Original Waikoloa Highlands Partners Share History of Cocaine Trafficking

posted in: November 2016 | 0

April 24, 2007. At a meeting of the Waikoloa Village Association, Waikoloa Mauka, LLC, principal Stephan Martirosian made a short presentation on his company’s plans for the area and presented a check for $25,000 to association president Margaret Tigue. The two smiled at a photographer as they shook hands, and the snapshot made the front page of the association’s newsletter, Waikoloa Breeze. Minutes of the meeting record Martirosian as assuring association members that his company “will eventually be developing 9,000 to 10,000 acres of the nearly 14,000 acres they acquired from the Waikoloa Development Company in mid-2005.”

The notion that a prosperous businessman, with connections to global oil interests, had taken over development of the stalled-out Waikoloa Highlands subdivision was generally welcomed by the community, especially after Waikoloa Mauka agreed that it would drop plans for a golf course that some residents feared would compete with the one in their village.

Other evidence bolstered the idea that the company had near-infinite resources to carry out the development. When LUC interim director Rodney Maile was describing progress toward an agreement on the conditions of redistricting on March 19, 2008, the financial wherewithal of Waikoloa Mauka was practically a non-issue.

“The parties did not dispute the petitioner’s financial capability to undertake the project,” Maile told the commissioners.

The final decision and order noted, “Petitioner intends to use $4 million in funds held by Morgan Stanley for pre-development costs for the Project. In addition, the Petitioner plans to use proceeds from sales of its properties to fund the Project. In conjunction with sale proceeds, Petitioner will also obtain funding from Arch, Ltd., one of the Petitioner’s members, to complete the Project.”

As evidence of the company’s robust financial health, the petitioners had offered to the LUC a 2005 federal tax return for the company that claimed more than $61 million in cash assets on Schedule M-2, “Analysis of partners’ capital accounts.”

Digging deeper into that same return, however, in a breakdown of Waikoloa Mauka’s assets, this same $61,365,680 value is described as “land for development,” rather than cash. Additional tax statements submitted for the two entities making up the Waikoloa Mauka partnership provided details. Twenty percent of the company’s assets — $12,271,000 – were contributed by Vitoil and the remainder — $49,084,000 – by Arch. (Although Waikoloa Mauka was incorporated in Delaware, Vitoil in California, and Arch in the Bahamas – all shared the same address in Glendale, California.)

What was missing in all the scrutiny was any consideration of the criminal history of Martirosian and other parties involved in the company. To be sure, the LUC does not generally consider this when it evaluates the fitness of petitioners to follow through on their commitments.

The sellers had, however, known of the unsavory ties of the individual who put the deal together. Michael Miroyan, then a part-time Hawai`i resident, claims to this day on his LinkedIn page that this was among his pinnacle achievements. But because of his criminal record, including a federal conviction for trafficking in cocaine, the landowners did not want to go forward with the sale if Miroyan’s name was on the deed.

Martirosian and partner Vitaly Grigoriants, a Russian oil company president, then entered into a side agreement with Miroyan. Among other things, the agreement noted that Miroyan and/or two of his California businesses “were also buyers for 20 percent of the Buyer’s ownership until sellers ran a ‘background check’ on Miroyan and requested that he be removed from the contract because of a felony conviction and the possibility of bad press.”

But Miroyan retained a role as a shadow participant in the deal. Martirosian and his attorney, Kevin Kellow, agreed that Miroyan would receive a 20 percent ownership share in the business entity that would be formed to take title to the Waikoloa acreage.

By 2008, the relationship between Miroyan and his erstwhile partners had soured – in Hawai`i and in California, as well. In California, Vitoil, Martirosian’s company, had sued Miroyan and his Golden Eagle Investments in a dispute over property held in Modesto, California, by Sperry Road Business Center, a company in which Miroyan was managing member and Vitoil had an interest. In that case and a counterclaim by Miroyan, Miroyan claimed Vitoil was attempting to defraud him through business deals made while Miroyan was incarcerated. Vitoil also sued Miroyan in Los Angeles in a dispute over the sale of a building in which Miroyan held an interest.

Against that background, in July 2009, Miroyan sued Arch, Vitoil, and related entities in Hawaii’s 3rd Circuit Court, alleging that Arch and Vitoil “have orchestrated the transfer of portions of the [Waikoloa property] worth approximately $35 million” and that they were “engaged in a pattern of selling and mortgaging (at very high interest rates and points) and cross-collateralizing the properties for less than reasonable equivalent consideration and with the intent to hinder, delay, or defraud” Miroyan.

Miroyan settled with Waikoloa Mauka. The agreement transferred to Miroyan’s company Hawaiian Riverbend title to about 31 acres at the mauka entry to Waikoloa Village, at the corner of Paniolo Drive and Waikoloa Road.

In spring of 2010, Waikoloa Mauka and Miroyan entered into a joint development agreement, calling for them to work together and split the costs of subdividing the parcel and making certain other improvements. The subdivision would divide Miroyan’s parcel into three lots: one of six acres fronting Paniolo Drive (where Miroyan planned to develop a 78-unit condominium complex), one of 14.6 acres (where Miroyan planned to build a shopping mall), and one of 10.7 acres, which would be developed as a park and donated to the county, to satisfy the Waikoloa Highlands rezoning condition requiring a per-lot contribution of more than $6,000 – totaling more than $2.45 million – to support county park and recreational facilities.

In return for donating 10.7 acres of his land, the development agreement provided for Waikoloa Mauka to transfer to Hawaiian Riverbend the triangular 10.8-acre parcel on the corner of Waikoloa Road and Pua Melia Street – the only parcel that Waikoloa Mauka now owns. The agreement, if fulfilled, would thus give Miroyan control of land on both mauka corners of the main intersection leading into Waikoloa Village.

Even before the development agreement was signed, Miroyan had transferred a 50 percent interest in Hawaiian Riverbend to Tae Kai and Kenneth Kai, trustees of the Kai Family Trust. In return, Miroyan expected to receive $527,000, of which $300,000 was owed to Waikoloa Mauka under terms of the settlement.

Miroyan claims he was paid only $330,000, which caused him to be unable to follow through with development plans for the property. Despite his having given mortgages to the Kai Trust, the trust did not deliver fully on the loans secured by the mortgages, Miroyan has stated in filings made to the U.S. Bankruptcy Court.

Miroyan then turned to other parties for loans, Gang Chen and Cory TerEick, securing them with additional mortgages on his Waikoloa property.

Beginning in 2014, Miroyan’s creditors initiated foreclosure proceedings, resulting ultimately in Miroyan filing an emergency Chapter 11 bankruptcy petition on April 4 of this year, forestalling a foreclosure auction in the proceeding initiated by Tereick.

The recently approved reorganization plan anticipates the sale of all three of Miroyan’s lots, which he claims should bring in $7 million. That, he says, should be more than sufficient to satisfy his creditor’s claims.

Meanwhile, the Hawai`i County Department of Finance has not been able to collect taxes on Miroyan’s property since just after the subdivision occurred. As of last month, the bill for taxes, interest, and penalties for all three lots stood at $56,754.78.

But if Waikoloa Land & Cattle was concerned about Miroyan’s criminal misdeeds, those of Martirosian apparently escaped notice. Yet his record, as detailed in an article published in the January 2, 2014, issue of LA Weekly, is at least as long as that of Miroyan.

By then, Martirosian and Chase had launched a film production enterprise called Envision Entertainment, Inc., incorporated in Wyoming but headquartered in the Los Angeles area. Among the films they backed are Lone Survivor, End of Watch, 2 Guns, and Escape Plan. LA Weekly reporter Gene Maddaus, now with Variety, had done exhaustive investigative work before sitting down for an interview with the two men and their publicist.

Maddaus’ article, “Drugs, Diamonds, International Intrigue – You Won’t Believe Two Hollywood Producers’ Crazy Backstory,” is available online. It documents, in shocking detail, the criminal lawsuits brought against both men, going back to 1989, four years after Martirosian immigrated to Los Angeles from Russia.

That year, Martirosian was arrested with four kilos of cocaine at a Border Patrol checkpoint in Texas. Again in 1993, he was accused of arranging to help transport 800 kilos of cocaine from Colombia to Florida. Martirosian told Maddaus he was only trying to buy coffee for a chain of shops in Moscow.

Chase has had additional run-ins with the law, involving everything from cocaine trafficking to forging checks to shoplifting glue.

Both men have attempted, and apparently succeeded, in getting their sentences reduced by offering their services as informers. In Martirosian’s case, that included offering the FBI information on KGB activities, as evidenced in an appellate court decision on his sentencing after the Texas arrest.

— Patricia Tummons

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