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Wednesday, May 26, 1999




Bishop Estate official
defends condo project deal

By Rick Daysog
Star-Bulletin

Tapa

A Bishop Estate land manager described a controversial 1995 real estate deal involving a brother-in-law of ousted trustee Richard "Dickie" Wong as a successful turnaround that will net the estate millions of dollars.

Paul Cathcart, director of the estate's urban Oahu district, said the estate did not give local developer Jeffrey Stone, Wong's in-law, a "sweetheart" deal when Stone and his mainland partner acquired the fee interest to the 219-unit Kalele Kai condominium project for $21.9 million.

Testifying before Circuit Judge Michael Town, Cathcart said Stone and his mainland partner National Housing Corp. stepped in after the original developer, California builder Peter Bedford, ran into financial problems that could have led to a costly foreclosure battle.

"We had a developer that was going down the tubes real quick," Cathcart said. "If we did not salvage that situation by trying to get someone else ... we would have to go and spend considerable legal fees to foreclose on Kapalele."

Wong's attorney Eric Seitz had called Cathcart as a witness for a hearing on a motion to dismiss criminal indictments against Wong and Stone. Seitz believes the charges are flawed and are based on incorrect grand jury testimony from Stone's former attorney Richard Frunzi, who recently was convicted of federal money-laundering charges.

Last April, an Oahu grand jury indicted Wong for allegedly taking a $115,800 kickback from Stone for his reported role in the Kalele Kai transaction. The panel also indicted Stone on commercial bribery and conspiracy charges.

Wong, who said he recused himself from board decisions involving Kalele Kai, and Stone have pleaded not guilty. The trial is scheduled for August.

During yesterday's hearing, Deputy Attorney General Lawrence Goya chipped away at Cathcart's testimony as he introduced evidence showing that Cathcart met with Frunzi during the negotiations. Cathcart previously had testified that he did not meet Frunzi.

Goya also introduced documents showing that Frunzi played a role in the Kalele Kai negotiations, giving him firsthand knowledge of whether it was a sweetheart deal.

The hearing resumes today with testimony from attorney James Stubenberg and local appraiser Robert Hastings.

In a separate courtroom yesterday, attorneys for Wong and fellow trustee Henry Peters delivered closing arguments in the trial over their temporary removal as trustees of the multibillion-dollar estate.

Probate Judge Kevin Chang on April 7 had already temporarily removed Wong, Peters, Gerard Jervis and Lokelani Lindsey and accepted the voluntary resignation of Oswald Stender after the Internal Revenue Service threatened to revoke the estate's tax-exempt status.

Deputy Attorney General Dan Morris argued that there are enough grounds for the permanent removal of Wong and Peters. He urged Probate Judge Collen Hirai to oust them on an interim basis because they took part in decisions to accumulate $350 million in trust income from the estate-run Kamehameha Schools and paid themselves $131,000 more than they were entitled to.

Glenn Sato, Wong's attorney, and Renee Yuen, Peters' lawyer, argued that the trustees have done a good job of managing the trust.

They also argued that the accumulation of income, which they characterized as retained savings, is prudent and permitted under the will of the estate's founder, Bernice Pauahi Bishop.



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