Friday, January 8, 1999

Lindsey says
travel bills were
related to business

Stender's attorney also asks
about credit card charges

By Rick Daysog


The Internal Revenue Service is investigating thousands of dollars of credit-card charges and travel expenses that Bishop Estate trustee Lokelani Lindsey billed the charitable trust during the past five years.

The IRS, which is conducting a massive audit of the operations of the tax-exempt estate for the 1992-through-1996 period, questioned Lindsey about 15 trips she made to Las Vegas between 1993 and 1997.

The IRS inquiries were disclosed during testimony by Lindsey in the two-month-old trial to remove her from the Bishop Estate's board. Fellow trustees Oswald Stender and Gerard Jervis are seeking Lindsey's ouster, alleging that she breached her fiduciary duties, mismanaged the estate-run Kamehameha Schools, and is unfit to serve on the trust's five-member board.

Under questioning yesterday by Stender's attorney, Crystal Rose, Lindsey said she reimbursed the estate for her personal travel but said she believed that expenses relating to her Las Vegas trips were business-related.

Lindsey said she often visited Las Vegas with staffers to monitor the estate's properties there. In the past, she has traveled to Las Vegas to meet with the estate's property managers, Con Am, and Las Vegas developer Richard Tam, she said.

The estate, through its for-profit Southern Nevada Income Properties L.P. and Meridian Associates L.P. units, owns roughly $200 million worth of rental condominiums in the Las Vegas area.

"I visited the properties from time to time," she said. "I am perhaps the person most familiar with the Las Vegas properties."

The IRS has been been auditing the multibillion-dollar Bishop Estate and its for-profit subsidiaries since 1966. The soon-to-be completed exam is taking a close look at the trustees' $800,000-a-year each compensation, perks such as country club memberships, and their personal use of estate assets and employees.

Trustees could face stiff fines if the IRS finds that they personally benefited at the expense of the estate.

Previous testimony by Bishop Estate land managers disclosed that the IRS has inquired about work conducted by staffers on Lindsey's Punaluu beach home.

Yesterday, Rose attempted to show that Lindsey did not repay the estate for many of her personal travel expenses until late 1997. Some of the repayments came three years after the original charges were made and were made well after the IRS and state Attorney General Margery Bronster began their separate investigations of the estate.

But Lindsey said she repaid the estate after they were called to her attention.

"Had I discovered it earlier, I would have reimbursed it earlier," she said.

Rose also questioned Lindsey about a series of trips she took with her husband and estate staffers to the 1997 Super Bowl in New Orleans, the 1996 Olympics in Atlanta and the 1994 Rose Bowl.

Stender and Jervis said the $7,000 Atlanta trip was paid for by Xerox Corp. after the company made a major sales pitch for the estate's business.

But Lindsey said she does not recall taking part in any board decisions involving Xerox, and that she probably would recuse herself from any such board actions.

In court papers, Stender and Jervis also have alleged that the Lindseys traveled to New Orleans in 1997 on a chartered flight that was partly paid for by an estate vendor, Education Management Group Inc.

According to Stender and Jervis, EMG sold the estate more than $3 million in distance learning computer software and hardware, which turned out to be obsolete. Lindsey said she eventually repaid EMG for the full cost of the New Orleans trip, adding that she did not take part in negotiations with EMG.

She said the New Orleans trip was business-related since she, her husband, and Kamehameha Schools Vice President Rockne Freitas were there to meet with officials from the National Football League about a potential software deal involving a separate estate entity, KDP Ltd. The deal never materialized and the estate's interest in KDP has since been put on hold.

The trial took an occult turn yesterday, when Lindsey was asked if she ever consulted a local psychic for advice on estate business. Lindsey said she knew psychic Lan Vo, who is a close friend of her sister's.

But Lindsey said she has never consulted Vo on personal matters or on matters involving the estate.

Judge denies estate’s
motion to have
fact-finder disqualified

Court-appointed master
Colbert Matsumoto is likened
to a part-time, freer judge

By Rick Daysog


Probate Judge Colleen Hirai today denied a motion by the Bishop Estate's majority trustees to disqualify court-appointed master Colbert Matsumoto.

Matsumoto -- whose reports on the multibillion-dollar trust harshly criticized trustees' management practices -- did not show an actual bias when he supported re-election efforts of Gov. Ben Cayetano, according to the ruling.

Hirai likened Matsumoto's job of court-appointed master to that of a part-time judge. Unlike full-time judges, a part-time one is allowed to support political candidates.

The estate's majority trustees -- Richard "Dickie" Wong, Henry Peters and Lokelani Lindsey -- have argued that Matsumoto should be disqualified to avoid the appearance of impropriety. They said that Matsumoto not only supported Cayetano but placed his signature on a Cayetano flier to local attorneys that credits the governor for his investigation of the estate.

James Duffy, Matsumoto's attorney, likened the trustees' disqualification tactic to bullying. The trustees did not like Matsumoto's report, so they personally attacked him, said Duffy.

He added that Matsumoto's name was mistakenly included by a campaign supporter on the flyer endorsing Cayetano.

"This is the conduct of a schoolyard bully," Duffy said. "It's not in the interest of the schools, and it's not in the interest of the beneficiaries."

Matsumoto's reports for the estate's 1994-1996 fiscal years have harshly criticized trustees' management of the estate's investments and for withholding $350 million from the estate-run Kamehameha Schools. Much of the reports served as grounds for Attorney General Margery Bronster's petition to temporarily oust Peters, Wong, Lindsey and Gerard Jervis.

Bishop Estate
investigation cost
state $800,000 so far

By Mike Yuen


The state's nearly 1-1/2-year probe of the Bishop Estate has cost $800,000 so far, says Cynthia Quinn, special assistant to Attorney General Margery Bronster.

For the first year alone, the tab was $700,000.

Most of the money is for work done by outside investigators and experts, Quinn said yesterday. It doesn't include salaries of the deputy attorneys general and other staffers who have worked on the case, Quinn said.

The $700,000 cost covers from August 1997, when the investigation began, to June 30, 1998, the end of fiscal 1997-98.

The probe is estimated to have cost the state $100,000 in the first six months of the current fiscal year, Quinn said.

Although her department has had a huge workload increase in recent years, Bronster said she will for the most part make do with existing staff.

But she told the Senate Ways and Means Committee that she is seeking an additional $900,000 for the next two fiscal years to try to collect $9.3 million in delinquent traffic fines, collect delinquent claims for the Human Services Department and investigate Medicaid fraud.

The funds would also be used to run the Missing Child Center and provide additional staff for the Hawaiian Home Lands claims disputes.

Bronster said the department "continues to be circumspect with investigative and legal costs" related to the Bishop Estate probe by primarily reallocating limited resources within the department and by sharing personnel, office space and equipment with other state departments.

"The magnitude and complexity of this investigation continues to require expertise in large white-collar investigations, accounting, and experts in trust administration and operations not available through present resources," Bronster told the Senate Ways and Means Committee yesterday.

"The number of opposing counsel has risen to over 10 private law firms, exclusive of in-house staff counsels."

The state's investigation has focused on alleged financial mismanagement and breaches of trust by individual trustees of the multibillion-dollar estate, which is the largest private landowner in Hawaii and one of the nation's richest trusts.

While Bishop Estate trustees Oswald Stender and Gerard Jervis are in court trying to remove another trustee, Lokelani Lindsey, the state's actions against trustees have not yet gone to trial.

Asked if she would be willing to meet privately with senators to brief them on the Bishop Estate case, Bronster said she would.

But Bronster later told reporters that she will not discuss matters such as evidence and trial strategy with senators.

A meeting with senators would be complicated because one of them, Sen. Marshall Ige (D, Kaneohe), is a target of the state's investigation of the estate.

Last year, in a 58-page petition filed in state probate court, Bronster accused estate trustees of directing a scheme in which $18,300 in illegal campaign contributions were paid to Ige and an additional $31,000 was allegedly funneled to former Senate Vice President Milton Holt.

Ige, who sits on Ways and Means but who was in Kaneohe when Bronster testified about her department's budget, said he would not feel uncomfortable sitting in on a closed-door Senate caucus with Bronster. But if such a meeting were to take place, he would first talk with Senate President Norman Mizuguchi (D, Aiea) as to how his presence might affect his fellow senators.

Ige, a former House member, was a protege of Bishop Estate trustee Henry Peters, when Peters was House speaker. Ige served as House vice speaker under Peters.

Ige last night reiterated that he knew nothing of an alleged bogus billing scheme that was used to conceal how a 1994 campaign debt of $18,261.71 was paid.

Ige last year used his authority as co-chairman of the Senate Government Operations Committee to obtain information about Goodenow Associates Inc., the investigative firm that Bronster paid $500,000 to probe the Estate.

Several weeks ago, Ige was demoted from Government Operations co-chairman to Labor and Environment vice chairman in the Senate's post-election reorganization. He said: "I was hoping that I was taken off because of a conflict of interest and how I was investigating the attorney general. But as it came out, it seems as though the 'free thinkers' were being punished. When I look around, the free thinkers got vice chairmanships. I look on that as unfortunate, more as punishment."

Mizuguchi could not be reached for comment.

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