Hawaii Superferry: Photo by Mel Ah Ching Productions
Hawaii Superferry: Photo by Mel Ah Ching Productions

Superferry Sinking Taxpayers

The shutdown of the Hawaii Superferry’s inter-island ferry operation, before it had a true chance to get off the ground, is an extremely controversial story once again in the national spotlight.

Hawaii Superferry Inc. had commissioned the Huakai and Alakai, both 300-foot-long ferries, to carry more than 800 passengers between Oahu and three neighbor islands as fast as 35 knots.

Environmentalists, who campaigned against the ferry’s very existence, argued it would bring death and destruction to Hawaii’s sea life.  Many neighbor islanders, who protested the Superferry, made it clear they didn’t want those city folks from Honolulu to bring their cars over and add to the traffic and trash.

But Superferry supporters were just as passionate in support, saying the ferries could unite the islands, allow families and businesses a more affordable way to travel and give people a choice for traveling inter-island.

But the environmentalists won that battle in court in 2009 when the Hawaii Supreme Court ordered that an environmental impact study be done to determine the ships’ impact on the state.

The company gave up the fight and closed its doors two months later. The company also filed for bankruptcy, leaving two Maritime Administration loans with $136.8 million in outstanding debt, and two other loans with the ships’ manufacturers for $22.9 million. The Maritime Administration eventually purchased the boats with the debt owed by the Superferry.

This month, the two ships, built for an estimated $190 million in 2004, are being auctioned off by the U.S. Maritime Administration. The deadline to submit a bid for the two ships now docked in Norfolk, Virginia, is 5 p.m. on July 20.

In a July 6 commentary, High Speed Misery: for Both Superferries & U.S. Taxpayers Alike, Joseph Keefe, lead commentator of MaritimeProfessional.com , takes a look at the impact of the closure of the Hawaii Superferry on taxpayers and that industry.

He reports, “Bottom line: it looks like the ferries could be sold to foreign interests and also reflagged. Or, maybe a U.S. flag operator will come to the rescue. If and when either scenario plays out, as much as $85 million in U.S.-based private equity capital, a guaranteed $136 million Title XI federal loan and tens of millions from the state of Hawaii to jumpstart the ill-fated Hawaii Superferry project will probably be paid back at 50 cents on the dollar.”

Keefe offers details on the bidding process: “There are a few stipulations and caveats that accompany the proposed sales, including the requirement that both vessels be bought (or sold simultaneously to two buyers). Additionally, Marad says that ‘because the Vessels are U.S. flagged, any bidder who is a foreign citizen must be prepared to comply promptly with the provisions of 46 U.S.C. 56101 and MARAD’s implementing regulations. And, Marad reserves the right to refuse any bid.’

He adds what Hawaii taxpayers already knew when the ferries went under:  “Someone, somewhere, is going to get quite a bargain. And, you are going to pay for it.”

J.F. Lehman & Co., a company established by former Navy Secretary John F. Lehman, did not get off without a major loss either. He’s out an $85 million investment on the Hawaii Superferry deal.

Maui Accountant Sentenced to Prison for Defrauding Investors

Lloyd Y. Kimura, age 61, of Wailuku, Maui, was sentenced today by United States District Judge David A. Ezra to 140 months in prison on eight counts of mail fraud, bank fraud and theft from employee benefit plans. Over 50 investors and other entities sustained losses in excess of $8 million in a Ponzi scheme and other frauds. Kimura plead guilty on January 5, 2011.

Florence T. Nakakuni, United States Attorney for the District of Hawaii, said that according to information produced in court, victims lost substantial savings, retirement funds and children’s college funds.

Court documents reflect that Kimura induced victims to invest money with him and a company of which he was President, representing that the company loaned funds to individuals at a high interest rate, usually between 18 and 24 percent.

The funds were usually not loaned to individual borrowers or businesses as represented but were instead eventually expended on Kimura’s personal and business endeavors, including the purchase of land and buildings. He also used the investment deposits by investors to pay previous investors principal and interest payments.

The case was investigated by the Federal Bureau of Investigation and Drug Enforcement Administration and was prosecuted by Assistant United States Attorney Ken Sorenson. (report submitted by U.S. Attorney in Hawaii)

Maui Is No Hideout

WSB TV in Atlanta has been reporting that Atlanta Public School teachers and principals are under investigation for what appears to be a wide spread cheating scandal.

While the news is on her trail, former APS superintendent Dr. Beverly Hall slipped out of Atlanta and escaped to Maui to what she thought would be a get-a-way in paradise.
But Channel 2’s Monica Pearson tracked her down. She notes in her report that “A state investigation revealed cheating on standardized tests at 44 of the district’s 56 schools. Investigators said 178 teachers and principals were involved in changing CRCT test results to improve scores. According to their 800-page report, the retired superintendent knew about the cheating and either ignored it or tried to hide it.”

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