Friday, July 2, 1999

By Craig T. Kojima, Star-Bulletin
Henry Peters meets with reporters after his case
was dismissed yesterday.

Peters didn’t get
fair hearing

Judge Town dismisses
indictments of Peters and
two businessmen

Stender vs. Lindsey in court again

By Rick Daysog


The state attorney general's criminal investigation of Bishop Estate trustees has suffered another setback as a state judge dismissed indictments against trustee Henry Peters.

But the judge's action does not rule out future criminal investigation of Peters.

Circuit Judge Michael Town yesterday threw out grand jury indictments against Peters, local developer Jeffrey Stone and isle businessman Leighton Mau, saying they were denied a "fair and unbiased" grand jury.

Town said prosecutors -- who alleged Peters, Stone and Mau took part in a kickback scheme involving Bishop Estate land -- improperly bolstered the testimony of Richard Frunzi, Stone's former lawyer. Frunzi gave up his law license after he was convicted of federal money-laundering charges.

"Frunzi's testimony ... denied these defendants a fair and unbiased grand jury and such conduct invaded the (jury's) province," Town said. "It certainly had a tendency to prejudice the grand jury."

On June 16, Town dismissed separate indictments against Stone, Stone's brother-in-law trustee Richard "Dickie" Wong and Wong's wife, Mari.

As in his previous ruling, Town dismissed the Peters indictment without prejudice, meaning that state prosecutors could bring new criminal charges against the trustee before a new grand jury.

Deputy Attorney General Lawrence Goya had no response when asked whether the state would seek new indictments. He said he'll meet with acting Attorney General Rick Keller to discuss options.

In its Nov. 25 indictment, the grand jury alleged that One Keahole Partners, a partnership between Stone and Cleveland-based National Housing Corp., received favorable treatment when it bought the estate's fee interest to the Kalele Kai condominium project for $21.9 million in 1995.

About the same time, Stone acquired Peters' second-floor condo at the upscale 1015 Wilder complex indirectly for $192,500 more than it was worth, the indictment said. Peters then used the money from that sale to buy a 12th-floor penthouse unit in the same complex, according to the grand jury.

"The crimes that have been charged are essentially theft crimes involving the Bishop Estate," Goya said.

Peters and Stone have denied wrongdoing, saying Stone and National Housing overpaid the estate in the Kalele Kai transaction. Both have said there is no connection between the Kalele Kai deal and Peters' private transactions.

Defense lawyers said the only link between Peters' condos and the Kalele Kai deal was provided by Frunzi, who was improperly called before the grand jury.

Stone's attorney, John Edmunds, said Goya engaged in misconduct by not telling jurors that Frunzi had been convicted on money-laundering charges. Edmunds added that Frunzi improperly violated the attorney-client privilege that exists between him and Stone when he went before the grand jury without Stone's knowledge or permission.

Peters said the criminal investigation is based on "fraudulent charges" and is part of a political campaign orchestrated by former Attorney General Margery Bronster and the Cayetano administration to remove him as a trustee.

Peters said he was disappointed that the case was not dismissed with prejudice, because it would allow the state to go back and continue its campaign against him.

Peters compared the allegation that he took a kickback to the 1986 smear that derailed the gubernatorial campaign of former U.S. Rep. Cecil Heftel. "From day one, this has been a Cec Heftel-type smear to dethrone the duly appointed trustees of Kamehameha Schools and Bishop Estate and have this governor appoint his provisional governance," he said.

"It's very disheartening to have a corrupt attorney general and governor besiege innocent people like this using millions and millions of dollars of taxpayers' money."

Peters said he hopes Town's ruling could help him get reinstated as a Bishop Estate trustee.

In a May 7 decision, Probate Judge Kevin Chang temporarily removed Peters, Wong, Gerard Jervis and Lokelani Lindsey from their $1 million-a-year posts and accepted the voluntary resignation of Oswald Stender after the Internal Revenue Service threatened to revoke the estate's valuable tax-exempt status.

Peters noted that Chang's ruling came in the same week that the estate saw its $500 million investment in Goldman Sachs Group Inc. grow several-fold with the Wall Street investment banking firm's initial public offering.

"Isn't it ironic that the very week in which we bring home $2 billion to the Bishop Estate is the week I lose my job? Any place else they would have given a parade for me. They would have given me bonuses. Here they indict you."

Stone and Edmunds said they would sue the state in federal court if the attorney general tried to seek a new indictment. Edmunds said the state has no case without Frunzi's testimony.

"I would like to see my family start to heal," Stone said. "... I think it's time for Hawaii to move on to a better subject."

Stender vs. Lindsey in court again

By Rick Daysog


Former Bishop Estate trustee Oswald Stender is opposing Lokelani Lindsey's request to set aside a judge's ruling to remove her as a $1 million-a-year trustee of the nonprofit, charitable trust.

In court papers filed yesterday, Stender said Circuit Judge Bambi Weil, who ordered Lindsey's dismissal May 6, demonstrated by clear and convincing evidence that Lindsey was unfit to serve as a trustee.

Lindsey said Weil abused her discretion by not allowing her to testify in rebuttal to several witnesses who followed her after she took the stand in the middle of the trial. Lindsey asked the judge to allow her to remain in office while she appealed her removal to a higher court.

Stender, whose motion was joined by the attorney general's office and trustee Gerard Jervis, said Lindsey testified for eight days and had ample opportunity to address the allegations against her.

Stender said restoring Lindsey would have a "devastating effect" and would "paralyze" the healing process under way at the Kamehameha Schools.

In her findings of fact and conclusions of law, Weil said Lindsey misappropriated estate assets, micromanaged the estate-run Kamehameha Schools and created a climate of fear on the school's Kapalama Heights campus.

Stender, who recently was named acting executive director of the Hawaii Nature Center, added that Weil found 19 instances in which Lindsey's trial testimony was not credible.

"The truth is that the court showed extraordinary patience in letting Mrs. Lindsey testify and 'tell her story' literally as long as she wanted to," said Stender's attorney, Crystal Rose. No stay, "no matter how carefully crafted, could safeguard Kamehameha Schools from Mrs. Lindsey's vindictiveness."

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