aqua Hotels' marketing strategy would be a risky one of reducing relationships with the vacation wholesalers and increasing reliance on Internet wholesalers.

In a court document, ResortQuest quotes an e-mail to Tatibouet from Aqua Hotels' chief executive, Michael Paulin, in which Paulin suggests a strategy for deflecting fallout from a lawsuit ResortQuest might file if Tatibouet tried to terminate its management contract.

"You might think about a preemptive ... statement to the press that deflates (ResortQuest), denigrates their progress at (Coral Reef Hotel), makes you the victim, and lauds Aqua," Paulin wrote.

In court papers, Tatibouet dismisses ResortQuest's claims as ill-founded and ultimately irrelevant, given the new financing from Canyon said to be waiting in the wings.