Hawaiian Airlines parent company to return $500K
By Kelly Yamanouchi
Advertiser Staff Writer
The parent company of Hawaiian Airlines is returning $500,000 to the airline after the airline trustee sued to recoup $28 million that he said had been "improperly diverted."
Hawaiian Airlines transferred $500,000 to Hawaiian Holdings Inc. shortly before filing for Chapter 11 bankruptcy protection in March.
According to Hawaiian Holdings, the money was to pay for franchise taxes, audit fees and other expenses related to its status as a public company. Hawaiian Holdings is no longer involved in the airline's management or its bankruptcy case.
In his lawsuit filed last month, bankruptcy trustee Joshua Gotbaum accused Hawaiian Holdings Chairman John Adams and companies he controlled, including Hawaiian Holdings, AIP LLC, Airline Investor Partnership LP and Smith Management, of trying to "defraud existing and future creditors" of the airline.
The $500,000 transfer to the parent company was a part of the amount Gotbaum has sought to recover. Since the filing of the suit, Hawaiian Holdings' board of directors has voted to release to Hawaiian Airlines the $500,000.
Tom Fritsch, Smith Management general counsel who also represents Hawaiian Holdings, said the parent company believes it fulfilled its fiduciary duty in originally transferring the $500,000 but that litigating the matter "would be in nobody's interest."
In a written statement, Adams said: "It could cost more than $500,000 to litigate this issue, and we didn't think that would be a wise use of the airline's resources."
"We hope the trustee will take our lead in seeking a quick emergence from bankruptcy without wasting money and dragging out this relatively straightforward bankruptcy proceeding," he said.
Gotbaum is still seeking to recoup $25 million, part of a tender offer made in 2002, of which $17.1 million went to Adams and other shareholders. An additional $3 million was paid to company insiders for consulting services and other compensation.
Hawaiian Holdings has no plans to return the rest of the $28 million to the airline, according to Fritsch.
"We intend to prove that everything that we did was proper," he said.
That is unlikely to satisfy Gotbaum.
"John Adams says that he might return less than two percent of the money he improperly diverted from Hawaiian Airlines," Gotbaum said in a statement yesterday. "If he actually follows through, Hawaiian Airlines and its employees will be $500,000 better off, but it would be much better if he would return all of the more than $20 million that he took."
Earlier this year, while waging an unsuccessful fight to avoid the appointment of a trustee for the airline, Hawaiian Airlines attorney John Karaczynski said that if the $500,000 transfer wasn't made, it could mean "in essence catapulting another company into Chapter 11 proceedings."
But aircraft lessor Boeing Capital Corp., a creditor in Hawaiian's case, called the transfer of the $500,000 and the $25 million tender offer "fraudulent" and included them as part of Boeing's arguments for Adams' ouster.
Gotbaum was named trustee after the bankruptcy court found Hawaiian Airlines, under Adams' control, "consistently placed the interests of its shareholders ahead of the interests of its creditors."
Reach Kelly Yamanouchi at 535-2470, or at firstname.lastname@example.org.