HILO — Hilo businessman Ken Fujiyama and his company still owe about $6.1 million to a North Carolina bank that held mortgage on the then-Naniloa Volcanoes Resort, according to a complaint filed in Hilo Circuit Court.
Fujiyama and Ken Direction Corp. were ordered by a judge in 2013 to pay almost $10.7 million to First-Citizens Bank &Trust Co.
In its Dec. 8 complaint, the bank also alleges Fujiyama, Ken Direction Corp. and associates — who no longer have leasehold ownership of the hotel on Hilo’s Banyan Drive — fraudulently transferred ownership of a 1,952-acre oceanfront property in Ka‘u to prevent the bank from obtaining the land through a lien.
Other defendants in the revised foreclosure suit include Joseph Gillespie III, Inner Circle Investments LLC, HPAC LLC, Lee Harlow, Nani Mau Inc., Kristie Komides, Mana Land Company LLC, Doris K. Iwaoka and Ian Fujiyama.
According to the complaint, HPAC transferred land known as the “Great Crack Property” to Gillespie, a Florida hospitality real estate investor and president of Inner Circle, on March 23, 2016, a day before a court hearing on the bank’s motion to appoint a receiver to take control of Ken Direction Corp.’s assets.
According to county tax records, the sale amount was $1.995 million.
The state Department of Commerce and Consumer Affairs’ website lists Nani Mau Inc. as the only member of HPAC LLC.
The only listed officers of Nani Mau are Harlow, Fujiyama’s wife, as president, secretary and director, and Komides, Fujiyama’s daughter, as vice president, treasurer and director.
The bank’s filing claims Gillespie paid no money for the land and the deed acknowledges only “consideration paid of $10 and assumption of certain alleged mortgages against the parcels comprising the Great Crack Property.” The filing claims the mortgages are bogus encumbrances on the property by defendants.
The document claims the defendants transferred the land to Gillespie because he lives in Florida, “beyond easy reach of the Hawaii state courts.”
The bank is seeking a court order nullifying the property sale and allowing the receiver, Honokaa attorney Jerry Hiatt, to take possession of the land for the bank, plus unspecified damages, attorneys’ fees and court costs.
Fujiyama filed a counterclaim Jan. 6. He alleges First Regional Bank of California, the original lender, fraudulently led Fujiyama to believe his $10 million, five-year construction loan would be extended over a 25-year-period once the original loan period expired.
The filing also alleges bank officials didn’t inform Fujiyama that in 2009, the Federal Deposit Insurance Corp. issued First Regional a cease-and-desist order due to unsound banking practices and alleged violations of law and/or regulations.
First Regional was shut down in January 2010 by the FDIC and California bank regulators and was acquired by First-Citizens.
First-Citizens foreclosed on Fujiyama’s loan and in May 2013 was awarded a $10.7 million summary judgment against Fujiyama and his company, Hawaii Outdoor Tours, then the Naniloa parent company and a subsidiary of Ken Direction Corp.
“I think they owe me big damages,” Fujiyama said last week about First-Citizens. “The bank created fraud and misrepresented. We’re claiming (Racketeer Influenced and Corrupt Organizations Act) charges against them … for how they created an enterprise to come after us.”
In his counterclaim, which seeks unspecified monetary damages, Fujiyama blamed Ralph Downing, a senior vice president of First Regional Bank.
“He’s the one who made the commitments to us, but during the time he was making the commitments, the bank had a cease-and-desist order from the FDIC,” Fujiyama said. “… And as soon as First-Citizens took over First Regional Bank … he continued to make us assurances that we were going to get the loan.”
The document claims that on Feb. 7, 2012, First-Citizens “surprisingly demanded payment in full without affording (Hawaii Outdoor Tours) sufficient time to seek other financing.” Fujiyama alleges the bank’s refusal to “honor its promise to extend the loan” forced Hawaii Outdoor Tours into bankruptcy.
Fujiyama alleges that during bankruptcy, First-Citizens “wrongfully, in bad faith, and/or negligently caused” the rejection of three offers that would have resulted in the bank being paid in full.
According to the counterclaim, the bank “wrongfully and in bad faith demanded” the Naniloa be sold “under ‘fire sale’ conditions” to WHR LLC, a development company headed by Ed Bushor, for $5.2 million, an amount less than half the “tax assessed value” at the time of $11.6 million.
Fujiyama’s counterclaim contends First-Citizens has no valid claim to the Great Crack Property because HPAC was not a defendant in the original complaint.
“Nani Mau and HPAC was not part of the original suit; they were not claimed as part of the original suit. So what they bank is trying to do is bring them in after the fact … trying to amend their first foreclosure action,” Fujiyama said.
Asked what he’s seeking, Fujiyama said the appraised value of the Naniloa after his improvements — minus the land, which is owned by the state — “is just a starting point.”
“There’s loss of income, there’s a whole list of damages,” he said. “… Our commitment was to put in $5 million over three years, which we did. But the additional funds that we put in because the bank told us to keep remodeling. We put over $9 million in for construction. Our own cash. So we had a lot of money tied up in this place.”
Multiple attempts to contact First-Citizens’ attorneys by phone were unsuccessful.