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Thursday, May 6, 1999




JUDGE REMOVES LINDSEY

The ruling takes her
permanently and immediately
out of her post

By Rick Daysog
Star-Bulletin

Tapa

A state judge today removed Bishop Estate trustee Lokelani Lindsey, in a ruling that will have a stunning impact on the two-year-old Bishop Estate controversy.

Circuit Judge Bambi Weil permanently and immediately removed the 60-year-old Lindsey from her $1 million-a-year post, making her the first trustee in the history of the 114-year-old trust to be fired from her job.

The ruling paves the way for major reforms of the scandal-plagued trust, which is the target of an 18-month investigation by the state attorney general's office and whose tax-exempt status has been threatened by the Internal Revenue Service.

"It's the beginning of the rational reform of the Bishop Estate trusteeship," said U.S. District Judge Sam King, a co-author of the 1997 "Broken Trust" article that criticized trustees' management of the estate.

Lindsey, appointed in 1993 as the first female member of the Bishop Estate's five-member board, was not available for comment. Her attorney David Gierlach did not return calls immediately. In the past, Lindsey has denied wrongdoing, saying she was the target of a smear campaign orchestrated by fellow trustee Oswald Stender.

If Lindsey decides to appeal the ruling, she will remain off the board during the process. Under state probate law, an appeal does not stay a removal ruling.

Stender and fellow trustee Gerard Jervis sued for Lindsey's removal in December 1997, saying she breached her fiduciary duties, mismanaged the estate-run Kamehameha Schools and intimidated students and teachers.

During the five-month trial that ended last month, attorneys for Stender and Jervis argued that Lindsey placed her personal interests above those of the estate and wasted hundreds of thousands of dollars of estate funds. They argued that she used estate credit cards for personal uses, made personal trips at trust expense and used estate employees to conduct certification work on her Punaluu home.

Stender and Jervis also charged that Lindsey in December released a flawed report that alleged that the longer students stayed at the Kamehameha Schools, the worse they performed as measured by standardized test scores.

The report also said that more than 40 graduating students in the class of 1997 could barely read at the 12th-grade level.

Lindsey's report, according to Stender's lawyers, relied on faulty data and inaccurate methodology and was designed to deflect blame from a scathing 1997 report by court-appointed fact finder Patrick Yim. Yim, a former state Circuit judge, said Lindsey was responsible for much of the morale problems at the Kamehameha Schools.

"I pray that today's ruling will be a first step toward restoring order, enthusiasm and a renewed sense of ohana at the Kamehameha Schools campus," Stender said. "Today we begin the process of healing.

Weil's decision comes on the eve of a trial to temporarily remove all five Bishop Estate trustees. Probate Judge Kevin Chang has ordered the trustees to demonstrate why they should not step down or be removed temporarily in the wake of the IRS threat to remove the estate's tax-exempt status.



Bishop Estate archive


Trustee Jervis
offers to quit
to settle case

If it would end the IRS, Kamehameha
Schools disputes, he would step
down, even permanently

By Rick Daysog
Star-Bulletin

Tapa

Bishop Estate trustee Gerard Jervis today said he would consider resigning permanently or temporarily if it would lead to resolving the 2-year-old controversy surrounding the multibillion dollar trust and the estate-run Kamehameha Schools.

Jervis' attorney, Ronald Sakamoto, said Jervis would be willing to resign if it would help address concerns raised by the IRS, which is threatening to revoke the estate's tax-exempt status, and the state attorney general's office, which has sued to remove trustees permanently and temporarily.

"As part of the resolution, he is willing to consider resigning temporarily or permanently," Sakamoto said.

"Gerry strongly believes that the interest of the trust must be protected and he has advised interested parties of his desire to immediately enter into negotiation to resolve all issues."

Jervis' remarks come on the eve of a hearing before Probate Judge Kevin Chang in which the trustees must demonstrate why they should not resign or be temporarily removed from their $800,000 a year posts.

Chang's order came after the IRS informed a five-member panel of special purpose trustees that they may yank the estate's tax-exempt status if trustees do not step down. The panel was appointed by Chang.

The 50-year-old Jervis' proposal is not tied to the resignation of other trustees. Previously, trustee Oswald Stender said he would be willing to step down temporarily if his four fellow trustees were agreed to resign or were removed on an interim basis.

Jervis' offer had been expected by many in the legal community. In March, he took an overdose of sleeping pills after he and an estate lawyer, Rene Ojiri Kitaoka, were caught in a sexually compromising situation in a Waikiki hotel bathroom. Kitaoka committed suicide the following day.

Sakamoto said he believes Jervis would not be found responsible for many of the issues raised by the IRS, since he has been a trustee for less than half of the period covered by the audit.


Gov: IRS should
tell trustees to
go, and why

Star-Bulletin staff

Tapa

An obsession with power.

That's what Gov. Ben Cayetano believes led to the call for Bishop Estate trustees to step down.

"I think in the exercise of power, the beneficiaries were not always the foremost in their minds," Cayetano said at a news conference yesterday.

"I think there was a good deal of focusing on accumulating as much money as possible for the trust but not enough focus on perhaps delivering good services to the beneficiaries, and I guess maybe the best example of the use of power was the micromanaging of the schools by one trustee."

Kekoa Paulsen, Bishop Estate spokesman, said: "It's easy to be a critic, and what the critics have been ignoring consistently during this entire controversy is the fact that Kamehameha is educating more Hawaiian children on a full-time basis than ever in its history, and the trust is stronger financially than it's ever been in its history, and those two facts are directly attributable to the efforts and the focus of the trustees."

Cayetano says he believes the Internal Revenue Service will force the trustees to resign. "One trustee said he would be willing to step down if they told him what he had done wrong. I think the IRS should just tell him, 'These are the reasons why you should step down. You breached your fiduciary duty by doing this, this and that,' and I think in the end they will step down."



Bishop Estate archive



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