For decades, Finance Factors Ltd. was the portrait of the old-school management style. Decisions were made by consensus, disagreements were settled quietly and proceeds from the business were divvied up evenly among the six Chinese-American families that founded the company more than 55 years ago.

But in recent months, the company's boardroom has been rocked by several shareholder lawsuits that claim that management has become entrenched and that the company's top executives enriched themselves at the expense of some of the scions of the founding families.

The suits could further delay efforts to restructure the 200employee company.

"It's very, very sad. These are people I grew up with," said Russell Lau, chief executive officer of Finance Factors and its parent, Finance Enterprises Ltd.

"What particularly pains me is that the people who are suing are near and dear friends."

Marvin Fong, son of the late U.S. Sen. Hiram Fong who was one of Finance Factors' original investors, and his wife, Sandra Fong, alleged in a Circuit Court suit filed in March that Lau and other company directors withheld vital corporate information, failed to pay dividends and undermined attempts by minority shareholders to sell their stock to outside investors.

In a court filing on Thursday, the Fongs also alleged that Lau, his father and company co-founder Daniel Lau, brother and local attorney Jeffrey Lau, and several relatives of co-founder Mun On Chun received more than $9 million in salaries and other compensation over a seven-year period.

During the same period, the Fongs said they received nothing from the company.

ANOTHER LAWSUIT

A separate lawsuit filed on Aug. 22 by local attorney Sherman Hee alleged that Finance Factors didn't pay for legal work that he conducted for the company over the years.

Hee, whose wife, Stephanie Hee, is related to company co-founder Clifford Yee, said he helped resolve legal problems that could have cost Finance Factors millions of dollars.

"Mr. Hee's above-described efforts, in sum, have conveyed enormous economic benefits on all of the defendants for which he has not been compensated, creating a substantial injustice to Mr. Hee and unjustly enriching the defendants," Hee's attorney Mitchell Wong wrote in the suit.

Lau declined to address specific allegations raised in the Fong and Hee suits since the litigation is still pending.

But Lau said his responsibility is to balance the interests of all shareholders, not just those who want to sell their stock to an outside buyer.

Lau said management decisions followed guidelines established by the company's articles of incorporation and were vetted by Finance Factors' attorneys.

"It's safe to say that we try to treat everybody fairly and have to balance the interests of people who want to leave with the interests of the people who want to stay," Lau said.

HURTING BUSINESS?

Some fear the litigation between members of Finance Factors' founding families is becoming a distraction to the business.

Attorney James Wright, an independent director of Finance Enterprises, said he "worries that this litigation will undermine public confidence in Finance Factors and ultimately hurt depositors, shareholders and employees."

"This is a business dispute that should have been resolved a long time ago," Wright said.

Tension between company shareholders has been mounting since last October when a California banking company, TFC Holdings Inc., made an unsolicited, $31 million bid for a majority stake in Finance Enterprises.

The Fongs' lawsuit alleged that Lau failed to disclose TFC's $1,000 per-share buyout plan to stock owners. The Fongs said they learned of the bid only after local newspapers published articles on the buyout plan.

The offer by TFC, parent of the seven-branch TomatoBank of Alhambra, Calif., was rejected by Finance Enterprises' board.

The Fongs alleged that management essentially thwarted their own attempts to sell their shares to TFC by spending $3 million to buy back a separate block of shares that the Fongs didn't own.

TFC was only interested in buying the Fongs' shares if they could acquire the $3 million block of shares, Judy Pavey, an attorney for the Fongs said in court documents.

Pavey said the $3 million should have been spent on dividends for shareholders.

Hee's lawsuit alleges that Finance Enterprises and several of its subsidiaries were "insolvent" during the late 1990s because of several bad loans.

One of those loans was to Koolau Agriculture, a Punalu'u Valley company headed by Campbell Estate heir Fred Trotter.

According to Hee's suit, Finance Factors helped Koolau Agriculture obtain a large commercial loan from First Hawaiian Bank by pledging its own stock as security, making Finance Factors a "de facto partner" in the deal.

Koolau later filed for bankruptcy, putting Finance Factors "at risk of takeover by First Hawaiian Bank," Hee suit said.

Hee said he helped resolve the problem by getting Koolau Agriculture to acknowledge more than $10 million in old debts, which allowed Finance Enterprises to carry the debt as an asset and not as a write off.

That, in turn, kept First Hawaiian Bank from taking the company's stock, Hee said.

The Koolau Agriculture deal figured prominently in the Federal Deposit Insurance Corp.'s decision in 2000 to issue a cease-and-desist order for lax lending standards and for operating with a large volume of poor quality loans.

MOVING FORWARD

The FDIC lifted the cease-and-desist order in 2001 after the company's financial performance improved and took corrective action on its lending practices.

Lau, meanwhile, said the company has made a lot of progress since it came under regulatory scrutiny.

According to the company's annual financial disclosures, the company's assets has grown from $595.6 million in 2004 to $672.9 million last year while deposits increased from $429.3 million in 2004 to $487.4 million in 2006.

Next year, the company plans to open new branches in Manoa and Liliha, which will increase the number of Finance Factors' branches from 11 to 13, Lau added.

Finance Factors also is looking to convert into a commercial bank in a move that will allow the company to offer more banking products and services to its customers.

The company now operates as a Hawai'i depository financial services loan company, meaning it can offer loans, mortgages and savings accounts but can't offer checking services, debit cards and lines of credit for business customers.

Lau said the move is vital for competing in today's marketplace. But some shareholders balked at approving the change when it met for a vote on June 7 and are now asking for further information.

Lau said the conversion won't go ahead without shareholder approval.

"What we are trying to do is move the company forward," Lau said.