State says lender was key in diverting funeral funds
By Jim Dooley
Advertiser Staff Writer
By Jim Dooley
State Attorney General Mark Bennett's office yesterday fired another shot in the ongoing legal war over financial problems at the state's largest operator of cemeteries and funeral homes, alleging that a Las Vegas lender was instrumental in diverting millions of dollars in consumer trust funds from the companies.
The lender, Vestin Mortgage Inc., denied any improprieties and warned that the state's position may lead to the closing of the companies that run the cemeteries and operate "pre-need" funeral plans.
Despite the ongoing dispute, state officials have repeatedly said in court that all customer contracts with RightStar companies here are safe and will be honored.
In a new lawsuit filed last week, Vestin charged that the state was trying to force the company to guarantee repayment of up to $20 million that operators of the RightStar group of companies allegedly improperly removed from customers' trust accounts.
Vestin also alleged that the state was negligent in its oversight of the RightStar companies, which operate four large cemeteries in Hawai'i and administer several large funeral services plans for as many as 50,000 customers.
The newest charges from Bennett's office are that Vestin, in loaning the RightStar companies $45 million in 2002 to purchase the cemetery and funeral businesses, imposed a 14 percent interest rate on the loan and required that $8 million be repaid in 60 days and another $20 million within 180 days.
But instead of repaying that $20 million, the state charged that RightStar Hawaii Management Inc. improperly invested $22 million of customers' trust funds in a Vestin investment fund.
In a press release issued yesterday, Vestin said it was the first to bring "the looting of the RightStar trusts by its trustees 18 months ago" to the public's and state's attention.
Former RightStar officials, and four former trustees, including former Hawai'i Gov. John Waihee, who oversaw consumer funds for RightStar, have denied any wrongdoing.
Vestin said the state government "was remiss in both its regulatory responsibilities and its legal responsibilities to the RightStar (customers) and to the taxpayers of Hawai'i."
The company warned that Hawai'i consumers may be victims of the legal dispute.
"We are fast reaching the point where we may, because of the state's irresponsible position, have to close the RightStar properties at a severe cost to its contract holders," Vestin said.
Vestin said that the investment funds held in its Vestin Fund II are safe and have outperformed all other RightStar investments, returning $7.6 million since late 2001.
In addition to filing the civil lawsuit, Bennett's office is also conducting a criminal investigation of the RightStar companies.
One court-appointed official is operating the RightStar businesses now and another is conducting an exhaustive examination of the companies' finances.
RightStar purchased and operated Valley of the Temples Memorial Park on O'ahu, Maui Memorial Park and Homelani Memorial Park and Kona Memorial Park on the Big island.
Reach Jim Dooley at firstname.lastname@example.org.