Japanese firm fight goes into isle court

A tycoon’s heirs say Seibu is moving to sell local hotels against their will

Four heirs of a deceased Japanese business tycoon have asked an Oahu Circuit Court judge to recognize them as owners of several large resorts and hotels in the state, including the Hawaii Prince Hotel Waikiki, Mauna Kea Beach Hotel and Maui Prince Hotel, which are part of the Seibu Railway Co. empire.

What is at stake Seibu Railway operates commuter rail, freight trucking and express bus services in the Tokyo region. Its holdings also include the Seibu Lions baseball team, hotels, golf courses and ski resorts in Japan, Taiwan, Singapore, Malaysia, Canada and Hawaii. In Hawaii they are: » Hawaii Prince Hotel Waikiki. » Mauna Kea Beach Hotel. » Hapuna Beach Prince Hotel. » Maui Prince Hotel. » Makena Golf Course. SOURCE: BLOOMBERG NEWS, SEIBU RAILWAY WEB SITE

The request by the heirs of the late Yasujiro Tsutsumi comes as executives in Tokyo are seeking to restructure Seibu, which recently emerged from an epic corporate scandal that led to the resignation of senior executives.

The heirs claim that Seibu management is preparing to hold a shareholder meeting next week that will authorize the sale of its assets, including the Hawaii properties.

The heirs who have sued in Hawaii -- Seiji Tsutsumi, Yuji Tsutsumi, Tadashi Kojima and Nanae Mitsumoto -- claim that Seibu management has refused to acknowledge their rights as controlling shareholders of the company and is moving toward liquidating the assets against their will.

Although the heirs have sought to enforce their rights through litigation in Japan, that could take a year or longer to resolve, said Kenji Hashidate, a Tokyo-based attorney for the plaintiffs. Meanwhile, the plaintiffs have sued in Hawaii to prevent management from selling any of the Hawaii assets before a judgment by the Japanese courts, he said.

Hashidate said time is of the essence because Seibu management has been marketing Hawaii properties to potential buyers. He said that when he was looking for local counsel in Honolulu, he encountered three corporate law firms that could not represent the heirs because they were representing potential buyers of Seibu properties.

"There is an urgency here," Hashidate said.

Akemi Kurokawa, president of Seibu Railways subsidiary Seibu Inc. and a defendant in the suit, was not available for comment late yesterday.

The roots of the dispute stem from a scheme exposed last year, when Japanese regulators began unraveling deceptions that Yasujiro Tsutsumi and his lieutenants had been committing since the 1950s. Tsutsumi's third son, Yoshiaki, became chairman of Seibu after Tsutsumi's death and eventually became one of the world's richest men. In October he was fined $43,376 and given a 2 1/2-year suspended jail sentence after he pleaded guilty to insider trading and falsifying shareholder records.

Those falsified shareholder records lie at the heart of the dispute. According to news accounts and assertions in the suit filed in Hawaii, the elder and younger Tsutsumis used employees for years as sham owners of Kokudo shares. While the shares would be registered in the employees' names, the employees actually were only "nominal owners," holding Kokudo shares for the Tsutsumi family. The complaint filed in Hawaii provides a catalog of former employees who have acknowledged participating in the scam and who say the shares they supposedly owned actually belonged to the family.

The scheme allowed Yasujiro Tsutsumi to maintain effective control of Seibu without alerting securities regulators.

Kokudo, the company formerly controlled by Tsutsumi and his fake shareholders, now owns an approximate 71 percent stake in Seibu Railway, the lawsuit says.

According to the complaint, Tsutsumi, in his name and the names of the fake shareholders, owned 96 percent of Kokudo's stock at the time of his death in 1964. The heirs claim to have inherited 55 percent of the interest in Kokudo, which would give them a controlling stake in the company that controls Seibu.

The heirs have attempted to assert their alleged rightful control, but, according to the suit, management has ignored them. The company's board has appointed a chief executive who has refused to grant the heirs' rights, they allege. Furthermore, they allege, Seibu plans to sell a stake in the company to Cerberus Capital Management LP, a vulture investment fund, diluting the heirs' ownership; it is not clear whether Cerberus would take shares in Seibu or Hawaii properties in exchange for its investment, Hashidate said.

Cerberus also is a lender to the bankrupt Aloha Airlines.

Hashidate said the heirs are determined to maintain control of Seibu's Hawaii portfolio, which includes the kind of landmark resort properties that are fetching huge sums these days. He said the heirs want potential buyers to know there is a cloud over the properties.

"We have to give a warning openly to many people," he said.