THE HARMON CHRONOLOGY

THE HARMON CHRONICLES - 1997 - 1999

01/05/97 BH sent a claim letter to John T. Sinnott, President and CEO of M&M, and enclosed a copy of his letter of December 29, 1996 to Trustees.

01/10/97 David Loo, John Mullen & Co., acknowledged receipt of Harmon’s letter and advised: “Various employees of our company have been listed as potential witnesses should the matter proceed to litigation. Under the circumstances, we have disqualified ourselves from handling this claim and have notified the insured and the insurer of our decision.”

01/22/97 Harmon applies for unemployment insurance with the Hawaii Dept. of Labor & Industrial Relations.

01/30/97 Robert Katz, Esq. of Torkildson, Katz, Fonseca, Jaffe, Moore & Hetherington wrote Plaintiff: “I have been retained by Kamehameha Schools Bishop Estate (“KSBE”) to assist and advise it in connection with your December 29, 1996 settlement proposal in the above-referenced matter. Due to the extent and complexity of your settlement proposal, it will not be possible for KSBE to respond by your requested date of January 31, 1997.”

02/02/97 ltr fm BH to Katz: “...Your letter does not disclose other information which is important in my responses to you and in my pursuit of these claims:

1. You state that you have been retained by KSBE. You do not indicate that you are also representing P&C Insurance Company, Inc. (P&C). Does this mean that your comments regarding disclosure of confidential information, etc. apply only to KSBE documents? Could you please provide me a copy of your retention letter in order to confirm your appointment.

2. Could you please clarify your statement that you have been retained by KSBE ‘to assist and advise it’ in connection with my claims. Does the scope of your responsibilities extend to actual settlement negotiations.

. 3. Has your engagement by KSBE been approved by the insurance carrier(s). If so, may I please have a copy of any letter evidencing this fact. ”

“. . . I am not aware of any information which may violate Hawaii’s Trade Secrets Law (H.R.S. Chapter 482B). However, if you will specify which documents you believe may be in violation of either KSBE’s policies or any applicable statutes, and detail valid reasons, I will certainly consider their immediate return. (emphasis added)”

cc: Trustees; Chubb Group; Mullen; & M&M.

02/07/97 Katz responded to BH: “In response to your February 2, 1997 letter, I wish to advise you as follows. First, our law firm is representing both P&C Insurance Company, Inc. and Kamehameha Schools Bishop Estate (emphasis added). For convenience I will refer to them collectively as ‘KSBE’. Our representation of KSBE would include settlement negotiations as deemed appropriate by KSBE. Finally, our representation of KSBE does not require approval by any insurance carrier.”

Katz’s statement that their representation of KSBE does not require approval by any insurance carrier was a material misrepresentation. Federal’s insurance policy, a copy of which was not received by BH until March 10, 1997, states:

DEFENSE AND SETTLEMENT

1.3 “The Company shall have the right and duty to defend any suit to which this insurance applies alleging a claim against an Insured even if any of the allegations are groundless, false or fraudulent, or alternately may, at the option of the Company, give its written consent to the defense of any such suit by the Insured (emphasis added).”

This misrepresentation was an unfair claims practice as defined under HRS 431:103(10)(A): “Misrepresentating pertinent facts or insurance policy provisions relating to coverages at issue.” Due to its deliberate and malicious nature, this constituted an act of bad faith.

02/07/97 P&C and Trustees of the Estate of Bernice Pauahi Bishop filed Civil No. 97-0512-02 against BH in the First Circuit Court, State of Hawaii. This civil lawsuit is ongoing.

02/08/97 BH tendered defense of this lawsuit to Michael Goolsby, Chubb Group, stating in part:

“...I am hereby tendering this claim to the Federal Insurance Company (Chubb Group) under the terms of its Directors & Officers and Association Liability policies issued to Kamehameha Schools Bishop Estate (KSBE) and P&C Insurance Company, Inc. . . . This lawsuit arises out of my employment as an employee of KSBE, and as an officer or P&C. As an insured person under the above policies, I am requesting that your company provides defense for this lawsuit. . . I understand an answer to the complaint is due withing twenty days of service. As I have not yet selected an attorney, I would appreciate your immediate response and recommendations. . .”

02/15/97 P&C and KSBE filed a Motion for Preliminary Injunction and Notice of Hearing of Motion. The Hearing of Motion was scheduled for February 18, 1997.

02/15/97 BH sent a letter by fax and mail to Goolsby: “This is to advise that I was served at 8:10 a.m., Saturday, Feb. 15, 1997 with PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION and NOTICE OF HEARING OF MOTION. . . The hearing is scheduled for this Tuesday, Feb. 18, 1997 at 1:30 p.m. As I have not had a response to my tender letter to you dated Feb. 8, 1997, or a return of my phone calls to your office, and as Monday, February 17^th is a holiday, I am very concerned that this hearing may be held before I have the time and opportunity to obtain adequate and proper legal advice. . . . As I stated in my tender letter of February 8, 1997, I have not yet selected or retained an attorney. I have been awaiting Chubb’s response and advice before taking this action as I am unaware if the company intends to appoint an attorney of its choosing, or if I am to be permitted to select the attorney, subject to your approval.”

Federal did not respond to Harmon’s letter in time for Plaintiff to comply with the terms of the insurance policy which states in § 1.3: “The Company shall have the right and duty to defend any suit to which the insurance applies. . . No Defense Costs shall be incurred or settlements made without the Company’s consent, which shall not be unreasonably withheld. The Company shall not be liable hereunder with respect to any settlement or Defense Costs to which it has not consented.”

02/15/97 As Harmon did not receive a timely response from Chubb, he had no choice but to seek out an attorney on his own. Under duress and time constraints, Harmon retained John Marshall, Esq. at to represent him at the scheduled hearing of KSBE’s Motion for Preliminary Injunction. Federal’s failure to respond in a timely manner to Harmon resulted in the incurring of legal costs which could not be recovered under the terms of the policy, and constituted an act of bad faith.

02/18/97 Harmon, through his then-attorney, John Marshall, Esq., filed an Answer to Verified Complaint filed on 2/7/97, and a Counterclaim, alleging and averring, in part:

“. . . 2. Counterclaim Defendants P&C INSURANCE COMPANY, INC. (hereinafter “P&C”) and/or RICHARD S.H. WONG, OSWALD K. STENDER, LOKELANI LINDSEY, GERARD A. JERVIS and HENRY H. PETERS, as TRUSTEES OF THE ESTATE OF BERNICE PAUAHI BISHOP (hereinafter sometimes collectively referred to as “Bishop Estate”) were during the relevant period the employer(s) of Counterclaimant.

3. While so employed, Counterclaimant witnessed and refused to participate in or acquiesce to acts and practices by the Counterclaim Defendants which were in violation of Federal and/or State of Hawaii laws and/or regulations and/or rules.

4. As a result of Counterclaimant’s refusal to participate in or acquiesce to said acts and practices, as well as because the Counterclaim Defendants believed that Counterclaimant had reported and/or was about to report said acts and/or practices to governmental authorities, Counterclaim Defendants wrongfully terminated Counterclaimant.

5. Counterclaim Defendants’ conduct and wrongful termination of Counterclaimant violated clear mandates of public policy.

6. Counterclaim Defendants’ conduct and wrongful termination of Counterclaimant violated the Hawaii Whistleblowers’ Protection Act, set forth in Hawaii Revised Statutes Chapter 378, such that he is entitled to, amongst other things, injunctive relief, actual damages, reinstatement, back wages, reasonable attorneys’ fees and/or costs of suit.

7. Counterclaim Defendants’ conduct and wrongful termination of Counterclaimant constitutes a breach of contract.

8. Counterclaim Defendants’ conduct and wrongful termination of Counterclaimant constitutes a tortious breach of contract.

9. Counterclaim Defendants’ conduct and wrongful termination of Counterclaimant constitutes a violation of HRS Chapter 480, for which Counterclaimants are liable to pay treble damages and reasonable attorneys’ fees, together with costs of suit.

10. Counterclaim Defendants’ conduct caused Counterclaimant serious mental distress and anguish; and constitutes the negligent and/or intentional infliction of emotional distress upon Counterclaimant.

11. As a result of Counterclaim Defendants’ above-described acts, practices and wrongful termination, Counterclaimant has sustained injury and/or damages.

12. Counterclaimant is entitled to general, special, consequential and/or incidental damages in such amounts as shall be proven at the time of trial.

13. Counterclaim Defendants’ conduct was wilful and wanton, so as to warrant the imposition of punitive damages.

14. Counterclaim Defendants are the alter-egos of each other and are in such a controlled relationship with one another that they should be treated as one and the same entity under the law and the fiction of their separate existences should be disregarded such that they are each liable for the debts and obligations of the other.

WHEREFORE, Counterclaimant prays for judgment against the Counterclaim Defendants, and each of them, for compensatory damages in such amounts as may be proven at the time of trial, together with treble and/or punitive damages, attorneys’ fees and costs, and such other relief as is provided by the statutes referenced and/or is just in these premises.”

02/19/97 Hearing was held on P&C/KSBE’s Motion for Preliminary Injunction, before Judge Karen M. Radius. Appearing at the hearing were Aipa, Katz and Tsukazaki for Plaintiffs, and Harmon and Marshall for Defendant. A written statement prepared by Plaintiff’s attorney, John Marshall, to be presented orally to Judge Radius at the hearing, made the following points:

“Your Honor, it is important to know why these documents are such a bone of contention.

- On 11/20/96, Mr. Harmon was terminated from his job as the president of Bishop Estate’s captive insurance company, P&C. Although it is a wholly owned subsidiary, it is supposed to have a separate corporate existence.

- And, Bishop Estate knows that if it doesn’t maintain an ‘arms length’ with this profit-making subsidiary, then it has implications for its non-profit tax-free status.

- Mr. Harmon has documents which show, amongst other things, that Bishop Estate did not maintain an ‘arms-length’ relationship and that Mr. Harmon wasn’t going along with it. Said another way, there may have been, and continue to be, some tax fraud afoot and Mr. Harmon got in the way of it.

- Yesterday, Mr. Harmon filed a Counterclaim against Bishop Estate claiming a Parnar-public policy type wrongful termination, and that Bishop Estate violated the Hawaii Whistleblower Statute.

- Mr. Harmon believes that if he didn’t have these documents, there is some chance that they won’t still be in existence when he requests them in discovery.

- When Bishop Estate’s papers herein say that Mr. Harmon said he might be providing the documents to third-parties, I believe the facts will show that two of those parties were the Internal Revenue Service and the Justice Department.”

02/19/97 Patrick A. Richard, Chubb Group, acknowledged receipt of the claim and advised that Tony Rangel would be conducting an investigation and evaluation of the facts and policies issued to KSBE to determine the availability of coverage.

02/20/97 Judge Karen Radius issued an Order Granting Plaintiffs’ Motion for Preliminary Injunction against Defendant Bobby N. Harmon, in part, as follows:

“1. Any and all privileged and confidential information and documents, records and things, and copies thereof, and the subject matter discussed therein shall remain strictly privileged and confidential, and shall not be disclosed by Defendant to any person;

2. Defendant shall not disclose or release his Settlement Demand letter dated December 29, 1996, to any third-party and all forms, originals, drafts, and copies, thereof, shall be turned over to Defendant’s counsel;

3. Defendant shall not orally or in writing reveal or disclose to any third-party, except to his attorney, confidential and/or proprietary information, documents or records, related to his employment or that he obtained while employed by KSBE or serving as an officer of P&C;

4. Defendant shall give to his counsel by the close of business, February 20, 1997, all documents, records and/or things, including any computer programs, discs or tapes, and all copies thereof, relating to Plaintiffs, which he obtained as a result of his employment at KSBE or as an officer of P&C; . . .

6. Defendant’s counsel may bate-stamp and catalog all documents, records and/or things, including any computer programs, discs or tapes, and all copies thereof, provided to him by Defendant, and a copy of the catalog will be provided to Plaintiffs’ counsel; . . .

11. Plaintiffs shall preserve the documents, records and/or things returned to it by Defendant and/or things returned to it by Defendant and the Court until the entry of the final judgment in this matter;

12. Defendant shall not contact or meet with any person with whom Plaintiffs have transacted business and/or of whom Defendant learned about while employed by KSBE or serving as an officer or P&C to discuss any matter related to Plaintiffs’ businesses and/or operations, and Defendant’s employment appointment with Plaintiffs;

13. Except as otherwise provided for herein, any and all discovery of privileged, confidential and/or proprietary information, documents, records and things, which is secured by Defendant is subject to this Order and such information and evidence is protected from disclosure under this Order;

14. Pursuant to Haw. R. Civ. P. 65(d), this Order Granting Plaintiffs’ Motion for Preliminary Injunction is binding on Defendant’s Spouse, agents, servants, employees and/or attorneys, and upon those persons in active concert or participation with them; . .”

02/21/97 The Court issued an order granting Plaintiff KSBE’s, et al. Motion for Preliminary Injunction for the recovery of the alleged “stolen documents” and “trade secrets”.

02/25/97 Rangel contacted Marshall by phone and advised that he had only a renewal binder so he cannot be certain what coverages are afforded under the actual policy. He thinks the actual policy should be issued and he is working with the underwriters.

02/28/97 Marshall filed BH’s Counterclaim against P&C and KSBE for wrongful termination.

02/29/97 Hearing held on P&C/KSBE’s Motion for Preliminary Injunction against Harmon, before Judge Karen M. Radius. Judge Radius issued an Order Granting Plaintiffs’ Motion for Preliminary Injunction against Defendant Harmon.

03/04/97 Rangel wrote to Marshall (received 03/10/97) and enclosed a copy of the renewal policy. Rangel advised, “I anticipate being able to provide you with our coverage opinion within the very near future, or at least within the next 30 days.” The undue delay in Federal’s response was unconscionable and constituted an act of bad faith.

03/13/97 Harmon turned over the allegedly “stolen” documents to the Court under seal. These included his letter of 12/29/96 to Trustees with all enclosures.

03/13/97 Dept. of Labor denies Unemployment Insurance benefits to Harmon on the basis of KSBE’s statement that Harmon was discharged for misconduct.

03/20/97 Harmon files Appeal No. 9701016 to Dept of Labor for Unemployment benefits.

03/27/97 Rangel wrote to Marshall advising of Federal’s decision to decline coverage. Note that Federal delayed informing Harmon of their decision until after KSBE and P&C had obtained the return of all incriminating evidence. Rangel cited Endorsements No. 1, 8 and 9 which amend Section 8.1, Definitions, and Endorsement No. 6 which amended Section 3.1, Exclusions, as the primary reason for denying coverages. The undue delay in Federal’s response was an act of bad faith.

04/11/97 BH and Marshall met with Robert Katz and Sandie Wicklein to discuss a possible settlement. A tentative settlement proposal was made to Harmon which Katz and Wicklein indicated would need to be presented to Trustees for their approval. Although Harmon believed the tentative offer was far less than his actual losses, Federal’s refusal to defend him and the fact that he could not afford to pay his attorney for defending against P&C’s lawsuit, weighed heavily in Harmon’s mind to accept the offer. Upon closer review of the actual policy, however, Harmon discovered that Federal had fraudulently back-dated material exclusion endorsements.

04/14/97 BH responded to Rangel’s letter of 03/27/97, disagreeing with his coverage position. Harmon pointed out that Endorsement No. 6 was issued on February 13, 1997, but back-dated to be effective October 27, 1995. This endorsement replaced End. # 4 which was also effective October 27, 1995. Endorsements 6, 7, 8 and 9 were also issued on the same date, and were also back-dated to show an effective date of 10/27/95. BH also argued that this claim was employment related, which would allow the claim to be covered even under End. # 6. The backdated alteration of this contract clearly constituted fraud, and due to its malicious and deceptive nature was an act of bad faith. The policy was sent by mail, constituting mail fraud.

04/15/97 Harmon hired by American Mutual Underwriters, Ltd. as Marketing Manager (not a VP as he had been when he voluntarily left AMU to join KSBE), at annual salary of $52,000 (compared to $70,000 a year at KSBE). AMU had no retirement plan comparable with KSBE, and no monthly auto allowance.

04/22/97 Rangel wrote to Marshall and stated that Federal was undertaking a review of Harmon’s arguments and anticipated being able to provide a response within the next 30 days.

04/28/97 Harmon wrote to the California Dept. of Insurance to request review of this case due to Federal’s unfair claims settlement practices: “. . . It is my belief that the Federal Insurance Company; the insured organizations, P&C Insurance Company, Inc. and Kamehameha Schools Bishop Estate; their insurance broker, Marsh & McLennan, Inc.; their captive manager, M&M Insurance Management Services, Inc.; and certain officers, directors and employees of these entities, have conspired to wrongfully decline coverages under the referenced policy. In the process, the Federal Insurance Company, in collusion with these entities, has fraudulently altered and misrepresented the terms of the policy; has engaged in deceptive claims practices; and has acted in bad faith by declining to defend me in the referenced lawsuit. . .. My primary concern is that the insurance company, in collusion with the insured organizations and the broker, Marsh & McLennan, Inc., knowingly and deliberately back-dated an exclusion endorsement in order to deny coverages for the referenced claim. . . I consider the company’s refusal to defend this claim based upon the retroactively revised wording in Endorsement No. 6 to be one of the most extreme examples of fraud and bad faith that I have encountered in my 35 years of experience in the insurance business. If I were a typical insured without this background and experience in insurance matters, this retroactive revision in the terms of the policy would probably have gone unnoticed. By bringing this matter to your attention, I hope that your office will take prompt and appropriate action in this case in order to protect the public from similar unfair claims settlement practices. . . “

cc: Insurance Commissioner, State of Hawaii; John Marshall, Esq.; Tony Rangel, Chubb Group; Elizabeth K. Kellner, Assoc Litigation Counsel, M&M (w/encls.)

05/06/97 J. Craig Collins, Assoc. Claims Officer of the Calif. Dept. of Insurance, responded to Harmon stating that his inquiry does not relate to a matter within the jurisdiction of this Department, and it was being sent to the Insurance Commissioner, State of Hawaii.

05/08/97 BH made counteroffer for settlement to KSBE and P&C, to expire 05/15/97. There was NO RESPONSE from Federal, P&C, Katz, M&M or Mullen to this offer. Another bad faith act.

05/14/97 Cecelia Chock, Investigator, State of Hawaii, Insurance Div., answered BH’s letter of 04/28/97:

“. . . We regret to advise you the State of Hawaii Insurance Division does not have jurisdiction over the denial of a claim or interpretation of coverage. Proper jurisdiction would rest with the Court system. . . .”

05/14/97 First Unemployment Appeals hearing held before Hearings Officer, Ernest Hanaumi.

05/15/97 More than 500 Kamehameha Schools parents, students, alumni and supporters march on Bishop Estate headquarters to protest what they said was trustees’ micromanagement of the campus.

05/19/97 H. Paul Breslin, Esq., of Archer McComas Breslin McMahon & Chritton, responded to Marshall:

“. . .We have been retained by Federal Insurance Company to represent its rights in connection with this coverage dispute. . . In his letter of April 14, 1997 Mr. Harmon claims that Endorsement No. 6 which changed the language of the Insured v. Insured exclusion should not apply to his claim. He then makes the following specific charges against Federal:

‘From this chronology, it would strongly appear that a deliberate attempt has been made by your company to back-date this exclusion in Endorsement No. 6 solely for the purpose of denying coverages for this litigation.’ ‘. . . It is evident that Federal Insurance Company, in collusion with the insurance broker, Marsh & McLennan, Inc, has knowingly and intentionally breached its duty to defend in this case, and has flagrantly engaged in deceptive claims practices by back-dating endorsements to the policy in order to deny coverages.’

“Each of these charges is totally unfounded and totally untrue. The statements are libelous per se. Since they have now been published to a variety of third parties, they detrimentally impact Federal’s reputation in the insurance market place and the ability to do business therein. . .

“We vehemently reject Mr. Harmon’s assertions of collusion, deceptive claims practices, and breaches of duty. We demand that Mr. Harmon cease and desist from continued publication of such libelous statements. . .”

These threats were meant to intimidate Harmon from exercising his right of free speech and from presenting his legitimate claims. This constitutes extortion and bad faith.

05/23/97 BH responded to Collins’ letter of 05/06/97: “My reason for writing the California Department of Insurance on April 28, 1997, was due to the advice of Tony Rangel, Federal Insurance Company, in his letter dated March 27, 1997. . . I relied on this advice of the insurance carrier to have your office investigate my complaints of possible fraud . . . misrepresentations by the broker and carrier, and deceptive and unfair claims settlement practices. . . . My primary concern was that the insurance company, in collusion with certain individuals in the insured organizations and the broker, Marsh & McLennan, Inc., knowingly and deliberately back-dated an exclusion endorsement in order to deny coverages. By filing this complaint, I hoped to help protect others from being victimized by such deceptive practices. . . . In light of this new information, I would appreciate further clarification of the jurisdictional issues you raised. . .”

05/24/97 BH replied to Cecelia Chock, Hawaii Ins. Div.’s ltr of 05/14/97:

“I recognize the fact that the State of Hawaii Insurance Division does not have jurisdiction over the denial of a claim or interpretation of coverages. . . . My primary concern was that the insurance company, in collusion with certain individuals in the insured organizations and the broker, Marsh & McLennan, Inc., may have knowingly and deliberately back-dated an exclusion endorsement in order to deny coverages. If this is true, then by filing this complaint, I hoped to help protect others from being victimized by similar deceptive claims practices. . . . Contrary to the information provided by Federal’s claims adjuster, it now appears that my complaint should have been addressed to the State of Hawaii Insurance Division. Therefore, I am formally filing this complaint at this time in accordance with ¶ 431:13-103 of the State of Hawaii insurance statutes. . . . It is my belief that the Federal Insurance Company; Marsh & McLennan, Inc. (M&M), and it officer, Rocco Sansone; Marsh & McLennan Insurance Management Services, Inc. (MMIMS), and its officer, Peter Lowe, may have made false, deceptive and misleading statements regarding the insurance coverages provided to me as an insured person in order to improperly influence the settlement of the referenced claim.”

“ . . . The following sections of ¶ 431:13-103 Unfair methods of competition and unfair or deceptive acts or practices appear to apply in this case:

(a) The following are defined as unfair methods of competition and unfair or deceptive acts or practices in the business of insurance:

(1) Misrepresentations and false advertising of insurance policies. Making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison which:

(A) Misrepresents the benefits, advantages, conditions, or terms of any insurance policy...”

(M&M and Federal represented that the referenced Directors and Officers Liability policy would defend claims made against directors and officers of P&C and against employees of KSBE for “wrongful acts” as defined in the policy. I consented to serve as President of P&C based partially on the conditions that: 1) P&C would indemnify and hold me harmless for acts performed in connection with my services to the company; 2) that Directors and Officers Liability insurance would be provided to defend me in the event of claims for any wrongful acts arising from my serving in this capacity.)

(10) Unfair claim settlement practices...

(A) Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue;

(Prior to purchasing the referenced policy, M&M and Federal represented to me in my capacity as the Risk/Insurance & Safety Manager of KSBE, and as the President of P&C, that the policy had a duty to defend trustees, officers, directors and employees against claims for “wrongful acts”. I relied on the representations of M&M and Federal that the policy that was issued and in force at the time of P&C and KSBE’s claims against me provided this coverage. M&M, Federal and the plaintiffs in this case have apparently conspired and caused the policy to be changed through a “back-dated” endorsement in order to deny this defense.)

(O) Failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage;

“ . . . This case involves an “insured vs. insured” situation with both defendants claiming coverages under the same policy. The carrier stated to me that they would assign separate adjusters to each side in order to create a “Chinese wall” in this case, so that any knowledge gained, or actions taken, by one adjuster would not be disclosed to the other. . . Apparently, this duty has been breached. A meeting was recently held with plaintiff’s attorney regarding a proposed settlement. It was after this meeting that I again reviewed the insurance policy and discovered that Federal’s letter denying coverages had been based on the back-dated endorsement. After reporting this fact to the adjuster, I relied on his advice that, under California statutes, I could report this matter to the California Department of Insurance for investigation. The fact that I had registered a complaint with the California Department of Insurance was somehow passed on to Robert Katz, Esq., the plaintiff’s attorney. I was informed that he was very upset at my action--to the point that the plaintiff’s were considering withdrawing the proposed settlement offer. . . .Consequently, it appears the purported “Chinese wall” has been breached to the advantage of the plaintiffs, as well as to the benefit of the insurance agents and carriers, P&C, M&M and Federal. It appears possible that the delays and refusal of Federal to provide defense coverages to me under the policy may have been deliberate and intentional in order to influence the settlement of my counter-claim covered under other portions of the insurance policy. . . . As stated earlier, I recognize that your office would not get involved in the court case or in the settlement negotiations. However, I believe that under these Hawaiian insurance statutes, your office would be responsible for investigating complaints against the insurance companies and their agents for unfair and deceptive practices. I also hope that your office will discourage and appropriately deal with any attempts by the plaintiffs, the insurance company or broker to retaliate against me in any manner for filing this complaint.”

cc: Craig Collins, Calif Dept of Ins; Tony Rangel, Federal Ins Co; Elizabeth Keliner, Esq., Marsh & McLennan; Board of Directors P&C; Trustees of KSBE; & Richard Wong, Pres., Pauahi Holdings.

BH received NO RESPONSE from the Ins. Dept. or any other entity.

06/02/97 2nd Unemployment Appeals hearing held.

06/12/97 On June 12, 1997, Harmon responds to Federal’s letter of May 19, 1997:

“. . . In your conclusion you reiterate, ‘There was never any discussion whatsoever between Federal on the one hand and Marsh on the other concerning the change in the Insured v. Insured endorsement.’ . . . If this is true, then it appears that you are admitting that Federal unilaterally made these changes without discussion with Marsh and without the mutual consent of the Insured . . . In what appears to be a contradiction, however, you indicate that Federal ‘suggested certain changes to the Insured v. Insured exclusion’ when they began to construct the exact language of the requested endorsements. You do not disclose the date these suggestions were made, or who was involved in the discussions and approval of these suggestions. I must assume, however, that these suggestions were made to Marsh and/or the Insured, and were made sometime prior to the issuance of Endorsement No. 6. If so, then this would bring us right back to collusion among these parties in the back-dating of this endorsement. Then it would appear that this is even further evidence of misrepresentation, wrongful denial of claims, unfair and deceptive claims practices, and bad faith. . . As the Federal has declined to provide defense to me under its insurance policy, this letter is written without advice of counsel. . .”

06/18/97 Harmon sent Katz a new settlement proposal.

06/25/97 Harmon retained attorney John Goemans to represent him in his whistle-blower countersuit.

06/26/97 BH received phone call from Katz that Trustees had rejected his settlement proposal of 06/18/97.

07/??/97 Harmon tendered KSBE’s claim against him to Tradewind Insurance Co., under his homeowner’s insurance policy. Tradewind accepted the tender with a reservation of rights letter, and assigned attorney Roy Hughes to handle the defense of KSBE’s lawsuit.

07/10/97 Breslin responded to Harmon’s letter of 06/12/97, and again denied defense coverages under Federal’s policy. Federal’s repeated denial in view of the fraudulently altered contract, was unreasonable, unconscionable and constituted another act of bad faith.

07/16/97 The Calif. Dept.of Insurance responded to Harmon’s letter of 05/23/97: “... Unfortunately, due to staffing cuts we are no longer able to furnish individual case investigation where an attorney is involved or the matter is in litigation....”

07/23/97 Harmon responded to Federal’s letter of July 10, 1997: “. . . I do not see that the complaint is ‘unequivocally clear that all of the alleged breaches and damage occurred after the termination of employment.’ As stated previously, the complaint specifically alleges that wrongful acts were committed both before and after my termination. And how does the fact that I allegedly breached my duties to the Association lead to the conclusion that there is no duty of the insurance company to defend me against these allegations? Again, I am the Insured Person under this policy . . . not P&C Insurance Company.”

“You state: ‘Mr. Harmon alleges that Marsh & McLennan is an agent of Federal. As Mr. Harmon well knows, Marsh & McLennan is an independent insurance broker which in this case acted as an agent of P&C Insurance and the other Insureds. Therefore, Federal had a perfect right to negotiate with and rely upon Marsh & McLennan regarding the insurance contract’.”

“THIS IS A COMPLETELY FALSE AND MISLEADING STATEMENT!”

“According to the Insurance Commissioner’s records, Marsh & McLennan, Inc. is an appointed agent of Federal Insurance Company in the State of Hawaii. They are not an independent insurance broker acting as an agent of P&C and other Insureds. . . . Consequently . . . Federal can be held legally liable for any misrepresentations made by its agent, Marsh & McLennan.”

“You state: ‘Mr. Harmon’s principal objection seems to be that he was not personally consulted about the retroactive applicability of Endorsement No. 6. Under the policy terms and conditions his specific consent is not required. The Association acts on behalf of all Insureds. At the time of the issuance of Endorsement No. 6, Mr. Harmon was no longer employed by the Association and therefore it is axiomatic that he was not involved and not authorized to be involved in the decision making process’.”

“Obviously, at the time of issuance of Endorsement No. 6, I was not involved in the decision making process. But you have not denied that I was directly involved in the decision making process at the time the contract was negotiated and the policy was issued. The highly questionable act is the back-dating of the endorsement to retroactively amend the contract conditions that I originally negotiated. Furthermore, Endorsement No. 6 is an exclusion which restricts the coverages originally afforded; and this exclusion endorsement was specifically cited to deny coverages. My objection is not that I wasn’t personally consulted; my objection is that this appears to constitute fraud, misrepresentation, breach of contract, wrongful denial of claims, unfair and deceptive claims practices, and extreme bad faith.”

“You state: ‘Mr. Harmon does not adequately respond to Federal’s allegations that the statements made in his prior letter are libelous per se.’ As I am not an attorney, I do not feel qualified to respond to these allegations. I am told, however, that truth is an absolute defense in libel suits. To the best of my knowledge and belief, all of the statements I have made regarding this matter are truthful and factual.”

Federal failed to respond to Harmon’s letter of July 23, 1997, which in view of the serious nature of the fraudulently altered contract, was unreasonable, unconscionable and constituted another act of bad faith.

08/09/97 The “Broken Trust” article in the Star-Bulletin authored by Randy Roth, Judge Samuel King and others alleges mismanagement of Bishop Estate assets and conflicts of interests by trustees.

08/12/97 Gov. Ben Cayetano orders Attorney General Margery Bronster to investigate KSBE.

08/21/97 P&C and KSBE filed an Emergency Motion to Enforce the Preliminary Injunction Order against Harmon, seeking contempt of court charges for allegedly violating a previous injunction that prevented him from disclosing “confidential” information and “trade secrets” about KSBE and P&C. Harmon was out-of-state. This was an obvious attemp to obstruct justice in the AG’s case against the Bishop Estate Trustees.

08/26/97 Harmon (Goemans) filed a Verified Petition for Writ of Prohibition in the Hawaii Supreme Court.

08/27/97 Hearing on P&C/KSBE’s Emergency Motion to Enforce Preliminary Injunction held in Circuit Court. Harmon was still out-of-state. Appearing in Harmon’s defense was Roy Hughes. John Goemans, as Harmon’s attorney in his countersuit against KSBE and P&C, also appeared.. Judge Bambi Eden Weil continued the matter to 09/26/97.

09/03/97 The Supreme Court denied Harmon’s Verified Petition for Writ of Prohibition.

09/18/97 Harmon filed a Motion to Dissolve the Preliminary Injunction Order.

09/19/97 Roy Hughes, Esq. wrote to Lawrence A. Goya, Dept. of the Attorney General, State of Hawaii, regarding P&C et al. v. Bobby Harmon, Civil No. 97-0512-02:

“Enclosed are copies of the KSBE Motions and related documents filed regarding Mr. Harmon prohibiting his dissemination of documents or statements relative to his former employer, KSBE. It remains the KSBE position that Mr. Harmon not discuss any of the information he has as to KSBE affairs. As the attorney general has expressed interest in further discussions with Mr. Harmon and perhaps obtaining documents referenced by Mr. Harmon, please know that it will not be until after the hearing on the KSBE Emergency Motion and the Motion of this office to modify or dissolve the injunction, Mr. Harmon will further cooperate with the attorney general.”

09/26/97 The Hearing on P&C’s and KSBE’s Emergency Motion to Enforce the Preliminary Injunction Order was held.

10/04/97 Harmon wrote a 23-page letter to the IRS, Tax Fraud Unit. Copies were sent to the A.G., State of Hawaii; Hawaii Tax Director; Hawaii Ins Commissioner; and Janet Reno, U.S. Atty General. No response to this letter was received from the IRS or Reno.

10/20/97 The Court granted in part and denied in part, KSBE’s and P&C’s Emergency Motion and ordered a continued hearing on the matter.

10/28/97 Harmon filed his Motion for Designation of this case as complex litigation.

10/30/97 In Civ. No. 97-0512-02, John Goemans files “Defendant Bobby Harmon’s Reply to Plaintiffs’ Request to Defendant Bobby Harmon’s Request that the Court Take Judicial Notice That Its Preliminary Injunction of February 21, 1997, Constitutes a Prior Restraint on Defendant Bobby Harmon’s Speech and Is Therefore Void.

10/31/97 The Court heard Arguments regarding KSBE’s and P&C’s Emergency Motion to Enforce the Preliminary Injunction. Judge Weil ruled that Harmon was in Contempt of Court for disclosing information to reporters, but that he did so on advice of his attorney, Goemans. Weil ruled that Goemans would be responsible for payment of legal costs.

11/10/97 On Nov. 11, 12 and 15, 1997, BH, with Goemans, met with the I.R.S. re audit of KSBE and its subsidiaries. Harmon hand-delivered a 10 page letter dated 11/10/97 to the I.R.S., which detailed his knowledge of the Trustees’ breach of interim sanctions and arms length issues.

11/24/97 Harmon, together with his attorney, Roy Hughes, met with Colbert Matsumoto, court-appointed Master for The Estate of Bernice Pauahi Bishop, and hand-delivered a 14 page letter regarding KSBE, Pauahi Holdings Corporation, and P&C. Copies of this letter were sent to Atty General, Margery Bronster; Goemans; and Hughes.

11/24/97 The Court denied Harmon’s Motion for Designation of this case as complex litigation.

12/12/97 Fact-finder Judge Patrick Yim alleges that trustee Lindsey managed KS by “intimidation”.

12/20/97 Supreme Court justices remove themselves from selecting Bishop Estate trustees.

12/29/97 Bishop Estate trustees Gerard Jervis and Oswald Stender file suit for Lindey’s removal.

01/07/98 The Court issued a Minute Order Regarding Plaintiff’s (P&C and KSBE) Oral Motion for Attorney Fees Against John Goemans, Esq., Harmon’s attorney.

01/08/98 The Court issued a Minute Order Regarding Defendant’s Motion to Dissolve or Modify the Order Granting Plaintiffs’ Motion for Preliminary Injunction Filed February 21, 1997.

01/09/98 The Court issued a Minute Order Regarding Names of People Which Bobby Harmon Gave Bishop Estate Documents To.

01/09/98 The Court issued its Findings of Fact and Conclusions of Law Regarding Defendant Bobby N. Harmon’s Motion to Dissolve or Modify the Order Granting Plaintiffs’ Motion for Preliminary Injunction Filed February 21, 1997 & Filed September 18, 1997.

01/12/98 Court issues a Minute Order Regarding the Court’s Detail Basis for Award of Attorneys’ Fees.

02/05/98 BH sent ltr to Hawaii Ins. Commissioner re: Complaint/Request for Inquiry - P&C Ins. Co.:

“In my letter of January 28, 1998, I requested an inquiry into several questionable acts that occurred during the time I was the president of P&C. This letter is to request an inquiry into a separate issue that I also raised in my letter dated November 20, 1996, to Coopers & Lybrand. . . . This issue involves the Articles of Incorporation for P&C, and P&C’s application . . . for a license to operate as a captive insurance company. . . .”

02/16/98 Unemployment Appeals Office denies Harmon’s latest request for subpoenas.

02/24/98 Rey Graulty, Insurance Commissioner, replies: “This is to acknowledge the receipt of your complaint letters dated January 28, 1998, and February 5, 1998, concerning P&C Insurance Company, Inc. . . . We will investigate your complaint to determine whether provisions of the insurance laws were violated.”

No further response was ever received.

02/28/98 Third Unemployment Appeals hearing held.

03/05/98 By Decision 9701016, the Appeals Officer affirmed the Claims Examiner’s determination that Harmon was discharged for misconduct, and disqualified him for benefits beginning 11/17/96.

03/12/98 BH applied for Reopening of Unemployment Appeals Officer’s decision, stating he was denied due process because of dept’s denial of subpoena of witnesses and documents not available to him, and failure of KSBE to show wilful or wanton disregard of the employer’s interests.

03/24/98 Appeals Officer responds to Harmon’s request for reopening of Unemployment decision, asking him to again state the necessity for the issuance of the subpoena to compel the attendance of the witnesses and the production of documents.

03/24/98 Harmon wrote to the Hawaii State Bar Association, regarding: “Request for Inquiry into Professional Conduct Concerning: Nathan Aipa, Esq.; Louanne Kam, Esq.; Colleen Wong, Esq.; Allan Yee, Esq.; Lyn Anzai, Esq.”

03/31/98 KSBE and P&C took Harmon’s depositions. Hughes was present; Goemans was ill and could not attend. (See: www.the-catbird-seat.net/KSBE-INTERROGATORIES.htm)

04/02/98 Harmon responds to Unemployment Appeals Officer’s letter dated March 24, 1998:

“ . . . I do contend that I was denied due process because I was disallowed the subpoena of any witnesses and documents which I believe would have substantiated my claim. . .”

“ . . . There was only one witness at the hearing representing KSBE, Louanne Kam. I was allowed to cross-examine this one witness, but, because of the declination of subpoenas, I was denied the opportunity to question any witnesses of my choosing... or review key documents . . .”

“ . . . a key document relating to my employment by both entities is the letter dated August 9, 1994 from Mark McConaghy of Price Waterhouse, KSBE’s tax consultant, addressed to Myron Mitsuyasu (KSBE tax department). In this letter, McConaghy stated that their discussions had largely revolved around the implications a captive insurance subsidiary may have on the tax-exempt status of KSBE. He emphasized that maintaining arms-length relationships between KSBE and the captive would be absolutely necessary to prevent private inurement (benefits flowing to insiders such as trustees, directors or officers) and/or private benefit (benefits flowing to third parties such as other subsidiaries) from becoming a problem. This letter also stated that it would be necessary that the board of directors and corporate officers be independent in order to maintain the corporate separateness between KSBE and the for-profit captive. The letter stressed that it was important to keep the captive’s business activities separate from the tax-exempt activities of KSBE, so as not to create a situation where the captive’s activities could be collapsed into the activities of KSBE. McConaghy also stated that an independent board of directors would show that KSBE does not control the captive. A copy of McConaghy’s letter was included in P&C’s application to the Insurance Commissioner for its license to operate as a captive insurance company.”

“When Kam was asked at the hearing if she had seen this document, I believe her answer was that she had not. Without the production of this document, and by being denied access to Myron Mitsuyasu, Gil Ishikawa, or any other witnesses that were familiar with the contents and importance of this letter, I believe I was placed at a disadvantage in these hearings by being required to ‘prove’ my contentions, while KSBE was allowed to withhold the evidence.”

“I testified that Aipa had orally informed me that I was not being transferred to P&C (as had been previously proposed because of the potential IRS consequences described in McConaghy’s letter), because ‘arms-length was no longer an issue.’ When Aipa made this statement, I requested that it be put in writing, which he agreed to do, but never did. When Kam was asked (by you) what Aipa meant when he made the statement that ‘arms-length was no longer an issue’, she replied that it was her understanding that Aipa had received another opinion. I believe she indicated that she had not seen this letter either. I believe this opinion, if it exists, should be subpoenaed for examination. Also, the person to whom the letter was addressed should be subpoenaed for cross-examination.”

“There was another document that I requested subpoenaed, which stated that in situations where KSBE’s subsidiary is involved in litigation, negotiations with third parties, etc., it must be made abundantly clear to the third party that the subsidiary itself is in control of the negotiations and litigation, and not KSBE. The document also stated that the CEO of a subsidiary should not be a Trustee or an employee of KSBE, and that the directors and officers of a subsidiary should not be dominated by, or subject to, the control of individuals who are Trustees, officers or directors of KSBE.”

“This document also stated that management of the daily operations of the captive insurance company, including claims administration, should be largely free of influence or control of KSBE’s trustees and staff. One reprimand which I received from Kam, resulted from the attempts of Trustee Richard Wong, Aipa and Kam to influence or control the settlement of the Larry Ching flood damage claim previously denied by P&C’s independent adjuster, John Mullen & Co.”

“It was also stated in this document that, to the extent that KSBE staff is called upon to assist in the management of a subsidiary, KSBE should be reimbursed by the subsidiary for the consulting services provided by KSBE’s staff. This was not being done. Or, if such services were to consume a large amount of the employee’s time, then transfer of such employee from KSBE to the subsidiary should be considered.”

“Another statement was that the directors and officers of subsidiaries should be compensated appropriately by the subsidiary in order to demonstrate the separateness between a subsidiary and KSBE. It also stated that these policies would likely operate to improve the arms-length relationship between KSBE and its subsidiaries, and thereby further KSBE’s mission of perpetuating the legacy of Bernice Pauahi Bishop by protecting its assets and maintaining its tax exempt status. On the other hand, according to this document, failure to implement appropriate policies to maintain an arms-length relationship between KSBE and its affiliates may result in significant adverse impact and costs to KSBE. If I had disregarded this advice, then I