Kona Circuit Judge Ronald Ibarra will appoint a receiver to handle day-to-day finances of the Country Club Condo Hotel, perhaps in time to keep the lights on at the beleaguered Banyan Drive building.
Ibarra’s decision came Friday, nine days after Hawaii Electric Light Co. sent a letter stating the Banyan Drive apartment building is seriously in arrears on its electrical bill and demanding a payment of $100,000 by Feb. 29 — which is a typo, since this is not a leap year. The total amount owed is $189,257.15 according to the letter from David Kurohara, HELCO customer service supervisor, to Carl Oguss, president of one of two board of directors competing for control of the building, and Kevin Aoki, principal broker of Property Professionals LLC, the building’s former manager.
“The other board has not paid HELCO since June, since we won the election,” said Oguss, who is suing Aoki, Property Professionals, leaseholder Country Club-Hawaii Inc., Herbert Arata, Country Club-Hawaii’s president, Alyce Arata, the vice president and others. “My board has been paying as much as we can. In fact, our policy is … that if they’re confused about which board to pay, pay HELCO, and either send us your receipt or send us your check, made out to HELCO. We’ll credit you and then deposit your check to HELCO.”
Richard Emery, president of Hawaii First Management, which took over building management Dec. 4, said a receiver should be named “in the next day or two.”
He thinks the appointment will be “welcome news for everybody” and added a court-appointed receiver “has authority to get all these owners together and get them to pay where he instructs them to pay.”
“The situation we inherited is that you have a board of directors,” he said. “Then, you have a group that used the League of Women Voters to get their own board in. That’s the Oguss board, for lack of a better term, who ignored the fact that boards are like corporations. They have bylaws and state laws. … They took the position that they’re the real board and started closing the association’s bank accounts, the Oguss board, telling owners not to pay the management company, that’s us, and formerly Kevin Aoki.”
Emery said the power struggle has made it impossible for the building to pay its bills.
“Approximately a fourth of the owners pay the association through Hawaii First,” he said. “A fourth of the owners are paying Oguss (and) we don’t know where the money is going. The rest of the owners have taken the position that they’re paying no one until the judge tells them who they’re supposed to pay. So we have almost a million dollars in unpaid maintenance fees from owners who are holding back payments because they don’t know who to pay. They don’t know who’s the real board.”
The president of the board recognized by the Aratas and Emery is Pearl Macomber, who didn’t respond to a phone message left early Tuesday afternoon by press time.
Emery acknowledged some owners are paying HELCO “some money, but not enough money.”
“You have this group, the Oguss board for lack of the better word, telling owners just to pay the electric company,” he said. “Where’s the accountability of who paid and who didn’t pay and how much? Who’s the agent for the declaration? We support the notion that there needs to be a receiver who is independent, who has the authority of the court, to get this stabilized, so they get can a plan to pay everybody. If we could get all the delinquent owners to pay, there would be no problem.”
Oguss said he thinks the timing of HELCO’s notice might be “a bit of retaliation” for his group questioning the company’s practice of applying payments to late fees before paying down the bill’s principal.
“Bottom line, since December we’ve been asking HELCO to justify the policy, just show us where it’s written down in an appropriate manner and that it is a legal policy — and they’ve been refusing,” he said.
Kurohara’s letter states: “You may find relevant tariff and billing policies on our website at hawaiielectriclight.com which may answer your prior inquiries.”
HELCO spokeswoman Kristen Okinaka said Tuesday that Public Utilities Commission’s Rule 8, which is included in a link on HELCO’S website, “allows us to assess a late charge.”
“It doesn’t specially say for Hawaii Electric Light how we will apply those payments,” she said.
In a follow-up email, she wrote: “While the payment application is not specifically stated, we do follow Rule 8 regarding payment of bills. Fortunately, we do have an opportunity to clarify this with our customers via our ‘Ho‘oku‘i’ bill insert and our website.”
She said HELCO’s “customer service people have been meeting with (Oguss) to resolve the issue.”
One bone of contention between the Macomber board and the Oguss board is the designation of the Country Club as a “condo hotel.”
“Our board voted to cut down the budget by laying off the 15 hotel employees. That would save us about $1,000 a day,” Oguss said. “And had Kevin’s group acknowledged the ownership’s right to that majority vote, we would have saved ourselves about $365,000 by now. It would’ve been enough to pay HELCO twice. And that’s what we’re telling HELCO, that if you’ll be patient looking for a bit of a resolution (to the lawsuit), there’s plenty of money to pay you. It’s just going out now to employees that we shouldn’t have in the first place.”
Not surprisingly, Emery has a different view.
“The reality of it is under Robert’s Rules of Order and the bylaws is, you are a condo hotel,” he said. “Second of all, the owners don’t have those referendum rights. If the bylaws give the board the power to make those decisions, they don’t have a unilateral right to force the board to do something to breach their fiduciary duty because the documents require them to be a condo hotel. Their lease with the (Department of Land and Natural Resources) requires them to be a condo hotel.”
The suit is being heard by Ibarra because both Hilo circuit judges, Greg Nakamura and Glenn Hara, disqualified themselves from the case, as has Kona Circuit Judge Elizabeth Strance. The Aratas and co-defendant Ken Takahashi filed motions to dismiss, which are scheduled to be heard March 19 by Ibarra.
A more immediate concern, however, is will the lights stay on?
“We’re hopeful that the receiver will talk to the electric company about the issue,” Emery said. “… HELCO just wants to get paid, and if a responsible person can tell the owners who to pay and where, I believe it’s in (HELCO’s) best interest not to harm the average person who lives there.”
Email John Burnett at firstname.lastname@example.org.