Woo vs. Harmon - Witness Hamilton McCubbin, PhD

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

HAMILTON I. MCCUBBIN, Ph.D.

Address to be determined.

Hamilton I. McCubbin was Kamehameha Schools’ first CEO, who was forced to resign in 2003. Dr. McCubbin also lists in his curriculum vitae dated August, 2003, the following Board of Directorships and Advisory Boards (partial list):

Board of Directors, Boy Scouts of America, 2002-Present; Advisory Board, Milton Hershey School Resident Study; Member, Hawaii Business Roundtable, 2001-2003; Advisory Committee, University of Hawaii, Health and Wellness Center Development, 2001-2003; Advisory Board, Hawaii Nature Center, 2000-2003; Board of Directors, Maui Pacific Center, 1995-present; Kuwait International Advisory Committee of the Higher Organization Committee, Government of Kuwait, 1993-present; United Arab Emirates, Al Ain, United Arab Emirates, 1993-2000; University, Qatar, 1997-2000...

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THE HAMILTON McCUBBIN PHOTO GALLERY

http://starbulletin.com/2000/01/07/news/story2.html

http://starbulletin.com/2000/12/29/news/story2.html

http://starbulletin.com/2003/05/15/news/story2.html

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NEW DISCOVERY (08-24-08): Undisclosed professional and financial conflicts of interests of David C. Farmer, Steven Guttman, Ross Murakami, KMH LLP, Arthur Andersen, Timothy Johns, Alton Ohira, Peter Hanashiro, Kamehameha Schools, Hamilton McCubbin, Colleen Wong, Nathan Aipa, etc.:

June 12, 2000

Volunteer Legal Services Hawaii, formerly Hawaii Lawyers Care: Jo Byrne, president; Margaret Ushijima, vice president; Wayne Tanna, secretary; Ross Murakami, treasurer; and Sen. Suzanne Chun Oakland, Douglas Codiga, David Farmer, Harriette Holt, Lucinda John, Timothy E. Johns, Derek and Leslie Kobayashi, Peter Leong, Marianita Lopez, Rene Mansho, Jim Mo'ikeha, Sara Silverman, Marian Tsuji, Joan K. Yanagihara and JoAnn Yukimura, board members.

http://starbulletin.com/2000/06/12/business/story3.html

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May 15, 2003

$400,000

That's how much
McCubbin gets for resigning

By Sally Apgar, Star-Bulletin

Hamilton McCubbin, who abruptly resigned as the chief executive of Kamehameha Schools last week in the midst of accusations of an inappropriate relationship with a female staffer, will be paid $400,000 in a confidential severance package, according to sources close to the negotiations.

McCubbin, 61, was also ordered to vacate by August the Kahala home he and his family have lived in, according to the sources. The home, which according to property records is assessed at $679,000, is owned by Kamehameha Schools.

His May 5 resignation came one week after a second estate inquiry into an alleged inappropriate relationship with a female employee. Both McCubbin and estate officials have declined comment on the investigations.

Beadie Dawson, a close friend of McCubbin, said the agreement includes a silence provision that McCubbin would not respond to allegations against him.

Kekoa Paulsen, a spokesman for the trust, declined to comment on the severance package because it is considered "a personnel matter" and is confidential.

McCubbin, who was hired to reform the scandal-weary school in February 2000, earned $350,240, according to the estate's latest tax return, filed June 30. His departure comes three months after he signed a three-year extension to his contract.

McCubbin could not be reached by telephone or at his Kahala home.

Deputy Attorney General Hugh Jones declined to comment on the package.

Jan Dill, president of Na Pua a ke Ali'i Pauahi, an organization of about 1,000 alumni, teachers and parents, also declined to comment on the package.

"It's time to move on," said Dill. "We've been enmeshed in this battle for the soul of Kamehameha for six years now. McCubbin was part of the reform and brought some needed changes, but what we really need is a cultural change."...

At Kamehameha, McCubbin will be replaced by acting CEO Colleen Wong, who has served as the trust's chief legal counsel.

http://starbulletin.com/2003/05/15/news/story2.html

~ ~ ~

December 9, 2000

Kamehameha
Schools to rehire
some law firms
let go last May

A $500,000 investigation
contradicts findings that
legal work personally
benefited former trustees

By Rick Daysog, Star-Bulletin

The Kamehameha Schools will rehire several of the outside law firms that it terminated when a report by a court-appointed special master raised serious questions about the firms' legal work.

But Hamilton McCubbin, the Kamehameha Schools' chief executive officer, said the estate will not retain all of the firms that it suspended in May.

The firms were let go as a result of special master Robert Richards' report, which alleged that several of the trust's outside lawyers conducted millions of dollars of work that personally benefited the estate's former trustees.

McCubbin said the trust is looking at the firms on a case-by-case basis and has not yet decided which firms it plans to rehire.

McCubbin's comments were in response to Probate Judge Kevin Chang ruling yesterday that the $6 billion estate is not required to pursue former trustees Henry Peters, Richard "Dickie" Wong, Oswald Stender, Gerard Jervis and Lokelani Lindsey and the trust's outside law firms for the millions of dollars in legal fees.

The Richards report recommended the surcharges, saying that the ex-trustees and several of the law firms took part in a "Herculean effort" to stonewall the state attorney general's investigation of the trust.

All firms deny wrongdoing

The Richards report singled out the Cades Schutte Fleming & Wright and McCorriston Miho Miller Mukai firms for taking part in a "destroy the opposition" campaign by former majority trustees Peters, Wong and Lindsey.

Richards alleged Cades Schutte spent considerable estate funds researching the free-speech limitations of senior U.S. District Judge Samuel King, an outspoken critic of the former trustees. Cades Schutte also reviewed sets of photographs taken of a 1997 protest march against the ex-trustees, in an apparent attempt to identify critics, Richards said.

As a result of the special master's report, the estate terminated its contracts with Cades Schutte, Ashford & Wriston, Verner Liipfert Bernhard McPherson & Hand and PriceWaterhouseCoopers. The McCorriston firm resigned after the former trustees were temporarily removed from the estate by Chang in May.

All of the firms denied wrongdoing.

McCubbin's decision to rehire some of the law firms is largely based on a trust investigation, conducted by the Washington, D.C., firm of Morgan Lewis & Bockius L.L.P., that contradicted several of the findings made by Richards.

The 252-page Morgan Lewis study, which was completed on Oct. 31 and reportedly cost $500,000, concluded that there are no grounds to pursue claims against the law firms and that work conducted by most of the firms benefited the trust.

'Like being blindsided'

David Schulmeister, a Cades Schutte partner, argued in court yesterday that the Morgan Lewis report found no evidence that his firm protected the personal interests of the former trustees.

Morgan Lewis also contradicted Richards' claim that Cades Schutte improperly reviewed photographs of the 1997 protest march, he said. Cades Schutte reviewed the photos to help the estate respond to subpoenas from the attorney general's office, according to Morgan Lewis.

Schulmeister asked Chang to strike many of the charges raised by Richards, saying they were based on speculation, not facts.

"The (Richards) report from the point of view of Cades Schutte Fleming & Wright was an experience a little bit like being blindsided with a crowbar in an alley," Schulmeister said.

"The problem here is, the bell was rung. It has tremendous ramifications. It has caused tremendous damage," he said.

In yesterday's ruling, Chang did not address Schulmeister's request to strike portions of the Richards report.

The judge also did not adopt the findings of either the Richards report or the Morgan Lewis report as a court finding.

Instead, Chang said that the recent settlement between the ex-trustees and the attorney general's office, which had sued the former board members in an effort recover millions of dollars in damages, made moot any surcharge claims for legal fees.

Kamehameha Schools archive

http://starbulletin.com/2000/12/09/news/story3.html

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July 12, 2000

A.G. faults
Kamehameha
interim board

Kamehameha Schools' probe
of its outside law firms
is said to undercut a
court-ordered report

By Rick Daysog. Star-Bulletin

The cold war between the attorney general's office and Kamehameha Schools' interim board of trustees is showing no signs of thawing.

In the latest skirmish, the attorney general's office is accusing the estate's interim board of attempting to protect its own interests by undercutting the recent findings of court-appointed special master Robert Richards.

Deputy Attorney General Dorothy Sellers, in court papers filed yesterday, also faulted the interim board's recent hiring of mainland lawyers and trust law experts to investigate the conduct of its outside attorneys as a waste of money.

"(The) interim trustees' sudden desire to 'investigate' is consistent with a desire to protect their own actions by undercutting the Richards report," Sellers said. "The interim trustees do not need a high-priced investigation to decide whether or not to continue the services of any professional firm."

In a May 18 report, Richards charged that several of the estate's outside law firms obstructed the attorney general's investigation of the trust and conducted millions of dollars in legal work that personally benefited former trustees Henry Peters, Richard "Dickie" Wong, Oswald Stender, Gerard Jervis and Lokelani Lindsey.

Richards also recommended that the probate court order the Cades Schutte Fleming & Wright firm to disgorge more than half of the $1.3 million that it billed the trust between August 1998 and May 1999.

The Richards report prompted the estate to suspend several of its outside law firms and enlist Yale law professor John Langbein and the firms of Morgan, Lewis & Bockius L.L.P. and Washington, D.C.-based Miller & Chevalier to review the firms' conduct.

Sellers said the estate's investigation is not independent since Langbein and the Miller & Chevalier firm were cited by Richards for conducting significant legal work that personally benefited the former trustees.

She also argued that the current interim board's internal investigation may be self-serving since the interim trustees could be liable for surcharges for work conducted by the Cades firm. Until the firm's suspension in May, the interim board had relied on Cades for significant legal work.

"If the former trustees are liable for surcharge for payments to Cades to hinder the attorney general, why would the interim trustees not be similarly liable for payments to Cades to perform the same services?" Sellers said.

A trust spokesman could not be reached for immediate comment.

The dispute is the latest legal posturing between the attorney general's office and the estate's interim board. The attorney general's office recently accused the interim board of withholding trust information vital to its attempts to recover tens of millions of dollars from the former trustees.

The estate, meanwhile, has charged that the attorney general's office is insensitive to the needs of native Hawaiians.

http://starbulletin.com/2000/07/12/news/story2.html

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July 26, 2000

[Hand Delivered]

Dr. Hamilton McCubbin, CEO
Kamehameha Schools
567 South King Street, Suite 200
Honolulu, Hawaii 96813

RE: Kamehameha Schools and P&C Insurance Company, Inc. - Equity 2048

Dear Dr. McCubbin:

Thank you for the opportunity to meet with representatives of Morgan, Lewis & Bockius, LLP on this date. As I understand the major focus of your investigation to be the improper use of outside legal counsel, accounting firms and other third-parties, the following is a list of individuals and companies that, in my opinion, colluded to improperly transfer trust assets from the Kamehameha Schools and related companies:

Attorneys and Law Firms

Cades Schutte Fleming & Wright (Michael Hare)

Chee & Markham (Kevin Chee)

Devens Lo Nakano & Youth

Watanabe Ing & Kawashima (Douglas Ing and James Kawashima)

Goodsill Anderson Quinn & Stifel

Law Offices of Stanford Manuia (Stanford Manuia)

Torkildson Katz Jossem Fonseca Jaffe Moore & Heatherington

Carlsmith Ball Wichman Murray Case & Ichiki

Nathan Aipa, Louanne Kam, Lyn Anzai and Colleen Wong often directly engaged these firms to handle insurance claims without the required authorization of the insurance companies, including P&C.

Once the firms were engaged, these KSBE employees “controlled” and “managed” the claim directly with outside counsel, deliberately disregarding insurance company guidelines regarding the use and payment of these firms. Nathan Aipa, as principal executive of the Legal Group, had ultimate approval of all legal bills including P&C’s.

Aipa would frequently pay these legal fees and costs from his General Counsel Account, without approval from the insurance companies. Often the amounts billed by the law firms exceeded allowable fees and costs provided in the insurance company guidelines. When, if ever, KSBE submitted the legal bills to the insurance company, many of the charges were disallowed. This practice led to the loss of millions of dollars that were never recovered from the insurance companies.

In the case of claims under P&C Insurance Company policies, Nathan Aipa, Louanne Kam or other KSBE attorneys directed that P&C pay the bills even though the outside firms flagrantly disregarded P&C’s written guidelines.

These outside legal firms reported directly to in-house counsel, rather than to the insurance companies. In-house attorneys, including Aipa, often would not disclose critical information to the insurance carriers in these “sensitive” claims, resulting in further millions lost to the estate due to “non-cooperation”.

This situation became particularly suspect and troublesome when these same KSBE employees handled claims in which they also had participated in the original financial transactions. They may have been potential witnesses— even defendants— in resultant lawsuits. These were extremely serious “conflict of interest” situations.

With P&C this became even more critical due to the obvious violation of “arms-length” principles, which potentially exposed the estate to unlimited losses beyond the actual insurance policy coverages and limits of liability.

During my years at KSBE, the following are just some cases in which KSBE and P&C funds were misused in the handling of insurance claims:

McKenzie Methane

Kona Enterprises

Ted Fields

Robert Trent Jones Golf Club

McConnell vs. KSBE

William Rosehill

From all public accounts and from my personal experience, these imprudent practices have continued— unhindered and unabated— from the time of my departure until the present, under both the ex-trustees and the interim trustees.

Accounting Firms/Representatives

Coopers & Lybrand LLP (Dennis Tsuhako)

Price Waterhouse (Mark McConaghy)

The roles that these two firms played in questionable activities are documented in my own RICO lawsuit, Chronology, and Documents.

Insurance Companies and Agent/Brokers

Marsh & McLennan (Hawaii) (Rocco Sansone, Christine Lee)

M&M Insurance Management Services (Peter Lowe)

Federal Insurance Company

The roles of these firms are also detailed in my RICO lawsuit, Chronology, and Documents.

Outside Contractors (Other)

Stay and Sons

The role of this “hazardous waste contractor” is detailed in the enclosed documents.

Kamehameha Schools’ Executives and Employees

It is clear that the ex-trustees did not operate alone in the alleged theft of hundreds of millions of dollars from the estate. It takes the consent and cooperation of key executives and managers to facilitate such a broad misuse— even embezzlement— of trust funds. The enclosed documents provide details.

P&C Insurance Company, Inc.

Henry H. Peters, Chairman, Board of Directors

Gilbert Tam, Director

William Richardson, Director, Secretary/Treasurer

Peter Lowe, Vice-President

Nathan Aipa, Asst. Secretary/Asst. Treasurer

Rodney Park, President

Louanne Kam, Officer

Marsh & McLennan, Inc.

Bank of Hawaii

William M. Mercer, Inc.

Again, details are provided in the enclosed documents.

I hope this information will be helpful in your investigation. If I can be of any further assistance, please feel free to contact me.

Very truly yours,

Bobby N. Harmon, CPCU, ARM

enclosures:

Harmon vs. Trustees, et al. - RICO Case Statement

Harmon Chronology

Harmon Documents

~ ~ ~

August 22, 2000

VIA FAX @ 523-6313 , and U.S. Mail

Dr. Hamilton McCubbin
Chief Executive Officer
Kamehameha Schools
567 South King Street, Suite 200
Honolulu, Hawaii 96813

RE: Kamehameha Schools - Equity 2048 - Insurance Opinion by Special Master

Dear Dr. McCubbin:

This is in response to Colleen Wong’s letter dated August 15, 2000, which read:

“. . . The Interim Trustees and Dr. McCubbin recognized the concerns you have raised. They have authorized the filing of a petition to apprise (sic) and to seek direction from the Probate Court on these matters. In response, a special master was appointed to review and to formulate recommendations to the Court. The Probate Court has now ruled.”

“With this ruling, guidance and direction has been provided to us. The Interim Trustees and staff are all committed to abiding and complying with the Court’s ruling.”

Although Ms. Wong provided me a copy of my letter of July 21^st, she did not provide a copy of the Probate Court’s ruling. Therefore, the following comments are made without the benefit of knowing the contents of that ruling.

Although I appreciate the fact that the Interim Trustees are committed to complying to the Court’s ruling (whatever that might be), I believe there is a larger issue here— which is, to restore honesty and accountability to the estate and to “stop the stealing!”

I seriously doubt that many of the concerns that I expressed in my letter were presented to the Probate Court, such as:

1. “Just as the interim trustees should not be involved in this lawsuit (against the ex-trustees), neither should any officers, directors or employees of Kamehameha Schools or P&C Insurance Company, such as Nathan Aipa, Colleen Wong, Louanne Kam or Rodney Park. Since it is the duty of the liability insurance companies, including P&C, to provide defense for the ex-trustees, all of these individuals have serious conflicts-of-interest by being involved.”

2. “The conflicts-of-interest issues in this case, however, appear to go beyond just the mechanics of handing the claims. The purpose of these deviations from procedures appears to be the intentional cover-up of thefts of trust funds by current employees of the estate in collusion with the ex-trustees and certain outside contractors. Some of these individuals and outside firms are known to me and were specifically named in my RICO lawsuit, so I will not repeat them all here. However, it is worthy of note that Aipa, Kam, Wong, Park, Federal Insurance Company, P&C Insurance Company, PricewaterhouseCoopers and Marsh & McLennan were all named as co-conspirators.”

3. “There are other reasons that ‘deals’ should not be made with only Federal, XL and P&C at this time. It appears that all potential insurance carriers may not have been notified in this case. Specifically, SoCal and McKenzie Methane should also have Directors & Officers liability coverages. If Henry Peters or other trustees or employees of KSBE also served as Directors & Officers of these entities there may be coverages applicable under these policies.”

4. “Also, if it is eventually found that Marsh & McLennan, Federal Insurance Company, PricewaterhouseCoopers, Mid Ocean Reinsurance, Underwriters Capital or others did, in fact, collude to defraud the estate, then the insurance policies of these entities may also be applicable.”

5. “There are other types of insurance policies carried by the estate which provide for substantial recovery of losses. Many of the alleged acts involved theft of trust monies by the ex-trustees in collusion with other KSBE executives and staff members, and with outside individuals or firms. These situations are covered by KSBE’s Employee Dishonesty insurance policy. To collect under these Employee Dishonesty policies, these claims must be reported to the insurance carrier. . . . Therefore, it would be the responsibility of the interim trustees and the Chief Executive Officer or Chief Operations Officer to report these claims to the insurance carrier. . . . One example of this type of claim would be the elaborate scheme to reimburse Milton Holt for the theft of his campaign funds and subsequent legal defense costs. . . . This is only one example. From the Attorney General’s investigation, and other investigations, and from my personal experience, there are dozens of similar cases of fraud which should have been reported to the insurance companies, but were not. If the current interim trustees and principal executives continue to ignore, or cover-up, these thefts, they are also exposing themselves (and the insurance carriers) to further claims of theft and breach of fiduciary duties.”

6. “Another source of potential recovery would be the Trustee Bonds of each of the five individual ex-trustees. This could possibly lead to another $500,000 recovery.”

7. “I would also like to comment briefly on the payment of fees for Trustees’ separate legal counsel as discussed in Davis Wright Tremaine’s memorandum dated 11/21/97 . . . and John Langbein’s letter of 11/23/97.... All that would have been required of Mr. Aipa would have been simply to report the claim to the insurance carriers. From that point on, these issues would have been handled by the insurance companies at their expense....”

As mentioned, I do not know what matters were discussed with the Probate Court; consequently, if these issues were indeed presented to the Court in the manner I presented them in my letter, then I apologize for my skepticism. However, since Colleen Wong and all the other individuals mentioned in my letter of July 21^st appear to continue to exercise control over all insurance issues involving the estate, then serious conflicts of interest and questions of propriety still remain.

My purpose in continuing to bring these issues to your attention is my hope that you and the interim trustees will yet act to “stop the stealing” and restore trust and integrity to Princess Pauahi’s legacy.

Very truly yours,

Bobby N. Harmon, CPCU, ARM

cc: Ms. Dorothy Sellers, Esq., Deputy Attorney General

~ ~ ~

September 11, 2000

Colleen I. Wong, Chief Legal Officer
Office of the Chief Legal Officer
Kamehameha Schools
567 South King Street
Honolulu, Hawaii 96813-3036

Re: Kamehameha Schools Pension and Insurance Plans

Dear Ms. Wong:

Thank you for your letter of September 7, 2000. Since this appears to be your final “dialogue” on these issues, as a matter of courtesy I am responding directly to you rather than to Dr. Hamilton McCubbin.

You state that in your previous correspondence you addressed my allegations by correcting numerous inaccuracies and misstatements of facts included in my prior correspondence. In light of this statement, I have very carefully reviewed your two page letter of August 4^th, and your two paragraph letter of August 15^th, and I regret to say that I am unable to pinpoint ANY corrections of inaccuracies or misstatements of facts that you mention. But perhaps this depends on what your definitions of “inaccuracies” and “misstatements of facts” are, as compared to my understanding of these terms.

You state that in the past I have made numerous allegations of fraud, conspiracy, collusion and misconduct relating to actions of Kamehameha Schools’ employees, consultants, including external and internal legal counsel. This is an absolutely accurate statement.

Your letter continues: “You have raised questions of misconduct, conflicts of interest and impartiality with respect to myself and my legal staff as well as outside counsel retained to assist us in reviewing your allegations including such reputable law firms as Torkildson Katz Fonseca Jaffe Moore & Hetherton; Miller & Chevalier and most recently the Carlsmith Ball law firm.”

The only word I would question in this statement is “reputable”. My dictionary defines the word as “held in good repute”. The word “repute” is defined as “estimation of the view of others; reputation”. The word “reputation” is further defined as “the estimation in which a person or thing is held, especially by the community or the public generally.” My Webster’s goes on to say:

“REPUTATION and CHARACTER are often confused. REPUTATION is the word which refers to the position one occupies or the standing that he has in the opinion of others, in respect to attainments, integrity, and the like. CHARACTER is the combination of moral and other traits which make one the kind of person he actually is (as contrasted with what others think of him).”

So, if by your use of the word “reputable” you would mean such entities as William Clinton, Hillary Rodham Clinton, the Rose Law Firm or F. Lee Bailey — as opposed to another well-known lawyer like, say, Abraham Lincoln — then I would accept your statement as being accurate.

You go on to state in your letter, “To my knowledge, none of these complaints or allegations of wrongdoing have resulted in any adverse actions taken by any of those offices, agencies or courts against KS employees and/or service providers.”

Perhaps, again, it depends on what you mean by “adverse actions”. By my understanding of this term, however, I would say that the removal of the five ex-trustees, the conviction of Milton Holt, and the pending trials of Henry Peters, Richard Wong, Jeff Stone, and

Marshall Ige would be considered by some to be “adverse actions”.

It may be true that no legal actions have yet been taken against Marsh & McLennan, Rocco Sansone, PricewaterhouseCoopers, Mark McConaghy, William Richardson, Gil Tam, Rodney Park, Yukio Takemoto, Gil Ishikawa, Nathan Aipa and others named in my letters; however, to the best of my knowledge, investigations are still ongoing— including the one by Miller & Chevalier which I understand is not due to be submitted until September 30, 2000.

You state in your letter, “It is clear that any investigations performed by internal KS staff members and/or outside service providers to review your allegations will be met with further claims by you of conspiracy, collusion and other allegations of wrongdoing.” This is not entirely correct. There are still many persons inside Kamehemaha Schools which I feel are trustworthy — at least one of whom is in the Legal Group. As for outside service providers, I have trust in the extensive investigations that were performed by Goodenow & Associates, and in the investigations by the court-appointed Master, Robert P. Richards, as detailed in his thoroughly researched and documented EQUITY NO. 2048 - REPORT OF MASTER REGARDING RETENTION OF NON-STAFF COUNSEL, filed May 18, 2000.

I do agree with the Master’s numerous conclusions, including: “MILLER & CHEVALIER. This is another Washington D.C. law firm that was retained to work on the IRS examination. The retention letter dated 11/25/98, [was] after the date the Attorney General had filed its action seeking removal. The firm invoiced the following amounts, which were paid ($653,511.71 Total). . . . It does not appear that this firm had done any previous work for the Estate and was then brought into the Audit for purposes of ‘explaining’ that work to the IRS. . . . In so doing they, according to their 12/1/98 acknowledgment letter, were to ‘coordinate with [CPA] Mark McConaghy’. . . . The Special Purpose Trustees appointed by this Court continued the services of Miller & Chevalier to defend with regard to the IRS Audit. As stated above, it is the recommendation that all fees of Miller & Chevalier be surcharged the trustees.”

Based upon personal knowledge, I am in even greater agreement with these comments by the Master: “In January 1998, Cades Schutte Fleming & Wright began work with reference to the IRS audit. There is no applicable trustee minute authorization or retention letter, but we do know from later correspondence to Miller & Chevalier that, pursuant to the instructions of the trustees, Michael Hare was to act as ‘local contact/counsel’ with reference to the audit. During the pendency of this action the firm billed ... $735,605.19 Total. ... This Master does not recommend surcharging the entire amount. ... The remaining sum, $511,609.94, is, however surcharged to all trustees, jointly and severally.”...

“Randy Roth was one of the authors of the Broken Trust article which criticized the actions of the trustees. In August (1997) his ‘claims were investigated.’ Then the claims of employee (Bobby) Harmon, who also criticized trustee conduct, were investigated.”

“Senior Federal Judge Sam King was also one of the authors of Broken Trust. In what can only be described as chilling and wholly inappropriate legal work, the firm spent 16 hours researching and drafting a memo ‘limits on freedom of federal judge regarding public statements on social issues and conclusions of law.’ This best illustrates the conclusion of this Master that no stone would be left unturned by the trustees in attempting to silence or at least discredit their critics. To charge the trust for such legal work is outrageous!”...

“This firm researched the issues of remedies in the event Mr. Harmon spoke about the conduct of trustees, in violation of the injunction gotten against him. What was the benefit to the trust? It is clear what the benefit to the trustees was, hope that employees would be silenced by fear of reprisal.”

You conclude your letter by stating, “Since we have attempted to explain and/or correct inaccuracies in your allegations which you continue to ignore, I believe it would not be fruitful to continue any further dialogue with you. However, any external investigations pursued by agencies or offices who have valid legal authority over the operations of the Kamehameha Schools will be met with our full cooperation.”

It pleases me to learn that your office is now committed to providing “full cooperation” with all legal agencies in their investigations. As you and I and these agencies well-know, this has not always been the case in the past.

I am also pleased to hear that you now believe it would not be fruitful to continue any further dialogue with me on these matters. On a personal note, I must say that I came to that unpleasant conclusion over ten years ago when you, Nathan and I were “discussing” the use of Watanabe, Ing and Kawashima to defend against William Rosehill’s wrongful termination lawsuit.

Remember?

Very truly yours,

Bobby N. Harmon, CPCU, ARM

encl: Sept 7, 2000 letter to Trustee Screening Committee

cc: Robert K.U. Kihune, Trustee
Ronald D. Libkuman, Trustee
Constance H. Lau, Trustee
David P. Coon, Trustee
Francis A. Keala, Trustee
Dr. Hamilton I. McCubbin, CEO
Dorothy Sellers, Esq.
Billy Beaver, U.S. Dept of Labor
Trustee Screening Committee

~ ~ ~

September 7, 2000

Trustee Screening Committee
c/o Inkinen & Associates
1001 Bishop Street
Pauahi Tower, Suite 477 (VIA Fax: 521-2380)
Honolulu, HI 96813

SUBJECT: Candidates for Kamehameha Schools’ Trustees

Dear Committee Members:

As the former Risk/Insurance & Safety Manager for Kamehameha Schools for eight years, and as the first president of P&C Insurance Company, Inc., I respectfully submit the following comments regarding the current trustee candidates:

FIRST, I wish to make you aware that many of the organization’s unsafe and corrupt practices that I learned of while employed by the estate have yet to be disclosed to the beneficiaries and the general public. In fact, these practices have been allowed to continue, if not grow, under the tenure of the current interim trustees. One major cause of the problem rests with the interim trustees’ retention of many of the executives that knowingly assisted, and collaborated with, the ex-trustees in many of the questionable activities which led to their ouster.

RECOMMENDATION NO. 1:

Because the interim trustees have not acted promptly and prudently to correct the ongoing improprieties, my first recommendation is that none of the interim trustees should be considered as candidates for permanent trustees. I do not make this recommendation because I believe that Robert Kihune and Constance Lau lack the ability or integrity to handle the job, but their failure to take action on these issues after a year and a half, raises considerable doubt if they will take any action in the future.

SECOND, I wish to make you aware that there was an instance while I was at KSBE when I was ordered by Nathan Aipa and Colleen Wong to use the law firm of Watanabe Ing & Kawashima for the adjustment of an Employment Liability insurance claim. Aipa and Wong then proceeded to exclude the insurance company claims adjusters and myself from any involvement in the claim, including providing important information needed for proper claim handling and settlement. The reason given for this unorthodox procedure was because “Douglas Ing may be our next boss.”

RECOMMENDATION NO. 2:

Because of the close working relationship between J. Douglas Ing and Nathan Aipa, Colleen Wong and the ex-trustees, it seems highly improbable that Mr. Ing would be impartial in taking any action against these individuals should he be selected as a trustee. Also, because of his past representation of one or more of the ex-trustees, it would appear that this would constitute sufficient conflict-of- interest to disqualify him from consideration.

THIRD, a comment about candidate Nainoa Thompson. Although I admire his accomplishments, there is the obvious question of whether his appointment would be based upon merit and ability, or is it “political”?

Also, there is the matter of the “McKenzie Methane deal” in which his father, Former Trustee Myron Thompson, was one of the co-investors, along with Henry Peters, Matsuo Takabuki, William Richardson, Rodney Park, Wallace Chin, Gilbert Ishikawa, Mitch Gilbert, Gilbert Tam, Mark McConaghy, and others, many of whom are still connected with the estate. This matter has not yet been resolved by current management and the interim trustees. If Nainoa Thompson is selected, would he actively pursue reimbursement for estate monies that were improperly used to bail-out these co-investors?

RECOMMENDATION NO. 3:

No one that is closely related to any of the prior trustees should be appointed as a trustee so long as there remain any unresolved criminal or civil issues that might involve that relative.

FOURTH, a comment and a question regarding R. Dwayne Steele. I know very little about this individual, except that Rocco Sansone and Marsh & McLennan were strongly “lobbying” for his selection when he was a candidate for the open trustee seat in 1994, and that he is a close friend of former trustee, Oswald Stender. Does the committee know what business relationships, if any, exist between Grace Pacific Corporation and Marsh & McLennan; between Grace Pacific and Kamehameha Schools or any of its subsidiaries; or between Grace Pacific and the state and city governments?

RECOMMENDATION NO. 4:

All business and “political” relationships between candidates and any entity connected with the estate should be fully disclosed before the final selections of trustees are made.

As further background behind the reasons for these recommendations, I refer you to the following internet website:

www.the-catbird-seat.net

(which was subsequently closed by Order of Judge David Ezra)

Thank you for the opportunity to present these recommendations.

Very truly yours,

Bobby N. Harmon, CPCU, ARM

www.kycbs.net/McCubbin.htm

~ ~ ~

May 15, 2004

Ex-schools chief got $1M

The package gave former KSBE
official McCubbin more than
$500,000 in benefits

By Rick Daysog, Star-Bulletin

Former Kamehameha Schools Chief Executive Hamilton McCubbin, who resigned under fire last year, received more than $1 million from the trust last year.

In its annual Form 990 tax filings with the Internal Revenue Service, Kamehameha Schools said it paid McCubbin $493,586 in base salary during its fiscal year ending June 30, 2003.

The $6 billion charitable trust also paid McCubbin $353,253 in severance and other benefits and $181,541 in housing allowances, health insurance and other expenses.

McCubbin's 2003 package rivals the $1 million a year that the estate's former trustees Henry Peters, Richard "Dickie" Wong, Lokelani Lindsey, Gerard Jervis and Oswald Stender paid themselves during the late 1990s trust controversy.

McCubbin could not be reached, and the estate declined comment on McCubbin's compensation, saying it was a personnel matter.

McCubbin, a 1959 Kamehameha Schools graduate, became the 120-year-old estate's first chief executive officer in February 2000. He abruptly resigned in May 2003 after the estate's five-member board investigated allegations that McCubbin had an inappropriate relationship with a female staffer.

The resignation came three months after McCubbin had negotiated a new, three-year contract in February 2003. McCubbin earned about $350,000 in the year ending June 30, 2002.

The estate's tax filings did not list the annual salary for the estate's current chief executive, Dee Jay Mailer, who assumed her post in January. But it did include pay figures for the estate's top executives and former officers. They included:

» Former Chief Educational Officer Dudley "Skip" Hare, who was paid $743,214 in fiscal year 2003. Hare stepped down in January 2003, and his compensation package included salary and severance.

» Kirk Belsby, the estate's vice president for endowment, earned $243,027 last year. Belsby assumed his new post in January 2003 and the amounts paid to him during the 2003 fiscal year represent a portion of his annual compensation rate.

» Michael Chun, headmaster of the Kamehameha Schools' Kapalama Heights campus, received $207,074.

» Stan Fortuna, headmaster of the Kamehameha Schools' Hilo campus, received $227,281. Rod Chamberlain, headmaster of the Kamehameha Schools' Maui campus, received $218,614.

Fortuna and Chamberlain earned a base salary of about $166,000 each, but both received about $40,000 in additional allowances that boosted their overall packages.

» Colleen Wong, the estate's vice president for legal affairs who served as the trust's acting chief executive officer after McCubbin's departure, earned $206,060.

» Former trust Chief Operating Officer Eric Yeaman received $201,997 in 2003. Yeaman left the trust in December 2002 to become Hawaiian Electric Industries Inc.'s chief financial officer.

» Darrel Hoke, the trust's internal auditor, was paid $188,501, while Dick Lau, the estate's human resources director, earned $181,401. Mike Loo, the trust's vice president for finance and administration, earned $164,023.

» Trustees Diane Plotts, Robert Kihune and Nainoa Thompson were paid $91,500 last year. Board Chairwoman Constance Lau received $104,000, while former Chairman Douglas Ing received $101,000. Trustees pay is set by the state Probate Court.

Established by the 1884 will of Princess Bernice Pauahi Bishop, the Kamehameha Schools is a nonprofit trust that educates children of native Hawaiian ancestry. It also is the state's largest private landowner with more than 300,000 acres in Hawaii.

For the 2003 fiscal year, the estate said it earned $137.5 million on revenues of $338.6 million. Expenses for the year totaled $201 million.

The estate said its biggest outside vendors were local architecture firm Group 70 International, which was paid more than $5.3 million, and the accounting firm of Karns Murakami & Hanashiro, which received $1.2 million for tax and consulting work.

The Washington, D.C., law firm Miller & Chevalier billed the estate $890,722, and Hogan & Hartson LLP charged $623,767. Both firms worked on tax issues and efforts to defend the Kamehameha School's Hawaiians-preference admission policy.