DWP GETS STUNG ON BAD LOAN L.A. UTILITY LIKELY TO GET SHAFT IN $1.87 MILLION SCOOTER DEAL.

Byline: Beth Barrett Staff Writer

The Hawaiian company that three years ago got a $1.87 million unsecured loan from the Los Angeles Department of Water and Power - to develop electric scooters and rechargeable battery stations - has filed for bankruptcy, casting doubt on whether the utility will ever be repaid.

Personal Electric Transports Inc., based in Kailua, filed under Chapter 7 last month in U.S. Bankruptcy Court, District of Hawaii, and has until today to file financial and asset statements. Sometimes called straight bankruptcy, a Chapter 7 filing usually leads to liquidation of a company.

The loan had sparked a political firestorm in 2003 when the utility's union - led by International Brotherhood of Electrical Workers Local 18 business manager Brian D'Arcy and then-Mayor James Hahn - got the DWP commission to approve it over objections about how the deal was structured and why local competitors were excluded.

Hahn, now managing director at Chadwick, Saylor & Co. Inc., and D'Arcy did not return calls.

Dominick Rubalcava, who was vice president of the DWP commission when the loan was made and joined two other commissioners who voted for it, called it unfortunate that the deal went sour.

``I'm always disappointed when a business situation the department enters into doesn't come to successful fruition,'' Rubalcava said. ``You make your call, and if you're proved to be wrong you're on history's roll call for the action you took.''

A Personal Electric Transports creditors' meeting is scheduled for later this month, but because the controversial DWP loan was not secured by real or personal property, the lender typically would have lower priority than secured creditors to get paid anything.

The bankruptcy filing also suspends binding arbitration that had been set to start this week as city officials sought to recover the loan after the company suspended interest payments last year, claiming the city violated contract violations.

``We have to see what (the company) has in the way of assets and then stand in line with other creditors,'' said DWP Deputy Attorney Dirk Broersma. ``Typically, unsecured creditors don't get much.''

Longtime critics of the deal, as well as new DWP officials, viewed the company's bankruptcy filing as proof positive the loan should never have been made.

``It's widely regarded (in the department) as one of the greatest faux pas of all time. The department regrets it and is embarrassed by it,'' said the DWP commission vice president, David Nahai, newly appointed by Mayor Antonio Villaraigosa, who has charged the board with reforming the DWP, including its contracting practices.

The Personal Electric Transports chief executive officer, Tony Locricchio, told DWP commissioners about the bankruptcy filing last week and asked for a public hearing, saying the city could be repaid if the programs PET developed - in conjunction with the completion of 100 scooters - are allowed to go forward.

Locricchio told the Daily News he can't afford the $26,000 for binding arbitration, which includes three retired judges provided by the American Arbitration Association.

He told commissioners that if the PET projects don't go forward, DWP's nearly $2 million loan ``is totally wasted.''

``The $2 million went into the projects that were in the contract, and all were completed and approved by DWP,'' Locricchio said in an interview. ``(Ratepayers) should know we had programs to pay the money back.''

Broersma said the utility just wants to get its money back.

``(Locricchio) just wants to have a public hearing on all his great ideas? Come on, it's not credible,'' Broersma said.

PET had paid $22,312 in interest on the loan when it claimed its business plan was damaged because DWP delayed by six months a final $150,000 loan payment after the scooters were finished.

City Administrative Officer Bill Fujioka, who in 2003 recommended council members reject the loan and send it back to the DWP commission, said his advice was sound.

``It was a bad deal then, and it continues to be a bad deal,'' he said.

Richard Mayer, who with his partner Malcolm Currie opened Currie Technologies Inc., was shocked in 2003 to learn about the loan and to be excluded from an opportunity to compete for the funding.

Mayer's firm was the largest electric scooter and bike company in the nation, as well as a DWP ratepayer.

Mayer, retired and now on the board of the expanding Chatsworth-based company, said Wednesday that had the loan gone to his firm it would have been repaid.

He said his firm also would have developed new battery technologies, as well as electric bike and scooter innovations that could have been tied into the Orange Line and other public transportation in the city.

``We'd have given away electric bikes to get a large focus group on how they work. Some of these are so light you can put them on the new buses. I'd love to tie it in, but it takes a lot of capital.

``I would have loved that money, and we absolutely would have paid it back.''

Former Councilwoman Ruth Galanter, who led opposition to the loan but couldn't muster enough council support to force reconsideration, said the bankruptcy is evidence the deal was political strong-arming at the expense of DWP ratepayers.

``You have to pin it on City Hall,'' she said.

Beth Barrett, [phone]

beth.barrett(at)dailynews.com