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THE leading trust law textbook in the country was revised this year to include a special section on Bishop Estate, calling the record of the former trustees a "debacle." Its author, and other trust experts outside Hawaii, have expressed amazement that so much abuse could go on for so long and not be detected. Where were
Bishop’s lawyers?
They have asked, "Where were the lawyers for the trust?"
This question does not refer to the lawyers hired specifically to represent the personal interests of the former trustees. These lawyers -- called personal counsel -- owed no duties to Kamehameha Schools or to trust beneficiaries.
The question refers to those lawyers hired specifically to assist the trustees in the administration of the trust estate. Such lawyers -- called trust counsel -- have a legal responsibility to serve the interests of the trust, as opposed to the personal interests of the trustees.
In addition to a dozen or more trust counsel, the former trustees had the services of the estate's staff of in-house lawyers. Like outside trust counsel, these in-house lawyers had duties to serve the trust, not the personal interests of the trustees.
The in-house lawyers were well-paid, but their compensation paled in comparison to the tens of millions of dollars that were paid to outside trust counsel over the years of abuse.
None of these many lawyers -- neither in-house nor outside trust counsel -- managed to stop the abuses or reveal them to the probate court. Didn't they recognize breaches of trust or did they recognize them and do nothing about it?
If they did not recognize the breaches, they did not earn the fees and salaries they were paid. If they knew but chose to do nothing about them, they breached their duties to the trust and its beneficiaries.
Perhaps they knew of the breaches but chose to do nothing on the theory of attorney-client privilege; lawyers are not supposed to disclose client confidences.
This is not an acceptable excuse. There are times, such as this one, when lawyers are both legally and ethically obligated to blow the whistle on corrupt clients. In the case of Bishop Estate, trust counsel were required to report to the probate court any and all serious breaches of trust that their trustee bosses refused to correct. This is Probate Rule 42(c).
It seems obvious that Bishop Estate trust counsel never reported any of the many abuses to the court.
That is one among many reasons why court-appointed master Bob Richards recommended in his detailed report earlier this year that some of these lawyers be sued for millions of dollars in fees that ought not to have been paid (this report is available online at www.napua.com).
Within hours of receiving Richards' report, the interim trustees voted unanimously to discharge certain trust counsel, pending the outcome of an internal investigation.
But who carried out the internal investigation? And how were the investigating lawyers chosen?
When the interim trustees took over, one of their first acts was to turn control of the organization over to the lawyer who had been chief in-house trust counsel during the years of abuse. This put him in a direct conflict of interest and a dangerous position to control the flow of information to and from the interim trustees.
Then, when it came to choosing lawyers for the internal investigation, the interim trustees gave the investigation to a team of lawyers that included a firm that had worked for the former trustees.
And when these investigating lawyers chose an expert to guide them in evaluating other lawyers who had worked for the former trustees, they picked yet another lawyer who had worked for the former trustees.
This hopelessly conflicted group of lawyers produced a phone-book-size report (for which they are reported to have charged the trust $500,000) saying in essence that most trust counsel for the former trustees had dealt skillfully and honorably with a very difficult situation. They should not be sued and Probate Rule 42(c) simply did not apply to anything they had done, according to the report.
Absent from the report was any evidence that trust counsel ever told the probate court about what has been described in national media as a world record for breaches of trust.
Richards, the court-appointed master who had concluded that millions of dollars of trust funds were wasted on lawyers trying to serve the personal interests of the former trustees rather than the interests of Kamehameha Schools or trust beneficiaries, was criticized in the report for not being more understanding of the difficult position in which trust counsel had found themselves.
THIS report went even further, saying that some of the old trust counsel would be hard to replace, and that it would cost the interim board a lot of time and money to bring replacement trust counsel up to speed.
In other words, the strong suggestion was to rehire many of the old trust counsel who either did not recognize breaches of trust or did not properly report them.
Meanwhile, in-house lawyers for the Bishop Estate are now asserting attorney-client privilege to prevent anyone from seeing critical documents on which this questionable report is premised. Even lawyers from the attorney general's office, whose job it is to represent the beneficiaries, have been denied access to these old documents with no significance apart from their role in holding former trust counsel accountable.
The interim board is about to be replaced by a new permanent board. These new trustees will be in a position to give the trust a genuine fresh start. This would logically begin with a total replacement of in-house and outside lawyers who either failed to detect obvious abuses or chose not to report them as they were required by law to do.
Without a fresh start, in the immortal words of Yogi Berra, it could be "deja vu all over again."
Randall Roth is a University of Hawaii law
professor and trust expert, and was one of
five co-authors of the "Broken Trust" essay
that ran in the Star-Bulletin in August 1997.
Kamehameha Schools archive