Kai brothers embroiled in lawsuit - The Explorer: Import

Kai brothers embroiled in lawsuit

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Posted: Wednesday, November 22, 2006 12:00 am | Updated: 7:52 am, Thu Mar 24, 2011.

November 22, 2006 - John Kai Jr. and younger brother Herb oversee a multimillion-dollar family operation they inherited from their immigrant parents.

Their parents turned humble Chinese roots into millions of dollars, simultaneously playing the roles of unassuming farmers and no-nonsense CEOs.

The Kais made smart, aggressive deals. The family bought land, farmed it, bought more land and increased its wealth. Today there remains little land in the Northwest untouched by the Kais. Pick a parcel in Marana - at some point, the Kais probably owned it, leased it or had an interest in the property next to it.

From peanuts to motels, the Kais have succeeded as a business and a family.

But all is not well.

John Jr. and Herb have sued each other, asking a Pima County Superior Court judge to dissolve three of their lucrative business partnerships.

The dispute began in April when John Jr. filed a complaint against his younger brother, a Marana Town Councilman, to get out of a land holding trust the two entered in 1989.

Court records describe the land in question as "two parcels" located "at or near the intersection of I-10 and Tangerine Road" in Marana. John wants to terminate the trust and split the land. John takes his portion; Herb takes his.

"We just got to get some things straight," John said last week, yawning several times during a brief interview.

"It's just a simple thing. We just got to get some issues straight and we'll go from there."

He hung up the phone without answering questions.

According to county records, the Kais own several parcels of land between Avra Valley and Tangerine roads east of the interstate. Court records do not make clear which parcels are the focus of the lawsuit. Several of those parcels, though, especially the ones that front Tangerine Road, are valued by the Pima County Assessor's Office at more than a $1 million.

"It's a frivolous lawsuit," Herb said. "I told him it would be open season if he did this and I'd have to fight it."

To outsiders, the Kais can seem more like a business than a family.

The Kai empire began with John Sr., who immigrated to the United States from China in 1915. In the 1930s, he bought land in Marana and grew cotton like the other families in pre-incorporation Marana.

With the help of his savvy wife Mamie, John Sr. carved out a good living for his family in Marana, where the Kai's still own more land than anyone.

John Sr. died in 1984, Mamie in 2000.

The brothers since have managed the wealth and lands acquired by their parents. The Kai's own or lease several dozen chunks of land in Pima and Pinal counties, much of it for farming. The brothers also sell farming equipment. John Jr. and Herb act as 50-50 partners in three businesses - Avra Equipment, Trico Gin and Kai Farms.

In court filings, both John Jr. and Herb have acknowledged their intent to "part ways" and asked a judge to dissolve the above partnerships.

"We're too old to be fighting," Herb said. "If our parents were around, they'd be slapping us around for this."

The Kai brothers have several other partnerships not at the center of the lawsuit.

Herb maintains that he simply reacted to the dispute, which John Jr. started by filing his complaint.

Neither brother would comment on the source of the dispute or which parcels they're fighting over.

"I don't know what my brother's thinking," Herb said. "It's unfortunate that he's doing this. But when someone sues me, I can't just sit there and take it."

In a counterclaim, Herb alleges that his brother withdrew funds from the three mentioned partnerships for personal use and other expenses, breaching a partnership agreement.

Herb's counterclaim also alludes to "ongoing disputes" between him and his brother. Through his attorney Gerald Maltz, Herb requested that John Jr. pay back the funds he took for personal use, according to court records.

Through his attorney George Feulner, John Jr. responded with allegations of his own.

John Jr. claims that Herb converted revenues for alfalfa crops and proceeds from the sale of farming equipment belonging to the Kai Farms company. Herb also failed to make lease payments on Kai Farms Red Rock's state land, John Jr. alleges.

He further contends that Herb made investments in his own name with funds belonging to the family's joint businesses.

Each brother denied the other's claims.

The court on July 26 appointed the brothers a mediator, Robert A. Hutchison, who acts as the family's certified public accountant. The Kai's in court filings agreed they would waive any conflict of interest involved in having their accountant intervene.

In phone interviews, both Herb and John Jr. said that mediations had not begun. They spoke as if they were unaware of a mediator, though they both agreed to Hutchison's appointment, according to court records.

Hutchison will help to determine "appropriate monetary adjustment with respect to each of the parties' claims against the other," court records state.

Once Hutchison completes his "investigation," the brothers have 60 days to settle the case. If a settlement fails, Hutchison will give a confidential report of his findings to the Kais. The report cannot be used as evidence in future court proceedings, according to court records.

Hutchison did not return a phone message. Maltz and Feulner, the attorneys representing the brothers, also failed to return phone calls.

Sidney Felker, an estate planning attorney listed as a partner or statutory agent in several Kai companies, refused to comment.

"I know that there's a lawsuit," Felker said. "But I can't talk about a client. All my clients and their dealings are confidential. It'd be a breach of ethics to discuss my clients."

After John Kai Sr.'s death, Mamie ran the show. Dynamics in the family changed when Mamie died in 2000, according to friends of the family who asked not to be identified out of fear of offending the Kais.

Herb became the behind-the-scene brains and John Jr. the outspoken voice of the family operation, friends said.

It appears John Jr. wants some independence, they said. Herb echoed those sentiments, suggesting that "maybe" his brother wants to "take what's his and separate it out."

One friend referred to the brothers' dispute as "just sparring."

The lawsuit is a family matter, the brothers said.

"It's personal," Herb said. "Our family shouldn't be squabbling. I don't know how my brother thinks, but he's my brother forever."

He added: "The Kai family has always done things together, and we've always operated as a family. We have more money than we can spend. I just don't understand."

© 2014 The Explorer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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