Anatomy of a bankruptcy.

After five years of political maneuvering, legal wrangling, and private-sector muscle, the Manoa Finance repayment story is drawing to a close.

ONE DAY IN NOVEMBER 1984, Donna Tanoue and Russel Nagata pushed open the double glass doors of their downtown office and hurried across the street. State Banking Examiner Tanoue and Nagata, the director of the Department of Commerce and Consumer Affairs, were on a mission. Their destination just one block away: the 18th-floor executive suite of Walter Dods Jr., resident of First Hawaiian Bank. Their goal: to dispel the cloud over the entire financial industry after the February 1983 bankruptcy of Manoa Finance, the industrial loan company that left 7,000 depositors clamoring for more than $45 million in frozen funds.

When the two state officials walked into Dods' office, they had already spoken to other thrift and banking leaders in Hawaii. But their hopes of securing private sector help to recover depositor funds had been fruitless thus far.No one wanted to touch the Manoa Finance fiasco. Even Dods' initial reaction was to cross his arms and shake his head. "I said, hey, everyone has looked at this thing and it's a dog," recalls Dods. "But I was stupid and crazy enough to think that I could come up with a solution."

Thanks in part to Dods, who engineered the repayment plan, the Manoa Finance saga is finally drawing to a close. After five' long years, about 216 properties worth $28.5 million have been liquidated and whittled down to about 40 parcels valued at $7 million. As a result, 95 percent of the $26.5 million in state and private loans used to pay back Manoa Finance depositors has now been repaid.

While liquidation of Manoa Finance's remaining properties may take another year to complete, Dods has come close to fulfilling his initial goal of wrapping up payouts by October 1988. After a five-year odyssey, Manoa Finance will be remembered as one of the state's few bankruptcy proceedings in which its creditors and depositors were paid back in bill (see story, page 66). But the final outcome was in no way assured, as the proceeding twisted its way through Hawaii's financial community, the federal bankruptcy court, and even the state capitol.

Facade of prosperity. For the depositors, the nightmare began five years ago, with the closing of the then- fourth largest industrial loan firm in the state. Manoa Finance had begun as a sole proprietorship by Hirotoshi Yamamoto on December 12, 1957. The industrial loan firm issued investment certificates to the public, financed real estate purchases through agreements of sale, and purchased and developed its own properties.