Trust-law expert says
Bishop Estate OKJudge denies new motion to dismiss
By Rick Daysog
Star-BulletinA mainland trust law expert said the state attorney general's office has shown no grounds for the interim removal of the Bishop Estate's trustees.
In testimony before Probate Judge Colleen Hirai, James Schwartz, a former California deputy attorney general in that state's charitable trust enforcement section, yesterday said the state has demonstrated no breaches of fiduciary duty by trustees Henry Peters and Richard "Dickie" Wong.
"In this case, I don't find a breach of trust or any ongoing threat to the trust," said Schwartz, now a private attorney specializing in trust law. "Therefore, there are no reasons to bring an interim removal based on what we have here."
Schwartz is an expert witness for trustees Wong and Peters, who are the subjects of a five-week trial over their interim removal. His opinions are based largely on recent reports by court-appointed master Colbert Matsumoto and court filings by the attorney general's office that sharply criticized the trustees' management of the multibillion-dollar estate and its investments.
The attorney general's office in September asked the probate court to immediately remove Peters, Wong, Lokelani Lindsey and Gerard Jervis, saying they breached their fiduciary duties, mismanaged the estate-run Kamehameha Schools and jeopardized the 114-year-old trust's tax-exempt status.
Lindsey's and Jervis' cases have been postponed.
A separate suit to permanently remove the trustees for alleged self-dealing and mismanagement will likely go to trial next year.
The state, echoing findings by Matsumoto, also said the trust accumulated about $350 million in trust income that should have been spent on the Kamehameha Schools. The accumulated income violates the will of the estate's founder, Bernice Pauahi Bishop, as well as past court orders, and shows that the trustees' continued presence in office will further damage the trust, the state has said.
Under questioning from Wong's attorney Glenn Sato, Schwartz said the interim removal of a trustee is a rare and "extraordinary remedy" that should be enacted only when the assets of a trust are in jeopardy, which he said is not the case with the Bishop Estate.
Schwartz said that the will of Pauahi, as well as past court orders, do not require the trustees to spend every dollar of income on the Kamehameha Schools. He also argued that the will gives the trustees -- and not the attorney general's office or the court-appointed master -- much discretion on school expenditures.
A state judge today denied a new request to dismiss criminal indictments against Bishop Estate trustee Henry Peters and local developer Jeffrey Stone. Judge denies new bid
to nix Peters indictmentCircuit Judge Michael Town also denied permission for Peters, Stone and local businessman Leighton Mau to file an interlocutory appeal to the state Supreme Court seeking to reverse a previous decision on dismissing the criminal charges.
Last November, an Oahu grand jury indicted Peters for theft, Stone for conspiracy and commercial bribery and Mau for conspiracy for taking part in an alleged kickback scheme involving Bishop Estate land in Hawaii Kai. Stone is a brother-in-law of estate trustee Richard "Dickie" Wong.
All three have pleaded not guilty and sought to dismiss the indictments on the grounds that Attorney General Margery Bronster does not have the legal authority to prosecute them criminally.
They also have argued that Bronster's duties as the estate's legal guardian, or parens patriae, is in conflict with her role as the state's chief law enforcement officer and that Bronster was using the criminal case to leverage a civil suit to remove trustee Peters from his $840,000 a year post.
Town denied the previous dismissal request earlier this year but attorneys for the defendants asked for new dismissal, saying Bronster's office attempted to introduce information about the criminal indictment of Peters into the trial before Probate Judge Colleen Hirai to remove the Peters temporarily.
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