Attorney general turns up the heat

Bronster says that if serious misconduct
is revealed, trustees could be removed

By Jim Witty


Based on the assessment to date, I have concluded that the rights of the beneficiaries may be at substantial risk. There are credible allegations that the intent of Bernice Pauahi Bishop is not being implemented, and that in specific instances a trustee may have breached the fiduciary duty owed to the trust beneficiaries. Accordingly, I believe it would serve the public interest to continue this investigation.

Full text of the attorney general's report

Attorney General Margery Bronster could remove Bishop Estate trustees if her investigation turns up serious misconduct, she said in a preliminary report released yesterday.

But investigators say they need people to step up with concrete information on the inner dealings of the $10 billion trust.

"Everything really hinges on who is willing to break through that code of silence and come forward," said Cynthia Quinn, special assistant of Attorney General Margery Bronster.

"Unfortunately, a lot of the people coming forward are requesting anonymity."

The preliminary investigation report concluded that the rights of Bishop Estate beneficiaries may be at "substantial risk." The report was submitted to Gov. Ben Cayetano on Aug. 29 and released yesterday.

The conclusions are based on "credible allegations" that trustees have not followed the will of Princess Bernice Pauahi Bishop and that individual trustees may have breached their fiduciary duties.

After interviewing the authors of a Star-Bulletin opinion piece published last month; a group consisting of Kamehameha Schools students, faculty and alumni; and the masters assigned by the probate court to review the estate, Bronster decided to forge ahead with the investigation.

While the report is short on specifics, Bronster said she'll focus on allegations of self-dealing and co-investing, specifically that one or more of the five trustees invested money in projects the estate had also invested in.

She cited trustees' 1989 investment of more than $2 million of personal money in a Texas methane gas venture that the estate eventually put $85 million into, and singled out trustee Henry Peters for allegedly representing the buyers who purchased the posh Robert Trent Jones Golf Club in Virginia in 1995 from a partnership that included Bishop Estate.

Both of those charges were culled from the "Broken Trust" opinion piece by University of Hawaii law professor Randall Roth, senior federal District Court Judge Samuel King, Monsignor Charles Kekumano, retired judge Walter Heen and former Kamehameha Schools Principal Gladys Brandt.

"This calls into question the trustees' duty against self dealing and the trustees' duty of loyalty," Bronster wrote.

Bronster also plans to look into allegations made by the authors of "Broken Trust" that trustees have taken actions unilaterally, not as a group as stipulated in the will.

Bronster's investigation also will delve into reports that estate assets were used to promote the personal interests of a trustee and the use of trust money to lobby against legislation that would limit trustee compensation.

In 1995, trustee Lokelani Lindsey allegedly used Bishop Estate staff to obtain a city zoning variance for her North Shore home.

The attorney general will also consider the amount of commissions trustees receive.

They made $843,109 each last year. "While there is a statutory provision on the maximum amount of commissions, the question of what is reasonable compensation still remains," Bronster wrote in the report.

Bronster said she will also investigate allegations that trustees deviated from the will by failing to publish an inventory of estate property and investments in a Honolulu newspaper and compelled employees to remain silent "under threat of termination of employment and pension entitlements."

"It is apparent from the plain language of the will that Bernice Pauahi Bishop directed openness and full disclosure," Bronster wrote in the report.

She has said that the selection of trustees by individual Supreme Court justices, a policy that has generated much controversy, will not be a major focus of the probe.

Bronster said the investigation won't duplicate work being done by court-appointed fact-finder Patrick Yim and master Colbert Matsumoto.

After the report was released yesterday afternoon, investigators met with Oswald Stender, the only trustee who hasn't been tainted by adverse allegations.

Key dates in the probe

All stories are available online
in our Bishop Estate Archive
Key dates in investigations into Bishop Estate:

May 3: A Kamehameha alumna calls attention to mismanagement of Kamehameha Schools in a letter to state Supreme Court justices.

May 14: Bishop Estate seeks to authorize trustees to delegate retired Circuit Judge Patrick Yim as fact-finder into allegations surrounding Kamehameha Schools.

May 15: More than 700 Kamehameha alumni and supporters stage a peaceful march to the state Supreme Court and to Bishop Estate.

May 20-22: Na Kumu o Kamehameha, a group of more than 200 faculty members, requests a meeting with trustees.

May 24: Eleven representatives of Na Pua a Ke Ali'i Pauahi -- an organization of more than 2,000 Kamehameha students, parents and alumni -- walk out of a meeting at Bishop Estate offices after only two trustees come.

June 5: Na Kumu issues a two-page public statement about their concerns surrounding management of the school.

June 27: Hearing before Judge Colleen Hirai. Court rules in favor of Na Pua's requests to open the inquiry to the public, give all persons with relevant information full and fair opportunity to be heard and grant confidentiality to all who ask for it.

July 10: Court order filed appointing Yim to conduct and begin an investigation. Yim has until Aug. 29 to produce a status report.

July 22: About 100 Kamehameha faculty meet with Yim and Na Pua's attorney.

Aug. 9: In a newspaper essay titled "Broken Trust," Gladys Brandt, Walter Heen, Monsignor Charles Kekumano, Samuel P. King and University of Hawaii Professor Randall Roth blast Bishop Estate trustees, except for Oswald Stender, and ask for the attorney general to conduct an investigation into their management of Kamehameha Schools and the estate's financial assets.

Aug. 12: Gov. Cayetano directs Attorney General Margery Bronster to make a preliminary inquiry into the Bishop Estate to determine whether there is a need for a wider investigation.

Aug. 25: Na Pua demands more accountability on the part of Bishop Estate trustees to beneficiaries and making results of Yim's fact-finding into estate matters known.

Aug. 29: In Yim's first report to the court, the fact-finder says it may take an additional 45 days to conclude interviews with witnesses and recommended another progress report be submitted to the court by Oct. 31.

Sept. 10: "I believe it would serve the public interest to continue this investigation," Bronster says in a report.

Two other inquiries

The investigation by state Attorney General Margery Bronster is in addition to two other inquiries:

Retired Judge Patrick Yim is due to release a fact-finding report into allegations regarding improper management and administration at Kamehameha Schools.

"We do not intend to duplicate Judge Yim's efforts," Bronster writes. "We will review his support and consider elements of his report that may be relevant to our investigation."

Attorney Colbert Matsumoto has been assigned by the Probate Court to be the "master" to review the financial papers of Kamehameha Schools Bishop Estate for the 1994 and 1995 fiscal years.

"The attorney general reviews the master's report and submits her comments to the Probate Court," Bronster writes. "If the master discovers any wrongdoing, the attorney general has the duty to petition the Probate Court to obtain redress."

Matsumoto reportedly has until the end of September to submit his findings.

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