Friday, February 20, 1998

Estate hires expert on trust law

Stender and Jervis
denounce the action as potential
abuse of estate assets

By Rick Daysog

The Bishop Estate has hired a top mainland trust-law expert, a move being criticized by two trustees as a potential abuse of trust assets and an attempt to delay the state's investigation into the trust.

Bishop Estate trustees, on a 3-2 vote, Tuesday hired Los Angeles-based attorney Andrew Garb and other outside attorneys to address the state's investigation of the multibillion-dollar charitable trust, the court-appointed master's review of the trust's operation, and legal challenges by trustees Gerard Jervis and Oswald Stender.

The outside attorneys, in effect, would replace the estate's in-house attorney, Nathan Aipa, on critical estate matters, said Jervis and Stender.

The two alleged today that Garb and his local counsel, Don Kitaoka, are paid by the estate but answer directly to trustees Richard Wong, Henry Peters and Lokelani Lindsey -- and not to the full board.

That represents a conflict of interest and could signal a "dangerous consolidation of information and decision-making power," Jervis and Stender said.

"It is now clear that your real intention is to have these estate-paid attorneys to take direction from and report only to you -- the majority of trustees and not all trustees," they wrote in a letter to Peters, Wong and Lindsey. "This unprecedented action appears to be a deliberate move by the majority of the board to delay the attorney general's investigation."

The Bishop Estate -- Hawaii's largest private landowner -- was founded by Princess Bernice Pauahi Bishop in 1884 to educate children of Hawaiian ancestry. Last year, Attorney General Margery Bronster opened an investigation into allegations of financial mismanagement and breaches of fiduciary duties by trustees.

Jervis and Stender's objection is the latest in the heated boardroom battle between the estate's five trustees.

In November, Jervis and Stender petitioned the probate court for instructions, alleging that Peters, Wong and Lindsey withheld estate information and kept them out of board decisions.

The two also have petitioned the court for the appointment of a special administrator to address the state's investigation. Trustees face a conflict of interest in overseeing the estate's response to the state investigation since they are the ones being investigated, according to Jervis and Stender.

The two said that the hiring of the outside attorneys demonstrates the need for the appointment of the special administrator.

An estate spokesman had no comment this morning. But in the past, the estate has denied that it kept trustees out of the decision-making process and has challenged the need for a special administrator.

Garb could not be reached for comment this morning. But in an interview Wednesday, Garb, an expert in trust and estate litigation, said he represents the estate in Jervis and Stender's petition for instructions and their petition for the appointment of an administrator ad litem. Garb said he saw no problem in his role since the will of Bernice Pauahi Bishop specifies that decisions are made by a majority vote among trustees.

Garb, 55, is a partner at Loeb & Loeb LLP, a high-powered, 190-attorney Los Angeles firm with branch offices in New York, Washington, D.C., Rome and Nashville. He has worked for Loeb & Loeb for 29 years.

Garb is just one of several top attorneys in the Bishop Estate's outside legal team, which includes William McCorriston, a former assistant U.S. attorney, former state Attorney General Warren Price and Mike Hare, a former member of the state Judicial Selection Commission.

In a related matter, the state Supreme Court may rule today on the estate's motion to suspend a lower court ruling which ordered the estate to turn over its Internal Revenue Service records to the attorney general. The estate is appealing Circuit Judge Kevin Chang's ruling that the IRS documents be turned over by today.

The IRS documents are part of a two-year audit by the IRS and could show if trustees received benefits and perks at the expense of the estate, the attorney general's office has said.

Bishop Estate Archive

Text Site Directory:
[News] [Business] [Features] [Sports] [Editorial] [Do It Electric!]
[Search] [Subscribe] [Info] [Letter to Editor] [Stylebook] [Feedback]

© 1998 Honolulu Star-Bulletin