Thursday, May 27, 1999

Developer got
incentives from
trust others didn’t

Bishop Estate's Kalele Kai
project is the subject in a hearing
to dismiss Wong's indictment

By Rick Daysog


A partnership that included a brother-in-law of Bishop Estate trustee Richard "Dickie" Wong received incentives that the estate did not offer to other local developers, according to testimony from a longtime Bishop Estate land manager.

Paul Cathcart, director of the estate's urban Oahu district and a trust employee for 22 years, said he could not recall an instance in which the estate offered similar terms to those given to One Keahole Partners, which acquired the estate's fee interest in the 219-unit Kalele Kai condominium back in 1995.

"There were features ... that were unique to this transaction," Cathcart said.

The disclosure marked the second day of a pretrial hearing before Circuit Judge Michael Town.

Wong, his wife Mari Wong, and his brother-in-law, local developer Jeffrey Stone, are asking Town to dismiss grand jury indictments against them.

They contend the criminal charges are based on flawed grand jury proceedings and faulty testimony from Stone's former lawyer, Richard Frunzi, who was convicted of federal money-laundering charges.

Last month, the grand jury, directed by the attorney general's office, indicted Stone and the Wongs in an alleged kickback scheme.

The indictment charged that Wong received $115,800 from Stone for a "sweetheart deal" in which One Keahole acquired the estate's fee interest to the upscale Kalele Kai project for $21.9 million.

Estate waived $2 million

One Keahole's investors include Stone and Cleveland-based National Housing Corp.

The attorney general's office has argued that the Bishop Estate, known as a tough negotiator when it comes to its leasehold properties, waived some $2 million in payments that the original developer, Kapalele Associates, owed.

The trust also offered favorable terms for guarantees and collateral that the developers pledged on the deal, the attorney general's office said.

Under questioning by Deputy Attorney General Lawrence Goya, Cathcart said he could not recall a land deal in which the estate granted similar guarantees or collateral terms.

Cathcart said local developers such as Bill Mills, Jack Myers and Peter Savio, who expressed interest in the property, were not offered the same terms.

But Cathcart stressed that the estate did not give Stone and his partners a "sweetheart" deal, saying the estate was able to to rescue a troubled project after the original developer, Kapalele, ran into financial trouble.

Cathcart noted that the property's fee interest probably was worth about $30 a square foot in 1995, due to falling real estate values brought on by the downturn in Japanese investment in Hawaii.

But the estate was able to convince One Keahole to pay $60 a square foot, he said.

Stone takes the stand

Competing developers like Mills, Myers and Savio never got to the point of acquiring the leasehold interest in the project as had One Keahole, he added.

"We didn't say anything about giving up anything," Cathcart said.

During yesterday's hearing, Stone also took the witness stand for the first time.

But his testimony was limited to issues relating to whether his former attorney Frunzi violated his attorney-client relationship when he testified before a grand jury about the Kalele Kai deal.

He said he did not waive his attorney-client privilege to allow Frunzi to testify.

He also denied that he committed a crime or was about to commit a crime when Frunzi represented him.

Town will hear further arguments on Wong's dismissal motion on June 7 before ruling.

Trustees drop contract with Terrance Tom

The interim board of the Bishop Estate has decided not to renew the contract held by former state representative and attorney Terrance Tom.

Tom had held a $48,000-a-year contract with the estate under the ousted trustees.

Tom's legal work for the Bishop Estate has been part of the state's investigation of the ousted estate trustees.

The former head of the House Judiciary Committee was criticized last year for voting on issues affecting the estate while on retainer.

Tom decided not to run for re-election to the House last year and then lost his Democratic primary bid for the Senate seat representing the area from Kahuku to Kaneohe.

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