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Wednesday, May 31, 2000

Attorney general’s
office rips trustees
over delays

It accuses both interim
and former Kamehameha
Schools trustees in a suit
to recover investment losses

By Rick Daysog


The attorney general's office is accusing the current and former trustees of Kamehameha Schools of obstructing its attempts to seek multimillion dollar claims against the estate's ex-board members.

In court papers filed today, Deputy Attorney General Hugh Jones asked Probate Judge Kevin Chang for a one-year postponement for the trial on the state's surcharge suit against former trustees Henry Peters, Richard "Dickie" Wong, Oswald Stender, Gerard Jervis and Lokelani Lindsey.

The trial has been scheduled to begin Sept. 18, but Jones said the current interim board of trustees has "refused to cooperate" with the state's numerous discovery requests, delaying the production of some documents by as much as a year.

"Over the last year, the Kamehameha Schools' trustees have employed a number of tactics to thwart the production of responsive records," Jones said. "The current trial date was unrealistic even under calm sea conditions."

Chang has scheduled a June 27 hearing on the state's postponement request.

All five of the embattled former trustees resigned from their $1 million-a-year jobs last year in the wake of the Internal Revenue Service's threat to revoke the tax-exempt status of the $6 billion trust. The state then sued the ex-board members for investment losses that the trust incurred during their tenures.

The state has alleged that the losses potentially exceed $200 million.

The surcharge lawsuit may be the most complex and expensive litigation in the three-year Kamehameha Schools controversy. The state has alleged that, in addition to making bad investment decisions, the former board members were overpaid and improperly hired consultants and lawyers.

A trust spokesman could not be reached today for immediate comment. But in the past, the estate has said that it has cooperated with the attorney general's investigation.

The former trustees, meanwhile, have maintained that the estate's finances were well managed, citing the trust's record $800 million revenues for the 1999 fiscal year.

The attorney general's office subpoenaed records of the trust's investments March 24, 1999, but it wasn't until a year later that a court-appointed discovery master ordered the trust to turn over the documents, Jones said.

Jones said that the current interim board of trustees has employed "numerous obstructionist tactics" to avoid the production of the records so that most of the relevant documents weren't turned over until this March.

He added that the former trustees have not cooperated, either. Ex-board members Peters, Stender and Jervis have declined to produce any documents, Jones said.

"The attorney general's diligent efforts have been thwarted by discovery stays, discovery delays, a succession of counsel, noncooperation and multiple intervening proceedings, and primarily by the steadfast noncooperation of the interim trustees, who possess all the critical documents," Jones said.

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