By Star-Bulletin Staff

Saturday, May 16, 1998

Kamehameha logo

Bishop Estate trustee
income rose in 1997

Tax records show the trustees were paid
$1,491 more for a total of $843,109 each

By Rick Daysog


Days after the state Legislature passed a measure to limit trustees' pay, Bishop Estate says all five of its trustees took home $844,600 in commissions each during the 1997 fiscal year.

The commissions represent a $1,491 raise from the $843,109 that trustees earned in the previous year, which ended June 30, 1996.

The estate -- which operates Kamehameha Schools for children of native Hawaiian ancestry -- said trustees Richard Wong, Oswald Stender, Henry Peters, Lokelani Lindsey and Gerard Jervis each waived about $435,400 that they were entitled to under state law.

Trustees waived commissions on education revenues, land sales and capital transactions.

The trustees' commissions were disclosed in federal tax forms filed by the Bishop Estate in state Probate Court Friday.

Critics of the estate have long argued that trustees' six-figure commissions are a major factor in the controversy surrounding the estate, now under investigation by the state attorney general's office and the Internal Revenue Service.

Last week, state lawmakers passed a measure limiting trustees' compensation to reasonable levels set by a state probate judge to address the public outcry over trustees' pay.

Randy Roth, University of Hawaii law professor and co-author of the "Broken Trust" article that prompted the state's investigation, questioned whether the high pay is justified given the lack of benchmarks that can be used to gauge trustees' performance.

Roth cited last year's report by the estate's court-appointed master Colbert Matsumoto that concluded that trustees have purposely withheld financial data to evaluate trustees' track records.

"The real question is whether these particular individuals are qualified for the jobs they now hold," Roth said.

The estate defended the commissions, saying they are performance-based. Bishop Estate spokesman Kekoa Paulsen said a recent study by Strategic Compensation Associates -- a mainland consulting firm hired by the estate -- found that the trustees' commissions are comparable to those of mainland corporate executives with similar duties.

"If (trustees) assume the responsibility and the liability for a multibillion-dollar estate, they should be compensated for that," Paulsen said.

Currently, Hawaii law entitles board members of private nonprofit estates to earn up to 2 percent in commission on all annual income above $205,000.

Paulsen noted that the estate enjoyed its best-ever financial results last year.

For the 12 months ending June 30, 1997, the estate -- one of the nation's wealthiest charitable trusts -- posted record revenues of $377.5 million, up from $203.4 million the prior year.

Last year's revenues topped the previous high of $303.6 million for the estate's 1994 fiscal year.

Much of the 1997 gains came from the sales of undisclosed stock market holdings during a raging bull market.

The estate listed revenues of $226.9 million from the sales of stock investments in 1997, up sharply for the the previous year's $86.3 million.

Interest income from savings accounts and short-term cash investments such as U.S. treasury bills rose to $70.9 million from fiscal year 1996's $44.7 million, the estate said.

Revenues from leasehold sales dropped to $46.9 million from fiscal year 1996's $52.9 million, reflecting the dwindling supply of lease-to-fee conversions.

The estate's two largest for-profit subsidiaries also enjoyed a strong year. The trust's Pauahi Holdings Corp. unit, which listed assets of $886.8 million, reported that its 1997 income increased to $163 million from the prior year's $115.1 million.

Socal Holdings Inc., parent of People's Bank of California, which has $1.8 billion in assets, listed its fiscal year 1997 income at $131 million, up from the year earlier's $123.4 million.

The estate listed its net assets at about $1.94 billion, up from the previous year's $1.71 billion.

On the expense side, the trust said it spent $118 million on educational programs and construction at its Kapalama Heights and Maui campuses.

While Bishop Estate's trustees saw only a mild increase in pay, many of the estate's senior executives were given hefty raises, the estate's tax filings show.

Kamehameha Schools President Michael Chun took home $210,459 last year, a 17.9 percent increase from the previous year's $178,371. Nathan Aipa, the estate's general counsel earned $186,979, up 18.8 percent from his salary of $157,423 for fiscal year 1996.

Rodney Park, the estate's principal executive for administration, saw his pay jump from $140,985 in 1996 to $165,373 last year, while former state Budget Director Yukio Takemoto, now the estate's principal executive for budget and review, received a $23,325 pay raise, which increased his 1997 salary to $163,010.

Rockne Freitas, vice president of Kamehameha Schools, earned $147,448 in the 1997 fiscal year, up from the previous year's $135,772.

The Irvine, Calif., law firm of Morrison & Foerster L.L.P. conducted $735,108 worth of legal work for the estate last year, while the Washington D.C.-based Verner Liipfert Bernhard McPherson Hand, whose local law partners include former Hawaii Gov. John Waihee, billed the estate $673,641.

The Ching Yuen & Morikawa law firm, headed by Waihee's friend William Yuen, charged the estate $555,190 largely for land use-related work during the 1997 fiscal year.

Bishop Estate Archive

Kamehameha logo

Na Pua marchers offer gifts
to trustees and others

By Rod Ohira


During the turbulent year following the May 1997 march that triggered the current Bishop Estate controversy, Kamehameha Schools' alumni and supporters have reclaimed their role as beneficiaries of the trust.

In the estate's early days, it was very clear they were the beneficiaries, said Beadie Kanahele Dawson, attorney for Na Pua a Ke Ali'i Pauahi, a Kamehameha Schools support group.

"In more recent years, perhaps as the estate became wealthier, the trustees have adopted a fiction that the sole beneficiary is the school itself. The irony of this is the school has no voice; it's an inanimate object," she said.

"As a device for having a beneficiary that cannot speak, that cannot challenge the acts and activities of your trustees, it was a rather inspired idea to silence the real beneficiaries. We have been silent in the past. We will be silent no more."

Friday their voices were heard.

Carrying gifts instead of signs and speaking of forgiveness rather than wrongdoings, several hundred Na Pua members walked from the Royal Mausoleum in Nuuanu to the estate's Kawaiahao Plaza to commemorate the first anniversary of the 4-mile march and deliver a special message to the trustees.

"They made an offer that was something different than a year ago, and that offer was very simple: Now's the time for healing," said Richard Wong, chairman of the estate's board of trustees.

"They kept repeating the phrase that we ought to be 'pono' and ought to be 'ha aha a,' humble, and that we ought to get on with the process of healing. I think that's a beginning. One year ago this was never said, and I think that's progress."

Restoring pono (goodness) was the purpose of the event, said Na Pua President Toni Lee.

"We implore you to open the doors to truth, open the door to begin the healing, stop the stonewalling, stop the legal maneuvering," Lee said in a public statement directed at the trustees.

Na Pua presented the trustees with symbolic gifts that included Bibles, kukui nut and yellow plumeria leis, kalo and breadfruit.

Wong, Oswald Stender and Gerard Jervis accepted their gifts. Trustees Lokelani Lindsey and Henry Peters were absent.

"I want to tell you, the mission that you seek and the solution that you seek perhaps will be manifested by today's presentation to the trustees," Wong told the gathering. "I hope as we go forward, there will be healing and there will be forgiving."

Wong's presence was significant in that it represents the first time more than two trustees have stood before Na Pua.

Four representatives from the new Kamehameha Schools faculty union spoke to the crowd at Kawaiahao Plaza in a show of unity. Faculty members were prohibited by trustees from participating in last year's march.

The marchers' first stop was Washington Place where gifts were presented to Gov. Ben Cayetano and state Attorney General Margery Bronster.

Na Pua member Fred Cachola thanked Cayetano and Bronster for their commitment to the state's investigation of the estate.

"It's a very emotional moment," Cachola said following the presentation to Cayetano. "Last year, we walked right past this place because we didn't know what to expect."

The marchers then gathered at the state Capitol to present gifts to Senate President Norman Mizuguchi and House Speaker Joe Souki to recognize the efforts of lawmakers in passing legislation for reasonable trustee compensation.

In the absence of Mizuguchi and Souki, the gifts were accepted by Rep. Dennis Arakaki and Sen. Norman Sakamoto.

Bishop Estate Archive

Democrats failed, GOP says, and Lingle can do better

Some said it with glee. Others with less emotion, but still with optimism.

As Hawaii Republicans opened their annual state convention Friday night, there was a common theme to the conversation among delegates and alternates: Hawaii's Democratic governor and Democratic Legislature failed to do what they promised. They couldn't even deliver on their lofty goal of bold moves to end Hawaii's seven-year economic slump.

You could hear the talk during the poolside reception at a Waikiki hotel for Linda Lingle, the Republican gubernatorial hopeful and Maui mayor.

It continued through the night over champagne at a dessert reception hosted by Quentin Kawananakoa, the GOP congressional candidate and state House minority leader. It also was said at the post-dinner gathering sponsored by state Rep. Gene Ward, Kawananakoa's rival in the Republican congressional primary, as guests dined over a variety of pies.

All that was missing was a toast to Democrats for giving campaign fodder to Republicans.

Since Gov. Ben Cayetano was able to get only a watered-down economic revitalization plan approved by his fellow Democrats, that kills the argument that a Republican governor would be ineffective when dealing with a Democratic-controlled Legislature, said Philip Hellreich, a GOP stalwart and former vice chairman of the state party.

"What does that say about his ability to govern?" Hellreich asked. "I think Linda can do a better job with the Legislature than Ben can."

City finds $6 million-plus surplus

City officials were worried they wouldn't have enough money to run the government in the upcoming fiscal year. But now they say they could end up with more than a $6 million surplus.

City Council Budget Chairman John Henry Felix, however, said budget rounds next year will be more difficult, and new sources of revenue must be found.

Mayor Jeremy Harris is already predicting a $60 million shortfall for fiscal year 1999-2000, and increased property taxes could become an issue again.

Felix Friday didn't predict the level budget deficits could reach in coming years, nor would he say increased property taxes will pay for them.

He added, however, that "property taxes are our principal source of revenue. . . . Next year, the problems will be even more monumental."

After threatening to raise hotel property tax rates yesterday, the Budget Committee said it found enough money to make up for a $6.7 million loss of hotel room taxes, keep 111 employees who were facing the possibility of layoffs, and still have about $6.6 million left over.

But it won't be so easy the next time the budget is debated. In the upcoming fiscal year, the cut in hotel room taxes won't kick in until January, but in the following year the city will face twice as much of a loss -- $13.4 million.

Also, a $9.1 million return to the city this year from the Employees' Retirement Fund and health plan is one-time only.

And collective bargaining is coming up.

"It will easily be $60 million before we even open the book," said Carol Costa, the mayor's spokeswoman, about Harris' deficit prediction for the next budget round. "We just slid by this year."

Hannemann takes over at City Council

Councilman Mufi Hannemann took over leadership of the City Council Friday, saying he wanted to take members "to another level . . . to exude patience with each other and overlook each other's shortcomings."

Hannemann was chosen chairman by a 6-3 vote, with Council members John DeSoto, Duke Bainum and Steve Holmes dissenting.

Last week, a new five-member majority signed a resolution transferring leadership, saying DeSoto -- who was chairman for the last four years -- had hindered efforts Hannemann to restructure and streamline city government according to a compromise reorganization plan reached with Mayor Jeremy Harris.

They said it was time to put bickering aside.

"I feel good about what I've done as chairman and the fairness I've shown," said DeSoto, who announced Friday he would run for re-election. "I've always agreed to disagree."

Councilwoman Donna Mercado Kim, part of the minority who had questioned the reorganization plan, said part of the reason for the change of leadership was that DeSoto "couldn't control me. My style of calling it the way I see it makes some members uncomfortable."

Father to stand trial in child abuse case

A Kalihi Valley man accused of breaking bones in his 3-month-old sons by shaking them told a detective he was suffering from stress and kidney stones.

Ramon Siuze, 41, also said he knew shaking a baby could cause brain damage but did it anyhow, Detective Jerry Trinidad said Friday at Siuze's preliminary hearing.

"He told me he shook them to make them stop crying," Trinidad said, adding that Siuze said he shook each twin at least six times in the last two months.

Per Diem District Judge Marilyn Carlsmith found enough evidence to have Siuze stand trial and set his arraignment for May 26 in Circuit Court.

Siuze is charged with two counts of second-degree assault, which carries a prison term of up to five years.

Deputy Prosecutor Cecelia Chang said the state would seek a harsher sentence if he is convicted, based on laws to protect children 8 years or younger.

Deputy Public Defender Todd Watanabe declined to discuss Siuze's defense. His questions during cross-examination focused on whether Siuze understood his constitutional rights when he gave statements to police.

Trinidad agreed that "there was confusion" when Siuze was asked about whether he wanted an attorney.

First 'kamaaina astronaut' returns to visit alma mater

Mercury 7 astronaut L. Gordon Cooper, who celebrated the 35th anniversary of his first launch into space yesterday, learned how to fly before he was old enough to drive.

The son of an Army aviator, the Oklahoman native soloed at 16.

"I knew most of the early aviators, aviators like Wiley Post," said Cooper, 71, here on a goodwill visit. "Aviation to me was a very small community when I was very small, and so aviators managed to get together wherever around the world they might be flying," he said in a brief interview.

Cooper -- a retired Air Force colonel who attended the University of Hawaii from 1946 to 1949 when his father was stationed at Hickam Field, which became Hickam Air Force Base -- earned a commission through the UH ROTC.

He later became the first person to make two orbital space flights.

Cooper's May 15-16, 1963, space odyssey took him around the Earth 22 times in Mercury spacecraft Faith 7. He was awarded the UH Regents Medal shortly after.

He and Charles Conrad orbited the Earth 120 times in the Gemini 5 spacecraft Aug. 21-29, 1965. That flight lasted 190 hours 56 minutes, and proved humans could live in weightlessness long enough to reach the moon.

A number of ROTC cadets shook his hand Friday when he attended the dedication yesterday of the L. Gordon Cooper Classroom at the UH ROTC Department. A replica of the UH Regents medal he received in 1963 is on the wall.

See expanded coverage in Saturday's Honolulu Star-Bulletin.
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