Four trustees receive
country club freebies

The free memberships, accepted by all
Bishop Estate trustees but Oswald Stender,
are called a conflict of interest

By Rick Daysog

Four out of five Kamehameha Schools/Bishop Estate trustees receive free memberships from exclusive country clubs that sit on Bishop Estate land, in what critics called a clear conflict of interest.

Bishop Estate trustees Richard Wong, Henry Peters, Lokelani Lindsey and Gerard Jervis are honorary members of the posh Waialae Country Club, whose lease rents were renegotiated in 1995 with the estate.

The four trustees also are listed as honorary members at the Mid-Pacific Country Club in Lanikai, which also sits on Bishop Estate land.

The fifth trustee, Oswald Stender, turned down the free club memberships in 1995 to avoid the appearance of a conflict and for tax purposes.

"They don't get the idea that they are trustees of a charitable trust," said Senior U.S. District Judge Samuel King, one of the five authors of the critical "Broken Trust" article that helped launch the state's investigation of the $10 billion charitable trust.

"I doubt if they know how to spell the word fiduciary."

Golf club memberships and other trustee perks, such as airline VIP club memberships, have been a subject of inquiries from the Internal Revenue Service, which is conducting an audit of the estate, according to one source familiar with the audit.

King believes honorary memberships underscore the need to remove some of the trustees from the board. He said the memberships create "an appearance of impropriety" since the estate owns the land under the golf courses and negotiates their leases.

According to Waialae's membership directory, the four trustees were honorary members in 1995 when the estate and club members rewrote the lease. Those talks raised the 144.9-acre course's annual lease rent from $60,000 to about $1 million, according to club members familiar with the lease terms.

Trustees also were honorary members at Mid-Pacific when the club renegotiated its rent in 1991. The 163-acre Windward Oahu golf course now pays $469,000 a year in lease rent, up from $6,000 previously.

Jervis, Lindsey and Wong were not Bishop Estate trustees when Mid-Pacific's lease was last negotiated.

"This certainly raises questions about the independence of trustees," said Edward Halbach, one of the nation's top experts on trust law and the former dean of the Boalt School of Law at the University of California Berkeley.

Trustees respond

An estate spokeswoman referred questions regarding the club memberships to the individual trustees. Peters and Lindsey did not return calls.

Wong, who doesn't golf, said he's been an honorary Waialae member for 22 years but has never used it. Jervis, who became a trustee in late 1994, said he became a Waialae member in 1995 but has golfed there only once.

He said he had been a regular paying member at Mid-Pacific but later became an honorary member after he became a trustee.

Stender had been an honorary member at Waialae when he was appointed to the board in 1989 but declined the memberships two years ago, according to sources. He now is a regular, paying member of the Oahu Country Club, which is not on Bishop Estate land.

Managers at both golf clubs declined comment when asked about the potential conflicts.

Traditional perk

The honorary memberships are a traditional perk that the clubs have extended to trustees for many years, some members said. One said the memberships don't pose a direct conflict since the lease talks with the clubs were handled by Bishop Estate staffers, not by trustees.

He added that Waialae's new lease terms are favorable to the club. Waialae, the site of the Hawaiian Open golf tournament for decades, now has a 75-year lease, although it has had to raise monthly dues by $62 to adjust for the higher lease rent, he said.

"It was strictly by the numbers," he said.

Breached duties?

Randall Roth, a University of Hawaii law professor and one of the "Broken Trust" co-authors, believes some trustees may have breached their fiduciary duties in accepting the free memberships since they're personally benefiting from their position with the estate.

For instance, a regular membership at Waialae costs $44,000 -- roughly equivalent to the median household income in Hawaii -- in addition to monthly dues of about $310.

Mid-Pacific Country Club members pay a one-time initiation and certificate fee of $36,000 and monthly dues of $265, according to Hal Okita, general manager.

Honorary member at both clubs enjoy nearly the same privileges as regular members, although they are not allowed to vote on club policy.

According to Okita, Mid-Pacific extends honorary memberships to public figures such as Gov. Ben Cayetano and Mayor Jeremy Harris, as well as trustees. Okita said trustees haven't formally accepted Mid-Pacific's honorary memberships and noted that they seldom use the club's facilities.

Besides Bishop Estate trustees, Waialae's 1996 membership directory lists U.S. Sen. Daniel Inouye, U.S. Rep. Patsy Mink, Cayetano, Lt. Gov. Mazie Hirono, Senate President Norman Mizuguchi and House Speaker Joe Souki as honorary members.

Former Bishop Estate trustees William Richardson and Matsuo Takabuki are regular, paying members of Waialae.

"I don't see any problem in giving away honorary memberships to the governor," said King, whose father served as a Bishop Estate trustee during the late 1950s.

"But when they do that for the landlord, that is a conflict of interest."

Honorary members

Of Waialae Country Club in 1996, followed by the year they became members:

Trustee Richard Wong (1994)

Trustee Henry Peters (not available)

Trustee Lokelani Lindsey (1993)

Trustee Gerard Jervis (1995)

Sen. Daniel Inouye (n/a)

Rep. Patsy Mink (1993)

Gov. Ben Cayetano (1987)

Lt. Gov. Mazie Hirono (1995)

Supreme Court Chief Justice Ronald Moon (1993)

Honolulu Mayor Jeremy Harris (1994)

Senate President Norman Mizuguchi (1994)

House Speaker Joe Souki (1993)

Former House Speaker Daniel Kihano (1987)

City Council Chairman John DeSoto (1995)

Rev. David Coon (1989)

University of Hawaii President Kenneth Mortimer (1993)

Golfer Arnold Palmer (1981)

Sei Hoon Yang, Consulate General of the Republic of Korea (1993)

Ting-Yu Yu, director general CNNA, Representative of Taiwan, ROC, (1993)

Source: 1996 Waialae Country Club membership directory

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