Monday, November 9, 1998

By Craig T. Kojima, Star-Bulletin
Bishop Estate trustee Lokelani Lindsey is greeted by fellow
trustee Gerard Jervis after she entered Circuit Judge Bambi
Weil's courtroom this morning.

Lindsey removal
trial under way

Stender and Jervis ready an attack
to change the estate's power and focus

Case could clear a path for Bronster's
push to oust all five Bishop trustees

By Rick Daysog


It's the type of legal battle that draws comparisons with a heavyweight prizefight.

The bruising, 11-month battle to oust Bishop Estate trustee Lokelani Lindsey from the multibillion-dollar estate's board entered a new round today with a trial before Circuit Judge Bambi Weil.

If the past year can be used as a gauge, it will likely be a slugfest.

Attorneys for trustees Oswald Stender and Gerard Jervis are expected to spend the next few months going toe to toe with Lindsey's lawyers over allegations of mismanagement, self-dealing and other breaches of duties.

The outcome - which won't likely be decided for months - could shift the balance of power in the estate's five-member boardroom and could establish a new direction for one of the nation's wealthiest charitable trusts, long criticized for paying more attention to investments than its primary mission of educating native Hawaiian students.

This morning, Lindsey sat on one side of the courtroom with her attorney, while Stender and Jervis and their attorneys sat at a facing table.

The trial began with Crystal Rose, Stender's lawyer, outlining the case against Lindsey. "The evidence will show that Mrs. Lindsey has breached her fiduciary duty, is unfit to serve and must be removed," Rose said.

Michael Green, Lindsey's attorney, was to counter those charges in his opening statement later today.

Also present were a handful of lawyers from the state attorney general's office.

The results of this trial could set the tone for separate removal proceedings initiated by Attorney General Margery Bronster, who has alleged multiple breaches of trust, mismanagement and self-dealing on the part of the 114-year-old estate's majority board members, who include Lindsey, Henry Peters and Richard Wong.

In effect, the proceedings also will put students' academic records at the estate-run Kamehameha Schools and the performances of school teachers and administrators on trial.

"What's at stake is the operations of the estate and Kamehameha Schools," said retired state Judge Walter Heen, one of five authors of the "Broken Trust" article that criticized trustees' management of the estate.

The high stakes are underscored by the volumes of legal documents already filed in the case and the scores of witnesses and experts both sides have lining up to support their arguments.

Stender, in his settlement agreement statement, listed 166 lay witnesses and 17 expert witnesses whose testimony would be used to support his allegations or refute Lindsey's arguments. Lindsey named 136 witnesses and three experts to support her conclusions.

The allegations are equally voluminous.

Jervis and Stender have charged that Lindsey, a Bishop Estate trustee since 1993, engaged in a pattern of mismanagement, fiduciary breaches and abuses that hurt Kamehameha Schools and its students and wasted the estate's assets. Specifically, the two trustees argue that Lindsey:

bullet Used Bishop Estate credit cards and travel accounts to charge thousands of dollars for meals, car rentals and personal travel, including several trips to Las Vegas. Lindsey, in some cases, repaid the estate three years after expenditures were made.

bullet Accepted free travel for her and her husband to the 1997 Super Bowl in New Orleans from an estate vendor. Supported by Lindsey, the vendor, Education Management Group, sold the estate more than $3 million in computer hardware and software. The Lindseys also received free trips to the 1996 Atlanta Olympics from Xerox Corp. after the company made a major pitch for estate business.

bullet Ordered two estate employees to help her obtain state shoreline certifications and city land use approvals on her beachfront home in Punaluu. Lindsey repaid the estate several years after the incident came to light.

bullet Failed to disclose her relationship with a promoter who led the estate to invest $2 million in a speculative Internet company, KDP Technologies Ltd. The promoter, Southern California investment adviser Ben Bush, was a co-investor with Lindsey in a gold bullion investment scheme in which Lindsey lost about $400,000. Bush recently was convicted of federal fraud charges in an unrelated venture.

bullet Demanded and initiated an investigation of Kamehameha Schools staff members in March over the release of an accreditation report critical of trustees by the Western Association of Schools and Colleges.

bullet Voted with fellow trustees Wong and Peters on Oct. 6 to approve an investigation of more than 800 students who signed a petition backing the removal of all five trustees.

bullet Damaged student morale with the Dec. 5, 1997, release of a report entitled "An Imperative for Educational Change." The report alleged that students' test scores have declined steadily during the tenure of the school's popular president, Michael Chun. The study also charged that 30 graduating students could barely read at a 12th-grade level.

Lindsey has denied Stender's and Jervis' allegations, saying her actions were conducted in the best interests of the estate and Kamehameha Schools. She said a majority of the trustees either approved her activities beforehand or ratified them after the fact.

In the past, Lindsey has said the work on her Punaluu home was appropriate and her lawyers have denied wrongdoing in her role in the EMG contract and the estate's investment in KDP.

As for her management of Kamehameha Schools, Lindsey's attorneys said in court papers that she recognized years ago that the schools weren't realizing their true potential, prompting her to compile her education report.

Lindsey said the report showed that the longer students were enrolled at Kamehameha, the poorer they performed academically. She said the report, whose findings are supported by a June study by Peterson Consulting L.L.C., recommended removing Chun.

"The imperative did not 'impugn' the integrity of the school employees, it merely stated facts and statistics and made recommendations," Green said in court papers.

"We're very happy that this trial is getting under way," said Toni Lee, president of Na Pua a Ke Ali'i Pauahi, a 3,500-member student, parent and alumni group that has backed the trustees' removal. "It's telling the children that there's a light at the end of the tunnel and that something is being done."

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