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Friday, December 29, 2000

Star-Bulletin file
After naming five trustees, a happy Judge Kevin Chang shakes
hands in his courtroom Nov. 3 with Francis Keala. Robert Kihune
is in the middle; at left is Ronald Libkuman.

Reform mends
trust’s wounds

Kamehameha Schools has a
new CEO, trustees, name and
strategic plan, and peace
on legal fronts

Top Stories 2000

By Rick Daysog

For the Kamehameha Schools, the year 2000 was a time for healing.

Shaking off the hangover from the three-year campus controversy, the 116-year-old charitable trust hired its first chief executive officer, appointed new permanent trustees, settled its legal battles with the Attorney General's Office and the Internal Revenue Service and implemented a new strategic plan for the next two decades.

The reforms were exemplified by the trust's new name. Starting in January, the $6 billion charity, formerly known as the Bishop Estate, became the Kamehameha Schools, emphasizing the trust's educational mission.

"The changes provide a more nurturing environment for educational programs," said Leroy Akamine, former president of Na Pua a Ke Ali'i Pauahi, a 3,000-member Kamehameha Schools alumni and parent group that sought major reforms at the trust. "It's a relief that many of the issues are now settled."

The estate started the year by naming a career educator and 1959 Kamehameha alumnus as its first ever chief executive officer. The appointment of Hamilton McCubbin, a former dean at the University of Wisconsin-Madison, came after ex-trustees Henry Peters, Richard "Dickie" Wong, Oswald Stender, Gerard Jervis and Lokelani Lindsey resigned from their $1 million posts in December 1999, and was part of a court-mandated reform to take the estate's day-to-day management from the embattled former board members.

The trust followed up McCubbin's appointment by finalizing its agreement with the Internal Revenue Service in February. The so-called closing agreement allowed the trust to retain tax-exempt status but required it to pay the agency $13.4 million to settle outstanding tax issues.

The IRS last year had threatened to revoke the trust's tax-free status after a lengthy investigation of the former trustees. The IRS had alleged that the former trustees took excessive compensation, mismanaged trust investments and neglected the estate's primary educational mission.

The estate also settled its long-running legal battle with the Attorney General's Office, which sued the former trustees to recover tens of millions of dollars for bad investments. That deal, which was finalized last week, calls for the trust to receive about $15 million in insurance proceeds to pay for the alleged damage caused by the former board members.

The trust -- under the guidance of McCubbin and the outgoing court-appointed interim board of trustees -- also implemented a painstaking strategic plan which calls for the trust to greatly expand its reach in the Hawaiian community. The estate will place a greater influence on vocational learning, early childhood education and Hawaiian culture and language studies.

That new strategic plan will come under the stewardship of five new permanent trustees. In November, then-Probate Judge Kevin Chang named attorney Douglas Ing, American Savings Bank executive Constance Lau, Hawaiian navigator Nainoa Thompson, former Hemmeter Development Corp. executive Diane Plotts and retired Adm. Robert Kihune.

Three of the trustees are of Hawaiian ancestry, and two are Kamehameha graduates. All five will assume their new posts on Jan. 1.

As for the former board members, the year did not lack turmoil. Wong spent much time in court on criminal perjury charges brought by the attorney general's office, which were later dismissed by Circuit Judge Michael Town. Lindsey, meanwhile, was recently indicted by a federal grand jury for bankruptcy fraud.

The year 2000 at a glance:

Bullet Jan. 7: Kamehameha Schools' interim board of trustees names Hamilton McCubbin as its first chief executive officer.

Bullet Jan. 15: Then-Probate Judge Kevin Chang approves trustee compensation that limits pay to $98,000 a year. Past board members earned as much as $1 million a year.

Bullet Feb. 23: The Internal Revenue Service finalizes its closing agreement. The deal calls for the trust to pay $13.4 million in back taxes and interest but allows it to retain its tax-exempt status.

Bullet Aug. 1: Kamehameha Schools earns $1.1 billion from its sale of 11 million shares in Wall Street investment banker Goldman Sachs Group Inc.

Bullet Sept. 28: Kamehameha Schools completes its court-ordered strategic plan, which offers a blueprint for educating native Hawaiians in the next two decades.

Bullet Nov. 3: Five new, permanent trustees are appointed.

Bullet Nov. 20: Circuit Judge Michael Town dismisses perjury charges against former trustee Richard "Dickie" Wong.

Bullet Dec. 22: Probate Judge Colleen Hirai finalizes a settlement between the Attorney General's Office and former trustees Wong, Henry Peters, Oswald Stender, Gerard Jervis and Lokelani Lindsey.

Bishop Estate Archive
Kamehameha Schools

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