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Saturday, December 9, 2000

Schools to rehire
some law firms
let go last May

A $500,000 investigation
contradicts findings that
legal work personally
benefited former trustees

By Rick Daysog

The Kamehameha Schools will rehire several of the outside law firms that it terminated when a report by a court-appointed special master raised serious questions about the firms' legal work.

But Hamilton McCubbin, the Kamehameha Schools' chief executive officer, said the estate will not retain all of the firms that it suspended in May.

The firms were let go as a result of special master Robert Richards' report, which alleged that several of the trust's outside lawyers conducted millions of dollars of work that personally benefited the estate's former trustees.

McCubbin said the trust is looking at the firms on a case-by-case basis and has not yet decided which firms it plans to rehire.

McCubbin's comments were in response to Probate Judge Kevin Chang ruling yesterday that the $6 billion estate is not required to pursue former trustees Henry Peters, Richard "Dickie" Wong, Oswald Stender, Gerard Jervis and Lokelani Lindsey and the trust's outside law firms for the millions of dollars in legal fees.

The Richards report recommended the surcharges, saying that the ex-trustees and several of the law firms took part in a "Herculean effort" to stonewall the state attorney general's investigation of the trust.

All firms deny wrongdoing

The Richards report singled out the Cades Schutte Fleming & Wright and McCorriston Miho Miller Mukai firms for taking part in a "destroy the opposition" campaign by former majority trustees Peters, Wong and Lindsey.

Richards alleged Cades Schutte spent considerable estate funds researching the free-speech limitations of senior U.S. District Judge Samuel King, an outspoken critic of the former trustees. Cades Schutte also reviewed sets of photographs taken of a 1997 protest march against the ex-trustees, in an apparent attempt to identify critics, Richards said.

As a result of the special master's report, the estate terminated its contracts with Cades Schutte, Ashford & Wriston, Verner Liipfert Bernhard McPherson & Hand and PriceWaterhouseCoopers. The McCorriston firm resigned after the former trustees were temporarily removed from the estate by Chang in May.

All of the firms denied wrongdoing.

McCubbin's decision to rehire some of the law firms is largely based on a trust investigation, conducted by the Washington, D.C., firm of Morgan Lewis & Bockius L.L.P., that contradicted several of the findings made by Richards.

The 252-page Morgan Lewis study, which was completed on Oct. 31 and reportedly cost $500,000, concluded that there are no grounds to pursue claims against the law firms and that work conducted by most of the firms benefited the trust.

'Like being blindsided'

David Schulmeister, a Cades Schutte partner, argued in court yesterday that the Morgan Lewis report found no evidence that his firm protected the personal interests of the former trustees.

Morgan Lewis also contradicted Richards' claim that Cades Schutte improperly reviewed photographs of the 1997 protest march, he said. Cades Schutte reviewed the photos to help the estate respond to subpoenas from the attorney general's office, according to Morgan Lewis.

Schulmeister asked Chang to strike many of the charges raised by Richards, saying they were based on speculation, not facts.

"The (Richards) report from the point of view of Cades Schutte Fleming & Wright was an experience a little bit like being blindsided with a crowbar in an alley," Schulmeister said.

"The problem here is, the bell was rung. It has tremendous ramifications. It has caused tremendous damage," he said.

In yesterday's ruling, Chang did not address Schulmeister's request to strike portions of the Richards report.

The judge also did not adopt the findings of either the Richards report or the Morgan Lewis report as a court finding.

Instead, Chang said that the recent settlement between the ex-trustees and the attorney general's office, which had sued the former board members in an effort recover millions of dollars in damages, made moot any surcharge claims for legal fees.

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