Olson Trust lawsuit alleges Tower Development execs violated noncompete agreement

  • KELSEY WALLING/Tribune-Herald Brush grows Wednesday on the roof of the defunct Uncle Billy’s on Banyan Drive. Tower Development has submitted proposals for redevelopment projects on Uncle Billy’s and the former Country Club Condominium Hotel.

The Edmund C. Olson Trust has filed a lawsuit against two corporate officers of Tower Development Inc. for pursuing redevelopment projects on Banyan Drive.

A lawsuit filed Tuesday in the Third Circuit Court alleges that Ed Bushor and Stewart Miller, respectively the CEO and president of Tower Development Inc. — and a partner of the corporate entity that owns the Grand Naniloa Hotel on Banyan Drive — pursued a pair of redevelopment projects in violation of an agreement with Olson/Naniloa LLC.

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According to the suit, Tower and Olson/Naniloa partnered to form WHR LLC, which owns the Grand Naniloa. In doing so, Bushor and Miller signed an agreement prohibiting Tower from acquiring, developing or owning any potential competitive properties — defined as “a hotel project of more than 50 rooms within a 30-mile radius of the Naniloa.”

However, last year, Tower submitted to the state Department of Land and Natural Resources two proposals for redevelopment projects on Banyan Drive — one, to partially demolish and replace the defunct Uncle Billy’s Hilo Bay Hotel and the other to renovate the former Country Club Condominium Hotel.

Both proposals would replace the two sites with Hilton franchises, which would, under the terms of the agreement, directly compete with the Grand Naniloa.

Emails submitted with the lawsuit indicate that Olson Trust President Ed Olson expressly gave disapproval for Tower’s potential interest in Uncle Billy’s and the Country Club as early as 2016.

The lawsuit alleges Tower submitted the development plans to the DLNR without providing any notice to Olson/Naniloa, which only discovered the plans from a newspaper article earlier this month about a DLNR committee’s decision to recommend that the Board of Land and Natural Resources approve Tower’s proposals for the Uncle Billy’s and Country Club properties.

“The idea of Tower becoming involved in the redevelopment of Uncle Billy’s has been floated for years,” read a letter sent Sept. 16 to Bushor and Miller on behalf of Olson/Naniloa. “At every point, Mr. Olson has clearly stated his objections. He thought it was a dead issue until recent newspaper articles revealed that you have been pursuing this project without disclosing your plans to the members of WHR. To make matters worse, the documents found on the DLNR website reveal that you are using WHR’s assets to enhance Tower’s bids. The entire situation is outrageous, for it reflects a blatant and inexcusable disregard for your fiduciary duties toward the members of WHR.”

The letter went on to criticize Bushor and Miller’s general management of Tower, noting that WHR came within days of defaulting on its Grand Naniloa lease with the state earlier this year.

“As we all know, WHR is insolvent and teetering on the edge of a bankruptcy filing and/or a foreclosure,” the letter read. “You have done your best to keep the investors apart, uninformed, and divided in their views about your leadership. The fact that WHR came within days, not just weeks, of a fatal lease default is inexcusable.

“Aside from demonstrating an unsurpassed ability to wheedle money from investors with false budgets, misleading projections and plans, and sweet talk, you have done nothing worthy of note,” the letter went on.

The letter concluded by demanding that Bushor and Miller withdraw their proposals by this past Monday. After the two evidently failed to do so, Olson/Naniloa filed the suit Tuesday — three days before the BLNR is scheduled to discuss proposals for the two properties, including Tower’s, on Friday

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Based on these complaints, Olson/Naniloa accused Bushor and Miller of breach of fiduciary duty and tortious interference with a contract. The suit calls for the court to order the defendants to halt their redevelopment projects and seeks additional damages to be proven at trial.

Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.