Woo vs. Harmon - Witness Dennis Tsuhako

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

DENNIS TSUHAKO, CPA

999 Bishop St., #1900
Honolulu, HI, 96813

Fax: 808-531-3433

Former employee of PricewaterhouseCoopers, LLP. (Formerly Coopers & Lybrand), “independent” CPA’s for Kamehameha Schools/Bishop Estate and P&C Insurance Company, Inc.

Dennis Tsuhako is expected to testify regarding the truthfulness and factual accuracy of the following letter:

P&C INSURANCE COMPANY, INC.
P.O. Box 38
Honolulu, HI 96810

November 20, 1996

Mr. Cary M. Okawa, C.P.A.
Coopers & Lybrand L.L.P.
2500 Pacific Tower
1001 Bishop Street
Honolulu, Hawaii 96813-3668

SUBJECT: P&C Insurance Company, Inc. - Annual Financial Report

Dear Mr. Okawa:

This is to provide further information regarding issues discussed in my meeting with you and Mr. Dennis Tsuhako in my office on October 18, 1996, regarding P&C Insurance Company’s (P&C) annual financial report.

As you will recall, we discussed my concerns with respect to “arms-length” issues between Kamehameha Schools Bishop Estate (KSBE) and P&C, as they related to what I believed were efforts to direct and control the operations of P&C by my superior, Nathan Aipa, Esq., by Louanne Kam, Esq. and by Henry H. Peters, who is a Trustee of Bishop Estate, as well as Chairman of the Board of Directors for P&C.

As examples, we discussed the blocking of my efforts to have P&C write the blanket property insurance program with reinsurance provided through the Hobbs Group, rather than by Marsh & McLennan, Inc. Also, I commented on what I considered to be excessive fees being charged by Marsh & McLennan, Inc. (MMI), and their failure to provide a satisfactory explanation for the services included in their flat fee of $200,000.

Finally, I related to you and Mr. Tsuhako my concerns regarding attempts being made by individuals at KSBE to direct and control the settlement of P&C’s claims. In addition to the example we discussed, I have recently received a copy of the attached memo from Rocco Sansone dated 11/7/96, regarding a proposed “Consent to Settle (P&C Insurance)” endorsement.

This memo addressed to Louanne Kam, Kamehameha Schools Bishop Estate, states: “The following proposed endorsement is submitted per our discussions and negotiations with Am-Re. This endorsement provides KSBE with the option of controlling the settlement process subject to the indicated agreements. Based on our discussions, we recommend KSBE accept the proposed wording. Please advise if there are any questions and with your approval to add the endorsement.”

This “Consent to Settle Clause” would, in effect, take the control of claims settlements away from P&C’s independent adjuster and turn it over to KSBE. P&C and KSBE would also be exposed to uninsured and unlimited payments of claims due to the condition, “If, however, the Insured shall refuse to consent to any settlement recommended by the Company and acceptable to the claimant and shall elect to contest or continue any proceedings in connection with such claim, the Company’s liability for the claim shall not exceed the amount for which the claim could have been settled plus expenses up to the date of such refusal.”

This recommendation by MMI is, in my opinion, highly unusual and one which could result in significant financial loss to P&C and KSBE. The enclosed documents (some written before our meeting and others afterwards) will provide further examples of what I consider to be improper and deceptive business practices by Marsh & McLennan, Inc. and M&M Insurance Management Services, Inc.

It is due to the fact that these issues have not been resolved, that I am declining to sign my concurrence to P&C’s Annual Financial Report for the fiscal year 1995-96.

Thank you very much for your understanding and concern.

Very truly yours,

Bobby N. Harmon, CPCU, ARM, AAI
President

enclosures

cc: Insurance Commissioner, State of Hawaii (w/encls)

www.kycbs.net/PC-Coopers-Lybrand-11-20-96.htm

~ ~ ~

NEW DISCOVERY (12-27-08): Undisclosed conflicts of interests between David Farmer, Steven Guttman, Jeffrey Portnoy, Matsuo Takabuki, Mark McConaghy, Dennis Tsuhako, PricewaterhouseCoopers, Sam Silverman, Chinn Ho, Stuart Ho, Aloha Airlines, HonFed, Bank of Honolulu, Sukamto Sia, Diane Plotts, Linda Lingle, Bob Awana, Nathan Aipa, Eric Martinson, Chubb Group, Marsh & McLennan, etc:

July 17, 1998

Hawaii
By Dave Donnelly

Portnoy on NBC
on Kimes case

IF you tune in NBC's "Dateline" tonight, you should see Honolulu attorney Jeffrey Portnoy. An NBC crew spent two hours with him Wednesday, interviewing him in reference to the case of Sante Kimes and her son, Kenneth, suspected in the disappearance and assumed death of New York socialite Irene Silverman.

Portnoy had represented an insurance company in an earlier case in which Kimes, already convicted of keeping an alien woman in slavery, was suspected of arson when her home went up in flames. He has videotape of Kimes, something all the networks would love to get their hands on, and he provided it to NBC for "Dateline."

Producers of "20/20" have been after him to give them a copy of the tape, even offering to have Barbara Walters call him personally, but he demurred that he'd given it exclusively to NBC. That network told him the Kimes' story is the biggest thing at the network since the death of Diana, Princess of Wales.

One unasked and unanswered question in the case is did the Kimes family know the missing socialite when she and her husband, Sam Silverman, were in Hawaii around the time they lived here? I knew Sam Silverman as early as 1970 when he was the financial advisor and longtime friend of local business tycoon Chinn Ho. I posed the question and Portnoy answered, "It wouldn't surprise me a bit." ...

www.archives.starbulletin.com/98/07/17/features/donnelly.html

An Unlikely Revolutionary: Matsuo Takabuki and the Making of ... - Google Books Result

by Matsuo Takabuki - 1998 - History - 237 pages -1998 University of Hawaii Press ... from the eyes of Matsy Takabuki working with Chinn Ho and Sam Silverman, ...

A FAMILY PORTRAIT: A special report.; A Twisted Tale of Deceit ...

Mrs. Silverman, an 82-year-old widow, was probably killed, officials say, ..... Mrs. Kimes filed suit against Chubb and began making threatening calls to Chubb ... were filed in the fire, which was never formally declared to be arson. ... Even before it could be bought, Mrs. Kimes was submitting an insurance claim ...

An Unlikely Revolutionary: Matsuo Takabuki and the Making of ... - Google Books Result

by Matsuo Takabuki - 1998 - History - 237 pages

Mitch Gilbert and Eric Martinson were the number-crunchers. They had computer printouts ... Nathan Aipa, our general counsel, headed our legal side....

An Unlikely Revolutionary: Matsuo Takabuki and the Making of ... - Google Books Result

by Matsuo Takabuki - 1998 - History - 237 pages

Matsuo Takabuki 1998 University of Hawaii Press ... Mark McConaghy of Price Waterhouse headed our tax team along with our staff tax ...

* * * * *

NEW DISCOVERY (11-30-08):

THE BEST GOVERNMENT MONEY CAN BUY

* * * * *

NEW UPDATE (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

~ ~ ~

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

~ ~ ~

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

www.kycbs.net/PC-Arms-Length-Guide-10-1-94.pdf

www.kycbs.net/Doc-EQ2048-Mediation-Order-3-9-0.pdf

www.kycbs.net/KSBE-INTERROGATORIES.htm

www.kycbs.net/RICO-In-Paradise.htm

~ ~ ~

NEW DISCOVERY (08-25-08): More undisclosed conflicts of interests between David Farmer, Steven Guttman, Governor Ben Cayetano, Governor John Waihee, Governor Linda Lingle, Kamehameha Schools, Hamilton McCubbin, Dee Jay Mailer, P&C Insurance Co., Goldman Sachs, Robert Rubin, Henry Paulson, Nature Conservancy, Rocco Sansone, Marsh & McLennan, Mercer Consulting, Chubb Group, Wally Chin, Rodney Park, Nathan Aipa, Colleen Wong, Lyn Anzai, Earl Anzai, Hawaiian Airlines, Aloha Airlines, Judge Lloyd King, Judge Robert Faris, Judge Kevin Chang, Judge Barry Kurren, Judge David Ezra, Judge Rey Graulty, Robin Campaniano, AIG, Douglas Ing, Louise Ing, Colbert Matsumoto, Jeff Watanabe, Joshua Gotbaum, Linda Lingle, AIPAC, Louanne Kam, Allan Yee, Dennis Fern, James Ahloy, Aloha Petroleum/Harken Energy, McKenzie Methane, Arthur Andersen, PricewaterhouseCoopers, Dennis Tsuhako, Enron, Alan M.L. Yee, Constance Lau, Eric Yeaman, Hawaiian Electric, Robert Clarke, Edwina Clarke, Peter Hanashiro, University of Hawaii, etc:

February, 2007

How to Save Your Business,
Your People & Yourself

Ross Murakami and KMH rise out
of the ashes of Arthur Andersen

David K. Choo, Hawaii Business

Ross Murakami first heard about the Arthur Andersen accounting scandal in November 2001 from an unexpected but reliable source: his mom. Mrs. Margie Kanemitsu called her accountant son from her home in Hilo, after watching a CNN broadcast.

“Ross, did you hear what happened to one of your clients, Enron?” she asked.

The younger Murakami was a partner at Arthur Andersen’s thriving 42-person Honolulu office. The large international accounting firm served as the financial auditor of Enron, a giant energy trading company based in Houston. That morning, Arthur Andersen had announced a restatement of an earlier audit of its client.

“Don’t worry, Mom. We’ll be fine,” he said.

Mothers can be like that. Worry, worry, worry. But, then again, you know what they say about a mother knowing best.

Within days, through a seemingly never-ending series of news reports, Murakami, his staff and the rest of the country watched Enron implode, sucking its staff, subsidiaries and investors down an irresistible vortex. Curiously, one of the first down the financial and political black hole was the auditor, 88-year-old Arthur Andersen, not only its Houston office, but nearly everyone else, including the people in far-off Honolulu....

“It was emotional. It was exhausting,” says Murakami of his office’s sudden fall and eventual rise. “It was also extremely rewarding.”...

THE YOUNG PARTNER

The year 2001 was promising to be a good one for Murakami. Hawaii’s economy was continuing its steady recovery from a decade-long slowdown, which meant a busy year for service businesses like accounting firms. In addition, in the fall, the then-37-year-old accountant made partner at Arthur Andersen. Having joined the company 14 years before, straight out of the University of Hawaii at Manoa, Murakami was the first partner in the Honolulu office to have begun his career at the Honolulu office.

Murakami started his new position at Arthur Andersen on Sept. 1st.

“Here I am a new partner, and, 10 days later, we are hit by one of the most tragic events in U.S. history, which, among other things, had a big impact on business in general,” says Murakami. “Then, two months after that, Enron. Kaboom!”...

Even though his once promising year was beginning to look nightmarish, when Murakami put down the phone after speaking with his mother on that November morning, he was confident that the scandal would pass. After all, every one of the big five accounting firms had had a questionable audit at one time or another in their histories. Some of them had even been sanctioned by the Securities and Exchange Commission for their indiscretions. But they all had weathered their respective storms. It seemed highly unlikely to Murakami that the actions of a few people in his company’s Houston office could reverberate all the way to Honolulu.

Around the office, he reassured his staff: This, too, shall pass. Corporate was tight-lipped about the growing scandal, preferring to wait for the legal and political dust to settle. Murakami and Honolulu office managing partner Randy Karns met with their local public relations consultant, who advised that they do the same. People wouldn’t appreciate public protests or protestations of innocence, they were told. Especially if they were protesting their own innocence. It would be bad form, especially in Hawaii.

Corporate sent representatives to reassure the Honolulu staff that the accounting irregularities were part of an isolated situation in Houston. They pointed to the firm’s vast capital base. Again, there was nothing to be alarmed about.

However, in the first quarter of 2002, as news reports announced one legal development (and lost client) after another, tensions were running high in the office. To relieve the anxiety, Murakami and his staff scheduled visits to members of Hawaii’s congressional delegation and met with Gov. Ben Cayetano. The sessions were gut-wrenching and emotional. “How could this be happening to us?” “Why was Arthur Andersen being made a scapegoat?” they asked. “We haven’t done anything wrong,” they insisted.

The leaders listened patiently and offered their sympathies and support.

“We knew they [Hawaii’s congressional delegation and the governor] wouldn’t be able to do much for us. How could they? It would be like stepping in front of a speeding truck,” says Murakami. “But we needed an outlet for all the anxiety, anger and emotion. We needed to vent.”

In Arthur Andersen’s 29th-floor office in the Pacific Guardian Life Center, the staff continued to vent with management’s full support and participation. Someone began writing encouraging messages with a Magic Marker on a Plexiglas wall off the reception area. People began writing words of support, inspirational quotes from leaders like Gandhi, or words of anger and defiance. They even had lighthearted activities in which they took out their frustrations on certain Department of Justice officials.

“You had this pride about working for Arthur Andersen and then there was this outrage that all this was going down and no one could do anything about it,” says Harvey Rackmil, chief financial officer for HONBLUE, who was the senior member of Arthur Andersen’s tax department from 1998 to 2002. “We were outraged at the government. We made ‘I am Arthur Andersen’ T-shirts for ourselves, and we went downstairs and took photos of each other. Arthur Andersen for the longest time didn’t fight back. They thought that we would get through it. Then the indictment was handed down and that was that.”

THE OLD PARTNER

In the fall of 2001, Randy Karns was quietly planning a second career away from public accounting. The 50-something Karns, who had opened Arthur Andersen’s Honolulu office nearly 20 years before, had been offered an early retirement package from the corporate office—mandatory retirement, actually. That was fine, because he had recently been offered his dream job. Today, Karns won’t disclose what the dream position was, or with whom. He does say that it was with an organization for which he had a passion, and that the position was both prestigious and lucrative.

Karns, who had conducted audits of Hawaii companies since the late ’60s, had spent his entire career with Arthur Andersen, starting out in the firm’s Los Angeles office. He was extremely proud of his company and the quality of work it had done, so 2002, had promised to be not only a sweet beginning to a new career, but a sweet ending, as well. However, as the feeding frenzy around the accounting scandal grew, the senior partner knew that his work at Arthur Andersen wasn’t done. He asked his potential new employers if he could have a little more time to decide about the position. They agreed....

On March 14, 2002, a federal grand jury in Houston indicted Arthur Andersen on one count of obstructing a Department of Justice investigation by destroying documents. After the announcement, Karns and his management team kicked things into high gear, calling an office-wide meeting in which Karns laid all the options on the table, including his recent job offer. No one was going to abandon ship, he assured his staff.

Subsequent informational meetings, held in a common area, spilled out into the halls. The meetings were held every two weeks, then weekly. Sometimes there was an agenda, like when Karns outlined what had happened with Enron. Sometimes it was just to talk story.

“We had meetings whether we had something to say or not. You would be surprised. You always have something to talk about,” says Karns. “Our staff wanted to know if Ross and I had heard anything, and if we hadn’t, did that change our thinking, if that makes sense. Even knowing that there is nothing new can be comforting.”

“Randy was a great leader,” says Rackmil. “He was the guy delivering the message, fireside-chat style. You knew he was going to do everything in his power to help. He had been here a long time and had a lot of loyalty in the community. As long as the clients stayed, we would be OK.”

All along Karns offered his options analysis and assessment without interjecting a prejudgment one way or another. This was a decision for the employees, not him. He was still considering his dream job.

Then, one day, he accidentally walked in on a small group of staff who were working on a gift of gratitude to the senior partner. Karns realized that he already had his dream job.

“I came home and told my wife that we were going forward. That [other] job would have been a lot of fun to do. But it [his decision] really wasn’t about money or prestige,” says Karns. “They felt so strongly about the firm, its mission, its clients and its people. They were doing all of this on top of dealing with all the stress of getting their jobs done. I felt privileged to be a part of them.”

THE NEW PLAN

Of course, Murakami’s mother wasn’t the only one outside the firm who called him about Enron and the future of Arthur Andersen. “I started fielding calls from clients, who would say: ‘Eh, Ross, how come you didn’t let me do all those things?’ I told them that I didn’t know why they did that,” says Murakami. “I told them we don’t do that. That’s not how business is done. We had a very solid client base. They knew us, and they knew we had always been very honest and open with them.”

Early in the crisis, Murakami and Karns hit Bishop Street hard, meeting with as many of their clients as they could. Sometimes, as at the gatherings with their staff, the two partners had little new information to impart to their anxious clients. There were a lot of uncomfortable discussions, some in front of boards of directors. But every client was contacted and spoken to face to face if possible. After Andersen’s indictment in March, the meetings got more urgent, going from heart-felt reassurances to the beginnings of a plan for a new firm.

“We kept them [our clients] informed and we told them that we were trying to pull something off that would be a stand-alone entity,” says Murakami. “We said we couldn’t tell them right now if it was going to be successful or not. We couldn’t wait till we were solid to let them know. It wasn’t about us. It was about them.”

At first glance, the partners’ plan, which they would appropriately name “Project Phoenix,” seemed simple. They, along with Peter Hanashiro, who was slated to be named partner at Arthur Andersen before the crisis, would buy the firm from corporate. They would continue to provide the same good service that they always had, except the new firm would no longer audit large publicly traded companies. But the new firm would be free from a rigid corporate fee structure and nimble enough to respond to changes in the local marketplace....

FLIGHT OF THE PHOENIX

Murakami made that August’s payroll, and has made every one since. But KMH has done more than just deliver paychecks on time. According to Murakami, the firm’s revenues have doubled since he switched off the lights on Arthur Andersen, with 20 percent growth for four years in a row. The staff has also doubled, growing from 42 to 85 in late 2006.

Throughout the ordeal, KMH lost only two or three tax clients and a handful of national and international clients, several of whom later rehired the firm in other capacities. KMH’s vision of a locally owned firm with a local focus along with national expertise has taken hold. Coincidently, it was also one that had been floating around in the heads of many experienced accountants in town.

“Even before Andersen imploded, we had discussed the possibility of creating a local firm with national ties. That is the way the market is moving,” says Wilcox Choy, partner at KMH and former partner at big four accounting firm, Grant Thornton. “But there just wasn’t enough critical mass to do that. Then Andersen went down and after talking with them, we realized we were on the same page.”

KMH started with three partners (Karns, Murakami and Hanashiro) and now has six. Alan Yee joined the firm from Grant Thornton’s Honolulu office in 2002 and Al Fernandez from Ernst and Young in 2003. Both run KMH’s tax practices. Alton Ohira, former head of KPMG Honolulu’s insurance and audit practice, came on board in 2003 and Wilcox Choy, once in charge of Thornton’s audit practice, also in 2003....

~ ~ ~

Timeline: The Fall of Arthur Andersen

Aug. 15, 2001
Enron vice president for corporate development Sherron Watkins writes a seven-page letter to her boss, CEO Kenneth Lay, warning of accounting irregularities at the oil and natural gas trader. “The business world will consider the past successes as nothing but an elaborate accounting hoax,” she writes.

Nov. 8, 2001
Enron revises its financial statements for the previous five years. Instead of showing huge profits, the company now says that it actually lost $586 million.

Jan. 10, 2002
Arthur Andersen acknowledges that it destroyed Enron documents.

Jan. 15, 2002
Arthur Andersen fires chief Enron auditor David B. Duncan.

March 15, 2002
Arthur Andersen is indicted by a federal grand jury in Houston on one count of obstruction of justice for shredding documents and deleting computer files regarding Enron.

March 26, 2002
Arthur Andersen CEO Joseph F. Berardino steps down amid an exodus of clients and overseas partners.

June 15, 2002
After a six-week trial, Arthur Andersen is convicted of obstruction of justice for destroying documents while on notice of a federal investigation.

May 31, 2005
The U.S. Supreme Court overturns the Arthur Andersen conviction. The justices unanimously agree that the Houston jury was given overly broad instructions by the federal judge presiding over the case. At issue is a memo from an Arthur Andersen in-house attorney detailing the company’s document retention policy.

Nov. 23, 2005
The Justice Department announces that it will not pursue the criminal case against Arthur Andersen in wake of the Supreme Court decision handed down earlier that year.

BALANCING THE BOOKS

On Monday, Oct. 16, 2006, the day after Hawaii’s statewide earthquake, accounting firm Accuity LLP opened for business. Just days before, the firm had served as the Honolulu office of accounting giant PricewaterhouseCoopers (PWC), which had decided earlier that year to pull out of the Hawaii market.

“I got a call from a friend that first day, who said: ‘PWC pulls out and the earth shakes,’” says Kent Tsukamoto, the former PWC managing partner and now Accuity’s managing partner. “You might say that we started off with a bang.”

While the circumstances surrounding Accuity’s transition from international juggernaut to locally owned big business weren’t as catastrophic as Arthur Andersen’s end and KMH’s beginning, Tsukamoto and his partners, Wendell Lee and Dennis Tsuhako, were essentially dealing with the same issue: How do you sustain a business while building another business?

However, a larger, more earth-shaking issue probably extends far beyond Accuity, KMH and the rest of the Islands’ accounting industry: How important is Hawaii to businesses with a global, or national reach? The answer is: maybe not much anymore.

According to Accuity’s tax partner, Wendell Lee, PWC’s decision to leave Hawaii and pursue larger markets on the Mainland was initially shocking, but not surprising in the end. “PWC has more than 15,000 clients in the U.S. Only about 200 of them account for 80 percent of the company’s revenue. On average, that’s about $54 million to $100 million per client, per year,” says Lee. “That leaves the Hawaii market off the scale, because, at the very bottom of the food chain, they were looking for at least $1.5 million in revenue per client. At PWC, our largest Hawaii client provided about $1 million.”

With PWC’s exit and Arthur Andersen’s demise in 2002, Hawaii is home to three of the big-four accounting firms. Tsukamoto believes that number may shrink over the next several years.

“The size of a public accounting firm is a function of the size of the services rendered. Accounting follows the organizations,” says Warren Wee, associate professor of accounting at Hawaii Pacific University. “Just look at the corporations that were based in Hawaii 10 or 20 years ago. It’s not rocket science to see what’s happening, really basic economics.”

“Ten or 15 years ago, you saw a lot of mergers of the large, national firms, going from the big eight to the big five. Now, of course, after Andersen’s implosion, it’s down to four,” adds Wilcox Choy, partner at KMH and former partner at big-four accounting firm Grant Thornton. “Everything’s bigger and bigger businesses need bigger profits.”

In other words, follow the money, and while the big money is on the Mainland, there is still more than enough business to be found in the Islands. Accuity has retained a vast majority of its staff and about 95 percent of its revenue since leaving PWC. Tsukamoto expects about 5 percent growth in 2007.

Local ownership has a plethora of benefits. Now, Accuity is no longer saddled with post-Enron, corporate office-imposed procedures, which had very little relevance to Hawaii’s small-scale businesses. (According to Tsukamoto, about 60 percent of Accuity’s clients are family-owned businesses.) Also gone is the constant pressure from the head office to increase fees by 20 percent to 30 percent, rates more in line with those charged in New York and Los Angeles. In addition, when Tsukamoto needs to make a decision, he just walks down the hall to talk with his partners.

Some of the advantages of local ownership can’t be accounted for on a balance sheet: “PWC offered us [the partners] positions on the Mainland, where we would have done well,” says Lee. “But that wouldn’t have been the right thing to do. We have 80 people who are our family, who in turn have families that they have to take care of. We couldn’t abandon them in the market like that. This is Hawaii. This is what you do. You take care.” — DKC

How to Save Your Business Your People & Yourself ...

Arthur Anderson and The Phoenix Project

~ ~ ~

WAIALAE COUNTRY CLUB

The Story of Waialae

The Golf Course was opened for play on February 1, 1927.

The Royal Hawaiian Hotel and Waialae Golf Course were built by the Territorial Hotel Co. as part of a promotional program to develop luxury travel trade to Hawaii. Matson Navigation Co. built the luxury passenger liner Malolo as part of this program. The hotel and golf course lands were leased from the Bernice P. Bishop Estate.

2007 OFFICERS

STUART HO, President
JOHN JUBINSKY, President-Elect
RICHARD INGERSOLL, Secretary
ALLAN LUM, Assistant Secretary
JAMES AHLOY, Treasurer
ALLAN LUM, Assistant Treasurer
DENNIS TSUHAKO, Internal Auditor

http://www.waialaecc.com/

~ ~ ~

November 19, 1997

Four trustees receive
country club freebies

The free memberships, accepted by all
Bishop Estate trustees but Oswald Stender,
are called a conflict of interest

By Rick Daysog. Star-Bulletin

Four out of five Kamehameha Schools/Bishop Estate trustees receive free memberships from exclusive country clubs that sit on Bishop Estate land, in what critics called a clear conflict of interest.

Bishop Estate trustees Richard Wong, Henry Peters, Lokelani Lindsey and Gerard Jervis are honorary members of the posh Waialae Country Club, whose lease rents were renegotiated in 1995 with the estate.

The four trustees also are listed as honorary members at the Mid-Pacific Country Club in Lanikai, which also sits on Bishop Estate land.

The fifth trustee, Oswald Stender, turned down the free club memberships in 1995 to avoid the appearance of a conflict and for tax purposes.

"They don't get the idea that they are trustees of a charitable trust," said Senior U.S. District Judge Samuel King, one of the five authors of the critical "Broken Trust" article that helped launch the state's investigation of the $10 billion charitable trust.

"I doubt if they know how to spell the word fiduciary."

Golf club memberships and other trustee perks, such as airline VIP club memberships, have been a subject of inquiries from the Internal Revenue Service, which is conducting an audit of the estate, according to one source familiar with the audit.

King believes honorary memberships underscore the need to remove some of the trustees from the board. He said the memberships create "an appearance of impropriety" since the estate owns the land under the golf courses and negotiates their leases.

According to Waialae's membership directory, the four trustees were honorary members in 1995 when the estate and club members rewrote the lease. Those talks raised the 144.9-acre course's annual lease rent from $60,000 to about $1 million, according to club members familiar with the lease terms.

Trustees also were honorary members at Mid-Pacific when the club renegotiated its rent in 1991. The 163-acre Windward Oahu golf course now pays $469,000 a year in lease rent, up from $6,000 previously.

Jervis, Lindsey and Wong were not Bishop Estate trustees when Mid-Pacific's lease was last negotiated.

"This certainly raises questions about the independence of trustees," said Edward Halbach, one of the nation's top experts on trust law and the former dean of the Boalt School of Law at the University of California Berkeley.

Trustees respond

An estate spokeswoman referred questions regarding the club memberships to the individual trustees. Peters and Lindsey did not return calls.

Wong, who doesn't golf, said he's been an honorary Waialae member for 22 years but has never used it. Jervis, who became a trustee in late 1994, said he became a Waialae member in 1995 but has golfed there only once.

He said he had been a regular paying member at Mid-Pacific but later became an honorary member after he became a trustee.

Stender had been an honorary member at Waialae when he was appointed to the board in 1989 but declined the memberships two years ago, according to sources. He now is a regular, paying member of the Oahu Country Club, which is not on Bishop Estate land.

Managers at both golf clubs declined comment when asked about the potential conflicts.

Traditional perk

The honorary memberships are a traditional perk that the clubs have extended to trustees for many years, some members said. One said the memberships don't pose a direct conflict since the lease talks with the clubs were handled by Bishop Estate staffers, not by trustees.

He added that Waialae's new lease terms are favorable to the club. Waialae, the site of the Hawaiian Open golf tournament for decades, now has a 75-year lease, although it has had to raise monthly dues by $62 to adjust for the higher lease rent, he said.

"It was strictly by the numbers," he said.

Breached duties?

Randall Roth, a University of Hawaii law professor and one of the "Broken Trust" co-authors, believes some trustees may have breached their fiduciary duties in accepting the free memberships since they're personally benefiting from their position with the estate.

For instance, a regular membership at Waialae costs $44,000 -- roughly equivalent to the median household income in Hawaii -- in addition to monthly dues of about $310.

Mid-Pacific Country Club members pay a one-time initiation and certificate fee of $36,000 and monthly dues of $265, according to Hal Okita, general manager.

Honorary member at both clubs enjoy nearly the same privileges as regular members, although they are not allowed to vote on club policy.

According to Okita, Mid-Pacific extends honorary memberships to public figures such as Gov. Ben Cayetano and Mayor Jeremy Harris, as well as trustees. Okita said trustees haven't formally accepted Mid-Pacific's honorary memberships and noted that they seldom use the club's facilities.

Besides Bishop Estate trustees, Waialae's 1996 membership directory lists U.S. Sen. Daniel Inouye, U.S. Rep. Patsy Mink, Cayetano, Lt. Gov. Mazie Hirono, Senate President Norman Mizuguchi and House Speaker Joe Souki as honorary members.

Former Bishop Estate trustees William Richardson and Matsuo Takabuki are regular, paying members of Waialae.

"I don't see any problem in giving away honorary memberships to the governor," said King, whose father served as a Bishop Estate trustee during the late 1950s.

"But when they do that for the landlord, that is a conflict of interest."

Honorary members

Of Waialae Country Club in 1996, followed by the year they became members:

Trustee Richard Wong (1994)

Trustee Henry Peters (not available)

Trustee Lokelani Lindsey (1993)

Trustee Gerard Jervis (1995)

Sen. Daniel Inouye (n/a)

Rep. Patsy Mink (1993)

Gov. Ben Cayetano (1987)

Lt. Gov. Mazie Hirono (1995)

Supreme Court Chief Justice Ronald Moon (1993)

Honolulu Mayor Jeremy Harris (1994)

Senate President Norman Mizuguchi (1994)

House Speaker Joe Souki (1993)

Former House Speaker Daniel Kihano (1987)

City Council Chairman John DeSoto (1995)

Rev. David Coon (1989)

University of Hawaii President Kenneth Mortimer (1993)

Golfer Arnold Palmer (1981)

Sei Hoon Yang, Consulate General of the Republic of Korea (1993)

Ting-Yu Yu, director general CNNA, Representative of Taiwan, ROC, (1993)

Source: 1996 Waialae Country Club membership directory

http://starbulletin.com/97/11/19/news/index.html

Also see...

http://starbulletin.com/98/10/16/news/story2.html

~ ~ ~

NEW DISCOVERY (08-20-08): Undisclosed professional and financial conflicts of interest of Trustee David C. Farmer and attorney Steven Guttman with Cerberus International; Kamehameha Schools; Goldman Sachs; Blackstone Group; David Banmiller, Judge Robert Faris, Judge David Ezra, Dane Field, James Ahloy, Dennis Tsuhako, Stuart Ho, etc., through his legal representation of Aloha Airlines:

September 21, 2007

Quiet, not silent, Stuart Ho
leads as he learns

by Janis L. Magin, Pacific Business News

Stuart T.K. Ho doesn't like to take a lot of credit for all he's done in 43 years as an attorney, a politician, a real estate developer, a trustee, a hospital CEO.

Others grabbed the glory and the headlines and Ho was mostly content to let them.

"He's not a self-promoter," said friend and attorney Cuyler Shaw, who represented the family business, Capital Investment of Hawaii, started by Ho's late father, Chinn Ho. "He seems to draw people because of his competence and understanding of the situation."

Ho, 71, is one of Hawaii's most influential business leaders, one of the most dedicated stewards of community service, and, to quote his son, "somebody who truly understand the inner workings of Hawaii business."...

Ho cultivated his connections and business savvy during his long career in business, as a state representative and as a member of a dozen corporate and charitable boards of directors. He ran the Rehabilitation Hospital of the Pacific for five years after closing down Capital Investment and he is now the state president for AARP Hawaii and the president of Waialae Country Club.

His wife, Elizabeth, is the area field service director for AFSCME, the parent organization of the state workers union, the Hawaii Government Employees Association.

Ho served as a director on the Aloha Airlines, Bank of Hawaii, Gannett Co., and TIAA-CREF Mutual Funds boards from the mid-1970s until the early 2000s. He also served as a University of Hawaii regent.

“One of the benefits I had with being on these various boards was the information you acquired that wasn't exactly street talk, especially with the local boards," Ho said. "Although you had to maintain your secrecy about these things, there's no question that what you put in your head stayed there."

He currently serves as a trustee on the University of Hawaii Foundation board, and as a director on the boards of Nuuanu Memorial Park, the Mamoru and Aiko Takitani Foundation, the Law Library Microform Consortium and Aloha Festivals....

The first of Chinn and Betty Ho's six children, Stuart T.K. Ho grew up in Honolulu and graduated from Punahou School in 1953, then headed to Claremont McKenna College in Claremont, Calif.

After graduation in 1957, two years of service in the Army took him to France and Lebanon, sparking a lifelong love of travel.

He went to law school at the University of Michigan, earning his degree in 1963. He returned to Honolulu, where he briefly worked as a deputy corporation counsel for the city before moving with his first wife, Mary, to practice law in New York City.

Returning to the Islands, he ran for the state Legislature in 1966 as a Democrat after reapportionment opened up a number of new seats, and represented Manoa for four years, two as majority floor leader.

"One of the most interesting periods of my life was government and the measurement of power and how it's applied," Ho said.

Despite his fascination with politics, Ho knew he needed to focus his attention on the family business, as he was expected to do. His brother, Dean, a business consultant in Shanghai, also worked for Capital Investment.

As a father, Ho did not expect, nor encourage, any of his three children to follow him.

"Real estate's a tough business and frankly, I wanted to encourage them to be in more stable businesses," Ho said. "Basically they went their own way."

Two of them did follow careers in business, although on different paths. Peter Ho was recently promoted to second in command at Bank of Hawaii.

Daughter Cecily Sargent recently sold a restaurant near Sydney, Australia, her second, and is getting ready to start another restaurant-related business.

"We weren't spoiled," Sargent said. "We were taught that you have to work hard to get what you want, and that success doesn't come without hard work."

The youngest of Ho's children was Heather, who died in the Sept. 11, 2001, terrorist attack on the World Trade Center. She was executive pastry chef at Windows on the World....

Although Ho is as busy as ever with his jobs at AARP and Waialae Country Club, he is looking forward to settling into a slower pace of retirement next year when his term at the club is up....

http://pacific.bizjournals.com

~ ~ ~

NEW DISCOVERY (07-12-08):

Harken Energy & The SEC

~ ~ ~

NEW DISCOVERY (06-02-08):

WAIALAE COUNTRY CLUB

http://www.waialaecc.com/

MAIN NUMBER: (808) 734-2151

FAX NUMBER(808) 734-4791

2007 OFFICERS

STUART HO, President
JOHN JUBINSKY, President-Elect
RICHARD INGERSOLL, Secretary
ALLAN LUM, Assistant Secretary
JAMES AHLOY, Treasurer
ALLAN LUM, Assistant Treasurer
DENNIS TSUHAKO, Internal Auditor

~ ~ ~

November 19, 1997

Four trustees receive
country club freebies

The free memberships, accepted by all
Bishop Estate trustees but Oswald Stender,
are called a conflict of interest

By Rick Daysog. Star-Bulletin

Four out of five Kamehameha Schools/Bishop Estate trustees receive free memberships from exclusive country clubs that sit on Bishop Estate land, in what critics called a clear conflict of interest.

The four trustees also are listed as honorary members at the Mid-Pacific Country Club in Lanikai, which also sits on Bishop Estate land.

The fifth trustee, Oswald Stender, turned down the free club memberships in 1995 to avoid the appearance of a conflict and for tax purposes.

"I doubt if they know how to spell the word fiduciary."

Jervis, Lindsey and Wong were not Bishop Estate trustees when Mid-Pacific's lease was last negotiated.

Trustees respond

An estate spokeswoman referred questions regarding the club memberships to the individual trustees. Peters and Lindsey did not return calls.

He said he had been a regular paying member at Mid-Pacific but later became an honorary member after he became a trustee.

Managers at both golf clubs declined comment when asked about the potential conflicts.

Traditional perk

"It was strictly by the numbers," he said.

Breached duties?

For instance, a regular membership at Waialae costs $44,000 -- roughly equivalent to the median household income in Hawaii -- in addition to monthly dues of about $310.

Mid-Pacific Country Club members pay a one-time initiation and certificate fee of $36,000 and monthly dues of $265, according to Hal Okita, general manager.

Honorary member at both clubs enjoy nearly the same privileges as regular members, although they are not allowed to vote on club policy.

Former Bishop Estate trustees William Richardson and Matsuo Takabuki are regular, paying members of Waialae.

"I don't see any problem in giving away honorary memberships to the governor," said King, whose father served as a Bishop Estate trustee during the late 1950s.

"But when they do that for the landlord, that is a conflict of interest."

Honorary members

Of Waialae Country Club in 1996, followed by the year they became members:

Trustee Richard Wong (1994)

Trustee Henry Peters (not available)

Trustee Lokelani Lindsey (1993)

Trustee Gerard Jervis (1995)

Sen. Daniel Inouye (n/a)

Rep. Patsy Mink (1993)

Gov. Ben Cayetano (1987)

Lt. Gov. Mazie Hirono (1995)

Supreme Court Chief Justice Ronald Moon (1993)

Honolulu Mayor Jeremy Harris (1994)

Senate President Norman Mizuguchi (1994)

House Speaker Joe Souki (1993)

Former House Speaker Daniel Kihano (1987)

City Council Chairman John DeSoto (1995)

Rev. David Coon (1989)

University of Hawaii President Kenneth Mortimer (1993)

Golfer Arnold Palmer (1981)

Sei Hoon Yang, Consulate General of the Republic of Korea (1993)

Ting-Yu Yu, director general CNNA, Representative of Taiwan, ROC, (1993)

Source: 1996 Waialae Country Club membership directory

http://starbulletin.com/97/11/19/news/index.html

Also see...

http://starbulletin.com/98/10/16/news/story2.html

~ ~ ~

Dennis Tsuhako is expected to testify regarding the truthfulness and factual accuracy of the following letter:

P&C INSURANCE COMPANY, INC.

P.O. Box 38

Honolulu, HI 96810

November 20, 1996

Mr. Cary M. Okawa, C.P.A.
Coopers & Lybrand L.L.P.
2500 Pacific Tower
1001 Bishop Street
Honolulu, Hawaii 96813-3668

SUBJECT: P&C Insurance Company, Inc. - Annual Financial Report

Dear Mr. Okawa:

It is due to the fact that these issues have not been resolved, that I am declining to sign my concurrence to P&C’s Annual Financial Report for the fiscal year 1995-96.

Thank you very much for your understanding and concern.

Very truly yours,

Bobby N. Harmon, CPCU, ARM, AAI
President

enclosures

cc: Insurance Commissioner, State of Hawaii (w/encls)

www.kycbs.net/PC-Coopers-Lybrand-11-20-96.htm

~ ~ ~

October 23, 2006

UH retains Accuity as auditor

Pacific Business News (Honolulu)

The University of Hawaii Board of Regents has voted to keep Accuity LLP as its auditor for the remainder of a three-year contract worth more than $700,000 annually.

The decision ends speculation about whether Accuity, which recently acquired PricewaterhouseCoopers' practice in Hawaii, would lose the university as a client.

The university has long been a client of PricewaterhouseCoopers, which officially withdrew from the Hawaii market on Oct. 13.

PWC's original audit contract with the university was for three years, from 2005 to 2007. The 2005 audit is completed. Accuity will do the 2006 and 2007 audits, said Carolyn Tanaka, a university spokeswoman.

www.pacific.bizjournals.com

~ ~ ~

Dennis Tsuhako is also expected to testify as to Harmon’s report to him that P&C’s financial statements were fraudulent and in violation of IRS and Insurance Department regulations. He will be asked as to which officer of P&C signed off on the 1996 financial statements, whether the auditors opinion was qualified or unqualified, and why Coopers & Lybrand approved P&C’s financial statements when they were previously advised by Harmon, then president of the company, that they were fraudulent.

Dennis Tsuhako is also expected to testify regarding his business, professional and personal relationships with Cary Okawa, Wendell Lee, Mark McConaghy, PricewaterhouseCoopers, Ben Benson, Kamehameha Schools, P&C Insurance Co., Warren Price III, Hamilton McCubbin, Colbert Matsumoto, Rodney Park, Wally Chin, Clyde Mark, Nathan Aipa, Colleen Wong, Louanne Kam, Constance Lau, Diane Plotts, Dee Jay Mailer, Guido Giacometti, Susan Tius, Sukamto Sia, Henry Peters, Richard Wong, Jeff Stone, Gilbert Tam, Margery Bronster, Hugh Jones, Earl Anzai, Lyn Anzai, Dennis Fern, McKenzie Methane, Greg Brenneman, Hawaiian Airlines, Aloha Airlines, Rocco Sansone, Marsh & McLennan, Aon Insurance, Judge Kevin Chang, Judge David Ezra, Judge Lloyd King, Judge Robert Faris, Judge Eden Elizabeth Hifo (fka Bambi Weil), Lokelani Lindsey, Jeremy Harris, City & Co. of Honolulu, Admiral William Crowe, Robert K.U. Kihune, Admiral Thomas Fargo, Faye Kurren, Peter Savio, Edwina Clarke, Accuity LLP, University of Hawaii, Evan Dobelle, GGP, LP, JMB Realty, Liberty House, Dwight Yoshimura, Carol Muranaka, James B. Nicholson, Kapiolani Health Foundation, Jas. Glover Holding Co., Ltd, Hi-Beam Organization, Baker Tilly International, David C. Farmer, Andrew H. Card, John Jubinsky, and others to be named upon discovery.