A commercial refuse hauler that stiffed the city on $3 million in garbage disposal fees may not have actually dumped that debt obligation through bankruptcy two years ago.

Rolloffs Hawaii, which had served Oahu for more than 40 years, ceased business after being sold at a January 2017 bankruptcy auction where proceeds were primarily used to repay a bank and other creditors were left with little to no recovery.

But earlier this month, a trustee in the bankruptcy case filed a complaint in U.S. Bankruptcy Court in Honolulu alleging that the former owners of Rolloffs, primarily two mainland private equity firms, defrauded creditors, including the city — and hence taxpayers — by running up debts that Rolloffs couldn’t repay while they also collected advisory fees from Rolloffs as the trash company struggled.

Court-appointed trustee Dane Field filed the complaint, which is akin to a lawsuit, in Bankruptcy Court on Dec. 7.

The complaint seeks to recover $5.7 million for the benefit of unpaid creditors of the refuse hauler.

Rolloffs was sold in bankruptcy for $5 million, and proceeds from the sale almost exclusively went to repay American Savings Bank, which refinanced Rolloffs debt in 2012 and was owed $6.3 million.

The next largest creditor is the city, which has a $3.1 million claim for unpaid disposal fees. The state Department of Taxation claims it is owed $108,971. Rolloffs also has a federal tax claim of $100,208.

Primary defendants in this month’s complaint are Corridor Capital LLC and SPB Management along with principals and affiliates of those firms that bought Rolloffs in 2009 for $10 million from the trash firm’s local owners, Robert and Linda Henriques. The buyers formed a company called TrashMasters LLC to buy and control Rolloffs.

The complaint alleges that California-based Corridor and SPB collected nearly $2 million in advisory fees from Rolloffs between 2009 and 2014 despite the trash firm generally not being able to pay debts when they became due.

“The officers and directors (of Corridor, SPB and Rolloffs) intended to further their own interests, and to assure themselves a return out of the operating revenue of the companies ahead of creditors, and did so irrespective of (Rolloffs’s) and/or TrashMasters’s financial condition,” the complaint said.

Corridor and SPB, through local bankruptcy attorney Chuck Choi, said Field’s complaint lacked merit and presented an inaccurate picture of what transpired.

The two companies said that investors in Rolloffs lost over $11 million from their acquisition, and that it was a material change in rubbish disposal terms coupled with competitive hauling and labor pressures that caused Rolloffs’s failure after the owners could not find additional financial help to keep the trash company alive.

“All of the owners, managers and employees were deeply saddened by the termination of the Rolloffs Hawaii LLC business,” Corridor and SPB said in a statement.

Field contends that Rolloffs was made insolvent when Corridor and SPB made their purchase.

The trustee’s complaint cited a default by Rolloffs in 2011 on a bank credit agreement TrashMasters used to help buy Rolloffs, and said that Corridor and SPB officials resolved the default by obtaining new loans at high interest rates as Corridor and SPB continued to take advisory fees.

Annual advisory fees taken from Rolloffs ranged from $50,000 to $289,000 for each company, the complaint said.

Field alleges that $1.85 million in advisory fee payments to Corridor and SPB were fraudulent and therefore subject to recovery for creditors of Rolloffs.

The trustee makes a similar argument for two debt repayments TrashMasters had Rolloffs make totaling $3 million and fees paid to a consultant hired to run Rolloffs in 2014.

Another payment deemed fraudulent by Field is $752,449 that TrashMasters had Rolloffs make to the Henriques in 2012 as the final payment for their business. The complaint said Rolloffs was not the one obligated to make this payment.

“The officers and directors, the Corridor entities, and the SPB entities, deepened (Rolloffs’s) insolvency, spending (Rolloffs’s) money, encumbering (Rolloffs’s) assets, and incurring additional loan obligations, interest and fees and/or debt for which (Rolloffs) and TrashMasters was unable, and would never be able, to repay,” the complaint said.

Field alleges that adding debt to, and siphoning funds from Rolloffs left the company unable to timely replace its trucks and other equipment, which worsened the company’s financial condition and led to Rolloffs filing bankruptcy in December 2016 with about $10 million in debts.

Rolloffs was sold in bankruptcy a month later for $5 million to West Oahu Aggregate Co., which integrated Rolloffs equipment, 83 employees and roughly 2,000 Oahu customers into its service.

ON THE MOVE

The Queen’s Health Systems has announced the following new directors:

>> Gavin A. Sanjume as director of retail and contract pharmacy services, he will oversee the Queen’s Physician Office Building pharmacies and the contract pharmacy at the Rehabilitation Hospital of the Pacific for the The Queen’s Development Corp. Sanjume was previously Medicare Part D STARs pharmacist at United Healthcare and is currently a medical service corps officer for the Navy reserve.

>> Hermina “Mia” Taylor as director of community and post-acute care services, previously manager of clinical programs at the Queen’s Clinically Integrated Physician Network. Her 32 years of nursing in both inpatient and outpatient experience, include nurse practitioner at St. Francis Hospice, prior to joing Queen’s CIPN in 2015.