Wednesday, June 9, 1999

Trustees’ banking
records subpoenaed

A federal grand jury wants
loan records and other documents

By Rick Daysog


A federal grand jury has subpoenaed the banking records of several Bishop Estate trustees, in yet another legal headache for the recently ousted board members.

But an attorney for trustee Richard "Dickie" Wong said the subpoenas are part of a "preliminary inquiry," and said Wong is cooperating with federal investigators.

Eric Seitz, Wong's lawyer, said the grand jury in January subpoenaed the Bank of Hawaii and First Hawaiian Bank for trustees' loan records, personal checking and savings account information and other banking-related documents. Seitz said the records were turned over.

Seitz said Wong has nothing to hide and has offered to meet with federal investigators. He said Assistant U.S. Attorney Les Osborne told him in January that the grand jury was in the early stage of gathering information and that he would notify him if a criminal case develops.

Since then, Osborne has given him no indication that the grand jury would proceed with a full-blown criminal investigation, Seitz said.

Osborne declined comment this morning.

The federal grand jury subpoenas come after separate Oahu grand juries -- convened at the request of the state attorney general's office -- indicted trustees Wong and Henry Peters for their role in an alleged kickback scheme with Wong's brother-in-law, local developer Jeffrey Stone.

Wong, Peters and Stone have all pleaded not guilty to the state charges.

The federal grand jury's subpoenas are an outgrowth of inquiries by the IRS' criminal investigation division, which is examining tax evasion issues.

In a letter May 4, a top-ranking official in the IRS's civil division hinted that the federal agency was looking into the personal finances of individual trustees.

Marcus Owens, director of the IRS' exempt-organization division, raised concerns that trustees would misuse assets of Bishop Estate and would divert funds beyond the jurisdiction of the IRS.

Owens -- whose division is conducting an exhaustive, four-year audit of the multibillion-dollar Bishop Estate -- also reinforced the IRS threat to seek revocation of the estate's tax-exempt status if board members Wong, Peters, Lokelani Lindsey, Gerard Jervis and Oswald Stender were not removed from their $1 million-a-year posts.

As a result of the IRS' ultimatum, Probate Judge Kevin Chang on May 7 temporarily removed Wong, Peters, Lindsey and Jervis, accepted Stender's voluntary resignation and named five interim trustees as replacements.

Peters asks to
appeal his removal
as estate trustee

By Rick Daysog


Bishop Estate trustee Henry Peters, temporarily ousted from his $1 million-a-year post last month, is asking a state judge for permission to appeal his removal, saying the judge's decision was "fundamentally flawed."

Peters filed court papers Monday asking for an appeal to the state Supreme Court or the Intermediate Court of Appeals of Probate Judge Kevin Chang's May 7 decision to temporarily remove four of the Bishop Estate's five trustees.

Peters also requested that Chang's interim removal order be entered as a final judgment, allowing him to appeal the decision to a higher court.

"Trustee Peters asserts that the May 7, 1999, orders are fundamentally and fatally flawed," Peters' lawyer Renee Yuen wrote.

An "immediate appeal is required to correct the court's substantial procedural errors and prevent irreparable harm to the trust estate."

Peters' filing follows fellow trustee Richard "Dickie" Wong's May 18 request to file an appeal of Chang's decision.

Chang has set a July 30 hearing for Peters' requests and a July 23rd date for Wong's request.

According to Yuen, Chang abused his discretion in removing the trustees in response to the Internal Revenue Services' threat to seek the revocation of the estate's tax-exempt status.

Yuen said the IRS' threat is unfounded and that Peters has not been able to contest the IRS' charges in an evidentiary hearing.

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