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Thursday, May 18, 2000

Report: Ex-trustees
tried to ‘destroy
the opposition’

A special master's report says
they ran an expensive and
well-orchestrated plan that
targeted judges and others


By Rick Daysog


Lawyers for the former Bishop Estate trustees took part in a costly "destroy the opposition" campaign that targeted state and federal judges, law enforcement agencies, the Honolulu Star-Bulletin and the trust's own beneficiaries, according to a court-appointed special master.

In a blistering, 67-page report expected to be filed today in state Circuit Court, attorney Robert Richards said the estate's former majority trustees Henry Peters, Richard "Dickie" Wong and Lokelani Lindsey wasted thousands of dollars of trust money in failed attempts to muzzle U.S. District Judge Samuel King's criticisms of the former trustees and to disqualify Probate Judge Kevin Chang from cases involving the estate.

One of the trust's law firms, Cades Schutte Fleming & Wright, investigated former trustee Oswald Stender's role in an unsuccessful Maui business deal and reviewed photographs of Kamehameha Schools alumni and parents who marched in protest to the former trustees in May 1997, in an apparent attempt to intimidate critics.

Richards, appointed by Judge Chang in March 1999 to review the estate's legal bills, found that the law firm of McCorriston Miho Miller Mukai drafted lawsuits against the Internal Revenue Service and the attorney general's office and conducted research into a possible racketeering suit against the attorney general's office.

By Ken Ige, Star-Bulletin
When the Kamehameha Schools interim trustee board met in the
Star-Bulletin conference room this morning, they were greeted with
this story's headline. From left, retired Admiral Robert Kihune,
attorney Ronald Libkuman, former Police Chief Francis Keala
and retired Iolani Headmaster David Coon met with the
Star-Bulletin editorial board. Also attending were Kamehameha
CEO Hamilton McCubbin and Dr. Michael Chun, President.
Hear an audio recording of the meeting, below.

The McCorriston firm also conducted legal work in an attempt to prosecute the Star-Bulletin and this reporter for disclosing sensitive details of the IRS investigation, according to Richards.

The intense civil and criminal investigations by the IRS and the attorney general's office prompted the former board members to resign from their $1 million-a-year posts last year.

"The conclusion of this master (is) that no stone would be left unturned by the trustees in attempting to silence their critics," Richards said. "There was ... the adoption of a 'destroy the opposition' strategy. There was a constant effort made, nearly always unsuccessful, to take steps to silence or discredit what was perceived to be the 'opposition,' whether that was an employee, a reporter, the attorney general, a judge or a master."

Attorney William McCorriston defended his firm's legal representation of the trust, saying his firm eventually recommended against filing actions against the IRS and the attorney general's office.

McCorriston added that many of his challenges to the attorney general's investigation were made on sound constitutional grounds.

The McCorriston firm billed the trust for $1.4 million in legal work in 1998-1999, and all of that is subject to a surcharge on the part of the former trustees. Mike Heihre, a Cades partner whom Richards described as the estate's "shadow general counsel," did not return calls.

"I'm not embarrassed about anything," said McCorriston, who resigned as trust counsel last year. "I'm pretty well convinced that if the trustees followed my advice, they'd still be there."

Critics have long argued that the estate's steep legal bills were inappropriate for a charitable trust established to educate children of native Hawaiian ancestry. They also believe the trust hired its high-profile lawyers to stonewall the IRS and state investigations.

That sentiment is echoed in Richards' report, which recommended that the Probate Court surcharge the former board members for about $5 million in legal work done by its outside firms.

Much of the attorneys' work, he said, was the result of the former trustees' alleged misconduct and was done to benefit the individual board members and not the trust. The special master also found that some of the work was so egregious that the law firms should refund part of their fees to the trust.

Little benefit to trust

For instance, Richards recommended that Cades Schutte disgorge about $880,000 of the $1.3 million that it billed the trust between August 1998 and May 1999. He also said that former Gov. John Waihee's firm, Washington D.C.-based Verner Liipfert Bernhard McPherson & Hand, should be ordered to refund the estate $347,564 for work Richards said was of little benefit to the trust.

"When one reviews the legal invoices one is drawn to the inescapable conclusion that the trustees thought of the assets of the trust as their own. No real thought was given to the advisability of spending money on lawyers," Richards said.

Richards' report is based on an exhaustive review of legal billings from 12 of the estate's local and mainland legal and accounting firms. The study, which covered the August 1998 through May 1999 period in which the Kamehameha Schools controversy was at its height, found that several of the law firms conducted duplicative work and that much of it was done for the defense of alleged misconduct by the former trustees.

Richards also noted that the former trustees and their law firms engaged in a "Herculean effort" to stall and avoid full disclosure in investigations by the attorney general and the estate's court-appointed master.

In many cases, the retention of the law firms was approved by Nathan Aipa, the trust's then-general counsel. Aipa currently serves as chief operating officer.

"There were monumental efforts made to keep trustee conduct from coming to light or, if it did come to light, to rationalize it," Richards said.

"In fact, one can easily conclude, as this master has, that a strategy was adopted to obstruct the legal process, to delay where ever possible, to object where ever possible, to utilize so many lawyers and so many arguments that the opposition would be overwhelmed and would choose to give up. That did not prove true."

No comment from estate

The estate, which recently was renamed the Kamehameha Schools, had no immediate comment. Interim trustee Ronald Libkuman said that he and his fellow board members are not aware of the details in the report and that the issues raised in the study will likely be a matter of litigation.

Former trustees Stender and Gerard Jervis had objected to the hiring of the McCorriston firm and other lawyers and have argued that they shouldn't be liable for the firms' legal tabs.

Ex-trustee Peters defended the use of outside attorneys, saying their work benefited both the estate and the will of the estate's founder, Princess Bernice Pauahi Bishop. Peters said he was not familiar with specific allegations in the master's report but confirmed that the estate once considered a racketeering complaint against the attorney general as well as sanctions against Judge King.

In many ways, Richards' findings underscore the Balkanized relationships between the estate's former trustees. Under the old regime, outside lawyers often reported directly to majority board members Lindsey, Peters and Wong but kept minority members Stender and Jervis in the dark. The master's report also included specific examples of attempts by the $6 billion charity to silence its critics.

'Inappropriate legal work'

One example: An associate at the Cades Schutte firm spent 16 hours to research and draft a memo on the limits of a federal judges' freedom to comment on social issues, in what Richards labeled "chilling and wholly inappropriate legal work."

The memo, directed at federal Judge King, was written three weeks after the publication of the "Broken Trust" article that heavily criticized the former trustees. King was one of the report's five co-authors.

Richards also faulted the Cades firm for reviewing sets of photographs taken at a May 15, 1997, protest march and rally at the estate's Kawaiahao Plaza headquarters, which touched off the Kamehameha Schools controversy more than three years ago. Richards said the work suggested that the Cades Schutte firm was assisting the former trustees in "identifying those who oppose them."

"More than any other law firm involved in this review, (Cades) was to represent the interests of the majority of the split board, namely the interests of trustees Peters, Wong and Lindsey," Richards said. "Except in very limited instances ... the work of this firm cannot be described in any fashion as benefiting the trust."

The master also knocked the McCorriston firm for drafting a complaint against the IRS in November 1998.

The unfiled complaint, which Richards described as an "ultimate show of arrogance," took the federal agency to task for not communicating with the former trustees.

At the same time the IRS suit was being contemplated, the McCorriston firm wrote up separate suits against the attorney general's office and the trust's court-appointed master Colbert Matsumoto for interfering with their right to communicate with the IRS.

Former Attorney General Margery Bronster generated much of the McCorriston firm's legal attention.

For instance, in 1998 the firm went so far as to review an annual report from Servco Pacific Inc., a company that had nothing to do with the Kamehameha School controversy other than that it is headed by Bronster's husband, Mark Fukunaga.

Bronster compared the trust's treatment of its critics to former President Richard Nixon's famed "enemies list."

Like many of Nixon's opponents during the 1970s Watergate crisis, people who spoke out against the former trustees were targeted for harassment, she said.

Bronster, whose controversial reconfirmation defeat last year has been attributed in large part to the former trustees' political clout in the state Legislature said the questionable legal billings confirms what she has suspected: That the former trustees and their lawyers were purposely stonewalling the state's investigation at the beneficiaries' expense.

"The beneficiaries should not suffer for the abuses of lawyers," she said.

"These were never appropriate charges for a charitable organization and someone should be made accountable for making the trust whole." Audio

A talk with the interim
Kamehameha Trustees

Online Audio
Thursday, May 18, 2000, 10:00 a.m.
Star-Bulletin conference room

The Star-Bulletin Editorial Board met this morning with the interim Kamehameha Schools trustees in the Star-Bulletin conference room to discuss their past year in office and their future plans for the estate.

They saw the headline on this article for the first time as they entered the room and discuss this story along with other wide-ranging topics in this 55-minute unedited audio recording.

In attendance were trustees Robert Kihune, Ronald Libkuman, Francis Keala and Rev. David Coon. Also attending were Kamehameha President Dr. Michael Chun and Kamehameha CEO Hamilton McCubbin. Trustee Constance Lau was not present

Kamehameha Schools Public Relations Specialist Kekoa Paulsen also sat in.


Click here for Streaming MP3
Click here for MP3 Download
55 Minutes, 12 Megabytes
Quicktime | RealPlayer


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