Woo vs. Harmon - Witness Margery Bronster

NEW DISCOVERY (09-19-08): More undisclosed conflicts of interests between parties named in Defendant’s RICO lawsuit and the U.S. Department of Justice (Plaintiff), Mark Bennett, Hugh Jones, Dorothy Sellers, Margery Bronster, Earl Anzai, Lyn Anzai, Henry Paulson, AIG, Chubb Group, ACE, Aon, Marsh & McLennan, Goldman Sachs, Henry Peters, Robert Kihune, Douglas Ing, Louise Ing, Aloha Airlines, Hawaiian Airlines, Joshua Gotbaum, Judge Kevin Chang, Faye Watanabe Kurren, The Nature Conservancy, Judge Barry Kurren, Judge David Ezra, James Nicholson, Linda Lingle, Ben Cayetano, John Waihee, OHA, AIPAC, David Farmer, Steven Guttman, etc:

CV05-00030 - David Farmer vs. Harmon -
Exhibit: "AIG: Buzz Yahoo story"

Friday, September 19, 2008 12:53 AM

From: "Bobby Harmon" <bobby_n_harmon@yahoo.com>iew contact details

To: "David Farmer" <farmerd001@hawaii.rr.com>, "Steven Guttman" <sguttman@kdubm.com>, "Carol K. Muranaka" <ustp.region15@usdoj.gov>

Cc: "Michael Mukasey <AskDOJ@usdoj.gov> ACLU Hawaii" <office@acluhawaii.org>, "All Representatives" <reps@Capitol.hawaii.gov>, "All Senators" <sens@Capitol.hawaii.gov>, "Andrew Walden" <hfpeditor@email.com>, "Andrew Winer" <winer@pacificlaw.com>, "Aon Insurance Managers" <mike_coulter@agl.aon.com>, "Arnold T. Phillips" <arnold.t.phillips@verizon.com>, "Arthur Rath" <imua@spamarrest.com>, "Barry M. Kurren" <richlyn_young@hid.uscourts.gov>, "Benjamin Kudo" <bkudo@imanakakudo.com>, "Blossom Tong" <blossom.d.tong@marsh.com>, "Bradley Tamm" <btamm@hawaii.rr.com>, "Brian E. Schatz" <teamschatz@gmail.com>, "Carl Morton" <ethics@hawaiiethics.org>, "Charles Goodwin" <HONOLULU@FBI.GOV>, "Charles Hurd" <mcp@mediatehawaii.org>, "Colbert Matsumoto" <service@islandinsurance.com>, "Craig Watanabe" <captiveins@dcca.hawaii.gov>, "Curtis B. Ching" <Curtis.B.Ching@usdoj.gov>, "Dane Field" <danefl@gucl.com>, "Dave Shapiro" <volcanicash@gmail.com>, "David A. Ezra" <theresa_lam@hid.uscourts.gov>, "Dee Jay Mailer" <ksinfo@ksbe.edu>, "Dorothy Sellers" <hawaiiag@hawaii.gov>, "Excecutive Office for U.S. Trustees" <ustrustee.program@usdoj.gov>, "Hugh Jones" <hugh.r.jones@hawaii.gov>, "Insurance Division Fraud Branch" <insfraud@dcca.hawaii.gov>, "J C Shannon" <Hapa1234@aol.com>, "James B Nicholson" <jamesbnicholson@aol.com>, "James B. Farris" <Farrisj@adr.org>, "James Cribley" <jcribley@caselombardi.com>, "James Duca" <jduca@kdubm.com>, "James Paul" <jpaul@pjpn.com>, "James Wriston" <jwriston@awlaw.com>, "Jeffrey Sia" <Jeff.Sia@excite.com>, "Jeffrey Watanabe" <jwatanabe@wik.com>, "Jim Dooley" <jdooley@honoluluadvertiser.com>, "Jo Ann Uchida" <rico@dcca.hawaii.gov>, "Joe Moore" <news@khon2.com>, "John D. Finnegan" <info@chubb.com>, "John Goemans" <wip@kamuela.com>, "Judge Lloyd King" <hib@hib.uscourts.gov>, "Judith Neustadter" <Judy@tiki.net>, "Judson Witham" <jurisnot@yahoo.com>, "Ken Conklin" <ken_conklin@yahoo.com>, "Kenneth Hipp" <khipp@marrhipp.com>, "Kevin S.C. Chang" <shari_afuso@hid.uscourts.gov>, "Lawrence Reifurth" <dcca@dcca.hawaii.gov>, "Linda Lingle" <governor.lingle@hawaii.gov>, "Louise Ing" <ling@hsba.org>, "Lyn Flanigan Anzai" <lflanigan@hsba.org>, "Margery Bronster" <info@bchlaw.net>, "Marsh Affinity Group" <prosecure@marshpm.com>, "Matt Tsukazaki" <mat@torkildson.com>, "Michael N. Tanoue" <mtanoue@paclawgroup.com>, "Michelle Tucker" <michelle@sterlingandtucker.com>, "Na Kumu Book Project" <nakumu@ksbe.edu>, "Nathan Aipa" <nathan@pitluck.com>, "Office of Inspector General Civil Rights Complaints" <inspector.general@usdoj.gov>, "Office of the U.S. Trustee District of Hawaii" <ustp.region15@usdoj.goV>, "Paul Alston" <palston@ahfi.com>, "Peter Carlisle" <emeguro@co.honolulu.hi.us>, "Randall Roth" <rroth@hawaii.edu>, "Rick Daysog" <rdaysog@honoluluadvertiser.com>, "Robert Bruce Graham" <bgraham@awlaw.com>, "Robert F. Miller" <info@robertfmiller.com>, "Robin Campaniano" <aigh001@aighawaii.com>, "Roy F. Hughes" <hthughes@hawaii.rr.com>, "Samuel P. King" <leslie_sai@hid.uscourts.gov>, "Susan Tius" <STius@rmhawaii.com>, "V K Durham" <vkdtdht@pionet.net>, "Valerie U. Katz" <clmrpt@islandinsurance.com>, "William K Slate" <Websitemail@adr.org>, "Jim Terrack" <tnthawaii@aol.com>, "Don Michak" <dmichak@journalinquirer.com>, "Rocco Sansone" <rocco.c.sansone@marsh.com>, "Ted Pettit" <tpettit@caselombardi.com>, "Mark Burch" <burch@hawaii.edu>, "Laura Thielen" <dlnr@hawaii.gov>, "Michael Moore" <MMFlint@aol.com>, "John D Zalewski" <jzalewski@caselombardi.com>, "Robert M. Kohn" <rkohn@polhawaii.com>, "Haunani Apoliona" <info@oha.org>, "Malia Zimmerman" <Malia@hawaiireporter.com>, "DC Bureau Office of Hawaiian Affairs" <mathar@oha.org>, "CPCU Society Hawaii Chapter" <kkanehiro@gmail.com>, "Hawaii Independent Insurance Agents Assoc." <hiia@hawaii.rr.com>, "Hawaii Insurance Bureau Inc" <dpeters@hibinc.com>, "Hawaii Insurers Council" <apowershawaii@yahoo.com>, "Manuel Valenzuela" <manuel@valenzuelas.net>... more

Dear Mr. Farmer, Mr. Guttman, Ms. Muranaka & All Concerned:

Due to the discovery of NEW FACTS, I am adding the subject Exhibit which you will find on-line at:

http://buzz.yahoo.com/article/1:3d49517441210c2e6d3a94c6d1bfc0da:c29ff698c41201b84cc7ef7daa06e35e?usc=1

As Judge David Ezra's Order constitutes a PRIOR RESTRAINT of freedom of speech, I regret that I must continue to submit each of these new and updated exhibits and witness descriptions for your review and approval in the event they may contain any prohibited "Protected Subject Matter". If you would like to avoid this approval process, then I would again suggest that we attempt a good-faith settlement of this case through confidential negotiation or mediation.

Your prompt reply will be appreciated.

Very truly yours,

Bobby N. Harmon, CPCU, ARM

~ ~ ~

December 19, 1997

Abolish system of
‘lead trustees’ now,
Bronster says

Judge Patrick Yim's
Fact Finder's report now online.

Star-Bulletin Staff

State Attorney General Margery Bronster says she could seek a court order to abolish Kamehameha Schools/Bishop Estate's much-maligned "lead trustee" management system.

Bronster yesterday said she plans to study an agreement finalized yesterday by Circuit Judge Colleen Hirai which calls for a review of the lead trustee system only after a management and financial audit of the estate's operations is completed.

The pact -- reached between the estate, the trust's court-appointed master Colbert Matsumoto and the attorney general's office -- represents a step back from a previous agreement to eliminate the system outright, Bronster said.

She agreed with nearly all of the remaining recommendations, which seek to streamline the estate's accounting process and financial reporting requirements.

"The time is now to abolish the practice of the lead trustee," she said. "We think the law is clear."

Bronster and Matsumoto have argued that the system -- which gives individual trustees authority over specific administrative areas -- may violate the will of the estate's founder, Bernice Pauahi Bishop, and may breach the trustees' fiduciary responsibilities since it delegates too much responsibility to one trustee.

William McCorriston, one of the estate's attorneys, disagreed, saying the informal lead trustee system is not for decision-making purposes but largely exists for reporting or oversight purposes.

All policy decisions are made by the whole board and not by individual trustees, he said. McCorriston added that many trusts use a similar system to manage their affairs.

"I don't know if we will ever be able to satisfy the attorney general," McCorriston said. "She doesn't have a good understanding of how the system works."

Under the system, the estate's asset management is handled by trustee Henry Peters and its government affairs programs are headed by Chairman Richard Wong. Trustee Lokelani Lindsey headed estate's educational programs, while Gerard Jervis ran the estate's legal affairs. Oswald Stender was in charge of the trust's Kukui Inc. subsidiary, which represents the estate's interest in a mainland methane gas drilling operation.

For many critics, Lindsey's role as lead trustee for education played a big role in the ongoing controversy. Student and alumni groups say she usurped the duties of popular Kamehameha Schools President Michael Chun and hurt school morale. Court-appointed fact-finder Patrick Yim went further, saying Lindsey managed by intimidation and played favorites.

Lindsey was removed as lead trustee more than a week ago in anticipation of Yim's report. Jervis also has relinquished his duties as lead trustee for legal affairs, according to McCorriston.

Matsumoto initially recommended abolishing the lead trustee system but said he was willing to grant the estate additional time to make the transition.

He said the estate has agreed to have its finances audited by a national accounting firm and that the audit will likely take six months to complete.

Matsumoto said he's confident that the audit of the estate will find that the lead trustee system should be eliminated and that trustees eventually will agree.

Matsumoto also had recommended that the court not approve the estate's accounting for the 1993-1994 fiscal year until the Internal Revenue Service completed its audit of the estate.

But Matsumoto said he now feels that may not be practical since it may be some time before the IRS completes its audit.

Judge Patrick Yim's
Fact Finder's report now online.

Bishop Estate Archive

http://starbulletin.com/97/12/19/news/satnews.html

~ ~ ~

September 11, 1998

Bronster:

“Sweetheart Deals with Cronies”

"I believe certain trustees received
kickbacks worth hundreds of
thousands of dollars."

--Margery Bronster

The trustees deny the state's
allegations and blame the Cayetano
administration for exploiting
the controversy

~ ~ ~

COMPLETE TEXT:
Attorney General's Petition for Removal

~ ~ ~

By Rick Daysog, Star-Bulletin

Raising the possibility of criminal charges, Attorney General Margery Bronster says Bishop Estate trustees received kickbacks, participated in illegal political campaign contributions and mismanaged Kamehameha Schools.

Yesterday, Bronster filed a 58-page petition in probate court targeting the removal of the estate's majority trustees Henry Peters, Richard Wong and Lokelani Lindsey, saying the three trustees enriched themselves at the expense of the trust's beneficiaries.

Bronster alleged that trustees Peters and Wong received kickbacks from a Hawaii Kai land deal involving Wong's brother-in-law, Jeff Stone.

Lindsey, meanwhile, mismanaged Kamehameha Schools and used trust employees to run personal errands and help renovate her Hauula home, the attorney general alleged.

"I believe certain trustees received kickbacks worth hundreds of thousands of dollars from relatives via elaborate real estate transactions," Bronster said in a letter to Gov. Ben Cayetano, who ordered the investigation more than a year ago.

"Trustees have hired friends, relatives and political allies who have given little or no service to the trust and trustees have also routinely made sweetheart deals with this same assortment of relatives, cronies and other hangers on."

Bishop Estate attorney William McCorriston denied that any breaches of trust have occurred, saying trustees and their individual attorneys look forward to answering the charges in a court of law.

"They are looking forward to having this resolved by judicial resolution in a court of law -- hopefully by a judge who won't be influenced by the electronic lynching by the media or be persuaded by anything except the evidence that will be presented," McCorriston said.

Yesterday's removal petitions also sought surcharges against Peters, Wong and Lindsey, saying the majority trustees offered jobs to friends and relatives. The jobs paid high salaries but offered little services to the estate.

Some of the hirings forced the estate to create unbudgeted positions to accommodate the new hires, the state said. They included:

> Local attorney and Peters' friend, Al Jeremiah Jr., was paid $35,000 to conduct menial and clerical labor in helping to inventory the Baker/Van Dyke collection of Hawaiiana, the state said.

> Office of Hawaiian Affairs trustee and Peters' associate, Clayton Hee, was hired by the estate's Royal Hawaiian Shopping Center Inc. subsidiary as a cultural affairs researcher, according to the state.

> State Rep. Terrance Tom, a former colleague of Peters' in the Legislature, has been paid a monthly retainer of $4,000 for negligible legal services, the state said. Tom has denied wrongdoing in the past.

> A company headed by Big Island businessman Larry Mehau is being paid $40,000 a month to provide security services at Kamehameha School's main gate. Mehau is a friend of Wong and Lindsey.

> Peters' former employer, Dura Constructors Inc., received more than $2.7 million in nonbid construction work from the Bishop Estate starting in 1995. Dura renovated Peters' home in Maili.

Renee Yuen, attorney for Peters, denied any wrongdoing by her client, saying the Cayetano administration is exploiting the controversy to boost the governor's "sagging popularity" and deflect attention from the weak economy.

"In the future, this dismantling of the Bishop Estate will be seen as the ultimate robbery of the native people directed by non-Hawaiians," she said.

Bronster, meanwhile, denied that politics is playing a role in her investigation, saying the timing of yesterday's petition is due in large part to delays caused by trustees.

A hearing on the permanent removal petition is scheduled for Oct. 23.

The removal requests come more than a year after the state launched its investigation into allegations of financial mismanagement, breaches of fiduciary duties and manipulations of the student admission process at the estate-run Kamehameha Schools.

Key Figures Named in
the Attorney General’s Petition

Joseph M. Souki

66, of Wailuku is a Democrat, the current speaker of the state House. The owner of a real estate company, Souki this summer was questioned by the state attorney general over a Maui land deal involving Bishop Estate that earned him a $132,000 commission. Souki denied any wrongdoing and said it a was a private real estate transaction. He is up for re-election this year, and has reported a $110,000 campaign war chest.

Robert N. Herkes

67, is a Democratic state representative from Kau-Puna, Big Island. The hotel industry executive first ran for public office as a Republican, winning a Hawaii County Council seat in 1983. Four years later, then-Gov. John Waihee appointed him to a Senate seat. The attorney general names Herkes as one of the politicians benefiting from trustees' actions aimed at "preserving excessive compensation”. In this Legislature, he opposed legislation to cap trustees' pay.

Clayton Hee

45, is a trustee and former chairman of the Office of Hawaiian Affairs. A Hawaiian culture college instructor, Hee, of Molokai, entered the state House in 1983. He later became a state senator -- where he became good friends with then-Sen. Ben Cayetano -- and served as Senate Judiciary chairman until 1988, when he lost his re-election bid. The attorney general says Hee was among politicians benefiting from trustees' actions aimed at "preserving excessive compensation."

Joseph S. Tanaka

56, is a Democratic state representative from Wailuku. Along with Souki, Tanaka was subpoenaed by the attorney general as part of the inquiry into the Maui land deal involving Bishop Estate. Tanaka earned a $42,000 commission from developer Everett Dowling last year, but said his consulting work did not involve the estate. Instead, Tanaka said he introduced Dowling to Sports Shinko Inc., which originally owned the Maui property.

Terrance Tom

50, has been a state representative since 1982. He now is running for the state Senate seat for Kahuku-Kaneohe. Tom, who has been blind since birth, has come under fire as chairman of the House Judiciary Committee for his stand on several issues, including same-sex marriage. As a lawyer who gets a retainer of $4,000 a month from Bishop Estate, he was criticized this past session for voting on legislation to cap trustees' pay. He voted against the caps.

Yukio Takemoto

59, is a former state budget director who resigned in late 1993 to become Bishop Estate's chief executive for budget and review. He made $163,010 in 1997. As state budget director under Gov. John Waihee, he came under scrutiny from a state Senate special investigative committee for his government purchase practices and investment decisions of the state pension fund.

Marshall Ige

44, is a state senator representing the Kaneohe-Enchanted Lake district. Ige, a former elementary school teacher, first ran for the state House in 1978 and served until 1994, when he narrowly lost a bid for the state Senate. He was elected to the Senate two years later. The Damien High School graduate received his education degree from the University of Hawaii. He currently serves as co-chairman of the Senate Government Operations and Housing Committee.

Milton Holt

45, is a former state senator and current administrative officer for Bishop Estate. In a story earlier this year based on records the estate submitted to the Internal Revenue Service, Holt reported he entertained state legislators at the estate's expense at local restaurants and hostess bars, although several lawmakers denied the meetings took place. From 1992 to 1997, more than $23,000 was charged on the estate's credit cards from Las Vegas casinos and local hostess bars.

HIGHLIGHTS ...

from Bronster's petition

Here are some accusations lodged by the state attorney general's office against Bishop Estate trustees:

Enriching themselves

Trustees Henry Peters, Richard Wong, and Lokelani Lindsey have enriched themselves from the trust at the expense of the beneficiaries:

> Inflated prices (on apartments at 1015 Wilder Ave.) were paid to Peters and Wong as a quid pro quo for conferring financial benefits on Wong's brother-in-law Jeffrey Stone.

The trust wired $500,000 to KDP-Technologies on July 2, 1997.

This investment was made without adequate due diligence and in disregard of an internal staff report. KDP-Tech was managed by principals with no proven business track records, was a highly speculative start up company, and the soft-porn nature of the investment was not suitable for a charitable educational trust.

Within a week of the trust's initial investment of $500,000, KDP-Tech began negotiating a consulting agreement with Wong's brother-in-law Randy Stone.

> KDP-Trust (KDP Ltd., a subsidiary of Royal Hawaiian Shopping Center) continued to advance trust money to KDP-Tech until its treasurer, Lindsey's acquaintance, was indicted for federal mail fraud and money laundering crimes (for which he was subsequently convicted and sentenced).

> While a director of Mid Ocean, Peters received substantial director's fees and received options to acquire 6,000 shares of Mid Ocean stock.

> The Mid Ocean fees and stock options are assets that belong to the trust and not to Peters individually.

> Peters has enriched himself at the expense of the beneficiaries by retaining the fees and stock options for his personal benefit.

Helping friends

> Peters and Wong concealed from the other trustees Holt's personal charges on the trust credit card and rejected suggestions to confiscate the card.

> Peters was instrumental in the trust entering into a consulting services contract with (friend Al) Jeremiah Jr., initially at $5,000 per month and then at $7,000 per month, without regard to whether any work was performed, with an additional $125 for each hour worked in excess of 40 hours per month.

> Peters was instrumental in the trust, by its subsidiary Royal Hawaiian Shopping Center (RHSC), hiring (friend) Clayton Hee as a cultural affairs researcher with negligible duties.

> Terrance Tom served with Peters in the Hawaii Legislature, and was hired by the trust at a monthly legal retainer of approximately $4,000 for providing negligible, if any, legal services to the trust.

> Peters directed RHSC to hire his cousin, Mona Ryan, as a property manager. Peters directed RHSC to hire a number of his other friends or relatives. "The trust created unbudgeted positions to accommodate these hirings."

> Lindsey directed RHSC to hire her grandson, Hoku Haiku.

> Larry Mehau, a principal shareholder of Hawaii Protective Association (HPA), is a friend of Wong and Lindsey.

In July 1996, the trustees hired the Hawaii Protective Association to provide additional security personnel at the Kamehameha Schools. There was no operational necessity to hire any outside security contractor.

It is more expensive for the trust to use HPA than to use Kamehameha Schools personnel to provide the same security services. It is more expensive for the trust to use HPA than other outside security services, because HPA charges above market rates.

The trustees did not solicit competitive bids for HPA's security services. There is no written contract with HPA.

> Peters is a former employee of Dura Constructors Inc. ("Dura"). Dura renovated Peters' Maile residence.

Beginning in 1995, the trust awarded construction contracts to Dura without competitive bidding and in amounts totaling more than $2.7 million.

Dura received $465,000 for work on the athletic locker room at the Kamehameha Schools. The work was so deficient that the building was unsafe for student use. The trust corrected Dura's work itself rather than pursue Dura for the deficiencies.

> Rhino Roofing also worked on Peters' Maili home renovation. Peters' nephew is the owner of Rhino Roofing.

Beginning in 1995, the trust awarded construction contracts under which Rhino Roofing received more than $1.3 million, customarily without competitive bidding or as the hand-picked roofing subcontractor.

> In 1993, the Lindseys obtained a permit from the Building Department of the City and County of Honolulu ("Building Department") to renovate the house on the property (53-823 Kamehameha Highway). The renovations uncovered structural damage that necessitated additional work beyond the scope of the existing building permit.

Lindsey went forward with the expanded renovation and was cited by the Building Department for violating the existing building permit.

Lindsey obtained a private proposal for $12,000 to obtain the necessary governmental approvals for the expanded renovation to proceed.

Rather than spend $12,000 of her own money, Lindsey used trust employees to obtain a shoreline certification from the State of Hawaii Department of Land and Natural Resources, and to obtain a zoning variance from the City and County of Honolulu.

Personal benefit

The trustees have used trust employees, equipment, supplies and resources for their personal benefit. For example:

> Lindsey has used trust employees to run personal errands for herself and her family members and to install a computer in her Maui and Oahu residences;

> During his 1986, 1988, 1990, and 1992 political campaigns while a trustee, Peters used trust employees to photograph him and his supporters for his campaign materials, in violation of trust restrictions on political activity by the trust and its employees.

http://starbulletin.com/98/09/11/news/story2.html

~ ~ ~

May 8, 1999

THEN THERE WERE NONE

Kamehameha supporters
embrace the chance for
reform and healing

Read the complete text of Judge Chang's ruling

By Rick Daysog, Star-Bulletin

A judge has delivered a possibly fatal blow to the trustees of the Bishop Estate in a historic decision that many believe will lead to the resolution of the two-year controversy surrounding the estate.

Probate Judge Kevin Chang yesterday ordered the immediate and interim removal of trustees Richard "Dickie" Wong, Henry Peters, Lokelani Lindsey and Gerard Jervis in a move that could lead to their permanent dismissal from their $1 million-a-year jobs.

Chang also accepted the voluntary resignation of trustee Oswald Stender and named a panel of five interim trustees to assume the duties of the ousted board members.

The interim trustees -- who were previously appointed by Chang to serve as special-purpose trustees to negotiate with the Internal Revenue Service -- are retired Adm. Robert Kihune, former Honolulu Police Chief Francis Keala, attorney Ronald Libkuman, Hawaiian Electric Industries Inc. treasurer Constance Lau and retired Iolani School headmaster David Paul Coon.

Chang's bombshell follows Circuit Judge Bambi Weil's ruling on Thursday permanently removing Lindsey from the multibillion-dollar trust's board after a four-month trial that ended in April. Trustees Stender and Jervis had sued for Lindsey's ouster, saying she breached her fiduciary duties, mismanaged the estate-run Kamehameha Schools and was unfit to serve.

Yesterday's decision, after a five-hour hearing, came after Chang ordered the trustees to demonstrate why they should not resign or be temporarily removed. The IRS, which has been conducting an audit of the estate since 1996, had threatened to revoke the charitable trust's tax-exempt status if the trustees were not removed.

Loss of the tax-exempt status could have cost the estate tens of millions of dollars a year and forced it to pay significant back taxes.

Chang said the trustees' refusal to step down "creates an immediate and substantial risk of significant harm to the trust estate" and "constitutes a breach of trust."

Under yesterday's order, Chang gave the attorney general's office, the estate's court-appointed master or the interim trustees 90 days to seek the permanent removal of the trustees. If no such suit is filed during the 90-day period, the former board members must ask the court to lift the temporary ban.

Chang also ordered the ousted trustees not to communicate with estate employees, attorneys and their agents and has ordered them off the boards of their various subsidiaries and affiliates.

In February, Chang forbade the trustees from negotiating with the IRS over issues raised by its audits. After reviewing some 2,500 pages of reports known as IRS Form 5701s, or notices of proposed adjustments, Chang found that the trustees had a conflict and prohibited them from handling audit issues.

Yesterday, Wong said he would appeal Chang's ruling because he believes his rights to due process were violated. Since Chang removed the trustees from discussing audit issues with the IRS, Wong said he has never been informed of any wrongdoing.

"I'm entitled to due process and I want to face my accusers and face the allegations. I want to know why I was removed," Wong said.

"I'm not going to walk away from a fight."

Fellow trustee Henry Peters has also hinted at an appeal and has raised the possibility of suing the IRS. Peters yesterday denied wrongdoing, saying the trust today is far more wealthy and liquid than it ever has been.

Peters pointed to this week's public offering of Goldman Sachs Group Inc., which added about $600 million to the estate's coffers. After the estate's investing $500 million in the Wall Street investment banking firm, the value of its holdings in Goldman has risen to as much as $2 billion.

"I'm not here to win a popularity contest, I'm here to do my job as a trustee. I can tell you unequivocally that we've done a good job," Peters said.

"We are big, we are massive, we are wealthy. If you want to refer to that as too much power, than so be it. We are proud of our legacy. We've done a wonderful job here and we're not going to apologize for our success."

To be sure, Wong and Peters are significant players in the controversy surrounding the trust. Both are targets of removal proceedings initiated by former Attorney General Margery Bronster and both have been indicted by separate grand juries investigating an alleged kickback scheme involving Bishop Estate land.

Stender said Chang's decision paves the way for major reforms of the Bishop Estate's operation. Future trustees will be more accountable to the needs of the Kamehameha Schools and to the interests of students, he said.

"I'm very pleased with the court's ruling today because it creates a new era for Kamehameha Schools and a new era for the management of the trust," Stender said.

Randall Roth, University of Hawaii law professor and co-author of the "Broken Trust" essay that criticized trustees' management of the estate, said that once the interim trustees take office, they will be able to waive the attorney-client privilege which former board members used to shield themselves from the state's investigation and to delay justice.

The interim trustees, according to Roth, see the benefit of cooperating with the state and federal probes.

"As a practical matter, what Chang's decision means is that the old trustees will never again be at the helm of the Bishop Estate," Roth said.

"This legal system is slow but it does deliver."

Meanwhile, members of the Kamehameha Schools ohana embraced yesterday's ruling, calling it the beginning of a long-overdue healing process.

"We are pleased the judicial process has worked, but slowly," said a statement issued by Na Pua, an organization of 3,300 Kamehameha Schools alumni, faculty, parents and students.

"Today's court decision is a vindication of the Kamehameha ohana and particularly for the many individuals who placed themselves at risk by speaking out."

Yesterday's hearing, before a packed audience, was attended by more than two dozen lawyers, including Bronster, who received an ovation when she entered the courtroom.

Last week, the state Senate, by a 14-11 vote, rejected Bronster's bid for a second term as attorney general, in a vote many believed was engineered by estate trustees.

Bronster, who launched the state's investigation of the Bishop Estate that led to the indictments of Wong and Peters, praised Chang for his decision and also trustee Oswald Stender for voluntarily stepping down.

"I think the court's order was very well thought out and it is a very important step," Bronster said.

"There's still a lot to be done."

Attorneys for trustees Wong, Peters and Lindsey argued that their clients' rights to a fair trial were denied. Ron Malone, Wong's attorney, accused the special-purpose trustees of "caving in to the IRS," which he said wants board members out so it can negotiate a settlement in its favor.

Malone said he believed that Wong is the target of a "mob mentality" and urged Chang to order a full evidentiary hearing. The request was denied.

Deputy Attorney General Dorothy Sellers said the trustees' real motives for keeping their jobs were made clear by their attorneys' arguments.

"What we heard today was 'Me, me, me, me. My job, my power, my authority, my rights, my compensation, my due process rights,' " Sellers said.

"Tell the trustees that the game is over. Take them out."

===

CHRONOLOGY OF
KEY EVENTS

1997

May 15, 1997: 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 Kapalama Heights campus.

Aug. 9, 1997: The "Broken Trust" article in the Star-Bulletin alleges mismanagement of Bishop Estate assets and conflicts of interests by trustees and criticizes selection of trustees by state Supreme Court justices.

Aug. 12, 1997: Gov. Ben Cayetano orders Attorney General Margery Bronster to investigate.

Dec. 12, 1997: Fact-finder Patrick Yim alleges that trustee Lokelani Lindsey managed Kamehameha Schools by "intimidation."

Dec. 20, 1997: Supreme Court justices remove themselves from selecting Bishop Estate trustees.

Dec. 29, 1997: Bishop Estate trustees Gerard Jervis and Oswald Stender seek Lindsey's removal.

1998

Sept. 9, 1998: Attorney General Margery Bronster calls for temporary removal of four trustees, saying they jeopardized the tax-exempt status of the trust.

Sept. 10, 1998: Bronster calls for removal of trustees Richard Wong, Henry Peters and Lindsey, charging they took part in a pattern of self-dealing and mismanagement.

Nov. 11, 1998: The trial to remove trustee Lokelani Lindsey begins.

Nov. 25, 1998: An Oahu grand jury indicts Peters on a charge of theft.

1999

March 11, 1999: Trustee Gerard Jervis is rushed to a hospital after taking an overdose of sleeping pills a week after a trust employee died in an apparent suicide. The day before her death, Jervis and the female worker were caught in a compromising position in a men's restroom by security workers at a Waikiki hotel.

April 12, 1999: Bishop Estate Chairman Wong is indicted on charges of first-degree theft, perjury and conspiracy.

April 27, 1999: IRS files a report saying it may revoke the tax-exempt status of the estate if the five trustees don't step down.

May 6, 1999: Circuit Judge Bambi Weil permanently removes Lindsey as trustee.

May 7, 1999: Probate Court Judge Kevin Chang temporarily removes four trustees and accepts Stender's resignation on an interim basis.

Bishop Estate Archive

http://starbulletin.com/1999/05/08/news/story1a.html

http://www.kycbs.net/CV05-00030-Exhibit-GY.htm

~ ~ ~

May 8, 1999

OTHER VIEWS

By David M. Matsuura

A senator’s vote
against Bronster

I have been asked why I voted against the confirmation of Margery Bronster as attorney general. Let me begin by saying that the purpose and function of the Attorney General's Office is to advise and defend the State of Hawaii and its departments.

As vice chairman of the Committee on Governmental Operations and Housing, one of my responsibilities is to evaluate state departments with respect to their productivity and efficiency in delivery of public service.

I and my committee members found a common problem that transcended many of the departments in terms of overall efficiency and, in many cases, increased overall cost to the public: inefficiency and inaction by the A.G.

Many state departments asked for legislation to hire their own legal counsel (starting from 1995).

This session, I voted to allow the Board of Education and the Hawaiian Homes Commission to hire their own legal counsel. I also introduced legislation to have an independent attorney general.

It would have been hypocritical for me to vote to allow a state department to hire its own legal counsel because of problems with the A.G.'s Office, and then to vote for confirmation of the attorney general herself.

There are 161 attorneys in the A.G.'s Office, but there are only two attorneys assigned to the Felix consent decree in the Department of Education.

I have listened to special education teachers and principals complain about their problems, and how they feel that they are not being represented by the A.G. This situation has cost the state millions of dollars and has hurt our overall educational system.

As for the tobacco settlement and gasoline lawsuit the attorney general hired -- on a contingency fee basis -- the same law firm for both cases. In the tobacco settlement, the firm was not hired to litigate the case but only to settle it. For that "service," the state lost millions of dollars.

All the messages that I received in support of Bronster were because of her investigation of Bishop Estate. I am aware of public sentiment about the estate's trustees, and share many of the same sentiments. But the job of the A.G. is to take care of the "state," not the "estate."

This is a very emotional, complex issue. So people should ask themselves these questions:

How and with what could the Bishop Estate trustees, imperiled as their positions were, have influenced the Senate to reap 14 no votes on Bronster?

What is the state's goal in spending over $7 million on this investigation? The destruction of the estate and Kamehameha Schools? The chances of that happening are almost nil. At best, the removal of the trustees is the only thing that can happen.

Who will have the ability to appoint the new trustees? Who will benefit? The political reappointment of the new trustees will probably not change anything regarding the estate.

Why didn't the A.G. exercise her right as "parens patria" of the Bishop Estate? This would have saved the state millions, the investigation would have been over months ago and the outcome would have been the same. The only difference: There would have been no publicity.

Was this investigation political in nature? The A.G. is supposed to be independent and do what is best for the state. Will there be any liability to taxpayers due to this investigation?

Why wasn't the criminal portion of the case turned over to the Prosecutor's Office for indictment?

On the floor of the Senate, I stated that it was a threat to all senators when the attorney general stated she would begin the criminal indictment of our colleague (Sen. Marshall Ige). Her implied threat to intimidate a senator on the morning of her contested confirmation is a threat to all.

This was a very difficult decision but I believe that I did the right thing. I stand by my vote and my colleagues who voted the same way.

I would like to thank the people who said I should be more like my father. It helped me stand firm in my decision, because I know that Dad would have also voted no, given all the facts.

What I have learned from this experience is that it is very difficult to stand up for what is right when public opinion, the media and the governor are against you.

Time will tell if my vote was correct. If not, I have only myself to blame and will take full responsibility for my actions.

Democratic Sen. David M. Matsuura represents
the 2nd Senatorial District (South Hilo, Puna). His father,
the late Richard Matsuura, was also a state senator.
senmatsuura@capitol.hawaii.gov

www.starbulletin.com/1999/05/08/editorial/otherviews.html

~ ~ ~

WITNESS UPDATE (06-10-08): Letter dated May 13, 1999:

Bobby N. Harmon, CPCU, ARM

Honolulu, Hawaii

May 13, 1999

TO: 1) Federal Bureau of Investigation - Fax No. (808) 566-4470

2) Internal Revenue Service - Fax No. (808) 541-1109

3) Attorney General, State of Hawaii - Fax No. 586-1375

4) Colbert Matsumoto, Esq. - Fax No. 523-7885

RE: Senator David M. Matsuura and Bishop Estate

Gentlemen:

After reading Senator Matsuura’s article in the May 8, 1999 edition of the Star Bulletin explaining why he voted against the confirmation of Margery Bronster as attorney general, I felt that perhaps Senator Matsuura may not have fully disclosed his business connections with Bishop Estate to the legislature, as well as to your offices and the general public.

While serving at the Risk/Insurance and Safety Manager for Kamehameha Schools/Bishop Estate (KSBE), I was involved in the handling of a wrongful termination insurance claim brought against the estate by William Rosehill sometime in 1994 or 1995. Mr. Rosehill was terminated for allegedly accepting kick-backs from a Bishop Estate lessee, Umikoa Ranch. During the investigation of the claim, it was reported that an “area of concern” had arisen with respect to a letter from David Matsuura to the Board of Directors of Umikoa Ranch. I have not seen this letter and have no knowledge of its contents. However, there were rumors that the senior Senator Matsuura, father of David and now deceased, had been inquiring of one or more of the trustees as to the settling of Rosehill’s case, and that the senior Matsuura seemed anxious that the case settle. I have no knowledge that these inquiries actually occurred, but the speculation at the time was that the letter to Umikoa Ranch might be viewed by the Senator as causing problems for his son. In any event, a staff report to trustees prepared on May 6, 1996, by Colleen Wong, Esq., of KSBE’s Legal Group, recommended that the case be settled. The trustees accepted this recommendation and the claim was quickly settled out-of-court.

As previously stated, I am not aware of the contents of the letter or Senator Matsuura’s connection with Umikoa Ranch, However, you may wish to question those persons with direct knowledge of the situation and circumstances. These individuals would be Nathan Aipa, Esq., Colleen Wong, Esq., William Rosehill, Robert Lindsey and Senator Matsuura himself.

It would seem that Milton Holt’s claim that the senior Senator Matsuura was one of the individuals he entertained at a “hostess bar” on a Bishop Estate credit card may be factual after all. Perhaps Mr. Holt could also provide additional information with regard to Senator Matsuura’s relationship with Umikoa Ranch, and thus Bishop Estate and the contents of his letter to Umikoa’s Board of Directors.

I hope this information is of some assistance in your ongoing investigations.

Very truly yours,

Bobby N. Harmon

http://www.kycbs.net/FBI-IRS-AG-Matsumoto-5-13-99.htm

~ ~ ~

Former Attorney General Margery Bronster is expected to testify about the facts and circumstances of EQ2048, and the testimony of Defendant as a witness in that case. Margery Bronster is also expected to testify regarding her business, professional and personal relationships with Kamehameha Schools/Bishop Estate; Nathan Aipa; Colleen Wong; Louanne Kam; Guido Giacometti; Jeffrey Stone; Randy Stone; Rocco Sansone; Marsh & McLennan; Federal Insurance Co.; XL Insurance Co.; Hugh Jones; Dorothy Sellars; Steve Goodenow; Robert Richards; Milton Holt; Calvin Say; Marshall Ige; Norman Mizuguchi; Bruce Graham; Walter Dods, Jr.; Island Insurance Co.; Judge Eden Hifo; Judge Kevin Chang; Judge Barry Kurren; Faye Kurren; Colbert Matsumoto; Earl Anzai; Lyn Anzai; Ben Cayetano; Linda Lingle; Patrick Yim, Judge Lloyd King, Judge Robert Faris, Benjamin Matsubara, Ron Libkuman, Curtis Ching, James Nicholson, David Farmer, Ivan Lui-Kwan, and others to be named upon discovery.