The son of former U.S. Sen. Hiram Fong is asking a state judge to block the reorganization of Finance Enterprises Ltd., the parent of Finance Factors, and is seeking the removal five of its 13 directors.

In a lawsuit filed in state Circuit Court yesterday, Marvin Fong and his wife, Sandra Fong, who control about 19 percent of the privately held company's stock, alleged that Finance Enterprises' chief executive officer, Russell Lau, and several directors withheld vital corporate information, failed to pay dividends and undermined the Fongs' attempts to sell their stock to outside investors.

"The management has done everything they can do to keep their activities secret from major shareholders," said Judy Pavey, attorney for Marvin and Sandra Fong.

"They're treating this like it's their own company and that they have no obligations to anyone."

Russell Lau could not be reached for response, and a company spokeswoman, Lee Tokuhara, had no immediate comment.

Finance Factors, a loan company, was founded in 1952 by several prominent Chinese businessmen, including Hiram Fong and Daniel Lau, Russell Lau's father.

Finance Factors, with over $650 million in assets, operates 11 full-service branches in Hawai'i and has a mortgage center on Guam.

Tension among the company's major shareholders has been brewing since last October when a California banking company, TFC Holdings Inc., made an unsolicited, $31 million bid for a majority stake in the company.

In the lawsuit, Pavey charged that Russell Lau failed to disclose the $1,000 per-share buyout plan to stock owners and that her client, the Fongs, learned of the bid only after local newspapers published articles on the buyout plan.

The TFC bid was rejected by Finance Enterprises' management.

Pavey also alleged that management "frustrated" the Fongs' attempts to sell their shares to TFC by spending $3 million to buy back shares that TFC had bid on in separate bankruptcy and foreclosure court proceedings last year. TFC was only interested in buying the Fongs' shares if they could acquire the $3 million block of shares, Pavey said.

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

Pavey also criticized attempts to reorganize Finance Enterprises, saying the plan would bar stockholders from selling shares for two years.

Finance Enterprises is considering converting Finance Factors from a depository financial services loan company into a commercial bank.

Under its current charter, Finance Factors can offer loans, mortgages and savings accounts but can't offer checking services, debit cards and lines of credit for business customers. The conversion would allow Finance Factors to add those services.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.