Bobby N. Harmon, CPCU, ARM
Louisville, Kentucky 40229-1655
March 1, 2004
VIA fax only @ (559) 490-1919
Mr. Justin W. Schuck, Case Manager
American Arbitration Association
6795 North Palm Avenue, 2nd Ave.
Fresno, California 93704
RE: Mary Lou Woo, Trustee v. Bobby N. Harmon - Case No. 74 166 00491 03 JUSC
Dear Mr. Schuck:
This is to bring to the AAA’s attention some new information related to conflicts of interests in this arbitration case, and why it is absolutely necessary for all involved parties to give full disclosures regarding the identities of their insurance brokers and carriers.
The following quotation is from the February 22, 2004, edition of The Honolulu Advertiser:
Insurers among investors that got Act 221 breaks
By Jim Dooley, Advertiser Staff Writer
Eleven Hawai'i insurance companies, including one closely tied to the state's two largest public employee unions, avoided paying $19 million in state taxes in 2001 and 2002 by investing in high technology ventures, including the "Blue Crush" teen surf movie.
The state won't identify the firms or reveal full details of their investments because of Tax Department secrecy laws now being questioned by some in Gov. Linda Lingle's administration and the state Legislature.
But government records, court documents and a local insurance executive identify the Royal State Insurance group of firms as a central player in a hui that invested in the Blue Crush production in 2001, generating millions in controversial state tax credits.
Repeated attempts to reach Royal State chief executive Melvin Higa for comment were unsuccessful. Russell Okata, head of the 40,000-member Hawaii Government Employees Association and chairman of the board of directors of Royal State Corp., declined to comment other than to say through a spokesman that he "had nothing to do with any Royal State business decisions regarding investments."
Documents contained in a state court lawsuit over distribution of the "Blue Crush" tax credits provide glimpses into the deals worked out in government and business circles over a bonanza of tax breaks available to Hawai'i investors under the 2001 law commonly called Act 221.
These details raise further questions about the public benefit of the tax credits, which cost the state's general fund $21.9 million in 2001 and are expected to cost $48.4 million this fiscal year and $76.7 million in fiscal 2005, according to state estimates....
State Sen. Colleen Hanabusa, D-21st (Nanakuli, Makaha), who opposed passage of Act 221, said she was "stunned and fascinated" by the identification of union-affiliated Royal State as a "Blue Crush" investor.
"That's the kind of information the public should have," she said. "I believe if you receive a tax credit from the state of Hawai'i then Hawai'i taxpayers should know who you are."
Lowell Kalapa of the Hawaii Tax Foundation, said it was ironic that Royal State Insurance, with its connections to Hawai'i's public worker unions, is reducing its state taxes by investing in a venture like the "Blue Crush" film.
Public workers are paid from state tax collections. "It's like these guys are sucking their own well dry," Kalapa said.
The identities of some of the "Blue Crush" investors are contained in an Act 221 tax credit lawsuit filed in 2002 by April Masini, a film and television industry figure active in Hollywood and Hawai'i, against the prominent Hawai'i law firm Cades Schutte Fleming & Wright and a partner in the firm, Vito Galati, who had helped draw in investors for "Blue Crush."
(The firm regularly provides legal representation to The Advertiser but was not involved in the preparation or review of this story.)
Masini claims that she was wrongfully denied "Blue Crush"-generated tax credits after she worked in 2001 to convince Universal Studios to film the movie in Hawai'i.
Masini said she worked with Gov. Ben Cayetano and his high technology adviser, Joseph Blanco, to obtain tax credit approvals for the project and searched for local investors willing to put money into the production....
Making a profit in tax credits is one of the controversial aspects of Act 221. The law allows out-of-state investors, who don't need Hawai'i tax credits, to give, sell or otherwise transfer their credits to Hawai'i taxpayers.
The law also may have created an underground market in the secrecy-shrouded credits, according to paperwork filed in the Masini suit.
The proposal to Damon Estate contained a provision that Masini and a Mainland partner had the right to purchase tax credits from the estate "for resale to third parties."
Masini's lawsuit said the estate and banks eventually turned down the "Blue Crush" proposal and the ultimate investors were "insurance companies" brought in by Galati, the Cades law firm partner.
The insurance companies are not identified in the court case because of state tax laws prohibiting public release of "taxpayer information," according to paperwork filed by Masini's lawyer, Philip Brown.
However, the Masini suit does list a number of local insurance companies and executives as witnesses to be called — if and when the case goes to trial. A trial date has been tentatively set for next year.
Companies identified
Among the witnesses listed by both the plaintiff and defendants in the suit are executives of four Royal State-affiliated companies, including the Performing Arts Investors and Royal Management that were formed in mid-December 2001 when the Blue Crush investment was being finalized.
According to state business records, HGEA's Okata was chairman of the board of Royal State at the time the Blue Crush investments were made.
Royal State is listed as the parent company of Royal State Investment Corp., which in turn is listed as the agent for Performing Arts Investors and Royal Management.
Also on the Royal State board with Okata at the time of the "Blue Crush" investment was Gary Rodrigues, then head of the 12,000-member United Public Workers Union, which represents mostly blue-collar state and county employees.
Rodrigues was sentenced last year to more than five years in federal prison in a union fraud and embezzlement case that involved Royal State and a related firm called Voluntary Employees Benefit Association of Hawaii. Both Rodrigues and HGEA's Okata were on the board of trustees of VEBAH.
Rodrigues is no longer affiliated with UPW. Acting union administrator Liz Ho could not be reached for comment.
Another local insurance company executive listed as a witness in the case is Colbert Matsumoto, chief executive of Island Insurance Co. Ltd. Matsumoto wouldn't discuss many details of his company's investments, but acknowledged that Island Insurance has made "several investments" in high technology ventures, including the "Blue Crush" production.
Matsumoto said "an investment entity" was formed to receive money from various insurance companies for the "Blue Crush" venture. Asked if the investment entity was Performing Arts Investors, the limited liability company operating from Royal State Corp.'s Beretania Street offices, Matsumoto said: "That sounds right."
Other executives of insurance companies listed as witnesses in the Masini suit did not respond to repeated requests for comment on "Blue Crush" investments.
The companies include Zephyr Insurance, supplier of much of the hurricane insurance coverage written in Hawai'i, Pacific Guardian Life Insurance, and DTRIC Insurance. Royal State owns a partial interest in the DTRIC insurance business in Hawai'i, according to state business records....
According to figures compiled by state Insurance Commissioner J.P. Schmidt, some local insurance companies quickly took advantage of Act 221 tax credits.
A chart prepared by Schmidt for The Advertiser shows nine insurance companies claimed $6 million in Act 221 tax credits in 2001, the first year the credits were available. The following year, 11 companies reduced their state taxes by $13 million using the credits, a 117 percent increase.
Schmidt said he couldn't reveal the names of the companies because of Tax Department confidentiality laws....
Reach Jim Dooley at jdooley@honoluluadvertiser.com or 535-2447.
(More of the above article can be found at: www.the-catbird-seat.net/Act221.htm)
< END OF QUOTATION >
The following are just some of the relationships between some of the parties named in this news article:
JIM DOOLEY
The author of this article, Jim Dooley, is named as a Witness for Respondent. He is the former investigative reporter for KITV News4 who first broke the story about my firing by Kamehameha Schools. He was later a co-defendant in Kamehameha Schools’ lawsuit against KITV News4 arising from his television report on my “whistle-blower” countersuit against Kamehameha Schools. The attorney for Mr. Dooley and KITV News4 in this case was Paul Alston of Alston, Hunt, Floyd & Ing, with whom the arbitrator, Judith Neustadter, was previously associated. My attorney who arranged the initial interview with Dooley was John Goemans, who is another Witness for Respondent.
CADES SCHUTTE FLEMING & WRIGHT
This is one of the law firms that I “blew the whistle on” with a number of agencies, including the Hawaii Attorney General’s office; U.S. Attorney General Janet Reno; the Internal Revenue Service, and the Federal Bureau of Investigation. The following are excerpts from some of my letters to various entities regarding this law firm:
May 8, 2003
VIA fax only @ (808)523-6313
Trustee Robert K.U. Kihune
Trustee J. Douglas Ing
Trustee Constance H. Lau
Trustee Diane J. Plotts
Trustee C. Nainoa Thompson
Kamehameha Schools
567 South King Street, Suite 200
Honolulu, Hawaii 96813
RE: Dr. McCubbin's Resignation and Colleen Wong's Appointment as Acting CEO
Dear Trustees:
This is to comment on the article in the May 5, 2003 edition of the Honolulu Advertiser that appeared under the headline, "McCubbin out as CEO of Kamehameha trust," as it relates to your selection of Colleen Wong to serve as interim CEO. This article read, "a person familiar with the situation said the trustees for months had been investigating a complaint of an inappropriate relationship between McCubbin and a female employee. The person asked not to be identified because of the sensitivity of the situation and the fact the trustees did not plan to talk publicly about the allegation."
As you no doubt are aware, I was a named witness in the Attorney General's case for the removal of the former trustees, and have provided information concerning that case, and other activities regarding the Estate, to Dr. McCubbin, the Attorney General's office, the Master, the Hawaii Insurance Commissioner, the FBI, the SEC, the IRS, and others. Excerpts from some of my letters to Dr. McCubbin and Ms. Wong will give you some background for my concern regarding selection of Colleen Wong as acting CEO:
July 26, 2000
Dear Dr. McCubbin:
Thank you for the opportunity to meet with representatives of Morgan, Lewis & Bockius, LLP on this date. As I understand the major focus of your investigation to be the improper use of outside legal counsel, accounting firms and other third-parties, the following is a list of individuals and companies that, in my opinion, colluded to improperly transfer trust assets from the Kamehameha Schools and related companies:
Attorneys and Law Firms
Cades Schutte Fleming & Wright (Michael Hare)
Chee & Markham (Kevin Chee)
Devens Lo Nakano & Youth
Watanabe Ing & Kawashima (Douglas Ing and James Kawashima)
Goodsill Anderson Quinn & Stifel
Law Offices of Stanford Manuia (Stanford Manuia)
Torkildson Katz Jossem Fonseca Jaffe Moore & Heatherington
Carlsmith Ball Wichman Murray Case & Ichiki
Nathan Aipa, Louanne Kam, Lyn Anzai and Colleen Wong often directly engaged these firms to handle insurance claims without the required authorization of the insurance companies, including P&C.
Once the firms were engaged, these KSBE employees "controlled" and "managed" the claim directly with outside counsel, deliberately disregarding insurance company guidelines regarding the use and payment of these firms. Nathan Aipa, as principal executive of the Legal Group, had ultimate approval of all legal bills including P&C's.
Aipa would frequently pay these legal fees and costs from his General Counsel Account, without approval from the insurance companies. Often the amounts billed by the law firms exceeded allowable fees and costs provided in the insurance company guidelines. When, if ever, KSBE submitted the legal bills to the insurance company, many of the charges were disallowed. This practice led to the loss of millions of dollars that were never recovered from the insurance companies.
In the case of claims under P&C Insurance Company policies, Nathan Aipa, Louanne Kam or other KSBE attorneys directed that P&C pay the bills even though the outside firms flagrantly disregarded P&C's written guidelines.
These outside legal firms reported directly to in-house counsel, rather than to the insurance companies. In-house attorneys, including Aipa, often would not disclose critical information to the insurance carriers in these "sensitive" claims, resulting in further millions lost to the estate due to "non-cooperation".
This situation became particularly suspect and troublesome when these same KSBE employees handled claims in which they also had participated in the original financial transactions. They may have been potential witnesses-- even defendants-- in resultant lawsuits. These were extremely serious "conflict of interest" situations.
With P&C this became even more critical due to the obvious violation of "arms-length" principles, which potentially exposed the estate to unlimited losses beyond the actual insurance policy coverages and limits of liability....
< END OF QUOTATION >
(The above letter is Respondent’s Exhibit 9. The full text of this letter, including enclosures, can be found at http://www.the-catbird-seat.net/Harmon-Trustees.htm.)
The following is an excerpt from my letter to Julie Schermerhorn and you dated September 30, 2003:
Dear Ms. Schermerhorn and Mr. Schuck:
This will acknowledge receipt of your letter of September 29, 2003 ...
As I continue to develop more information regarding the relationships between parties involved in this matter, I am continuing my review of Judith Neustadter’s apparent conflicts-of-interest in this case as it relates to the following entities:
Paul Alston
A founding partner in the firm of Alston Hunt Floyd & Ing, Mr. Alston also serves on the Board of Directors of Enterprise Honolulu. Others on the board include Vito Galati, Esq., attorney with Cades Schutte Fleming & Wright; Mason Williams, Managing Director, Marsh USA, Inc., T. Michael May, President & CEO, Hawaiian Electric Industries, Inc.; Eric Yeaman, CFO & Treasurer, Hawaiian Electric Industries, Inc., and former CFO of Kamehameha Schools; Sanford Murata, Director, Commercial Assets Division, Kamehameha Schools.
Mr. Alston is also a member of the Real Property and Financial Services Section of the Hawaii Bar Association, along with C. Michael Heihre (fka Michael Hare), Lynn H. Higashi, Grace Kido, Laurie Kuribayashi, Martin Hsia, Sarah Jean Lee, Donna Leong, Gail Tamashiro, and Dean Uehara of Cades Schutte Fleming & Wright; Brian Tadashi Hirai, Andrew William Char, Clifford J. Miller, and Shaun Masaru Mukai of McCorriston Miho Miller; Irene A. Anzai, Edward Sanpei, Caroline Otani and Walter Beh II of Rush Moore Craven Sutton Morry & Beh; J. George Hetherington, Steven L.F. Ho, Shirley Cheung, and Steven V. Torkildson, of Torkildson Katz Fonseca Jaffe Moore & Hetherington; Francis P. Hogan, A. James Wriston, Jr., and Robert B. Graham, Jr. of Ashford and Wriston; Kevin H. Oda, Teri Kondo, Eric Kunisaki, and Brandon Davidson of Watanabe Ing & Kawashima; Louanne Kam, Stacy Rezentes, Colleen Wong, Livingston S.M. Wong, Jr., and Joyce Tamanaha, of Kamehameha Schools; Philip W.T. Chang, Pauahi Management Corporation; Alan T. Kido and Dana Sato of Pitluck Kido Sato & Stone; John M. Schwarz, Goldman Sachs & Co.; Paula Chong, Verner Liipfert Berhnard McPherson & Hand; Michele H. Tucker of Sterling & Tucker; Marilyn Chung Ushijima and Troy T. Fukuhara of Alston Hunt Floyd & Ing, Alfred H.H. Hee, Attorney at Law and Steven Guttman, of Kessner Duca Umebayashi Bain and Matsunaga, to name a few.
Louise K.Y. Ing
A partner in the firm of Alston Hunt Floyd & Ing, Louise Ing is also a director of American Savings Bank. Other directors and/or officers of American Savings Bank connected with this case include Constance H. Lau, president and chief executive officer; Diane Plotts, business advisor; and Jeffrey Watanabe, partner, Watanabe, Ing & Kawashima.
Constance Lau and Diane Plotts are current trustees of Kamehameha Schools, and are named witnesses in this arbitration case. Another trustee, J. Douglas Keauhou Ing is a senior partner and member of the Executive Committee of Watanabe, Ing & Kawashima, and is also one of my named witnesses.
Another director of American Savings Bank is Bert Kobayashi, a construction contractor who also serves on the boards or committees of the University of Hawaii and Bishop Museum.
Louise Ing also serves as vice president for Kahi Mohala Behavioral Healthcare. The current chairman for Kahi Mohala is Colbert Matsumoto, former Master for Kamehameha Schools, current president of Island Holdings Inc., and chairman and CEO of Island Insurance Co. Another board member is Oswald Stender, a former Kamehameha Schools trustee who was a defendant in my RICO lawsuit, and a named witness in this arbitration.
Louise Ing is also a director for the Hawaii health insurance organization, HMSA. Another director of HMSA is Michael J. Chun, Ph.D, President, Kamehameha Schools.
Leigh-Ann K. Miyasato
Leigh-Ann Miyasato is the Executive Director of HiBEAM, a Hawaii organization that promotes investments in Hawaii. Before beginning her work in the non-profit sector, Ms. Miyasato was counsel to Alston Hunt Floyd & Ing, and of counsel to Fujiyama, Duffy & Fujiyama.
Other key “mentors” of HiBEAM include Kenton Eldridge and Ron Higgins from Hawaiian Electric Industries, Inc.; Gregory Kim and Richard Sherman from Goodsill Anderson Quinn & Stifel; Charles A. Sweet from Carlsmith Ball LLP; Darlene Blakeney and Rann Watamull from Bank of Hawaii; Brad J. Wagenaar from King & Neel, Inc.; Michael J. O’Malley and Patrick H. Oki from PricewaterhouseCoopers LLP.
HiBEAM Board Members include: Barry M. Weinman, Managing Director of Allegis Capital; William K. Richardson, General Partner of HMS Hawaii Management Partners; Eric K. Martinson and Bruce M. Nakaoka, of MN Capital, both previously employed by Kamehameha Schools....
< END OF QUOTATION >
Related information can be found in my letter to Ms. Schermerhorn and you dated October 20, 2003:
Dear Ms. Schermerhorn and Mr. Schuck:
This responds to Steven Guttman’s letter of October 17, 2003, which he states is in reply to my letters dated October 3, October 4, October 6 (two letters), October 7, October 8 and October 9 (3 letters), 2003....
I am providing the following additional facts excerpted from reliable news sources, followed by further explanations....
February 13, 2000
Expenses include hiring PR firm, trustee friends
By Sally Apgar, Honolulu Advertiser
Kamehameha Schools’ ousted board of trustees raked in record-breaking revenues of $459.7 million in fiscal 1999, but also spent millions on lawyers, accountants, friends and even a public relations guru, according to an Advertiser review of recent estate financial records.
More than $6.3 million was paid to law firms during the fiscal year ending June 30, 1999. Another $1.4 million was paid to the accounting firm PriceWaterhouseCoopers L.L.P. and $824,826 to Arthur Andersen L.L.P. to audit the estate’s finances in response to the IRS investigation....
Record-breaking costs
In all, the estate spent almost $22.4 million in fiscal 1999 for professional services ranging from fees paid to lawyers and accountants to bills for fixing copy machines and installing or improving computer systems....
Friends of the former trustees also were on the payroll, as in previous Advertiser reviews of the $6 billion estate’s financial records....
The attorney general is also seeking surcharges for the hiring of Q Mark Research & Polling, which it alleges was hired to conduct political polling for legislators with close ties to the estate under the guise of doing research on water and land issues. The attorney general alleges that polling was done to benefit Tom, Sen. Whitney Anderson, Rep. Robert Herkes, Sen. Marshall Ige and Rep. Joseph Souki....
History of high bills
The Advertiser review also found:
Cades Schutte Fleming & Wright, which has worked closely with both the former and interim trustees, was paid the most for legal work, receiving $1.746 million in 1999 and $1.6 in fiscal 1998. The Honolulu firm reviewed most of the hundreds of thousands of documents churned up in the investigations by the attorney general and the IRS....
Ashford & Wriston, the estate’s main trust attorney who has advised the former and interim trustees, received $401,256 in fiscal 1998 and $706,417 in fiscal 1999.
Verner Liipfert Bernhard McPhearson & Hand, the Washington-based firm that retained former Gov. Waihee when he left office, was paid $351,634 in fiscal 1999 and $418,914 for unspecified legal work involving federal legislation. A source close to the attorney general has said the firm was paid $143,000 in connection with the state’s investigation.
Honolulu attorney Colbert Matsumoto, the court-appointed master who reviewed the estate’s finances for fiscal 1994 to 1997, was paid $256,615 in fiscal 1999 and $102,433 in fiscal 1998. Matsumoto’s work is the foundation of much of the attorney general’s case.
Howard Luke, a Honolulu attorney hired by the estate to represent employees who were interviewed by the attorney general as part of the investigation, was paid $139,859 in fiscal 1999....
< END OF QUOTATION >
COLBERT MATSUMOTO
Colbert Matsumoto is one of the Witnesses for Respondent. He was the former Master for Kamehameha Schools. I quote the following from my letter to you dated September 17, 2003:
Dear Ms. Schermerhorn and Mr. Schuck:
This is in further response to Steven Guttman’s letter of September 15, 2003, in which he states, in part:
“With respect to the other substantive issues raised by Mr. Harmon in his Letters, we believe we have previously submitted our comments on these matters. Our reading of Mr. Harmon’s Letters is that he is attempting to explain why he disagrees with our commentary regarding his prior correspondence; he is not raising any new discussion points.”
If you will kindly refer back to Mr. Guttman’s letter dated August 25, 2003, you will find these comments:
“I reiterate my prior comments as to Mr. Harmon’s correspondence regarding Ms. Neustadter and the AAA proceeding with the arbitration. There is nothing in any of his letters which establishes that Ms. Neustadter has any conflict regarding this case. The objective reality that the Hale O Kaula case, referenced in letters from Mr. Harmon, has absolutely nothing to do with the parties to this arbitration or the claims being presented. Further, there is no correlation between the concern of Special Master Robert Richards quoted in Mr. Harmon’s August 23 letter and Ms. Neustadter serving as the arbitrator in this matter.”
The following is the true and factual “objective reality” in the Hale O Kaula case, as it relates to the connections between Colbert Matsumoto, Judith Neustadter and the Maui Planning Commission:
Colbert Matsumoto was the appointed Kamehameha Schools/Bishop Estate Master to whom I reported the wrongdoing at the Estate. I believe he was also the person largely responsible for the fact that the critical findings of Special Master Robert Richards were eventually discounted in favor of a report by the firm hired by Kamehameha Schools, Morgan, Lewis & Bockius.
Colbert Matsumoto is also now chairman of Island Insurance Company, Ltd., which is the company that defended me in Kamehameha Schools’ and P&C Insurance Company’s lawsuit against me. Island Insurance is also the company that has rejected my tender of defense in the current complaint regarding interpretation of the Settlement Agreement – an agreement that the attorney assigned to me by Island Insurance Co. helped negotiate.
Colbert Matsumoto also served as a member of the Department of Land and Natural Resources which administers state land use regulations working in conjunction with county regulators, including the Maui Land Use Commission, on which Ms. Neustadter serves.
In the April 18, 2002 issue of the Honolulu Advertiser, it was announced that five local investors were buying a minority stake in the Honolulu Star-Bulletin. The local investors were Colbert M. Matsumoto and Franklin M. Tokioka of Island Holdings, Inc. (parent of Island Insurance Co.); Duane K. Kurisu, partner in local real estate investment firm Kurisu & Fergus’ and the families of Warren K.K. Luke and Jeffrey Watanabe, a partner in the law firm of Watanage, Ing & Kawashima. This law firm was one of the key law firms hired by Kamehameha Schools and their role in the Kamehameha Schools alleged wrongdoing was prominently mentioned in the Richards’ Report, and in my own RICO lawsuit and my letters to Dr. McCubbin and the Kamehameha Schools’ trustees.
Colbert Matsumoto is also currently a director for the Honolulu Star-Bulletin. On July 7, 2003, the Star-Bulletin ran an editorial entitled “Feds shouldn’t meddle in local religion dispute,” which referred to the then-pending lawsuit regarding the Hale O Kaula church case against Maui County for denying it a permit to add a second floor to a building so it could be used as a chapel. A copy of the editorial is enclosed for your information.
For further details regarding these matters, I refer you to copies of my letters to Colbert Matsumoto, Dr. Hamilton McCubbin, and Trustees of Kamehameha Schools, which can be found on the internet at: www.the-catbird-seat.net/KSBEMaster.htm; www.the-catbird-seat.net/McCubbin-MorganLewis.htm; and www.the-catbird-seat.net/Harmon-Trustees.htm.
These letters comprise part of my “letter writing campaign” that appears in Trustee Mary Lou Woo’s Complaint as Issue No. 5. I have referred to their location on the internet, rather than enclosing copies with this letter, due to their length....
I present these new facts as objective reasons for my belief that Ms. Neustadter should not be considered as a neutral party in this case, and not for the purpose of “raising any new discussion points” for Mr. Guttman to debate. To prevent any further unnecessary delays in the arbitration process, I again respectfully request that Ms. Neustadter be disqualified, or recluse herself, from this case and that Mr. Daniel Bent be appointed as her replacement....
< END OF QUOTATION >
J.P. SCHMIDT
Hawaii Insurance Commissioner J.P. Schmidt is on my List of Witnesses, and is expected to testify regarding the licensing of Clyde Mark, President of P&C Insurance Co., and Matt Tsukazaki, attorney for Kamehameha Schools and P&C Insurance Co., who are wrongfully purporting to be licensed Claims Adjusters, and regarding my complaints to the Department of Insurance about Federal Insurance Company and P&C Insurance Company.
The following is from my letter to you dated September 15, 2003:
Dear Ms. Schermerhorn and Mr. Schuck:
... I have already cited some specific personal and professional relationships with parties connected to this case in my previous letters. I have also indicated that these cases were not the only ones, but that I thought these should be sufficient to disqualify Ms. Neustadter. As these previously described relationships do not appear to satisfy Mr. Guttman’s criteria, however, I will give one additional example which illustrates my arguments to all four of his points:
1. My complaint regarding P&C Insurance Company was made to Hawaii Insurance Commissioner, J.P. Schmidt. Prior to Mr. Schmidt’s appointment as Insurance Commissioner on February 1, 2003, he was a partner with the Maui law firm of Crockett, Nakamura & Schmidt and supervised the risk management functions for Maui County. This means that Mr. Schmidt and Ms. Neustadter had a common employer, Maui County, during the period involved in this dispute.
2. Commissioner Schmidt has not yet replied to my Complaint filed on August 14th. The factual question of whether or not Clyde Mark and Matt Tsukazaki are licensed Claims Adjusters is a key issue in determining if P&C Insurance Company wrongly denied my tender of defense for this arbitration.
3. My objection to Ms. Neustadter serving as the arbitrator of this case, and,
4. “Alleged” conflict issues arising from Ms. Neustadter serving as the arbitrator, would appear to be much the same point. In any event, the conflicts that I have cited in previous letters, as well as the ones stated here are undeniably factual - not “alleged.”
Because of her position on the Maui Planning Commission, I can cite dozens of cases where Ms. Neustadter and Maui County were engaged in activities that involved individuals or companies that were connected to our case. I enclose just one page from the July 18, 2003, Meeting Agenda of the Maui County Council to illustrate my point. You will note that item No. 03-61 involves a resolution authorizing additional compensation of $60,000 for special counsel Marr Hipp Jones & Pepper, for a total compensation of $120,000. Item No. 03-62 recommends adoption of resolution authorizing the employment of special counsel McCorriston Miller Mukai MacKinnon LLP in a matter before the Maui Planning Commission. Item No. 03-63 recommends the adoption of a resolution approving amendments to the Lanai City Redevelopment Project (Castle and Cooke Resorts, LLC).
I quote, again, from the AAA’s Arbitration Disclosure Form: “It is most important that the parties have complete confidence in the arbitrator’s impartiality. Therefore, please disclose any past or present relationship with the parties or their counsel, direct or indirect, whether financial, professional, social or of any other kind. If any relationships arise during the course of the arbitration or if there is any change at any time in the biographical information that you have provided to the AAA, it must also be disclosed. Any doubt should be resolved in the favor of disclosure.”...
< END OF QUOTATION >
Also, I quote the following from my recent letter dated February 25, 2004, addressed to Matt Tsukazaki, Esq., of the firm Torkildson, Katz, Fonseca, Moore & Hetherington:
This responds to your letter of February 23, 2004, in which you state:
“We have received a copy of your letter of February 19, 2004, addressed to Clyde Mark, President of P&C Insurance Co., Inc., in care of Kamehameha Schools. We are responding to your letter on behalf of Kamehameha Schools, P&C Insurance and Mr. Mark.
“You are instructed that my firm and I are legal counsel for Kamehameha Schools and P&C Insurance concerning all current matters in which you are involved, and you are again instructed that any communication from you to either Kamehameha Schools or P&C Insurance must be sent to my office addressed to my attention. You are not to communicate directly with any Trustee, director, officer or employee of Kamehameha Schools and/or P&C Insurance. Our non-response to any of your letters does not change the fact that all of your communications to Kamehameha Schools and P&C Insurance, on any issue whatsoever, must be directed to my office.”...
First of all, my letter of February 19, 2004, to Clyde Mark was sent out of necessity, due to the fact that I was receiving no response from an authorized claims adjuster. My request to Mr. Mark in this letter was simply that he “have P&C’s current Captive Manager and/or Claims Administrator contact me immediately in order that I may answer any questions and provide further details, including the preliminary witness lists for Claimant and myself. Since witnesses for both Claimant and Respondent include employees of Kamehameha Schools, I am willing to provide copies of these witness lists, and other information, only to an independent claims adjuster who must establish a ‘China wall’ to prevent the exchange of confidential and privileged information between various opposing parties in this case.”
As I have stated in previous letters, I maintain that neither you nor Clyde Mark are independent claims adjusters acting on behalf of the professional liability insurance carrier for Kamehameha Schools and P&C Insurance Company. I consider your assertion that you are denying my tender of defense on behalf of their unnamed insurance company to be an act of bad faith and unfair dealing. I also would point out that under Hawaii Revised Statutes, Section 31: “... No person shall in this state act as or hold himself out to be a general agent, sub-agent, solicitor, or adjuster unless then licensed therefore by this state.”
Even if you were a licensed claims adjuster, which you are not, you would be conflicted in this matter for a number of reasons:
1. You and Kamehameha Schools’ employee Louanne Kam are named as witnesses for both the Claimant and the Respondent in these arbitration proceedings.
2. On December 12, 2003, I sent a Notice of Claim against Matt A. Tsukazaki, Robert Katz, Sabrina Toma and Torkildson Katz Fonseca Jaffe Moore & Hetherington “for racketeering, tax fraud, mail fraud, wire fraud, conspiracy to commit fraud, breach of attorney-client privilege, conflicts of interests, obstruction of justice, and other wrongful acts.” I believe Sabrina Toma may have left your firm and may now be employed by Kamehameha Schools. Although it has been over two months, I have not yet received a response to this Notice of Claim.
3. On December 12, 2003, I sent a Notice of Claim against the Trustees of Kamehameha Schools, Colleen Wong, Louanne Kam, Maryanne Inouye, Nathan Aipa, Clyde Mark, Rodney Park, their Attorneys and Independent Contractors, et al, for breach of contract, racketeering, tax fraud, mail fraud, conspiracy to commit fraud, breach of attorney-client privilege, conflicts of interests, obstruction of justice, and other wrongful acts. As an attorney for Kamehameha Schools, I believe you would also be included in this claim. Although it has been over two months, I have not yet received a response to this Notice of Claim from Kamehameha Schools’ insurance company.
It is my understanding of the Settlement Agreement that all disputes are to be submitted to arbitration. I would point out that neither Kamehameha Schools, P&C Insurance Company, nor Torkildson Katz are Complainants in the referenced arbitration matter. Since my “letter-writing campaign” is one of the issues to be decided in these proceedings, I would have expected that all three entities would have joined in the Trustee’s Demand for Arbitration if they felt they had a legitimate complaint to present to the arbitrator....
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Due to this new, relevant, and factual information regarding Hawaii’s Act 221, as quoted from The Honolulu Advertiser news article at the beginning of this letter, I again must ask that the AAA disqualify Judith Neustadter as the arbitrator in this case.
Please feel free to contact me if you have any questions with regard to this matter.
Sincerely yours,
Bobby N. Harmon
cc: Mary Lou Woo, Trustee, c/o Steven Guttman, Esq.
Kessner, Duca, Umebayashi, Bain & Matsunaga (via fax @ 808-529-7177)
Dee Jay Mailer, CEO, Kamehameha Schools (via fax @ 808-523-6313)
J.P. Schmidt, Hawaii Insurance Commissioner (via fax @ 808-586-2806)
Hugh Jones, Deputy Attorney General (via fax @ 808-586-1237)
Casimer Fidele, Tradewind Insurance Co. (via fax @ 808-521-7489)
This is a leaf from
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To fly to the top of the tree