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Friday, August 11, 2000

State deal with
former trustees reported

Bullet The terms: Dickie Wong's attorney says the agreement resolves pending action against the ex-trustees

Bullet The significance: A settlement of the suit would avoid a costly trial scheduled next month

By Rick Daysog

The attorney general`s office has agreed to settle its multimillion dollar lawsuit against the five former trustees of the Kamehameha Schools, according to a lawyer for former trustee Richard "Dickie" Wong.

Another person familiar with the settlement talks said, however, that while there is an agreement in principle it may be some time before it is completed.

In a sworn affidavit filed in the Hawaii Supreme Court yesterday, Wong's lawyer Eric Seitz said he has been informed that the attorney general`s office reached a "global settlement" on Aug. 4 with ex-board members Wong, Henry Peters, Gerard Jervis, Oswald Stender and Lokelani Lindsey that resolves the pending probate, tax and civil litigation against the former trustees.The plan, which requires approval from the state Probate Court, represents a major milestone in the three-year controversy that has dogged the $6 billion charitable trust. If approved, the deal would avert a costly, one-year trial that is scheduled to begin Sept. 18.Details of the proposed deal remain under seal but Seitz, who represents Wong in the criminal actions brought by the state, said some of the attorney general`s civil claims against the former trustees will be covered by the estate`s $25 million insurance policy with Federal Insurance Co.

It is not clear whether the former trustees will be personally liable for any of the surcharges sought by the attorney general`s office.Seitz added that the insurance company will not cover the outstanding legal bills for the criminal proceedings against his client and Peters, who were indicted by an Oahu grand jury on theft charges. The criminal theft charges have been overturned by Circuit Judge Michael Town, but the state is appealing those decisions. Seitz, who is owed about $20,000 in legal fees for his work in Wong's criminal case, criticized the proposed settlement, saying it uses the insurance company's resources to pay for the civil cases at the expense of the criminal cases involving former trustees Wong and Peters. Until now, the insurance policy had been covering Wong's and Peters' criminal defense costs.

"It's not only unfair but it's an outrage, because it takes away ... the criminal protection that he's entitled to," Seitz said.

Seitz' affidavit was in response to a request by the attorney general's office for records relating to Federal Insurance's payments for Wong's legal costs, a subject of the state's surcharge suit. Seitz argued that state attorneys shouldn't be entitled to the insurance records since they have settled the surcharge suit.

Deputy Attorney General Hugh Jones had no comment on Seitz' affidavit, saying the mediation process is subject to a confidentiality order. Glenn Sato, a lawyer representing Wong in the Probate Court proceedings, also declined comment on Seitz' filing, citing the court's confidentiality order.

An attorney for Stender also had no response, while lawyers for Peters and Jervis could not be reached.

Michael Green, Lindsey's lawyer, took issue with Seitz' affidavit, calling it irresponsible given the sensitivity of the settlement talks.

"The discussions at this point are fragile at best," Green said. "For any lawyer, including Mr. Seitz, to say this case is settled is irresponsible."

A spokesman for the estate said there is no settlement at this time. He declined further comment.

In its lawsuit, the state is seeking multimillion dollar surcharges against the former trustees for allegedly taking excessive compensation, mismanaging the trust's educational programs and incurring more than $200 million in investment losses.

The former trustees have denied wrongdoing, saying the trust is well-run and financially stable.

According to Seitz, the global settlement was reached by all of the parties, including Federal Insurance, during an Aug. 4 closed-door conference with Probate Judge Kevin Chang. Seitz said the plan was placed on the record, making it enforceable.

But others familiar with the talks said that while there may be tentative agreement, there are outstanding issues.

They noted that the attorney general's office and lawyers for the former trustees continue to hold discussions with the court-appointed mediators, David Fairbanks and James Duffy.

Minutes to the Aug. 4 meeting in Chang`s chambers are under a court-ordered seal.

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