Friday, February 19, 1999

Peters seeks
dismissal of charges

Bishop trustee challenges
Bronster's authority and
balancing of legal roles

School report 'devastated' Chun

Majority trustees attack rulings

By Rick Daysog


A state judge will decide Wednesday whether to throw out grand jury indictments against Bishop Estate trustee Henry Peters and two local businessmen.

Circuit Judge Michael Town heard closing arguments yesterday from the state attorney general's office and lawyers for Peters and businessmen Jeffrey Stone and Leighton Mau.

The defendants are asking Town to dismiss the charges on the grounds that Attorney General Margery Bronster -- who convened the grand jury -- does not have the primary authority to conduct a criminal investigation.

They also believe that Bronster's dual role as the estate's legal guardian, or parens patriae, is in conflict with her role as the state's chief law enforcement officer.

Last November, an Oahu grand jury indicted Peters on a theft charge from an alleged kickback scheme involving Bishop Estate land. Stone, a brother-in-law of trustee Richard "Dickie" Wong, was indicted on conspiracy and commercial bribery charges. Mau was charged with conspiracy.

Yesterday, Peters' attorney Renee Yuen argued Bronster is trying to use the criminal investigation as leverage in a probate court action to remove her client from the estate's board for alleged breaches of duty.

Yuen believes the state's actions have unfairly harmed Peters, forcing him to step down as chairman of PBOC Holdings Inc., a Beverly Hills-based savings and loan in which the estate is a big investor. Under federal banking law, Peters' indictment prohibits him from serving on the PBOC board.

"There is no law in this land that justifies what she is doing," added John Edmunds, Stone's attorney.

Deputy Attorney General Lawrence Goya said Peters' resignation from the PBOC board was not due to a potential conflict of interest but because he was charged with a crime.

Goya argued that the attorney general's office is authorized to play several roles. While that may raise a potential for conflict, there is no actual conflict since the attorney general has no personal interest at stake, he said.

"You have to keep in mind that the attorney general has been aggressive in the way she is pursuing the probate and criminal matters," Goya said.

"But that is not improper."

Chun: Lindsey report
‘devastated’ him

It contained 'damaging and
inaccurate allegations,' he testifies

By Debra Barayuga


Kamehameha Schools President Michael Chun said he was "devastated" when he read a newspaper story in December 1997 about a confidential report that criticized student performance and raised allegations of mismanagement and fiscal improprieties at the school.

"There were some very damaging and inaccurate allegations regarding our school, and what was devastating -- it was coming from within and not without," Chun said yesterday in his second day of testimony before Circuit Judge Bambi Weil.

"It was coming from our boardroom and I couldn't believe anything like this would have been allowed to happen."

While Chun had learned of the report prepared by trustee Lokelani Lindsey four days earlier, and had been asked by her to respond to it but to keep it confidential, "it doesn't hit you until you read it," he said.

Chun said he was even more disturbed that he was not given the opportunity to respond to certain allegations, particularly those alluding to misappropriation of school funds, before Lindsey released the report to the media.

Lindsey has accused Chun of breaking the confidentiality of the report by sharing it with his staff. Chun said he became upset later when members of his staff admitted to releasing some school data and speaking to a reporter.

Chun's testimony is key to trustees Oswald Stender and Gerard Gervis' petition to remove Lindsey from the five-member board. It's also the first time he has responded publicly to the allegations contained in Lindsey's report, which included the controversial statement that the longer students stay at Kamehameha, the more poorly they perform.

Chun said that after trying to keep the report confidential even from his own staff, he made copies to enlist their help in responding to the allegations.

His initial response was submitted to the trustees a week later, and a more detailed supplement was submitted in January 1998. To this day, Chun said he is not aware of any action taken by the trustees on Lindsey's report or his subsequent response to her allegations.

During questioning by Stender's attorney Doug Ing, Chun cited instances of "micromanaging" by Lindsey -- from approving T-shirt designs to holding protocol meetings to decide where trustees and principals sat and who would get what kind of leis at song contests and other major school functions.

The T-shirt issue arose when the school's volleyball team came up with a Hawaiian word for volleyball since none existed, Chun said.

Lindsey had said that the word the team chose for their T-shirts had a "bad meaning" and required that all T-shirt designs from then on be approved by her.

Chun said he was "incredulous" when he learned of her directive and a similar requirement that written communications to parents be reviewed by her before they were sent out.

"That's not something a trustee should be doing," Chun said. "They should be holding me accountable, if anything. It sends the message that you don't trust your people and honor their professionalism."

He was also "taken aback" that meetings he and other top-level school administrators were asked to attend to discuss seating arrangements and lei selection at major school events would warrant a trustee's involvement, eliciting titters from the gallery. "It didn't make any sense to me."

Chun also said he objected to the trustees' decision in 1995 to eliminate community-based and alternative-learning programs because they were not cost-effective. The trustees chose instead to build four satellite schools on the neighbor islands, expand preschools, summer programs and financial aid to graduating students.

Although the outreach programs, designed to help preschoolers, students at risk of failure and adults of Hawaiian ancestry, were not entirely successful and were being worked on, they were affecting more children of Hawaiian ancestry and their families, Chun said.

After the programs were eliminated, "There was a great deal of disappointment we were not doing what we used to," he said. Chun testified that he was involved in putting together at least four strategic plans for Kamehameha Schools.

Majority trustees seek
to overturn rulings

By Rick Daysog


Bishop Estate's majority trustees are seeking to overturn two recent court decisions that could significantly shape the outcome of the two-year-old controversy surrounding the charitable trust.

Majority trustees Richard "Dickie" Wong, Henry Peters and Lokelani Lindsey filed for a writ of mandamus with the state Supreme Court yesterday seeking to reverse probate Judge Kevin Chang's Feb. 4 decision barring trustees from matters relating to the Internal Revenue Services' investigation of the estate.

Chang, who appointed a five-member outside panel to handle all matters relating to the IRS audit, found that the trustees have a conflict of interest because the IRS investigation concerns their personal interests.

Separately, attorneys for Wong filed for a writ of mandamus last week asking the high court justices to order probate Judge Colleen Hirai to disqualify the estate's court-appointed master, Colbert Matsumoto, in his reviews of the 1994-1996 period, has sharply criticized the trust's financial and management practices, and his findings have played a major role in Attorney General Margery Bronster's petitions to remove Bishop Estate's majority trustees.

In seeking to reverse Chang's decision, trust attorney William McCorriston has said the lower court's decision goes against 150 years of trust law practice.

McCorriston recently cited a sworn declaration by a former chief counsel of the IRS, Atlanta attorney Jerry Cohen, who said the trustees do not have a conflict of interest at this time since the audit is still in the preliminary stages.

Last month, the IRS sent trustees the preliminary findings of its exhaustive, four-year audit. While details of the audit have not been disclosed, Chang said the IRS is looking at trustees' $800,000-a-year commissions.

Chang's ruling was in response to court filings by the minority trustees -- Oswald Stender and Gerard Jervis -- who argued that trustees were in conflict in matters involving the IRS inquiry.

Stender and Jervis -- who have voluntarily recused themselves -- had asked Chang to appoint a three-person panel to address the IRS audit.

Meanwhile, Wong is asking the high court to overturn Hirai's Jan. 8 order denying Matsumoto's disqualification.

Glenn Sato, Wong's lawyer, said Hirai abused her discretion by not holding a full evidentiary hearing on Wong's motion to disqualify Matsumoto, who, Sato argued, is based against the estate.

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