Kawamoto’s arrest raises questions about Kahala homes

Gaudy. Cheap. Offensive.

Dozens of statues that Japa­nese real estate tycoon Genshiro Kawa­moto erected on four of his sprawling estates along Kahala Avenue have been described by observers in these terms.

But not criminal.

Yet that is what Japa­nese media are suggesting might be the case after Kawa­moto, 81, was arrested Tuesday in Tokyo for suspected tax evasion.

Now, Kahala residents who have been perplexed — and in some cases angered — by Kawa­moto’s property makeovers on the street dotted with million-dollar beachfront mansions are wondering how the tax evasion case might affect their enigmatic neighbor’s plans to transform some of his real estate into art and garden museums.

One neighbor, who asked not to be identified so as not to attract a reaction from Kawa­moto, wondered whether Kawa­moto would be allowed to return to Hawaii if convicted, and suggested that perhaps his purported good deeds here that included breaking down walls and filling in swimming pools were being repaid in Japan.

Stanton Johnston, a Kahala resident who sold his late mother’s house to Kawa­moto three years ago to satisfy taxes and charitable giving, said Kawa­moto lied to him about keeping the gracious home and numerous trees on the property that now features lion and nymphlike female nude statues.

"It’s such a shame," he said. "It was a beautiful home. I hope (Japa­nese authorities) look into money laundering."

Prosecutors in Japan allege that Kawa­moto evaded about $9 million in corporate taxes from his Maru­gen group companies, which operate more than 50 buildings in places such as Ginza in Tokyo and the Hakata and Kokura districts of Fuku­oka prefecture, according to Japa­nese media reports. The buildings house clubs and bars.

Kyodo News said Kawa­moto was arrested for hiding more than $31 million in revenue over three years ending in December 2011, avoiding $9.2 million in corporate taxes.

The Yomiuri Shimbun newspaper, quoting the prosecutors office and other sources, said Kawa­moto is believed to have played a leading role in Maru­gen’s tax evasion by not reporting rent from some tenants of the group’s core company, Tokyo Shoji, and falsely listing losses under the guise of building sales. Tokyo Shoji, which has been liquidated, did not pay corporate tax during that period as it reported losses.

Japanese television network NTV reported that the money from the alleged tax evasion was used to buy art for Kawa­moto’s planned Hawaii museum project.

Kawamoto, once ranked among international billionaires by Forbes, has denied that he cheated on his taxes.

In an interview with reporters before he appeared before the Tokyo District Public Prosecutors Office, Kawa­moto said, "I haven’t evaded taxes, and I don’t know anything about it (the charges)," the Yomi­uri Shimbun reported in its English-language edition.

An accountant for Maru­gen reportedly told prosecutors that Kawa­moto gave instructions to juggle accounts, the Yomi­uri Shimbun reported.

Kawamoto was occasionally informed of sales, and told the employee to juggle the accounts to keep the company "slightly in the red," the newspaper reported. Kawa­moto checked tax documents before they were submitted, the sources said.

Kawamoto told the Yomi­uri Shimbun on Feb. 22 that he did not handle accounting details.

Marugen is a company that Kawa­moto established in 1961 to seek real estate opportunities after closing a kimono shop he inherited from his family, and the business grew into a cash machine.

In the late 1980s at the peak of Japan’s economic bubble, Kawa­moto invested in Hawaii’s housing market, spending what he referred to as "pocket money" to buy nearly 200 homes around Oahu for at least $85 million.

A Tokyo Shimbun article said Kawa­moto’s company had nearly 700 tenants in 60 buildings in the Ginza area of Tokyo at the peak of the bubble but that occupancy has fallen to 80 tenants today with buildings almost empty.

In Hawaii, Kawa­moto returned about a decade ago and began selling most of his homes that he had rented out with little upkeep over the preceding 15 years. Then he began buying up million-dollar estates on Kahala Avenue, spending close to $165 million for almost 30 homes over the last decade.

Kawamoto announced a plan in 2006 he dubbed "Kahala Avenue Mission" to rent nine homes to nine Native Hawaiian families for $150 to $200 a month, though complaints over housing discrimination led him to curtail the plan and provide three Hawaiian families with free residences since 2007.

The other element of the plan was to create art and garden museums.

"In order to make this beautiful street, all the houses and gardens will be lit up in the evening so that people can enjoy the view at their own leisure," Kawa­moto said in a written statement in 2006.

But his creations have been slow to emerge and largely remain unsightly.

Kawamoto crudely broke down walls, leaving rubble lying about. He also filled in swimming pools, he said for liability reasons, and often let vegetation grow wild. Some of his homes fell into disrepair and racked up city fines. Several homes were demolished, some have been vandalized and some were sold.

On four properties he has arranged dozens of statues, including life-size lions, nudes and towering pagodas.

Caroline Bombar-Kaplan, a visitor from Washington state, couldn’t help stopping on the side of the road to take a closer look Tuesday. "I personally think it’s quite hideous," she said. "It looks like they went to Costco and bought several six-packs of statues and then threw them all over. I feel sorry for the neighbors who have to see that every day."

Richard Turbin, a local attorney who lives next to a Kawa­moto property and has called for city officials to penalize Kawa­moto more severely for repeated violations of dangerous and unsightly conditions, wondered whether Japa­nese tax authorities might seek to claim some of the statues.

"It sounds like he had some sort of slush fund and he was using the money to buy these god-awful statues," Turbin said.

Hawaii Kai resident Rodney Foth, however, supports Kawa­moto and said it’s understandable that it would take a part-time visitor from Japan a long time to assemble a collection of adjacent lots and convert them into gardens and museums.

"He means well," said Foth, who was eliminating graffiti Tuesday on one Kawa­moto home and said he keeps an eye out for vandals and does maintenance projects for the landowner.

The independent contractor said he expects Kawa­moto to emerge from the tax ordeal in Japan and follow through with his Hawaii garden and museum plan. "I’m sure he’ll work it out," Foth said.

———

Star-Advertiser reporter Craig Gima contributed to this report.