Saturday, March 13, 1999

Bishop's  'bizarre' scandal deepens

'People are stunned' by
events tarnishing the
trust's legacy

Bullet Mood on campus 'shocked, subdued'
Bullet Other reaction from around town

By Rick Daysog


One trustee overdosed on sleeping pills after a tryst in a hotel restroom with a female estate worker became public. Another board member is the target of a nasty removal battle brought on by two fellow trustees. A third board member was indicted for theft, while the trust's chairman is the subject of a grand jury investigation.

Is this the way to run a multibillion-dollar charitable organization?

The scandals that have rocked the Bishop Estate's five-member board and tarnished the legacy of the 114-year-old trust are prompting renewed calls for the ouster of the estate's five trustees.

Some observers believe the estate's board of trustees has become so dysfunctional that the operations of the trust and the estate-run Kamehameha Schools are being compromised. They say that trustees, who earn more than $800,000 a year, are so enmeshed in their own personal legal battles and financial agendas that they're distracted from their broader board duties.

"Even without this most recent tragic turn of events, it has been increasingly clear that these trustees need to be removed," said Randall Roth, a University of Hawaii law professor and co-author of the 1997 "Broken Trust" article which criticized trustees' management of the estate.

"The interests of the trust and its beneficiaries require the undivided attention of competent trustees."

Attorney General Margery Bronster already has petitioned the state Probate Court for the temporary and permanent removal of several trustees for alleged breaches of trust and financial mismanagement.

But most of the renewed interest in removal stems from the recent tragedy involving trustee Gerard Jervis.

On Thursday, Jervis took an overdose of sleeping pills at his Kailua home and was taken by ambulance to Castle Medical Center. The overdose came after last week's apparent suicide of a Bishop Estate employee, Rene Ojiri Kitaoka.

A compromising situation

The day before Kitaoka's death, private security guards found her and Jervis in a compromising situation in a men's restroom at the Hawaii Prince Hotel in Waikiki, sources have said.

Kitaoka, 39, was general counsel for the estate's Kamehameha Investment Corp. subsidiary. The 50-year-old Jervis served as KIC's chairman.

Jervis is now recovering at the hospital and is on medical leave from his duties at the estate, according to his attorney, Ronald Sakamoto.

"I think people are stunned by the bizarre aspects of this," said Daniel Kurtz, a former top regulator of charities in New York state and author of a book titled "Board Liability."

Kickback scheme alleged

Founded in 1884, the Bishop Estate is one the nation's richest charitable trusts, with assets over $5 billion.

The trust also is Hawaii's largest private landowner, with more than 365,000 acres.

The estate and its trustees are the target of several federal and state investigations. Last November, an Oahu grand jury impaneled by Bronster indicted trustee Henry Peters for allegedly accepting a $192,500 kickback from local developer Jeffrey Stone, a brother-in-law of trustee Richard "Dickie" Wong.

A separate grand jury is investigating Wong's role in the same alleged kickback scheme. The grand jury has met several times to hear testimony from witnesses, but it is not clear whether the panel will indict Wong.

Peters, Wong and Stone all deny wrongdoing.

Removal trial under way

In addition to the grand jury proceedings, Jervis and trustee Oswald Stender are seeking trustee Lokelani Lindsey's removal from the board on the grounds that she breached her fiduciary duties, mismanaged Kamehameha Schools and intimidated students and teachers.

Ed Halbach, an authority on trust law and former dean of the University of California's Boalt Law School, said state probate courts have a wide range of powers when it comes to removing trustees.

Typically, a judge can remove a trustee when there's a pattern of self-dealing or gross negligence. But Halbach, who has served as a consultant to Colbert Matsumoto, the estate's court-appointed master, said a judge could remove a trustee on the grounds the trustee simply cannot work well with fellow board members.

"I would think that something needs to be done," Halbach said.

The estate disagrees. From an economic standpoint, the Bishop Estate is enjoying one of its best years ever, said William McCorriston, attorney for majority trustees Peters, Lindsey and Wong.

'The trust is doing fine'

Since the so-called Bishop Estate controversy began about two years ago, the trust has been able to place over $800 million in investments and is looking forward to the planned initial public offering of Goldman Sachs Group in May, according to McCorriston. Bishop Estate's 10 percent stake in Goldman Sachs has been valued at $2 billion to $3 billion.

Although there are differences in the boardroom, trustees can work with each other in a professional way, McCorriston said. He noted that more than 90 percent of all board business is approved unanimously during trustees' twice-weekly meetings.

"The trustees execute the leases, make the investments, and they move forward," said McCorriston.

"Financially, the trust is doing fine, and it looks like the students at the school are keeping their focus, and that's a tribute to them and their parents."

Students embarrassed

Toni Lee, president of the 3,000-member parent, teacher and alumni organization Na Pua a Ke Ali'i Pauahi, said she takes strong exception to McCorriston's view that it's business as usual at the estate. She believes the constant public battle among the trustees is taking its toll on the self-esteem and morale of students.

Lee said some Kamehameha students who come to school wearing campus uniforms bring a change of clothes they can wear when they go home. That way, they can avoid any embarrassment.

"Some of these children will be living this tragedy for their whole high school lives," said Lee, a 1959 Kamehameha Schools graduate.

"The whole controversy has taken a toll on everybody. We need to put this all to an end."

Spokesman says ‘shocked,
subdued’ mood on campus

By Rod Ohira


A student body stunned by another tragic episode involving a Bishop Estate trustee received a calming message from Kamehameha Schools President Michael Chun.

"My understanding is Dr. Chun started the day with a closed-circuit TV message that was very much spiritual and very prayerful," Kamehameha Schools/Bishop Estate spokesman Kekoa Paulsen said.

"He focused on having compassion and aloha for the individuals and families involved and reminded them that it's not God's way to be judgmental. He also reminded them that as an institution, we're family and all part of the same ohana."

One faculty member, who requested anonymity, says administrators handled the situation well. "They were very sensitive and it went well," the teacher said.

Chun could not be reached for comment.

Kamehameha Schools faculty received memos yesterday directing them to refer all media inquiries to Paulsen without comment.

"It's just general operating procedure," Paulsen said. "Because so many things are happening, we're trying to convey a single message as an institution from an operational point of view.

"The school's trustees and administrators are aware of what has occurred and are deeply affected by it. Everyone is feeling it together."

Paulsen described the mood on campus yesterday as "one of shock and concern, very subdued."


Here are responses from people about the relationship of Bishop Estate trustee Gerard Jervis and attorney Rene Ojiri Kitaoka:

Manoa Shopping Center

bullet Geoff Heise, 56, of Manoa, entrepreneur and actor: "I think it's a bizarre occurrence. However, it proves that human beings can be a pretty crazy bunch."

bullet Amelia Allen, 28, a University of Hawaii campus minister: "It's sad. I think it's hard to see people's personal lives displayed all over the paper."

bullet Cameron Jackson, 33, of Manoa, an optical technician: "I don't know what to say about it. It's pretty hard to believe the whole thing."

University of Hawaii Manoa Garden

bullet Ivan Hall, 66, semi-retired professor who teaches in Japan: "I wish the front page would have something of national and international importance and maybe carry this on the second page. It's just that there's so much going on in the world and in the country now."

bullet Angela Carbonaro, 37, of Manoa, a clerk-typist: "I think it's sad."

TGI Fridays on Ward Avenue

bullet Ames Scott, 54, of Punchbowl, a stage hand: "Another black eye for the Bishop Estate."

bullet Everett Belelai, 26, of Waikiki, a health care worker: "I think the Honolulu (newspapers are) just basically selling papers on somebody's intimate affairs. I don't see the relationship between people's affairs and the goodness of the Kamehameha Schools."

Murphy's Bar & Grill on Merchant Street

bullet Bruce Doorly, 50, a downtown resident and contractor: "It makes me sad. It really does. I feel sorry for all of the parties involved."

bullet Laura Skay of Ewa Beach, a business manager: "I think it's all terribly sad, terribly sad."

Bullet Bill Mosa, 44, of Waikiki, an engineer: "The behavior exhibited by Mr. Jervis is not much different from that exhibited by Bill Clinton. I don't think we should then hold him accountable."

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