Mark Zuckerberg's Legal Fight In Hawaii Uncovers Pitfalls In HNW Paradise

Mark Zuckerberg's Legal Fight In Hawaii Uncovers Pitfalls In HNW Paradise

The pursuit of billionaire isolation can backfire unless you’re willing to buy everything and everyone on the island. The family office needs to weigh the long-term costs against immediate gratification, and even then compromise may not be avoidable.

There’s a big gap between what Facebook billionaire Mark Zuckerberg says his lawyers are trying to achieve in Hawaii and how the locals feel about their neighbor suing hundreds of locals and their estates.
Zuckerberg argues that he’s just trying to lock down title over every square inch of his 700-acre compound on the relatively unspoiled island of Kauai.
It’s true, ancestral property rights get nebulous in the Aloha State. But the price of 100% clarification in the future is significant blowback in the here and now.
When the 10th richest person on the planet even appears to threaten families who’ve had a small fractional stake in this land since before Hawaii had formal inheritance laws, it’s a problem.
And when your fortune revolves around getting advertisers to consider you a good neighbor and not a predator, it’s a big problem.
“Quiet title” demands response
Zuckerberg paid $100 million to buy out majority claims to his slice of paradise, which he hopes to convert into a combined family retreat and environmental preserve.
However, native Hawaiian law makes room for fractional inheritance on land occupied before 1850 and those claims -- often poorly recorded -- have passed down from generation to generation.
While these grandfathered estates never amounted to a whole lot of property, eight of them at least theoretically overlap with Zuckerberg’s acreage, which makes them a potential headache down the road.
That’s why the lawyers have filed “quiet title” lawsuits in Hawaiian court to compel all potential heirs to step forward and either pursue their interests or relinquish them forever.
It’s a little like the publication of death notice that validates the probate process. If nobody steps forward to defend an ancestral claim, Zuckerberg knows he’s secure on that particular dot on the map.
He says now that he won’t contest any valid claimants who do step up. All he wants is to be able to buy out minority owners and coexist with those who won’t sell.
Unfortunately, that noble motive wasn’t so clear when the suits were filed. At the time, local media outlets were quick to note that responding could cost each claimant up to $200,000 in legal fees simply to defend their rights.
Multiply by maybe 400-500 Hawaiians -- many elderly, cash-poor or both -- and it’s still pocket change for Zuckerberg, who’s currently worth north of $50 billion.
If this was simply a question of establishing access rights for native Hawaiians, he could have volunteered to pay all the court costs that his own lawsuits generate.
Instead, it looks like an attempt to squeeze a few very old families out of the property by forcing them to come up with the cash to trace the claims.
Even then, the majority owner gets the right to force an auction sale, so in effect all the minority interests can achieve here is their own liquidation.
It’s an extremely sensitive issue in Hawaii, where long-term residents feel an ancestral connection to the landscape and are too easily alienated from it by wealthy interlopers throwing their weight around.
Add it all up, the lawsuits were necessary to lock down the integrity of Zuckerberg’s empire, but the handling was awkward at best.
Access will always be a problem
From here, Zuckerberg can either bend over backward to give his minority “shareholders” all the concessions it will take to make them very publicly happy or else live with the reputation of being a bad neighbor.
He’s apparently working with a few of the families as well as native cultural advocates to clear up similar situations across the state.
There was never a lot of Hawaiian real estate subject to these rules -- at most, around 8,400 parcels were awarded in the early years -- but successive partition has created hundreds of tiny stakes for the most prolific families to allocate.
Resolving those question marks within Zuckerberg’s land package will eliminate the need to maintain open access through his acreage in the event any member of those old families decide to visit their property.
He’ll have to pay for that resolution, of course. Some of these divided parcels are appraised at well over $500,000 per acre and in an open auction the bidding will probably run a lot hotter.
But when and if he does resolve the internal claims, he can protect the perimeter a whole lot better, getting much better privacy and security for his family when he’s on site.
The problem is that access issues probably won’t ever go away. He’s got close to a half mile of beach in that compound and under Hawaiian law public access to that shoreline is mandatory.
Zuckerberg can refuse right of way and pay the state up to $2,000 per infraction, which in theory he could well afford to do.
There’s really no alternative. He can wall off the beach like he’s walled the perimeter of his property, but that really isn’t going to be an ideal solution.
Any wall will need to be high and inviolate to keep the riff raff out and the family safe. As it is, the 6-foot rock wall on the land side is probably more ornamental than functional -- his security team is going to have its hands full patrolling all that forest for trespassers.
But of course any wall imposing enough to keep surfers from wandering inland from the beach is going to impair easy access as well as the views from the house.
While building better barriers may be the only solution, it’s only going to alienate everyone else on the island.
Beyond 100% protection
He could befriend the locals, of course. So far that doesn’t seem to be the main motive driving his legal tactics, but it might be an angle his advisors could explore. 
Zuckerberg’s compound could turn into a new form of state park, mostly open to public recreational use like any natural preserve while the family’s living space remains as private as money can buy.
I’m not really sure he was thinking in those terms when he started buying up land without rolling the acreage into some form of public trust right away.
But now that he’s got the locals riled up, pulling the family back behind an impenetrable screen may be the best security approach at this point.
The public would be mollified. In theory, ancestral residents would be allowed to remain as a gesture of goodwill. The beach would remain open.
And the backlash brewing on Facebook itself would blow over like so many other social media squalls. Zuckerberg could get back to business.
At the end of the day, a billionaire with a lower public profile could easily lock out the locals, build that wall and enjoy complete privacy within his estate borders.
Zuckerberg still needs to play nice with the public in order to make sure Facebook is more than this year’s advertising playground. Once the empire is truly ironclad, he can do what he likes.
For now, much like many of us little people, he still needs a few friends in order to feel secure.

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