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For two generations a pair of notable kamaaina families were closely linked in friendship and real estate deals that ranged from Honolulu high-rise condominiums to a storied Pacific atoll. Sadly, though, this bond between the families, the Fullard-Leos and Savios, is no more.
The personal and business relationship was forged by two matriarchs and passed on to sons of the families who considered each other brothers. Yet a string of real estate investments gone bad has shattered the genial connection, several lawsuits filed over the last few years show.
One legal complaint filed last month in state court presents a particularly revealing picture of the two families that went from being trusting partners to bitter adversaries.
“It’s unfortunate,” said local developer Peter Savio, the defendant in several lawsuits filed by Fullard-Leo family members. “They were like family.”
According to the recent lawsuit, Savio’s mother, Mary, became friends and formed business connections with Ellen Fullard-Leo more than 50 years ago.
Mary Savio, who died in 2011, was a real estate broker in the 1950s while Ellen Fullard-Leo, who died in 1974, was a champion of amateur sports development and authored a Honolulu Advertiser sports column.
The Fullard-Leo family owned a home in Waikiki and invested in real estate in Hawaii and elsewhere. Mary Savio represented the Fullard-Leo family in real estate transactions.
“The three Fullard-Leo brothers (Dudley, Ainsley and Leslie) were so close to (Peter) Savio that the four of them regarded one another more as siblings than as mere friends or business acquaintances,” the lawsuit said. “Savio was considered part of the family.”
Peter Savio represented the brothers when they sold Palmyra Atoll for $30 million to the Nature Conservancy in 2000. Palmyra was a U.S. military asset during World War II that in the 1970s became the scene of a mysterious murder and subject of a best-selling book.
The Fullard-Leos and Savio also invested in real estate together including student dorms in Waikiki and a project in the Central American country of Belize.
The subject of the lawsuit filed last week is a 105-unit apartment building at 1617 Kapiolani Blvd. near Ala Moana Center that Savio bought in 2008 for $33 million and converted for sale as condominiums.
Unit sales at the project called Ala Moana Tower faltered right after the purchase amid an unfolding financial market meltdown and economic recession, and Savio couldn’t sustain payments on the loan that the suit said was made possible by guarantees from the Fullard-Leos.
To prevent a lender from taking over real estate assets the Fullard-Leos pledged as loan collateral, the Fullard-Leos bought about 30 units in the building for close to $11 million. The Fullard-Leos also never collected $1.6 million that Savio was to pay them for their backing, the suit said.
The Fullard-Leos contend that Savio misled them about the investment deal and fraudulently rushed them into backing the loan. Savio said the allegations are false.
While the dispute over Ala Moana Tower has just surfaced, tensions between Savio and the Fullard-Leos appear largely rooted in several deals made in 2003, including a downtown Honolulu office building at 1143 Bethel St., a student dormitory in Waikiki and a real estate project in Belize.
In those three deals the Fullard-Leo family lent Savio roughly $960,000 that Savio failed to repay with interest, according to three lawsuits filed in 2014.
Savio contends in court filings that his investments in 2011 were generating net income of $3 million a year and that he was willing to satisfy the debts. But he claimed that the Fullard-Leo family resisted providing him with financial documents showing loan balances, payments and what he reasonably owed after the Fullard-Leos took possession of collateral, typically interests in real estate partnerships, that Savio pledged to secure the loans.
In an interview, Savio said his relationship with the Fullard-Leo family began to sour after one brother, Ainsley, died in 2008 and Ainsley’s son Marcus got more involved in the business deals. (Another brother, Leslie, died in 2001.)
Savio said Marcus Fullard-Leo lacks the trust and belief in old-style handshake deals that his father and uncles shared with Savio.
“Nobody was cheated,” Savio said. “Nobody was taken advantage of. We made a lot of money. (Marcus) assumes someone is always cheating someone on a business deal.”
But the lawsuit filed last week representing Dudley, Marcus and other Fullard-Leo family members claims that Ainsley and Dudley Fullard-Leo were especially irritated by Savio’s “lackadaisical approach” in business dealings.
“Too often, Savio would pitch a general investment idea but remain vague on many critical details,” the complaint said.
Savio maintains that he and the Fullard-Leo brothers were good partners and that Marcus Fullard-Leo broke it up.
Marcus Fullard-Leo said that’s not so and that his family collectively grew disappointed by the way Savio handled their business, their trust and himself.
“When I was growing up, I looked up to Peter Savio as a mentor,” Marcus Fullard-Leo said. “However, after years of seeing how he does business on a firsthand basis, he is not someone I want to be like or would choose to emulate. While I do engage in handshake deals from time to time with trustworthy parties, knowing what I know now, I would never do a handshake deal or any other deal with Savio. My father passed away in October 2008, knowing Savio had chosen his own personal gain over their friendship.”
Marcus Fullard-Leo said one example arose in 2008 while Savio was managing student housing operations in Waikiki for a Fullard-Leo company in which Savio had an ownership stake.
Conditions were deplorable and included floors long saturated with water, according to Marcus Fullard-Leo. “My father and uncle made the decision to remove Savio as the manager,” he said. “Within a month (Savio) announced he was opening a student housing operation within a couple minutes’ walk.”
The Fullard-Leos contend in one lawsuit that Savio’s dorms were competing with them in violation of the operating agreement for their joint venture called Kuhio Avenue Holdings LLC.
Savio claimed that he was already in the dorm business when he partnered with the Fullard-Leos. “I was in the dorm business and we broke it in two companies,” he said in a 2011 email to Marcus Fullard-Leo contained in the lawsuit. “You manage one and I manage the other. I am not interested in fighting with you. It is a waste of time and energy and not worth the effort to correct your misrepresentations. I really don’t care anymore. You and the family can go your own way and we will see who does the best.”
Later the Fullard-Leos, as majority owners of Kuhio Avenue Holdings, voted, over Savio’s objections, to amend the company’s operating agreement to make Savio an “unadmitted assignee” in the business without rights he previously had as a member. That issue led to a lawsuit filed by the Fullard-Leos in 2014 in Washington state, where the company is based.
Untangling all the business deals between Savio and the Fullard-Leos has proved tough with the pending litigation. However, earlier this year the three Fullard-Leo lawsuits filed in Hawaii against Savio, plus one filed in 2013 over a Waikoloa project on the Big Island involving Savio, were paused pending a mediation effort.
Savio said he expects the recent lawsuit over Ala Moana Tower will be resolved in arbitration. No repair to the family friendship is expected.
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