In a bizarre move, newly appointed Port Authority of Guam General Manager Rory Respicio reached out to the owner of a business that has been locked in a legal battle to collect a $17 million payment from the Port Authority.
Respicio told The Guam Daily Post on Monday he reached out "informally" to the principal owner of Guam YTK, attorney Eduardo "Champ" Calvo, "to see if there was any opportunity to stave off a $17.1 million judgment that's ticking at the rate of $900,000 a year in interest."
Respicio also acknowledged he did so without first getting the Port Authority board's approval but that he would ask permission later for further talks to occur. At the time this went to press, the Port Authority board had not decided on whether it would grant Respicio permission.
To recap this lengthy legal battle, the issue arose from a lease agreement on Hotel Wharf, which the Port Authority has jurisdiction over after the Navy handed over the waterfront property. The former owners of Guam YTK entered into a lease agreement with the Port Authority to develop the wharf into a commercial fishing facility. When the project failed to take off and Guam YTK fell behind on lease payments, the Port Authority canceled the lease, which also failed to get the required legislative approval to continue beyond five years.
Under its former owners, Guam YTK eventually closed shop. A few years later, Calvo's group saw potential in the lease agreement as a breach-of-contract case. It bought Guam YTK and sued the Port Authority for breach of contract alleging, in part, it was the agency's fault for not providing utilities access and other things needed for the project and that under then-Gov. Carl Gutierrez, Guam YTK received executive approval for a lease beyond five years. Guam YTK managed to convince the arbitration panel the Port Authority should pay for the remaining economic value of its purported 45-year lease.
An arbitration panel of private attorneys subsequently awarded $14 million to the new Guam YTK owners, plus interest for late payment. The bill has ballooned to $17 million. The Port Authority challenged the arbitration panel's award. Now both sides are waiting for a decision from the Supreme Court of Guam.
The Port Authority has been confident it would prevail. But with Respicio at the helm for just a few weeks, he's pivoting out of the wait for a decision from the courts – the same venue where the agency had spent considerable time and money fighting against having to pay the arbitration panel award. Then-Attorney General Elizabeth Barrett-Anderson and the previous Guam legislative leadership had also joined the Port Authority in arguing that Guam YTK should not get paid because the lease is no longer valid.
Former Port General Manager Joanne Brown has commented that it's "highly, highly, highly inappropriate" for the new general manager to be steering the agency toward out-of-court mediation at this point.
Respicio, in response to Brown's comments, said, "The former general manager can say and do whatever she wants, but she's long gone and she's not going to be the one left holding the bag."
Port attorney Mike Phillips said it's best to wait for the Supreme Court decision.
If the Port and Guam YTK agree to go into mediation, Phillips said, it automatically suspends the proceedings in court.
We urge the Port Authority to wait for the Supreme Court to decide.
It's highly unusual for the agency's new management to opt for giving Guam YTK a guaranteed payout at this point – and disregard the years the Port Authority – with the support of the AG and the Legislature – has spent fighting the issue in court.
The Port Authority board's direction has been very clear, Phillips said. Government land, including port property, cannot be leased for more than five years – unless the Legislature approves a term for longer than that.
Former Gov. Gutierrez, who approved the lease to begin with, and who now serves as a senior adviser to Gov. Lou Leon Guerrero, could help boost the agency's confidence and wait for the Supreme Court to decide. He could say back then, he had overstepped his power as governor to approve a government lease beyond five years.
His silence could be costly to the Port Authority – and to every consumer on Guam, who could pay a higher cost for goods as a result of a guaranteed payout over this dispute.