David Farmer vs. Harmon - Witness Tom Enomoto

Hawaii developer and “behind-the-scenes power broker” in the John Waihee administration.

Campaign laws could have
been violated and it could
have lost its tax-exempt status

The documents -- discovered last year in the office of former trust manager Namlyn Snow -- include binders containing detailed logs of the attorneys' contributions to the Ige campaign, as well as photocopies of canceled checks to pay for the contributions.

Each attorney or firm contributed $250, for a total of $1,250. All of the checks were received by the Ige campaign on Aug. 17, 1994, and were deposited together in the campaign's bank account on the following day, suggesting that the contributions were bundled by Bishop Estate representatives.

Trust attorneys familiar with the documents said it was clear that Snow, who died last year, had a part in obtaining the donations.

On Monday, the Star-Bulletin reported that an investigation by the attorney general's office had found that the estate engaged in a massive attempt to influence legislation and direct tens of thousands of dollars to isle politicians during the tenure of previous board members Richard "Dickie" Wong, Henry Peters, Lokelani Lindsey, Gerard Jervis and Oswald Stender.

The findings of the attorney general's inquiry, along with documents relating to the law firms' contributions to the Ige campaign, were turned over to the state Campaign Spending Commission last week, which has opened a separate investigation of the trust.

Bob Watada, executive director of the state Campaign Spending Commission, also declined to discuss the law firms' contributions to Ige. But speaking generally, Watada said bundling of contributions could be seen as a campaign contribution made under a false name, which is illegal.

Federal law also bars tax-exempt trusts from making campaign contributions or taking part in a political election. Violations could lead to the loss of a charity's tax-exempt status.

The latest disclosure comes as Ige is facing misdemeanor charges for alleged campaign finance abuses. The charges stem from an alleged campaign laundering scheme involving Bishop Estate's architecture and engineering firms. Ige has pleaded not guilty, and a trial is scheduled for next month.

Birney Bervar, Ige's attorney, declined comment on the latest development involving his client's campaign finances.

Attorneys with the Ashford & Wriston and Dwyer Imanaka firms had no response, while Bill Yuen of the Ching Yuen firm said he could not recall the circumstances of the contributions.

Nakamura, who does civil litigation work for the trust at the law firm of Rush Moore Craven Sutton Morry & Beh, said she remembers purchasing the fund-raiser tickets and attending the event with her parents. Nakamura, who lives in Ige's district, added that she may have purchased the tickets with the assistance of Bishop Estate personnel.

Heihre, formerly known as C. Michael Hare, said his donation to Ige was a personal contribution on his own checking account. But Heihre, a partner in the Cades Schutte Fleming & Wright firm and former chairman of the state Judicial Selection Commission, said he could not recall if he discussed his contribution to Ige with Kamehameha Schools personnel.

Each of the law firms that contributed to the Ige campaign has billed the trust tens of thousands of dollars each year for legal work. Last year, the estate paid the Cades Schutte firm about $1.8 million.

... Since 1987, the year in which the trustees were forced to make public the amount of their fees, they have received in excess of $40 million. Fees paid over the past three years have averaged $900,000 per trustee, per year.

The distracting thing about this piece of the mosaic is that people made responsible for preserving $5 to $10 billion of wealth, and carrying out an educational mission that is as important as it is unique, arguably ought to be highly paid.

We think the more important issue is the credentials of the specific individuals who are being paid these large sums of money. Given the estate's ability to pay big-league compensation, one would expect to find an array of phenomenally talented trustees. Yet somehow, with the exception of Oswald Stender, the Bishop Estate trustees simply don't measure up to the job.

Many people are under the impression that the justices of Hawaii's Supreme Court are legally obligated to select Bishop Estate trustees because that's what the princess put into her will. Not so. Clearly, they don't have to do it. The justices acknowledged as much in 1989 when they refused the request of a woman named Sadie Smith to pick the trustees of her charitable trust.

Acknowledging the obvious impropriety of making trustee selections in their official capacity, the justices tell us they are acting as individuals when they select Bishop Estate trustees. This is a distinction without meaning. To be blunt, it's a dodge.

The reality is that Bishop Estate trustees are selected by five individuals who through no coincidence are also justices of the state Supreme Court. The further reality is that these same five individuals are virtually certain to be called upon to decide cases involving the trustees they select (the estate has been before the Supreme Court at least 18 times in the last 13 years). At a minimum, this creates the appearance of a conflict.

Some people wonder why the justices would stretch logic and judicial ethics to the breaking point just to do something they clearly don't have to do, and then do it poorly.

Can we be blamed for questioning the justices' collective judgment in other areas? After all, if the justices exercise questionable judgment in their individual capacity when selecting trustees, why shouldn't we expect equally questionable decisions in their official capacity? Worse, if selection of trustees is influenced by politics (as we believe it is), why shouldn't the public assume that judicial decisions are equally political?

It is imperative that the Supreme Court enjoy the trust and respect of the entire community. According to Democratic Rep. Ed Case, "The Supreme Court's trustee appointment role has the real potential of undermining and perverting our judicial system, starting with the judicial selection process. Getting out of the Bishop Estate trustee selection business is the single biggest thing the court could do to enhance the court's standing with the public." We agree.

More than 100 years have passed since Mrs. Bishop's death, and if she were here today, she unquestionably would decide some things differently. For example, the princess named five men, who happened to be haole, as the initial trustees of her trust. Does that mean she wanted all future trustees to be of that same make up? Of course not.

In fact, the justices and trustees have themselves occasionally ignored the language of the will -- perhaps with good cause. For example, the will says the schools should be primarily vocational, and only secondarily college preparatory. That's changed. The will also specifically expresses a desire that the schools benefit orphans and others in indigent circumstances, and makes no mention of admissions based on academic ability. Again, the will's instructions have been modified to deal with the demands of the time.

The will specifically provides that the trustees must be "persons of the Protestant religion," and no court case has said that such a requirement is invalid. Yet the current justices of Hawaii's Supreme Court, acting as individuals and not as a court, have indicated that they will ignore the will in this respect when selecting new trustees.

Taking refuge in the literal words of the will is more of an excuse than a reason.

To understand why each member of the court would insist upon doing something that we consider unethical, it helps to consider the circumstances of their own selection.

The Judicial Selection Commission is an attempt to take politics out of the selection of judges and justices. A "reform" idea out of the 1978 Constitutional Convention, the commission is a bipartisan group that reviews potential applicants and submits a list to the governor for selection. Previously, the governor alone nominated judges.

One of the most powerful duties of the commission is to decide -- by itself -- whether any judge, or justice, will be retained for another term of 10 years.

We believe that most of the people who served on the commission over the years have been public spirited, well intentioned and capable. But no process, no matter how well designed, will work properly when individuals are determined to manipulate it. For instance, we believe that during the period John Waihee was governor it was common for him to confer ahead of time with several commission members who then would strive to get a predetermined name on each list.

In the words of someone who served on the commission during those years, "If a few members decided ahead of time to do their best to get a particular name on a list, they probably were able to do that. No one is so naive as to think there isn't a certain amount of horse trading going on."

According to a prominent Democratic politician, "The commission always seemed to have at least a few people whose first and foremost allegiance was to Governor Waihee. With people like Warren Price, Tom Enomoto, Michael Hare and Gerry Jervis on the commission, it was easy to get one particular name on a list. The thing, though, is that it already had been determined who was going to get the appointment."

This was the era when the commission put 36-year-old Sharon Himeno on a list for the Supreme Court, from which she was selected by Governor Waihee. It bothered some people that Himeno was Attorney General Warren Price's wife and that she wasn't considered an exceptional lawyer.

But the bigger concern for many was an allegation of a serious ethical lapse in connection with a family corporation's apparent $3 million profit on a back-to-back purchase/sale of a mainland golf course involving Himeno's client, the state Employees' Retirement System. Her nomination to the state's highest court seemed to be based on the fact that she and Price had directed their good friend John Waihee's gubernatorial campaign.

When Judge Walter Heen was interviewed as an applicant for the Hawaii Supreme Court, he was asked by Hare "what kind of person" he might select as Bishop Estate trustee, if he ever had the opportunity to do so. According to David Fairbanks, a current member of the commission, such a question, if asked, would have been "totally improper."

That this question was asked of a candidate for the Supreme Court, by a member of the Judicial Selection Commission, illustrates how the trustee-selection power of justices played a significant role (with respect to some members of the commission) in the consideration of candidates for the state's highest court.

Hare's law firm has been paid more than $10 million in legal fees by the Bishop Estate since 1992. It's an excellent firm, but we find it hard to believe that's the reason it was selected by the trustees.

When it comes to its legal armament, few can match the arsenal that Kamehameha Schools/Bishop Estate can bring to the courtroom.

The $10 billion charitable trust -- the state's largest private landowner -- employs an army of well-connected attorneys that includes a former governor, two former state attorneys general and the former chairman of Hawaii's Republican Party.

The estate's outside legal team also lists House Judiciary Chairman Terrance Tom and Bill McCorriston, a former assistant U.S. attorney who has represented former Mayor Frank Fasi and was on the city Charter Commission.

"With this kind of legal cannon pointed at you, most people would run for cover," said Beadie Dawson, attorney for Na Pua a Ke Ali'i Pauahi, which has criticized trustees' management of Kamehameha Schools.

The estate maintains that it hires attorneys for their expertise. Waihee and Tom were hired because they are good attorneys and not because of their political ties, the estate said.

McCorriston, who is representing the estate in Attorney General Margery Bronster's investigation of the trust, added that the trust is like any major corporation that hires lawyers to represent its diverse legal interests.

For instance, for leasehold and litigation matters, the estate relies on Mike Hare and the Cades Schutte Fleming & Wright law firm. The Verner Liipfert firm conducts much of its Washington, D.C., lobbying, while McCorriston's firm, McCorriston Miho Miller Mukai, has done mostly land-use work, McCorriston said.

Bishop Estate trustee Gerard Jervis considered joining the McCorriston Miho firm several months ago as an outside counsel. But Jervis said he decided against the move because of his heavy workload with the estate.

Jon Miho, one of the firm's founders and a friend of Jervis', added that if Jervis had joined McCorriston Miho, it would have made it more difficult for the firm to do work for the estate.

Jervis also shares close political ties with Washington, D.C.-based Verner Liipfert through its local partner Waihee. Jervis served on the Judicial Selection Commission during the Waihee years.

Verner Liipfert -- whose mainland offices lists former U.S Treasury Secretary Lloyd Bentsen, former Republican presidential candidate Robert Dole and former Texas Gov. Ann Richards on its roster -- also employs prominent labor-relations attorney and former Hawaii GOP head Jared Jossem and Renton Nip, who served as state Land Use Commission chairman during the Waihee years, in its local office.

Former Attorney General Warren Price and his successor, Robert Marks, through their firm serve as outside counsels to Verner Liipfert and have conducted legal work for the estate.

To be sure, the legal work for the estate can be lucrative. According to its tax filings, the estate's nonprofit unit paid nearly $4.2 million in legal fees during the year ending June 30, 1996.

More than half, or $2.75 million, went to Cades Schutte, which does the legal work for the estate's leasehold conversions and some of its real-estate litigation.

Waihee's firm, Verner Liipfert, earned $844,245, while the Ching Yuen & Morikawa firm -- whose partners include longtime Waihee friend Bill Yuen -- was paid $580,603.

The estate paid McCorriston Miho $223,079 in legal fees for the fiscal year 1995 and another $235,050 for the 1993 fiscal year.

Randall Roth, University of Hawaii law professor and co-author of a scathing report that helped launch Bronster's investigation of the estate, criticized the large amount of legal fees that the estate pays each year -- especially since it is a nonprofit organization.

While the estate's attorneys are among the top in town, Roth believes that political connections probably play a key role in who gets selected for its legal work.

"This strikes me as an exorbitant amount of money for a charity to be spending on legal fees, especially when it has its own legal department," said Roth. "We can only wonder if the money is well-spent."

And the spending doesn't include legal bills wracked up by Bishop Estate's for-profit subsidiaries.

The estate declined to disclose the amount of legal fees that its for-profit units incur each year. But recent news reports said the estate spent $500,000 to defend an $86.7 million lawsuit that film producer Frederick Field filed in 1995 over soured real-estate investments on the mainland.

An estate subsidiary, Royal Hawaiian Shopping Center Inc., wracked up at least $500,000 in legal bills in the McKenzie Methane Corp. legal battle.

The estate sued the Houston-based natural gas company's founder Mike McKenzie in 1992, alleging that fraud and mismanagement led them to lose some $60 million in the venture.

The company filed for bankruptcy protection in 1994 and was sold to the estate, which now says it has been able to recoup much of its losses in McKenzie Methane.

McKenzie denied the estate's fraud allegations, saying its hardball tactics have made his life a legal nightmare.

He said the estate wrongly accused him of stealing money from Hawaiian children and that the estate's attorneys hired private investigators -- two former FBI agents -- to harass him.

Suer of estate finds it
tough to hire a lawyer

When Bobby Harmon filed a wrongful termination suit against Bishop Estate in February, he couldn't find a lawyer to take his case.

The former president of the estate's in-house insurance company, P&C Insurance Co., was turned down by eight local law firms because they either did business with the estate or wanted to, said John Goemans, Harmon's attorney.

Some were just afraid to oppose them, he said.

"The reality is that it's virtually impossible to take on the estate," said Goemans.

Harmon sued the estate after the estate sued him for releasing confidential information.

The estate said Harmon was fired for cause and that the firing was upheld by a state Department of Labor review, which denied him unemployment benefits.

Documents released by Harmon contained false and defamatory allegations, the estate has also said.

A Circuit Court judge recently ruled that Harmon violated a court order not to disclose estate information. The court also said that Harmon did not act in bad faith since he was acting on advice of his lawyer.

For Goemans, the Harmon case underscores the estate's clout in Hawaii's legal community and the difficulties of opposing it. Goemans said his client has run up about $20,000 in legal bills.

"Few have the capability of resisting a $10 billion behemoth with an unlimited supply of lawyers who have a clear modus operandi of deluging opponents with paper," Goemans said.

By Rick Daysog, Star-Bulletin

Local hotel entrepreneur Simon Bebb recently lost a $2.7 million deficiency judgment related to loans he took out to buy two Waikiki hotels in the 1990s.

Bebb, who was not present at the February hearing, said he was surprised by the judgment as he has counterclaims of almost $5 million against creditor GE Capital Hawaii Inc.

"We have counterclaims almost double this and we agreed that they would leave us alone if we would leave them alone," Bebb said.

GE Capital's attorneys at Case Bigelow & Lombardi did not respond to PBN's requests for comment.

The judgments, one for $395,117 and the other for $2.3 million, came more than two years after foreclosure proceedings began and stem from money Bebb and his then partner, Thomas Enomoto, borrowed from GE Capital to buy the Continental Surf and the majority of the rooms in the Kuhio Village Resort towers, across Kuhio Avenue.

As of Oct. 15, 2000, GE Capital was owed more than $12 million, according to a suit the credit company filed in 1st Circuit Court in December 2000.

After foreclosing in March 2001, GE Capital partnered with American Property Management Corp. of San Diego to form Hawaii-based Continental Surf LLC, which operates the entire Continental Surf and 166 rooms of the 212-unit Kuhio Village Resort towers, said Richard Emery, president of Hawaii First Inc., the condominium managing agent for Kuhio Village Resort towers.

"Both are running at 90 percent occupancy," said Guy O-Nan, general manager of the Continental Surf hotel and the hotel portion of the Kuhio Villages Resort. "We've been operating since September 2001 and it was a really bad clientele at that time. Now we do Japanese and Korean tours and snowbirds from Canada as well as a lot of business from the University of Hawaii. Their dorms were full so we took their overflow."

Bebb is also working to convert the former Diamond Head View hotel into condos after the former lessee stopped making its payments late last year.

Under threat of foreclosure from Nevada-based creditor Sunset Management LLC, Bebb said sales of the units will bring about $2.4 million, more than twice what he paid for the property in 1994.

Tom Enomoto, a Hawaii developer, is returning shopping, business and professional centers to lenders in order to avoid foreclosure.

Enomoto renegotiated about $50 million in loans with First Hawaiian Bank and GE Capital Hawaii, but he still wasn't able to offset cash flow problems he encountered due to the state's slow economy in the 1990s.

Properties going back to lenders include Azeka Place and Kihei Professional Plaza on Maui, in addition to vacant land and a warehouse on Oahu.