The charges by the SEC and payment by Adams hardly satisfied former stockholders such as Jay McLean yesterday.

"Adams got a $4,000 fine. Big deal," said McLean, a Hawaiian pilot for 26 years who owned 12,500 shares of Hawaiian stock until late last year. "Four thousand dollars isn't enough to be pocket change. What kind of penance is that?"

The SEC alleged that Adams and AIP withheld information about Hawaiian's weak financial performances in April and May of 2002 while stockholders were considering whether to sell up to $25 million worth of shares back to Hawaiian.

The tender offer was made in June 2002 shortly after Hawaiian received $25 million in payments from the federal government to compensate airlines for losses following Sept. 11.

Internal financial data projected that Hawaiian would go from a $12 million operating profit to a $9.3 million operating loss in 2002, the SEC said. But in discussing the tender offer with minority shareholders, the SEC said Adams and AIP continued to use optimistic financial projections about Hawaiian's performance.

"John Adams learned vital information about the company's health but failed to disclose that information to his fellow shareholders," said Marc Fagel, assistant district administrator for the SEC in San Francisco.

Hawaiian had projected a net loss of $500,000 for April, but the April financial results actually showed a $7.7 million net loss. The May results projected a likely operating loss of $7 million — compared with the original projected $2.3 million loss.

"Adams and AIP made representations that the company would remain solvent," Fagel said. "The board relied on the projections when it went out with its tender offer. Over the next two months ... the company and Adams had two very bad months financially that were far below the company's internal projections. In our view, that was something the shareholders needed to know in deciding whether to hold on to the stock."

Companies typically conduct stock buybacks when they are doing well financially. A stock buyback will increase earnings per share by reducing the amount of shares outstanding.

In May 2002, Adams proposed that Hawaiian's parent company, Hawaiian Holdings, purchase just under 6 million shares from shareholders at $4.25 each. That month, the shares were selling for an average of $3.22.

By the time the offer closed on June 27, shareholders representing the majority stake — more than 26 million of Hawaiian's nearly 34 million outstanding shares — wanted to sell their stock back to Hawaiian.

Hawaiian accepted only 6 million shares — of which 4 million belonged to AIP.

AIP received $17.1 million through the buyback program. As one of four AIP owners, Adams received $342,000 of the proceeds, according to the SEC. Adams' personal shares earned him another $29,000.

Nine months later, Hawaiian filed for federal bankruptcy protection.

In May 2003, U.S. Bankruptcy Judge Robert Faris removed Adams from any management role in Hawaiian and replaced him with a bankruptcy trustee. Faris said at the time that Adams had failed to act prudently in carrying out the stock buyback when the company's fortunes were dwindling.

Adams cut all financial ties to Hawaiian in June by resigning from Hawaiian's parent company, Hawaiian Holdings, and selling all his shares to Ranch Capital LLC, a San Diego-based investment company bidding to take over Hawaiian.

The nearly $2.5 million in payments by Adams and AIP will go into an escrow account to be invested in short-term U.S. Treasury securities with maturities not to exceed six months. SEC officials eventually hope to get the money into the hands of shareholders who did not benefit from the buyback program.

"It's not going to the U.S. Treasury Department," said Carlos Vasquez, an attorney with the SEC. "We're hoping to get a plan together to give it back to the shareholders who lost out on this offer."

Fagel declined to say exactly why the SEC began investigating Adams' and AIP's role in the stock buyback program.

"Obviously there was a lot of media coverage," Fagel said. "And it's a somewhat unusual circumstance to have a public company do a tender offer, saying it will remain solvent, and then file for bankruptcy shortly after. That certainly got our attention."

The settlement with Adams and AIP also orders them to cease and desist from any violations of failing to promptly disclose similar information. But with yesterday's announcement, Fagel said, the SEC considers the case against Adams and AIP closed.

AIP representatives said yesterday they're glad the matter has been settled.

"We're obviously pleased that the SEC concluded its investigation without finding that Mr. Adams or AIP engaged in any fraudulent behavior and without their admission of any wrongdoing," said Thomas X. Fritsch, attorney for AIP. "We can now take even greater satisfaction from the fact that Hawaiian's shareholders are enjoying a current stock price that is almost $3 more than the tender offer price and the apparent likelihood that Hawaiian's creditors will receive 100 cents on the dollar in the reorganization of the airline."

Yesterday, Hawaiian Holdings' shares traded for $7.18.

In a separate agreement announced yesterday, the SEC will not file any claims or seek penalties against Hawaiian Airlines. The airline also pledged to comply with disclosures if it makes another public tender offer.

"Our agreement will avoid any potential litigation or claims by the SEC and will help speed Hawaiian's successful exit from bankruptcy," Hawaiian's bankruptcy trustee, Josh Gotbaum, said yesterday.

The U.S. Bankruptcy court is considering three competing offers to restructure Hawaiian and take it out of bankruptcy.