BY JIM DOOLEY – Legal papers filed recently in state court make new allegations about former Gov. John Waihee’s role in the 2004 financial failure of Hawaii’s largest group of funeral homes and cemeteries.
The court filings are latest shots in a six-year legal war over recovery of $40 million taken from the funeral trust accounts of 50,000 RightStar Hawaii customers.
A court hearing on the new charges set for Monday, October 18, was delayed indefinitely because one of Waihee’s co-defendants in the case filed bankruptcy papers late last week.
The bankruptcy was filed by local businessman Reed B. Rohrer, who served as co-trustee with Waihee and two other men from 2001 to 2004 for millions of dollars held for RightStar customers in “pre-need” and “perpetual care” trust accounts.
Comerica Bank and Trust, the new trustee for RightStar customer accounts, said in court papers last month that Waihee, Rohrer and the other trustees, as well as RightStar principals, “wrongfully withdrew and invested more than $40 million from the trusts.”
The new legal complaint by Comerica alleges that the former trustees “agreed to permit trust funds to be used for luxury automobiles, for exotic lifestyles, to make millions of dollars of RightStar loan repayments and for other improper purposes.”
In return, Comerica charged, “RightStar agreed to pay the trustees enormous fees using funds from the trusts.”
Waihee, Rohrer and the other trustees have previously denied wrongdoing and asserted that they reported wrongful acts by RightStar owners to state regulators.
Waihee lawyer William McCorriston declined to discuss the newest allegations, saying he would oppose the new Comerica complaint in a hearing before Circuit Court Judge Sabrina McKenna.
But that hearing was delayed after Rohrer’s bankruptcy papers were filed.
RightStar has been under state court supervision since it was sued in 2004 by Bennett and Las Vegas moneylender Vestin Mortgage, Inc.
RightStar operates Valley of the Temples cemetery and Diamond Head Mortuary on Oahu, Maui Memorial Park, and Homelani and Kona Memorial Parks on the Big Island. RightStar also owns several companies that sell and administer “pre-need” funeral plans, including 50th State Funeral Plan.
State and Vestin officials have consistently said that all funeral and interment contracts held by RightStar customers will be honored.
RightStar was incorporated in mid-2000 in Nevada by John Dooley and Katheryn Hoover, a married couple in Texas, and Richard Bricka, a California businessman. The company was formed two weeks after Dooley and Hoover completed bankruptcy proceedings in Texas and a year after Bricka emerged from bankruptcy in California.
They set their sights on buying the Hawaii funeral and cemetery assets of a huge multinational player in the “death care” industry, Loewen Group, which was then undergoing bankruptcy reorganization in Delaware.
Dooley, Hoover and Bricka believed there were millions of dollars in “surplus” money in the trust funds – beyond what was legally necessary to service customer contracts – and planned to use the surplus money to finance their purchase of the assets.
Dooley and his partners enlisted Hawaii securities dealer Lance Newby, then working here for Raymond James Financial Services, Inc., to search for initial financing.
Newby was later stripped of his securities license and banned from securities work for the rest of his life because of the work he did for RightStar.
A personal bankruptcy case filed by Newby was one earlier cause of lengthy delays in the state court RightStar legal proceedings.
Newby has since moved to Costa Rica, but this year in an internet blog – The Old Boys Club – Newby denied any RightStar wrongdoing and blamed his legal and financial problems on former bosses at Raymond James.
He says he intends to sue them for $500 million in Costa Rica courts.
“I plan on making this an annual suing event,” says Newby, who now operates a company called “Eloan International.”
The Comerica legal complaint alleges that Newby recruited friends and his ex-wife to serve as trustees of the RightStar funeral funds.
Waihee later replaced Newby’s ex-wife as a trustee.
An attorney, Waihee originally worked for RightStar as a lobbyist, helping the company obtain operating licenses from state regulators, Comerica alleged.
Waihee “also had a ‘consulting agreement’ and ‘Japan burial plot sales agreement’ with RightStar,” Comerica alleged.
The trustees were to be paid $200,000 each as a RightStar “inception fee,” plus another $5,000 to $10,000 per month, according to Comerica.
Waihee’s pay schedule was a $400,000 “inception fee,” plus monthly fees one-third lower than what the other trustees received, according to the Comerica suit.
Only one individual has ever been charged criminally in the RightStar legal proceedings.
Company co-founder and former president John Dooley pleaded guilty last year to stealing some $50,000 in RightStar customer funds. He was sentenced to five years of probation and has since moved back to the Mainland.
RightStar is now owned by Vestin, which acquired the company when no qualified bidders made purchase offers at two earlier foreclosure auctions.