The utility that powers most of Hawaii continues to face mounting legal and financial challenges following Maui’s devastating and deadly fires earlier this month. 

On Thursday, investors filed suit against Hawaiian Electric Co.’s parent company, Hawaiian Electric Industries, as well as several of its key current and former executives, alleging that the company and its top leaders violated federal securities laws. 

The investor class-action suit, filed in U.S. District Court in California, seeks unspecified damages from the company and those leaders

It states that they made “materially false and misleading statements” in their filings with the Securities and Exchange Commission, and that they failed to disclose to investors that the company’s wildfire prevention protocols were “inadequate.”

Specifically, the suit names former HEI President and CEO Constance Lau, who stepped down in January 2022, as well as her successor in that role, Scott Seu. 

It also names the company’s former executive vice president and treasurer, Gregory Hazelton, and Hazelton’s successor, Paul Ito, who now serves as HEI executive vice president, treasurer and chief.

HECO representatives said in a statement Thursday that “we are still reviewing the complaint and have no further comment at this time.”

The lawsuit landed the same day that Maui County separately sued HEI subsidiary Hawaiian Electric Co. in state court for not turning off the power ahead of the fierce winds forecast to pummel Maui  on Aug. 8, when much of Kula burned and Lahaina town was almost entirely destroyed by fire. At least 115 people perished in the Lahaina fire.

HECO has said it didn’t have a plan to shut off the power, even though utilities in other fire-prone areas have started using that strategy, because such a shut-off would have compromised Maui  fire crews’ ability to fight any blazes that arose. The company’s explanation has drawn widespread criticism, and Maui water officials have said their pumps can function without HECO electricity.

The news that HECO lacked a shutoff plan helped to sink HEI’s stock price by more than 33% in the first week of the fire’s aftermath, the investor suit states. The Hawaii company has since lost more than 50% of its market value, and it could face difficulty raising capital to make many of the urgent upgrades needed to the islands’ power grid in the fires’ aftermath.

The suit further points to a February 2019 HEI report filed with the SEC in which company officials said they believed they had “appropriately responded to environmental conditions requiring actions and that, as a result of such actions, such environmental conditions will not have a material adverse effect on the Company or Hawaiian Electric.”

Authorities still have not officially determined what caused the fire, but HECO’s downed and damaged power lines are widely suspected to have contributed.

Preliminary estimates put the cost to rebuild Lahaina at more than $5 billion. HEI and Hawaiian Electric face numerous class-action suits filed on behalf of fire victims.

American Savings Bank In The Mix

HEI has said that it’s seeking advice from global investment firm Guggenheim Securities on a path forward for the company but that it’s not looking to restructure. 

Still, it’s not clear how the developments might affect one of HEI’s other main holdings, American Savings Bank — one of the largest financial institutions in Hawaii. 

In a statement released Tuesday, ASB asserted that it has  a “strong capital position, excellent credit quality and ample liquidity” in the wake of the Maui fires. The statement described ASB as an “independent” company that’s poised to help Maui rebuild, but it did not address the financial woes of its parent company.

In its separate statement released Thursday, HECO said that “there is no risk to customer deposits as a result of legal claims related to the fires under any scenario.”

Also on Thursday, The Washington Post reported that HECO removed fallen poles and other damaged equipment from a key site off Lahainaluna Road before investigators with the federal Bureau of Alcohol, Tobacco and Firearms were able to assess the evidence there.

Jim Kelly, HECO’s vice president for government, community relations and corporate communications said in an email Thursday that the Post allegations weren’t accurate.

“Hawaiian Electric understands its legal obligations and took extraordinary steps to preserve evidence,” Kelly wrote.

Civil Beat’s coverage of Maui County is supported in part by grants from the Nuestro Futuro Foundation.

Read the investors’ lawsuit here: