Posted on: Wednesday, April 2, 2003

EDITORIAL
DFS rent: State taking proper steps to collect

We're pleased that the Lingle administration is taking a firm stand on the issue of overdue rent from Hawai'i's duty-free operator, DFS.

It seemed intuitively obvious that something is badly wrong when DFS hasn't paid the $49 million it owes the state in rent because it is "technically ... insolvent," yet manages to make a $100 million payment to its 60 percent owner, LVMH Moet Hennesy Louis Vuitton.

Now Attorney General Mark Bennett has validated that assessment with a strong legal argument. In a lawsuit, Bennett argues it is illegal under the state Uniform Fraudulent Transfer Act to pay LVMH while defaulting on debt.

Bennett says the state's approach is three-pronged: a lawsuit, collection of DFS' performance bond and a demand for an immediate $25 million payment.

Bennett said Gov. Lingle was not going to allow the state to be "treated as a second-class citizen" over repayment of debts. That tough approach contrasts with the wrong-headed attitude of lawmakers who have advanced a bill that offers DFS retroactively reduced rent.

"We certainly sympathize with the fact that tourism is down," Bennett said. Sure, the slump affects businesses here and on the Mainland, as well as state and federal governments he said. "But these events don't excuse contract performance."

Right on, Mr. Bennett.