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The Honolulu Advertiser
Posted on: Sunday, July 20, 2003

Politics enter drydock dispute

By Jim Dooley
Advertiser Staff Writer

A bitter competition between Hawai'i's two private shipyards has spread to the nation's capital, where a Republican congressman from Alaska is fighting to protect one ship-repair company here while two senior members of Hawai'i's all-Democrat congressional delegation are backing the other, according to interviews and public records.

Fred Anawati, president of Marisco Ltd., estimates that his business would be cut in half and he would have to lay off about 100 people if his company loses the Ex-Competent drydock.

Deborah Booker • The Honolulu Advertiser

It's all part of a commercial battle for multimillion-dollar public and private ship-repair contracts that has been waged for 20 years on Honolulu's waterfront by two private firms: Marisco Ltd., and Honolulu Shipyard Inc.

The fight heated up two years ago when the Marisco yard, at Barbers Point deep-draft harbor, joined forces with a Native Alaskan business called Tanadgusix Corp., or TDX, to obtain use of a massive surplus Navy drydock called the Ex-Competent.

Honolulu Shipyard, now part of an umbrella maritime company called Pacific Shipyards International, says that TDX's agreement with the U.S. government required it to move the drydock to Alaska and Marisco's use of it here is illegal.

U.S. Sen. Dan Inouye and Rep. Neil Abercrombie agree and have been pressing federal officials since 2001 to force removal of the massive structure — valued at more than $5 million — to Alaska, according to federal records.

How a Native Alaskan corporation, with headquarters on remote St. Paul Island in the Bering Sea, came to own and operate a Navy surplus drydock in Hawai'i is a tangled story rooted in the complexities of federal law.

As a Native Alaskan business, TDX is allowed to receive free surplus federal property ahead of other companies who would have to bid for the property at auction. Native Hawaiian organizations are not recognized under federal law as qualified recipients of such government property.

According to federal court records, TDX expressed an interest in the Ex-Competent, which the Navy had put in mothballs at its Inactive Ship Facility at Pearl Harbor, after transfer to another Native Alaskan corporation fell through.

TDX claimed in court papers that it told federal officials and the Alaska state government, which was involved in the property transfer, of its intention to leave the drydock in Hawai'i for operation at Marisco and that the plan was approved. The company said moving the drydock to Alaska would cost more than its $5 million appraised value, and the Alaska state government did not want the facility there.

Aleuts have been employed at the Marisco yard, learning shipyard and drydock operations, benefiting the Native Alaskan population served by TDX, the company argued.

Mixed rulings

A racketeering lawsuit filed in federal court here last year by PSI against Marisco and TDX claiming the two firms conspired to fraudulently obtain use of the drydock was dismissed by U.S. District Judge David Ezra. But another federal lawsuit filed in Alaska resulted in a summary judgment last December against TDX, which held that the drydock must be moved to Alaska or given back to the government. Both rulings are under appeal at the 9th U.S. Circuit Court of Appeals in San Francisco.

Fred Anawati, president of Marisco, said that Inouye's position is based on long-standing political ties he has with Honolulu Shipyard.

Executives of Pacific Shipyards and its associated companies regularly donate to the political campaigns of Inouye and Abercrombie, according to government records. Companies affiliated with TDX have made regular, but smaller, donations to the campaign of Alaskan Republican Rep. Don Young, who has been trying to broker a "legislative solution" in Washington, D.C., to the drydock dispute, the same records show.

In a letter sent last year to U.S. Attorney General John Ashcroft, Marisco attorney Michael Freed complained about Inouye playing a possible role in the award of non-bid federal government contracts and grants for ship design research work by Pacific Marine, part of the Pacific Shipyards family, and the appearance of favoritism in the award of Navy contracts to Pacific Shipyards and Honolulu Shipyard.

Freed would not comment last week on whether he received a response to the Ashcroft letter.

William Clifford, president of Pacific Shipyards, called Freed's allegations "completely false," noting that the contracts are competitively bid and that Inouye would have no involvement in the process.

He said his company, along with many others in Hawai'i, has been a "strong supporter" of Inouye because of his strong leadership in Congress on its behalf.

Clifford wrote letters of complaint about the TDX-Marisco arrangement to the Native Aleut shareholders of TDX. The drydock dispute could "cause political ill will among some of the Native Alaskan people's strongest supporters," he wrote, adding that

Inouye and Abercrombie "both support native Alaskan development but do not support locating the drydock in Hawai'i."

Michael Schmicker, executive vice president of Honolulu Marine, said Inouye has been a friend and supporter of many high-technology companies, not just Pacific Marine.

"Without his help, most small tech companies in Hawai'i, including ours, would have a very difficult time getting aÊfair hearing at the Department of Defense," he said.

Jennifer Goto-Sabas, head of Inouye's Honolulu office, acknowledged that the Pacific Shipyards companies have been political supporters of the senator, but said the relationship has nothing to do with Inouye's opposition to Marisco's use of the Ex-Competent.

"It's illegal," Goto-Sabas said. "The courts have ruled that the drydock was never supposed to be used in Hawai'i. It's supposed to be in Alaska."

An appeal of that court ruling is on hold while a solution is pursued in Washington, according to court papers filed in San Francisco.

Talks have been held this summer with representatives of TDX, Inouye, Abercrombie and Young. Alaskan Republican Sen. Ted Stevens is described as being neutral in the dispute.

Young has been defending the presence of the Ex-Competent in Hawai'i and now has proposed a settlement of several million dollars payable to TDX and Marisco if the drydock is surrendered back to the federal government, according to parties involved in the talks.

Settlement possible

The congressional appropriation, authored by Young, would compensate TDX and Marisco for money they spent rehabilitating the 59-year-old Ex-Competent and would include an agreement that the drydock would be moved out of Hawai'i, according to Goto-Sabas.

"It would include a proviso that the money couldn't be used (by TDX) to repeat the situation in Hawai'i," she said, meaning that TDX could not try to bring another surplus drydock to the Marisco yard.

Repeated efforts to obtain comment from Young were unsuccessful. Abercrombie spokesman Mike Slackman said the congressman would defer comment on the subject to Inouye's office.

PSI has argued that it spent $4.5 million putting a drydock at its Pier 41 facility at Honolulu Harbor. The addition of the Ex-Competent to the Marisco yard, in direct competition with PSI's drydock facility, damaged PSI's competitive position in the ship repair market here, Clifford said.

"We lost a half-dozen jobs for which we had the time, manpower availability and the drydock to do the work," Clifford said.

Anawati of Marisco said if the Ex-Competent leaves his shipyard, "our business would be cut in half, and I'd have to lay off maybe 100 people."

He also said that PSI now has a competitive advantage in bidding for Navy contracts because the company is allowed to operate out of office space at Pearl Harbor under the large, multiyear ship repair contract it holds in partnership with United States Marine Repair subsidiary Southwest Marine.

Clifford said his firm frequently subcontracts work at Pearl Harbor to Marisco, including shaft repair work on the stricken SS Matsonia.

"We are not trying to drive Marisco out of business," he said, adding that during the past two years, his company has subcontracted more than $2 million worth of work to Marisco.

Meanwhile, discussions over what to do with the Ex-Competent continue in Washington.

Goto-Sabas said she wasn't sure about the status of the talks but added that the proposed settlement payment of several million dollars might be inserted into a transportation bill within the next several weeks by Young.

Anawati said he may have to accept the inevitable.

"I'd have to find another drydock," he said. "But that's OK. I think I know where I can get one."

Reach Jim Dooley at jdooley@honoluluadvertiser.com or 535-2447.

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