Ex-state official’s role
in liquidation disputedTwo insurance firms went
bankrupt after 1992's Hurricane Iniki
Senate Minority Leader Fred Hemmings says answers are needed to "serious questions" about the role former state insurance commissioner Linda Chu Takayama, a Democratic Party insider, played in the liquidation of two bankrupt insurance companies following Hurricane Iniki.
CORRECTION
Wednesday, Oct. 23, 2003>> Former state Insurance Commissioner Linda Chu Takayama did not work for the McCorriston Miho Miller Mukai law firm. A story on Page A4 in yesterday's early edition said incorrectly that she did.
The Honolulu Star-Bulletin strives to make its news report fair and accurate. If you have a question or comment about news coverage, call Editor Frank Bridgewater at 529-4791 or email him at fbridgewater@starbulletin.com.
J.P. Schmidt, the insurance commissioner under the new Republican administration of Gov. Linda Lingle, agrees, even though the liquidation was unusually successful and the state stands to gain a windfall of up to $15 million.
The liquidation was handled by Honolulu attorney Jerrold Chun, who was arrested last week on three counts of felony theft and allegations that he diverted more than $12 million from insurance claims and creditor settlements resulting from the 1992 hurricane that devastated Kauai.
As insurance commissioner, Takayama won court approval in 1993 to assign the liquidation of Hawaiian Underwriters Insurance Co. and United National Insurance Co. -- subsidiaries of Hawaiian Electric Industries' subsidiary, the Hawaiian Insurance Group -- to the McCorriston Miho Miller Mukai law firm, where Chun was assigned to handle the case, said Hemmings (R, Lanikai-Waimanalo).
Takayama, an attorney, resigned as insurance commissioner in 1994 to become deputy director of the Department of Commerce & Consumer Affairs, and later joined McCorriston Miho.
She then joined Chun in leaving McCorriston Miho to start their own law firm, Chun Chipchase Takayama Nagatani, taking the liquidation case with them, said Schmidt, who has filed a civil claim against Chun, seeking the $12 million for the state. That case does not name Takayama.
Takayama did not return telephone calls seeking comment Friday and yesterday.
At some point, private attorney Takayama, with the court's approval and probably because of her familiarity with the case, was appointed as a "deputy liquidator," serving "up until we uncovered these misappropriations and what have you, at which time I removed her and Chun and the other folks involved and appointed my own deputy liquidator," Schmidt said yesterday.
"It raises some questions," he said. "Until we get the files and look at it, I'm not sure whether it's improper. If it was improper, then we need to know whether it then led to any improprieties because of the conflict or not."
A deputy liquidator is responsible to the judge overseeing liquidation and is paid out of funds from the liquidated company, Schmidt said.
Schmidt said that the files with details on the HUI/UNICO liquidation have been subpoenaed in the criminal case against Chun and are now sealed.
"A question that has to be asked is, During the tenure of Linda Chu Takayama's partnership with Chun, was she a beneficiary of the business she assigned to him, directly or indirectly?" Hemmings said Friday. "She can claim, 'I never collected a direct commission,' but what did she collect?"
However, "if you connect all the dots, there's a lot of politics and conflicts of interest in it," he said. "I'm confident the attorney general and insurance commissioner are going to do what should have been done a long time ago regarding the improprieties in the insurance industry."
Takayama, who is closely allied to U.S. Sen. Daniel Inouye, is a former top aide in the office of the U.S. Senate Sergeant at Arms. She is also a member of the board of governors of the East-West Center and is chairwoman of the Hawaii Foodbank. Her husband, Gregg, is a reporter for KHON television news in Honolulu and served for 12 years as Inouye's press secretary, followed by three years as press secretary for then-Lt. Gov. Ben Cayetano.
In 1999 she was named to a four-year term as one of 78 public interest directors of the Federal Home Loan Banks, and is registered with the state as a lobbyist for Abbott Laboratories Inc., Hawaii Pacific Health, Hawaii Psychological Association and Pfizer Inc.
The attorney general's office launched a criminal investigation of the HUI/UNICO liquidation after an internal investigation by Schmidt's office found that Chun negotiated substantially lower payouts for three claims and then kept the difference from the original claim amount.
After Hurricane Iniki hit on Sept. 11, 1992, homeowners and property owners flooded the two companies with claims that overwhelmed their reserves, at which time HEI said it would not provide additional capital, which resulted in a Circuit Court order granting Takayama's motion for the state to take possession of the companies and their assets.
In April 1993, Takayama, then the insurance commissioner, filed a complaint against HEI on behalf of creditors and policyholders, alleging the company had misled the public about its financial support of the Hawaiian Insurance Group and had mismanaged and drained HIG's financial assets.
In February 1994, HEI agreed to pay a $32 million settlement to reduce the anticipated $73 million deficit faced by its HIG subsidiary.
Schmidt said Chun did such a good job in liquidating the assets of HUI/UNICO that not only will the policyholders get their claims, the state general fund could end up with a potential windfall of $10 million to $15 million.
