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Tuesday, October 31, 2000




Former trustees funneled donations to lawmakers

Thousands of documents indicate
a pattern of political intervention

The state Campaign Spending Commission
will hold hearings
on the political activities
of the Kamehameha Schools
and its former trustees


By Rick Daysog
Star-Bulletin

FORMER trustees of the Kamehameha Schools operated an underground political network that funneled money to the campaigns of dozens of key Hawaii lawmakers, according to trust documents obtained by the Honolulu Star-Bulletin.

Between 1992 and 1997, the $6-billion estate's now-defunct government relations department orchestrated contributions to incumbent Democrats friendly to the trust's interests or to high-ranking politicians with regulatory control over the trust's massive land and business holdings.

Those on the receiving end of estate contributions included U.S. Rep. Neil Abercrombie, Honolulu Mayor Jeremy Harris and former Mayor Frank Fasi's Best Party.

Check

Check

Check


These checks from various former trustees to local political
candidates were subpoenaed from the trust.

The donations provide a rare glimpse into the ways of big-money politics in Hawaii and help to explain the immense clout of the state's largest private landowner and one of the nation's wealthiest charities.

The state Campaign Spending Commission is looking into whether the trust illegally laundered contributions through former trustees, employees, relatives and outside contractors.

"This ... is an example of how a large, wealthy and powerful organization can use its resources to assist public officials," deputy Attorney General Kurt Spohn wrote in a confidential 20-page letter to the spending commission in April. "There is at least the appearance that the elected official is indebted to the organization that helped elect him or her."


For a complete history of the Bishop Estate scandal, see our Bishop Estate Archive


The commission and the attorney general's office declined comment.

However, the Star-Bulletin has reviewed most of the 40,000 pages of documents that make up the two agencies' investigations.

The documents -- which include more than 3,000 pages of sworn testimony from dozens of staffers and outside contractors, photocopies of political donation checks and internal logs listing scores of contributions to local politicians -- indicate that the trust and its agents may have violated federal tax laws that bar charitable organizations from taking part in political activities, and state campaign finance laws.

In the 1994 elections alone, the internal trust logs show about $23,000 in contributions from trustees, vendors and staffers.

The list of recipients for that election year reads like a Who's Who of island politics. They include:

Bullet Congressman Abercrombie: Former trustees Henry Peters and Richard "Dickie" Wong wrote $1,000 checks to the congressman's campaign committee on Oct. 27, 1994, while ex-board member Myron "Pinky" Thompson wrote a $1,000 check to the committee the next day. All three checks were delivered by a trust staffer on Nov. 1, 1994.

A separate $1,000 check dated Oct. 14, 1994, to the Abercrombie campaign from former trustee Oswald Stender was delivered by a staffer on Nov. 1 as well. The Stender check came a month after Stender and Wong separately sent the Abercrombie camp $2,000 checks that were later returned.

The congressman recalled that the contributions were made on an individual basis.

Bullet Honolulu Mayor Harris: When Harris ran for mayor in 1994, the trust's for-profit subsidiary, Royal Hawaiian Shopping Center, bought $250 worth of campaign tickets for a Dec. 28, 1994, fund-raiser at the Dole Cannery Ballroom. Handwritten notes on a photocopy of one of the "It's Jeremy" fund-raiser tickets found at the estate's offices say the estate's nonprofit parent received an additional $1,750 in tickets that apparently were not purchased. A Harris campaign official said he was unaware of the contributions.

Bullet Former City Councilman Arnold Morgado: Harris' opponent in the 1994 mayoral race, Morgado received a $1,000 contribution from Thompson. The personal check, dated Sept. 7, 1994, was delivered by a staffer, and copies of the check were stored in a trust safe. Stender also contributed $1,000 to the Morgado campaign on Nov. 12, 1994. Morgado could not be reached for comment.

Bullet Former state Sen. Rey Graulty: On March 22, 1994, Wong bought $250 worth of tickets for a Graulty fund-raiser at the Disabled American Veterans' Hall. The check was delivered by a staffer. Graulty, now a state Circuit judge, could not be reached for response.

Bullet Former Big Island Councilman Bob Rosehill: Each of the five former trustees contributed $400, or a total of $2,000, to a June 25, 1994, golf tournament and fund-raiser for Rosehill at the Kona Country Club. A handwritten note on a copy of a Rosehill fund-raiser brochure said each trustee sponsored a foursome at $100 per person. Rosehill said he couldn't recall the contribution.

Bullet Former Honolulu Mayor Fasi's Best Party: Ousted trustee Lokelani Lindsey purchased $2,000 worth of tickets for an April 1, 1994, fund-raiser held by the Best Party at the Sheraton Waikiki, according to Paul Cathcart, an estate land manager. The donation was made when Lindsey was negotiating with the city for variances on her home in Punaluu. Fasi said he couldn't recall the contribution.

Pattern of intervention

In court documents, the estate's interim board of trustees has acknowledged that predecessors may have taken part in a pattern of political intervention.

In the aftermath of the Internal Revenue Service audit of the trust, the interim board dismantled its government relations department, which coordinated the trust's political and lobbying efforts.

Hamilton McCubbin, the estate's newly appointed chief executive officer, said he was not aware that the estate as an institution was involved in funding individual candidates. If it was, reforms would be warranted, McCubbin said.

"Obviously the practice that led to that must be stopped," he said.

The ex-trustees deny that they took part in an organized effort to finance the campaigns of isle politicians. They say their political contributions and those of staffers and outside vendors were personal in nature and have nothing to do with trust business.

"The institution does not buy any tickets and it does not get involved politically. But as individuals, why not?" former trustee Henry Peters said. "There's no limitations there. As long as it's the individuals' resources and they do it on their own time. If KSBE (Kamehameha Schools/Bishop Estate) benefits from that, hallelujah."

However, in sworn testimony, some staffers say they not only helped organize the campaign contributions but also used trust facilities to direct the money to local politicians.

An undated internal memo by Namlyn Snow, the former head of the estate's government relations department who died last year, gives a detailed outline of how the trust handled political donations:

"In an effort to organize the distribution of fund-raiser tickets to (the estate's) staff, the following is proposed: One, all tickets received by staff should be turned in to the government relations manager. Two, once the tickets are submitted to the government relations manager, she will apprise the trustees of the event, cost and date. Three, trustees will determine the amount of tickets to purchase. Four, GRD manager will distribute tickets according to staff's responsibilities, district affiliation, interests, etc. It is important to note that distribution of tickets will be at the discretion of the trustees and GRD manager. Requests from staff to attend a specific fund-raiser should be made directly to the GRD manager."

Checks and variances

Among the transactions listed in the trust's logs is a 1994 contribution for $2,000 to the Best Party from former trustee Lindsey.

At that time, Lindsey was facing permitting difficulties for renovations on her Punaluu home. The project made headlines when it became known that Lindsey used trust employees to obtain zoning variances from the city's Department of Land Utilization.

Land manager Cathcart told state investigators under oath that Lindsey, during a private meeting in her Kawaiahao Plaza office, asked him to deliver a $2,000 check to Donald Clegg, then head of the Department of Land Utilization, for an April 1, 1994, fund-raising dinner for Fasi's Best Party at the Sheraton Waikiki.

Cathcart said Lindsey asked him to call Clegg every week for updates on her case and wanted to use the check delivery as an excuse to raise the issue with Clegg, once Fasi's supporter and a former Best Party official.

Cathcart said he remembers taking the check to Clegg's office in the city municipal building, where Clegg refused to talk to him about the contribution and ordered him out of the building.

"As best as I can recall ... I did walk over, gave it to him (Clegg) personally 'cause that's what she (Lindsey) wanted me to do, and then at the same time ask him, oh, how's her permit doing?" Cathcart said in a July 8 interview with state investigators. "And that's when he said, 'don't bug me about it Paul, we're processing it,' you know, so that's what she got for her contribution, you know, an obtuse answer."



Notes indicate that the trust secretly contributed to
Mayor Jeremy Harris' campaign.



Lindsey got the zoning variance after a June 1994, public hearing. Her fine on the project also was reduced to $335 from $1,550.

Lindsey said she couldn't recall making the political contribution to the Best Party. She added that she has contributed to local politicians during the years and in each case the donations were personal and not trust-related.

Clegg denied that Lindsey received special treatment and said his department's review was by the book. Clegg said he couldn't recall the meeting but said he never mixed campaign work with city business.

"It bothers me because I feel they should have more sense than that," Clegg said. "It's an obvious attempt to manipulate me. It does turn me off."

The Best Party's filings with the state Campaign Spending Commission listed the Bishop Estate as the donor, not Lindsey.

Internal trust documents also connect Clegg and Cathcart to the estate's purchase of $250 worth of tickets for a Dec. 28, 1994, fund-raiser at the Dole Cannery Ballroom for Mayor Harris.

A trust staffer's handwritten notes on a photocopy of a Harris ticket said the trust's former for-profit subsidiary, Royal Hawaiian Shopping Center, bought 10 tickets at $25 each. Seventy tickets, valued at $1,750, were sent to the trust's nonprofit parent but apparently were not bought.

Clegg said he didn't recall the request. Cathcart told state investigators that he wasn't sure if the tickets had come from Fasi or Harris but remembers "grousing and grumbling about the tickets and having to deal with them."

Harris' 1994 filings with the spending commission did not list a Royal Hawaiian contribution.

Trust kept contribution logs

In addition to city and state political races, the former trustees contributed to Abercrombie's campaign.

Abercrombie, who served with Wong and Peters in the state Legislature, has supported the Kamehameha Schools' educational programs in national legislation.

Among the volumes of records subpoenaed from the trust, state investigators found photocopies of $1,000 personal checks to the Abercrombie Back to Congress committee from former trustees Peters, Stender, Thompson and Thompson's wife, Laura. Thompson served on the estate's board until 1994. A photocopy of a $1,000 check from Wong also was among the records.

The checks were delivered to the Abercrombie camp on the same date -- Nov. 1, 1994 -- and were listed in detailed logs of contributions maintained at the trust.

An official with the Federal Election Commission told the Star-Bulletin that the ex-trustees' donations to Abercrombie could raise questions, given that trust staff not only monitored the campaign contributions in detailed logs but used estate offices to store records of the transactions.

That implies that the trust, and not the individual board members, was facilitating the purchase of tickets, the FEC official said. Federal law bars corporations and organizations such as the estate from making direct political donations in congressional elections.

However, the official said the FEC is not likely to examine the contributions to Abercrombie since the five-year statute of limitations has lapsed.

Abercrombie recalled that the former trustees' contributions were made on an individual basis and came at a time when they wanted to get more involved in national politics. He said he recalled that the former trustees contributed to the Democratic National Committee during that same period.

Given the trust's expanding investments on Wall Street and the U.S. mainland, the former trustees during 1994 wanted to have a stronger presence in Washington, D.C., to keep track of the tax and business ramifications of legislation, Abercrombie said. He added that the former trustees later scaled back those efforts.

"They wanted to make sure they were in the picture," he said.

Secret political polls

Throughout its 116-year history, the Kamehameha Schools has been entwined with state politics.

Prior to statehood, the estate was seen as an extension of the Republican party and the Big Five companies that dominated political and economic life in Hawaii. And with the rise of the Democratic party in the 1950s, the trust was closely associated with the administrations of former Govs. Jack Burns and George Ariyoshi.

The recently deposed board of trustees -- which included former state House Speaker Peters and ex-state Senate President Wong -- continued that relationship, internal trust documents indicate.

The Star-Bulletin previously reported that the trust spent nearly $200,000 during an eight-year period to conduct secret political polls in districts of certain state legislators.

The districts at the time were represented by former state senators Milton Holt (D, Palama), Marshall Ige (D, Kaneohe), Donna Ikeda (D, Hawaii Kai), Whitney Anderson (R, Waimanalo) and former state Reps. Robert Herkes (D, Puna), Terrance Tom (D, Kaneohe) and Joe Souki (D, Maalaea), a former House Speaker.

And in the well-publicized criminal cases involving Ige and Holt, state and federal prosecutors alleged that the former trustees and their staff directed outside vendors to illegally pay more than $48,000 in campaign debts owed by the two. Holt pleaded guilty and served a one-year sentence on campaign-related charges, while Ige is awaiting trial for misdemeanor charges stemming from the alleged campaign finance abuses.

Testimony from staffers indicates the campaign contributions were part of an effort that involved senior trust officials, ex-board members and some of the trust's outside law firms, accountants, architects and engineers.

That point is illustrated by the trust's apparent efforts to bundle campaign contributions for Ige in 1994.

Nathan Aipa, who recently took a leave of absence from his post as the trust's chief operating officer, told state investigators that he had been asked by Snow four or five times to sell campaign fund-raiser tickets to trust law firms.

Aipa said that in 1994 he contacted several trust attorneys on behalf of Snow and Peters, including Benjamin Kudo, William Yuen, Cynthia Nakamura and Mike Heihre, the former state Judicial Selection Commission chairman, to contribute to Ige's 1994 campaign.

Aipa at the time was the trust's general counsel and was in charge of hiring and retaining estate lawyers. In all, trust lawyers bought $1,250 worth of tickets.

The law firms said the contributions were personal and had nothing to do with trust business.

Sam Hata, senior director of facilities and support services at the Kamehameha Schools, said he raised more than $1,600 for Ige's 1994 campaign from 10 estate architectural and engineering firms.

Two firms, Ronald N.S. Ho and Associates and Akinaka & Associates, would figure in the questionable campaign contributions to Holt and Ige two years later.

Hata, budget director for the City and County of Honolulu during the 1970s, solicited the campaign donations only after Snow asked him to do so. He also collected the money and turned it over to Snow.

A July 21, 1994, memo from a former trust staffer said the estate collected a total of $5,400 from estate vendors for the Ige campaign. The money, which included $4,800 in checks and $600 in cash, was given by Snow to former trustee Peters, who delivered it to Ige.

According to Ige's filings with the state Campaign Spending Commission, the contributions were received on the same day -- Aug. 17, 1994 -- and deposited into the campaign's bank account on the following day.

"This is done all over Hawaii. I know that," Hata said in a May 26, 1999, interview with state investigators. "When I was working for the city, we used to do that, so I don't feel uncomfortable with that."

No estate support for GOP

The estate's campaign contributions underscore complaints from Republicans that the charitable estate operated like a private bank for the Democratic party's old-boy network.

During her failed run for governor in 1998, former Maui Mayor Linda Lingle criticized the estate's board seats as a retirement perk for Democrats.

Lingle said the abuse of power at the estate is the result of Democrats' longtime control of isle politics.

Cathcart testified that he received fund-raiser tickets several years ago from state Rep. Barbara Marumoto (R, Waialae Iki) but declined to forward the tickets to the government relations division because she was a Republican.

Cathcart said he threw away the tickets rather than send them to the estate's government relations division.

"The idea was hopeless," Cathcart said. "She's GOP and our trustees don't support GOPs."

Symbiotic relationship

In many ways, the estate's campaign practices highlight the symbiotic relationship between the trust and Hawaii politicians.

Clegg, no longer an official in the Harris campaign, said it's not unusual for a local candidate to send hundreds of fund-raiser tickets to large organizations such as the Kamehameha Schools which will, in turn, sell some of the tickets to their contractors and business associates. Typically, about half the tickets are sold.

For instance, the Harris campaign sent 1,200 fund-raiser tickets at $25 each to the trust in an unmarked manila envelope, according to sworn testimony by trust staffer Laurita Hookano.

The tickets apparently were not bought, but several trust staffers said the request showed that politicians such as Harris, who were often at odds with the estate, would solicit it for funds.

For example, Harris supported the city's mandatory leasehold conversion law, which allows owners of leasehold homes to acquire the fee interest in their land from landowners such as the Kamehameha Schools.

"You would be very surprised how many legislators sent tickets to our company for their various fund-raisers ..." Hookano told state investigators. "It was very funny, because ... people that do things against the Bishop Estate ... still send us all of their tickets."

The Kamehameha Schools' role as a deep-pocket contributor is underscored by a Feb. 3, 1997, telephone message taken by former trustee Wong's secretary. The message is from Henry Giugni, former U.S. Senate Sergeant-at-arms, who was informing Wong about a fund-raiser for Sen. Daniel Inouye at the home of Walter Dods, First Hawaiian Bank's chief executive officer.

Giugni is a longtime aide to Inouye, while Dods is a Democratic party power broker.

"Wanted to let you know that he's (Giugni) sending Sen. Inouye's fund-raiser tickets to you," the notes of Giugni's call said. "He doesn't expect trustees to give because they already gave."



Bishop Estate Archive
Kamehameha Schools



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