A photo of the Coco Palms building with its row of hotel rooms near the lobby. // WikiMedia

The Hawaii Independent // Currents

February 2018

ON KAUAʻI’S EASTERN SHORE—sandwiched between restaurants, resorts and housing developments and strung along the busiest stretch of Kūhiō Highway—is a parcel of lush land where nature has begun to reclaim what was once a world-famous resort development.

The area, located at the mouth of the Wailua River Valley, once hosted the Coco Palms resort, until ʻIniki, the most devastating hurricane in Hawaiʻi’s modern history, destroyed the hotel and caused a total of $3.1 billion (1992 USD) in property damage along the southern half of the Garden Island.

Today, the buildings lay dilapidated and overgrown. But just mauka of the hotel site, a small group of activists, educators, farmers, fishermen and students—many of them Native Hawaiian—are working to restore the area’s ecosystem to a healthy, productive state.

The camp of 30 or so may not look like much now, but its occupants say they have a vision to turn it into a site of cultural restoration, food production and community self-determination.

Long before the hotel existed—before the overthrow of the Hawaiian Kingdom—the area was once reserved for and tended by Kauaʻi’s royalty, and was home to a thriving loko iʻa, a Hawaiian fishpond, and acres of highly productive land that produced taro for the surrounding population centers. Development of the land here during the 20th century destroyed or rendered unusable these precious resources. But the group of dedicated community members there, who see themselves as modern day konohiki—stewards of land—are working to turn this place back into a source of abundance and wealth for their community.

Whether or not they will be able to stay here and continue their work is not certain, however. A group of developers led by businessmen Tyler Greene and Chad Waters is claiming ownership of the land and moving in with plans to redevelop the resort, and convert it into a wealth-extraction point within the modern day capitalist paradigm. In January, 2018, a judge ruled that these developers—Coco Palms Hui LLC—do have legal rights to possess the land based on a limited warranty deed passed down from one of Hawaiʻi’s most controversial, though largely unremembered, court cases.

Judge Michael Soong of the District Court of the Fifth Circuit ordered the eviction of the Hawaiian camp beginning Sunday, January 28, 2018. In response, around 100 Hawaiian community members and allies descended upon the camp to help prevent the eviction. Today, a small group remains on the land.

The situation closely mirrors arrests in Wainiha on Kauaʻi’s northern coast. After Facebook CEO Mark Zuckerberg attempted to clear hundreds of ancient land titles from his 700-acre Pilaʻa, Kauaʻi, compound, Hawaiian community members came forward with similar land claim assertions. The case, and the subsequent arrests, brought international attention to the land issues on Kauaʻi, and in Hawaiʻi as a whole.

“Kauaʻi is where the fight over land in Hawaiʻi is crystalizing now,” says veteran Hawaiian sovereignty activist Laulani Teale. “Wailua is one of them. There’s also a similar reclamation going on in Wainiha, and others across Kauaʻi. In all of these places, the people are taking back Hawaiian land; they’re taking back ancestral land. That’s the stress in everything. On one side, there’s this push by the wealthy to grab land, and then there’s another push by kānaka and protectors to take it back—both of them by force; but different kinds of force.”

At the heart of this story—which features multiple court cases, contested wills, cultural appropriation, dubious foreign funding, and the legacy of one of Hawaiʻi’s more notorious historic swindlers—is the issue of continued colonization and institutionalized persecution of Hawaiians in their own land. In Wailua, as in other land struggles across the state, young Hawaiians—raised in cultural immersion and coming of age during a time of great inequality—are at the forefront of the movement to reclaim land that was often taken in unjust ways at the expense of the Hawaiian people.

Faced with the prospects of jail, houselessness, drug addiction and indoctrination within an oppressive system that continues to erase, persecute or dismiss the cultural traditions—the very language—that their kūpuna rediscovered just a generation or two earlier, these young people are choosing to create an alternative path for themselves that re-aligns their lives with the values of Aloha ʻĀina, Ea and Kūʻē.

Along the way, they may make some controversial decisions—after all they’re figuring this process out as they go. But what struggle to reclaim identity, land and self-determination was ever a smooth process?

The values that this movement seeks to return to need not necessarily conflict with development. However, these values do mandate that development do no harm to the land or the people who care for it; that developers respect the wishes of the community into which they desire entry; and that genuine respect be shown for the culture that was born in these islands. And yet, when it comes to Wailua, just as in Wainiha—or Waiāhole, Waikāne, Kalama Valley and numerous other examples from across the archipelago in generations before—the proposed development is very much in conflict with those values.

Wailua Konohiki

“This is where Maui discovered how to make fire,” says Noa Mao-Espirito. “It was here, in Wailua, that he caught the ʻalae ʻula duck and forced it to teach him how to use sticks to create fire. When I first came here, the ʻalae ʻula approached me and I started feeding them. There are three native ducks that live here and all of them are endangered.”

According to Mao-Espirito, the proposed hotel development would have a severe impact on the ecosystem and the endangered species living here.

“The ducks, the ʻoʻopu, all the endangered species here—they’d be disturbed big time,” he says. “The hotel would destroy all of this: the fishpond, the taro patches, the habitat for native species.” 

The loʻi at Wailua are special because they are sourced from a pūnāwai—a spring. This watershed system used to jettison out near the site of the Horners surf spot parking lot. But after Kūhiō Highway was built, the water stopped flowing naturally. Now, it backs up into the Coco Palms site.

“The stream flow was already disturbed by the previous developments here. So we want to stop them from doing any more damage,” says Mao-Espirito. “I just want to keep this place safe.”

Mao-Espirito is a kaiapuni—a Hawaiian immersion graduate who has studied ʻŌlelo Hawaiʻi since his childhood. In 2016, after researching his genealogy and the history of the local land, Mao-Espirito discovered a link to the area. He and a few others cleared the overgrown road by hand, and began to actively care for the numerous burials and native species in the area.

Mao-Espirito began planting kalo, lau pele, bananas and other cultural plants; he began to monitor native waterbirds and other threatened species. Other Hawaiians living in the area, many of them formerly houseless, began to join in the work of caretakership. They’ve since cleaned out invasive grasses, hauled away tons of hotel trash and broken furniture, and begun to work together as a community.

“Really, what we’re doing here on the ʻāina is restoring our nohona ka wai—our Hawaiian lifestyle,” says Keʻala Lopez, another kaiapuni who has joined the camp at Wailua. “It’s a paradigm shift from what we have been forced to buy into: the 9–5 job, getting caught up in paying bills. I think a lot of us are tired of that. The ʻāina is here for the people. The kings and queens said that the ʻāina is sovereign. It’s here to feed us as long as we take care of it. Right now we’re being deprived of it, and we want to restore that balance so that it will take care of us after the barge stops coming.”

Mao-Espirito also began to clean the nearby Ka Lae O Ka Manu heiau complex. He hauled out trash and cleared weeds and he and the families began to work on the restoration of the waterways, filling old boats with trash from the river. He says he’s been threatened, and that police and government officials have generally sided with pressure from the corporate interests involved. Mao-Espirito was even charged with trespassing—on the lands of his own kūpuna. Even worse, the County of Kauaʻi has contemplated building a bypass road next to the master ʻauwai that would pollute and destroy the ancient water flow the amateur konohiki have worked to restore. Nevertheless, Mao-Espirito remains positive, and support for his efforts to care for the land continues to grow.

“The significance of a place like this—where our people can come to live and work the resources provided here—cannot be overstated,” Mao-Espirito says. “This place represents freedom and the understanding that the people can survive right here on the ʻāina. That’s what would be lost if the hotel is built.”

According to The Garden Island (TGI), Coco Palms Hui LLC purchased the land through a special warranty deed from Prudential Insurance for $23 million. “By spring 2018, crews were expected to start Phase II, the renovation and reconstruction of Coco Palms,” TGI wrote. The proposed redevelopment would create a 350-room resort adjacent to what Kauaʻi resident and historian John Wehrheim describes as the two most congested intersections in all of Kauaʻi.

“You’re going to have all those people crossing a road with no pedestrian improvements to get to a beach that isn’t that big and is already maxed out by the local people,” he says. “On top of that, on the north side of the development, right along Kūhiō Highway, is the county’s sewage pump booster station and a man hole that is so over-capacity already that the whole place smells like raw sewage, and has for years. And they want to put a bigger load on the thing.”

Wehrheim continues, “Kauaʻi has around a 1.8 percent unemployment rate. That means that there are people on Kauaʻi who are unemployable that are still working—oftentimes multiple jobs. Nobody can hire anybody here. Most of the construction workers are off-island guys. You can ask anyone: nobody can even get a parking space at the airport now, and we’ve got a houseless crisis on our hands. So we’re gonna add all those rooms? And where are we going to get the people to build these rooms? And where are we going to get the people to work there? What is the point? It’s a horrible idea in terms of traffic, employment, sewage, infrastructure, beach—on and on and on. It should have been shut down years ago.”

In the literal sense of the word, this portion of the ʻāina is in “occupation” to prevent a development from proceeding—similar to the situation at Standing Rock or Mauna Kea. And yet the word “occupier,” when applied to indigenous people, perpetrates a cruel twist of history. While this camp and the camp at Wainiha may lack some of the discipline, structure and size of the Standing Rock camp, Teale reports that, at both Wailua and Wainiha, there are common themes of caring for the land, extensive cleaning, weed control, care of native species, and a return to sustainable agricultural practices, despite what negative connotations and stereotypes the media uses to describe these sorts of camps.

Consistent in most media coverage of land struggles is the stereotypical portrayal of the angry Hawaiian protester, an image that is replicated and reinforced in popular culture. Mainstream reporting tends to treat these incidents as just another protest but, for the young kaiapuni leading the movement, these struggles are about something bigger.

“It’s about self-determination, and being able to go back to our culture and reestablish our identity,” says Lopez. “But in order to do that we need to have food, water and shelter—all things that we can find right here in Wailua and that should be preserved and perpetuated.”

“We have strong people in our movement; we are all family, and everyone showed up,” says community member Kaʻimi Hermosura. “No matter what they bring at us—court cases, title claims, ejectment—they still gotta deal with the Hawaiian Kingdom, which is our people and each other.”

“The development will deprive our people of the benefits of food cultivation, shelter and a sense of belonging that they get from the land here,” Lopez says. “And for what? Profits from a hotel that could be under water in 10 years? We want to restore the land to a state that can weather the storm of global climate chaos; we want to practice the proper protocols for our kūpuna lying here; we want to work the land to feed our people, and to not let all the potential here go to waste.

“We are now working on protecting the area they want to develop,” she continues. “There are hundreds of iwi kūpuna here—hundreds of burials—of all kinds; of royalty, of warriors, female warriors, and even dating back to our legends when there were giants that roamed this island. There are giants buried here.”

Shady Developments

In the Coco Palms Hui LLC development application, the developers propose that $86 million—or two thirds of the total budget for the 12,000-square foot Hyatt Resort—be raised through 172 wealthy foreign nationals in exchange for a direct path to U.S. Citizenship for them and their families:

The proposal identifies the new commercial enterprise (“NCE”) of the project as Lexden Coco Palms Loan Company, LLC, which was formed in the State of Delaware on January 31, 2014. The project is located at 4-947 Kuhio Highway, Kapaʻa, on the island of Kauaʻi in the State of Hawaiʻi. These 172 immigrant investors will subscribe to the NCE as limited partners in exchange for capital contributions of $500,000 each and an aggregate of $86 million. The NCE will loan the $86 million of EB-5 capital to a third-party entity, Coco Palms Resort. The EB-5 capital loan proceeds will then be used to acquire and re-launch The Coco Palm Resort as the Coco Palms by Hyatt in Kauaʻi.

In a December, 2017, article in TGI, author Allan Parachini wrote:

In 2014, for example, Coco Palms Hui filed with the U.S. Securities and Exchange Commission to offer eligibility for U.S. visas in exchange for investment commitments of at least $500,000 by non-U.S. citizens. The program was intended to produce $28 million in investor commitments, according to the SEC filing, although only $1 million had actually been raised.

The filing also noted that BPG Hawaii LLC, another entity owned by [Tyler] Greene and Chad Waters, the other principal in Coco Palms Hui, intended to collect $800,000 in sales commissions and finders fees from the $28 million offering. How much the visa-for-cash offer produced is not known.

These EB-5 Visas are often referred to as “Golden Visas,” and multiple projects on Kauaʻi, across Hawaiʻi and throughout the United States are using these types of insured, $500,000 “investment loans” from wealthy foreign investors as major funding sources. Here’s how another Kauaʻi resort development is soliciting these EB-5 investment loans from wealthy foreign nationals.

When concerned community members began to discuss the nature of this funding on Facebook, Waters insisted that the development has collected no money in this way:

Aloha & Good Morning Kauaʻi! I appreciate this page and often scroll through to keep up to date on what is new and happening on the island that we all love. As the developer for the Coco Palms Resort, I would like to personally respond to this group and the one member that has posted erroneous information numerous times, 30+ and counting, on this page. It seems to be the same incorrect information over and over and over again.

Based on the responses to these posts, very few people care about the EB5 financing program. Here is how just about every post starts “The Coco Palms Hyatt Resort developers solicited as much as $86 million in loans from wealthy Foreign Nationals using the EB-5 Golden Visa program.” For those of you that could care less about how Coco Palms may or may not be financed, please disregard this posting. However for those of you that would like to hear the truth, Coco Palms has neither solicited or raised $0.01 in EB5 funds. End of story…let’s move on to something else ok? We are all entitled to our opinions about Coco Palms or any other subject. Post away! However, I think we all agree if that we are posting something we are presenting as a fact, at least please try to make it factual. Regarding Coco Palms, if you want to know the facts, just ask.

In response Mark Miller, an artist and historian of Hawaiian descent living in Northern California who traces his roots back to Kauaʻi, did ask, citing The Garden Island report.

“You are assuming that Allan [Parachini] and TGI got that correct which he did not,” Waters responded on Facebook. “Fact: The USCIS approved the Coco Palms resort for up to $86M. Fact: Not one penny was every solicited or raised … At some point in the near future will do a sit down with Allan so he can write another story to correct any errors in the first one.”

He continued, “As mentioned, we had a firm to get the project approved for EB5 should we chose to use it. The regional center that was created by our approval is owned by Lexden Capital. We have no interest in this company and they are not soliciting anything on behalf of Coco Palms Hui LLC.”

The Independent found at least one website, written in Chinese, that appears to indicate an intention on the part of the Coco Palms Hui to raise $100 million in EB-5 funding from 200 investors.

“I am going on the record here to say that I like the program when used correctly and legally,” Waters wrote. “It is a win-win for the developer (gets financing), the community (the $ amount of loan depends on jobs created), and investor (they get green card). Please note that only about 80 percent of investor[s] get approved. The other 20 percent are deemed bad apples and rejected from program.”

Technically, these projects are required to generate no fewer than 10 jobs within the United States as a trade-off. The program is now up for Congressional reauthorization. However, there are serious problems with this program. According to a PBS column:

The ability to monetize a scarce public asset—access to the United States—has become a gravy train for developers seeking cheap loans, immigration attorneys, China-based migration agencies and federally-authorized investment packagers known as regional centers.

The profits at stake prompt deceptive practices—both in marketing investments and claiming job creation—that distort the intent if not the letter of the law.

Not even the U.S. government is able to verify the true identities of these wealthy investors and their families, nor are they actually able to validate where this money comes from, posing a potential national security threat for us all.

A report from the United States Government Accountability Office concludes:

Because of difficulties ensuring the integrity of the Regional Center Program, the United States Citizenship and Immigration Services (USCIS) was limited in its ability to prevent fraud or national security threats and could not demonstrate that the program was benefiting the U.S. economy and creating full-time employment as required by law.

USCIS has identified fraud and national security risks in the EB-5 Program in various assessments it conducted over time and in collaboration with its interagency partners. Specifically, a senior Fraud Detection and National Security Directorate (FDNS) official noted that, while adjudication of petitions in the EB-5 Program, like other immigration programs, centers on the eligibility of the petitioner, the EB-5 Program also has an investment component that creates increased program complexity and the potential for fraud risks.

[A]ccording to USCIS officials, it can be difficult to verify the sources of immigrant investors’ funds and such verification difficulties could pose fraud risks to the program. For example, USCIS officials told us that some petitioners may have strong incentives to report inaccurate information about the source of their funds on their applications in instances when the funds come from illicit—and thus ineligible—sources, such as funds obtained through drug trade, human trafficking, or other criminal activities.

USCIS officials said that … FDNS did not have a means to verify self-reported immigrant financial information with many foreign banks. In addition, both USCIS and State officials noted that they did not have authority to verify banking information with many foreign countries. For example, State officials said that because the U.S. government lacks access to many foreign financial systems, there is no reliable method to verify the source of the funds of petitioners.

The amount of investment required to participate in the EB-5 Program, coupled with the fact that EB-5 investors are making an investment in order to obtain an immigration benefit, can create fraud risks tied to unscrupulous regional center operators and intermediaries. According to Securities and Exchange Commission (SEC) officials, they have identified instances of fraudulent investment schemes, including securities fraud, related to EB-5 investments.

An advisory from the U.S. Financial Crimes Enforcement Network (FinCEN) further elaborates:

Although FinCEN to date has focused on residential real estate, money laundering can also involve commercial real estate transactions.

Real estate transactions and the real estate market have certain characteristics that make them vulnerable to abuse by illicit actors seeking to launder criminal proceeds. For example, many real estate transactions involve high-value assets, opaque entities and processes that can limit transparency because of their complexity and diversity. In addition, the real estate market can be an attractive vehicle for laundering illicit gains because of the manner in which it appreciates in value, “cleans” large sums of money in a single transaction, and shields ill-gotten gains from market instability and exchange-rate fluctuations. For these reasons and others, drug traffickers, corrupt officials and other criminals can and have used real estate to conceal the existence and origins of their illicit funds.

FinCEN’s analysis of Bank Secrecy Act (BSA) and Real Estate Geographic Targeting Order (GTO) reported data, law enforcement information and real estate deed records, as depicted by the case studies in this advisory, indicates that high-value residential real estate markets are vulnerable to penetration by foreign and domestic criminal organizations and corrupt actors, especially those misusing otherwise legitimate limited liability companies or other legal entities to shield their identities. In addition, when these transactions are conducted without any financing (i.e., “all-cash”), they can potentially avoid traditional anti-money laundering (AML) measures adopted by lending financial institutions, presenting increased risk.

Money laundering is a crime orchestrated to conceal the source of illegal proceeds so that the money can be used without detection of its criminal source.

Use of shell companies decreases transparency: Criminals launder money to obscure the illicit origin of their funds. To this end, money launderers can use a number of vehicles to reduce the transparency of their transactions. One such vehicle, highlighted in the below case study, is the use of shell companies. Shell companies are typically non-publicly traded corporations, limited liability companies (LLCs), or trusts that have no physical presence beyond a mailing address and generate little to no independent economic value. Most shell companies are formed by individuals and businesses for legitimate purposes, such as to hold stock or assets of another business entity or to facilitate domestic and international currency trades, asset transfers, and corporate mergers. Shell companies can often be formed without disclosing the individuals that ultimately own or control them (i.e., their beneficial owners) and can be used to conduct financial transactions without disclosing their true beneficial owners’ involvement. Criminals abuse this anonymity to mask their identities, involvement in transactions, and origins of their wealth, hindering law enforcement efforts to identify individuals behind illicit activity.

Criminals can use all-cash purchases to make payments in full for properties and evade scrutiny— on themselves and the origin of their wealth—that is regularly performed by financial institutions in transactions involving mortgages. All-cash transactions account for nearly one in four residential real estate purchases, totaling hundreds of billions of dollars nationwide, and are particularly exposed to abuse.

If you tried to guess how many active business (and at least one nonprofit) entities exist that are related to Tyler Greene, Chad Waters and the Coco Palms Hyatt development, you’d almost certainly guess short of the actual number. We found 26:

• BPG Hawaii LLC;

• Coco Palms Hui LLC (branch);

• Coco Palms Hui LLC;

• Lexden Coco Palms Loan Company LLC;

• Lexden-Hawaii Regional Center LLC;

• Petrie Coco Palms LLC;

• PR II Coco Palms LLC;

• Coco Palms LLC;

• Coco Palms Investments LLC;

• Coco Palms Cultural Advisory Committee, Inc. (nonprofit);

• KK1&2 LLC;

• Coco Palms Lending LLC;

• WB Hui, LLC;

• Kuauli Investments, LLC;

• Olomana Hui LLC;

• Sound Investments LLC;

• Olomana Pahoa LLC;

• Kaala Hui LLC;

• CPK LLC;

• Onouye Sebastian LLC;

• TG Onouye Investments LLC;

• JHMP LLC;

• Hauiku LLC;

• Kuauli Investments LLC;

• MPB Holdings LLC; and

• GWCP LLC.

It’s true there’s nothing inherently illegal about setting up a slew of shell companies. And, while the EB-5 program is incredibly problematic, it too remains legal on the books. We don’t know what the developers’ intentions are with respects to this approved funding source.

However, as we will explore in the next part of this report on the situation at Wailua and the proposed redevelopment of the Coco Palms resort, one thing is certain: The deed the Coco Palms Hui is using to claim ownership of the land and evict the konohiki was inherited from an erroneous will. What’s more, the will was used to swindle the rightful inheritors out of their land at Wailua immediately following the overthrow of the Hawaiian Kingdom.

Editor’s note: This is the first piece in a two-part series looking at the land use struggle at Wailua involving the Coco Palms redevelopment.