“If we do not develop this land, someone else will.” So said Karl Hippmann, vice president of Palace Development Corporation, in defending Charles Chidiac’s plans to build the Hawaiian Riviera Resort. Now that Chidiac had given people the idea that this land could be exploited for resort purposes, Hippmann told Environment Hawai`i, development was only a question of when, not if. Unbeknownst to Hippmann, far from Chidiac being the first to attempt to cash in on the idea, he is merely the last in a series spanning more than 20 years.
Castles in the Air
These can be traced in the public record back to 1968. At the time, the trustees of the Estate of Samuel M. Damon, which owned the land, began negotiating with the Wendell-West Company, which represented itself to be a partnership registered in the state of Washington. Wendell-West agreed to pay $4.5 million for the property. In a letter setting forth terms of the sale, one learns of the type of development Wendell-West had in mind.
Paragraph 6 of the agreement states: “In case the Buyer shall exhaust the supply on the property of volcanic fines consisting of cinders, pumice and ashes sufficient for the development on the property of roads and one airstrip and the 50-acre area surrounding Pohue Bay, the sellers will … permit the buyer to remove and take not more than 1 million cubic yards of volcanic fines from… Kahuku Ranch.” Given that the 25,000-acre parcel is covered largely with lava, one can only imagine how intensive development would have to be to exhaust available supplies.
Even more generous was the offer in Paragraph 7: “In case the Buyer shall exhaust without success all economically reasonable means of developing water on the property adequate for its cultivation and use under urban development, Sellers will grant to Buyer appurtenant to the property a perpetual easement in a suitable area not exceeding 150 acres of the rain forest located in the southeast portion of the remaining Kahuku Ranch … to develop, gather, and store sufficient water by catchment basins, reservoirs and other appropriate means, to take from the Kiolaka’a Stream below the existing wier of the Sellers not more than 25 percent of the flow of water therein existing at any time, and by means of pipelines, ditches and other water courses to conduct such water to the property only for use thereon.” (Under the new state Water Code, it is not clear that such arrangements would be legal. In any case, the Damon Estate’s offer of water expired long ago. The problem of developing adequate water supplies remains one of the biggest challenges to the present developer.)
The agreement with Wendell-West culminated in a sale of the property in 1970. To obtain financing, Wendell-West turned to North American Acceptance Corporation, which, when Wendell-West went into default, took legal title to the property. It, in turn, established a subsidiary; NAAC of Hawai’i, whose only purpose was to hold the deeds to this land and to an adjacent parcel, which was purchased from the Yee Hop Ranch and was later returned to Yee Hop’s possession in the NAAC related bankruptcy cases.
(Wendell-West attempted unsuccessfully to develop similarly bleak properties in Australia. Sitting on its board of directors were the singer Pat Boone, five businessmen from Washington state, and a woman who later became involved in the Nugan Hand Bank, the Australian firm that collapsed under the weight of a CIA-linked scandal in 1980. For a fuller discussion of this aspect of Wendell-West, readers should consult Jonathan Kwitny’s book The Crimes of Patriots.)
Upping the Ante
Two years later, NAAC appears to have found a willing and eager – if not able – purchaser of its Hawai’i land. According to records at the Bureau of Conveyances, Carlsberg Financial Corporation, registered in Delaware but having its principal office in California, purchased the land from NAAC-H in October 1973 for at least $11,516,000 (the principal amount of the mortgage to NAAC-H). Carlsberg purchased the adjoining parcel as well, giving NAAC-H a mortgage of $10,421,500 for that land.
Inside of four months, the land was back in the lap of NAAC-H. In January 1974, Carlsberg granted title to a company called CGP Inc., whose office address was identical to Carlsberg’s. No purchase price for this transaction has been recorded. On the same day CGP took title, it returned the two parcels to NAAC subsidiaries. (NAAC-H got the Ka’u parcel now owned by Palace Development Corporation; another subsidiary; this one called North American Properties, was given title to the Yee Hop Ranchland.) In another coincidence, Joel A. Cassell, the corporate secretary signing the documents on behalf of CGP (which shared offices with Carlsberg Financial Corporation) was secretary also of NAAC when it granted Carlsberg title to the properties in the first place Carlsberg changed its name to the IPG Company Inc in 1986. Environment Hawai`i telephoned IPC to ask about these transactions, but no one returned our calls.
Shell Games
Whatever else the deals accomplished, they did not restore NAAC to the pink of financial health. If anything, NAAC was more awash in red ink than ever. In March 1974, Robert E. Hicks, an Atlanta lawyer, was appointed trustee in bankruptcy for NAAC and its 10 subsidiaries. In September 1978, Hicks retained Fred B. Carter III to sell the property. Despite Carter’s extensive efforts, no buyer was found. On December 15, 1978, a public auction was held attended by, among others, the Damon Estate trustees (who were still owed money by NAAC). No serious offers were made. Four days later, though, Hicks had reached an agreement with a company called Transworld Associates Real Estate Investment Corporation, calling for sale of the Ka’u parcel for $5.5 million. Transworld assigned its right to purchase the land to David W. Larsen in February 1979.1
The story gets complicated at this point. Larsen, who belongs to an old kama’aina family but whose work took him around the globe, told Environment Hawai’i that he was acting on behalf of a hui of several people (including Chidiac, whom Larsen said he met in Lebanon many years ago), who all wanted to be partners in the purchase. (Larsen did not tell us much more than this, saying he did not like the nature of our questions and that he did not have to answer them.)
From documents at the Bureau of Conveyances, members of the hui seem to have included Larsen, Chidiac, Walter Witte (involved in the Hawai’i Ka’u partnerships), Edgar Kerr (also in the Hawai’i Ka`u partnerships), and Hy Hunter, of California. Witte and Kerr got a 40 percent undivided interest in the property once Larsen acquired it in January 1980. Chidiac got a 30 percent undivided interest. That 30 percent portion that was to have gone to Hunter, however, was instead sold by Larsen to British Hawaiian Properties Ltd., whose principals were David W. Larsen, his wife, Shirley A. Larsen, and Peter D. Larsen, whom we believe to be David’s son.
In May 1980, Hunter sued. In July, the 30 percent stake controlled by Larsen (through British Hawaiian Properties) was further divided. Remaining in BHP’s possession was a 15.3 percent interest in the property. Sold to a Hong Kong partnership named Plantorel was a 14.7 percent share. (Plantorel’s two partners were themselves corporations bearing the intriguing names of Septimus and Tertius. Its agent in Hawai’i was a company called Agro Industrial Associates, Inc., whose president was – no surprise here – David W. Larsen.)
Notwithstanding Hunter’s claims, on July 30, 1980, David W. Larsen entered into an agreement with Barclay & West, a California corporation, to sell to it the combined 30 percent share in the land owned now by Plantorel and BHP. Separately, Barclay & West and Chidiac entered into an agreement of sale for Chidiac’s interest, according to the escrow instructions. On October 1, 1980, and with the signed blessing of Peter D. Larsen, Barclay & West assigned its purchase agreement to a Panamanian concern called Montserrat Overseas Holdings, S.A.
November 1980: David W. Larsen, as agent for Plantorel and BHP assigned their stake in the land back to him and his wife.
December 1980: David W. Larsen deeded this 30 percent share in the land over to one William W. Reisner and, on the same day, Reisner apparently deeded it immediately back to Plantorel and BHP. The transfer to Reisner was recorded at the Bureau of Conveyances the following day, December 4. The return transfer was not recorded until March 31, 1981. When Environment Hawai’i reached the only William W. Reisner living today on O’ahu, he denied any knowledge of these transactions. “I would remember owning something like that,” he said. David W. Larsen said he had no recollection of this transaction.
Juggling Titles
On the same day, December 3, that Larsen was juggling titles, Hy Hunter assigned his option to purchase Larsen’s 30 percent stake to Walter C. Witte, with purchase to occur before April 1, 1981. That settled Hunter’s claims on the property; but not those of Montserrat, which filed its notice of intent to sue in U.S. District Court for the District of Hawai’i on December 22, 1980.
Montserrat’s claim was eventually denied. But by February 1981, David Larsen was unable to make payments on his mortgage to Hicks, the bankruptcy trustee for NAAC. Before the month was out, Witte and Larsen agreed that in the event of default, Witte would have the option to take over the mortgage to Hicks and assume Larsen’s interest in the property.
In a long and involved series of transactions, Witte and his partners acquired uncontested title to 70 percent of the parcel in Ka’u. By the end of February, when these deals were being consummated, no one seems to have been straight on who had owned what when. As a result, the record is strewn with quitclaim deeds from people whose claim on the property was no longer lively and with releases of mortgages that had already been released months earlier. By the end of March, British Hawaiian Properties’ principals had voted to dissolve their corporation; title to the property now rested solely with partnerships associated with Walter C. Witte (70 percent) and Charles Chidiac (30 percent). The long, complicated and litigious phase of Larsen’s involvement finally was over.
Consolidation
The Hawai’i Ka’u partnerships are at least as complicated as anything devised by David W. Larsen. More interesting, however, so far as this parcel of land goes, is the metamorphosis of the several companies controlled by Chidiac.
When Chidiac bought the property (using the name Charles C. El Chidiac), he represented himself as living in London. At the time, he was also acting as a manufacturer’s representative in the Middle East for several U.S. companies. In October 1981, however, Chidiac set up a company called Mount Lebanon Corporation in Georgia. On July 2, 1982, he transferred title to his 30 percent stake in the Ka’u property to that corporation, and four days later, July 6, 1982, he registered Mount Lebanon with the Hawai’i Department of Regulatory Agencies as a foreign corporation – that is, a business incorporated outside the state, whether in the United States or elsewhere. By the end of September that year, Witte and Chidiac had arrived at an agreement to partition the tract. The share controlled by Witte was to increase to 85 percent (and for this additional 15 percent stake Witte’s partnership Hawai`i Ka`u III agreed to pay Chidiac $1,312,850).
In August 1986, Chidiac filed articles of incorporation for Palace Development Corporation, and a month later, a surveyor set forth the metes and bounds description of three new parcels within the larger 21,000-acre tract. Lot 1, which was to be Chidiac’s, was the westernmost panhandle of the property, consisting of 3,128 acres bounded by the largely vacant Hawaiian Ocean Ranchos subdivision on the north, Manuka Natural Area Reserve on the west, and fronting the ocean on the south. To the east was Lot 2, roughly 1,100 acres extending from Hawaiian Ocean Ranchos to the ocean. To the east of that, in turn, was Lot 3, more than 16,000 acres stretching from Mamalahoa Highway to the ocean and bounded by Kihuku Ranch to the east. Title to lots 2 and 3, representing approximately 85 percent of the acreage, was given to Hawai`i Ka`u partnerships. The subdivision was recorded on Hawai’i County tax maps in February 1987.
More Litigation
What happened next is unclear. Chidiac ostensibly turned over to Palace 740 acres of his 3,128 acres in February 1987, although no notary witnessed this transaction (Chidiac signed for both parties) and it was not recorded at the Bureau of Conveyances until November 1987. In the meantime, however, in August 1987, a Georgia corporation named Southwire filed suit against Chidiac in federal district court in Atlanta. Southwire, which had used Chidiac as its representative in Middle East sales, claimed Chidiac had “abused” Mount Lebanon’s “purported corporate form and has made it a mere instrumentality for the transaction of his own personal affairs.” Chidiac had “co- mingled his property, business and personal affairs with those of the purported Mount Lebanon Corporation and has used Mount Lebanon Corporation as his alter ego for transaction of his own personal business,” the lawsuit claimed. “The purported transfer of Mr. Chidiac’s stock in Mount Lebanon, and the purported transfer of Mr. Chidiac’s real property and other property to Mount Lebanon, are frauds upon Mr. Chidiac’s creditors, including Southwire.”
This suit, as well as another one filed in federal district court in Manhattan (and a counter-suit by Chidiac) were settled “amicably,” according to Southwire’s attorney in Georgia.
In any case, Mount Lebanon Corporation of Georgia did not live long thereafter. In December of 1987, Chidiac merged its assets, including the portion of Lot 1 that had not been turned over to Palace, into yet another corporation he had setup in Hawai’i in April of that year – Mount Lebanon Hawai’i.
Motivated Sellers?
Meanwhile, back at the Hawai’i Ka’u Ranch, the partners may have been getting a little nervous. On November 20, 1987, the classified real estate advertisements of the Wall Street Journal carried a notice that a 17,797-acre parcel, “the last of its kind,” was for sale on the “Isle of Hawai`i.” Asking price for this parcel, which had seven miles of ocean frontage and bore an unmistakable resemblance to the Hawai`i Ka`u property, was $53 million. Interested parties were told to call one “Art Larson I.C.S” A telephone number in the Seattle area, where several of the Hawai`i Ka`u ‘Aina partners joined forces with Chidiac in his plans to build a resort on the site. However, on July 25, 1988, even before the Hawai`i County Council approved in August an amendment to its general plan approving resort development in the area, the Hawai`i Ka`u partners granted Chidiac an option to purchase their interest “in said resort and the HKA Property.” In August 1990, Palace finally exercised that option.
In February of this year, Mount Lebanon Hawai`i merged with Palace and, although it was the surviving corporation from a legal standpoint, Mount Lebanon is no more. After dissolving Palace, Mount Lebanon turned around and assumed Palace’s name. The only constant is Charles Chidiac. And, of course, the land, which, other than the addition of a few surveyor’s posts, has withstood two decades of speculation unchanged.
1. In 1986, six years after the death in bankruptcy of the original NAAC, another North American Acceptance Corporation filed articles of incorporation in the state of Washington. A year later, the second NAAC registered with the Department of Commerce and Consumer Affairs to do business in Hawai`i. The nature of its business was to sell “time-share memberships in the World Wide Vacations Club.” The DCCA revoked registration in November 1990 following two consecutive years in which NAAC did not file annual reports. When Hicks, bankruptcy trustee for the original NAAC, was informed of the new NAAC, he expressed great astonishment. When the list of corporate officers was read to him, he stated that to his recollection, none of them had been associated with the first outfit.
Volume 2, Number 1 July 1991
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