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Wednesday, July 26, 2000

State narrows
case against
former trustees

Instead of $300 million,
the attorney general will
seek to recover $190 million

By Rick Daysog


The state attorney general's office has narrowed its case against the former trustees of the Kamehameha Schools.

In a July 14 letter to Circuit Judge Eden Elizabeth Hifo, Deputy Attorney General Daniel Morris said the state will seek to recover some $190 million from the former board members for their alleged roles in eight money-losing trust investments.

Previously, the state alleged that ex-trustees Henry Peters, Richard "Dickie" Wong, Lokelani Lindsey, Oswald Stender and Gerard Jervis incurred more than $300 million in losses and write-offs from more than 70 investments.

Morris said the state had to focus its case due to the reluctance of the interim board of trustees to hand over key documents.

Morris added that concerns about the estate's insurance coverage also had a hand in the decision.

The interim trustees said that they have tried to cooperate with the attorney general's office but that they ran the risk of losing $75 million in insurance coverage if they took an active role in the case.

Probate Judge Kevin Chang ruled in favor of the interim trustees last week, saying the board should not assist or participate in the state's suit.

The state's surcharge suit is set for trial Sept. 18.

In his letter to Judge Hifo, Morris said that the state will pursue surcharges for the former trustees' investments in the Robert Trent Jones Golf in Virginia; Hamakua agricultural land; KDP Ltd., an Internet start-up; McKenzie Methane Inc., a Houston-based natural gas producer; and Southern Nevada Income Properties, a Las Vegas-based developer.

The state also will pursue the former trustees for forgiving debts to two partners in McKenzie Methane.

In addition to mismanagement of trust assets, the attorney general's office is seeking surcharges against the former board members for taking millions of dollars in excessive compensation, mismanaging the trust's educational programs and for self-dealing.

These claims are largely unchanged.

Kamehameha Schools' former trustees have denied wrongdoing, saying that they managed the trust prudently and that their pay was performance-based.

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