Friday, July 23, 1999

Removed trustees can't appeal yet

Judge: only final decision appealable

Peters intends to return as 'rightful trustee'

By Rick Daysog


Bishop Estate trustees Richard "Dickie" Wong and Henry Peters cannot appeal a court order temporarily removing them from their posts, a state judge ruled today.

Probate Judge Kevin Chang said his May 7 order removing four of the estate's five trustees on an interim basis cannot be considered a final decision, since many of the issues regarding the removal order are outstanding.

Once Chang issues a final decision, the trustees can be allowed to appeal.

Chang removed Wong, Peters, Lokelani Lindsey and Gerard Jervis after the Internal Revenue Service, as part of a pending audit of the multibillion dollar Bishop Estate's operations, threatened to revoke the estate's tax-exempt status.

Trustee Oswald Stender voluntarily stepped down from the post.

In temporarily removing the trustees, Chang also gave the interim board and the attorney general's office 90 days to seek the permanent removal of the former board members.

Peters and Wong, however, argued that Chang's order should be considered a final decision and that they should be allowed to appeal the order the state Supreme Court.

Peters' attorney Renee Yuen had said the removal was "fundamentally and fatally flawed." Yuen said Chang abused his discretion in removing the trustees in response to the IRS threat. Wong and Peters also asked Chang for permission to file an appeal of his May 7 order with the high court. Chang also rejected that request.

Peters says he intends to
return as ‘rightful trustee’
of Bishop Estate

By Rick Daysog


Despite threats by the Internal Revenue Service that it would seek to revoke the Bishop Estate's tax-exempt status, trustee Henry Peters is refusing calls to permanently step down.

In a four-page letter to the estate's interim board yesterday, Peters said he plans to seek reinstatement and charged that his temporary removal from the Bishop Estate board was the result of a conspiracy by the Cayetano administration.

"Rather than accept your request to voluntarily step down, I wish to advise you of my intention to return as the rightful trustee of the Kamehameha Schools Bishop Estate," Peters said. "After all, I am innocent and the charges against me are created with smoke and mirrors and not facts."

Probate Judge Kevin Chang on May 7 temporarily removed Peters and trustees Gerard Jervis, Lokelani Lindsey and Richard "Dickie" Wong and accepted the voluntary resignation of Oswald Stender. Chang's decision -- which also named five, interim replacement trustees -- was in response to a threat by the IRS that it would revoke the estate's tax-exempt status if the former board was not removed permanently.

Critics say Peter's refusal to voluntarily resign shows that he is placing his personal interests above those of the trust.

"The bottom line is that Mr. Peters doesn't understand the nature of his fiduciary duty and why it is that the interests of the beneficiaries have to come before his own personal desire," said Randall Roth, University of Hawaii law professor and one of five co-authors of the 1997 "Broken Trust" article that alleged trustees mismanaged the estate.

"Even if this were somehow unfair to him, that's not the point. The best interest of the beneficiaries has to be served."

Last Friday, the interim trustees -- retired Adm. Robert Kihune, attorney Ronald Libkuman, former Iolani School headmaster David Coon, retired Honolulu Police Chief Francis Keala and Hawaiian Electric Industries Inc. Treasurer Constance Lau -- sent letters to the former trustees, urging them to step down permanently in the interest of the trust.

Peters' refusal to step down means that the new board will likely sue for his permanent removal. Chang's order gave the new board until Aug. 4 to petition for the permanent ouster of the former trustees.

The attorney general's office is also pursuing a suit to permanently remove Peters, Jervis and Wong, alleging a pattern of self-dealing and mismanagement.

Peters -- who also is the target of a grand jury investigation into kickback allegations -- charged that the IRS's threat to revoke the estate's tax-exempt status is based on misrepresentations by the attorney general's office.

Peters said he recently was contacted by the IRS's western region office and he now expects the IRS to reverse its position over the coming weeks as a result. He declined to give details of his discussions with the IRS.

Peters also took issue with Chang's order, saying it removed the people most qualified to negotiate with the IRS.

He said that he and fellow board members were able to preserve the estate's tax-exempt status earlier this year after IRS questioned Kamehameha Schools admission policy, which gives preference to children of native Hawaiian ancestry.

A Bishop Estate spokesman did not return calls and a spokeswoman for the attorney general's office declined comment.

In a separate matter, U.S. District Judge Alan Kay has scheduled a Tuesday hearing on Peters' motion for a temporary restraining order against the attorney general's office. Peters, in a suit filed last Tuesday, is asking Kay to block a grand jury investigation into an alleged kickback scheme involving Bishop Estate land.

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