Monday, December 20, 1999

By Craig T. Kojima, Star-Bulletin
Interim Bishop Estate trustees, from left, Francis Keala,
Constance Lau, Robert Kihune, Ronald Libkuman and
David Paul Coon at today's press conference in their
downtown Honolulu office.

Bishop Estate faces
$165 million tax bill

The interim board hopes to
negotiate downward the trust's
tax liabilities for its
for-profit subsidiaries

Wong pleads not guilty

By Rick Daysog


Despite a favorable deal preserving its tax-exempt status, the Bishop Estate faces a potentially huge tax bill for its for-profit subsidiaries.

The interim trustees of the $6 billion trust disclosed today that the Internal Revenue Service several months ago proposed that the estate pay $165 million to settle outstanding tax issues involving the estate's for-profit units for the 1990-1996 period.

But retired Adm. Robert Kihune, chairman of the estate's interim board, said the $165 million amount is a preliminary figure that the estate hopes to negotiate downward.

The trust previously negotiated the tax bill for its nonprofit parent to $9 million.

The IRS originally said the trust's nonprofit parent owed $65 million, and threatened to revoke the trust's tax-exempt status in a move that could have cost the estate as much as $1 billion.

"I hope that we can get it down to the lowest level possible," Kihune said in a meeting today with the news media. "But to have it at zero would be hopeful thinking."

Kihune declined to provide additional details on the tax liabilities of the estate's for-profit subsidiaries, citing negotiations with the IRS.

But sources in the past had pointed to the estate's previous board of trustees' aggressive transfers of money-losing investments from the nonprofit trust to the taxable subsidiaries.

The take-downs of the money-losing investments allowed the trust to take a more hands-on approach to managing those assets, sources said.

Kihune, meanwhile, said the estate hopes to complete its closing agreement with the IRS that would preserve the estate's tax-exempt status.

He said the closing agreement still required probate court approval of a proposed spending plan.

The plan specifies a set percentage of the estate's assets to be spent annually at the Kamehameha Schools.

During their news conference, Kihune and fellow board members also said they are considering expanding their Big Island and Maui campuses and may add additional outreach programs for native Hawaiians.

Interim trustee David Coon, former Iolani School headmaster, said the temporary Big Island campus educated about 152 students, but that could be expanded to 2,000 once the permanent Big Island campus is built.

Wong pleads not
guilty to perjury

At issue is testimony about a Hawaii Kai
land deal involving Bishop Estate

By Rick Daysog


Former Bishop Estate trustee Richard "Dickie" Wong today pleaded not guilty to committing perjury.

Wong's co-defendant, Jeffrey Stone, also pleaded not guilty to a perjury charge.

Trial for the two has been tentatively set for the week of June 6.

Wong, who permanently resigned from the Bishop Estate on Dec. 3, appeared in state Circuit Court today for his arraignment before Circuit Judge Michael Town but made no comment.

His attorney, Eric Seitz, said Wong and Stone plan to contest the criminal charge, which he called "ill-advised."

"Our view is that the state ought to drop the criminal case," said Seitz. "We think this should be over with."

Earlier this month, an Oahu grand jury, led by the state attorney general's office, indicted Wong and Stone for perjury for statements they made to a previous grand jury about their alleged role in a controversial Bishop Estate land deal in Hawaii Kai.

The previous grand jury indicted Wong for theft and Stone for commercial bribery, but the charges were thrown out by Town due to "illegally bolstered" testimony by Stone's former attorney, Richard Frunzi, who pleaded guilty to federal money-laundering charges.

The state is appealing Town's earlier dismissal.

John Edmunds, Stone's attorney, said he believes the state is trying to indict his client on perjury charges to "smear" Stone's credibility in a separate criminal trial directed by the attorney general's office.

Stone, Wong's former brother-in-law, faces a separate March trial over commercial bribery charges. Earlier this year, a grand jury indicted Stone for commercial bribery, perjury and accomplice to theft. That grand jury also indicted former Bishop Estate trustee Henry Peters for theft.

Last friday, Town threw out Peters' theft charge and tossed all but the bribery charge against Stone.

Stone, Peters and Wong have denied wrongdoing in the Hawaii Kai land deal, saying the estate benefited tremendously in the transaction.

The attorney general's office had no comment.

"These cases should not have been brought, and the courts thus far, when push comes to shove, have agreed with us that there are problems with the prosecution" of the cases, Seitz said.

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