Miami-based real estate developer Crescent Heights points to the luxury Ko’olani condominium tower it built in Honolulu as an example of "excellence in new construction."

But six years after the project was completed, $12 million in construction defects — including severe water leaks, uneven air conditioning and algae growing on the roof — plague the 47-story Kakaako building.

Despite a court judgment, Ko’olani residents have been unable to get anyone to pay for fixing the vast majority of problems, as companies involved in developing the tower employ teams of lawyers to wrangle over who is liable.

The trouble at Ko’olani, industry observers say, represents one of the largest and most tangled construction defect cases in Hawaii history.

Ko’olani’s problems also have tested the patience and stressed the finances of many of the building’s 370 residents who paid $13,000 each over the past two years to replace waterlines in their units. This year, owners are being assessed about $3,600 apiece to cover legal expenses. These charges were on top of residents’ regular monthly maintenance fees.

The board of Ko’olani’s association of apartment owners fears an end to the struggle could be far off.

"Ko’olani residents have been forced into a David-and-Goliath situation," said Carol Tsai, a retired real estate agent who lives in the building and is on the board. "The Ko’olani residents — David — have suffered greatly at the hands of the numerous Goliaths."

The Goliaths to which Tsai refers include Crescent Heights as well as other companies that have argued against paying for defects, including general contractor Hawaiian Dredging Construction Co., subcontractors and insurance firm AIG.

Crescent Heights completed Ko’olani in 2006 near the peak of Hawaii’s real estate boom, selling units for close to $850,000 on average, or roughly $300 million in total.

But problems began to emerge soon afterward, and residents in 2007 pursued corrections with the developer through mediation, which later led to arbitration.

Arbitration took three years to conclude, and last year after 14 days of hearings that involved roughly 30 witnesses, arbitrator Keith Hunter of Dispute Prevention & Resolution Inc. awarded residents $12.4 million for about 40 defect claims.

The award, confirmed by a state judge, included $741,000 for improperly sealed bathtubs and shower wands, $360,000 for cracked kitchen tiles, $831,000 for rain infiltrating the parking garage and $342,290 for a tennis fence that didn’t stand up to the wind.

The two biggest damage awards were $4.8 million for corroding waterlines and $2.3 million for exterior metal wall panels that allow rain into the building.

The waterline problems, according to Hunter’s decision, were caused by a cost-cutting move to substitute brass connections for copper connections on polyethylene pipes. The brass fittings were prone to corroding and failing, posing a potentially "catastrophic" risk, the decision said.

Owners paid to replace all the lines. The work required cutting open walls and ceilings, and displaced residents.

"It was a big hassle," said Dave Crooks, a retired airline pilot who is on Ko’olani’s board.

The waterlines were among only a few things repaired, while most other defects remain. "We don’t have infinite amounts of money to fix all those things," Crooks said.

Tsai said some residents can no longer afford to live in the building, but they are having trouble selling because many lenders won’t make loans to prospective buyers due to the unresolved defect liability.

Residents also have been frustrated that they can’t pursue Crescent Heights for the arbitration award because the company shielded itself from broad liability by forming a separate company to build Ko’olani called Sunset Heights Hawaii LLC.

Such setups are common among high-rise developers, and Crescent Heights, which is one of the biggest in the industry, explains in a fine-print disclosure statement, "Each particular Crescent Heights project is developed by a separate, single purpose entity that is solely responsible for that development, its obligations and liabilities."

Ko’olani owners were able to obtain a settlement with Sunset in mediation involving separate issues from the $12 million in arbitration. The settlement provided $850,000 plus ownership of commercial space in the building designed for a spa, which is no longer in business.

Other efforts to collect from Sunset or Crescent Heights haven’t been fruitful. "It’s basically become a blood-from-stone situation," said Terrance Revere, an attorney representing Ko’olani owners.

A representative of Sunset and Crescent Heights would not comment because of pending litigation. But the developer has argued that contractors and materials suppliers are responsible for the problems, and that an insurance policy is supposed to cover the arbitration award.

Sunset sued Hawaiian Dredging and more than 40 other companies including subcontractors and materials suppliers over Ko’olani’s construction defect liability in 2008 as arbitration was proceeding. The case, described by one person involved as a circular firing squad, has generated more than 1,100 documents filed in court and continues to drag on.

Sunset also attempted to collect on an insurance policy it believed would cover construction defects. Sunset paid more than $6 million for the policy that included general liability from affiliates of AIG.

But the AIG companies, Chartis Specialty Insurance Co. and National Union Fire Insurance Co., refused coverage and in 2010 sued Sunset and about 20 other companies including contractors covered by the policy.

An attorney representing AIG would not comment for this story because the case is pending.

AIG in court is using a controversial 2008 state court decision that said construction defects that caused devastating mold damage at Hilton Hawaiian Village’s Kalia Tower weren’t covered by another insurance company’s general liability policy.

That ruling was upheld in 2010 by the Hawaii Intermediate Court of Appeals, and several insurance companies have used the Kalia case to avoid paying claims by contractors.

Some observers speculate that the insurance issue for Ko’olani defects could ultimately be decided years from now by the Hawaii Supreme Court.

Jim Schlosser, a retired high school principal and Ko’olani’s board president, said he’d like to see Hawaiian Dredging, as a bonded general contractor, pay the damage award to relieve residents of their distress and make the building the prestigious property it was intended to be.

"Dredging isn’t owning up to their responsibility," he said.

Hawaiian Dredging attorney David Schulmeister said the company isn’t liable for the arbitration award, which was made against Sunset. Hawaiian Dredging also has argued in court that AIG should cover damage from construction defects.

Revere, the owners’ attorney, said he is confident that parties involved in constructing, insuring and bonding Ko’olani ultimately will pay the $12.4 million judgement, which is earning 10 percent annual interest that will bring the award to $13.6 million in June.