Woo vs. Harmon - Witness David Fairbanks

Cronin, Fried, Sekiya, Kokina & Fairbanks
841 Bishop Street, Suite 600
Honolulu, HI 96813

NEW DISCOVERY (08-04-08): UNDISCLOSED CONFLICTS-OF-INTEREST BETWEEN JUDGE KEVIN CHANG; JUDGE COLLEEN HIRAI; THE FORMER BISHOP ESTATE TRUSTEES (DEFENDANTS IN HARMON’S RICO LAWSUIT); THE COURT-APPOINTED MEDIATORS IN EQUITY 2048 (DAVID FAIRBANKS AND JAMES DUFFY); FEDERAL INSURANCE COMPANY; XL INSURANCE COMPANY; ATTORNEY GENERAL EARL ANZAI; DEPUTY ATTORNEY GENERAL HUGH JONES, STEVEN GUTTMAN, AND OTHERS:

The terms: Dickie Wong's attorney says the agreement resolves pending action against the ex-trustees

The significance: A settlement of the suit would avoid a costly trial scheduled next month

The attorney general`s office has agreed to settle its multimillion dollar lawsuit against the five former trustees of the Kamehameha Schools, according to a lawyer for former trustee Richard "Dickie" Wong.

Another person familiar with the settlement talks said, however, that while there is an agreement in principle it may be some time before it is completed.

In a sworn affidavit filed in the Hawaii Supreme Court yesterday, Wong's lawyer Eric Seitz said he has been informed that the attorney general`s office reached a "global settlement" on Aug. 4 with ex-board members Wong, Henry Peters, Gerard Jervis, Oswald Stender and Lokelani Lindsey that resolves the pending probate, tax and civil litigation against the former trustees.

The plan, which requires approval from the state Probate Court, represents a major milestone in the three-year controversy that has dogged the $6 billion charitable trust. If approved, the deal would avert a costly, one-year trial that is scheduled to begin Sept. 18. Details of the proposed deal remain under seal but Seitz, who represents Wong in the criminal actions brought by the state, said some of the attorney general`s civil claims against the former trustees will be covered by the estate`s $25 million insurance policy with Federal Insurance Co.

It is not clear whether the former trustees will be personally liable for any of the surcharges sought by the attorney general`s office. Seitz added that the insurance company will not cover the outstanding legal bills for the criminal proceedings against his client and Peters, who were indicted by an Oahu grand jury on theft charges. The criminal theft charges have been overturned by Circuit Judge Michael Town, but the state is appealing those decisions. Seitz, who is owed about $20,000 in legal fees for his work in Wong's criminal case, criticized the proposed settlement, saying it uses the insurance company's resources to pay for the civil cases at the expense of the criminal cases involving former trustees Wong and Peters. Until now, the insurance policy had been covering Wong's and Peters' criminal defense costs.

"It's not only unfair but it's an outrage, because it takes away ... the criminal protection that he's entitled to," Seitz said.

Seitz' affidavit was in response to a request by the attorney general's office for records relating to Federal Insurance's payments for Wong's legal costs, a subject of the state's surcharge suit. Seitz argued that state attorneys shouldn't be entitled to the insurance records since they have settled the surcharge suit.

Deputy Attorney General Hugh Jones had no comment on Seitz' affidavit, saying the mediation process is subject to a confidentiality order. Glenn Sato, a lawyer representing Wong in the Probate Court proceedings, also declined comment on Seitz' filing, citing the court's confidentiality order.

An attorney for Stender also had no response, while lawyers for Peters and Jervis could not be reached.

Michael Green, Lindsey's lawyer, took issue with Seitz' affidavit, calling it irresponsible given the sensitivity of the settlement talks.

"The discussions at this point are fragile at best," Green said. "For any lawyer, including Mr. Seitz, to say this case is settled is irresponsible."

A spokesman for the estate said there is no settlement at this time. He declined further comment.

In its lawsuit, the state is seeking multimillion dollar surcharges against the former trustees for allegedly taking excessive compensation, mismanaging the trust's educational programs and incurring more than $200 million in investment losses.

The former trustees have denied wrongdoing, saying the trust is well-run and financially stable.

According to Seitz, the global settlement was reached by all of the parties, including Federal Insurance, during an Aug. 4 closed-door conference with Probate Judge Kevin Chang. Seitz said the plan was placed on the record, making it enforceable.

But others familiar with the talks said that while there may be tentative agreement, there are outstanding issues.

They noted that the attorney general's office and lawyers for the former trustees continue to hold discussions with the court-appointed mediators, David Fairbanks and James Duffy.

Minutes to the Aug. 4 meeting in Chang`s chambers are under a court-ordered seal.

NEW DISCOVERY (07-18-08): Undisclosed professional conflicts of interests with Defendant’s attorney, Bradley Tamm, and attorneys representing parties involved in Harmon’s RICO lawsuit and EQ2048; breach of attorney-client privilege confidentiality rules:

Current members of the Bankruptcy Mediation Panel are listed below. Applications for appointment to the panel will be accepted on a continuing basis.
Ryther L. Barbin, Esq. Louis L. C. Chang, Esq. Robert E. Chapman, Esq. Chuck C. Choi, Esq. Harrison P. Chung, Esq. Charles W. Crumpton, Esq. Nicholas C. Dreher, Esq. James N. Duca, Esq. Don Jeffrey Gelber, Esq. Steven Guttman, Esq. Owen H. Hellekson, Jr., Esq.	Simon Klevansky, Esq. Ronald K. Kotoshirodo, Esq. Colin K. Kurata, Esq. Remy Luria, Esq. Alan J. Ma, Esq. Michael F. Nauyokas, Esq. William J. Plum, Esq. Bradley Tamm, Esq. Susan Tius, Esq. James A. Wagner, Esq. Thomas J. Wong, Esq.
LBR 9019-2. ALTERNATIVE DISPUTE RESOLUTION (a) Purpose and Scope. To facilitate the voluntary resolution of adversary proceedings and contested matters, the Bankruptcy Court is authorized to establish guidelines for court-sponsored Bankruptcy Alternative Dispute Resolution (“BDR”) procedures. This rule does not preclude parties from participating in the alternative dispute resolution (“ADR”) procedures implemented under LR 16.11 or in any other ADR process. (b) Program Administration. (1) Bankruptcy Mediation Committee. The court may establish a Bankruptcy Mediation Committee to formulate guidelines for BDR procedures and the selection, training and evaluation of individuals to serve on a Mediator Panel. (2) BDR Administrator. The court may appoint a BDR Administrator to administer the BDR program and to serve as liaison between the court and the Bankruptcy Mediation Committee. (3) Bankruptcy Mediator Panel. The BDR Administrator shall publish and maintain a list of qualified individuals approved by the court to serve as members of a Bankruptcy Mediator Panel. Individuals selected to serve on the panel may be required to provide a minimum amount of service without compensation. (c) Confidentiality. (1) Except as otherwise provided by this rule or applicable law, any and all communications made in connection with any mediation under this rule shall be subject to Rule 408 of the Federal Rules of Evidence. (2) Mediators and parties shall not communicate with the court about the substance of any position, offer or other matter in the mediation without the consent of all parties, unless such disclosure is required to enforce a settlement agreement or to provide evidence in an attorney disciplinary proceeding, but only to the extent required to accomplish that purpose. (d) Immunity of Mediators. All persons serving as mediators under this rule shall be deemed to be performing quasi-judicial functions and shall be entitled to all of the privileges, immunities and protections that the applicable law accords to persons serving in such capacity.
12/19/2002

03/30/02

Letter from Harmon to Bradley Tamm re Ch 7 Case 99-04339

www.kycbs.net/Claim-Tamm-3-30-2.htm

www.kycbs.net/Claims-Branch-Dunn-Tamm.htm

04/06/02

Fax from Harmon’s attorney, Bradley Tamm, to Steven Guttman, Matt Tsukazaki, and Susan Tius requesting that these parties “SHOULD ALL COOPERATE IN EXCHANGING SUCH INFORMATION FOR OUR MUTUAL BENEFIT AND THE PRESERVATION OF OUR CARRIER’S INTERESTS.” This is indisputable evidence of violation of attorney-client privilege and conspiracy to commit fraud.

www.kycbs.net/Claim-Tamm-4-6-2.pdf

Honolulu mediator Clyde Matsui was among a roomful of lawyers in an antitrust case when a mainland attorney suggested that one reason they were having problems was that Matsui did not know what the lawyer meant when he used the term "oligopoly."

Matsui asked the attorney whether he meant it in the context of the Sherman Antitrust Act, Section 2, as it was used against railroad companies and later the cigarette industry when six or fewer sellers supply 75 percent of more of the market.

Matsui then told the lawyer he wanted to say three things so they would not get distracted again: First, Hawaii has law books; second, Hawaii will soon get computers.

"And No. 3," Matsui recalls that he told the lawyer, "you condescend to me one more time, you're leaving this process, and it might not be through the door."

Matsui, 60, a lawyer who specialized in civil cases, is regarded in the legal community as one of Hawaii's top mediators and arbitrators who are part of a growing industry to help resolve court cases and avoid costly and oftentimes emotionally draining litigation.

His detractors suggest that he can be too blunt and too impatient, but Matsui has handled hundreds of cases and his track record shows major successes.

Matsui's supporters believe that he is effective because he is bright, does his homework, knows how to close deals and focuses on the critical issues. Some also see similarities with Wallace Fujiyama, a prominent Honolulu lawyer who died in 1994 and was known for his unabashed support of local culture and local people.

"He certainly is a local boy, but, like Wally, he's a very sophisticated local boy," said Honolulu lawyer David Fairbanks, also considered one of the best mediators and arbitrators in town.

"I think he is very loyal to the local practice of law. That's not to say people from the mainland are treated differently or less fairly, but Clyde is mindful of his roots and what we have here."

In a recent interview, Matsui acknowledged that he strongly supports Hawaii's lawyers.

He said he finds some pleasure in deflating egos of mainland attorneys who think they are more worldly and wise than Hawaii lawyers "stuck in the middle of the Pacific with law degrees from correspondence schools."

"I love when they come and I find one opportunity to dissuade them from that notion," Matsui said.

At the same time, though, Matsui said the mainland lawyer in the "oligopoly" anecdote later became the most helpful in getting the case settled.

Fujiyama coached Matsui when he was 10 to 12 and played on a youth baseball team. Matsui said he talked a lot, and Fujiyama gave him the nickname "Lippy." He said during trips to the mainland, Fujiyama would insist that Matsui sit next to him and would talk throughout the flight.

His parents, Jiro and the late Betty Matsui, also were huge influences with their "old school" philosophy. Although the father worked as a state research analyst and his mother as a secretary, the money had to be stretched to support Matsui, his two brothers and his grandparents, all living together in McCully.

Still, the parents, like many of their generation, valued education highly and sacrificed to send Matsui to Iolani School.

"They teach you not to disappoint them, no matter what you do. You don't shame the family in a small community like McCully. I guess through the years, you kind of learn what they taught you is not to disappoint yourself."

Matsui's first major mediation led to the settlement of the bitter dispute between the state and the former Bishop Estate trustees in 2000. Matsui's fellow mediators were David Fairbanks and Jim Duffy, now an associate justice of the Hawaii Supreme Court.

Matsui said he currently has about 14 pending arbitration and mediation cases, including one involving a major Mapunapuna landowner suing the city and state over the constant flooding in the area.

The case reveals a commonsense approach Matsui is known to use in settling cases.

Matsui said the parties agreed to deal with the causes -- the tides, the overflow from Mapunapuna Stream and an abandoned waterline that was not plugged. Once the problems are fixed, they can start figuring out liability and money, Matsui said.

For the landowner, the sublessees will suffer less damage, and the property will be worth more, Matsui said. For the city and state, the flooding will end, and the repairs will cap any further liability.

"The whole point is, you put the fix in front of the settlement rather than go mindlessly into the settlement of the case," Matsui said.

Matsui believes that as litigation becomes more expensive, mediation becomes the only "viable alternative."

He recalled that he settled one dispute between a private trust and its lessee, but not before each side spent "several million dollars" in attorneys' fees.

"I firmly believe that (mediation) will be the most important -- and greatly beneficial -- change in American jurisprudence since the early days of common law," he said.

While mediation is a way to save time and money, the parties will still need lawyers.

"I get very irritated when people go for legal services in Hawaii and say, 'Ho, this is a big case. We better get a mainland law firm.'

"To me, the lawyers we have here are exceptional, far better than big-firm lawyers who cannot see the end of the lawsuit and are preoccupied with the fighting."

It was during that "oligopoly" antitrust case, Matsui also recalled, that the mainland lawyers sat at the table, and their Hawaii co-counsels sat behind them along the walls.

He told the group the local counsel should sit at the table and that the mainland lawyers should sit behind them.

When someone took it as a joke and laughed, Matsui told the lawyers he was serious.

"I deal with the (Hawaii lawyers) every day. I deal with you only when you fly into town, and then you fly back to wherever you came from and then I got to deal with (the Hawaii lawyers)," he said.

With their mainland counterparts behind them unable to see their faces, the Hawaii lawyers sat at the table.

After graduating from Hastings College of Law, where he excelled as associate editor of the college's law review, Matsui declined to join Fujiyama's law firm.

Fujiyama, a prominent lawyer, was an outspoken advocate of local values and culture who used to visit Hastings and tell the Hawaii students to return and help the local people.

Matsui said they did not talk for 11 years until a chance meeting in a bar. When Matsui was returning from the restroom, Fujiyama saw him.

The state may have compromised its environmental policy because of pressure from Hawaii Superferry executives who were worried about financing for the interisland ferry project, the state auditor has concluded.

The auditor found that an internal June 2005 deadline imposed by Superferry executives "drove the process" and pushed the state Department of Transportation to bypass an environmental review. The deadline, according to the auditor, was tied to Superferry's agreement with Austal USA to secure financing to pay the Mobile, Ala.-based shipbuilder to construct two high-speed ferries.

The federal Maritime Administration, which approved a $140 million loan guarantee for ferry construction, wanted confirmation that no environmental assessment of harbor improvements would be required because of the risk that environmental concerns could jeopardize port access. But Maritime Administration officials told the auditor they did not set the June 2005 deadline as a condition of the loan guarantee.

"In the end, the state may have compromised its environmental policy in favor of a private company's internal deadline," state auditor Marion Higa concluded. "It remains to be seen whether these decisions will cost the state more than its environmental policy."

The performance audit was required by state lawmakers as part of a law passed in special session last fall that allowed Superferry to resume operations while the state conducts an environmental impact statement. Legal challenges and public protests had halted ferry service after the state Supreme Court ruled in August that the state's decision to exempt $40 million in state harbor improvements from environmental review was in error.

The auditor's main finding was that the June 2005 deadline was not imposed by the federal government, but related to an agreement between Superferry and Austal. The audit questions whether the state did "sufficient due diligence to verify whether the deadline was valid for the reasons Hawaii Superferry Inc. claimed."

John Garibaldi, Superferry's chief executive officer, said yesterday that Superferry has consistently portrayed the June 2005 deadline as necessary for both federal and private equity financing. He described the agreements with the Maritime Administration, Austal USA and primary investors J.F. Lehman & Co. as interrelated.

"They were all dependent upon each other. No one stood on its own," Garibaldi said. "I think that's what we tried to express to people."

Garibaldi declined to comment on other findings in the audit because he had not yet seen a copy.

The auditor's descriptions of the chain of events that led the state to exempt the project from environmental review in February 2005 are similar to reports in The Advertiser in September and January.

The auditor and the newspaper received many of the same documents, which were screened by the Lingle administration for attorney-client privilege and executive privilege before being released. The administration is preparing a privilege log for the auditor and the newspaper to describe the documents that have been withheld. The Advertiser requested the documents under the state's open-records law.

Most significantly, the auditor — like The Advertiser — emphasized a late December 2004 meeting at the governor's office that included the governor's then-chief of staff Bob Awana, department officials, and Superferry executives.

Staff in the department's harbors division had wanted to require a statewide environmental assessment of the project and to get Superferry to install a stern ramp on the vessel to give it more flexibility at Kahului Harbor on Maui. But Superferry executives, according an account by a department staffer, told the state that anything but an exemption was a deal-breaker and that they would not install any ramps.

"Decisions made: We need to pursue EXEMPTION; and HSF will not provide any ramps on vessel," one department staffer told colleagues afterward in an e-mail.

The auditor concluded that department e-mails showed a decision was made at this meeting, although who made the decision is not revealed.

"Current and former department officials and employees who worked on the ferry project were either unable to recall who made the decision at that meeting or chose to invoke executive privilege when asked who directed the team," the auditor found.

The department, in its written response to the audit, rejected any inference that a decision was made at the governor's office directing the department to pursue an exemption. The auditor countered that the department's e-mails about the meeting "are self-explanatory."

"Ultimately, a decision involving the governor's office was made that directed the 'ferry project team' to pursue scenarios that would exempt the ferry harbor work from environmental review," the auditor found.

Awana, who resigned last year, told The Advertiser in January that he had no role in the decision. Barry Fukunaga, who was then the department's deputy director of harbors and is now Gov. Linda Lingle's chief of staff, has said he made the decision in consultation with his construction and engineering staff and then-department director Rod Haraga. The department also consulted with the state Office of Environmental Quality Control and county planning agencies.

Fukunaga told The Advertiser in writing last year that he did not discuss his deliberations or his eventual decision with Lingle, Awana or state Attorney General Mark Bennett.

The audit is also similar to The Advertiser's reporting last September on the Maritime Administration's loan guarantee for Superferry. Maritime Administration officials told the auditor that loan guarantees are typically exempt from environmental review because they just provide financing for ship construction. The vessels typically use port facilities already in place.

Maritime Administration officials told the auditor that harbor improvements for Superferry could have triggered an environmental assessment that could have limited ferry access to ports. So the Maritime Administration added a condition that Superferry provide confirmation that no environmental assessment was required.

"MARAD's position was that it was not willing to finance the construction of any vessel that might be unable to operate because it has no port," the auditor found.

The audit recommends that the Legislature empower a state agency to enforce environmental review laws and require agencies to update exemption lists every five years. The auditor found that the public has little involvement in the exemption process other than the right to file a lawsuit to challenge an exemption.

Higa had complained to lawmakers that she missed a March deadline for a preliminary draft of the audit because of significant delays in obtaining documents from the Lingle administration. Higa repeated those complaints in the audit and said her staff would be preparing a second phase of the audit for a later report.

Higa described the Lingle administration's cooperation as "slow and incomplete, at best." The department called that description "wholly untrue" and said any delays were based on requests by Higa that the attorney general found were "unreasonably broad in scope."

The department chose not to comment on many of Higa's conclusions. Mike Formby, the department's deputy director of harbors, said last night that the administration's wants the opportunity to review the second phase of the audit.

I think what we wanted to do was reserve the right to see the full report, because it's really risky to look at half the report and respond knowing that they're out there still doing field investigation, interviews, reviewing documents," Formby said. "And basically, they look at the response you gave, and they go out and look for a way to rebut your response."

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.