Unions representing employees say the company shut down without giving them their final paychecks.

Larry Ellison, the man who owns most of Lanai, was forced to testify in the U.S. District Court of Hawaii on Wednesday in an ongoing civil case about the 2017 bankruptcy of his now-shuttered airline, Island Air. 

During a rare court appearance for the tech billionaire, Ellison testified about what he knew about Island Air’s financial situation and when he knew it. 

Ellison, who owns 98% of Lanai, including its two Four Seasons resorts, walked into court Wednesday morning with Paul Marinelli, president of a venture capital company that manages most of Ellision’s financial investments. Marinelli is also named as a defendant in the lawsuit along with Jack Tsui, CEO of Panda Travel; and Jeffrey Au, whose investment group took control of the airline in 2016. 

Larry Ellison, from left, and Paul Marinelli, former director of Island Air, enter the Prince Kuhio Federal Building Wednesday, Oct. 4, 2023, in Honolulu. Ellison is testifying in federal court in the Island Air bankruptcy case. (Kevin Fujii/Civil Beat/2023)
Larry Ellison, left, and Paul Marinelli, former director of Island Air, are among several executives being sued by employees of the airline formerly owned by Ellison. The employees say owners shut the company down with no notice and did not give them their final paychecks or pay their medical premiums. (Kevin Fujii/Civil Beat/2023)

Ellison, who is chief technology officer of Oracle Corp., appeared composed as a lawyer peppered him with questions about the purchase price of Lanai and how much he had invested in hotels there, though he didn’t have to answer after a judge sustained objections from his attorneys. 

He did answer a question, though, about whether he purchased Island Air in 2013 in order to provide “high quality” air service between Honolulu and Lanai to make it easier for tourists to visit his hotels. 

“Exactly,” Ellison replied. 

The lawsuit was filed in 2019 by Elizabeth Kane, a bankruptcy trustee who represents creditors and the two unions that speak for most of Island Air’s employees — the Airline Pilots Association and the Hawaii Teamsters. 

The complaint says Island Air’s owners acted in their own self interest while they allowed it to go bankrupt and then shut it down without giving employees the required 60-day notice and without paying wages from their final pay period. 

At the time the airline filed for Chapter 7 bankruptcy and liquidated in November 2017, Ellison had one-third ownership of the company. The airline employed around 400 people at the time, according to the lawsuit.

Island Air, which at one point was Hawaii’s second-largest airline, received many complaints from customers during its lifetime, especially from residents of Molokai who felt they were given short shrift after Ellison purchased the airline and made travel to Lanai its top priority. 

Island Air and Hawaiian airlines aircraft sit near the Honolulu Interisland Terminal. Airport. 22 june 2015. photograph Cory Lum/Civil Beat
Ellison said it was difficult for Island Air to compete with “aggressive” competition from the state’s largest airline, Hawaiian Airlines. But, he said he didn’t know employees were laid off without being paid after Island Air went bankrupt. (Cory Lum/Civil Beat/2015)

The airline’s finances continued to tank during the years following Ellison’s purchase. 

An email sent by Marinelli to Ellison in June 2015 and shown to the jury during Wednesday’s hearing said the airline was losing more than $1 million per month and would “likely run out of cash before the end of the year.” 

The airline discontinued its service to Lanai in March 2016 shortly after Ellison sold a two-thirds controlling interest of the company to Au and his partners.

Island Air continued to struggle financially while misleading employees about the future of its survival, the lawsuit says. The company faced multiple payroll crises during the summer of 2017, and in July of that year processed payroll with an $840,000 overdraft.

The lawsuit says the airline was “kept on life support” with small infusions of cash just long enough for five of Ellison’s airplanes to be sold. 

When it shut down in November 2017, employees were “shocked,” the lawsuit says. In addition to their final paychecks being withheld, their medical premiums went unpaid.

Ellison testified that he didn’t find out the airline hadn’t paid employees until it was “too late.” 

“We had no idea they were closing the airline and letting people go without paying them,” he said. 

He said by the time he found out people were still owed wages, there was no way for him to pay them. 

When Nickolas Kacprowski, an attorney for the plaintiffs, asked Ellison if he had considered trying to reach each individual employee to pay them what they were owed, Ellison said he hadn’t considered the idea. 

Ellison still owns Lanai Air, a private airline offering luxury travel on small planes from Honolulu to Lanai. (Courtesy: Oracle)

“I guess we could have published an ad in the newspaper and tried to find out who was working at Island Air exactly at that time, but we didn’t have any records of the people,” he said. 

Ellison declined to comment outside of the courtroom. Ellison’s attorney, Christopher Muzzi, said he couldn’t comment while the lawsuit was pending. 

Ellison still owns Lanai Air, a small, seven-aircraft private airline that boasts travel between Honolulu and Lanai on luxury planes that can fit up to eight passengers. Ellison testified that the company has survived “aggressive” competition from much-bigger Hawaiian Airlines because it offers customers something Hawaiian can’t — package deals that combine airfare with rooms in Ellison’s opulent resorts.

When asked if he thought the closure of Island Air would harm his relationship with Hawaii politicians, he said he thinks he’s done enough in the state to maintain a “good standing” in the community. 

“I think the politicians would give us credit for some other things we have done in Hawaii, I think, to stay in their good graces,” he said. “We’ve done a bunch of things on Lanai, I think, the politicians really like that we do.”

But not everyone likes what Ellison and his companies do in Hawaii, and many residents have accused his projects of leaving out the interests of locals and favoring the desires of the elite.   

For example, a $5 million runway expansion at Lanai Airport that Ellison has said he’ll pay for is designed to bring more private aircraft to the island — something that will benefit wealthy travelers more than locals, Maui County Councilman Gabe Johnson said last year.

Plaintiffs in the Island Air case make similar accusations about Ellison prioritizing the interests of the wealthy, including himself. The complaint says that once Ellison’s planes were sold and Island Air’s bankruptcy filing was imminent, funds that been had been transferred to the airline were transferred back “for the benefit of the seventh richest man in the world.”  

That was four years ago. According to Forbes, Ellison is now the third richest man in the world.

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