Tuesday, November 10, 1998

Lindsey said
to have cost
estate thousands

Stender's lawyer says she
charged personal expenses
to the estate

By Rick Daysog


When the Bishop Estate was implementing a no-growth spending policy at the Kamehameha Schools, trustee Lokelani Lindsey ran up thousands of dollars on an estate credit card for travel and other personal uses, an attorney for trustee Oswald Stender charged.

In opening statements of a hearing yesterday on Lindsey's removal, Crystal Rose, Stender's lawyer, said Lindsey made at least 20 trips to Las Vegas that were paid either in full or in part by the estate.

The estate also reimbursed Lindsey for hotel expenses during a 1994 trip to the Rose Bowl football game in Pasadena, Calif., because the trip purportedly served a public relations purpose, Rose said.

Lindsey, a Bishop Estate trustee since 1993, repaid the estate for many of the expenditures. But some repayments came several years after the charges, Rose said.

"Mrs. Lindsey's free-spending antics occurred at the same time she was imposing an austere, zero-based budgeting mandate on the schools," Rose said.

"Mrs. Lindsey has misspent or misused thousands of dollars of trust assets or resources for her personal use, and has intentionally or negligently caused hundreds of thousands of dollars of losses to the trust."

Lindsey's attorneys have denied that she used estate funds inappropriately. They have stated that Lindsey's credit card expenditures were made in the course of estate business and that all reimbursements were proper.

Yesterday's opening arguments before Circuit Judge Bambi Weil come nearly a year after Stender and fellow trustee Gerard Jervis petitioned the state courts to remove Lindsey from the estate's five-member board.

In a sign that the trial will be highly contentious, attorneys for the feuding trustees traded allegations of financial wrongdoings yesterday. Rose attempted to show that Lindsey engaged in a widespread pattern of misuse or waste of trust assets. Among the allegations:

bullet Lindsey failed to disclose her relationship with a promoter who led the estate to invest hundreds of thousands of dollars in a financially troubled Internet company, New Jersey-based KDP Technologies.

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.

Rose said that Lindsey failed to disclose to the estate's board that she was interviewed by the FBI in its investigation of Bush. Lindsey also failed to disclose that KDP paid Bush a $7,500-a-month salary and repaid a $53,000 loan, Rose said.

bullet Lindsey and her husband flew to the 1997 Super Bowl in New Orleans partly at the expense of an estate vendor, Education Management Group Inc. EMG, supported by Lindsey, sold the estate more than $3 million in computer hardware and software, which turned out to be obsolete, Rose said.

bullet The Lindseys also received from Xerox Corp. free trips to the 1996 Atlanta Olympics valued at more than $7,000 after the company made a major pitch for estate business.

bullet Lindsey ordered two estate employees to help her obtain state shoreline certifications and city land use approvals on her beachfront home in Punaluu, which would have cost her $12,000. Lindsey repaid the estate about $5,800 several years after the incident came to light, Rose said.

Lindsey has denied the allegations by Stender and Jervis, saying the work on her Punaluu home was appropriate. Her lawyers have denied wrongdoing in her role in the EMG contract and the estate's investment in KDP.

Lindsey has said that 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 his opening statement, Lindsey's attorney, Michael Green, criticized Stender for an unsuccessful attempt in 1995 to buy a controlling interest in a Maui company that the estate had considered acquiring.

The company, Maui Land & Pineapple Co., was extremely undervalued after the local real estate market tumbled and pineapple prices plunged.

At the time, Stender proposed that the estate acquire a majority stake in Maui Pine, but the plan was rejected by the estate's full board. Stender later approached the company with an offer of his own but was rebuffed.

Green said the Maui Pine example shows that Stender was engaged in self-dealing. In the past, Green has argued that Stender has "unclean hands" and therefore could not seek Lindsey's removal.

"The evidence will show that old Oz was double-dealing," Green said.

Attorneys for Stender have denied Green's allegations, saying the proposed deal did not result in harm to the estate.

Yesterday's proceedings are separate from a petition by state Attorney General Margery Bronster that seeks the permanent removal of Lindsey and fellow trustees Richard Wong and Henry Peters over a wide range of allegations of financial mismanagement and fiduciary breaches.

That case is not expected to go to trial until late next year.

Allegations of financial mismanagement weren't the sole focus of yesterday's opening arguments.

Jervis and Stender, who petitioned the state courts for Lindsey's removal last December, have alleged that Lindsey, as the former lead trustee in charge of the estate's educational programs, hurt student morale and intimidated teachers.

In particular, the two trustees said Lindsey 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 12th-grade levels.

According to Rose, the findings are incomplete and misleading. Lindsey released them to the public to deflect blame from a critical report by the estate's court-appointed fact finder, retired state Judge Patrick Yim, Rose said.

The Yim report in December alleged that Lindsey intimidated students and staffers, usurped Chun's duties and fostered an environment of favoritism.

Green, meanwhile, argued that Lindsey's report simply points out longstanding problems.

Its findings were recently backed by an independent study by Peterson Consulting L.L.C. that faulted Chun for his management of the schools, he said.

Green also characterized Lindsey -- the estate's first female trustee -- as a career educator who pursued much-needed improvements.

She has been wrongly criticized for attempting to change a system in which 65 percent of all Kamehameha elementary school students are denied entry to its high school, he said. "Lokelani Lindsey was a trustee that dared to challenge the system," Green said.

Bronster urged to pursue
removal of Bishop trustees

By Star-Bulletin staff


An organization that represents students, parents, alumni and supporters of Kamehameha Schools is requesting that Attorney General Margery Bronster pursue interim removal of Estate majority trustees Richard Wong, Henry Peters and Lokelani Lindsey.

A letter from Na Pua a Ke Alii Pauahi yesterday says that while the majority trustees remain in power, Kamehameha is managed by fear and intimidation.

"We now understand that no trial date in the Attorney General's Petition for Removal of Trustees will be set until October 1999, implying a trial in late 2000," said the letter, signed by Antoinette Lee, president, and two other officers of the organization, which has 3,500 members.

"There may not be a decision on the Attorney General's Petition until 2001! That is far too long into the future. Kamehameha needs relief now!"

The letter acknowledges that trial has begun on the petition of trustees Oswald Stender and Gerard Jervis to remove Trustee Lindsey, but says this trial may take several months.

"We applaud and support the Stender/Jervis effort since it could and should result in permanent removal of Mrs. Lindsey."

Removal of the majority trustees is in the best interest of the school, the letter says.

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