THE UNITED STATES DEPARTMENT OF JUSTICE
OFFICE OF THE U.S. TRUSTEE
David C. Farmer, Successor Trustee
Bobby N. Harmon
(Formerly Mary Lou Woo vs. Harmon and James Nicholson vs. Harmon)
United States District Court, District of Hawaii
Judges: David A. Ezra; Kevin S. Chang
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ALAN M.L. YEE
2400 Pauahi Tower
1003 Bishop Street
Honolulu, HI 96813
Fax: (808) 536-5817
Alan Yee is a Partner in Tax Compliance & Business Advisory Services and also oversees the division. Prior to joining KM,H Alan was the Office Managing Partner and tax department head of Grant Thornton LLP’s Honolulu office...
More than twenty years of experience providing tax and business advisory services to corporations, partnerships, non-profit organizations, closely-held businesses and individuals
Substantial experience in the areas of compensation and estate planning
Alan has worked with a variety of clients representing Hawaii’s major industries, including real estate developers, contractors, financial institutions, retail and wholesale companies, brokers, non-profit organizations and personal service companies
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NEW DISCOVERY (08-22-08): More undisclosed conflicts of interests between Alan Yee, David Farmer, Steven Guttman, Governor Ben Cayetano, Nathan Aipa, Colleen Wong, Lyn Anzai, Louanne Kam, Arthur Andersen, PricewaterhouseCoopers, Dennis Tsuhako, Cary Okawa, Enron, Eric Yeaman, etc:
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....
How to Save Your Business Your People & Yourself ...
Arthur Anderson and The Phoenix Project
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NEW DISCOVERIES (02-08-09): More undisclosed conflicts of interest between Steven Guttman, James Duca, David Farmer, Guido Giacometti, Alan Yee, Diane Hastert, John Waihee, etc.:
February 14, 2005
Receiver fires RightStar execs
Pacific Business News (Honolulu)
The court-appointed receiver of an embattled Hawaii cemetery business said Monday he has fired a handful of the company's top executives since his appointment two months ago.
Guido Giacometti said that among key officers let go from RightStar Hawaii Management Inc. are principals John Dooley and Kathy Hoover, who were named in the recent foreclosure suit that led to Giacometti's appointment.
Giacometti, a Big Island resident, said he also fired RightStar CEO Bruce Dooley, who is John Dooley's brother, and the company's chief information officer, Zachery Hoover, Kathy Hoover's son.
"It was a top-heavy management structure," Giacometti said. "Over a year's time, we should see six figures in savings from the changes we've made."
Circuit Court Judge Sabrina McKenna appointed Giacometti to run the cemetery business after it was sued by Vestin Mortgage Inc. on Nov. 16, 2004, for defaulting on an estimated $34 million loan.
Cemeteries under RightStar management include Valley of the Temples in Kaneohe, Kona Memorial and Homelani Memorial on the Big Island and Maui Memorial.
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May 6, 2005
John Candon steps in to investigate RightStar finances
Pacific Business News (Honolulu) - by Harold Nedd
Accountant John Candon is ready to help state investigators determine whether an estimated $20 million was misused by an embattled cemetery business and four trustees, including former Gov. John D. Waihee III.
The 53-year-old president of Candon Consulting Group is the court-appointed master in the Office of the Attorney General's lawsuit against RightStar Hawaii Management Inc. and has been asked to pore over the company's books.
His task will be to uncover the great mystery behind the $20 million that is supposed to be in a trust for nearly 20,000 people who pre-paid for funeral services at Hawaii cemeteries.
Follow the money
What is supposed to emerge from his forensic accounting work is a portrait of where that money went and who -- if anybody -- is to blame for the lapse at RightStar.
Jim Wagner, the lawyer representing RightStar, contends that there has been no wrongdoing. Rather, he says, the company inherited serious financial problems when it bought the business out of Chapter 11 bankruptcy in Delaware in 2001.
It's Candon's job to penetrate that structure to detect whether there was wrongdoing at RightStar, which fired Waihee, a Democrat who served as governor from 1986 to 1994, and three other trustees.
"We will follow the money and do our best to find out what's going on," Candon told PBN. "People want to get the trust accounts straightened out. They want to get to the bottom of this and we're delighted that they feel we'll do a good job."
Candon's appointment comes following the court's appointment of a receiver, Guido Giacometi, to run the day-to-day operation of the cemetery business that has been sued by a Nevada mortgage company for defaulting on an estimated $34 million loan.
Giacometi's job is to help keep RightStar in business, paying bills and serving clients. In contrast, Candon's role is to dig into the company's finances.
The law requires RightStar and other businesses licensed for pre-need funeral services to put 70 percent of the money into a trust fund to be held until it's used for funeral expenses.
The law also requires RightStar to give an accounting for those funds every year. RightStar didn't do that in 2002 or 2003.
The state said it already knows from independent audit firm KMH LLP that $20 million was withdrawn from RightStar's pre-need trusts. In its lawsuit, the state said $38 million is still in RightStar's trust funds. But there should be $58 million.
If anybody can figure out what happened to that money, it's Candon, said James Duca, a bankruptcy lawyer in Honolulu.
Candon's résumé is full of the kind of "forensic accounting" work that involves finding out all the facts that need to be learned, Duca said.
"One of his specialties is reassembling records and figuring out where the money went," Duca said.
Other lawyers point out that it's difficult to "snow" him with too much information and expect that he'll find the "needle in the haystack." Colleagues insist that following $20 million around isn't too tricky for Candon, who they say is known to go wherever the money takes him.
Previous court-appointed cases include the bankrupt House of Adler, a large retail jewelry chain. Candon had to liquidate its roughly $10 million in assets to repay creditors.
Also, Candon was brought in by the courts when Jackson Builders Corp., a large drywall contracting firm, went under and needed someone to collect on debt and pay bills.
Plus, he is a court-appointed trustee for Trans Hawaiian, the motor coach company currently in a complex dispute with Roberts Hawaii involving roughly $10 million. On top of all that, Candon is the special master in a $3 million dispute between Loveland Academy and the state Department of Education.
Within the past couple of weeks, lawyers for the state and RightStar gave the court their consent for Candon to be appointed master. His appointment will become official once it has been sanctioned by the court.
Pacific Business News
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August 15, 2007
Improving Judicial Accountability in
Hawaii's Highest Court
By Randall Roth, The Hawaii Reporter
This is a summary of Randy Roth’s Comments to AJS Committee on Judicial Independence and Accountability (March 13, 2007)
Something is wrong with the system of judicial accountability when serious questions can be raised about the conduct of a state’s entire Supreme Court without an official body either coming to the defense of those justices or taking steps to hold those justices accountable.
Given the seriousness and specificity of the allegations in the Broken Trust essay and book, one would expect some kind of response. Thus far, the silence has been deafening:
• Commission on Judicial Conduct
• Judicial Selection Commission
• The Judiciary—Rule 19 Judicial Evaluations
• Hawaii State Bar Association
• American Judicature Society—Hawaii Chapter
• AJS Committee on Judicial Independence and Accountability
Nearly 10 years have passed since publication of the Broken Trust essay. Why has none of these organizations done anything? Are they assuming that the allegations have no merit? Or, are they assuming the existence of meritorious explanations for what appears to be unethical behavior? Why assume anything?
Why has “everyone” stuck his, her, or its head in the sand over a matter of such monumental importance? Doesn’t the deafening silence and lack of action indicate to you that something is wrong with the system of judicial accountability in Hawaii?
My goal is not to see anyone embarrassed or treated unfairly. If too much time has passed for there to be individual accountability, so be it. That’s one question.
A completely separate question is the one that has me here today: Did the judicial accountability system work or not work properly in the days, months and years following the publication of the Broken Trust essay? What about over the past year in response to new revelations in the Broken Trust book?
If this body does not attempt to answer such questions, who will? As corny as it sounds: If not you, who? If not now, when?
My perception is that the system did not work. My further perception is that the individuals running the various organizations are in denial.
If this body were serious about its assigned task, step one would be to acknowledge that the judicial accountability system failed in this instance. Step two would be to acknowledge that it failed intentionally. The people and issues involved here are simply too important for the total absence of accountability to have been inadvertent.
How can this body expect to deal with its task responsibly—and credibly—if it does not first acknowledge such obvious facts?
I apologize if my words offend anyone. According to Kate, you invited me here today to tell you what I think you should do. So that’s what I’m doing.
I also have some specific suggestions, but I don’t want to waste your time—or mine— going over them if you are not ready to acknowledge that the system failed miserably in this instance, and that the failure was not inadvertent.
Here are some specific suggestions that I hope the committee will consider along with the suggestions of others:
Analyze what went wrong, and explain it to the public.
Abolish the Judicial Selection Commission.
Although originally touted as a way to de-politicize judicial selection, the JSC simply moved the politics to behind a closed door. Limiting the governor to names on a short list that the JSC develops in secret makes it difficult, if not impossible, to hold anyone accountable for a bad selection decision. Similarly, because judicial evaluations are not made public and the JSC makes all retention decisions in secret, it is virtually impossible to hold the JSC accountable for its retention decisions.
Hawaii should put the process of appointing and re-appointing judges back into the hands of the governor. If the governor wants to appoint a panel to produce a short list of candidates, that would be fine. Either way, the governor should be expected to explain publicly the reasons for each appointment and re-appointment decision. All such decisions should be subject to Senate confirmation.
If the Senate or the public perceives an appointment to be other than merit-based, the governor would not have the excuse of having been limited to someone else’s short list. These proposed changes would increase significantly the current low levels of transparency and accountability, and for that reason alone would tend to increase public confidence in the judiciary (i.e., even if the quality of the judiciary were to remain the same).
Abolish the Commission on Judicial Conduct.
The Commission on Judicial Conduct is supposed to hold accountable the justices who select the members of the Commission, and the Commission operates totally in secret. These attributes do not instill confidence and trust in the judiciary. To the contrary, they promote distrust and cynicism. An independent party who operates more openly could better accomplish the Commission’s work. (See below)
Create an Office of the Inspector General.
This person would be appointed by the governor and confirmed by the Senate. He or she would have investigatory but not enforcement powers, and would render written advisory decisions on matters of alleged or apparent improper behavior by judges. The governor would be expected to address the substance of any such decision when announcing a decision to re-appoint, or not to re-appoint, a judge whose behavior had been considered by the inspector general. In the event of serious misconduct, a judge could, and presumably would, be removed from office by majority vote of the Senate. In addition to taking over the work of the Commission on Judicial Conduct, the inspector general could administer the judicial evaluation process. (See below)
Revise the Judicial Evaluation Program.
To increase the level of confidence and trust in the judiciary, a party other than the judiciary should administer the judicial evaluation program. The inspector general could oversee the program and share detailed results with a small committee of judges whose function would be to help individual judges use that feedback as a tool for improvement. Each year the inspector general would provide to the public a bottom-line evaluation of each judge (e.g., satisfactory or unsatisfactory). This bottom-line public evaluation would begin only after an appropriate grace period of at least several years to give a new judge an opportunity to grow into the job.
Of course good people are the most important ingredient in achieving judicial independence and accountability. They will generally find a way to make even a flawed system work reasonably well. Unfortunately, the converse is equally true: bad people will usually find a way to manipulate to some degree even the best of systems. That reality should be kept in mind.
What I have proposed would not be perfect. The important question is whether these changes would be a significant improvement over the current system. As I stated earlier, I believe the current system of judicial accountability is not working.
These proposals would increase significantly the current levels of transparency and accountability in the judiciary. Transparency and accountability are critically important in establishing and maintaining confidence and trust in the system of justice, in my opinion.
Thank you for this opportunity to share these thoughts with you.
Randall Roth is an attorney, professor at the University of Hawaii School of Law, and co-author of "Broken Trust: Greed, Mismanagement & Political Manipulation at America’s Largest Charitable Trust"
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Latest Developments as of June 6, 2007
Named "BOOK OF THE YEAR" by Hawaii Book Publishers Association... see details here and here
This Week's Quote*:
"Broken Trust was by far the most popular text in my class. Students loved it!"
-Professor William Edmond Sharp, Jr., Hawaii Pacific University
Last Week's Quote*:
"I just finished reading 'Broken Trust' and it is brilliant! I could not put it down. For every question I had, there was an answer in the book. It is clear, concise, historic, and hugely entertaining. This should be required reading for everyone, especially students.
“I am also dismayed and discouraged that, in so many ways, nothing changed. Maybe I am naive, but it makes me angry that the still sitting judiciary is responsible not only for the debacle, but the perpetuation of the same skewed selection process. They have no shame, no remorse, no ethical or moral sense to make a change that is so obvious, only justification of their own behavior. That the 'interim trustees' , despite the IRS mandates, public outcry, legal cases, etc, kept the BE staff attorneys on the payroll completely boggles my mind. Thank you for having the courage and the sheer grit to write this book. Without this record, I have no doubt the players would continue minimizing the truth and erasing history to excuse actions that are truly inexcusable."
-Kathi Thomason, Accountant
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Latest Developments as of February 19, 2007
This Week's Quote:
"I loved this book! Not only is the story amazing, and well-researched, but it is so well told. It was like reading a thriller; I could not wait to find out what would happen next. Who would have thought that a book about a charitable trust could be so exciting? Some of the characters are truly unforgettable. I guess truth really is stranger than fiction. I am still shaking my head at the fiduciary breaches and the conflicts of interest."
-Professor Mary LaFrance, University of Nevada School of Law~ ~ ~
July 5, 2006
'Broken Trust' Forum Calls for
Release of Corruption Documents
By Malia Zimmerman
The full story of the corruption that permeated Hawaii's $10 billion charitable trust, the Kamehameha Schools/Bishop Estate, to the highest levels of government in Hawaii, has never been told.
But the information that has become public is categorized by 60 Minutes as "The biggest story in Hawaii since Pearl Harbor;" by The New York Times as "A feudal empire so vast that it could never be assembled in the modern world;" and by Howard M. McCue III, the Chairman of the Charitable Planning Committee for the American College of Trust and Estate Counsel, as "The most significant legal dispute of our time ... a tale of unbridled ambition, infectious greed, and high drama...."
This saga, involving Bishop Estate trustees, state Supreme Court justices, a former governor and leaders in the Hawaii State Legislature, peaked in 1997.
However, nearly one decade later, critics say there has been no accountability for the many influential people who wrongfully took advantage of Princess Pauahi Bishop's charitable trust - a trust she established in 1884 to fund the education of Hawaiian children, not to fatten the pockets of politicians and trustees.
University of Hawaii Law Professor Randall Roth and U.S. Federal Judge Samuel King, co-authors of a newly published book, Broken Trust: Greed, Mismanagement and Political Manipulation at America's Largest Charitable Trust, documented the story of the trust from its inception 100 years ago through current times.
At a July 5 forum hosted by Small Business Hawaii, and moderated by Hawaii Reporter, Roth and King shared their thoughts on what led to the extensive problems at the Bishop Estate and what still needs to be done to ensure there is justice and accountability for past wrongdoings.
Joining them were four other prominent Hawaii citizens who played a major role in pushing for reforms including Hawaiian attorney Beadie Dawson, former Honolulu Star-Bulletin Managing Editor Dave Shapiro, former Campaign Spending Director Robert Watada and Congressman Ed Case....
Before the 90-minute panel wrapped up, the panelists shared some of the following insights from their experiences:
Congressman Case was a freshman state legislator in 1995 when he tried to make two major reforms related to the Bishop Estate - take the Supreme Court justices out of the trustee selection process and limit trustee compensation to what was “reasonable” - both of which made him forceful enemies within the legislative leadership, the court and the Bishop Estate.
“I got nailed pretty bad,” Case says of his first attempt in 1995.
The Hawaii Supreme Court justices admitted that they were split on whether they should be in the business of appointing trustees because of perception of cronyism and favoritism.
In 1997, Roth, King and three other well-respected Hawaiians signed their name to a compelling essay entitled “Broken Trust” that documented the power, influence and wrongdoing in the highest levels of the Bishop Estate and the Hawaii government.
Shapiro, then the managing editor of the Honolulu Star-Bulletin, published the oped, which rocked the very core of the Hawaiian, political and legal communities.
That was the final catalyst for all but one justice - Robert Klein (now an attorney/lobbyist for the Office of Hawaiian Affairs) - to voluntarily step aside from the duty.
Case’s bill to limit trustee compensation also passed, despite major obstacles. At the time, trustees were making more than $1 million a year.
The House, which had Bishop Estate-backed leadership, including House Speaker Joe Souki, and Reps. Terrance Tom and Calvin Say, agreed to a bill that would study the issue. But the Senate sides with Case in establishing compensation limits. In a highly unusual move, Case moved to suspend the rules and adopt the Senate version. Because of extensive pressure from the Hawaiian comunity, the media and the public, the House agreed to the bill by a vote of 50 to 1 with Rep. Say (who is presently the House Speaker) as the one dissenting vote.
Now, as a Congressman for the second district who is running for U.S. Senate against Sen. Daniel Akaka, Case has distinguished himself from his opponent on this issue. Akaka was sympathetic with the ousted trustees, while Case pushed for more accountability and less compensation. Today, Case says there are still “broken trusts” in Hawaii, which need to be addressed....
A great deal of the information Roth and co-author Judge King used to write the Broken Trust was given to them by Watada, the director at the time of the state Campaign Spending Commission.
But Roth says there are still between 1 million and 2 million more documents sealed by the courts that he wants to review and catalogue and believes should be made public.
He hopes trustees will some day be held accountable for their mismanagement. But that is unlikely: they did not pay legal fees for the most part, they took millions of dollars for themselves, they paid off political cronies with trust funds, and held what Roth calls a "world record for breaches of trust."
Roth and King maintain the Broken Trust saga is not over, and neither are the problems for Kamehameha Schools if further safeguards and reforms are not implemented....
Alan Yee is expected to testify as to the facts and circumstances of the Settlement Agreement, and the reasons he believes that Defendant’s acts of sending copies of letters to him regarding wrongful, fraudulent and illegal actions of trustees, employees, independent contractors, and others related to this case; sending copies of these letters to law enforcement and regulatory authorities; and posting copies of these letters on the Internet, constitutes a breach of the Settlement Agreement.
Alan Yee is also expected to testify regarding her business, professional, personal and political relationships with John Waihee, Bobby Harmon; John Goemans; Roy Hughes; Greg Dunn; Bradley Tamm; P&C Insurance Co.; Mark Polivka; Jean Rolles, Outrigger Hotels; Nainoa Thompson; Dee Jay Mailer; Douglas Ing, Diane Plotts, Bank of Honolulu, Judge Kevin Chang; Judge Barry Kurren; Faye Kurren; Henry Peters, Peter Savio, Ben Benson; The Nature Conservancy; The Ocean Conservancy; Bishop Museum; Mark Polivka; Milton Holt; Richard Wong; Jeff Stone; Kevin Showe; Kenneth Hipp, Marr Hipp Jones & Pepper; Gilbert Tam; William S. Richardson; Nathan Aipa; Louanne Kam; Lyn Anzai; Hamilton McCubbin; Wally Chin; Sandie Wicklein; Maryanne Inouye; Yukio Takemoto; Robert Katz; Matt Tsukazaki; PricewaterhouseCoopers; Mark McConaghy; Federal Insurance Co.; Marsh & McLennan; Rocco Sansone; John Mullen Company, Inc.; Paul Alston, Alston, Hunt, Floyd & Ing; Gensiro Kawamoto; Henry Paulson; Goldman Sachs; CB Richard Ellis; Susan Tius, Lissa Andrews, Rush Moore LLP; Guido Giacometti; Sukamto Sia; Apollo Advisors; The Carlyle Group; Henry Kissinger; Investcorp; Trinity Investment; Mitsui Bank & Trust Co.; Alika Thompson; Calvin Say; Clayton Hee; Office of Hawaiian Affairs; Hawaii Land Use Commission; Maui County Planning Commission; Colbert Matsumoto; Peter Young; Hawaii Dept of Land & Natural Resources; Michael Chun; Rockne Freitas; James H. Case, Carlsmith Ball LLP; Paul M. Ueoka, Carlsmith Ball LLP; Gerald A. Sumida, Carlsmith Ball LLP; Andrew Pepper, Carlsmith Ball LLP; Judith Neustadter Fuqua, Mary Lou Woo; Steven Guttman, Carol Muranaka, Bruce Bennett, Jean Rolles, Judge Alan Kay, Judge Michael Town, Judge Michael Seabright, Judge James Duffy, Colleen Hirai, Colleen Hanabusa, James Wriston, Kirk Caldwell, Hawaiian Airlines, Aloha Airlines, David Farmer, James Nicholson, Darren Ah Chong, Enron, Arthur Andersen, Eric Yeaman, Stuart Ho, Waialae Country Club and others to be named upon discovery.
Documents, News Articles and Related Links
IRS - PricewaterhouseCoopers, Arm’s Length and Intermediate Sanctions
IRS - Closing Agreement for Kamehameha Schools
Hawaii Dept. of Labor - CV 98-2394-05 - Unemployment Insurance Appeal
RICO Lawsuit - 99-CV-00304-DAE-BMK
Equity 2048 - Hawaii Attorney General vs. Bishop Estate Trustees
XL Reinsurance Policy No. XLRKS-01796
Equity 2048 - Related Correspondence and Documents
First Amendment Rights/Obstruction of Justice
Broken Trust: The Book, by Samuel P. King and Randall Roth
Lost Generations: A Boy, A School, A Princess, by J. Arthur Rath
KITV Special Report
Last update: August 17, 2009