It’s back. The plan to log koa, the beautiful, high-value native hardwood, from about 12,000 acres of land just north of Hilo went down in flames six years ago, amid lawsuits and countersuits over land ownership and logging deals, violations of state Conservation District regulations, and a host of other messy conflicts. In the years since, the owners struggled to get the project back on its feet, to little effect.
Now, though, with the publication of a new draft environmental impact statement in March, the proposal to take koa from a swath of land immediately to the east of Hakalau Forest National Wildlife Refuge, the most important refuge for endangered Hawaiian birds, is once more on the march.
The plan is intended, its architects state, to save the forest from the encroaching weeds, notably strawberry guava. If nothing is done, says Wade Lee, a biologist who has been involved in the logging project since the outset, the koa forest may be gone in as little as 15 years. The forester who developed the forest management plan, Randy Sennock, formerly a professor at the University of Hawai`i at Hilo, has estimated that each day, on average, invasive species displace 2.3 koa trees, Lee says.
Without money from logging, no funds will be available for managing the forest and suppressing invasive species, Lee says.
But not everyone buys into that logic. The most recent draft EIS has generated an avalanche of critical comments. And, while many of the past questions of ownership and logging deals may have been settled, new ones, just as thorny, have arisen in their place.
The draft EIS, which rivals the Manhattan phone book for sheer heft, is the third environmental disclosure document published for the project: the first was a draft environmental assessment (2001), followed by a draft EIS in 2003. Comments on the first two documents ranged from the mildly critical to the withering, and are appended to the 2007 draft EIS. To judge by the letters submitted during the public comment period for the most recent draft EIS, none of the principals involved in the current project heeded those early warning signs.
The state agency that is processing the Conservation District Use Application is the Office of Conservation and Coastal Lands, within the state Department of Land and Natural Resources. OCCL received the application for the most recent logging proposal on February 2. By statute, the Board of Land and Natural Resources has 180 days – or until August 1 – in which to make a decision on the application, or it is deemed approved by default.
On May 15, following the close of the comment period on the draft EIS, OCCL administrator Sam Lemmo wrote the applicant’s agent, Kyle Dong, summarizing many of the criticisms made during the comment period and suggesting that the applicant seek a 90-day time extension for processing the application. Not only must the applicant prepare a final EIS responsive to the criticism, Lemmo noted, but in addition, a public hearing on the application has to be arranged and held in Hilo. If no time extension was sought by June 29, Lemmo wrote, “staff will be required to submit a staff report for July 13, 2007, asking the Board of Land and Natural Resources (BLNR) to deny CDUA HA-3405.”
A Turbulent History
The land itself has been largely undisturbed except for a small fraction that lies within the state Agriculture District (and for which no permit to log is required) and another area, within the Conservation District, that was logged illegally in 2003. That Conservation District violation was resolved in 2004, with the owner, Hawai`i Forest Preservation, LLC, being fined $141,000 and forced to carry out a mitigation project.
In 2000, Hawai`i Forest Preservation, one of several companies with which koa logger Kyle Dong is affiliated, acquired the land. The same year, Dong obtained financing of roughly $12 million from Metropolitan Mortgage & Securities and closely affiliated companies. In addition, Dong agreed to pay Metropolitan $3 a board foot for the first 6 million board feet taken from the area.
As Environment Hawai`i reported in December 2003, the lender companies attempted to foreclose on Dong in 2001 and obtain clear title to the koa acreage. Since then, Metropolitan and its affiliates exploded in a financial scandal that rocked the Spokane area, where the companies were based. Dong worked out a settlement with the courts and creditors in 2005, leaving Hawai`i Forest Preservation with title to the land but still saddled with debt.
In March 2006, Dong and two others involved with his business ventures, Lowell Ing and Mark Hee, who used to be a broker with Morgan Stanley, obtained a note of $3,216,109.58 from D. Buyers Enterprises, LLC, secured with personal guaranties from Dong and Hee, and the promise of a personal guaranty from Ing. Also, according to a lawsuit filed last October, D. Buyers Enterprises was to receive a mortgage on the two parcels of land that together make up the area where the koa logging is planned, although that, like the Ing guaranty, was not delivered.
The note was to be repaid in three payments of $250,000 at three-month intervals, with the balance due December 1, 2006. By October, however, less than one full payment had been made, and D. Buyers Enterprises went to court to force payment of the full amount due.
According to Gary Grimmer, attorney for D. Buyers Enterprises, at the time of the note, “the representations were that Hawai`i Commercial Timber (one of the Dong-affiliated companies) would run a successful koa timber operation.”
“When it became apparent that Dong probably was not going to be successful,” Grimmer said, the company asked him to do whatever he could to get the investment back.
In March of this year, Hawai`i Forest Preservation delivered the promised mortgage to D. Buyers Enterprises, pledging the Hilo land as security for the $3.2 million owed by Hawai`i Commercial Timber. Signing on behalf of Hawai`i Forest Preservation were Dong, as manager of HCTG, and Ing, as member. The mortgage, which is subordinate to two others, “was given to postpone us taking them to a hearing in court,” Grimmer said, “where we were probably going to get a ruling that they’d violated promises and we’d have liens on various things. So they gave us a lien on the timber land.”
Who Has Title?
Nowhere on the mortgage does one find the name of David S. DeLuz Jr., assistant vice president of Big Island Toyota in Hilo. Yet according to an abbreviated two-page chronology summarizing the history of the project since 2000 that appears early in the 2007 draft EIS, “David S. DeLuz purchase [sic] property from Koa Timber & Hawai`i Forest Preservation, LLC” in September 2006. DeLuz, who submitted the Conservation District application, also identified himself as the owner of the land where the logging would occur. DeLuz listed Dong as his agent.
Hawai`i County real property tax records show the land continues to remain in the name of Hawai`i Forest Preservation. DeLuz may have purchased an interest in that entity, but that is not reflected in ownership records nor has it been filed with the state Bureau of Conveyances.
In November 2006, DeLuz made his first attempt to obtain a permit for the logging project, listing Hawai`i Forest Preservation as owner. That application was rejected as inadequate on December 8. A week later, DeLuz notified the DLNR that, “effective immediately, I am no longer affiliated with Hawai`i Forest Preservation, LLC,” instructing them to “direct any further contact or requests to the principals of Hawai`i Forest Preservation.” The same day, December 15, he signed a formal “statement of dissociation” from the company, which was received by the state Department of Commerce and Consumer Affairs three days later.
On January 2, a month before submitting his second Conservation District permit application, DeLuz wrote to the DLNR, stating, “I wish to retract my previous letter disassociating myself from the project.”
“Due to a misunderstanding concerning a separate family matter, I felt obligated to withdraw from participating in the project,” DeLuz wrote. “Since that time, I have had the opportunity of talking to my attorney and the attorney for Hawai`i Forest Preservation. We have discussed, clarified and resolved my concerns about my continued participation” in the permit application.
DeLuz’s explanation left the staff at the Office of Conservation and Coastal Lands scratching their heads. A lawsuit brought by his father, David S. DeLuz Sr., against Victor Trevino, a former executive with several of the DeLuz family enterprises, sheds some additional light on DeLuz’s behavior. Trevino left the company in October 2006 after a falling out with DeLuz pere. According to statements to the court by Trevino, a month earlier, he and DeLuz Jr. “agreed to work together on purchasing approximately 12,000 acres around Hilo at cost and gaining a percentage of a koa harvesting project.” The younger DeLuz would “assist with the permitting process and act as a manager for one of Trevino’s corporate entities. DeLuz Jr. agreed and work progressed” even after Trevino and DeLuz Sr. parted ways, according to Trevino’s account.
But owing to pressure from his family, which wanted him to have nothing more to do with Trevino, DeLuz Jr. withdrew from the project., according to Trevino’s account. “This put the project in serious jeopardy and exposed Trevino to damages,” his court filings state. Out of consideration for DeLuz Jr., Trevino says, he bowed out of the picture and DeLuz Jr. “then rescinded his letter to the permitting authority and has continued to pursue the project.”
In the midst of all the confusion, no one has paid property taxes on the land for two and a half years. According to the county’s real property tax office, the total delinquency (back taxes, interest, and penalty) comes to $146,247.25. In August, the first half of property taxes for 2007 comes due, which will add another $28,000 or so to the tab.
Environment Hawai`i provided DeLuz the opportunity to respond to written questions. After receiving them, he said that he was “still negotiating transactions” and that he would have no other comment for now.
Repeated calls were made to seek comment from Dong. By press time, he had not responded.
Patricia Tummons
For further reading:
- A prize-winning report on the koa logging project by visiting journalist Paula Dobbyn appears in our December 2003 edition.
- A report on the past Conservation District violation at this site is in the February 2004 “Board Talk” column by Teresa Dawson.
- In 1995, Dong sought and received state permission to cross state land to get to a site in Honomalino where he was logging koa. For a discussion of that, see our “In the Conservation District” column, in the September 1995 issue of Environment Hawai`i.
All these articles are available online in our web archive.
Volume 18, Number 1 July 2007
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