Friday, January 22, 1999

Bishop Estate
master seeks panel to
take over trustees’
tax work

Matsumoto also asks that they
be kept from replying
to the IRS audit

By Rick Daysog


Bishop Estate's court-appointed master is calling for the appointment of a special panel to deal with the Internal Revenue Service, which is finalizing its four-year audit of the trust.

In legal papers filed yesterday, attorney Colbert Matsumoto asked Probate Judge Kevin Chang to appoint five administrators who would take over the trustees' duties relating to the IRS investigation of the estate.

Matsumoto also asked Chang to prohibit the current trustees from responding to the audit, saying they face conflicts of interest in dealing with the probe.

Matsumoto's filing was prompted by the IRS, which on Jan. 4 notified the estate of some of the preliminary findings of its audit for the 1992-1996 fiscal years.

The preliminary findings, known as IRS Form 5701s, indicate that the IRS may have completed the investigatory phase of its audit and is in the process of finalizing actions it plans to take with the trust.

Matsumoto declined to disclose the details of the agency's initial findings, saying they were confidential.

The Star-Bulletin previously reported that the IRS is investigating whether trustees have benefited at the expense of the 114-year-old charitable trust, which operates the Kamehameha Schools for children of native Hawaiian ancestry.

The IRS is taking a close look at trustees' $800,000-a-year compensation, executive perks such as free country club memberships and personal use of estate credit cards and travel expenditures.

The agency also is investigating the estate's tax-exempt status, Kamehameha Schools' admission policies and the relationship between the nonprofit trust and its for-profit subsidiaries.

If the IRS finds that trustees received improper benefits, they could face hefty fines.

Matsumoto's recommendations echoed arguments on Wednesday by Bishop Estate trustees Oswald Stender and Gerard Jervis, who said they have voluntarily recused themselves from addressing the IRS, saying they have a conflict.

Stender and Jervis asked Judge Chang to appoint a three-person panel to handle the audit. They are also asking Chang to prohibit the estate's majority trustees -- Henry Peters, Richard "Dickie" Wong and Lokelani Lindsey -- from responding to the IRS investigation.

A hearing is scheduled for Jan. 29.

Bronster likely to
take stand in case against
Henry Peters

By Rick Daysog


Attorney General Margery Bronster will likely take the witness stand next week in the criminal case against Bishop Estate trustee Henry Peters.

Circuit Judge Michael Town yesterday denied a motion by the attorney general's office to quash a subpoena for Bronster's testimony.

Town said he was reluctant to order Bronster to the stand but said the defense attorneys and prosecutors have the right to call officers of the court as a witness.

The subpoena was filed last month by attorneys for Peters and local developers Jeffrey Stone and Leighton Mau, who are asking Town to throw out criminal indictments against their clients.

In November, an Oahu grand jury convened by Bronster indicted Peters on one count of theft relating to an alleged kickback scheme involving Stone, a brother-in-law of Bishop Estate trustee Richard "Dickie" Wong.

The grand jury also indicted Stone and Mau on conspiracy charges. Stone also was indicted on a commercial bribery charge.

John Edmunds, Stone's lawyer, is seeking dismissal of the charges on the grounds that Bronster does not have the legal authority to prosecute the case.

Edmunds and Brook Hart, Mau's attorney, also have alleged that Bronster faces a conflict of interest in her role as criminal prosecutor and legal guardian, or parens patriae, of the Bishop Estate.

A hearing on the dismissal motion has been scheduled for Monday and Tuesday.

Besides Bronster, Geoffrey Hazard, a University of Pennsylvania law professor, and Michael Cody, former Tennessee attorney general and one-time federal prosecutor, will take the stand as expert witnesses.


Estate's master can't be
deposed in removal trial

Bishop Estate's court-appointed master, Colbert Matsumoto, cannot be called as a witness in the trial to permanently remove four of the estate's five trustees, a state judge ruled today.

Probate Judge Kevin Chang denied a motion to have Matsumoto deposed in the removal case, saying Matsumoto, as the court-appointed master, has a quasi-judicial status.

Lawyers for trustee Richard "Dickie" Wong had subpoenaed Matsumoto for his deposition.

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