By Star-Bulletin Staff

Saturday, August 8, 1998

Bishop Estate kept
millions meant for schools

Report of unspent funds spurs outrage
among Hawaiian beneficiaries

By Susan Kreifels, Star-Bulletin

In1995, thousands of native Hawaiian youngsters and adults lost community outreach programs through Kamehameha Schools that helped them learn to read, earn high school equivalency diplomas and try to get ahead in life.

Bishop Estate trustees said they lacked money to keep the programs alive and build schools at the same time.

Kamehameha teachers didn't get raises this year. Students didn't have track meets or nighttime football games because they lacked facilities. Many Hawaiian children didn't get into the school.

Yet over many years the trustees have accumulated more than $349.3 million in income that should have been spent on the schools, despite court orders that they develop plans to spend it. But neither did the courts enforce their orders.

The accumulated income is five times the annual operating budget of Kamehameha Schools.

The court-appointed master for the Bishop Estate said in his report Friday that accumulating the unspent income "may violate the express direction of the will and prior court orders."

At the same time that the estate saw significant increases in net assets from 1994-96, spending on education remained "relatively level."

Alumni, teachers and others involved with Kamehameha Schools were outraged by the unspent millions.

"We are being shortchanged, our children are being shortchanged, our princess is being shortchanged," said Toni Lee, president of Na Pua a Ke Ali'i Pauahi, the 2,700-member organization of Kamehameha parents, teachers and alumni. "We should have a top-notch organization."

The Bishop Estate was founded by the will of Princess Bernice Pauahi Bishop to educate native Hawaiians.

Fred Cachola, director of the outreach program that was killed, said 30,000 to 40,000 Hawaiians lost services. "It's very appalling. The money was supposed to be used for children in need, but it was squirreled away.

"It's blatant mismanagement in violation of the will."

William McCorriston, estate attorney, said he doesn't believe the accumulated income violates the will and is an appropriate use of the funds. Much of that money came from involuntary leasehold conversion sales.

"When we were forced to sell the land, that land became converted into cash. Does that land go in the income side of the ledger . . . or does it become the corpus (assets)? Two different accounting firms look at that issue differently. The trustees have relied on advice from their accountants and have chosen to treat it accordingly."

McCorriston said the trustees have "a very ambitious" school construction program that will cost hundreds of millions of dollars. "Last year we were accused of losing a lot of money; this year we're being accused of accumulating too much money. These are two inconsistent things."

He also said the outreach program may not have been cost-effective. "Just because we have the money doesn't mean we can waste it."

Roy Benham, president of the Kamehameha Schools Alumni Associations, Oahu Region, said for years alumni have been asking for more schools. "They should all be in place by this time," Benham said. "Mr. (trustee Henry) Peters continuously reminds you they've made an awful lot of money. The proof of the pudding is to educate an awful lot of Hawaiian students.

"All that money," Benham said in disgust.

Master Colbert Matsumoto said unspent revenue funds, the primary operating fund of the trust estate, has for years been shifted into an account called corpus funds, which include original and acquired assets. Matsumoto said it appears the shift was made without proper authority.

Randall Roth, University of Hawaii law professor and co-author of the "Broken Trust" article that criticized trustees' management, said he knew funds were being shifted but "I'm shocked that the numbers are so big.

"They diverted hundreds of millions of dollars of income which is supposed to be spent on the education of Hawaii's children and devoted it to building up an empire -- in a way that seems to intentionally hide the fact that they have done it and ignored court orders.

"The most troubling thing is, how in the world did they get away with it for so many years? Attorneys general and the courts have had a chance to see what's been going on from the inside. For them to let this develop and let trustees ignore them is simply inexplicable."

The master's report said Arthur Andersen LLP, a national accounting firm that recently completed a financial and management audit of the estate, could not determine the status of the accumulated income from financial records provided by the trustees. The information came only after Matsumoto asked for it.

Although the trustees contend that the transfers were done with the funds being "earmarked for maintenance, or operations of the schools," the accounting firm found no evidence of such marking in the general ledger accounts.

Matsumoto recommended that the accumulated income be restored to the revenue account, that independent verification be made of the income, and that plans incorporate spending the income, with court approval.

The 10-year projections "all reveal a complete disregard for the existence of the substantial accumulated income balance held by the trust estate. None of the 10-year projections even hints of the existence of the large accumulated income balance, let alone plan for its expenditure."

Matsumoto said the projected balance of unspent income by 2006 would be $1.5 billion.

As early as 1943, the state Supreme Court said an accumulation of then more than $1 million dollars violated the intention of the wishes of the princess, the master's report said.

Matsumoto also condemned the trustees' interference in daily operations at the schools and said the "need for judicial intervention is exemplified by the conditions at the Kamehameha Schools."

The report also said the "lead trustee" system, in which one trustee oversees the schools, "usurped the traditional powers reserved to the president and others in the management hierarchy" at the schools. "During the three fiscal years under review, your master found that administration of the Kamehameha Schools fell into disarray."

Larry McElheny, president of the Kamehameha Schools Faculty Association, said teachers are aware of the disarray.

He said efforts to stop the teachers union will be futile.

Bishop Estate master would rein in
trustee conflicts in spending, policy

By Rick Daysog, Star-Bulletin

It was inappropriate for the Bishop Estate to spend trust money to lobby on federal legislation barring excessive salaries for trustees of charities, according to the estate's court-appointed master.

In the 145-page report filed yesterday in state Circuit Court, special master Colbert Matsumoto recommended that the estate's trustees explain why they should not be surcharged for lobbying Congress to influence the intermediate sanctions law.

The recommendation is one of 19 contained in Matsumoto's highly critical review of the multibillion-dollar trust's operation for the 1993-1996 period. The report also called for strict conflict-of-interest policies, urged the estate to appoint a chief executive officer and raised questions about the estate's investment performance.

Matsumoto believes that trustees' financial interests were in conflict with their fiduciary duties to the estate when they attempted to influence the intermediate sanctions legislation. The estate spent about $1 million to lobby on the bill, which aims to penalize board members of charitable trusts from receiving excessive salaries and other perks at a charity's expense.

The lobbying expenses "raise a serious question of whether such expenditures were necessary or appropriate and reasonable in carrying out the purposes of the trust estate," Matsumoto said.

Bishop Estate attorney William McCorriston said the lobbying expenses were appropriate. The estate's trustees did not oppose the concept behind the intermediate sanctions law, but were against an early draft of the measure that would have made Kamehameha Schools and Bishop Estate staffers liable for penalties, he said.

Under the current law, which was passed in 1996, board members of a nonprofit trust who receive excess benefits can be fined up to 25 percent of the benefit and be forced to return the benefit to the trust.

"It could have put everyone in the whole organization in jeopardy," McCorriston said.

The master's report and an accompanying management and financial audit by Arthur Andersen LLP also contained harsh criticisms of the performance of the estate's investments.

The Arthur Andersen audit found that the estate experienced losses and loss reserves of $242 million for the 1993 to 1996 fiscal years. It also noted that the estate's total return was minus 1 percent for the three years ending June 1996 and a meager 2.4 percent for the five-year period ending in June 1996.

That's well below the 17.3 percent compound annual rate of growth the estate said its investments have enjoyed since 1970.

Matsumoto said that gains from other investments within the estate's portfolio offset any losses or reserves recorded by the estate. But he noted that the losses and reserves suggest a need to examine if there are adequate safeguards within the estate.

McCorriston said the analyses by Matsumoto and Arthur Andersen took many figures out of context and failed to acknowledge that the estate has reversed much of its recent troubled investments.

For instance, the estate initially faced losing much of its $70 million investment in SoCal Holdings Inc., the parent company for a 19-branch Southern California thrift that suffered substantial losses during the California recession. But when the economy rebounded, the savings and loan's finances improved. The thrift, now known as PBOC Holdings Inc., recently went public and the estate now stands to earn a $60 million profit from the venture.

"The fact of the matter is, this particular board of trustees has added between $2 billion and $4 billion dollars in value to the estate," McCorriston said. "That's a record unmatched in any institution in the state of Hawaii."

Bishop Estate trustee Henry Peters said the report exonerates the current board's investment policies. He noted the report said the estate experienced an increase in net assets of $192.8 million during the estate's fiscal 1994 year, when Matsumoto reported last November the estate experienced more than $264 million in losses and loss reserves that year.

"That's a swing of over $400 million," Peters said. "The report points out that our investments have been sound and -- contrary to earlier reports -- profitable for the trust."

Peters said that part of the confusion is based on the master's definition of losses and loss reserves. For instance, the estate recently was able to lower the value of some of its isle land holdings by $160 million through tax appeals and other procedures.

While the lower value may appear as a loss to an auditor, the trust benefits by having lower property taxes, Peter said.

(The nonprofit estate pays property taxes on land holdings that don't serve an educational function.)

Meanwhile, trustee Gerard Jervis agreed with Peters that the estate's overall finances are in good shape. But he noted that the report also found important management issues the estate should consider.

Jervis said he and fellow trustee Oswald Stender agree with a recommendation by Matsumoto and Arthur Andersen for the appointment of a chief executive officer. He believes the estate should implement a system in which a chief executive would serve as a buffer between the trustees and lower management in the estate in order to improve communication.

"This sets out a blueprint that's needed at the estate that trustee Stender and I have been talking about for a long time," Jervis said. "This shouldn't be a report that ends on a shelf collecting dust."

Marchers lift torch to invite
change on Hawaii centennial

By Pat Omandam, Star-Bulletin

There are two things Gay Sousa wants to do in the Ke Kukui 'A torch walk around Oahu: Carry the Hawaiian flag or the torch.

Sousa early Saturday achieved half her goal when she joined the midnight first leg of the 128.5-mile march carrying the Hawaiian flag from Mauna'ala, or the Royal Mausoleum in Nuuanu, to Kamehameha Highway in Pearl City.

This evening, the Kailua resident plans to rejoin the procession in the Waianae district at Kahe Beach Park, hoping to carry the torch somewhere along the stretch from Kahe Point to Kaena Point.

Like other participants in the seven-district Ke Kukui 'A, as well as in the simultaneous Aloha March in Washington, D.C., the events reaffirm her belief in "the proper authority of the Hawaiian islands" -- namely, the Hawaiian people.

About 250 people at 11:48 p.m. yesterday gathered under a full moon on the darkened and solemn grounds of Mauna'ala to witness a torch-lighting ceremony by John Keola Lake and a dozen members of the cultural group Na Koa, which handled the protocol.

The mixed crowd of kupuna, young families, couples and teen-agers listened as Lake chanted in honor of Hawaiian King David Kalakaua. Part of the chant asked Kalakaua to lift the kapu, or ban, on daylight torch ceremonies which were restricted during his reign, so that the torch walk can be done, said Umi Sai, vice president of the Hawaiian Patriotic League, organizers of the 3-1/2-day march.

Sai said fire is symbolic of change, cleansing and rejuvenation, and is an appropriate way to begin the centennial events tied to Hawaii's annexation to the United States on Aug. 12, 1898. Many Hawaiians contend Hawaii's annexation was illegal.

"One of the reasons we wanted to do this (walk around Oahu) is because a lot of the negative -- and as we say 'hewa' -- that happened, happened here on this island," league member Kaui Goodhue said. "So this fire will be taken around to burn away the old, so that the new can come in."

Marcher Earl Kawa'a added: "Hawaiians are making a political statement. It is not based on emotions, but based on facts."

Those include two large petitions signed by nearly all the members of the Hawaiian population in 1897-1898 that opposed the annexation and called for the restoration of the monarchy.

A Hawaiian delegation to Washington, D.C., in 1897 led by Queen Liliuokalani successfully stalled a treaty of annexation in the U.S. Senate.

But many believe mounting pressure from the Spanish-American War for a secure Pacific harbor for the American military prompted Congress to pass a joint resolution to annex Hawaii. President William McKinley signed the resolution into law on July 7, 1898.

Nation of Hawaii leader Dennis "Bumpy" Kanahele yesterday said that the public, government officials and the news media need to accept the truth about Hawaii's annexation.

"You know, the bottom line is that there was no treaty at all, and that was what this protest (petition) was all about," Kanahele said.

"A lot of people in the past 20, 30 years have been fighting for the same thing, but it's just that the truth is coming out," he said.

To honor the efforts of their ancestors to stop annexation, members of the centennial observance group Hawaii Loa Kulike Kakou started their own petition drive yesterday, with committee chairman Mel Kalahiki the first to sign.

Kalahiki last night left the procession at Nuuanu Avenue and Nimitz Highway to rest before another busy day. The group, which numbered nearly 100 after it left Mauna'ala at midnight, dwindled to 25 people at 2 a.m. after a brief stop at Carl's Jr., a fast-food hamburger store on Nimitz Highway near Sand Island Access Road.

At 5:45 a.m., a dozen people walked in single file on Kamehameha Highway on the far sidewalk fronting the Pearl Harbor Visitors Center, the torch kept head-high.

The seven-district procession is expected to pass through the Ewa district today and enter the Waianae district at 6:30 p.m. It is expected to round Kaena Point at 6:30 a.m. tomorrow and remain on the North Shore's Waialua district for the rest of the day.

Organizers estimate the torch will reach Sunset Beach at 7:45 p.m. tomorrow and Waikane Valley Road at 12:30 a.m. Monday. It is scheduled to pass Makapuu Beach Park at 4:30 a.m. Tuesday and reach the Waikiki Aquarium at 2:15 p.m. Tuesday.

The march is expected to end 6:15 p.m. Tuesday with ceremonies at Iolani Palace.


Aloha March charms
capital, grabs attention

By Pete Pichaske, Star-Bulletin

WASHINGTON -- Seated in a wheelchair because of his diabetes, rolling down Pennsylvania Avenue in a green lei po'o and a red kikepa at the head of 150 cheering, chanting, sign- and flag-waving fellow native Hawaiians and their supporters, Butch Kekahu looked a happy man.

"I feel great," he said. "We came here to make a statement and we made it -- a long overdue statement."

The Aloha March on Washington, a 17-year-old dream of Kekahu to increase national awareness of the plight of native Hawaiians 100 years after annexation, culminated today with a two-mile walk from the Capitol building, past the White House to the Ellipse.

Although the number of marchers fell short of the thousands organizers had hoped for, few were complaining.

"This is not about numbers. This is about pono," said Al Wong, a march leader from Massachusetts.

Organizers said they achieved their goal of getting out the word, noting news reports on CNN, in the Washington Post yesterday and today, and on several radio networks that reached three million to five million listeners.

"To continue with our struggle, the world must know, and they know now," said Wong.

"The sovereignty movement needs a little more high visibility here in Washington, and I think we got it,' said marcher Mark LaBarre, who lives in nearby Rockville, Md., but was raised on Oahu.

"I know Washington sees these things all the time, but this is a huge event for the people from Hawaii. And we're getting attention."

Threads broken on throne
of Iolani Palace, report says

By Mary Adamski, Star-Bulletin

An inspection of an upholstered throne at Iolani Palace found about 20 broken threads and others that are loose or disturbed.

A report by Bishop Museum conservators released yesterday did not pinpoint the cause of the damages, but described them as changes in condition since the throne was last inspected Nov. 3, 1987.

The damage would take a textile conservation expert about two days to repair, said Elizabeth Tatar, the museum's vice president for collections management and public programs.

Tatar said that the report does not refer to the incident which generated an inspection.

Abigail Kawananakoa, president of the Friends of Iolani Palace, sat on the throne for a Life Magazine photographer in April, an occasion that led palace Managing Director Jim Bartels to resign. The palace board called for an inspection in the turmoil set off by the dispute.

"It is difficult to pinpoint damage to a particular instant," Tatar said. "It is obvious that you would change its condition if you were to sit on it. It is that fragile."

The experts' assessment described damage as "areas of disturbed thread groups on the arm rests, back rest, front panel and seat. This includes raised threads, gaps between threads, loose thread and more than 20 broken threads," according to a museum release.

"There is a gap exposing the canvas underlay fabric on the back of the throne. On the seat of the throne there are two areas of disturbed thread groups, one broken original warp thread and three sections showing a series of small pulls or snagged silk threads and associated disturbed line warps."

Tatar said it is possible to duplicate repair work done in 1986, and that Bishop Museum -- which owns the two thrones on display at the palace -- plans to do so later this year.

The dark red damask brocade is the original fabric from 1883, when the thrones were made in Boston.

"The original (pre-1986) damage was pretty extensive," Tatar said. "Those threads were neatly pulled together, lined and stitched into place with crepeline, called hair silk, thread so thin that it would easily break."

She said there is no question of replacing the frail material because of the thrones' historical significance.

They were used by Hawaii's last monarchs, King Kalakaua and his successor, Queen Liliuokalani. The thrones are the only pieces in the palace with the original fabric.

Prosecutor amends court memo
on defendant in Viti death

By Linda Hosek, Star-Bulletin

The name on a May ticket for driving without a license was Luther Niheu Jr., who faces probation to 10 years in prison for killing photojournalist Carl Viti and fleeing the scene.

But Deputy Prosecutor Marcus Sierra Friday said Luther's brother, Charles, may have been the driver and used Luther's name to avoid his own arrest.

Sierra had referred to the new offense in a court memo to oppose probation for Niheu, who said he didn't know anything about it.

He said Niheu received the ticket after he pleaded no contest to failing to render aid, negligent homicide and driving without a license. He argued it showed Niheu's persistent disregard for laws.

But Sierra also noticed that the signature on the ticket didn't match Niheu's signature.

He said he found the car owner through the car's registration.

He also talked to an officer at the scene to get the name of the passenger, who was the car owner's daughter.

Sierra said he called the owner to find the daughter, who answered the phone. He said she identified the driver as Luther's brother, Charles.

"Right away she said it wasn't Luther," he said. "She didn't sound like the story was rehearsed."

The woman said Charles Niheu had a warrant out for his arrest and gave his brother's name to avoid arrest, Sierra said.

Hayden Aluli, Luther Niheu's attorney, said neither he nor his client knew about the new citation until they saw the memo to oppose probation.

Protesters trespassed, court rules

HILO -- The state Supreme Court has affirmed without explanation trespassing convictions against 28 people who walked on a private road to the shoreline south of Hilo during a 1994 Hawaiian "spiritual gathering."

Hawaii County Prosecutor Jay Kimura Friday announced the July 22 decision regarding the Shipman Estate near Keaau.

Attorney Hayden Aluli, one of two defense lawyers in the case, said the high court ruling was just one sentence long, with no explanation.

"Its silence is deafening," he said.

At issue was the four-mile-long road from Keaau to a shoreline location believed to be the site of a former village called Ha'ena.

To protest lack of public access on the road and to gather at Ha'ena, considered sacred, about 125 people joined the 1994 spiritual gathering resulting in some being arrested.

Campaign postcard called 'cowardly'

Three of the four Democrats vying for the Windward Senate seat being vacated by Mike McCartney have denounced a campaign dirty trick that they believe was aimed at driving a wedge between them.

The object of their wrath is a postcard that attacks former state Rep. Bob Nakata and urges support for former Board of Education Chairwoman Debi Hartmann.

The postcard -- containing five criticisms of Nakata, including "Bob is in favor of homosexual marriages" -- does not say who is responsible for sending it out, nor does it have a return address.

"This is not the type of help I need or want," said Hartmann, who opposes the legalization of same-sex marriage. "I don't want help at the price of someone's character."

She was "absolutely outraged," Hartmann said. "Having my name on it really angers me." She branded the postcard "a cowardly act."

Nakata said he believes Hartmann is not behind the mailing, which apparently targeted some of his campaign workers and backers in an attempt to get them to withdraw their support.

Symphony marketer resigns, will relocate

The Honolulu Symphony marketing director who helped increase ticket sales 400 percent during her three-year tenure has resigned.

Maureen McNamara, 38, is relocating to New York City next month. Since she began with the symphony in 1995, ticket sales climbed from $300,000 a season to the current $1.2 million, said symphony Executive Director Michael Tiknis.

McNamara said Friday she is leaving the post for personal reasons.

"I fell in love with Hawaii, the challenge facing the symphony and the staff," McNamara said.

Tiknis said McNamara, a longtime friend, was "my partner in reviving this orchestra and I wish she could stay forever."

A search for a replacement is under way, he said.

In another development, Tiknis said the symphony later this month will move its administrative office and box office from Kakaako to Dole Cannery at 650 Iwilei Road. The move will give the symphony more space, while cutting its rent by half to about $40,000.

The symphony also has hired Melissa Stowers as the orchestra's director of public relations. Stowers previously worked for the University of Florida Health Science Center in Jacksonville.

Guam brown tree snake found dead at airport

A brown tree snake from Guam was found dead in the landing gear of an Air Micronesia aircraft at Honolulu Airport.

Officials believe the 28-inch snake stowed away in the wheel well when the plane departed from Guam on one of two flights made between July 30 and Aug. 4.

State plant quarantine inspectors and a dog team searched the plane and maintenance area and found no evidence of other snakes, according to the state Agriculture Department. It commended the mechanic who found and reported the snake.

The discovery led state and federal officials to review procedures to prevent arrival of the reptile species in the islands. It is the eighth brown tree snake to be found in Hawaii since 1981.

The species has devastated the bird population on Guam, posing a threat to people as well as causing economic and ecological loss.

Honolulu Zoo reptile specialist Duane Meier identified the snake as a juvenile.


East Honolulu man, 27,
killed in one-car accident

By Debra Barayuga, Star-Bulletin

A 27-year-old East Honolulu man was killed early Saturday after his car struck a metal utility pole on Diamond Head Road.

He was pronounced dead at the scene shortly after the 3:44 a.m. crash.

Traffic investigators said his dark blue Honda appeared to have been traveling east on Diamond Head Road on a right-hand curb fronting Kapiolani Community College when the driver lost control and struck a utility pole on the opposite curb.

The car crumpled around the light pole, crushing the driver side of the car and crumpling its roof. The victim was pinned in the car and had to be removed by Kaimuki firefighters.

Speed is a possible factor in the crash, investigators said. The area has a 25-mph limit. Alcohol involvement is unknown at this time.

The man was wearing a seat belt, but the driver-side air bag apparently did not deploy. Debris from the light pole was found nearly 50 feet away.

Diamond Head Road in front of the college remained closed to traffic at 7 a.m. Traffic was rerouted through the parking lot and onto Makapuu Avenue.

Second time around for bank robber?

Authorities believe the man who robbed an Ala Moana area bank yesterday may have also robbed a neighboring bank last month.

The FBI said a man escaped with an undisclosed amount of money from the Makiki branch of Central Pacific Bank on Keeaumoku Street around 2:30 p.m. He presented a note to the teller. No weapon was seen.

The suspect is described as a Filipino male, in his late 20s, 5 feet 5 inches tall and about 175 pounds. He has medium-length black hair that is pulled back.

He wore dark-colored shorts and a brown colored T-shirt with "Nike" on the front.

The robber is believed to be the same man who robbed the Kapiolani branch of International Savings on July 9.

Lantern starts fire; Kihei woman burned

WAILUKU -- A lantern that tipped over in a bedroom started a fire yesterday that destroyed a house in Kihei and sent a 66-year-old woman to Maui Memorial Hospital, Assistant Fire Chief Clayton Ishikawa said.

Isidra Espiritu, who suffered some burns, was treated and released from the hospital.

Ishikawa said Espiritu apparently discovered her room in flames after coming out of the bathroom.

Ishikawa said the fire spread so fast that others in the home were unable to put it out and had to flee for safety. The fire was extinguished by 6:41 a.m.

Big Isle police hunt work furlough escapee

HILO -- Police are looking for inmate Michael "Fingers" Anderson, 24, who escaped Thursday from the Hawaii Community Correctional Center.

Serving time for a marijuana conviction, Anderson had been on a work furlough when he reported for a urine test Thursday. When informed the results were positive, he ran from the area, police said.

He is 6 feet tall, weighs 190 pounds, and has short, receding brown hair.

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