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Friday, February 11, 2000

Peters to receive 6-figure income from Kamehameha

The estate will pay the former
trustee deferred compensation
from past service

By Rick Daysog


Although he resigned under fire as Kamehameha Schools/Bishop Estate trustee, Henry Peters will continue to receive six-figure payments from the charitable trust.

Peters confirmed Tuesday that he will be paid regular distributions from the Kamehameha Schools as part of a deferred compensation plan administered by the trust. His trustee pay was about $1 million a year.

The payments, now in the process of being finalized, were triggered by his resignation in December.

Peters would not reveal the level of his payments or the amount he deferred. But the attorney general's office said that Peters deferred several million dollars of his past compensation. Sources familiar with the trust said Peters could receive hundreds of thousands of dollars a year under the plan.

The attorney general's office believes that Peters' deferred salary is improper because it is based on his trustee pay, which it believes was excessive.

They are seeking surcharges against Peters and fellow board members for paying themselves high salaries at the expense of the trust.

Peters defended his deferred compensation, saying it's part a retirement plan he set up that would provide for his family. He also defended the former Kamehameha Schools trustees' pay, saying it was based on performance and was reasonable under state law.

He added that trustees waived millions of dollars in commissions that they were legally entitled to.

A Kamehameha Schools spokesman declined comment, saying questions about an individual's retirement plan are a personnel matter.

Deferred compensation plans are tax-saving strategies in which a top executive allows his employer to postpone payment of a portion of his salary. The idea is to hold off payment until a later date when the executive is in a lower tax bracket.

In addition to the tax savings, the executive receives the full amount of the deferral and any amount the company may have earned on the deferred pay.

Kamehameha Schools began a deferred compensation plan for employees and trustees back in 1976 but stopped offering the program during the early 1990s.

Peters, a former state House speaker and a Kamehameha Schools trustee in 1984, was responsible for the trust's vast investments, which include extensive land holdings in Hawaii and the mainland, as well as large stakes in Goldman Sachs Group. L.P., Saks Fifth Avenue and Columbia/HCA Healthcare Corp.

On May 7, Probate Judge Kevin Chang temporarily removed Peters, along with former trustees Richard "Dickie" Wong, Lokelani Lindsey and Gerard Jervis after the Internal Revenue Service threatened to revoke the estate's tax-exempt status.

Peters resigned in December after an interim board of trustees appointed by Chang sued for the former board's permanent ouster, saying they jeopardized the trust's tax-exempt status by taking excessive pay, mismanaging trust assets and neglecting the estate's core educational mission.

Peters said he believes his deferred compensation plan is protected but said he isn't ruling out challenges from the IRS, the attorney general's office and the estate's interim trustees.

In many ways, the issues surrounding Peters' deferred pay are similar to those faced by William Aramony, former president of the United Way. After Aramony was convicted of defrauding the United Way, the charity attempted to withhold the full amount of his $4.4 million deferred compensation plan.

A federal judge ruled last month that Aramony was entitled to his full pension because the plan did not contain a clause requiring the forfeiture of money if Aramony committed a felony.

But U.S. District Judge Shira Scheindlin in New York also found that the United Way could withhold $2.02 million in salary and other costs that Aramony owed the charitable organization.

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