Takayama denies
knowing of theftThe former insurance commissioner's
ex-partner is accused of stealing $12 million
Former state Insurance Commissioner Linda Chu Takayama said yesterday she has no knowledge about the alleged theft of $12 million from two liquidated insurance companies by her former law partner.
And she said she will cooperate with the state's investigations into the matter.
Takayama, a top Democratic Party insider, issued a written statement in response to questions raised by Senate Republican Minority Leader Fred Hemmings and current Insurance Commissioner J. P. Schmidt about her role, after she left office, in the liquidation of the bankrupt insurance companies following Hurricane Iniki.
Schmidt, appointed by Republican Gov. Linda Lingle, said he was concerned about his predecessor's role, even though the liquidation was unusually successful and the state stands to gain a windfall of up to $15 million.
The final liquidation work was handled by Jerrold Chun, a Honolulu attorney who was arrested last week on three counts of felony theft with allegations that he diverted more than $12 million from insurance claims and creditor settlements resulting from the 1992 hurricane that devastated Kauai.
Schmidt said Chun does not dispute that he received $12 million, but claims former Insurance Commissioner Wayne Metcalf had verbally approved it as a "success fee" to be paid on top of his hourly rate for negotiating smaller settlements to creditors.
Takayama, as insurance commissioner, recommended in 1993 to the Circuit Court that liquidation of Hawaiian Underwriters Insurance Co. (HUI) and United National Insurance Co. (UNICO) be handled by the law firm McCorriston Miho Miller Mukai, where Chun was among attorneys assigned the case. (The two companies are subsidiaries of Hawaiian Electric Industries subsidiary The Hawaiian Insurance Group (HIG).)
When Chun left the law firm, he took with him what remained of the HUI/UNICO liquidation work, according to William McCorriston, lead partner of McCorriston Miho.
Takayama, an attorney, resigned in 1994 as insurance commissioner to become deputy director of the Department of Commerce and Consumer Affairs. She later left the state job to join Chun as a partner in the law firm Chun Chipchase Takayama Nagatani, which was then handling the remaining liquidation.
Takayama said the state Judiciary's Office of Disciplinary Counsel found no conflict of interest when it considered her situation several years ago.
As for Chun, Takayama said: "It is unfortunate that someone who was so instrumental in the early days of the project could have taken advantage of it as it is being wound down."
"Jerry (Chun) was once my partner, but we have not been on good terms since my departure from the firm in 1999," she said.
To correct information provided by Schmidt, McCorriston said yesterday that Takayama was never employed by his law firm and that Chun was only one of four attorneys in the firm who handled the HIG rehabilitation and HUI/UNICO liquidation.
"While Mr. Chun was part of team that led to that result, he was not solely responsible for it," said McCorriston, adding that before Chun left, taking the "wind-up" of the HUI/UNICO liquidation with him, more than $60 million had been recovered by the team, earning the law firm a commendation for its work.
"He left our firm in the early '90s and the proposition was put to us that he and Linda Chu Takayama would be taking the HUI/UNICO case with them," he said. "I understand politics and I understand that Mr. Metcalf may have had a number of reasons to do that," he said, referring to then-Insurance Commissioner Wayne Metcalf.
"The former insurance commissioner (Takayama) knew about the cases and Chun obviously was knowledgeable about the cases," McCorriston said. "Our firm was offered a continuing role and I declined."
"Our firm had nothing to do with appointing Linda Chu Takayama as the special deputy liquidator. That happened after she left the state and joined Chun. It wasn't our idea nor our recommendation," he said.
Schmidt said that because of the criminal case against Chun, many of the records on the liquidation have been sealed, but said Takayama's becoming a law partner with Chun and then being appointed by the court as the state's deputy liquidator in the case "raises some questions."
Based on the findings in the Chun investigation, Schmidt recently terminated Takayama's role as deputy liquidator and will look at whether that relationship was proper once he can look at the files, he said.
Takayama said in her statement that after Iniki, HIG was unable to pay more than $300 million in claims.
She said she "created a novel restructuring, rehabilitation and eventual sale of HIG and the satisfaction of virtually all outstanding claims through the affiliated companies of HUI and UNICO under the supervision of the Circuit Court."
Chun has been released on $150,000 bail, pending a preliminary hearing Nov. 10. Chun has made no public comment on the allegations and a call to his attorney yesterday was not returned.
