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By Dennis Oda, Star-Bulletin
Family and friends try to shield Lokelani Lindsey, center,
from cameras as she leaves the federal courthouse yesterday
after pleading not guilty to several charges. She and sister
Marlene had to post $25,000 signature bonds and surrender
their passports before being fingerprinted and released.

Lindseys plead
not guilty to
fed charges

The sisters face a March
trial on bankruptcy fraud
and money laundering

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By Rick Daysog
Star-Bulletin

Ousted Kamehameha Schools trustee Lokelani Lindsey has pleaded not guilty to federal bankruptcy fraud, money laundering and conspiracy charges.

A visibly distraught Lindsey made no comment yesterday as she appeared before federal Magistrate Barry Kurren in U.S. District Court for arraignment.

Her sister, Marlene Lindsey, also pleaded not guilty to similar bankruptcy fraud and money-laundering charges.

Kurren set a March 6 trial date before U.S. District Judge Helen Gillmor and ordered the two women to surrender their passports and post $25,000 signature bonds. The Lindsey sisters were then fingerprinted, processed and released.

"We're really surprised by this indictment," said William Harrison, Lindsey's lawyer. "I certainly believe that when we go to trial she will be vindicated. There's obviously no basis to this."

In its Dec. 27 indictment, a federal grand jury charged that Lokelani Lindsey helped Marlene Lindsey conceal assets after the latter filed for Chapter 7 bankruptcy liquidation in January 1995.

The scheme involved the sale of 100 shares of stock in a local freight company, Atlantic Pacific International Services, that Marlene Lindsey sold to an Atlantic Pacific executive for $100,000.

According to the indictment, Marlene Lindsey secretly transferred her stock to her sister during her bankruptcy proceedings and backdated the transaction by a year, in an apparent effort to elude creditors.

The indictments were the result of a two-year investigation into the personal dealings of the former Kamehameha Schools trustees by the Internal Revenue Service's criminal division.

Harrison said the IRS is simply "trying to make headlines on a case that has no basis."

"Basically, the state has come against her already. They've got their pound of flesh," Harrison said. "Now it's the federal government's time to try to get their pound of flesh, but there's nothing there to get."

The federal charges are the latest in a string of personal and legal woes suffered by the former trustee.

Circuit Judge Eden Elizabeth Hifo removed Lokelani Lindsey in May 1999 as a $1 million-a-year Kamehameha Schools trustee, saying Lindsey had breached her fiduciary duties and mismanaged the $6 billion trust's educational programs.

The attorney general's suit against Lindsey and her fellow board members, seeking to recover tens of millions of dollars in bad investments by the ex-board, was settled recently.

Meanwhile, the IRS has placed liens on her Hawaii properties for failing to pay more than $400,000 in back taxes.

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Kamehameha Schools