Posted on: Wednesday, November 7, 2001
Aquasearch claimant calls for ouster at top
By John Duchemin
Advertiser Staff Writer
A claimant in the involuntary bankruptcy lawsuit against Aquasearch has filed a motion to freeze the company's assets and remove its top officers, a move that managers of the Big Island biotechnology company vowed yesterday to fight.
Gregory Kowal, who says Aquasearch owes him $350,000, wants U.S. Bankruptcy Court to seize control of the company from president Mark Huntley and chief financial officer Earl Fusato. Kowal asked the court to appoint Honolulu attorney John Paul Moon as temporary trustee of Aquasearch.
Kowal is one of five claimants seeking a total of $550,000 in the bankruptcy petition, filed Oct. 30 in an attempt to force Aquasearch into a Chapter 11 reorganization. Huntley has promised to oppose the petition, saying it is an underhanded attempt by Kowal — a minority stockholder and venture investor in Aquasearch — and other investors to take control of the publicly traded company.
The motion to appoint a trustee marks an escalation of what has become a bitter battle between the claimants and Aquasearch, a company founded by Huntley.
Aquasearch officials say the bankruptcy case has placed the company in a bind.
For years, Aquasearch has been developing a system to cultivate microscopic algae and cultivate them for useful compounds.
The company has accumulated losses of more than $19 million, and revenues have been negligible. However, Huntley said Aquasearch hopes to break even within a few years, thanks to the recent kickoff of Mainland sales for AstaFactor, the first Aquasearch product.
But cash flow has been slow to build, and Aquasearch recently ran into problems with some creditors. In August and September, it fended off a proxy fight initiated by Kowal and other investors; in October, it laid off half its employees as inventories exceeded sales.
In his latest motion, Kowal based his demand for removal of Huntley and Fusato on allegations that Aquasearch management had engaged in "dishonesty, irregular business practices and gross mismanagement."
In the filing, Kowal accuses Aquasearch officials of misleading him on the use of his investment money. He said they also failed to honor an agreement giving him and two co-claimants in the bankruptcy petition — Lance Nakamura and Kenneth Crowder — seats on the seven-member board of directors of Aquasearch.
He also said in the filing that Huntley and Fusato mismanaged the company by failing to pay employees who were laid off in October.
Huntley yesterday acknowledged Aquasearch failed to pay some of the furloughed employees, but said it was only because Kowal failed to follow through on commitments he made to finance payroll. Huntley said all of Kowal's other claims are false.
"We expect that the facts will demonstrate that the allegations are lies, are self-interested, in bad faith, and are against the interest of all the other shareholders," Huntley said.
He said Aquasearch plans to introduce evidence that will refute Kowal's claims.
Kowal could not be reached for comment yesterday.
