Wednesday, November 19, 1997

Master's report adds to criticism of trustees

THE Bishop Estate trustees have taken another big hit in the form of the report of a court-appointed special master. Attorney Colbert M. Matsumoto sharply criticized the trustees' investment policies and procedures. He decried the secretiveness and obstructionist tactics he encountered, remarking that he felt he was "reviewing the CIA's finances rather than those of a charitable educational organization."

Coming after the devastating indictment of the trustees in the "Broken Trust" article last August, the unprecedented protest demonstration by alumni and parents of students at the Kamehameha Schools and the attorney general's launching of an investigation of the estate, the master's report constitutes more damage to the credibility of the trustees. In particular, it confirms the accusations of financial mismanagement and an amazing degree of arrogance and defiance.

Matsumoto's finding that the estate posted $264 million in losses and loss reserves for the period under review - 1993-94, a period of strong growth for stocks - and could lose as much as $1.9 billion is another indication that something is very wrong with the way the trustees conduct the estate's financial affairs. As others have charged, the trustees seem to have made a number of investments involving a higher degree of risk than is appropriate for a charitable trust. In 1993-94 at least, some of those investments turned sour.

As Matsumoto noted, the board's policy of having one trustee take prime responsibility for policymaking in a specific area is highly questionable. In the case of investment management, that trustee in recent years has been Henry Peters, who has no special qualifications in this vitally important area and made some dubious decisions.

The overall picture painted by Matsumoto is of a board that operates in a secretive manner without a clear plan or procedural safeguards, leaving the estate vulnerable to rash and improper decisions. The report does not call for the removal of trustees but it implicitly reinforces previous demands for such action. In the current atmosphere, so critical of the trustees, it will be difficult for the court to refuse to take remedial action.

A waste of dollars

CONGRESS has approved and sent to President Clinton legislation to create a gold-colored dollar coin to replace the Susan B. Anthony dollar, but don't expect to see much of it. The gold dollar is doomed because Congress lacked the courage to withdraw the dollar bill. Replacing the greenback with a minted dollar would have saved billions. The flawed legislation will create a whimsical novelty the country can ill afford.

Replacing the dollar bill with a coin and greater circulation of the $2 bill are long overdue for reasons of both convenience and cost. A dollar bill today would have been the equivalent of a quarter bill in the 1960s, so vending machines and mass transit vehicles have had to be equipped at great expense to accommodate the paper dollar. Dollar bills cost 4 cents to print and last 17 months; coins cost 8 cents to mint and last 30 years.

The dollar coin authorized by Congress is bound to fail because retailers will control its circulation and will have no incentive to circulate it. While banks put larger bills into consumers' hands via tellers or teller machines, they put smaller bills and coins into circulation by providing them to retailers to use as change for customers. Store owners can hardly be expected to ask banks for both dollar bills and dollar coins, since that could confuse clerks and slow down service.

Congress apparently lacked the stomach to replace the dollar bill with a coin because of polls showing that the public strongly opposes such a move. But when proponents of the change conducted a similar poll with the information that it would result in savings of $456 million annually - the projection of the Federal Reserve and the General Accounting Office - 56 percent supported the idea compared with 36 percent opposed.

A widely circulated dollar coin makes sense from every standpoint, but Congress has chosen a method that won't work. This foolish buck should stop at President Clinton's desk.

Terrorism in Egypt

THE claim of an Egyptian terrorist group that the gunmen who massacred 58 tourists at an ancient temple in Luxor were trying to take hostages and did not set out to kill is pathetically unpersuasive. Witnesses reported no such attempt. Rather, one witness said, "They were pulling tourists like sheep on the floor and slaughtering them."

However, the claim by the organization, the Islamic Group, is instructive. It said hostages were sought to force the United States to release the blind spiritual leader of the bombers of the World Trade Center in New York, Sheik Omar Abdel Rahman, who was convicted in 1995 and sentenced to life imprisonment. Conceivably the killers disregarded their instructions.

The attack killed more foreigners in three hours than all such acts in the previous five years. It belied the Egyptian government's claim that it has defeated the Muslim fundamentalists who are trying to overthrow it. The Islamic Group was involved in another attack on tourists on Sept. 18 - the bombing of a tour bus in Cairo, which killed nine Germans and an Egyptian driver. The damage to Egypt's tourism industry could be catastrophic.

The massacre closely followed the killing of four American oil company employees and their driver in Karachi, Pakistan, last week. That attack also appeared to be connected to Muslim terrorist incidents in the United States, but involving Pakistanis. In both cases, the terrorists whose colleagues have been prosecuted in the United States have not shrunk from retaliating against the innocent. This has nothing to do with the tenets of Islam, but with ruthless fanaticism.

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