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1 man stands up to trust -- and gets clobbered

EMPLOYEES WHO QUESTIONED Bishop Estate's doings were not treated so well. Bobby Harmon was a prime example. Harmon began working at Bishop Estate in 1988 in the area of risk management. He had solid credentials and worked hard. For eight years his job evaluations were excellent, and he was promoted to president of P & C Insurance, a wholly owned subsidiary of Bishop Estate. Harmon's job required him to evaluate risks, decide on insurance coverage and negotiate with brokers of independent companies for the best prices. It was important work involving big money.

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.

During the two years Harmon headed up P & C, from 1994 to 1996, Henry Peters was lead trustee for asset management. Between Harmon and Peters was Nathan Aipa (the estate's chief in-house lawyer). Harmon came to believe that serious breaches of trust were occurring, exposing Bishop Estate to potentially large lawsuits and putting its tax-exempt status at risk. For example, the trust's tax counsel had stressed to Harmon the need for Bishop Estate to keep its for-profit subsidiaries, such as P & C, at arm's length to preserve the trust's tax-exempt status. Yet Harmon knew from experience that although he was president of P & C, it was Peters and Aipa who effectively ran the company.

Harmon also was concerned about decisions that seemed to go against the best interests of both P & C and Bishop Estate. Against his recommendation, a big insurance contract was given to a favored vendor at a cost more than double what Harmon thought he could have secured through competitive bidding. Harmon also found instances in which trustees had not brought in the estate's insurance carrier to defend the claims. This meant the trust would unnecessarily pay its own defense costs, and trust funds would be used to pay any damages that the insurance company would refuse to pay. This subjected the trust estate to big risks without any compensating benefit that Harmon could see. What Harmon did not realize at the time was that trustees had their own reasons for keeping under wraps the details of certain trust investments -- such as the McKenzie (Methane Corp.) deal in which four trustees secretly held personal interests.

In November 1996 Harmon made a list of things he had witnessed that made no sense to him or that appeared wrong, and (gave) it to Aipa and Peters. They told him not to concern himself with these matters; he should just do what they told him to do. But Harmon believed that his role as president of P & C required him to do more. He knew that new IRS regulations permitted someone in his position to be fined if a charitable trust incurred unnecessary expenses, and he saw no reason to subject himself to personal liability.

Harmon reported his concerns to the trust's outside auditors, Coopers and Lybrand. Shortly thereafter Harmon received the first formal reprimand he had ever had in his working life. By the end of the following month, Harmon had been fired for "wrongful actions" and hit with an injunction that forbade him from discussing the circumstances of his firing with anyone. This was about six months before the publication of "Broken Trust."

HARMON tried to find a job elsewhere in Hawaii, but without success. ... And because the file said he had been fired for wrongful actions, he could not even collect unemployment benefits.

Harmon went to eight local law firms asking if they would be willing to sue Bishop Estate. ... All eight firms turned him down. Then Harmon sent a long memo to several government officials and media reporters, saying he wanted them to know what had happened. Within hours, Bishop Estate lawyers hauled him into court for breaching the confidentiality clause in his employment contract and violating the terms of an injunction. Judge Bambi Weil ordered everyone who had received materials from Harmon to return them to Bishop Estate. The estate's director of communications, Elisa Yadao, declined to comment other than to say that Harmon was under injunction "because of his unauthorized removal of Estate property."

Harmon had personally witnessed what he believed to be serious wrongdoing within a charitable trust. He had tried to get help from within the organization, then from its outside auditors. When he was punished for doing this, he expected the judge to encourage him to tell all. Instead, she muzzled him.

Harmon had blown the whistle, and for his trouble he lost his savings and his home. He declared bankruptcy and moved to the mainland.

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).