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Friday, December 22, 2000


A $20.1 million deal
ends legal battles over
Kamehameha Schools

By Rick Daysog

The Internal Revenue Service has approved a $20.1 million settlement agreement between the Attorney General's Office and the five former trustees of the Kamehameha Schools, putting to rest three years of legal battles over the $6 billion charitable trust.

In court documents to be filed today, the state Attorney General's Office says the IRS reached closing agreements yesterday with ex-trustees Richard "Dickie" Wong, Henry Peters, Oswald Stender, Gerard Jervis and Lokelani Lindsey.

Terms of the closing agreements were not disclosed. But the Attorney General's Office said it is dismissing its lawsuit against the former trustees with prejudice, meaning that all of the conditions of the Sept. 29 settlement had been met.

"This comes as very good news for the Kamehameha Schools," said trust spokesman Kekoa Paulsen. "With all parties now signing off, including the Internal Revenue Service, the surcharge settlement can be finalized, and Kamehameha Schools can move past this matter and focus on educating children."

In the deal, the Kamehameha Schools will receive about $15 million from the trust's insurer, Federal Insurance Co., to cover investment losses incurred by the ex-board members. The Attorney General's Office will receive $1.3 million to cover its expenses, while the former trustees will get about $4 million to pay for their legal bills.

The Attorney General's Office had been seeking tens of millions of dollars in surcharges against the former trustees, saying the ex-board members took excessive compensation, mismanaged Kamehameha Schools' educational programs and incurred more than $200 million in investment losses.

But the suit was settled two weeks after it was scheduled to go to trial to avoid a costly and lengthy legal battle.

The IRS's approval concludes its lengthy civil investigation into the conduct of the former trustees. Last year, the IRS reached a closing agreement with the nonprofit Kamehameha Schools in which the trust agreed to pay the service $9 million.

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