Timothy Johns has recused himself from some HECO decisions, as an activist shareholder calls for overhauling HECO’s board.

The chairman of the board of Hawaiian Electric Co. Inc. is also the president and chief executive of a local insurance company that’s suing HECO and its affiliated companies, alleging Hawaiian Electric caused the Maui wildfires. 

So how is Timothy Johns, president and chief executive of Zephyr Insurance and chairman of HECO’s board, remaining in both positions while one company he works for sues the other?

“Mr. Johns has fully recused himself from any matters of discussion related to subrogation claims,” Jim Kelly, Hawaiian Electric’s vice president for government and community relations and corporate communications, said in a statement, referring to the insurance lawsuits. “Mr. Johns has also been screened from receiving any economic benefit from Zephyr’s claims.”  

HECO is the utility subsidiary of Hawaiian Electric Industries Inc. and has been named in numerous lawsuits along with HEI, Maui Electric Co. and even Hawaii Electric Light Co., the HEI utility on the Big Island.

More than 140 insurance companies have sued Hawaiian Electric, saying the company should reimburse the insurers for claims related to the Maui fires. HECO’s board chairman, Timothy Johns, is president and chief executive of one of the insurers suing the utility. (David Croxford/Civil Beat/2023)

Johns is also stepping aside from wildfire issues at Zephyr, the insurance company said.

“Tim Johns has disclosed to the company his potential conflict of interest resulting from his position as board chair of Hawaiian Electric Company and has recused himself from oversight and decisions related to all claims and matters related to the Maui Wildfires,” Zephyr said in a statement. “Garet Azama, COO of Zephyr, has been assigned as the lead executive on these matters.” 

Johns was removed from any involvement in potential claims soon after the Aug. 8 fires, Kelly said.

Johns’ recusals come at the same time an activist shareholder is pushing to replace HECO’s board in light of the Maui fires. Individual investor Kevin Barnes has stepped in to buy a position of HECO preferred stock shares since the fires, according to a Securities and Exchange Commission filing. His position of 15,699 “Series H” preferred shares amounts to 6% of those total preferred shares.

The preferred shares of HECO trade on the over-the-counter exchange. They are different from the shares of the holding company, Hawaiian Electric Industries, which trade on the New York Stock Exchange. HEI is the parent of  HECO and American Savings Bank.

Now Barnes is using his position to try to replace HECO’s board members with people he says have better skillsets to guide the company out of the legal and financial quagmire the company has fallen into since the wildfire.

That quagmire includes the lawsuit filed by Johns’ company, Zephyr Insurance and 141 other insurance companies. The so-called subrogation suit blames HECO and the other HEI entities for negligently starting the fires that burned most of Lahaina, killing 100 people and causing massive property damage. The suit asks HECO to reimburse Zephyr and other insurers for claims paid as a result of HECO’s alleged negligence.

The insurance suit is just one of scores of similar lawsuits filed against the utility. 

In his SEC filing calling for a board change, Barnes argues HECO’s board has a responsibility to conduct a meaningful “refreshment of its current membership with new independent directors who possess the enhanced skillsets necessary to move the enterprise forward.”

Few Board Members Have Both Independence And Utility Experience

HECO’s current board is a mixed bag when it comes to utility industry experience. For instance, according to his bio on HECO’s website, besides running the insurance company now suing HECO, Johns has been chief consumer affairs officer for HMSA, president and chief executive of the Bishop Museum, chief operating officer for the Estate of Samuel Mills Damon, chair of the Hawaii Board of Land and Natural Resources and vice president and general counsel of Amfac Property Development Corp.

Other utility directors include Alana Kobayashi Pakkala, a real estate developer, and Toby Taniguchi, president of Big Islands grocer KTA Superstores.  

There’s also a question of how independent the directors are. Shelee Kimura is HECO’s president and chief executive. James Ajello, who was HEI’s executive vice president and chief financial officer until 2017, has nearly 18 years utility industry experience. 

Mary Kipp, now president and chief executive of Puget Sound Energy Inc., has also been president and chief executive of El Paso Energy Co. She’s the only HECO board member with industry experience who doesn’t work for HECO or HEI. 

Barnes is arguing for a prompt change with preferred shareholder input well before HECO’s next annual meeting. He is also demanding HECO cease any actions that could dilute the value of its stock until shareholders have a chance to weigh in on the size and composition of the new board. That includes activities like upstreaming HECO dividends to Hawaiian Electric Industries and “executing any litigation or regulatory settlement agreements.” 

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