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Pflueger reportedly sells land in advance of foreclosure

Despite a state filing, the retired car dealer transfers a 383-acre property on Kauai

Embattled retired car dealer James Pflueger reportedly was scheduled to finalize the sale Friday of 383 acres near the Kilauea Point National Wildlife Refuge on Kauai’s north shore where a massive mudslide occurred in 2001 because of reckless and unauthorized grading and landscaping.

The state has already moved to foreclose on the property to collect a $4 million fine owed through Pflueger’s company, Pilaa 400, for causing the mudslide, which damaged the secluded beach and reef at Pilaa Bay.

The state attorney general filed the foreclosure petition July 28 in state court on Kauai. The attorney general also filed papers at the state Bureau of Conveyances to prevent Pflueger from transferring or selling the property.
Pflueger, 88, has yet to respond to the foreclosure petition. The deputy attorney general who filed the petition declined comment.

The foreclosure is the latest in a troubling history connecting Pflueger to reckless environmental damage.

In 2006 the Ka Loko Dam breach on another of Pflueger’s properties sent hundreds of millions of gallons of water downstream, sweeping seven people to their deaths and washing away portions of Kuhio Highway. In a deal with the state, Pflueger pleaded no contest last year to felony reckless endangering, and his company Pacific 808 Properties pleaded no contest to seven counts of manslaughter.

Pflueger’s sentencing, originally scheduled for this past January, has been rescheduled several times because of his health. The latest sentencing date is Oct. 15. He has agreed to five years of probation, but the state can also ask for conditions that include up to a year in jail, a fine and community service. Pacific 808 Properties will pay $350,000 in fines, the maximum $50,000 for each death, that will go toward a dam inspection and safety program.

Pflueger was accused of filling the dam safety spillway in disregard of the risk the dam might break. He maintained that filling the spillway did not cause the breach.

After the 2001 mudslide on the Pilaa property, Pflueger was sued for the environmental damage by the state, the federal government and two Kauai community groups. Two weeks after the state filed the foreclosure petition, he notified all parties in the suit he intended to transfer the parcel.

As part of a federal court consent decree to settle the lawsuits, Pflueger was required to notify the plaintiffs of any proposed sale of the property, said David Henkin of Earthjustice Legal Defense Fund, the attorney representing the two community groups.

Henkin said he received a letter from Pflueger dated Aug. 13 informing the Limu Coalition and the Kilauea Neighborhood Association that he intends to transfer the property to Koa Kea International LLC, which in turn will convey a portion of it to Pilaa International LLC and West Beach Kauai LLC. According to the letter, the sale was to close Friday. The letter also includes acknowledgment from the prospective buyers that they are aware of federal court requirements to restore the property and that they accept that responsibility, Henkin said. The letter does not say how much the buyers are paying for the property.

Henkin said he was not aware of the state’s foreclosure petition.

“It doesn’t matter who owns the property; the responsibility to fix it runs with the land,” he said.

He said Pflueger has completed most of the restoration he agreed to in the consent decree. “All that’s left is a two-year monitoring period to maintain native vegetation,” Henkin said.

THE LAWYER for Koa Kea registered the business with the state in August 2013. The registration lists as one of its managers Sara S. Jehn, a local architect involved in the latest effort to rebuild Kauai’s iconic Coco Palms Resort. Jehn declined comment.

Honolulu lawyer Gino Gabrio, of the law firm Cades Schutte, registered West Beach Kauai on Aug. 6 this year. Gabrio is listed as the company’s manager. He could not be reached for comment.

There is no record of Pilaa International in state business registration records.

Pflueger granted the state the mortgage on the 383 acres in 2005 as bond after the state Board of Land and Natural Resources fined him $3.96 million and assessed him $69,996 in administrative costs for damaging the beach and reef at Pilaa Bay. Pflueger challenged the fine, and the state agreed not to move on the property until after Pflueger had exhausted his appeals.

The Hawaii Supreme Court upheld the fine in February.

Pflueger now owes the fine plus interest.

The Pilaa property runs from Kuhio Highway to the ocean.

According to Kauai County property tax records, the 2014 tax assessed value of the 383 acres of mostly agricultural land is $6.47 million.

Whether the state can recover its $4 million through foreclosure depends on the market value of the property, who else has claims on it and for how much.

PFLUEGER bought the 383 acres, through his company Pflueger Properties, plus 13 other parcels that cover nine more acres in Pilaa, from his family’s trust in 1997 for $5.325 million. Pflueger has said his family has owned the property since 1871. He approved the sale as one of the trustees of the Will and Estate of Mary N. Lucas. The other trustee was Paul Richard Cassiday.

In 2001, Pflueger’s new company, Pilaa 400, assumed the mortgage for the 14 parcels for $4.82 million. But the state and Pilaa 400 are not the only entities to hold mortgages to the property.

Pilaa 400 granted Koa Kea a mortgage for all 14 parcels in August 2013 for $4.19 million. The mortgage amount grew to $4.76 million when Koa Kea loaned Pilaa 400 an additional $573,144 this past May, according to state property records.

There was even a fourth mortgage on the property. In 2011 Pflueger, through Pilaa 400, granted the trustee of the Ka Loko Dam Litigation Settlement Trust a $4 million mortgage on the 383-acre parcel as bond to guarantee a portion of his share of the settlement. He granted the trustee two other $4 million mortgages on a 1.32-acre parcel in Pilaa and 117 acres nearby. In August 2013 the trustee filed papers at the Bureau of Conveyances releasing Pflueger from all three mortgages.

Pflueger, the state, Kauai County, current and former owners of the land under the dam, their insurers, engineering firms and contractors agreed to pay $25 million to settle a number of lawsuits stemming from the March 2006 Ka Loko Dam breach. Pflueger’s trouble over the Pilaa property began in 2000, when he won approval from the Kauai County Planning Commission to develop the property into a 19-lot subdivision. He then erected a nearly milelong, 15-foot-tall earthen berm along the mauka end of the property, blocking ocean views from the highway.

The county forced Pflueger to lower the berm to 5 feet, the maximum height allowed by his permit. But Pflueger planted trees on top of the lowered berm.
Pflueger did other work on the property without government permits.

The unapproved work included large-scale grading on the plateau above Pilaa Bay, a vertical cut to create a 40- to 60-foot-tall cliff on a portion of the property classified for conservation use, construction of a road along the base of the cliff and installation of a 30-inch pipe or culvert under the road that drained water and mud directly onto Pilaa Beach.

In November 2001 heavy rain caused a massive mudflow from the areas of the property where Pflueger had done unpermitted work. The mud poured into Pilaa Bay and left a layer of mud several feet thick on someone else’s property at Pilaa Bay.

Pflueger challenged the state fine for the damage to the beach and reef. But he signed a federal court consent decree to settle lawsuits brought against him by the Limu Coalition, Kilauea Neighborhood Association, state Department of Health and U.S. Environmental Protection Agency for violations of the federal Clean Water Act.

The settlement required Pflueger to make $5.5 million worth of remediation and environmental restoration work, and pay $2 million in state and federal penalties, $200,000 to replace aging cesspools with modern septic tank systems in nearby Kilauea and $135,000 to fund a mobile water-testing facility for the community.

Pflueger also paid a $500,000 state court fine for felony violations of state water pollution laws. He paid a $3,075 fine to Kauai County and was required to perform 450 hours of community service for three misdemeanor charges.

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