Guam Port Authority May Be Out $14 Million Due To Guam YTK Settlement

Analysis

By Gaynor Dumat-ol Daleno

HAGÅTÑA, Guam (Pacific Daily News, May 24, 2016) – In 2011, Gov. Eddie Calvo first took office.

At the Port of Authority of Guam, as is traditional, the board that sat under the previous governor had resigned. Calvo put in a new board, which then hired a new general manager.

The year Calvo took his oath of office, his relatives had recently acquired a failed tuna transshipment business — Guam YTK Corp. — which for years had claimed the Port Authority owed it money under its lease agreement to use Hotel Wharf. The business also had been in arrears on its rent since it signed its lease in 2001.

Guam YTK could soon get paid $14 million by the government-run port in connection with the lease dispute. An arbitration panel awarded YTK that amount in April for alleged breach of the lease terms, even though the port had terminated the lease for non-payment.

Guam YTK had signed a 45-year lease with the government under the Gutierrez administration, intending to use portions of Hotel Wharf to conduct a fisheries business. The company failed to develop its facility within the agreed timeline.

Past port management, under the Felix Camacho administration, had resisted paying anything to Guam YTK because they believed the company had reneged on its lease when it failed to pay rent and its share of the insurance premiums. The Port Authority canceled Guam YTK’s lease in 2008. The company has argued the port made it difficult to comply with the agreement.

Port board minutes state the board, in 2010, had considered paying the company $618,000 to resolve any issues with the Guam YTK lease and to pave the way for possible federally funded renovations of Hotel Wharf.

Calvos buy out Guam YTK

At the time, EC Development, which co-owns Guam YTK, saw business potential in Hotel Wharf, especially because the waterfront facility is next to the main cargo seaport, which is congested. The commercial seaport could see more congestion if the planned construction of the Marine Corps base starts.

“It doesn’t take a real estate genius to figure out this is very valuable,” said Eduardo “Champ” Calvo, legal counsel and co-owner of Guam YTK. “I looked at the Guam YTK Development agreement and lease agreement, and sure enough, it was a great contract from the lessee standpoint. And I didn’t negotiate it. I bought it.”

Champ Calvo said the $14 million was less than what Guam YTK had asked for in this last go-round, but a confidentiality agreement in the arbitration process forbids him from discussing the details.

Champ Calvo is the governor’s first cousin. He is the son of the late Guam businessman Eduardo Torres “Jake” Calvo, who with his brothers, former Gov. Paul Calvo and the late Jerry Calvo, created Calvo Enterprises, one of the island’s largest and most prominent businesses. Gov. Eddie Calvo is the son of Paul Calvo.

Champ Calvo and his brothers own EC Development, which is distinct and separate from the businesses owned or shared with the governor, Champ Calvo said. Champ Calvo’s father created EC Development more than 20 years ago as a real estate development company.

EC Development purchased Guam YTK from its former owners, Yoshie and Tom Kamiyama before 2010, Champ Calvo added.

In 2010, Guam Revenue and Taxation Department documents still showed the Kamiyamas as owners of Guam YTK. The 2011 company filings show EC Development as the major shareholder.

Champ Calvo said when deciding whether to buy the business, his company reviewed the lease that attorney Ed Ching originally negotiated on behalf of Guam YTK’s previous owners.

“Ed Ching did a great job from a tenant standpoint because as a warranty it says: ‘Look, we guarantee that the lease is binding and valid, and we will indemnify you, we will pay you. And if it’s ever terminated through no fault of YTK, then the government will pay the fair market value of the 45-year lease.’ And I’m going, ‘Wow, what a great provision.’”

The lease dispute was an ongoing issue with the port board.

New Port Authority board

Within the first few months of the Calvo administration, the new port board hired former Guam YTK representatives to run the port, as general manager — Pedro Leon Guerrero — and deputy general manager — Anisia Terlaje. Leon Guerrero had worked for YTK until 2008. He was the company representative in the lease dispute with the Port Authority boards at the time. Terlaje also represented Guam YTK in its communications with the port in the early years of the Kamiyamas’ ownership of the company, a letter from the company to the port shows.

Gov. Calvo also had appointed his brother-in-law, Mike Benito, to the board, who then became its vice chairman. Benito is a manager in one of the Calvo family businesses.

“Our family is very close, but in all these business transactions, it’s completely separate,” Champ Calvo said. “There’s inference in the papers that it has something to do with Adelup or the governor.

“The governor has no interest in anything involving EC Development,” Champ Calvo added.

Letters, emails press for settlement

In early 2011, emails between then-Vice Chairman Benito and General Manager Leon Guerrero showed that Benito encouraged Leon Guerrero to reach a settlement with Guam YTK, which was now owned by EC Development.

Pressure by the port leadership to pay the new owners of Guam YTK began in 2011, letters and emails from Guam YTK, obtained by the Pacific Daily News show. Prior to 2011, previous boards refused to settle with the company.

Vice Chairman Benito wrote an email on May 9, 2011, to port General Manager Leon Guerrero, referring to Leon Guerrero’s lack of response to Benito’s query about a settlement deal for Guam YTK.

“Pedro, I must admit, I’m a bit disappointed with your lack of response to me. Frustrating doesn’t even begin to describe it,” stated the email from Benito.

Hours after that email, Leon Guerrero wrote back: “Mike, as per our phone conversation earlier this evening, I will be signing a settlement proposal regarding Guam YTK Corp. by tomorrow. Pedro LG.”

The following day, Benito, in an email to Leon Guerrero, stated, “Pedro, Was the letter prepared for you & delivered?”

Leon Guerrero replied: “Mike, I just spoke to Champ and informed him that the letter will be signed by my Deputy GM and I will deliver to Champ’s office.”

When asked for comment, Benito said he didn’t recall the email correspondence with Leon Guerrero. Leon Guerrero has not responded to a voicemail message left with his cell phone. Benito left the Port board in January 2013.

When asked about his cousin’s emails to the port general manager at the time, emails that directly represented his company’s interests, Champ Calvo did not address the question directly, but explained that Guam is a small place and he has had to work with all the different administrations, including his cousin’s administration, as his usual course of business.

Champ Calvo: Gov. Calvo not involved

“The thing that is unusual is that people are criticizing us for doing this now because my cousin is governor,” he said. “The truth of the matter is we actually feel there is reverse discrimination, and we had a much easier time with the Camacho administration, the Gutierrez administration, the Ada administration, because what we present are: What our projects are; what our goals are; and the government is free to accept it or reject it.”

Gov. Calvo has refused to be involved in any Guam YTK business and won’t even talk about it with his relatives, Champ Calvo said.

The governor hasn’t responded to a request for comment on the Guam YTK arbitration settlement.

Daniel Tydingco, chairman of the port board between February 2011 and January 2014, recently said he was unaware of the direct communication between Benito and port General Manager Leon Guerrero about Guam YTK.

Tydingco said when he was port board chairman, he stood firm that Guam YTK had an invalid claim against the port, and the company’s lease on Hotel Wharf had expired.

Tydingco said he still maintains that stance today, despite the arbitrators’ decision. His position is consistent with Superior Court of Guam Judge Anita Sukola’s decision in 2013, in which Sukola ruled Guam YTK’s lease had expired, so the port didn’t have to go into arbitration with the company.

“The legal analysis furnished to the board, citing the invalidity of the claim, and subsequently upheld in the trial court by Judge Sukola, is on point and is backed by case law,” Tydingco stated.

“Only the three arbitrators can explain why they went against that.”

The arbitration panel – made up of attorneys Cesar Cabot, Cynthia Ecube and Mitchell Thompson – held hearings in January this year after Guam YTK appealed Sukola’s decision and won a 2014 Guam Supreme Court decision. The Supreme Court panel, led by Justice Philip Carbullido, ordered the two parties to go into arbitration.

Evolved settlement proposal

The arbitration award is almost twice what Guam YTK’s new owners had initially asked for in 2012, and more than 10 times what the previous owners of Guam YTK had been willing to take in 2007 to walk away, documents show.

The port’s former board, during its November 2010 meeting, discussed that a $618,000 buyout was the most the port would pay to Guam YTK, to clear up any leasehold issues that may arise.

The port needed the Hotel Wharf lease resolved, documents state, because the port had been asking the federal government for grants of between $10 million to $20 million to develop Hotel Wharf. The federally funded improvements were sought because of an anticipated congestion at some of the wharf spaces within the port complex.

The 2010 board ran out of time to take action on the proposal to settle the Guam YTK dispute for $618,000. By early 2011, members were replaced with new appointees under the Calvo administration.

The port breached certain provisions of the lease agreement and rolled the dice by refusing to settle what was essentially a bad deal for the government when the settlement offer from Guam YTK was still around $1 million, Champ Calvo said.

Guam YTK is now 99.9 percent owned by FOL International LLC. Leonard P. Calvo, Jay Lather and Joe John Mantanona are the minority shareholders.

EC Development Group LLC and Pacific Combat Extreme LLC, which is also a Calvo business, own FOL International.

The cost of the arbitration award would eclipse the port’s audited net income of $4.6 million in fiscal 2015.

Senator, community advocate speak out

Sen. Tom Ada, who is chairman of the legislative committee that has oversight of the Port Authority, said he wants the port to challenge the arbitration award in court.

The port’s management and legal counsel said they are unable to comment on what the port’s next move will be.

Ken Leon-Guerrero, a community advocate who has lobbied against an unrelated trash-burning incinerator project, said taxpayers could sue to stop the $14 million arbitration award.

Leon-Guerrero said he doesn’t believe members of the public have been fairly represented in the arbitration process that led to the $14 million award.

“Every man, woman and child on Guam might as well write a $86.48 check to the governor’s family — that’s what the award would cost island residents,” he said.

Pacific Daily News
Copyright © 2016 Guam Pacific Daily News. All Rights Reserved

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