Biotech firm fights trustee takeover

By John Duchemin
Advertiser Staff Writer

Aquasearch, a Big Island biotechnology company battling an involuntary bankruptcy, fought to keep its management intact yesterday, filing a formal opposition to a creditor's request to replace top Aquasearch officials with a court-appointed trustee.

Aquasearch argued that chief executive officer Mark Huntley and chief financial officer Earl Fusato — the two officials that creditor Gregory Kowal wants replaced with trustee John Moon — are essential to company operations, and that removing one or both would irreparably harm the interests of the company.

The filing is the latest in the Aquasearch bankruptcy case, which began Oct. 30 when Kowal and four other creditors claiming $550,000 in unpaid debt sought an involuntary Chapter 11 reorganization of the company. Within a week, Kowal requested Aquasearch be placed in trusteeship, alleging that Huntley and Fusato were dishonest and mismanaged the company.

Aquasearch officials have vowed to fight the bankruptcy, calling it an extension of a scheme by Kowal and co-claimants Lance Nakamura, Edward Sun and Kenneth Crowder to take control of the company. Kowal and Nakamura, who together own more than 11 percent of Aquasearch shares, earlier waged an unsuccessful proxy campaign to take control of the board of directors, according to documents Aquasearch filed in court yesterday.

In the latest filing, Aquasearch lawyers Jerrold K. Guben and Stuart T. Feeley argued that Huntley, a co-founder of the company, and Fusato are the only people who know enough about Aquasearch technology and accounts to effectively run the company.

Aquasearch uses patented breeding tanks to grow microscopic algae, which are harvested for molecules including antioxidant astaxanthin, the key compound in AstaFactor, Aqua-search's nutraceutical pill.

An independent trustee would have no idea how to run such a complex enterprise, argued Guben and Feeley, attorneys with Honolulu law firm Reinwald O'Connor & Playdon.

"No trustee could conceivably operate (Aquasearch's) business as a going concern," they said in the filing.

The lawyers also denied Kowal's claims of dishonesty and mismanagement, presenting documents that they said rebutted those provided by Kowal in his earlier filings.

A hearing on Kowal's trustee request is set for Dec. 7 in the court of Bankruptcy Judge Lloyd King.

Reach John Duchemin at 525-8062 or jduchemin@honoluluadvertiser.com