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The Honolulu Advertiser
Posted on: Wednesday, September 4, 2002

FBI seeks bankrupt builder's records

By Andrew Gomes
Advertiser Staff Writer

Federal authorities have opened a criminal investigation into the business dealings of Hawaiian Palisade Homes as the troubled manufacturer of factory-built houses tries to reorganize under Chapter 11 bankruptcy.

At bankruptcy proceedings yesterday, Hawaiian Palisade counsel said the Federal Bureau of Investigation had subpoenaed company records and the U.S. Attorney's Office has impaneled a grand jury.

Kevin Rickett, chief division counsel for the FBI in Honolulu, said the agency does not confirm the existence of, or comment on, investigations as a matter of policy.

Assistant U.S. Attorney Michael Seabright cited a similar policy in declining comment.

In response to the federal inquiry, Hawaiian Palisade President Art Smith cited his Fifth Amendment right in declining to answer questions yesterday at a meeting of creditors.

Smith said his personal attorney advised him not to comment.

"It's not that I didn't want to talk to these people," he said. "I could have answered a ton of questions."

U.S. Trustee Curtis Ching said he was disappointed at what he said amounts to another delay in sorting out the affairs of Hawaiian Palisade.

The 2-year-old Kapolei-based firm set out to build low-cost homes primarily for Native Hawaiians. The company took about $20 million in orders, but ran into labor, regulatory and financing problems that led suppliers to force Hawaiian Palisade into bankruptcy in June.

Two months ago, the business shut down, leaving about 120 buyers without homes, and prompting the state Office of Consumer Protection to file a civil lawsuit.

Yesterday, an attorney representing a California contractor interested in buying the assets of Hawaiian Palisade said a purchase agreement that would help repay some creditors and deliver homes to others should be signed in 30 days.