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Saturday, May 20, 2000

fires law firms

A special master's report
says much legal work served
board members' interests,
not the trust's

By Rick Daysog


Kamehameha Schools has terminated several of its law firms, one day after a court-appointed special master issued a scathing report on their roles in the three-year trust controversy.

In a brief statement yesterday, the estate's interim board and Chief Executive Officer Hamilton McCubbin said they would immediately discontinue the firms' services pending the completion of an internal investigation.

The estate said it would decide what action, if any, it would take against the firms once its inquiry is completed.

"The report of the special master ... raises question about the propriety of services rendered by some of these advisors," the estate said.

The charitable trust did not identify which firms were terminated, but one, Cades Schutte Fleming & Wright, confirmed its suspension. At least one other firm, Ashford & Wriston, also was terminated, a person close to the trust said. Partners at the Ashford firm did not return calls.

In a report filed in Circuit Court on Thursday, court-appointed special master Robert Richards said several of the estate's outside attorneys assisted in a "Herculean effort" to circumvent disclosure to the attorney general's investigation and took part in a "destroy the opposition" effort by former majority trustees Henry Peters, Richard "Dickie" Wong and Lokelani Lindsey.

The Richards study, which examined legal work by 12 of the estate's outside firms in the 1998-1999 period, also recommended that the probate court surcharge the former trustees for nearly $5 million in fees, saying much of the law firms' work served the interests of the board members and not the trust.

Richards singled out Cades Schutte's work as "the most troubling" and urged the probate court to order the disgorgement of $880,000 of the $1.3 million that it earned between 1998 and 1999.

Richards said the firm spent considerable trust funds researching the free-speech limitations of senior U.S. District Judge Samuel King, an outspoken critic of the trust, and looked into possible remedies against Bobby Harmon, the former head of the estate's insurance subsidiary, in an apparent attempt to silence criticism.

The law firm also reviewed sets of photographs taken of a May 1997 protest march, in an apparent attempt to assist the former majority trustees in identifying opponents, Richards said.

Cades Schutte strongly disagreed with the master's findings and said its work for the trust was appropriate. The firm said its staff was not trying to silence criticism when it reviewed photos of the march but was attempting to prepare documents in response to various subpoenas and legal requests.

The firm, which has represented the estate for at least 30 years, said it expects to be vindicated once the Probate Court hears its side of the story.

"There was never any attempt by us to identify any of the people in the photographs," the firm said.

"The master's report was wrong about that, and about other allegations, in large part because he never talked to us. We are amazed and disappointed that he took several months to prepare his report and made serious allegations without ever asking our attorneys or staff members about what they did or why."

Meanwhile, the attorney general's office applauded the estate's decision to suspend some of their outside firms in light of the disclosures in Richards' report.

"This is a prudent course of action," said Deputy Attorney General Hugh Jones.

"The attorney general strongly supports the announcement by the estate's chief executive officer."

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