The Bishop Estate trustee is
By Rick Daysog
accused of taking a kickback of
$192,500 in a condo deal
Star-BulletinAn Oahu grand jury has indicted Bishop Estate trustee Henry Peters, making him the first board member in the estate's 114-year history to face criminal charges.
The 16-member panel yesterday indicted the 57-year-old Peters for one count of first degree theft in connection with a Hawaii Kai land deal involving Jeffrey Stone, a brother-in-law of Bishop Estate trustee Richard Wong.
The investigative grand jury, which was impaneled on Sept. 16 at the request of Attorney General Margery Bronster, also returned indictments against Stone for commercial bribery, criminal conspiracy, perjury and for serving as an accomplice to theft.
Leighton Mau, a business associate of Stone's, was indicted on charges of criminal conspiracy and for serving as an accomplice to theft.
"As a Bishop Estate trustee, Henry Haalilo Peters violated his fiduciary duty to the Bishop Estate by accepting a bonus or commission for himself . . . for acts he had done as a trustee for the Bishop Estate," the indictment said.
Peters yesterday denied the charge, saying the indictment is part of a political campaign by Bronster to hurt his image and harm the reputation of the estate.
He said he welcomed the opportunity of a jury trial in which he will be able to clear his name before an impartial body. Peters' attorney, Renee Yuen, said her client has no plans to step down from the board.
"It comes as no surprise to me," said Peters, a former speaker of the state House of Representatives. "I've been waiting for this for quite a while."
Stone's attorney, Birney Bervar, was not available for comment last night. In the past, Stone has denied any wrongdoing, saying he received no preferential treatment in the Hawaii Kai deal. He has said that his partnership, One Keahole Partners, paid a record price for the deal.
Mau could not be reached for response.
Lawrence Goya, Deputy Attorney General, said that the grand jury investigation is ongoing but would not say whether additional indictments will be handed down.
"I'm sure that this does put trustees on notice that we are continuing to investigate and that we will pursue misconduct where ever it may occur," Goya said.
The nine-page indictment alleges that in 1996 Stone, through a company controlled by Mau, bought Peters' second-floor condominium in the upscale complex at 1015 Wilder Ave. in Makiki for $192,500 more than it was worth.
Peters later used the proceeds from the sale of his second-floor condo to acquire a 12th-floor condo at the same building.
The apartment deals were completed months after Peters helped a company affiliated with Stone, One Keahole Partners, acquire Bishop Estate's fee interest in a 229-unit, Hawaii Kai condominium complex known as Kalele Kai for $21.9 million, the indictment said.
The allegation echoed some of the findings in a Sept. 10 probate court petition by Bronster to permanently remove trustees Peters, Wong and Lokelani Lindsey. That removal petition, which alleged that the trustees engaged in a widespread pattern of self-dealing and mismanagement, charged that Peters and Wong received kickbacks from Stone.
If convicted, Peters could be sentenced to as many as 10 years in prison. Stone and Mau also face the possibility of 10 years in prison if they are convicted.
Peters' bail was set at $5,000, while bail for Stone and Mau was set at $12,000 and $10,000, respectively.
The arraignment date has not been set, but state attorneys expect a trial to take place within the next six months.
Samuel King, federal judge and co-author of the "Broken Trust" article that prompted the state to investigate Bishop Estate trustees, said he can't recall an instance in which any of the 34 current and past trustees were indicted for a criminal charge.
King said the indictment underscores the need to temporarily remove Peters from the estate's board, likening it to a situation where an employer would put a worker charged with a crime on administrative leave.
Bronster currently is seeking the temporary removal of four of Bishop Estate trustees on the grounds of continued harm to the trust.
"That's the minimum that should happen here," said King, whose father, Samuel W. King, served as a Bishop Estate trustee from 1957 to 1959.
Founded in 1884, the Bishop Estate is a tax-exempt trust set up by the will of Princess Bernice Pauahi Bishop to educate children of native Hawaiian ancestry. The estate, the isles' largest private landowner and one of the nation's wealthiest charities, operates the Kamehameha Schools at Kapalama Heights.
Peters, a trustee since 1984, is the longest serving current member on the multibillion dollar estate's five-person board. As the estate's treasurer and its former acting asset manager, Peters had been responsible for the estate's vast local and mainland real estate holdings and its investments in major companies like Goldman Sachs Group and Saks Fifth Avenue.
Yuen, Peters' attorney, believes that Bronster is targeting Peters because he is the senior trustee and has successfully guided the estate during its big growth years.
Yuen, calling the grand jury proceedings "one-sided," said she plans to challenge the indictment and will likely contest a recent appraisal conducted of Peters' Makiki home. The appraisal played a key role in Peters' indictment.
She declined to say whether Peters was subpoenaed by the grand jury but said that he did not testify as a witness.
"I'm confident that when we have our day in court and when we are allowed to present witnesses and cross-examine witnesses, trustee Peters will not be found guilty of any criminal action," Yuen said.
Yesterday's indictment comes after several months of legal sparring between Peters and the attorney general's office.
Peters was scheduled to testify with state investigators as far back as July, but that interview was cut off when Peters objected to the videotaping of the event. Circuit Judge Kevin Chang later ruled state investigators could not film Peters' testimony. The interview was not rescheduled.
Peters was to appear before the grand jury on Oct. 28 but failed to show up on advice of Yuen, who said then that the attorney general's office violated court rules by failing to personally serve Peters with a subpoena.
Peters' previous date with the grand jury came after state investigators on Oct. 21 conducted a surprise, videotaped search of Peters' 12th-floor apartment. Yuen criticized the search, which was conducted for the purpose of conducting an appraisal of the property, as a "Gestapo tactic."
Peters, meanwhile, has petitioned the Probate Court to disqualify Bronster as parens patriae, or legal guardian, of the estate, saying she caused harm to the trust and its beneficiaries. That petition was denied by Probate Judge Colleen Hirai.
Since the grand jury was seated more than two months ago, the panel has met about five times and has heard testimony from Stone, estate trustee Lindsey and estate employees Paul Cathcart and Nathan Aipa.
The grand jury yesterday met for about seven hours but took 30 minutes to reach a verdict.
During the morning session, the panel questioned trustee Wong for two hours about the Hawaii Kai real estate deal between the estate and Stone's company. But the panel yesterday took no action against Wong, who said he is cooperating with the grand jury probe.
The attorney general's office has alleged that Stone in 1996 paid a kickback to Wong by buying Wong's condo in the same 1015 Wilder complex for an inflated price. Wong, in turn, used the proceeds of the condo sale to buy a home in Kahala from Stone for about $1.1 million.
Eric Seitz, Wong's attorney, said that Wong answered all of the questions asked by the grand jury and said he doesn't expect the grand jury to indict his client once they are presented the facts.
"Basically, we've given them everything," Seitz said. "We're hoping that when they look at what they get, they'll back off."
Peters says charge is no surprise
Bishop Estate trustee Henry Peters offered the following statements in response to an Oahu grand jury's decision to indict him on a charge of theft:"It comes as no surprise to me. I've been waiting for this for quite a while. The attorney general has been at it for a year and a half. It's part of her political campaign to impugn the reputation of this institution and, of course, my reputation as well.
"Of course, I look forward to having my name exonerated and appearing before a real jury so I can tell my side of the story, tell the truth and at least give my attorney the opportunity to review all of the documents and get my name cleared."
Henry Peters at a glance
Age: 57
Source: Bishop Estate, court filings, state and federal business records
Trustees say estate paying
for personal legal servicesJervis and Stender say the other
By Harold Morse
trustees have a conflict of interest and
are wasting trust assets
Star-BulletinBishop Estate trustees Gerard Jervis and Oswald Stender have filed petitions in Circuit Court objecting to a majority of fellow trustees voting for legal services in the personal interest of these trustees and not the estate.
Estate attorney William McCorriston disagrees. "The only assignments that I have been given pertain to trust matters and not to the personal interests of the trustees," he said.
Jervis says he could submit copies of three resolutions passed by votes of majority trustees Richard S.H. Wong, Lokelani Lindsey and Henry Peters over objections of Jervis and Stender.
The three board resolutions were passed "on or about Nov. 17," the Jervis petition says. They authorize Robert Bruce Graham of Ashford & Wriston and McCorriston of McCorriston Miho Miller Mukai to render specific legal opinions on subjects that "give rise to a conflict of interest between the personal interests of the trustees and their interests as trustees to act in the best interest of the estate."
Thorough legal work already has been done in these areas, Jervis says in his petition. "Therefore, the resolutions seek duplicative services, which are a waste of trust assets."
The resolutions also give Bruce Graham and McCorriston wide latitude in retaining additional consultants and expend trust funds, Jervis says. "Such granting of unlimited authority is improper and may result in further wasting of trust assets."
The petition says Jervis believes the purpose of the resolutions are to secure additional legal research, opinions and services, at estate expense, for individual trustees in their own defense in other proceedings.
"The effect of the resolutions is to transfer the cost of individual trustees' defense to the trust."
Jervis says this constitutes a direct conflict of interest between these individual trustees and their fiduciary duties. "Their personal interests do not necessarily coincide with the interests of the trust."
McCorriston said it seems someone wants the trust to go without legal representation in matters in court. "The trust has a very definite interest in having its own representation in court proceedings, separate and apart from the lawyers representing the individual trustees," McCorriston said. "The lawyers for Jervis and Stender are serving their clients' interest, not the interest of the trust."
"There are numerous other examples where trustees have acted in the best interest of the trust and deserve representation by the trust. The whole idea of conflict is being used for tactical advantage by various parties, McCorriston said.
Estate critics see case
By Mary Adamski
as ‘signal’ to act
Star-BulletinCritics of the Bishop Estate trustees said they hope the grand jury action against Henry Peters stimulates action in another court.
"Hopefully, the probate court will see this as a signal that it's time to act," said University of Hawaii law professor Randy Roth, one of the authors of the "Broken Trust" essay which set off the state investigation into Bishop Estate.
"I feel that the trustees should have been removed a long time ago. They've been fighting to keep their jobs, their wealth and now, at least in Peters' case, their freedom.
"There's no way they can adequately do what trustees of the Bishop Estate need to do," Roth said.
U.S. District Judge Sam King, also a "Broken Trust" author, said, "I get no pleasure out of other people's misfortunes, but he should rethink resigning as a Bishop Estate trustee."
Peters and the other trustees have declined to resign, and state probate Judge Colleen Hirai has not acted on the attorney general's request that she temporarily remove four of the five trustees. Hirai has set a March 1 trial date on the request.
"Of course, someone is innocent until proven guilty," said King. "That's not the same test you use on whether someone should continue as a trustee in a fiduciary position. That's a stricter test.
"Much of this had been rumored. It's a sad situation which shouldn't be allowed to continue."
King said: "Judge Hirai could have acted a long time ago. It's up to her."
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