On Aug. 9, the Star-Bulletin published Broken Trust,
an essay written by five prominent Hawaii citizens
accusing the Bishop Estate trustees of mismanagement
of the trust and violation their fiduciary duties.
This is the response to Broken Trust
from the chairman of the
Bishop Estate trustees.
is not broken
By Richard S. H. Wong
Chairman, Bishop Estate Board of Trustees
For several months now, clouds of controversy have been swirling around Kamehameha Schools/Bishop Estate. In the interest of confining ongoing discussions and efforts to facts and with the hope of moving toward positive solutions, I have been silent. Little good is achieved when individuals prolong debates over personalities and styles, or when personal or political agendas are allowed to influence outcomes.
But I have become increasingly concerned that in all of the furor that has arisen, what is of paramount importance here has become obscured -- the intent of KS/BE's founder Bernice Pauahi Bishop and her vision regarding the purpose and potential of Kamehameha Schools/Bishop Estate. While Pauahi's deep and abiding concern was for her people, the Hawaiian people, I believe that she recognized, even then, the impact KS/BE could make on all the people of Hawaii.
The Honolulu Star-Bulletin on Aug. 9 ran an opinion piece titled "Broken Trust.'' While I respect those opinions and indeed regard many of the participants highly and with warm affection, a complete story was not told. In that lapse, I believe the vitality, the very reason for KS/BE's existence has been threatened. For among the changes to our organization that the authors appear to be contemplating is an opening of our school doors to all. To this, I answer with a clear and emphatic no. To this I say, who then holds responsibility for breaking trust and destroying the magnificent gift left to Hawaiians by our Princess Pauahi?
THIS TRUST IS NOT BROKEN. In fact, the exact opposite is true. Kamehameha Schools/Bishop Estate is in a period of unprecedented accomplishments in educational achievement. Our financial position is better and brighter than at any other time in our history -- bar none. We are living up to the terms of our founder's will as she directed, and we will continue to do so.
While the essay made for fascinating reading, I would be remiss if I did not highlight the fact that many of the claims made were done so without attribution and, indeed, nowhere in that article was any attempt made to present the positions of KS/BE. Opinion piece or not, serious charges were made which responsibility and fairness would dictate presentation of an alternate viewpoint. These comments, then, are offered in the spirit of fostering a reasoned view.
Will of Bernice Pauahi BishopAs a trustee, I have taken a vow to uphold the sanctity of the will of Bernice Pauahi Bishop. It is the closest thing KS/BE has to a charter document. The current trustees often refer to the will as our "bible" when it comes to decisions about the governance and direction of the institution. Each trustee has taken a sworn oath to uphold and protect the terms of this document.
Critics are now agitating to alter, if not eliminate, several provisions of the will to suit their own desires. What began as a questioning of the trustees' authority to regulate the affairs of Kamehameha Schools -- which the will clearly empowers them to do -- has evolved into a frenzy of challenges that threaten the very foundation of the trust.
It is my strong belief that Randall Roth, as a lawyer, should understand a basic tenet of trust law. At all costs, one of the most sacred provisions of a will is that which governs selection of trustees, and Bernice Pauahi Bishop was especially clear about the manner in which she wanted her trustees to be selected.
Those five critics belittle Pauahi's will because of its age -- and say with all degree of certainty that if she were here today she unquestionably would decide things differently. Unlike these five, I have no contact with Pauahi other than through her will, and I would admonish these individuals against asserting their wishes and desires over hers.
Fred Trotter, a former trustee of the Campbell Estate, says the trustees' responsibilities to the trust are to:
1. Defend the will of the testator, Bernice Pauahi Bishop.As trustees, unlike corporate decision makers, the responsibilities of a trustee go much deeper -- their ability to delegate certain trust responsibilities under some circumstances is not possible.
2. Carry out the wishes of the testator.
3. Preserve and enhance her assets in order to carry out their responsibilities.
Educational programsBecause this issue began with questions about the trustees' management of Kamehameha Schools -- for which, according to Pauahi's will, we have full power and responsibility -- I wanted to hear from an educational expert. I asked University of Hawaii-Manoa President Dr. Kenneth Mortimer for his thoughts on how KS/BE was doing with its educational initiatives. President Mortimer commented first not on KS/BE's campus programs, but spoke of a little known statistic that speaks volumes about KS/BE's deep commitment to the education of Hawaiian children.
"There are over 6,000 Hawaiian and part-Hawaiian students enrolled at the University of Hawaii in any given year. Approximately 1,600 to 1,700 (nearly 28 percent) receive funding from KS/BE. In past years, this has amounted to about $6 million."
Those voicing their concerns about Kamehameha Schools/Bishop Estate have been virtually mute on the one subject which is at the heart of this organization -- the educational opportunities it provides young Hawaiians and their families. Notwithstanding the countless Hawaiians who have been served by KS/BE in its 113-year history, consider the unprecedented expansion of KS/BE's educational reach through its "Go Forward" program. Under "Go Forward" and since 1994, KS/BE has:
Opened two new elementary schools, one in Pukalani, Maui, and the other in Keaukaha, Hawaii, to extend the reach of KS/BE's full-time educational services to Hawaiian families on the neighbor islands. "Go Forward'' also envisions two more campuses being opened, one in West Hawaii and another on Oahu, by 2005.The importance of education and its vital place in the improvement of the well-being of our people is what should be the real topic of discussion, and there are many leaders in our community who recognize that.
Expanded its statewide preschool enrollment from 540 to 1,080 4-year-olds. Plans call for adding nearly 800 more preschoolers by 2005.
Launched the first for-credit interactive distance learning class ever offered by a Hawaii private school. Producers and technicians were Kamehameha students, broadcasting from the new television studio on campus.
Had more than 95 percent of its graduates enroll in two- or four-year institutions of higher learning upon leaving Kamehameha.
Granted more than $50 million in financial aid to some 25,000 Hawaiian scholars, including Kamehameha and non-Kamehameha graduates.
Served tens of thousands of young Hawaiians and their families from pre-school to college and beyond, saving the state of Hawaii millions of dollars.
Myron "Pinky" Thompson served as a trustee of KS/BE for more than two decades. A strong advocate for education, he has devoted his professional life to improving the well-being of the Hawaiian people.
Thompson believes that, "It is important for Hawaiians as a people to focus on our potential as a people. While socio-economic indicators reveal that we are, in fact, a people with special needs and challenges, we must acknowledge that these indicators do not foretell what we can be in the future.
"For us to truly move ahead, in any significant measure, requires we utilize all of the tools which are available to us. One of the most powerful of these tools is education, and we must acknowledge the importance of the Kamehameha Schools and the positive influence it can have on our children, our families and our community.
"Through solid educational efforts we not only provide our children firm foundations, we ensure that they are equipped to one day raise healthy families themselves.'
Kamehameha Schools/Bishop Estate has been and continues to be a strong influence in the perpetuation of Hawaiian culture. We have demonstrated our commitment through support of specific Hawaiian cultural ventures, such as the deeply moving production of "Holo Mai Pele" that was so masterfully staged at the Blaisdell Concert Hall by the Edith Kanakaole Foundation.
"[KS/BE] recognized at the outset that 'Holo Mai Pele' was a cultural event that was uniquely Hawaiian and would produce a sea change in how we indigenous Hawaiians would expansively feel about our culture," Foundation President Pualani Kanakaole Kanahele said.
"KS/BE's insight and commitment to move forward on the birth of this new indigenous Hawaiian genre earns our deep gratitude."
Management of the trustIt is interesting, and very disturbing, to note how cries of "micro-management" have now faded from public attacks on the estate as more facts of educational excellence and accomplishments have been brought forth. Now some critics, deprived of what they thought was a good line of attack, have gone into the gutter making baseless and unprovable charges, sometimes resting on clearly incorrect assertions and second-hand sources with an ax to grind.
These critics have adopted the deplorable mainland political tactic: "If you throw enough mud, some of it is bound to stick."
Although the gutter is not the place to normally have a debate, these charges are so disgraceful and easily countered that it is incumbent upon me and anyone who values fairness and truth to respond.
KS/BE's detractors say KS/BE isn't accountable. That's simply incorrect. In fact, KS/BE is by law one of the most regularly reviewed and closely scrutinized institutions in our state. The Internal Revenue Service reviews our tax returns every year, and because we are a self-sustaining charity, our returns are given special attention -- and greater scrutiny. The bottom line here, though, is we are in compliance with all of the laws -- tax and otherwise -- that apply to us.
The state also looks at our books every year. The probate court appoints a master each year to review our accounts and operations. These reports are submitted to the attorney general's office for approval and acceptance. If either the court or the attorney general raises questions, we are obligated by law to address them. This has been the process and practice from the beginning, and we, again, have complied with all requirements.
As an aside, the masters' reports, which are a matter of public record, contain a wealth of observations and comments which generally present a dispassionate, balanced portrait of KS/BE and the trustees. As an example, Master Benjamin Matsubara wrote in 1993, "[T]his master found all of the trustees to be involved and concerned in regard to their responsibilities and the direction of KS/BE. All of the trustees, without exception, were committed to fulfilling 'the legacy of the princess.' Each trustee realizes that he or she is just one of five members of the board, and that progressive action requires a consensus. Individual points of view, if not shared by others, will continue to be an individual point of view with the continuing recognition that the business at hand must go on as the majority has determined."
I find it curious that comments like these, made by an informed observer with first-hand experience with the trustees and KS/BE's operations, somehow never get reported to the wider public. By contrast, negative comments from past masters have been the stuff of headlines.
Questions have been raised regarding the management of the trust's assets. For most of the schools' history, KS/BE was land rich, cash poor. That financial situation changed dramatically in the 1980s. Contemporary trustees have prudently diversified the trust's portfolio to guard against economic fluctuations, while significantly increasing the net income available for much larger operating and capital costs and expansion of programs -- unthinkable goals in the trust's earlier years.
KS/BE has made a much publicized and quite profitable investment in the world-renowned investment banking firm of Goldman Sachs & Co. KS/BE is one of only two partners that Goldman Sachs has accepted as "outside" investors. Prior to agreeing to KS/BE's investment, Goldman Sachs reviewed KS/BE's accounts and operations in great detail with an eye specifically toward assessing our long-term financial strength and operational viability. We measured up well; we met their standards, and they met ours.
KS/BE's financial strength and stability are reviewed periodically by both Standard & Poors and Moody's Investors Service, two of the world's leading credit rating agencies. We have consistently merited the highest ratings given by both organizations. By way of local comparison, we have a higher credit rating than the state's largest utility, Hawaiian Electric Co., and S&P rates us higher than the state's largest bank, Bank of Hawaii.
"KS/BE is in a class by itself as far as credit-worthiness," says Fred Trotter, a Bank of Hawaii director. He is joined by BOH Chairman and CEO Larry Johnson in lauding KS/BE as a valued customer with which the bank has a substantial working relationship involving deposits, loans and investments.
Neither Goldman Sachs, Moody's, Standard & Poors, nor Bank of Hawaii give their highest endorsements lightly. Their very reputations are linked to the assessments they make and the ratings they issue, and KS/BE has earned top-drawer consideration from each of them. This is not only a good indicator of our solid financial health, but also of proper and prudent administration on the part of the trustees and their staff.
Vision for the futureOne of the claims made recently is that KS/BE has no plan for the future, no vision to take the organization forward. During his service to KS/BE, Pinky Thompson stressed the need for strategic planning. He offers these comments.
"During the years 1991-1993, the trustees of KS/BE developed a strategic vision and mission for Kamehameha Schools/Bishop Estate. This was the foundation for the new Strategic Educational Plan.
"Very recently, I was given the opportunity to briefly review the 1997-2005 strategic plan adopted by the trustees this past week. The current plan has the potential to provide a sense of direction for the schools. It offers the students, faculty and staff of Kamehameha, parents, alumni and others who are interested a clear and directed focus. It is my strong feeling that discussion and implementation of this plan is of paramount importance.
"I feel it is critical that the entire community be informed of the content of this strategic plan and be invited to comment, to be heard, in a quest to achieve unity through a shared vision.
"My comments are based on the belief that the trustees and all in the Kamehameha Schools /Bishop Estate family will incorporate and work toward these goals and objectives which they recently adopted in their strategic plan:
"Vision: To carry out in perpetuity the wishes of Ke Alii Pauahi to educate children and youth of Hawaiian ancestry to become good and industrious men and women;
"Mission: KS/BE exists to carry out the wishes of Bernice Pauahi to educate Hawaiian children as resources permit. To accomplish this, KS/BE will:
Promote the educational development and growth of all people at KS/BE."Reach: The trustees commit themselves to expanding the reach of KS/BE educational resources to children and youth of Hawaiian ancestry through prudent management of assets, planned increase in enrollment in existing programs and selective new programs and through the use of new teaching and telecommunications technologies.
Foster Protestant religious worship, morals and spiritual values.
Prudently and actively manage assets to meet educational goals.
Conduct ourselves with a clear commitment to pookela -- excellence.
Encourage, cultivate and inspire students, graduates and staff to serve the Hawaiian community and the community at large.
Preserve and perpetuate Hawaiian culture, traditions and values.
Instill throughout the organization Hawaiian ancestral values.
"Readiness: The administration, faculty and staff of KS/BE commit themselves to readying children and youth of Hawaiian ancestry to become good and industrious men and women.
"Return: The alumni and students commit themselves to returning to the Hawaiian community through their leadership and service some of the benefits they have received from their association with Kamehameha Schools.
"In addition, a set of 15 organizational goals which rededicated the KS/BE resources, both human and financial, is included.
"Now that the trustees have articulated their goals for KS/BE, faculty and staff are empowered to determine how to achieve those goals through operational plans which the faculty and staff will create. I believe it is vital that the operational plans be shared for comment with students, alumni, parents, Na Pua A Ke Alii Pauahi and others and that their suggestions be considered.
"The time to concentrate on positive, constructive work is overdue and it is important that we, as a community, assist in whatever fashion possible to bring about a shift of focus. It is my opinion that focusing on the educational/operational planning processes has the potential for bringing the KS/BE family together to work toward establishing our island home, Hawaii, as a healthy, productive and safe place to live. "
Positive, productive outcomesWe all share a concern regarding the divisive nature of the current discussions and the eagerness with which those outside the Hawaiian community have embraced this fight. It is important, again, to reflect upon those safeguards and measures currently in place which serve to ensure the integrity of the trust and its trustees.
The state attorney general has begun an investigation into allegations raised, and we will offer her our cooperation. Each year, KS/BE is reviewed by a court-appointed master and that master's report has been endorsed and accepted each year by the attorney general. Many of the claims raised by KS/BE critics have already been scrutinized and laid to rest by these court-sanctioned reviews.
On our own and in an effort to resolve many of the concerns raised, the KS/BE Board of Trustees unanimously agreed to petition the probate court for the appointment of a fact-finder. Patrick Yim, a retired judge with more than 20 years experience, is the man conducting the fact-finding. We asked him to undertake this effort because of his integrity and skill and these have been lauded by all of the parties involved in this matter, including Na Pua A Ke Alii Pauahi.
Of the fact-finding, Pinky Thompson says, "The current trustees are now involved in a fact-finding process. I would hope that all quarters of the Kamehameha Schools/Bishop Estate and our entire community will participate fully in this process and then heed the final outcome. I encourage Judge Yim and the trustees to invite a nationally recognized educational outfit of some kind to review and comment on whatever recommendations and plans are made with regard to the schools."
Office of Hawaiian Affairs trustee Frenchy DeSoto is concerned that the entire matter be solved in a proper fashion: "Too much is at risk. We need to look to our culture to find the solutions that will help us heal."
As trustees of KS/BE, we are making every effort to firmly and thoughtfully move KS/BE in the right direction, striving for educational excellence; broadening educational opportunities, substantial financial strength and investment diversity to ensure its perpetual responsibilities.
While these are troubled times for Kamehameha Schools/Bishop Estate, they are also dynamic times. For even amidst the controversy, there is powerful opportunity at hand. We can and must take all of the current energy and interest and channel those forces into positive directions and actions.
For 113 years, KS/BE has contributed to the well-being of the Hawaiian people and, indeed, to all the people of Hawaii. We have provided opportunities for educational excellence to young Hawaiian children and their families, and we intend to continue doing so for countless generations.
Let us not lose sight of the bright beacon of education or extinguish the promise of this great organization's potential through misguided actions, however well intentioned. This trust, the gift of Ke Alii Pauahi to the Hawaiian people, remains unbroken.
(Tomorrow: Response to "Broken Trust"
from the justices of the Hawaii Supreme Court)
Bishop Estate Archive
Broken TrustBy Gladys Brandt,
Msgr. Charles Kekumano,
Walter Heen, Samuel King
and Randall Roth
We commend Bishop Estate trustee Richard S.H. Wong for responding to our "Broken Trust" article. The five of us consider public dialogue to be an essential component of a healthy community.
However, his response does not deny* essential facts previously set forth. We remain concerned regarding:
Millions of dollars, which could have been spent at Kamehameha Schools, were instead spent fighting the federal intermediate sanctions law which threatens trustees who pay themselves unreasonably high fees.
Bishop Estate trustee Henry Peters negotiated against the interests of KS/BE while on the board of a Virginia Country Club.
Bishop Estate trustee Lokelani Lindsay failed to reimburse KS/BE for her improper personal use of KS/BE personnel.
Trustees unilaterally ordered actions before obtaining necessary approval from the entire board.
Yukio Takemoto, as Bishop Estate director of budget and review, has awarded non-bid contracts, and now has a 13-person department and a budget of $1.6 million per year.
Trustees invested their own money in KS/BE investments.
KS/BE suffered losses of $44 million in 1995 and another $34 million in 1996.
Trustees have not fully adopted generally accepted accounting principles.
This response was submitted by "Broken Trust'' authors
Gladys Brandt, former principal of Kamehameha School for Girls;
Msgr. Charles Kekumano, retired Catholic priest and chairman of
Liliuokalani Trust; Walter Heen, retired judge of the state Intermediate
Court of Appeals and former legislator; Samuel King, senior
federal District Court judge; and Randall Roth, University of Hawaii
law professor and expert on wills and trusts.
Bishop Estate Archive
* This sentence was corrected online on Thursday, August 21, 1997 from, "However, his response denies essential facts" as originally posted. This was in error.