Woo vs. Harmon - Witness Hugh Jones

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

HUGH JONES

Deputy Attorney General, State of Hawaii.

Office of the Attorney General
425 Queen St., Rm 317
Honolulu, HI 96813

Website: www.hawaii.gov/ag/

~ ~ ~

NEW DISCOVERY (09-07-08):

EARL I. ANZAI
Attorney General of Hawaii

DOROTHY D. SELLERS
HUGH R. JONES
Deputy Attorneys General
425 Queen Street
Honolulu, Hawaii 96813

Attorneys for the Beneficiaries

IN THE CIRCUIT COURT OF THE FIRST CIRCUIT

STATE OF HAWAII

In the Matter of the Estate

BERNICE P. BISHOP,

Deceased.

EQUITY NO. 2048 KSCC

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REPORT OF ATTORNEY GENERAL CONCERNING MAY 7, 1999 ORDER

The May 7, 1999 order regarding orders to show cause requires the former trustees immediately to resign offices and directorships in the trust’s subsidiary and affiliated organizations... P&C Insurance Company, Inc., is a captive insurance company, the sole stock holder which is Pauahi Holdings Inc.

The Attorney General respectfully invites the court’s attention to the annual report publicly filed on March 28, 2000 by P&C (Ex. 1). The annual report lists Henry H. Peters as a director. The Attorney General is unable to determine whether the listing is incorrect; or whether Peters remains a director in violation of court order. The Attorney General’s several inquiries of the trust concerning this matter remain unanswered despite the passage of three months (Ex. 2).

DATED: Honolulu, Hawaii, May 5, 2000

Respectfully submitted,

<s> DOROTHY SELLERS
Deputy Attorney General

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DECLARATION OF DOROTHY SELLERS

DOROTHY SELLERS hereby states:

1. I am a deputy attorney general, and I am familiar with the case records and files in Hawaii First Circuit Court Equity No. 2048 going back to approximately August 1997.

2. I have personal knowledge of the facts contained in this declaration and am competent to testify to them.

3. Exhibit 1 is a true and correct copy of the annual report of P&C Insurance Company for the year ending Dec. 31, 1999, filed in late March 2000.

4, Exhibit 2 is a true and correct letter of my February 15, 2000 letter to counsel for the trust asking for verification that Henry Peters had resigned from P&C and the effective date of the resignation. I have never received a response to that letter.

5. On March 13, 2000, deputy attorney general Hugh Jones wrote trustee Libkuman (with a copy to general counsel Colleen Wong) about a number of matters. The final two paragraphs of that letter are:

Finally, we also requested some time ago copies of Henry Peters’ letters of resignation from directorships and ex officio positions, and specifically from P&C Insurance Company. Although the resignation letters of the other trustees were filed with the Court, Peters’ were not.

Please respond to these requests before March 31, 2000. Thank you.

I DECLARE UNDER PENALTY OF PERJURY THAT THE FOREGOING IS TRUE AND CORRECT.

DATED: Honolulu, Hawaii, May 5, 2000

www.kycbs.net/Doc-EQ2048-PC-Peters-5-5-0.pdf

http://www.kycbs.net/ChubbGroup.htm

http://www.kycbs.net/Confessions.htm

http://www.kycbs.net/Broken-Trust-Book.htm

http://www.kycbs.net/JUSTICE.htm

http://www.kycbs.net/Lost-Generations.htm

http://www.kycbs.net/MarshBirds.htm

http://www.kycbs.net/RICO-BH.htm

http://www.kycbs.net/Whistler.htm

http://www.kycbs.net/XL.htm

http://www.kycbs.net/Claims-Branch-Chubb.htm

http://www.kycbs.net/Claims-Branch-Kamehameha.htm

http://www.kycbs.net/Claims-Branch-Kessner-Duca.htm

http://www.kycbs.net/Claims-Branch-Marsh-McLennan.htm

http://www.kycbs.net/Claims-Branch-P-C.htm

http://www.kycbs.net/Claims-Branch-XL.htm

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NEW DISCOVERY (06-24-08):

Final Decree entered

Date: Tuesday, June 24, 2008 8:17 PM

From: "Steven Guttman" <sguttman@kdubm.com>

To: "Bobby Harmon" <bobby_n_harmon@yahoo.com>, "David Farmer" <farmerd001@hawaii.rr.com>, "Michael Mukasey" <AskDOJ@usdoj.gov>, "Kevin Chang" <sa@hid.uscourts.gov>, "Robert Faris" <hib@hib.uscourts.gov>, "Barry M. Kurren" <richlyn_young@hid.uscourts.gov>, "Carol K. Muranaka" <ustp.region15@usdoj.gov>, "J P Schmidt" <insurance@dcca.hawaii.gov>, "Janet Kamerman" <HONOLULU@FBI.GOV>, "Mark Bennett" <hawaiiag@hawaii.gov>, "Hugh Jones" <hugh.r.jones@hawaii.gov>, "Linda Lingle" <governor.lingle@hawaii.gov>

Cc:

"Mediation Center of The Pacific" <mcp@mediatehawaii.org>, "Sheryl Nicholson" <office@acluhawaii.org>, "Robert Bruce Graham" <bgraham@awlaw.com>, "James Wriston" <jwriston@awlaw.com>, "Andrew Winer" <winer@pacificlaw.com>, "James Cribley" <jcribley@caselombardi.com>, "Lawrence Goya" <hawaiiag@hawaii.gov>, "Pension Benefit Guaranty Association" <participant.pro@pbgc.gov>, "James B Nicholson" <jamesbnicholson@aol.com>, "Executive Office for U.S. Trustees" <ustrustee.program@usdoj.gov>, "Office of Inspector General US Dept of Justice" <oig.hotline@usdoj.gov>, "George Will" <georgewill@washpost.com>, "Haunani Apoliona" <info@oha.org>, "Leroy Colombe" <lcolombe@ckdbw.com>, "Scott Helman" <shelman@globe.com>, "Bob Nichols" <bob.bobnichols@gmail.com>, "Laura Thielen" <dlnr@hawaii.gov>, "Barry Taniguchi" <communications@hcf-hawaii.org>, "Paul Achitoff" <honoluluoffice@earthjustice.org>, "Laurie Bennett" <info@muckety.com>, "Dave Shapiro" <volcanicash@gmail.com>, "Gail Kim-Moe" <Gkim.moe@gmail.com>, "Marshall Chriswell" <mc@whistleblowers.org>, "Greg Palast" <palast@gregpalast.com>, "Dee Jay Mailer" <ksinfo@ksbe.edu>, "Laser Haas" <laserhaas@msn.com>, "Michael Moore" <mike@michaelmoore.com>, "Texas Observer" <editors@texasobserver.org>, "Brian W. Bisignani" <bbisignani@postschell.com>, "Aon Insurance Managers" <mike_coulter@agl.aon.com>, "William Burgess" <hwburgess@hawaii.rr.com>, "Brian E. Schatz" <teamschatz@gmail.com>, "Patricia Case" <pattycase@aol.com>, "Cheryl Nakamura" <CNakamura@rmhawaii.com>, "Bill Yuen" <billyuen@cymlaw.com>, "Randall W. Wulff" <rwulff@wqsadr.com>, "Karen Spiller" <karen.spiller@baesystems.com>, "Andrew Killgore" <akillgore@wrmea.com>, "Patrick Leahy" <senator_leahy@leahy.senate.gov>, "Pamela A. McCullough" <HONOLULU@FBI.GOV>, "James Duke Aiona" <ltgov@hawaii.gov>, "Ken Conklin" <ken_conklin@yahoo.com>, "William H. Donaldson" <enforcement@sec.gov>, "Ian Lind" <diary@ilind.net>, "Jim Terrack" <tnthawaii@aol.com>, "Andrew Walden" <hfpeditor@email.com>, "All Senators" <sens@Capitol.hawaii.gov>, "All Representatives" <reps@Capitol.hawaii.gov>, "Thomas Fitton" <info@judicialwatch.org>, "Stew Webb" <stewwebb@stewwebb.com>, "Judson Witham" <jurisnot@yahoo.com>, "J C Shannon" <Hapa1234@aol.com>, "Jeff Biener" <jeffandmary@ozarkopathy.org>, "V K Durham" <vkdtdht@pionet.net>, "Richard Grove" <Richard@8thEstate.com>, "Bradley Tamm" <btamm@hawaii.rr.com>, "Susan Tius" <STius@rmhawaii.com>, "Paul Alston" <palston@ahfi.com>, "John Goemans" <wip@kamuela.com>, "William K Slate" <Websitemail@adr.org>, "Lissa Andrews" <landrews@rmhawaii.com>, "John D. Finnegan" <info@chubb.com>, "Terry Mullen" <tmullen@johnmullen.com>, "Margery Bronster" <info@bchlaw.net>, "Michael N. Tanoue" <mtanoue@paclawgroup.com>, "Neil Ambercrombie" <Neil.Abercrombie@mail.house.gov>, "Lyn Flanigan Anzai" <lflanigan@hsba.org>, "Lorraine Inouye" <seninouye@Capitol.hawaii.gov>, "Samuel P. King" <leslie_sai@hid.uscourts.gov>, "Arthur Rath" <imua@spamarrest.com>, "Randall Roth" <rroth@hawaii.edu>, "Rick Daysog" <rdaysog@honoluluadvertiser.com>, "Jim Dooley" <jdooley@honoluluadvertiser.com>, "Robin Campaniano" <aigh001@aighawaii.com>, "Blossom Tong" <blossom.d.tong@marsh.com>, "Sammye Richardson" <sammyerichardson@yahoo.com>, "Daniel Hopsicker" <madcownews@gmail.com>, "Richard L Righter" <righterwmx@aol.com>, "Dirk Kempthorne" <webteam@ios.doi.gov>, "Jeffrey Sia" <Jeff.Sia@excite.com>, "Jim Babka" <downsizer-dispatch@downsizedc.org>, "Truth" <truth@grandecom.net>, "J. C. Jones" <JCJJONES@aol.com>, "Dane Field" <danefl@gucl.com>, "Jeffrey Watanabe" <jwatanabe@wik.com>

Message contains attachments

LT var 6-24-08.pdf (112KB)

Please see attachment

STEVEN GUTTMAN

Kessner Umebayashi Bain & Matsunaga
220 South King Street, Suite 1900
Honolulu, Hawaii 96813

Tel. 808.536-1900

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NEW DISCOVERY (02-09-08): Kamehameha Schools made a “confidential” settlement agreement with the plaintiff in the John Doe vs. Kamehameha Schools case, which my former attorney, John Goemans, Esq., says, according to what he has learned from the IRS, violates the rules for a non-profit charitable trust:

February 9, 2008

$7M

An attorney involved in a challenge to Kamehameha Schools' Hawaiians-only policy reveals the amount of a settlement

By Ken Kobayashi, Honolulu Star-Bulletin

Kamehameha Schools made the first move to settle a legal challenge to their admissions policy giving preference to native Hawaiians and later agreed to pay $7 million, a lawyer involved in the case said yesterday.

John Goemans, an attorney for an unnamed non-native Hawaiian student who filed a lawsuit contesting the policy, said the charitable trust offered for the first time to talk about an out-of-court settlement last May, just days before the U.S. Supreme Court was to decide whether to hear the case.

Goemans, a former Big Island attorney recuperating in Florida from heart surgery, and Sacramento, Calif., lawyer Eric Grant, the lead attorney, represented the unnamed student and his mother.

"They (the schools) approached Eric and said we wanted to settle and we have to settle by Friday morning," when it was believed the high court was to make a decision about accepting the case, Goemans said.

He said it appeared the high court would accept their appeal of an 8-7 decision by the 9th U.S. Circuit Court of Appeals that upheld the policy.

"They (the schools) were worried about losing in the Supreme Court," Goemans said.

Goemans said he did not know how Grant and the Kamehameha Schools arrived at the $7 million figure.

The hotly disputed federal civil rights lawsuit caused a firestorm of controversy among Kamehameha Schools supporters who believed the challenge struck at the more than century-old admissions policy and the heart of the charitable trust's mission to educate children of Hawaiian ancestry.

The confidential settlement was announced on May 14. Those connected with the case repeatedly refused to disclose the terms.

Goemans said he was disclosing the amount because he said he recently learned from Internal Revenue Service officials that Kamehameha Schools, a tax-exempt charitable trust, cannot keep the figure confidential.

"Because exempt organizations operate in the public good, you got to report all your expenses with particularity, and you cannot keep information relative to those expenses confidential," he said. "It's in the public interest to have full disclosure."

Ann Botticelli, Kamehameha Schools spokeswoman, said yesterday the settlement contained a confidentiality clause.

"We intend to honor the terms, and we will not be discussing the settlement or John Goemans' assertions," she said.

Grant said yesterday he had no comment.

Kamehameha Schools, a multibillion-dollar charitable trust and the state's largest private landowner, was established under the 1883 will of Princess Bernice Pauahi Bishop. It educates more than 6,700 students at its flagship campus at Kapalama Heights, two other campuses on Maui and the Big Island, and 31 preschools throughout the state.

Senior U.S. District Judge Alan Kay upheld the school's Hawaiians-first policy, but a panel of the appeals court in San Francisco ruled 2-1 that the practice violated federal civil rights laws. That decision triggered statewide protests and marches by school supporters.

Later, a larger appeals court panel voted 8-7 to uphold the policy.

It was an appeal by Grant of that 8-7 ruling that was on the doorsteps of the U.S. Supreme Court when the settlement was announced.

At the time, school officials indicated that the settlement calling for the dismissal of the lawsuit leaves intact the appeals court's 8-7 decision upholding the admissions policy.

But the dismissal does not guarantee that another lawsuit might surface and make its way to the high court, although it would first have to go through the federal trial and appeals courts, where the 8-7 ruling would be considered to be binding on the issue. But even if those who file the new lawsuit lose on those two levels, they could still ask the high court to review the case.

Honolulu attorney David Rosen said he has plaintiffs for a lawsuit to challenge the admissions policy. He said the settlement does not affect his case. Rosen said he expects the suit will be filed this year.

Goemans said Grant received 40 percent, or $2.8 million of the $7 million. Goemans said he is preparing to file his own lawsuit seeking to recover a "reasonable percentage" of the $7 million for his work in the case.

Goemans said he found the unnamed student and arranged for Grant to be the attorney for the student and his mother.

"I put the whole thing together," Goemans said. "But for me there would not have been a $7 million payment."

The student never was admitted to Kamehameha Schools because his case was pending. He has since graduated from high school and had been attending college, Grant said last year.

http://starbulletin.com/2008/02/09/news/story02.html

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February 9, 2008

Amount of settlement
raises critical concern

By Robert Shikina, rshikina@starbulletin.com

Supporters and critics expressed surprise yesterday at the $7 million Kamehameha Schools paid a student to settle a lawsuit disputing its Hawaiians-first admission policy.

One Kamehameha Schools alumnus says disclosure of the settlement with the anonymous, non-Hawaiian student will prompt questions among Hawaiians.

"I'm not happy with $7 million," said Kamehameha Schools alumnus Jan E. Hanohano Dill. "Unfortunately, that's a lot of money, and it's going to create a lot of questions in the Hawaiian community whether it was right or wrong and to continue."

Dill, also a board member of Na Pua a Ke Ali'i Pauahi, a nonprofit group whose members include students, parents, and alumni of Kamehameha Schools, said he continues to support the school's decision.

"I don't know the details, and I think that's something that has to be cleared," he said. "You settle because you want to avoid costs that would be incurred as you go forward."

He added, "I have to believe that they understood that this was something good for the Hawaiian people. ... It will be clear as things unfold whether that was true."

Dill, who is also president of the nonprofit Partners in Development Foundation, said the admissions policy must eventually be addressed and that the settlement avoids this case but does not stop other cases.

Marion Joy, former vice president of Na Pua, called the settlement a "misuse of trust funds."

"The trust is continually going to be challenged," she said. "This is not going to be the last. ... As far as settling for the particular lawsuit, it's not in the best interests of the beneficiaries (of the 1883 will of Princess Bernice Pauahi Bishop)."

Kamehameha Schools declined comment.

Honolulu attorney David Rosen, who has sought potential clients to sue Kamehameha over its admissions policy after the settlement, sent out a statement yesterday that said the $7 million settlement was used to "buy off this case."

He added that the trustees should open a campus on the Leeward Coast of Oahu and possibly Molokai where increased educational opportunities are needed.

H. William Burgess, a retired attorney and founder of Aloha for All, a group opposed to Hawaiian sovereignty, said the settlement raises questions about the proper use of the trust funds.

"Normally, trustees, if they're doubtful about doing something, they ask the court to give them instructions," he said. "Yet in this case, the biggest charitable trust, probably in the nation, instead of welcoming the opportunity to get the highest court in the land to settle it, they pay $7 million to leave it open. And it is very much open."

http://starbulletin.com/2008/02/09/news/story03.html

* * *

From The Catbird Seat website:

The Wise Old Owl asks: How much of the settlement amount came from Kamehameha’s insurance companies, and how much came from the trust funds? How much did Kamehameha Schools (and/or their insurance company) spend for defense costs in this case before they decided to settle? Who is their insurance company? Their insurance broker? Who actually signed the Settlement Agreement?

http://www.kycbs.net/Bishop7.htm

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NEW UPDATE 02/05/08:

July 3, 2005

Cemetery operator
faces criminal probe

'Wall' keeps criminal, civil probes separate

By Jim Dooley, Advertiser Staff Writer

The state Attorney General's office is conducting a criminal investigation of the purchase and operation of the RightStar group of funeral and cemetery companies in Hawai'i, according to state officials and private attorneys familiar with the investigation.

The criminal probe is separate from a civil lawsuit filed last year by the Attorney General's office that accuses RightStar officials and four local lawyers, including former Gov. John Waihee, of mismanaging more than $20 million in RightStar funds held in trust for thousands of Hawai'i customers who purchased "pre-need" funeral services and cemetery plots.

RightStar owns and operates four cemeteries: Valley of the Temples on O'ahu, Maui Memorial Park on the Valley Isle, and Homelani and Kona Memorial Parks on the Big Island.

The company purchased the cemeteries and related mortuary and funeral plan trust assets in 2001, and the state licensed RightStar to operate them in November 2001.

William McCorriston, attorney for Waihee and the other three lawyers who acted as trustees of the RightStar customers' trust funds, said he does not believe his clients are targets of the criminal investigation.

"We have informed the Attorney General of irregularities and delinquencies which had concerned us," McCorriston said. "We believe our information was the genesis of their investigation."

Waihee could not be reached for comment.

Attorneys for RightStar officials and Vestin Mortgage Inc., a Las Vegas-based lender that financed RightStar's purchase of the companies and filed a mortgage foreclosure lawsuit against RightStar for failure to repay $34 million in loans, said their clients have done nothing wrong. They said company officials are cooperating in the criminal and civil probes conducted by the Attorney General.

State Attorney General Mark Bennett and Deputy Attorney General Lawrence Goya confirmed the criminal investigation but would not elaborate on details of the case.

Legal quagmire

RightStar's financial problems have spawned a welter of lawsuits in state and federal court here, and involved the companies and its officials in at least one other ongoing criminal investigation, according to court records.

Most of the civil cases center on how the companies and trustees managed trust-fund assets.

The trust funds contain money from cemetery plot and funeral plan buyers that is supposed to be held in trust for the customers until they die. The funds also contain money set aside for "perpetual care" of the cemeteries.

According to state figures, the value of the trust funds stood at $63.2 million when RightStar took control of them. A year later, the value dropped to $40 million.

The foreclosure lawsuit filed by Vestin Mortgage claims that RightStar defaulted on loans that were used to purchase the companies. A state judge handling that case has appointed an independent receiver, Guido Giacometti, to run the cemeteries and funeral businesses and protect the rights of customers while the competing claims from numerous parties are sorted out.

In his two most recent monthly reports filed with the court, Giacometti said the companies have a "critical need" for additional money and are attempting to develop new cemetery plots and sell new funeral plans to increase cash flow.

"We're doing OK — sales volumes are relatively consistent," Giacometti said. "We'd like them to be higher but we inherited a company that had not reinvested in itself. There are a limited number of cemetery plots available, so we're working toward development of future areas."

Consumers caught

Local resident John Quinores bought four burial plots for himself and his family at Valley of the Temples in the 1960s and said he's worried about his investment. After agreeing to buy the cemetery plots, Quinores later supplemented that purchase with "pre-need" plans designed to provide funeral services when he dies.

"I'm still paying," Quinores said. "I called the company a couple of months ago with some questions but the lady that answered was vague and defensive."

Giacometti said he has made customer service a top priority and also is dealing with a variety of other pressing issues, including satisfying a dozen consumer complaints filed with the state Regulated Industries Complaints Office. Also unresolved are numerous other complaints about RightStar's decision last year to sell burial plots and funeral services contracts at a discount to a company called Alternative Debt Portfolios.

That sale was an effort by previous RightStar management to raise funds, Giacometti said.

"About 2,100 cemetery plot contracts were sold, but some of the contracts had already been paid in full and should not have been included in the deal," Giacometti said. "There are also some questions about who is responsible for the funeral services that are included in some of the other contracts."

Giacometti said he's cooperating in state and federal tax investigations of RightStar as well as a separate FBI investigation of Funding Solutions Inc., a company in Stamford, Conn., to which RightStar turned for financial assistance in 2004.

RightStar "made a $250,000 payment to them in return for a loan commitment, but then never got the loan," Giacometti said.

When Giacometti asked the company for a refund, "we ran right into an FBI investigation," he said. "They are investigating Funding Solutions and principals of the company and we are cooperating in that investigation."

According to federal court records, Funding Solutions executives Leonard Kalish and Joel Pondelik were charged with conspiracy to commit wire fraud in a criminal complaint filed by the U.S. Attorney's office in New York City in January.

A call to the company for comment was returned by Kalish's New York attorney, Martin Adelman, who said only that Kalish "will answer any and all official inquiries (about RightStar) when they are made."

A right to foreclose

Hawai'i Circuit Judge Sabrina McKenna ruled last month and again Friday that Vestin had the right to foreclose on RightStar, with the companies to be sold "to a licensed and qualified buyer" who would protect "the interests of consumers."

Attorney Grant Kidani, attorney for Alternative Debt Portfolios, had asked McKenna to delay foreclosure proceedings for 120 days, arguing that documents filed in another RightStar-related lawsuit, now pending in federal court here, showed both Vestin and RightStar had "unclean hands." Their relationship should be examined more closely before foreclosure takes place, he said.

The other federal court suit, first filed in U.S. Bankruptcy Court in Delaware and now pending before Hawai'i Federal Judge Helen Gillmor, alleges that Waihee and three other local attorneys who acted as RightStar funeral plan trustees were part of a fraudulent conspiracy to "strip the assets" of RightStar.

The suit was filed against RightStar by Alderwoods (Hawai'i) Inc., which purchased the assets of the cemetery and mortuary business in a Delaware bankruptcy court sale and then resold it to RightStar in 2001.

Charges in the suit are based in part on allegations from David Jackson, a former financial controller of RightStar Hawaii Management, who charged that Waihee used his "political influence" to smooth the company's dealings with state regulators.

McCorriston, Waihee's attorney, said Jackson's allegations "are part of an effort to besmirch Waihee's and the other trustees' reputations. RightStar has gone belly-up, so instead they're pointing their guns at the trustees."

Candace Ito, executive officer of the state Cemetery and Funeral Trusts Program, also denied Jackson's allegations, saying that "RightStar did not receive any special treatment" from the state.

RightStar President John Dooley said Waihee "did nothing improper while representing the company in the licensing process. He used his abilities to assist a private business attain licensing in the state of Hawai'i in much the same way that other former governors have assisted businesses in the past."

RightStar attorney James Wagner added, "Jackson is a disgruntled former employee who was fired for incompetence."

Attempts to reach attorneys for Jackson and Alderwoods were unsuccessful.

Transfers questioned

The state has charged in its civil suit against RightStar that the company and the former trustees improperly removed about $20 million in trust fund assets in 2002, transferring the money to RightStar's operational accounts. The state said the transfers should only have been made after a full accounting of the finances of the cemeteries and trust funds had been completed and filed with the state. Such financial statements have yet to be filed by RightStar, according to court records.

The Attorney General's suit also charged that the trustees removed another $20 million in trust fund assets and improperly invested the money in a Nevada real estate venture called Vestin Fund II. That fund is managed by Vestin Mortgage, the same company that financed RightStar's purchase of the cemeteries and trust funds in the first place.

An independent expert, John Candon, has been appointed by the court in the Attorney General's civil lawsuit to examine the finances and activities of RightStar and the trust funds and to make sure the money is properly accounted for and protected.

Last year, the U.S. Securities Exchange Commission revealed that it was investigating Vestin Fund II. Vestin called the SEC probe an "informal inquiry" that appears to focus on its financial reporting to the SEC.

Vestin attorney Paul Alston said the investment has yielded a return of 9 percent interest per year and is probably one of the best investments the trustees made."

And Alston said at least some of the blame for RightStar's problems belongs with the state. "It appears that the trusts were mishandled under the state's proverbial nose, and it is only because of Vestin's complaints ... that the state has stirred to action," Alston said in a letter to Judge McKenna.

In late May, state Deputy Attorney General James Paige said in a letter to Judge McKenna that the state had attempted unsuccessfully to recover $20 million in RightStar trust money from Vestin Fund II.

Under the terms of the investment, Paige said, the fund can give back no more than 10 percent of an investment per year. At that rate, the consumer trust funds that the state wants back will not be fully recovered "until approximately the year 2015," Paige wrote.

Class-action suit filed

Last week, a class-action lawsuit was added to the legal woes besetting RightStar. One plaintiff in the suit, Yahnina Hackney, repeated claims reported earlier by The Advertiser that RightStar improperly canceled her stepmother's funeral services contract after the elderly woman became sick and failed to make monthly payments to the company.

The company said in response that the cancellation was made by previous owners of the company and some of the disputed funds are still being held in trust.

Hackney said when her stepmother died, there was no money to pay for her burial. "I had to ask the state to do it," she said. "It was very sad. She was cremated. She didn't want that. I have her ashes at home."

She said she "would like to see everybody wake up and take a look at this issue. It's very important and it's something we all will have to face."

Reach Jim Dooley at 535-2447 or jdooley@honoluluadvertiser.com.

Honolulu Advertiser

www.kycbs.net/EXHIBIT-Dooley-HA-7-3-5.htm

~ ~ ~

July 3, 2005

'Wall' keeps criminal,
civil probes separate

By Jim Dooley, Advertiser Staff Writer

The Attorney General's office must keep its civil and criminal probes of RightStar separate and has taken steps to prevent any collaboration between the lawyers and staffers involved in two cases, attorneys said.

The separation is important because it is improper to use the threat of criminal action to advance a civil case, or vice versa.

Similar ethical barriers, informally called "Chinese walls," were erected inside the Attorney General's office when simultaneous civil and criminal investigations were conducted in the late 1990s of the Kamehameha Schools/Bishop Estate trustees and their management of the estate.

In fact, two lawsuits are still pending in state courts here — filed by former Bishop Estate trustee Richard "Dickie" Wong and his former brother-in-law, developer Jeffrey Stone — alleging that the Attorney General's office illegally used the separate civil and criminal probes as leverage to force Bishop trustees to resign.

Deputy Attorney General Lawrence Goya, who filed and later dropped criminal charges against Wong, Stone and former Bishop Estate trustee Henry Peters, is a defendant in both pending suits. One filed by Wong was dismissed by a Circuit Court judge, but that ruling is now under appeal before the state Supreme Court. The other, filed by Stone last year, is scheduled to go to trial next year.

Attorney William McCorriston, who represents four former RightStar trustees named as defendants in the attorney general's civil lawsuit said, "There's always a concern in a 'Chinese wall' situation, because there's an inherent tension between civil and criminal proceedings conducted by the same office."

Another ethical issue arises because Attorney General Mark Bennett