David Farmer vs. Harmon - Witness Bruce Dunford

David C. Farmer, Successor-Trustee vs. Harmon

(Formerly Woo vs. Harmon & Nicholson vs. Harmon)

CV05-00030 DAE KSC

U.S. District Court For the District of Hawaii

Judges: David A. Ezra; Kevin S. Chang

—

DEFENDANT’S WITNESS

BRUCE DUNFORD

Associated Press Investigative reporter.

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August 20, 1997

Fired exec
questioned

State attorneys interview ex-worker
who alleges irregularities

By Bruce Dunford, Associated Press

A Bishop Estate official who says he was fired last year for raising questions about irregular and possibly illegal activities has been interviewed by state attorneys ordered by the governor to investigate the estate.

Bobby Harmon served for eight years as head of the estate's insurance programs and ultimately served as president of P&C Insurance Co., a for-profit subsidiary of the $10 billion charitable trust that supports Kamehameha Schools.

He said he questioned:

> An annual payment the estate made without accounting for why it was made;

> His salary for the profit-making organization being paid by the nonprofit trust in apparent violation of IRS rules;

> The company's legal work being parceled to certain lawyers.

Harmon met for 1-1/2 hours yesterday with Senior Deputy Attorney General Lawrence Goya and the attorney general's auditor, he said.

They expressed interest in obtaining a 50-page document he prepared detailing questionable and possibly illegal activities by Bishop Estate's trustees and top executives, Harmon said.

Bishop Estate, however, earlier obtained a Circuit Court injunction against the release of the document, claiming it contains confidential and proprietary information that should not be made public.

Harmon has also offered to share his papers with retired Circuit Judge Patrick Yim, who is also conducting an investigation into the management of Bishop Estate and Kamehameha Schools at the request of the probate court.

Harmon said he was fired in November after he refused to sign off on a required financial report involving the estate's contract with Marsh & McLennan Inc. as the estate's insurance broker.

He said was worried about a $200,000 annual flat fee superiors wanted him to pay to MMI because there was no accounting why it was being paid, Harmon said.

Harmon said he felt if he "looked the other way" as encouraged by his superiors, "I would be breaching my fiduciary duties to the organization."

Harmon also questioned why his salary was from the nonprofit trust when almost all his time was spent working for the for-profit P&C captive insurance company.

This appears to violate IRS rules against using tax-exempt trust funds to subsidize a profit-making company, he said.

It appeared that Bishop Estate attorney Nathan Aipa, Harmon's direct supervisor, and trustee Henry Peters wanted to maintain tight control over all insurance matters, including parceling out related legal work to selected attorneys, he said.

Estate spokeswoman Elisa Yadao has declined to comment on Harmon's allegations, but said they will be challenged in court.

Harmon's documents support his proposed settlement for what he claims was his wrongful termination by Bishop Estate. It seeks up to $1.8 million.

The use of trust funds to support Bishop Estate's various taxable subsidiaries was common, yet not reported on IRS forms as required, Harmon said.

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Classes resume
amid controversy

It's hoped that students will
"settle down and concentrate"

By Debra Barayuga, Star-Bulletin

Almost 2,200 students returned to classes at Kamehameha Schools today as two separate investigations continued into alleged mismanagement of the schools and financial assets by Bishop Estate trustees.

An additional 600 students, kindergarten through sixth grade, including two new classes of fourth-graders on the Big Island and Maui, are to resume classes tomorrow, followed by 1,000 preschoolers on the Big Island and in Maili.

Meanwhile, parents, alumni and trustees this week tried to reassure returning students and school faculty that they are doing all they can to resolve the turmoil that has rocked the institution for the past several months.

"I'm hoping that with all that's going on, students will attend school with an open mind and be ready to settle down and concentrate on having an outstanding year," said Toni Lee, president of Na Pua a Ke Ali'i Pauahi, an organization of students, parents and Kamehameha alumni.

Students should be confident that their elders are working toward their best interests, she said. "At least now things are happening, where before no one was listening," Lee said.

Yesterday, at an annual ceremony honoring employees for their years of service, trustee Gerard Jervis described the past three months as the most turbulent in the schools' history and called on faculty, staff, alumni, parents and students to stand together to guard against any outside attempts to change the will of Bernice Pauahi Bishop.

"I don't know of any other time in our history that the very foundation of our existence has been called into question so publicly, by so many, with such intensity," he said. "But I do know one thing: How Kamehameha Schools/Bishop Estate emerges from this situation will depend entirely on how we - as a family and as individuals - conduct ourselves during this very challenging time," Jervis said.

Despite the turmoil, Jervis said the quality, integrity and compassion among members of the Bishop Estate/Kamehameha Schools family continues to thrive and will see them through this crisis.

This week, the state attorney general began an inquiry into Bishop Estate, including issues raised in "Broken Trust," an opinion piece written by five people critical of the way trustees are chosen and the trustees' failure to fulfill their fiduciary duties.

Also, fact-finder Patrick Yim has 10 days to complete a preliminary investigation into allegations of micromanagement by certain trustees and a climate of fear that has made faculty, students and staff afraid to speak out.

Jervis urged those who haven't spoken to former Circuit Judge Yim to do so and without fear of retribution.

"If we've made mistakes, we need to find out what they are and correct them. Then we need to move on," Jervis said.

Bishop Estate Archive

http://archives.starbulletin.com/1997/08/20/news/story1.html

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Bruce Dunford is expected to testify regarding First Amendment Rights to Freedom of Speech and Freedom of the Press, and his professional relationships with Defendant Bobby N. Harmon, John Goemans, Robert Richards, Colbert Matsumoto, Jeffrey Watanabe, Benjamin Matsubara, Jared Jossem, Renton Nip, Michael Heihre, Richard Wong, Jeffrey Stone, Ko Olina Resort, Margery Bronster, Moya Davenport Gray, Benjamin Cayetano, Office of Information Practices, Warren Price, Robert Marks, Kathleen Callaghan, Darolyn Lendio, Elisa Yadao, Kekoa Paulson, James Kawachika, Laureen K.K. Wong, Judge Patrick Yim, Ian Lind, Gordon Pang, Richard Borreca, Pat Omandam, Jim Witty, Rick Daysog, David Shapiro, Paul Alston, Linda Lingle, Bob Awana, Robert F. Miller, Investors Equity Life Insurance of Hawaii, Masayuki Takabuki, John Waihee, Desmond Byrne, Beverly Keever, Terrance Tom, William McCorriston, Beadie Dawson, Calvin Say, Robin Matsunaga, Robin Campaniano, and others to be named upon discovery.