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Pressure mounts on trustees

ON AUGUST 9, 1997, the Honolulu Star-Bulletin published an essay in its editorial section under the banner headline "Broken Trust." The essay began: "The community has lost faith in Bishop Estate trustees, in how they are chosen, how much they are paid, how they govern. The time has come to say 'no more.'"

EXCERPTS FROM THE BOOK Sunday: Trustees of Bishop Estate held power without accountability, a recipe for disaster. Monday: The selection of Bishop Estate trustees by Supreme Court justices showed signs of manipulation. Tuesday: Kamehameha Schools alumni, staff and students rose up against trustee Lokelani Lindsey. Wednesday: Investigating Bishop Estate was like probing the CIA, said a court-appointed master. Thursday: Attorney General Margery Bronster went head to head with Supreme Court justices over trustee selection. Friday: Instead of housecleaning, the interim trustees of Bishop Estate "handed the keys to the old guard." Want to comment on excerpts? Letters received by tomorrow evening will be published in Sunday's Insight section. For instructions, see "How to write us" on the letters page. Tonight on KITV Island Television News at 6 ... He took part in the historic Kamehameha Schools march in 1997. Paula Akana talks with a Kamehameha alumnus about whether the turmoil was worth it. starbulletin.com/specials/bishop.html This link takes you to the original "Broken Trust" essay of Aug. 9, 1997, and other Star-Bulletin stories about Kamehameha Schools.

The essay went on to cover virtually that entire section of the paper, a head-on, 6,400-word attack charging that underqualified and overpaid trustees had been selected in a rigged political process, had engaged in loose and self-serving financial management and had distinguished themselves mostly by conflicts of interest, disdain for accountability, greed and arrogance. "Broken Trust" reached beyond Bishop Estate to indict the whole interlocked system of cogs and wheels that had produced the trustees and allowed them to operate with impunity: Hawaii's political machine, the Judicial Selection Commission, the Hawaii Supreme Court justices ...

According to the authors, the situation at Bishop Estate screamed for attention. The system as it was now operating was producing trustees who were perverting Pauahi's vision: "The princess intended a sacred trust. What we ended up with is a political plum."...

Five people had submitted "Broken Trust" to the Star-Bulletin. Gladys Brandt, a former principal of the Kamehameha Schools and former chairwoman of the University of Hawaii Board of Regents; Walter Heen, a retired judge of the state Intermediate Court of Appeals and a former state legislator and Honolulu City Councilman; Monsignor Charles Kekumano, a retired Catholic priest and chairman of the Queen Liliuokalani Trust; Samuel King, a senior federal District Court judge; and Randall Roth, a professor at the University of Hawaii Law School. ... Four of the five were Hawaiian: Brandt, Heen, Kekumano and King. And these four also were kupuna, Hawaiian elders, with the wisdom of age. ...

THE BISHOP Estate communications department characterized the essay as an attack on Pauahi's legacy. They placed full-page newspaper ads defending the trustees, with Pauahi's portrait prominently placed. Wong insisted that the essay was the work of Roth, a mainland haole. The trustees' chief in-house lawyer, Nathan Aipa, picked up on this, repeatedly referring to the "Broken Trust" authors as "the Roth group." Aipa also told reporters that Sam King was probably just sore because nobody ever made him a Bishop Estate trustee. ...

Peters also took aim at the four Hawaiian co-authors of "Broken Trust," calling them "high muckety-muck, country-club Hawaiians" and "a very arrogant group." ...

Gov. Benjamin Cayetano and his attorney general, Margery Bronster -- who, as parens patriae, was supposed to watch out for the interests of the beneficiaries of charitable trusts -- did not get involved when trust abuse was obvious, nor when the Kamehameha ohana marched. They also chose not to intervene when Na Pua (a group of teachers, students, alumni and parents) and Na Kumu (Kamehameha teachers) formed and asked for their help. But the political climate had just changed. Community reaction to "Broken Trust" signaled that the public -- including the Kamehameha ohana -- would support an investigation, even demand it. ...

ON AUG. 12, 1997, three days after the publication of "Broken Trust," Cayetano made a blockbuster announcement: He had just instructed his attorney general to begin an investigation. Serious accusations raised by prominent leaders could not be overlooked, said Cayetano. Asked by reporters why he had not called for an investigation sooner, Cayetano, a non-Hawaiian, said, "If the beneficiaries don't get excited, why should we?"

Bronster's investigation would not be the only one. Patrick Yim, the trustees' handpicked fact-finder, had started his research into problems at Kamehameha Schools several weeks earlier. He declined to talk to reporters, however, so the public knew little about that investigation. The master's report also was due to be filed, in just one month. ... Prior to the publication of "Broken Trust," there was no reason to expect (court-appointed master Colbert) Matsumoto's report to be out of the ordinary. ... After reading "Broken Trust" and hearing that Cayetano had instructed Bronster to investigate, Matsumoto told friends, "It's a whole new ballgame."

THE MASTER submitted his preliminary report on Nov. 17, 1997. It was 119 pages long, carefully structured, clearly written and remarkably direct in its assessment: Bishop Estate trustees were nowhere near compliance either with the law or with Pauahi's will. The investment decisions had been haphazard; conflicts of interest were evident; strategic planning was sorely lacking; the basis used for calculating trustees' fees was flawed; minutes of board meetings were woefully deficient; and annual reports fell short in 10 major ways. Matsumoto had been "taken aback" by the level of secrecy he found at Kawaiahao Plaza; he said he could not help feeling as though he were reviewing the Central Intelligence Agency's finances rather than those of a charitable educational organization.

And he was amazed by what a close look at the books revealed. With (certified public accountant Stephen) Sakamaki's assistance, Matsumoto determined that the trustees had not generated the substantial investment returns they had claimed. In fact, for the year under review -- July 1, 1993, through June 30, 1994 -- Bishop Estate investments actually lost $135 million. Matsumoto was especially critical of the lead trustee system of governance, which, as he explained thoroughly, violated basic principles of trust law. The system's abolition was just one on a list of 21 recommendations Matsumoto made to the probate court. ...

ON NOV. 27, 1997, the Star-Bulletin published "Broken Trust II." The headline read: "Schools' gross mismanagement must stop now -- tyranny, distrust, poor decisions reign at Kamehameha." The opening words were: "We are appalled by developments at Kamehameha Schools since the appointment of Lokelani Lindsey as 'lead trustee' for education." The body of the essay, like that of "Broken Trust," piled up evidence of things gone terrible wrong, beginning with the firing of 171 outreach workers in 1995 and going on to describe Lindsey's public statements that Kamehameha teachers were incompetent, her closed-door interrogation of a student leader, her threat to fire Na Kumu representatives for speaking out, and more.

Like "Broken Trust," this second essay had five authors, and only Brandt was a member of both groups. All were noted experts on education, and a majority were Hawaiian and had been intimately connected with Kamehameha Schools: Isabela Aiona Abbott, Ph.D., professor of botany at the University of Hawaii and a 1937 graduate of the Kamehameha School for Girls; Winona K.D. Rubin, former assistant to the president of Kamehameha and former state director of human services; Nona Beamer, former student and teacher at Kamehameha, and author of the incendiary letter that helped get the marchers rolling; and Roderick F. McPhee, president emeritus of Punahou School and the group's only haole.

Over the course of three and a half months, Patrick Yim conducted 160 interviews and collected 1,200 completed questionnaires, all under the watchful eye of Beadie Dawson, Na Pua's lawyer. People from all walks of campus life stepped forward to tell their stories, which were overwhelmingly critical of Lokelani Lindsey.

YIM WANTED to keep things contained, to resolve them internally, quietly, perhaps using ho'oponopono, a Hawaiian form of mediation. On Nov. 10 he met with the trustees to make an offer: he was prepared to submit a detailed report of his findings and to recommend that Lindsey be removed as a trustee, but there was another option. He was willing instead to report back a single word to Hirai: pau (completely done). All she or the public would ever know was that the matter had been resolved. For him to do that, however, Lindsey had to step down as lead trustee for education, apologize to the people she had offended and agree to stay away from the campus.

On hearing Yim's conditions, Lindsey cried, Wong protested and Peters erupted. ...

THE YEAR'S stunning series of unprecedented events ended with one final blockbuster announcement. Seven months after the march of the Kamehameha ohana, four months after the publication of "Broken Trust," one month after the release of the Matsumoto report and two weeks after Yim submitted his sealed report ... and the majority trustees switched overnight from ridiculing Matsumoto's recommendations to promising to abide by them, the Hawaii state Supreme Court did its own about-face. Four of the five justices announced that, beginning immediately, they would no longer select Bishop Estate trustees.

Four months earlier, in their response to the "Broken Trust" essay, the justices had indignantly defended their sacred and historic duty to select trustees. Now the justices said their continued participation would "promote a climate of distrust and cynicism and ... undermine the trust that people must have in the judiciary."

LEGACY BETRAYED WHAT WENT WRONG AND WHY This week the Honolulu Star-Bulletin is excerpting chapters of a new book about the Kamehameha Schools/Bishop Estate scandal that erupted in 1997 and forced the removal of trustees and changes in the estate's management. "Broken Trust: Greed, Mismanagement & Political Manipulation at America's Largest Charitable Trust" was written by two people at the heart of the event, Judge Samuel King and law professor Randall Roth. The book was published by the University of Hawaii Press (uhpress.hawaii.edu).