By George F. Lee, Star-Bulletin
Oswald Stender, all smiles with attorney Crystal Rose, after
yesterday's decision, led the attack on former trustee
Lokelani Lindsey's work.

Oswald Stender

Ousted trustee says he was
willing to step down to help
preserve the Bishop Estate's
tax-exempt status

By Rick Daysog
Star-Bulletin

It may well have been the endgame he envisioned.

When Oswald Stender offered his temporary resignation as a trustee of the Bishop Estate, his sacrifice may have influenced Probate Judge Kevin Chang's ruling hours later to temporarily remove the remaining trustees of the multibillion-dollar charitable trust, observers said.

Stender, the sole graduate of the trust-run Kamehameha Schools serving on the estate's board, yesterday said he offered to step down because he believed that the Internal Revenue Service would move to revoke the 114-year-old estate's tax-exempt status if trustees did not resign.

The 67-year-old ex-Marine, a board member since 1990, said he owed the school so much that he was willing to walk away from his $1 million-a-year post to protect the legacy of the estate's founder Princess Bernice Pauahi Bishop.

"I think Oz Stender's offer to step down with no strings attached was an honorable and even inspiring gesture on his part," said Randall Roth, co-author of the Broken Trust article.

"The only thing that I'm not happy about is that Oz Stender ended up being dragged down with the rest of them."

Stender's unconditional resignation came after he offered to step down last week on conditional terms. Back then, Stender said he would resign if the IRS revocation threat were real and if his four fellow trustees -- Richard "Dickie" Wong, Henry Peters, Gerard Jervis and Lokelani Lindsey -- were to step down or were removed on an interim basis.

Circuit Judge Bambi Weil on Thursday ordered the immediate and permanent removal of trustee Lindsey in a separate removal proceeding brought by Stender and Jervis.

Stender and Jervis had sued for Lindsey's removal on the grounds that she breached her fiduciary duties, mismanaged Kamehameha Schools and was unfit to serve.

Stender's lawyer Crystal Rose said a May 4 letter from the IRS convinced the trustee that the estate's tax-exempt status was in jeopardy. She also chastised the four trustees for placing their self-interest above the interests of the trust and the students of Kamehameha Schools.

She said she believes that the trustees are willing to risk losing the estate's valuable tax-exempt status to preserve their own jobs. Loss of the estate's nonprofit status could cost the estate tens of millions of dollars a year.

"They do not care about KSBE, the students or the education of Hawaiian children. They are only concerned about preserving their positions as trustees. They have the audacity to come before this court and argue that it would be in the best interest of KSBE for them to fight the IRS and risk losing KSBE's tax-exempt status so they can remain as trustees," Rose said.

"Their true colors are showing, their personal interests are bright and glowing."

Friends said Stender's act demonstrates his selfless commitment to the Kamehameha ohana.

Dwayne Steele, chairman of Grace Pacific Corp., a local paving and construction company, said he admired Stender for not walking away when the campus controversy erupted about two years ago.

At the time, Stender was named to a short list of candidates to become a trustee of the Estate of James Campbell to replace C. Dudley Pratt. But sources said Stender, a former chief executive officer of the Campbell Estate, took his name from consideration to concentrate on his task at the Bishop Estate.

"I think he's a real hero," Steele said.

Former Campbell Estate trustee Wade McVay, who hired Stender at the Campbell Estate about 40 years ago, said he has not been surprised by what Stender has been able to achieve at the trust.

McVay, who had recommended Stender for appointment to the Bishop Estate board several times before he was named to the post in 1990, has remained committed to improving the Bishop Estate despite the turmoil that has deeply divided the Kamehameha ohana.

"He never has gotten angry about this thing," said McVay. "He seemed to be resolved that this would be a long and hard fight and would come out all right."

THE JUDGE'S RULING Read the complete text of Judge Chang's ruling Excerpts from the ruling by Probate Judge Kevin S.C. Chang: IRS NEGOTIATIONS One of the nonnegotiable conditions for settlement stated by the IRS involves the status of the Incumbent Trustees. Specifically, the IRS has stated that the five Incumbent Trustees must resign or be removed to resolve IRS concerns. The IRS has informed the Special Panel that if it did not receive a "clear signal" that appropriate action was being taken to satisfy this condition, the IRS would discontinue negotiations with the Special Panel and proceed with steps to revoke the tax-exempt status of the Trust Estate. Revocation of the Trust Estate's tax-exempt status will have a major financial impact on the Trust Estate and will result in litigation with the IRS regarding the tax-exempt status of the Trust Estate. The litigation will be extremely costly and could take considerable time to complete without any assurance of a successful outcome for the Trust Estate. Based on the foregoing, the Court finds and concludes that, with the exception of Trustee Stender, the failure or refusal of the other Incumbent Trustees to resign or accede to the conditions stated by the IRS, whether on a conditional or unconditional basis, creates an immediate and substantial risk of significant harm to the Trust Estate. CEO MANAGEMENT-BASED SYSTEM Stipulation No. 14: A New CEO Based Management System Shall Be Instituted. The Trustees shall adopt and implement a CEO based system of management for the Trust Estate consistent with the concept recommended in the Anderson Report and hire a CEO within 180 days after the date on which the Court enters its order approving this Stipulation. The system shall incorporate a formal governance policy which more clearly defines the roles of the Board of Trustees and that of the CEO. During the hearing, counsel for the Incumbent Trustees disclosed that the day before the hearing, over the sole dissenting vote of Trustee Stender, the four other Incumbent Trustees approved the extension of an offer to a prospective candidate for the CEO position to serve on an "interim" basis. It was disclosed that the candidate was not selected from any list of candidates developed by the executive "headhunter" firm hired by the Trust Estate or any opportunity for all of the Trustees to participate in the screening or interview process. The extension of the job offer by the Trustees is inconsistent with the requirements of Stipulation No. 14 of the Stipulated Order since it was extended prior to the Court's approval of a CEO based management system and formal governance policy. The Court finds that the Incumbent Trustees have failed to meet the deadline and other requirements of Stipulation No. 14 of the Stipulated Order. Importantly, these items were agreed to by all of the Incumbent Trustees and were the result of negotiations among counsel for the Incumbent Trustees, the Attorney General and the Master. REMOVAL OF INCUMBENT TRUSTEES Trustee Oswald Kofoad Stender has tendered his resignation on an interim basis and the court accepts his resignation effective immediately upon the filing of this Order. Immediately upon the filing of this Order, Henry Haalilio Peters, Richard Sung Hong Wong, Marion Mae Lokelani Lindsey and Gerard Aulama Jervis are removed as Trustees of the Estate of Bernice P. Bishop. The Incumbent Trustees are relieved of all power and authority to exercise any trust power related to the Trust Estate and its subsidiaries and affiliated organizations Hawaiian Trust Co. v. Breault, supra., In re Ikuta, supra, and In re Holt, supra.

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