Waikoloa Highlands Told to Defend Project At October LUC Meeting

posted in: October 2018 | 0

“The Waikoloa Highlands project you see today is unusual.”

In this way did Steve Lim, attorney for the developer, prove himself master of the understatement.

Lim made the comment to the Land Use Commission at its meeting of September 6, when he was attempting to sell commissioners on the idea that his client, Waikoloa Highlands, Inc., should be given one more year to show that it was serious about moving forward on the project.

The commission had gathered in Kona to consider a show-cause order issued to the developer – an order, that is, that the developer give the commission good reason as to why the land proposed for development should not lose the entitlement bestowed on it by the LUC 10 years ago. That entitlement, needed to allow the company to develop 398 house lots on some 761 acres of land, shifted the designated land use category from Agricultural to Rural. Performance – defined by the LUC as installation of “backbone infrastructure” needed to allow the sale of the house lots – was to have occurred within 10 years of the redistricting. Nothing has been done on the land in that time.

It was only after the LUC had voted to approve the show-cause order at a status hearing in May that Lim came on board as the attorney for Waikoloa Highlands. “About June or so – June of this year – after my client missed the status conference in May, I was contacted by Mr. [Joel] LaPinta and together we discussed” approaches to the LUC’s order, Lim told the commissioners. LaPinta, a planning consultant in Hilo, has been designated as the project manager.

“Until that time,” Lim said, “I don’t think my clients understood what they were facing. We’ve done our best to educate them.”

“This was a project delayed by fraud [and] mismanagement, allegedly,” Lim said, referring to the company’s reliance upon a former director, Stefan Martirosian, to carry out the project. “Now the owners do understand the Land Use Commission entitlement process in Hawai`i much better.”

What Lim was seeking on September 6 was a one-year continuance of the order to show cause, effectively giving Waikoloa Heights an opportunity to seek an amendment to the 2013 zoning ordinance (which expired in March), attempt to resurrect past agreements with service providers and contractors whose last contact on the project dates back nine or more years, and figure out how to satisfy other conditions imposed by the LUC’s 2008 decision.

Lim handed to the LUC’s deputy attorney general a draft stipulation he was going to propose to the two other parties to the LUC proceeding: Hawai`i County and the state Office of Planning. Neither party had had a chance to review the stipulation; Lim acknowledged that the owner, in Moscow, had given Lim his approval to offer the draft stipulation barely 10 minutes before the meeting began.

Accompanying Lim at the meeting was, in addition to LaPinta, Natalia Batichtcheva, who was identified as a director of the company. No one at the table, however, could make a statement binding the company to any agreement, a fact that troubled several of the commissioners.

Commissioner Gary Okuda asked Lim for “the names of the specific individuals who are considered the decision-makers with respect to this project. … You did reference that you had to seek the approval of decision-makers outside of Hawai`i. Nothing wrong with that. The law makes no distinction, but just for the record, we should know the specific names of specific people considered by you as decision-makers.”

In addition to Batichtcheva, who seems to be merely the face of the company in the United States, with no decision-making authority of her own, Lim named as shareholders of the company Ovashafyan Ayaks and Vitaly Grigoriants.

Okuda continued with a line of questioning about ownership of the company, noting that Lim had stated that the present petitioner, Waikoloa Highlands, “is an entity separate from the original petitioner, Waikoloa Mauka, LLC.”

Lim agreed: “a separate company.”

Okuda: Did these companies at any time have identical shareholders?”

Waikoloa Mauka, the original petitioner, “was an LLC,” Lim answered, “so they had membership interests. For the relevant time the commission is looking at this, they had the same control group, with the exception of Martirosian.”

“So the group controlling Waikoloa Mauka is the same group that now controls Waikoloa Highlands?” Okuda asked.

“Essentially, yes,” Lim responded. He went on to blame the problems with the project on Martirosian’s “bad acts” – or, at least, allegations of bad acts, taking pains to point out that nothing had yet been proven in a court of law in any country.

Commissioner Dawn Chang also had questions about the company’s ownership. “The gentleman – Martirosian – the gentleman in jail, he has no position in the company at all?” (Martirosian has been held in a Moscow jail since last fall, appealing an order to have him extradited to Armenia, to face charges of fraud brought by Grigoriants.)

“None at all,” Lim stated. “He was a director, running the company, but because of his fraudulent and criminal acts that were alleged, he was taken into prison.”

At that point, LUC chairman Jonathan Scheuer noted that one of the exhibits that Lim himself had submitted showed that Martirosian still held a 20 percent ownership interest in the Waikoloa Highlands.

Lim conferred briefly with Batichtcheva. “Ms. Batichtcheva says they have something,” he told the commission – apparently something to indicate that Martirosian is no longer in the picture. Whatever that is, it was not presented to the commission.

What his client was seeking, Lim said, was also something out of the ordinary, so far as commission proceedings were concerned. Normally, when the commission enters a show-cause order, the developer is not supposed to do any further work on the project while the order is pending.

In this case, however, the developer wants to move forward with the project, obtaining renewals of county permits and engaging with the Department of Transportation and other agencies to develop plans for the traffic improvements and other projects related to the development, Lim said.

“Essentially, what we’ve done, at the request of the Office of Planning originally, is try to find a middle ground where OP would be comfortable with no further groundwork at the project, and we would do certain things with respect to entitlement. In the meantime, we would process land use entitlements,” Lim said, describing the terms of a proposed stipulation order.

With respect to things like the development of the promised traffic circle at the intersection of Paniolo Drive and Waikoloa Road and other improvements, “those are subdivision issues,” Lim said. “That’s why we suggest we go there [to the county] first and then come back to the Land Use Commission with a motion to amend” the conditions of the redistricting order the LUC approved a decade ago.

“Give us about a year, to go to the county and do rezoning. If we don’t finish by that time, we’ll come back, on the order to show cause. If we have no progress, we’ll proceed with the order to show cause.”

The county deputy corporation counsel representing the Planning Department, Ron Kim, indicated that “generally speaking,” the county was agreeable to Lim’s stipulation.

The Office of Planning was hesitant, however. Its representative at the meeting, deputy attorney general Dawn Apuna, said that the OP didn’t “oppose the motion for continuance, but we would like to ask the petitioner that they halt any development as well as entitlements until the order-to-show-cause hearing.”

Lim then outlined for the commissioners what he called the “paradox” of the “order-to-show-cause box.” “Once you get into the OSC box, it’s paradoxical,” he said. “Because here we are, with a new team, wanting to develop the project, and everybody is saying, ‘don’t develop.’ We’re ready to proceed. We have engineers, we hired an archaeologist. We submitted drainage plans and satisfied the affordable housing requirement. We have an agreement to satisfy the parks requirement – but we don’t understand the deal on that We may implement the park in another location, but there are things we want to do to proceed with the project. This was a project delayed by fraud and mismanagement, allegedly. Now the owners do understand what the LUC entitlement process is in Hawai`i much better.”

(The agreement to provide land to the county for a public park involved a parcel of land on the opposite side of Waikoloa Road that is owned by a former associate of Martirosian, Michael Miroyan. After Miroyan and Martirosian fell out, the park agreement does indeed seem to be off the rails.)

Commissioner Okuda disagreed with Lim on the point of the “OSC paradox.” “I don’t believe there’s a paradox,” he said. Citing language in the Hawai`i Supreme Court’s decision involving the `Aina Le`a case, reported on extensively in past issues of Environment Hawai`i, Okuda noted that “vacant land with appropriate state and county Land Use designation is often subject to speculation…. [It] inflates the value of the land, increases development costs, and frustrates federal, state, and county” interests.

“In other words,” Okuda continued, “I believe the Supreme Court has stated that one of the legal reasons why the commission must strictly review and enforce these conditions is that in certain cases – and I’m not prejudging this case, but in certain cases – allowing developments to basically lie there without compliance to conditions and where these conditions aren’t complied with sometimes for decades really does not give the benefit to the community” that was represented at the time the boundary amendment was approved. “It contributes to land speculation,” he said, “driving up prices without concurrent benefit.”

Commissioner Arnold Wong made a motion to have the LUC hear the order to show cause at an LUC meeting on October 24 and, if needed, the 25th. At that time, he stated, the LUC  “would like the petitioner to give us more information to insure that we know who is running this. … And, also, if your representations are binding. If this gentleman, Martirosian – he’s no longer a part of this petition at all? [We need] some kind of representation.”

Lim indicated he understood the commissioners’ concerns.

Before the vote, LUC chairman Scheuer explained why he would be voting in favor of the motion. “When we move land from ag or conservation into rural, we do so deliberately and thoughtfully with conditions that are put in place not to burden landowners but to make sure that substantial public interests are held up, and one of those conditions is that they proceed timely.”

The motion passed without dissent.

— Patricia Tummons

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