Friday, March 6, 1998

Senate backs bill
that would set
trustees’ salaries

The measure would empower
the Probate Court to decide the salaries
of the trustees of charitable trusts

By Rick Dasog

The Senate Ways and Means Committee approved a proposal that would allow the state Probate Court to set the salaries for trustees of the Bishop Estate and other charitable trusts.

The committee yesterday voted unanimously to pass a measure which sets the annual compensation of trustees at "reasonable" levels, which would be determined by a probate judge.

The Senate Judiciary Committee, which also heard the measure, deferred a decision until today.

Legislature '98 Supporters said the bill is needed to correct excessive compensation paid to Bishop Estate trustees. The current law caps trustee pay at up to 2 percent on all trust income and rents above $205,000. Under that formula, Bishop Estate's five trustees each earned about $840,000 in commissions during the estate's 1996 fiscal year.

Beadie Kanahele Dawson, attorney for Na Pua a Ke Ali'i Pauahi, which has criticized Bishop Estate's trustees, said the problem of high trustee pay has "plagued and angered" the local community and contributed to the current controversy surrounding the estate.

Dawson cited the analysis of a trust-law expert, former Boalt School of Law Dean Ed Halbach, who said the current law is "incomprehensible" and encourages "churning and generation of income."

But Bishop Estate trustee Henry Peters said the commissions of trustees are "results and performance based." In written testimony, he noted the estate has conducted three separate compensation studies which found Bishop Estate's trustees were paid within the range of its mainland counterparts.

The estate, meanwhile, is financially healthy and invests all of its earnings in Hawaii through its administration of Kamehameha Schools, he said.

"The reason it is targeted on us is because of our success," Peters said.

The attorney general's office -- which is investigating allegations of financial mismanagement and breaches of fiduciary duties by Bishop Estate trustees -- said it supported the intent of the bill but prefered one that caps trustee pay.

The Cayetano administration previously submitted proposals linking trustee pay to that of the chief justice of the state Supreme Court.

When you have excessive pay for trustees, less trust money is spent on an estate's beneficiaries, said Deputy Attorney General John Anderson.

"Trustee compensation, as opposed to the interests of beneficiaries, becomes the primary motivation for service as trustee," Anderson said.

"More money goes to the trustee that should be used for the benefit of beneficiaries."

The House Judiciary Committee has passed a bill setting up a task force to study trustee pay.

Kamehameha admissions
testimony to resume

An agreement provides for safeguards
on student confidentiality

By Rick Daysog

The director of admissions at Kamehameha Schools will resume his testimony with the state attorney general on March 27.

Attorneys for the state and for Wayne Chang, the schools' admissions director, reached an agreement this morning that would allow Chang to testify with some safeguards protecting students' confidentiality.

Chang recently was interviewed for several hours by state attorneys about Kamehameha's admissions practices, but attorneys said he refused to answer questions on whether some children received preferential treatment for admissions.

Howard Luke, Chang's lawyer, said his client was cooperating with the state attorneys, who had interviewed Chang for nearly a full day. But Chang was concerned about violating students' and parents' privacy rights, Luke said.

Federal law requires schools to provide parents and students due notice to the release of information about the students. The law also allows parents to object to the release of information.

Under today's agreement, Chang will inform Kamehameha Schools' general counsel by March 10 as to the names of students that may come up in the state interview.

The estate's attorneys then will have two weeks to notify parents of affected students.

The state is examining the admissions policies as part of its probe into allegations of financial mismanagement and breaches of fiduciary duties by trustees.

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