Saturday, May 8, 1999

Historic removal of
Bishop trustees

Bullet The issue: Four of the Bishop Estate trustees were removed and the fifth resigned.
Bullet Our view: The action was needed to restore the integrity of the estate.

THE removal of the Bishop Estate's five trustees had been sought for nearly two years but neither Circuit Judge Kevin Chang's decision nor its timing were surprising. The ruling is historic in its significance and essential to restore the integrity of the estate.

Chang based his ruling on a recent ultimatum by the Internal Revenue Service that the trustees resign or be removed. If not, the estate's tax exemption as a nonprofit charity would be in jeopardy. The trustees' removal is temporary but could be made permanent after 90 days -- and the presumption is that it will be.

Trustees Richard Wong, Henry Peters, Lokelani Lindsey and Gerard Jervis contested their removal, while Oswald Stender submitted his resignation.

However, Stender's resignation also is temporary, apparently allowing him to take a passive role in further litigation while leaving open the opportunity for his return as trustee in the unlikely event that the other trustees prevail.

Chang's decision culminates a stormy period following publication of the "Broken Trust" essay in the Star-Bulletin by five distinguished citizens in August 1997 that called for the trustees' removal. Four months after its publication, the state Supreme Court justices ended their role of appointing trustees for the estate, but a new selection process has not been decided.

In February, Judge Chang authorized a panel of replacement trustees to deal with the IRS because of conflicts of interest of the incumbent trustees. His order yesterday allows that panel to assume full authority over the estate immediately. The panel is comprised of Hawaiian Electric Industries Treasurer Constance Lau, attorney Ronald Libkuman, retired Adm. Robert Kihune, former Iolani School headmaster David Coon and retired Honolulu Police Chief Francis Keala. Their involvement should restore confidence among the estate's beneficiaries, the students of Kamehameha Schools.

Chang's ruling makes no mention of the allegations of mismanagement and self-dealing that have been made against the trustees. It cites solely the IRS "non-negotiable" condition that the trustees be removed prior to settlement of federal tax issues involving the estate. However, the allegations of mismanagement and self-dealing may have been involved in the IRS position. As Chang noted, failure to remove the trustees would create "an immediate and substantial risk of significant harm to the trust estate." This is clearly inconsistent with their obligations to the trust.

The judge also pointed out that the trustees had failed to comply with a court order that they implement a system of management by a chief executive officer, although the trustees -- over Stender's dissent -- offered the job to former trust executive Gil Tam. The offer was obviously a last-minute attempt to appear in compliance with Chang's order, but the judge noted that Tam was not selected from any list of candidates developed by a "headhunter" firm and his appointment was therefore invalid.

The majority trustees can be expected to vigorously contest their removal on a permanent basis, but the order yesterday is a major step toward the resolution of this controversy that the estate and the entire community sorely need.

Bishop Estate Archive

British ‘devolution’

Bullet The issue: Scotland and Wales will have new parliaments.
Bullet Our view: Regional -- or state -- legislatures can be a mixed blessing.

SCOTLAND has retained its cultural identity over nearly three centuries, although it has been absorbed in just about every other way by Britain since losing its independence in 1707. As an integral part of the United Kingdom, its constitutional status -- no legislature, no executive, no political power of any consequence -- has been less than that of a state or province. Through elections held Thursday, that changes.

"Devolution" -- the name for allocating more power to various members of the United Kingdom -- was a principal plank in Tony Blair's campaign for prime minister, but it will not give Scotland independence. Scotland will have its own parliament and a regional government with authority over health, education, transportation, the environment and culture and the power to raise or lower taxes by up to 3 percent. The British Parliament will retain control of defense and foreign policy, taxation and social security.

Britain's ruling Labor Party claimed victory, thwarting nationalists wanting to break up the United Kingdom. Labor took the biggest share of seats in the new body but fell short of an outright majority that would have allowed it to rule without a coalition.

In Wales, three million voters also cast votes for members of a new legislature, but with less power than the Scots'. Taxes will be beyond the authority of the Welsh National Assembly.

Under Blair's program, residents of the northern and middle regions of Britain will be encouraged to think about the possibility of future governments for their areas. Politicians in France, Belgium and Spain who are testing ways of granting various degrees of autonomy to restive parts of their countries are observing the British innovations with interest.

Britain, and perhaps other European countries, could be heading in a direction that seems familiar. Americans have become accustomed to governments at the federal, state and local levels, a system that has worked well on the whole but, as Hawaii voters can attest, can create conflicts. The Europeans should proceed with caution.

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