(POSTED 4/26/07)
The lease of 10 acres of state land to Venu Pasupuleti, an Ohio entrepreneur, moved forward last month when the board of directors of the Natural Energy Laboratory of Hawai`i Authority voted 6-3 to approve a set of stringent conditions to attach to the lease.
NELHA administrator Ron Baird was instructed to work out final language of a lease with Pasupuleti that would include these conditions. The board then would vote on the final lease at a later meeting.
Approval of the lease conditions came after the board raised a number of questions concerning Pasupuleti’s past businesses and outstanding judgments against him and Megasoft-named businesses he had been involved with in Ohio.
Yet several of the board members voting on the motion had been given no description of Pasupuleti’s latest proposal. At the March board meeting, his operation was described as one that would eventually occupy 50 acres of land, employ 4,200 skilled workers, and use up to 50 megawatts of electricity.
By the May 2 meeting, however, with questions having been raised over fitting an operation of that scope within the limits set by a 1985 environmental impact statement for the entire technology park, Pasupuleti’s project had been considerably scaled back. Don Thomas, a board member and professor at the University of Hawai`i’s School of Ocean and Earth Sciences and Technology, told other members that the “initial proposal of 4,000 employees is no longer on the table.”
Edward Young, board representative of the Hawai`i Strategic Development Corporation, noted that he was “not privileged to see the scaled-down proposal.”
Thomas then described it for Young and other board members – and the public, as well. The original plan called for a phased-in project that ultimately would employ around 4,000 people, Thomas said. “Phase I had only 150 employees, and revenues were going to be in the range of several million dollars, not in the hundred-million dollar range. As part of this discussion, the grand plan seemed to be unreasonable with the rate of expansion and so forth. So the general intent was, we would approve only Phase I development with 150 employees and a much scaled-down parking area. Essentially it’s 10 percent or less the size of the full build-out.”
Board member Robert Arrigoni asked Pasupuleti if there were any legal claims outstanding against him personally or other Megasoft companies with which Pasupuleti had been involved. (Several of those judgments are described in the May issue of Environment Hawai`i.)
“I’ll have to talk to my attorney,” Pasupuleti replied. “I’m not a legal expert… If there’s a problem, we’ll resolve it.”
Arrigoni: “You’re not aware of these issues?”
Pasupuleti: I don’t know the history… Everybody has some kind of blemish.”
Ted Liu, director of the Department of Business, Economic Development, and Tourism, asked
Pasupuleti: “These judgments, you have no knowledge of?”
“I don’t want to comment on things I don’t know,” Pasupuleti said, adding: “They’re working on these issues for some time.”
Bryan Yee, the deputy attorney general assigned to NELHA, asked Pasupuleti if his attorney would be able to appear before the board.
“I would like an Ohio attorney to address that,” Pasupuleti replied.
When asked if he had an attorney, Pasupuleti responded, “We’re going to bring them on board.”
Young asked if the board should require a clearance on outstanding legal judgments as a lease condition.
Yee, the deputy AG, advised that the board ask for a warranty on the absence of any unpaid judgments.
No ‘There’ There
One of the members of the audience was Brian Goldstein, chairman of the board of the state High Technology Development Corporation and a member of the executive board of the Hawai`i Angels investing group, which has invested more than $20 million in start-up enterprises in Hawai`i.
The role of the executive board, he said, was to give a first-cut review to business plans from entrepreneurs seeking investors. “If a plan makes it through the first cut, the smell test, entrepreneurs may be invited in to make their presentation….
Pasupuleti sent his plan to the Hawai`i Angels, Goldstein said. “I just wanted to share with you the views of this fairly educated group of astute investors,” he said. “This plan did not make it past the first cut.” And that, he added, was a low threshold; “the kind of plan that doesn’t make it past the first cut is, for example, a plan to cure cancer over the phone.”
“There is no ‘there’ there,” he said of Pasupuleti’s proposal. “NELHA is the last place you’re going to do this sort of data center…. It makes no sense to do this business with the computing, energy, and people requirements they describe.”
“I don’t know what the expertise of this group is,” he said, referring to the NELHA board. “I just thought you ought to know the viewpoints of the Hawai`i investing community… When I see a plan that just raises huge red flags coming into a state facility, … I just wanted to share my views with you.”
Goldstein’s expertise aside, the board then voted to approve a set of lease conditions and to instruct its administrator to prepare a final lease with Pasupuleti for future board approval. Among the conditions was one requiring an irrevocable letter of credit equal to 18 months rent (10 acres at $3,000 a month per acre for 18 months comes to $540,000) and another requiring Pasupuleti to warrant to the board that there are no outstanding judgments against him.
Six members voted in favor; three – Tsuji, Arrigoni, and Pat Cooper, representing the University of Hawai`i president – opposed.
The NELHA board is tentatively scheduled to meet again on May 29.
Patricia Tummons
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