Bobby N. Harmon, CPCU, ARM

Las Vegas, NV 89118

March 28, 2005

                 (via fax @ 303-844-3596)

Janet S. Hughes, Mgr.

Employee Plans & Exempt Organizations 

Internal Revenue Service

1244 Speer Blvd., Ste 442

Denver, CO 80204-3583

RE: Report of Continuing Violations of IRS Section 4958 By Kamehameha Schools

Dear Ms. Hughes:

This is to report to the IRS what appears to be continuing violations of IRS Section 4958 regulations by Kamehameha Schools, and ongoing efforts by the interim and current Trustees, Louanne K.L. Kam, Esq., and certain other employees of the estate, to cover-up these violations by means of intimidation and inflicting serious financial harm.

I originally reported similar violations in a letter dated October 4, 1997, addressed to the Internal Revenue Service, Tax Fraud Unit, Fresno, California. The latest violations have occurred during the Arbitration Tribunals of the American Arbitration Association in the matter of the Arbitration between MARY LOU WOO, Trustee, Claimant, and BOBBY N. HARMON, Respondent, Case No. 74 166 00491 03 JAFA. These violations are continuing to this date and the latest litigation is an Application by Plaintiff-Trustee Mary Lou Woo for Confirmation of Arbitration Award and for Entry of Judgment Against Bobby N. Harmon, Case No. CV05-00030 DAE KSC. The judge involved in this latest civil case brought against me is Judge Kevin S. Chang - whom I have requested to be recused.

As background information for these new allegations, much of which you already have in your files, I am providing the following chronology of events which preceded the latest actions, with references to addresses on the Internet where you can view certain of these documents:

10/01/94         As a result of directives by Nathan Aipa and based on the advice of Price Waterhouse, BH drafted "arms length" Guidelines for P&C:

GUIDELINES - P&C INSURANCE COMPANY. INC. - ARMS-LENGTH RELATIONSHIPS

The following are certain guidelines which should be utilized to maintain arms-length relationships between P&C Insurance Company, Inc. and its Parent and Corporate Affiliates:

1. Written communications should be on appropriate letterhead and signed by the proper parties, including pertinent position titles (e.g., any correspondence concerning business matters of P&C Insurance Company, Inc. must be on P&C letterheads and signed by the Captive Manager or by an Officer or Director of the corporation).

2. P&C should not invest any of its funds in any subsidiary of the Parent, nor in any entity in which the Parent or any subsidiary has a substantial financial interest. Primary communications, financial reporting, etc., must be between P&C and the investment firms.

3. In situations where P&C is involved in litigation, bankruptcy proceedings, or negotiations with third parties (e.g., John Mullen & Co.), it must be made abundantly clear to the third party that P&C itself is in control of the negotiations and litigation and not KSBE or Pauahi Holdings Corporation (PHC), and that all correspondence and communications from the third party should be directed to P&C rather than to KSBE or any subsidiary.

4. All financing provided by PHC to P&C should be on terms similar with the market.

5. Any services provided to P&C by KSBE or PHC personnel should be charged back to P&C. (BH Note: This was never done!)

6. The majority of the directors and majority of officers of P&C should be persons who are not Trustees or employees of KSBE or PHC.

7. The Chief Executive Officer of P&C should not be a Trustee or an employee of KSBE. (BH Note: Henry Peters was the CEO of P&C!)

8. The directors and officers of P&C should not be dominated by or subject to the control of individuals who are Trustees, officers or directors of KSBE or PHC.

9. To the extent that KSBE or PHC staff is called upon or needed to assist in the management of a P&C project, a Consulting Agreement should be entered into and P&C should reimburse KSBE or PHC for the consulting services provided by their staff. As an alternative, if such management consulting services is expected to consume an inordinate amount of KSBE’s staff's time, then transfer of such staff employee from KSBE to the subsidiary should be considered. (P&C should be careful not to allow consulting agreements with KSBE or PHC to proliferate to the point that KSBE or PHC is essentially managing P&C's day-to-day operations.) (BH Note: The original discussions with management were that I would be transferred to P&C as soon as the captive insurance company was formed. KSBE breached this original proposal and I continued to be an employee of KSBE all the time I was president of P&C Insurance Company - again in violation of IRS arms-length regulations. Louanne Kam perjured herself in the Unemployment hearings when she stated that “according to Nathan Aipa, arms-length relations were ‘no longer an issue.”)

10. A Compensation Policy should be established so that P&C's Directors and Officers are compensated appropriately by P&C in order to demonstrate the separateness between P&C and KSBE and PHC. The shareholder(s) of P&C should establish this compensation.

11. The employment practices of P&C (e.g., hiring, determination of wage scales, employee benefits, pension plans, disciplinary actions, etc.) should not be controlled or managed by KSBE or PHC. (Any indication of control of management by KSBE or PHC of P&C's employment practices would be pivotal in the determination of an arms-length relationship.)

12. P&C must comply with all state regulatory requirements, including by not limited to sufficient capitalization and appointment of a qualified, licensed agent to manage the operations of the captive insurance company.

13. Management of the daily operations of P&C, including claims administration and investing of P&C's capital, should be largely free of influence or control by KSBE's (or PHC's) Trustees and staff. (BH Note: Claims administration was largely controlled by KSBE’s legal department, including directly contracting with outside attorneys, and in some instances without notification to me or to the insurance carriers, as detailed in my RICO lawsuit.)

14. In general, P&C should not reinsure its risks with any reinsurer on whose boards of directors KSBE (or its subsidiaries) has representation. (In the event this should occur, however, KSBE's representative on the board should recuse himself from voting on any matter which may come before the reinsurer's board concerning the captive insurance company.) Since P&C Insurance Company, Inc. is an affiliate of KSBE and PHC, it is important that both KSBE and PHC maintain arms-length relationships with P&C at all times. (As reflected by the HIG/HEI insurance case, failure by KSBE or PHC to maintain an arms-length relationship may render KSBE and/or PHC liable for claims against, and debts of, the captive subsidiary.)

The foregoing policies should operate to establish and maintain the appropriate arms-length relationships.

BH: These written Guidelines were in effect at the time of my termination.

94,95,96         BH: During the period when the formation of the captive insurance company was under discussion, I recommended to Aipa that I be transferred from KSBE to the captive in large part due to the arms-length issues. I drafted a staff report for this transfer which was submitted to Aipa for review and approval. My recommendation was that I be transferred to P&C and KSBE contract with P&C for risk management services... I included an estimated $200,000 in the initial budget for P&C to establish and operate a separate office. This staff report was never presented to trustees by Aipa....

Little concern was shown by Aipa re work being performed for P&C by KSBE management and staff at no charge to the subsidiaries. I spent hundreds of hours on KSBE time performing work for P&C which was never charged to it.... Others providing "free" services included ... C. Wong, Kam and Aipa. According to Price Waterhouse's letter, this might be considered by the IRS as "improperly subsidizing a for-profit subsidiary.”

09/??/94         P&C Insurance Co., Inc. (“P&C”) chartered as a captive insurance company in Hawaii, a for-profit subsidiary of Pauahi Holdings Corporation (“PHC”), which is a for-profit subsidiary of KSBE.

11/??/94         Harmon named President of P&C. Peter Lowe, M&M, is V.P.; William Richardson is Sec/Treas.; Nathan Aipa is Asst. Sec/Treas. Board of Directors: Henry Peters, Chairman; William Richardson; Gil Tam.

01/31/95         INSURANCE MANAGEMENT AGREEMENT between M&M Ins Mgt Services, Inc. and P&C signed by Peter Lowe and B. Harmon. Key agreements: “Whereas, P&C has received authority from the Commissioner of State of Hawaii Insurance Division (the “Commissioner”) under the provisions of Chapter 431, Article 19, Hawaii Revised Statutes to engage in the underwriting of various classes of ins. and reins. As a captive insurance company; and Whereas, in conjunction with such underwriting P&C will require management, administrative and consulting services and IMS is willing to furnish such services; and Whereas, the parties desire to enter into an agreement whereby IMS will render itself or through others retained by IMS, management, administrative and consulting services with regard to the operation of P&C. . . . 1. IMS’ SERVICES. IMS will render the following services with regard to the business of P&C . . .a) Underwriting of Insurance . . . b) . . . Policy holder Services. . . . IMS shall issue and endorse policies . . . and issue notices of cancellation. IMS shall bill, receive and render receipts for premiums due . . . IMS shall have full authority hereunder to take whatever action it deems necessary or appropriate to attempt to collect premiums . . . 2. OFFICE RECORDS . . . BOOKS . . . c) Reports and Examinations. All federal and state reports, other than federal tax returns, and all other applications and reports as shall be required by Chapt. 431, Article 19, HRS shall be prepared and filed by IMS after review by P&C.

. . . g) Authority of IMS. IMS shall have all the power and authority necessary or desirable to carry out its duties and obligations under this Agreement, which shall include the right to engage, as an independent contractor, any person, corporation or other organization to perform any functions to be performed hereunder by IMS. The authority granted hereunder shall specifically include the right to engage other operating units within Marsh & McLennan, Inc., or any subsidiary or affiliated company thereof, to perform such functions. 3. RELATIONSHIP BETWEEN PARTIES; LIMITATION OF RESPONSIBILITY. a) Independent Contractors . . . b) Compliance with Laws. IMS shall use its best efforts to advise P&C regarding compliance with the insurance laws of the State of Hawaii. . . c) Scope of Services. The obligations of IMS hereunder are limited to the good faith performance of the services to P&C set forth herein and IMS shall have no liability to P&C or any other person for any action taken pursuant hereto other than as a result of its wilful misconduct or gross negligence. d) Indemnification. P&C shall indemnify and hold harmless IMS, its officers, directors, employees, agents and affiliates from and against any losses, claims, damages, liabilities, cost of expenses, including reasonable attorney fees and expenses of investigation (collectively, “Losses”), to which IMS may become subject in connection with the services it provides hereunder; provided, however, that P&C shall not be liable under the foregoing indemnity in respect of an Losses to the extent that a court having jurisdiction shall have determined by a final judgment that such Loss resulted from IMS’ wilful misconduct or gross negligence. The provisions of this section shall survive the expiration or termination of this Agreement, including any extensions thereof . . . f) Entire Agreement. All prior negotiations and agreement between the parties hereto relating to the subject matter hereof are superseded by the Agreement, and there are no representations, warranties, understandings or agreements other than those expressly set forth herein, except as modified by an instrument signed by the parties hereto. . . g) Waivers. . . . Any waiver by either party of any breach of any provision hereof shall not be construed as a waiver of any continuing or succeeding breach of such provision, a waiver or modification of the provision itself, or a waiver or modification of any other right under this Agreement. . . . COMPENSATION AND EXPENSE PROVISION . . . (A) Annual Fee. In consideration for the services to be performed by IMS, P&C agrees to pay IMS a fee on a time and expense basis. . . .(D) Billing and Payments. IMS shall render, within 30 days after the end of each month, a statement to P&C setting forth the reimbursable costs and expenses incurred during the immediately preceding month. . .

BH: Nothing in M&M’s original proposal or this Management Contract mentioned anything about a FLAT ANNUAL CHARGE OF $200,000 from M&M to P&C for any type of services. The additional $200,000 charges were apparently fraudulent and arranged through a conspiracy between Peters, Aipa, Kam, Sansone and Lowe. There was a conflict of interest as Lowe was SR. V.P. for M&M IMS, as well as V.P. for P&C. Lowe had a duty of loyalty to P&C to make sure that P&C was obtaining competitive bids from independent contractors (including M&M), and that the company was not being defrauded by being sent false invoices for services not rendered and not under contract. BH was only performing his legitimate duties as P&C’s president when he obtained alternative quotations for insurance services and coverages for P&C. Aipa and Kam, as KSBE employees, did not have legal authority to: 1) supercede this Management Contract between P&C and M&M IMS -- especially orally; 2) question Harmon’s authority to obtain competitive bids for P&C from M&M or any other independent contractor; 3) question Harmon’s authority to require a written fee proposal and contract from M&M; and 4) question Harmon’s refusal to pay M&M any service fees not under a legal contract. In actuality, M&M was charging fees for policy services, safety services, claims services, etc. for which they were also receiving commissions from the standard insurance companies they represented — including Federal Insurance Co. and AMRE.

02/??/95         An article in the Honolulu Advertiser discloses the names of individual investors in the McKenzie deal. BH: Even though I was responsible for the handling of these insurance claims, this was my first knowledge that Trustees, managers, employees and independent contractors had invested in this deal including: Henry Peters, Gil Tam, Mitch Gilbert, Gil Ishikawa (KSBE’s Tax Administrator), Rodney Park (KSBE Controller) and Wally Chin (Asst Controller). Mark McConoghy, of Price Waterhouse, KSBE’s tax consultant, was also an investor.

02/27/95         The Honolulu Advertiser, under the headline, "Monitoring groups not told about deals," reported:

“Both the state Probate Court and the state Attorney General's Office are required to annually review Bishop Estate operations."

"Neither agency knew about the personal investments estate trustees and employees made in connection with the estate's McKenzie Methane investment, according to court records and interviews."

"Peter Trask...made no mention of the McKenzie Methane or HAK Partners investments in his report to the court."

"James Duffy, who reviewed Bishop Estate operations last year for the state Probate Court, said he was unaware of the McKenzie Methane investment and had never heard of the HAK partnerships."

"Benjamin Matsubara, the current court master, also said he was unaware of the HAK Partnerships ..."

"Deputy Attorney General Kevin Wakayama, who reviews Bishop Estate activities for the state, said personal investments by estate trustees and staffers in estate-related business deals have `never been publicly reported by the estate.'"

02/28/95         The Honolulu Advertiser under the headline, "Bishop Estate tax-exempt status scored," discloses:

"...Peters (attorney Ronald Peters, not Henry Peters) pointed out yesterday that the estate trustees told James Duffy, court-appointed master for the estate's 1989-90 fiscal year, that `they have not undertaken any transactions with members of their families, business associates, employees of the state, or members of immediate families of employees of the estate except such as are disclosed to the master...'"

"The estate had no comment yesterday on questions about why the existence and activities of the HAK partnerships were not reported to court masters since 1989."

"The estate also had no immediate comment on whether it was obligated to report the HAK partnership transactions on its federal income tax returns."...

"The estate itself invested some $85 million in the same energy deal."

09/13/95         The IRS “Interim Sanctions” regulations go into effect (retroactively).

07/30/96         Taxpayer Bill of Rights II signed re Intermediate Sanctions for Tax-Exempt Organizations under which Congress enacted rules which allow the IRS to assess penalty excise taxes on individuals who are involved in transactions with tax-exempt organizations that constitute private inurement. The law applies retroactively to "excess benefit" transactions occurring after 09/13/95. Penalty excise taxes can also be imposed on "organization managers" (an officer, director, or trustee) who knowingly permits the organization to engage in an excess benefit transaction, even if that manager did not personally benefit. Tax-exempt organizations cannot circumvent the rules by causing a controlled entity to engage in the excess benefit transaction. There is no notice of this new act given by Aipa to me (or to any other employees as far as I know).

08/28/96         To budget P&C's expenses for the 1996 fiscal year, BH requested a written proposal from M&M on a "time and expense" basis, which they refused to provide. Aipa and Kam strongly pressed BH to have P&C continue to pay M&M the $200,000 annual flat fee.

09/04/96         The Marsh & McLennan issues resulted in the "Change in Assignments and Supervision" memo from Aipa. In this memo, he relieves BH of any responsibility for the property insurance program placement and designates L. Kam as KSBE's representative to provide the necessary direction and support to both Hobbs Group (Hobbs) and M&M, and asks that all my files and records regarding the program be turned over to Kam. This same memo states that eff 09/04/96, he is temporarily charging Kam with direct supervision and oversight of me and the function of my dept.

09/05/96         Due date for M&M’s fee proposal to P&C on a time and expense basis. No proposal rcvd.

09/19/96         Pat Chalfin meets with BH in Harmon’s office. Harmon gives Chalfin details of the situation he is in regarding the pressure being placed upon him to follow directives of Peters, Aipa and Kam that he feels are improper and possibly illegal.

09/23/96         Forbes article entitled, "No More Sweetheart Deals":

"Under the new rules, trouble starts if the IRS determines that there has been a misdeed with an "excess benefit." It could be a fat salary, a sweetheart contract or an embezzlement. If someone got an excess benefit, the IRS can both fine the recipient 25% of the benefit and demand that the benefit be given back to the charity. If the guilty party doesn't pay the money back, he or she owes twice the excess benefit to Uncle Sam."

"Say a board member convinces the president of a college to let the school's insurance contracts to her firm, even though going with a rival would save the school $150,000. In turn, the board member is influential in voting the president a lavish salary, perhaps $200,000 higher than the norm at comparable universities. The IRS could force the repayment of both the $150,000 and the $200,000..."

"What about directors who sit still for this kind of mischief? They can be fined a collective $10,000, even if they didn't profit..."

BH: It appears that the IRS could interpret several transactions between Marsh & McLennan and KSBE/P&C as resulting in "excess benefit". For examples:

1. I obtained a property insurance proposal from Hobbs Group that was approximately $600,000 less than KSBE was paying for coverages placed through the incumbent broker, Marsh & McLennan. MMI's account representative, Rocco Sansone, represented that M&M could have gotten the same coverages with the same company at the same price... Aipa and Kam conspired with Sansone to keep MMI on as KSBE's exclusive broker... They arranged to have MMI review and give their opinion of Hobbs' proposal before allowing my staff report to go to Trustees. I was pressured by Aipa/Kam/Sansone to give MMI an exclusive broker of record letter to enable them to take over the Hobbs proposal. I considered it highly unethical and not in the best interests of the estate. When MMI was unable to get a resident agent appointment from Arkwright Ins. Co. as Sansone had represented, MMI's policies were canceled and the business went to Hobbs. The 45-day delay in rewriting the policies, however, cost the estate and its subsidiaries nearly $75,000. MMI benefitted not only from the commissions they received from the $600,000 "overcharge", but they also received commissions for the extra 45 days their policies were in force.

2. On June 7, 1994, I received a fee proposal from Peter Lowe, VP of M&M Ins Mgt Services, Inc., (IMS) for services for the formation and ongoing management of a captive insurance company. Fees were quoted on a time and expense basis. The total annual estimated fee for ongoing captive management services was $66,500. After the captive was formed, however, the actual charges made by IMS for ongoing management services was $60,107 for the first 9-month period ending July 1, 1995. MMI, however, had billed an additional $200,000 flat fee for brokerage services" which had not been indicated in the proposal or in the captive management contract with IMS...

Outside services required by P&C were almost always contracted for on a time and expense basis. The exception was Marsh & McLennan, Inc. They billed their services to P&C at a flat rate of $200,000 annually, invoiced in installments of $100,000 each. When I received the first of these invoices, I noted there was no explanation for the invoice and I questioned IMS about the charges. The answer was that these were for "broker services" that IMS was not staffed to perform... I was advised that MMI would provide further details about the services in the future. I never received a satisfactory explanation and a written agreement was never entered into for these services. The year prior to P&C being formed (1993-94), MMI received $274,928 in brokerage commissions from KSBE. The first year of the captive (1994-95), MMI received $290,443 in brokerage commissions from KSBE, plus the $200,000 flat charge from P&C. In addition, P&C paid MMI-affiliates IMS and Wm Mercer, $60,107 and $2,663 respectively. Total income to MMI and affiliates had gone from $274,928 to $553,213 in one year. (And one of the purported advantages of forming a captive was reduced costs by elimination of the "middle-man".) The following year (1995-96) the total fees and commissions to MMI and its affiliates increased to $632,714.

09/24/96         Eric Martinson sent memo to Ramona Hinck, KSBE, regarding premium allocations to the SoCal, AFCO, Unison and SINO subsidiaries. This is an example of a “private benefit”. As a result of this directive, premium charges that had been previously allocated to the subsidiaries were transferred back to KSBE. Martinson is also Secretary/Treasurer, Sino Finance Group LLC, and Vice President, Unison Pacific Investment (US) Limited. These billings and credit memos were done by mail (mail fraud).

10/01/96         BH sent memo on P&C ltrhd to P. Lowe, M&M IMS re Revisions in Captive Operations Manual. BH states that revisions needed due to changes in procedures and personnel. TOP PRIORITY. One major purpose for change is to make clear distinction between the services contracted by P&C from 3^rd party captive service providers vs. services provided by these same contractors to KSBE or its subs. “. . . As you know, there are important ‘arms-length’ issues with regard to the relationships between KSBE, Pauahi Holdings and P&C. Therefore, it is extremely important that we do not inadvertently create any appearance of intermingling of funds between the non-profit and for-profit entities. Also, we need to make sure that P&C has written contracts with all its service providers. This is not only prudent business practice, the failure to do so could be questioned by our Board of Directors as well as our Auditors, and possibly the Insurance Div. . . . On p. 7, I omitted Sec E - Financial Risk Management Consultants (M&M) as P&C does not have a contract for these services. At such time that we do enter into a contract, we can reinsert this sec. . . .On p. 9, Sec D - Insurance Broker is deleted for the same reason. . . P&C has never appointed an insurance broker. . . If I am mistaken, please provide me with a copy of P&C’s Agency Agreement with M&M. Again, I have arms-length concerns about confusing M&M’s role as KSBE’s Broker as opposed to being P&C’s Broker. . . .The changes in claims reporting procedures on p. 18 result from our streamlining the reporting procedures so that . . . claims will now be reported directly to John Mullen & Co. . . This speeds the reporting process, eliminates redundancy and reduces the amount of time and paperwork for M&M’s Claims Dept. . . .and also reduces P&C’s service costs. On p. 23, I have deleted the Resident Agent (M&M) as, again, I do not believe P&C has appointed a resident agent.” cc’s: Kam, Sansone, P. Onogi, R. Kuroda, Mullen

10/08/96         BH: A meeting was called by Kam to discuss M&M's fees to P&C. Attending the meeting were Kam, Rocco Sansone, Peter Lowe, Garrett Liu and me. One of my frequent admonitions to MMI and IMS was that P&C should always act at arms-length from KSBE and its subsidiaries. As Liu's meeting notes indicate, I expressed my desire to be able to justify MMI's fees for the services performed, and to keep P&C's costs separate from KSBE's costs. Rocco expressed his opinion that some of the services provided to P&C were difficult to unbundle from the services provided to KSBE, and suggested that a fee proposal be made for the entire KSBE account and not just P&C. Lowe stated that almost all of the captives he dealt with had a flat fee arrangement with their risk managers and brokers. Kam remarked that I had no "bench marks" for these service fees, and suggested I check on what other captives were doing. After this meeting, I obtained "bench marks" by talking with other local captive managers to see what kind of fee arrangements they had with their clients. In just two five-minute phone calls, I obtained "time and expense" estimates and sample agreements from two other captive managers--something which MMI had not been willing to provide in two years. These competitive cost estimates ran from $25,000 to $50,000 a year and included all the services being provided by MMI and IMS at a cost of approximately $287,000.

10/09/96         Aipa's Pers 9 reprimand memorandum to BH: "Deficiencies in Handling of Placement and Binders for the Property Insurance Program", again relating to the Hobb's program.

10/11/96         BH was called to a meeting w/ NA and Henry Peters in Peters’ office. Peters told BH that he was to report to Aipa in his capacity as KSBE’s Risk/Insurance & Safety Manager and regarding all matters relating to the operations of P&C. Peters also told BH that he would hold Aipa responsible for his actions, and that BH could be removed as president of P&C. BH sent a follow-up memo to Henry Peters on this same date to document in writing this oral directive.

10/18/96         BH: At their request, I met with P&C’s auditors, Cary Okawa and Dennis Tsuhako, of Coopers & Lybrand, regarding P&C's annual financial report. We discussed my concerns with respect to "arms-length" issues between KSBE and P&C, as they related to what I believed were efforts to improperly direct and control the operations of P&C by Aipa, Kam and by Henry Peters. As examples, we discussed the blocking of my efforts to have P&C write the blanket property insurance program reinsured through the Hobbs Group. I commented on what I considered to be excessive fees being charged by M&M, and their failure to provide a satisfactory explanation for the services included in their annual flat fee of $200,000. I also expressed my concern regarding attempts being made by persons at KSBE to direct and control the settlement of P&C's claims.

10/25/96         M&M invoiced P&C $50,000 for “Risk Mgt. Consulting Services — Initial Billing”.

10/29/96         BH: On P&C stationery, and signing as Pres. of P&C, I wrote to Sansone regarding our meeting on 10/08/96. Main comments were: “As background, in preparing P&C’s budget for the current fiscal year and in order to develop the premiums for our renewal policies, I had previously requested a proposal for services from M&M. This request outlined the services required by P&C from MMI, and stated that the proposal should be on a time and expense basis, rather than a flat fee as in previous years. The proposal had a target due date of 09/05/96. It was important that this information be received in a timely manner in order to establish P&C’s current fiscal year budget, as well the renewal premiums . . . When this proposal still had not been received by mid-Sept., I sent a follow-up request to Peter Lowe on Sept. 17^th. . . Your response on the same date proposed that we continue discussions after renewal negotiations were completed, and you suggested that P&C use the previous flat fee of $200,000 for budget purposes. This was unworkable for me due to the time constraints for determining P&C’s financial budget as well as the renewal premiums (renewal date was 10/01/96.) . . . In the absence of a proposal from MMI and after consulting with Lowe, I used my ‘best estimate’ of $50,000 for the services P&C required. At our meeting, you presented reasons why you felt the previous fee was justified, and why it should remain on a flat basis. Kam indicated her concurrence, and asked that I justify my position and provide benchmarks for services and costs for similar captive insurance company programs. . . . 1^st, a flat fee of $200,000 is unacceptable for several reasons. For one, the renewal premiums for P&C were projected to be over $600,000 less than last year, so the G&A costs also needed to be reduced. For another, I have been unable to determine . . . exactly what services are being included in this $200,000 flat fee. . . . in your Stewardship Report (to KSBE) dated 10/01/96, you indicate that safety and loss control services performed by M&M Protections Consultants (M&MPC) are included in the $200,000 flat fee. In your pie chart, “Hazards Management” . . . accounts for roughly 20% of the total fee. This is surprising since P&C has a separate agreement with M&MPC for safety and loss control services. M&MPC’s contract . . . is on a time and expense basis so we are able to specifically identify these services and their related costs. Last year P&C paid $24,881 to M&MPC. . . . In your pie chart, “Brokerage/Misc. Consulting Services” comprise roughly 25% of the total fee. The task of the Brokerage Dept. is, as you indicate in the accompanying table . . . ‘Reinsurance Renewal Marketing’. As you know, MMI is compensated by commissions from the reinsurance company for obtaining the reinsurance policy. If your chart . . . accurately depicts the fee breakdown, it would mean that you are being compensated twice for the same service. . . . Clearly, there is a need to better identify MMI’s services and their associated costs. . . . If the cost is a flat fee, there is no opportunity to reduce costs through improving efficiency, eliminating duplications, etc. Changing to a fee schedule based on time and expense would provide P&C important info to identify where costs are being incurred. . . In order to comply with Ms. Kam’s request to provide some ‘benchmarks’ for captive services, I contacted two local service providers, Alexander Insurance Managers, and 50^th State Risk Management Services, Inc. . . . Their responses are enclosed. Please note that these are their standard fee schedules and can be modified through negotiation, especially in a bid situation. . . . the fee schedules were provided immediately after a five minute phone inquiry. . . . Please note that both sample proposals include all services required for management of a captive insurance company . . . with exception of loss control services. . . . The sample proposals do include all services . . . currently provided to P&C by both MMI and M&M IMS. . . . AIM’s sample proposal states, ‘Historically, the majority of our management contracts are written on the basis of time and expense charged at standard rates plus out-of-pocket expenses.’ . . . Under AIM’s Option 1, the adjustable cost range was limited to $25,000 minimum and $36,000 maximum. . . These costs can be compared with the time and expense fees last year of $80,527 charged by M&M IMS, plus the flat fee of $200,000 charged by MMI . . . Marc Lapointe, Managing Dir. for AIM . . . also stated ‘. . . in today’s competitive market you can obtain excellent service at affordable rates.’ . . . the rates quoted by 50^th are substantially lower than AIMS’. 50th’s hourly rates range from $12 per hour for clerical staff to $30 per hr for sr accountants, to $40 per hr for managers. . . I trust this . . . will provide adequate benchmarks to prepare your proposal. . . . Your proposal should be based on the services indicated in my previous request . . . On behalf of P&C Ins Co, I thank you for your kind consideration and look forward to receiving your time and expense fee proposal for 1996-97.”

cc’s: Nathan Aipa, Louanne Kam, Peter Lowe

10/30/96         BH: Kam rescinded my P&C letter of 10/29/96 to M&M without any prior explanation or notification to me. In her letter addressed to Rocco Sansone, written on KSBE stationery, and referenced: “Fees for Services to P&C insurance Co., Inc.”, Kam states: “You are to disregard the letter dated Oct. 29, 1996 from Mr. B. Harmon on the above referenced subject. This letter should not have been sent. . . We regret any inconvenience to you and your staff. . . “

10/30/96         Kam gives Harmon another PERS 9 reprimand. In her memo, Kam stated: "I was shocked to read your letter of October 29, 1996 which was sent to Mr. Sansone and Mr. Lowe. This letter was not previously reviewed or approved by either Nathan or myself. This is a flagrant failure to follow clear and express directives from your supervisors and amounts to insubordination. Any further incident in which you fail to follow directives will be grounds for further disciplinary action including immediate termination."...

BH: By this time I had strong suspicions that private arrangements had been made between Nathan Aipa, Louanne Kam, Rocco Sansone and Peter Lowe to which I had not been a privileged party. Looking at the income MMI and its affiliates were receiving from KSBE and P&C, I could definitely see the opportunity for "excess benefit". My understanding of the Taxpayer Bill of Rights II is that as an officer of P&C I could be fined $10,000 by the IRS if it were determined that I knowingly permitted the organization to engage in an excess benefit transaction. But the main reason for my "flagrant failure to follow clear and express directives from my supervisors" was that I felt it was dishonest. In my mind, if I "looked the other way" and allowed this activity to continue, I would be breaching my fiduciary duties to the organization. I believed that my duties to the estate were greater than my duties to my supervisors. ... I knew that my conscience would be troubled with the thought that I had allowed certain individuals to steal from the beneficiaries of the estate.

11/07/96         Sansone’s fax memo to Kam re: “Consent to Settle (P&C Insurance)”: “The following proposed endorsement is submitted per our discussions and negotiations with Am-Re (P&C’s reinsurer). This endorsement provides KSBE with the option of controlling the settlement process . . . Based on our discussions, we recommend KSBE accept the proposed wording. Please advise . . . and with your approval to add the endorsement. . .” cc: Bob Harmon, KSBE; Chris Lee, M&M (Note: Harmon was not previously included in these discussions. No copy was shown to have been sent to Peter Lowe, M&M IMS, P&C’s captive mgr.)

11/08/96         Harmon’s 14-page reply, with 26 exhibits, to Aipa’s reprimand memo of 10/09/96, stated: “. . . .Marsh & McLennan . . . had self-serving interests in discrediting Hobbs’ proposal. . . I sincerely believe that I have acted to manage my responsibilities and duties both as Risk Mgr for KSBE as well as President of P&C, in a competent, honest and professional manner. . . I believe this is evidenced in the fact that I was able to eventually obtain the Hobbs/Arkwright program despite the fact that MMI had made several deliberate misrepresentations which delayed and confused the process. . . As documented in this letter, this program has benefitted KSBE and its subsidiaries by not only improving coverages and limits, but also by reducing the annual cost by over $600,000. As further evidence, I point to the fact that during the last fiscal year P&C Insurance Co. . . experienced a before-tax profit of $1.2 million. On the other hand, I consider MMI's actions to be extremely unethical, unprofessional and costly to KSBE. Their questionable actions contributed to the delays in final presentation of the staff report to Trustees, which cost KSBE over $75,000 in premiums. Had we continued with MMI’s property program, instead of transferring to the Hobbs’ program, KSBE would have lost another $600,000 annually. . . .The fact that we were unable to write the property insurance in P&C by July 1 or October 1, 1996, cost P&C over $1 million in gross written premium. . . .In view of these actions on the part of MMI, my recommendation would be that KSBE place their insurance program and the captive insurance management contract out to bid for the July 1, 1997 renewals (if not before). . . . I would also recommend that P&C put the Captive Insurance management contract out to bid . . . I further recommend that P&C write the property program on the same date.”

BH believes that these recommendations contributed significantly to his termination 12 days later. He believes these reprimand memos and Aipa's evaluation of his performance were meant to intimidate, threaten, and extort him into “going along” with the unwarranted payments to M&M, and were contrived "excuses" for his termination. He believes these actions were taken by Aipa and Kam to conceal, and to permit to continue, questionable conduct and conflicts of interest by individuals within and outside of KSBE, especially Henry Peters and Rocco Sansone, M&M.

11/08/96         Harmon’s memo to Chris Lee, M&M re: 1) American Reinsurance Co. - Cert. No. 9257325, Inv. No. 199500 and 2) Risk Management Consulting Service Fee - Inv. No. 199501 - “ . . . this is in response to your letter of Oct. 28, 1996. (1) By copy of this memo to Garrett Liu, I am authorizing payment of your invoice No. 199501 in the amount of $235,254 for the subject reinsurance certificate. (2) . . . I am unable to authorize payment of your invoice No. 199501 in the amount of $50,000 for the Risk Mgt. Consulting Fees. This is because P&C has not yet entered into a contract with MMI for these services, and fees have not yet been determined. . . . As a reminder, all correspondence, invoices, etc. relating to P&C business should be addressed to P&C. If correspondence needs to be addressed to my attention, it should indicate my title as President, rather than being addressed to me as Risk/Insurance & Safety Mgr of KSBE. In this instance, the original invoices should have been sent to Peter Lowe or Garrett Liu, with a copy to me. I am forwarding these original to Mr. Liu with his copy of this memo. . .” cc: L. Kam; G. Liu, R. Sansone

11/12/96         BH answers Kam’s reprimand letter of 10/31/96. In view of the lower quotes from other captive managers, and the refusal of M&M to submit any bids on a time and expense basis, and to enter into a written contract, BH recommended that KSBE place their insurance program and the captive insurance management contract out to competitive bids for the 7/1/97 renewals and have P&C write the property program on the same date.

11/12/96         Kam writes another PERS 9 reprimand to BH based on his meeting with Aipa and Kam regarding the Ching flood claim. Her memo provides an example of how Aipa/Kam attempted to control the claims settlement process to the benefit of 3^rd parties -- at the cost of the estate and P&C.

11/20/96         BH responds to Kam’s reprimand letter of 11/12/96, pointing out that: 1) he had never heard or understood that Aipa had directed him to allow Kam to pick the attorney in the Ching claim, and to hire the hydrologist. BH pointed out the arms-length regulations between KSBE and P&C, and P&C’s procedures, allowed only Mullen to hire attorneys and outside experts.

11/20/96          Ltr fm BH to Cary Okawa (Coopers & Lybrand):

“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’s 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., 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, KSBE, 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.... 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 . . . 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.” . cc: Insurance Commissioner, State of Hawaii

BH received NO RESPONSE from C&L or the Hawaii Insurance Commissioner (Wayne Metcalf) to this letter.

11/20/96         BH received KSBE termination notice during meeting with Nathan Aipa. [Ltr]: “This action is being taken in recognition of a fundamental difference between (1) our teamwork and management approach within the Legal Group, and (2) your view and approach to the management of risk insurance and safety department.” At same time, NA handed BH a letter from Henry Peters terminating him as President of P&C. The ltr gave no reason for the dismissal.

12/11/96         The Star-Bulletin reports "Investor’s Equity deal OK'd":

"A Circuit Court judge has approved a settlement between state Insurance Commissioner Wayne Metcalf and Gary Vose, the sole shareholder of Investors Equity's parent company at the time the insurer was placed into liquidation in June 1994..."

"The state seized the insurance company after its management ran up a $90 million deficit largely because Vose lost policyholders' money in highly speculative leveraged investments known as derivatives, the state charges..."

"Metcalf said the settlement is part of a series of actions against Bank of America, several brokerage companies including...Goldman Sachs, accountants and attorneys associated with the failure of Investors Equity Life..."

"A state lawsuit accused Vose of racketeering, fraud and other misconduct... The suit alleges that the holding company that controlled Investors Equity conducted sham real estate deals and used the insurance firm's assets to pay large fees to Vose and companies connected with him..."

BH: Bishop Estate and William Simon had other tie-ins with Investors Equity Life through their HonFed investment. Marsh & McLennan had a connection with HonFed as their insurance broker, as well as Mert Chillingworth who sat on HonFed's board of directors. The accounting firm for Goldman Sachs is PricewaterhouseCoopers....

01/22/97         BH filed for Unemployment Insurance Benefits with Hawaii DOL. Kamehameha Schools Bishop Estate states reason for separation is “Discharged for unsatisfactory work performance.”

02/14/97         BH ltr to DOL giving his reasons why performance was not unsatisfactory.

03/13/97         DOL denies Unemployment Benefits to BH, as he failed to follow orders of his superiors at KSBE.

03/20/97         BH ltr to DOL to Appeal Decision to Deny Unemployment. BH’s justification for appeal largely based on KSBE’s breaches of Arms-Length relationship with P&C.

05/27/97         BH ltr to DOL to request subpoena of witnesses and records not available to him. Witnesses included Sandie Wicklein, Patrick Chalfin, Gil Tam, Oswald Stender, Henry Peters, Rodney Park, Wally Chin, Gilbert Ishikawa, Glenn Hara, Richard Wong (Pres., Pauahi Holdings), Peter Lowe (M&M), Cary Okawa (Coopers & Lybrand), Robert Kuroda (John Mullen & Co.) Documents included: all documents in my Personnel File; my letter dated 12/29/96 to the Trustees of KSBE w/all attachments; letter dated 08/09/94, from Mark McConaghy, Price Waterhouse, to Myron Mitsuyasu providing “arms-length” operating guidelines for P&C; my letter dated 11/20/96 to Coopers & Lybrand relating to what I considered to be directives from my superiors at KSBE to violate the “arms-length” guidelines previously provided by Price Waterhouse; KSBE’s Employee and Supervisors’ Handbooks which contain rules stating employees should report anyone engaged in improper or illegal activities to their supervisor; Copy of P&C’s Application for License to operate as a captive insurance company, filed with the Insurance Commissioner’s office, State of Hawaii. Forming a part of this application is the Price Waterhouse letter of 08/09/94 relating to the IRS “arms-length” guidelines to be followed by P&C; Copy of P&C’s Operating Manual which details the operating guidelines of the company. This manual includes the authorities and responsibilities of the independent claims adjuster, John Mullen & Co. This document will contradict statements made by Louanne Kam and Nathan Aipa that they were authorized to hire experts and appoint counsel in the ... claims which is at issue in my termination case; 1995-96 audited Financial Statements for P&C Insurance Co. Footnotes to statement should indicate who signed-off on the financials (as I had refused to do so due to reported irregularities); Claims Management agreement between P&C and John Mullen & Co. This document will show authorities and responsibilities for independent claims management, which contradicts statements made by Louanne Kam and Nathan Aipa (that they had the authority to hire outside attorneys and direct the handling of P&C’s claims).

06/27/97         DOL Appeals Hearing before Earnest Hanaumi. Appeal, and subpoena of witnesses and documents, denied.

10/04/97         BH initial “whistle-blower” letter to IRS re: Report of Tax Fraud and Request for Immediate Investigation - Kamehameha Schools/Bishop Estate; Pauahi Holdings Corporation (PHC); P&C Insurance Company, Inc. (P&C). “This is to give information relating to fraudulent tax returns filed by the subject entities, and to request your immediate investigation into the matter. ... I was employed by Kamehameha Schools/Bishop Estate (KSBE), a tax-exempt charitable trust, as their Risk/Insurance & Safety Manager from November, 1998. I was also the president of P&C Insurance Company, Inc. (P&C), a for-profit subsidiary of Pauahi Holdings Corporation (PHC), from October, 1994. All of my services for P&C were paid for by the charitable trust. ... I was terminated from both positions on November 20, 1996. It is my belief that my termination was due to my refusal to obey various directives to commit tax fraud and other illegal acts given by my superiors, Henry H. Peters, Trustee, KSBE and Chairman of the Board, P&C; Nathan Aipa, General Counsel, KSBE, and Asst. Secretary, P&C; and Louanne Kam, Esq., Litigation Manager, KSBE. ... Some of the major directives involved breaches of ‘arms-length’ relationships between the tax-exempt entity and its for-profit subsidiaries and related companies (including subsidizing of for-profit subsidiaries by the trust); transactions involving conflicts of interest, private inurement and private benefit; and falsification of financial statements, federal and state tax returns.... ” (As this letter is too lengthy to even begin to summarize here, a complete copy can be found on the Internet at: www.the-catbird-seat.net/IRS-10-4-97.htm.)

11/20/97         EQ2048 - Master Colbert M. Matsumoto’s Report on the 109^th Annual Account of the Trustees: “C. Audited Financial Statements for FY 1994. The financial statements for FY 1994 were audited by the CPA firm of Coopers & Lybrand who have served as the Trust Estate’s auditors for several years. ... 1. The Financial Statements Do Not Conform To Generally Accepted Accounting Principles. ... In 1995, Benjamin M. Matsubara, Esq., Master for the 107^th and 108^th Annual Account, recommended a review of whether the financial statements of the Trust Estate should conform to GAAP. ... The Trustees responded to this recommendation as follows: ‘...KSBE retains the services of a major national accounting firm and the Trustees are satisfied that the accounting system used by that firm for KSBE is appropriate to KSBE and that it presents an accurate, meaningful and consistent picture of KSBE’s financial situation.’. ... 2. Failure To Consolidate In Accordance With GAAP Gives An Incomplete Financial Picture. ... The manner in which the failure to consolidate gives an incomplete financial picture are illustrated by the following examples: 1. Pauahi Holdings, Inc. is the Trust Estate’s principal for-profit subsidiary. Pauahi Holdings, Inc. in turn owns several other subsidiaries, including Royal Hawaiian Shopping Center, Inc., Kukui, Inc., and Kamehameha Investment Corporation. Its diverse investment holding also include the limited partnership interest in Goldman Sachs & Company and a large stock ownership interest in Columbia/HCA. Despite the Trust Estate’s 100% ownership of the entity, the financial statements of Pauahi Holdings, Inc. are not consolidated with the Trust Estate’s financial statements. ... Employee Interviews. Employees of the Trust Estate are bound by confidentiality clauses in their employment contracts. Such confidentiality provisions operate as a deterrent to free and open provision of information from employees to the Court’s Master. During your Master’s review of the annual account, he was required to arrange all contact with employees of the Trust Estate through the General Counsel’s Office. This proved to be cumbersome and it may have had a chilling effect on the interview process since employees would be contacted by the General Counsel’s Office prior to being interviewed by your Master. Your Master suggests that the Guidelines should make clear that such confidentiality provisions are inapplicable and may not be enforced with respect to any communications between any employee of the Trust Estate and its subsidiaries and the Court’s Master. The Trustees should also be required to modify the confidentiality clauses in any future contracts with its employees so as not to inhibit communications with the Court’s Master.” (www.starbulletin.com/specials/bishop/masters/index.html)

02/16/98         BH ltr to DOL re appeal “to again request subpoena of witnesses for my appeals hearing that are not available to me.”

02/27/98         Appeals Hearing before Earnest Hanaumi. Louanne Kam and Sabrina Toma appear for KSBE. When issue of arms length is raised as respects Aipa’s previous oral directive to BH that “another legal opinion had been received that arms length is no longer an issue”, Kam agreed that this was true but that she did not have a written copy of this legal opinion. (Parol evidence rule?)

03/05/98          Haunaumi issues his Decision that the Department’s determination is affirmed. “The employer discharged the claimant for misconduct connected with work.” In his Statement of Facts, Hanaumi states: “The employer discharged the claimant effective November 20, 1996, after they were unsuccessful in getting the claimant to comply with the higher management’s directives. They verbally told the claimant to follow the directives of the Senior Counsel and Risk Management Administrator and the General Counsel for the Estate. However, until the date of his discharge, the claimant ignored his superiors directives because he concluded that he would be violating the Internal Revenue Service Code or the Insurance Commission’s Regulations, if he complied with the directives..... He felt that he would be in violation of the I.R.S. Code and Insurance Commissions regulations if he complied with his superiors directives. ... The claimant was unable to produce the section of the I.R.S. Code nor the Insurance Commission’s regulations that prohibits the current relationship of the insurance company and the estate. He filed a complaint with the I.R.S. and the Insurance Commissioner after his discharge. However, the complaint is still in process with the respective organizations....

In his Reasons for Decisions, Hanaumi states: “...The employer must show that the claimant acted in wilful disregard of the employer’s best interest. Here, the evidence shows the claimant at times refused or ignored his superiors’ directives. Although he had a genuine concern for the organization, the claimant fails to show that he or the organization would have been in violation of the I.R.S. Code or the Insurance Commissions Regulations. He had ample time following his discharge to get the evidence that supports his concerns. However, the claimant failed to produce the evidence that shows the employer violate the I.R.S. Code or the Insurance Commissions Regulations. ... Based on the above, the claimant acted in wilful disregard of the employer’s best interest. Accordingly, the employer discharged the claimant for misconduct connected with work...

03/12/98         BH requests reopening of Appeals Officer’s decision of 3/5/98, due to denial of subpoena of witnesses; the fact that there was no director, officer or employee of P&C Insurance Co. present at the hearings (“To my knowledge, P&C has not made any of the required employment tax filings, or paid Federal Unemployment Tax... Based upon this fact, it would appear that P&C should not be permitted to dispute my unemployment insurance claim.”)...

03/24/98         Appeals Officer Hanaumi responds to appeal, asking BH to again state the necessity for the issuance of the subpoena to compel the attendance of the witnesses and the production of the documents for the appeals hearing.

04/02/98         Sabrina Toma (Torkildson Katz), writes a 6 page letter to Hanaumi objecting to BH’s application for reopening because ... “he has not identified any new evidence which he could not have obtained to present at the hearings conducted in this matter...” “P&C Ability To Contest The Claim ... Mr. Harmon alleges that the Decision contained ‘errors and misleading statements.’ To the extent the identified statements were in fact erroneous and/or misleading, KSBE contends they are still insufficient to support his Request for the following reasons. ... Second, Mr. Harmon’s claims on pages 3 and 4 of his Request that he did not have to report to anyone regarding his ‘employment by P&C,’ or that Kam had ‘no legal authority’ to reprimand him is inaccurate. As set forth above, Mr. Harmon was not employed by P&C, but served as an officer. Mr. Harmon admitted that as an officer of P&C, he was directly accountable to the P&C Board of Directors....”

04/06/98         BH ltr to Hanaumi in response to Toma’s letter of 4/2/98: ...“Ms. Kam was not an officer, director or employee of P&C, and did not have any authority to hire outside attorneys or direct the settlement of any P&C insurance claims.”...

12/16/98         Appellee B.P. Bishop Estate’s Answering Brief Filed by Robert Katz and Sabrina Toma (Torkildson, Katz...): “...Harmon argues the witnesses and documents necessary to establish that the Aipa and Kam directives contravened the “arms length” policy of KSBE’s Board of Trustees, as well as IRS regulations’ was based upon tax advice provided by an accounting firm which recommended certain practices to minimize the risk of tax liability to KSBE. There is no evidence that the advice indicated contrary business practices were illegal. The opinion letter was not a ruling by a government agency, nor was it binding on KSBE. Moreover, the overwhelming weight of the evidence shows that Harmon’s superiors determined arms-length practices were no longer applicable in late 1996.”

03/29/99         Oral Argument in Appeal before Judge B. Eden Weil, with Appellant appearing by telephone on his own behalf, with Staci I. Wong, Deputy Atty Gen, appearing on behalf of Appellee Director of Labor and Industrial Relations, and with Robert S. Katz, Esq., appearing on behalf of Appellee Bernice P. Bishop Estate (Employer).

05/25/99         Judge Weil’s Order Reversing Employment Security Appeals Office’s Decision (Civil No. 98-2394-05): “... The first issue raised is the appeals officer’s failure to allow Appellant’s request to subpoena records and witnesses. ... The Court finds it appropriate to take judicial notice of Civil No. 97-0512-02, an action entitled P&C Insurance Co., Inc. and Richard S.H. Wong, Oswald K. Stender, Lokelani Lindsey, Gerard A. Jervis and Henry H. Peters as Trustees of the Estate of Bernice Pauahi Bishop: Therefore, an action brought by Employer as well as by P&C Insurance Company. ... In Civil No. 97-0512-02, on February 21, 1997, Judge Radius sitting in the Circuit Court, granted KSBE’s motion for preliminary injunction against Appellant. By the court taking judicial notice of the minute order for that date, the Court notes that Mr. Katz was present when that occurred with his partner or associate Mr. Tsukazaki of the same law office, the same law office which is representing KSBE today, and did throughout the unemployment insurance hearing. ... That on May 27, 1997, in the agency appeal, Appellant requested subpoenas and records including his personnel records which the Appeals Office denied. ... On August 21, 1997, Mr. Katz’s law firm with Mr. Katz again on the pleading, filed an emergency motion for enforcement of Judge Radius’ order in Civil No. 97-0512-02. On August 26, Sept 26, and Oct 31, 1997, this particular judge heard that motion. Mr. Katz did not argue, but the attorney from his law firm, Mr. Tsukazaki argued the motion. ... On Feb. 16, 1998, the Appeals Office rejected another of Appellant’s requests for subpoenas.... On March 5, 1998, the Appeals Office decision was entered. ... On March 12, 1998, Appellant brought a motion for reconsideration and again requested subpoenas for the documents, and based on the testimony of Louanne Kam at the hearing, added the need for Mr. Aipa to be called as a witness, and a specific document to which Ms. Kam had referred that being a second opinion on the arms length relationship between KSBE and P&C. ... On April 29, 1998, the Appeals Office denied the request to reopen the case and again denied Appellant’s request for subpoenas on the basis that Appellant failed to show the necessity of the individuals and documents for a fair hearing. ... Based on the above, the argument that Appellant should have brought forth the documents he was precluded from having because of actions taken by Mr. Katz’s law office in the companion case will not prevail. ... The documents sought by Appellant would be relevant to whether Appellant’s ‘insubordination’ was an exercise of good faith discretion as KSBE’s risk manager. ... The Court additionally finds that there was a probative, substantial and reliable evidence in the record to support the finding that Appellant ‘ignored his superior’s directives because he concluded that he would be violating the IRS code or the insurance commissioner’s regulation if he complied with the directive.’ It is not disputed that Appellant was acting on information that indicated such action could or would jeopardize Employer’s tax-exempt status. ... The Court finds because of those uncontested findings for which there is support in the record, Appellant cannot be denied unemployment benefits because he was not fired for misconduct as Hawaii Revised Statutes paragraph 383-30(2) defines that term. ... The record shows there was no wilful or wanton disregard of Employer’s interests; Employer being KSBE, the charitable estate as opposed to any individual who worked for KSBE, and that his actions were an exercise of his discretion. The Court cannot say whether it was error in Appellant’s judgment to disobey orders, but even if it was an error in judgment, it was truly a good faith error. ... IT IS THEREFORE HEREBY ORDERED that the Employment Security Appeals Office Decision 9701016 dated March 5, 1998, finding Appellant disqualified for benefits is reversed and unemployment insurance benefits be paid....”

07/12/99         KSBE’s attorneys, Robert S. Katz and Sabrina Toma (Torkildson, Katz...) file Appeal of Judge Weil’s Decision to Supreme Court, State of Hawaii: ...“The Circuit Court’s Conclusion Regarding Misconduct Was Wrong ... First, the Appeals Officer correctly concluded that Aipa and Kam were authorized to issue directives to Harmon ... Second, there was no probative evidence on the record before the Circuit Court that the directives violated a specific law. Harmon could not cite any particular sections of either the Internal Revenue Code or the regulations promulgated by the State Insurance Commissioner which he believed were violated by the Aipa and Kam directives regarding the Ching claim and the Marsh & McLennan matter. ... Moreover, Harmon conceded he had no information from either the Internal Revenue Service or the Insurance Commissioner to support his position that complying with the Aipa and Harmon [sic] directives would violate a law or regulation. Instead, Harmon’s firm belief was premised upon his own interpretation of a 1994 tax consultant’s report which suggested that the captive insurance company maintain an arms-length relationship with the non-profit entity...as well as written materials from Coopers & Lybrand, magazines, and newspapers regarding the interim IRS sanction regulations. Harmon admitted that neither Coopers & Lybrand, nor the tax consultant, regulated P&C’s business activity. ... His subjective belief as to what was in the ‘best interests’ of KSBE, as well as his understanding of what was lawful, both of which had tenuous bases, did not justify his flagrant acts of insubordination. ... Third, Harmon’s understanding of the applicability of the arms-length concept to his duties on behalf of P&C and KSBE were, like his reading of the tax code interim sanctions, premised upon his own flawed interpretation. ... Moreover, the probative evidence establishes that Harmon’s preoccupation with arms-length practices ... was misguided. Kam testified that KSBE had obtained a legal opinion which suggested alternatives to the applicability of arms-length to the relationship between P&C and KSBE, such that the practices were no longer applicable. ... As Kam testified: We had a legal opinion of the way, we had a legal opinion that set out that these actions could be taken on and not jeopardize or (inaudible) [run afoul] of arms length [sic] transaction. ... Fourth, Harmon never told either Aipa or Kam that he believed their directives regarding the Marsh & McLennan fee matter and Ching claims would violate tax or insurance laws until his November 20, 1996 memo which Kam received after Harmon’s termination. ... While Harmon had previously requested written confirmation from Aipa that arms-length issues were no longer applicable, the issue only dictated certain practices to decrease potential tax liability for KSBE and did not implicate unlawful action. Other than continuing to resist Aipa’s and Kam’s directives until Aipa provided Harmon with written confirmation, Harmon acknowledged he never attempted to clarify the matter through other means such as raising the issue with P&C’s Board of Directors or contacting the IRS, despite opportunity to do so....”

05/05/00         From EQUITY NO. 2048 - KSCC (Judge Kevin S.C. Chang) - REPORT OF ATTY GEN 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. ... The annual report lists Henry H. Peters as a director. The Attorney General is unable to determine whether the listing is incorrect (and hence the signed certification of the annual report 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. ... Dated Honolulu, Hawaii, May 5, 2000. <signed> DOROTHY SELLERS, Deputy Attorney General. . . . DECLARATION OF DOROTHY SELLERS: ... 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. ... Exhibit 2 is a true and correct letter of my Feb. 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. ... 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. ... I DECLARE UNDER PENALTY OF PERJURY THAT THE FOREGOING IS TRUE AND CORRECT. ... DATED: May 5, 2000 <s> DOROTHY SELLERS.

Reference: www.the-catbird-seat.net/Doc-EQ2048-PC-Peters-5-5-0.pdf

Based upon this Report of Deputy Attorney General Dorothy Sellers, my reading of IRS Section 4958 regulations and all materials regarding this issue that I have been able to gather, I continue to believe that violations of Section 4958 were, indeed, a factual issue in my terminations from KSBE and P&C, and that these violations continue to the present time.

To bring this Chronology up to date as respects the new and ongoing violations by Kamehameha Schools of The Taxpayers’ Bill of Rights II:

06/11/04         Case No. 74 166 00491 03 JSFA - In the Matter of the Arbitration Between MARY LOU WOO, Trustee, Claimant; and BOBBY HARMON, Respondent: DECLARATION OF LOUANNE K.L. KAM, ESQ, IN SUPPORT OF ARBITRATION BY TRUSTEE MARY LOU WOO ... I, LOUANNE K.L. KAM, do hereby declare the following under penalty of perjury that the following is my Direct Written Testimony submitted herein if [sic] support of the arbitration by Trustee Mary Lou Woo: ... Q. Are you familiar with the Settlement Agreement that was entered into with Harmon? A. Yes. Q. Explain how you were involved in the Settlement Agreement? I helped set Kamehameha Schools’ position and interest in settlement. ... I attended one or two settlement conferences with Magistrate Judge Barry Kurren. I secured the approval of the settlement from the Trustees of Kamehameha School. ... Q. Describe the activities or conduct of Harmon, which are in breach of the Settlement Agreement? A. Harmon has no right to raise or assert any of the demands, rights, claims, and allegations, he has asserted in the letters he has written. Shortly after the Settlement Agreement was signed, Harmon started writing letters and copying the letters to a number of entities and individuals. Harmon kept demanding W-2 and 1099 forms from Kamehameha Schools. We wrote to him through outside counsel to inform him that the settlement proceeds were not wages under the Settlement Agreement. Harmon refused to accept the fact that he was not entitled to such forms. ... Not willing to accept this explanation, Harmon then started to write about these same complaints and sent his letters to the Trustees and Chief Executive Officer of Kamehameha Schools, the Internal Revenue Service, the Hawaii Department of Taxation, the Insurance Commissioners in California and Hawaii, U.S. Department of Justice, and Kamehameha Schools’ insurance carriers and agents. ... Harmon’s letter writing campaign violates the terms and spirit of the Settlement Agreement. ... Harmon has not limited his violations of the Settlement Agreement to his letter writing campaign. He has placed similar materials, documents, pleadings and letters, on his web-site. Harmon’s web-site contains material about his employment with Kamehameha Schools and his RICO lawsuit and allegations. ... Finally, the harassment has been extended to this arbitration. Despite being informed to the contrary, Harmon continues to demand that he is entitled to a defense or for indemnification by Kamehameha Schools for the costs he incurs in this arbitration. Harmon continues to write to P&C Insurance and Kamehameha Schools’ outside counsel demanding (1) P&C or Kamehameha Schools to pay for his expenses incurred in this arbitration; (2) information about Kamehameha Schools’ insurance policies and business relationships; and (3) an explanation and evidence concerning his conflict of interest allegations. Harmon refuses to listen and repeats these demands over and over again. Harmon has even filed a complaint with the Hawaii Insurance Commission against Kamehameha Schools’ insurance agent and its attorneys, simply because he refused to accept the plain reading of the Settlement Agreement. ... Q. Has this breach of the Settlement Agreement by Harmon injured Kamehameha Schools? A. Yes. Q. How has this breach of the Settlement Agreement by Harmon injured Kamehameha Schools? A. The constant barrage of letters from Harmon for no legitimate purpose wastes the time and energy of the Kamehameha Schools Trustees, officers and employees. It forces Kamehameha Schools to expense valuable resources to address Harmon’s groundless claims and issues. It disrupts the operations of the administrative staff and interferes with the relationship that Kamehameha Schools has with its agents. It requires me and other Kamehameha employees to take our attention away from legitimate issues of concerns to the Kamehameha Schools to deal with letters received from Harmon. ... To the extent that the complaints are made to various state and federal agencies, Kamehameha Schools must respond to and address the inquiries of these agencies. Kamehameha Schools must expend its time, energy and resources, to explain to these agencies the facts and circumstances surrounding Harmon’s allegations, and the completed absence of any factual and legal basis for such allegations. Kamehameha Schools still retains and pays for the services of outside legal counsel to respond to or address Harmon’s claims and allegations. ... Time, energy and money, are all expended, wasted and forever lost to Kamehameha Schools because Harmon fails and refuses and continues to fail and refuse to comply with the terms of the Settlement Agreement. ... Finally, the constant letters, repeatedly received and copied to Kamehameha Schools’ Trustees, officers, and employees, all involving the same claims and issues, which have been responded to by Kamehameha Schools, constitute harassment. Harmon is being a nuisance. ... Q. Do you believe that this breach of the Settlement Agreement by Harmon has injured the bankruptcy estate? A. Yes. Q. How has this breach of the Settlement Agreement by Harmon injured the estate? A. The letter writing about groundless issues prevents the bankruptcy trustee from closing the bankruptcy estate. The estate and the parties to the Settlement Agreement cannot close this case and move forward. Furthermore, the estate must expend its limited resources to address this issue because Harmon refuses to accept the advice of bankruptcy counsel and his own counsel. ... Q. What do you believe needs to happen to remedy the breaches of the Settlement Agreement by Harmon? A. Closure of these matters with Harmon cannot be achieved until someone of authority tells him to stop. The Arbitrator should issue an arbitration award that finds (1) that Harmon has breached the terms and the spirit of the Settlement Agreement, and (2) that Harmon’s refusal to abide by the terms and accept the advice of his own counsel and the Trustee and his incessant letter writing campaign on (a) the treatment of the settlement proceeds, (b) the demands for a W-2 and 1099, (c) questioning the representation of the parties and their counsel, (d) demands that Kamehameha Schools or P&C Insurance or their carries [sic] or adjuster must provide insurance coverage or a defense in this arbitration, and (e) refusal to stop writing directly or copying the Trustees, officers and employees of Kamehameha Schools or its subsidiaries, and other state and federal agencies, are all acts of bad faith in violation of the terms and spirit of the Settlement Agreement. ... The Arbitrator should issue a ruling that forever prevents Harmon from resurrecting this same issues and complaints with any party to the Settlement Agreement, from communicating and contacting any of the parties and their counsel as to issues and claims directly and indirectly released by the Settlement Agreement or as identified above, and requiring Harmon to remove from his web-site all materials related to as to issues and claims directly and indirectly released by the Settlement Agreement or as identified above.” ... Signed June 9, 2004, by LOUANNE K.L. KAM. (Note: Kam states that it is the estate that is expending its “limited resources” to address my letters - rather than P&C Insurance Company, which should be the case!)

06/14/04         BH Answer to Declaration of Louanne K.L. Kam, Esq: “...To the Question, “Explain how you were involved in the Settlement Agreement,” ... she answered, ‘I helped set Kamehameha Schools’ position and interest in settlement. I was advised on settlement negotiations being handled by outside legal counsel for Kamehamea Schools. I attended one or two settlement conferences with Magistrate Judge Barry Kurren. I secured the approval of the settlement from the Trustees of Kamehameha School.’ ... Harmon asks the Arbitrator to take particular note of Ms. Kam’s answer to this question, because it goes directly to the primary cause of the multitude of problems that have engulfed this case from the very beginning. As Harmon has stated in his Answer to Demand for Arbitration, filed on May 13, 2003: ‘The Claimant’s description of the background for this case omits information that is pertinent to this arbitration process. It should be known that the “complaint filed in the U.S. District Court for the District of Hawaii against the Kamehameha Schools and its agents” was a Racketeer-Influenced Corrupt Organizations (RICO) lawsuit which named as Defendants: FEDERAL INSURANCE CO., INC.; P&C INSURANCE COMPANY, INC.; MARSH & McLENNAN COMPANIES, INC.; PRICEWATERHOUSE, COOPERS & LYBRAND, LLP; TORKILDSON, KATZ, FONSECA, JAFFE, MOORE & HETHERINGTON, A LAW CORPORATION; HENRY H. PETERS, RICHARD S.H. WONG, LOKELANI LINDSEY, GERARD JERVIS AND OSWALD STENDER, TRUSTEES OF THE ESTATE OF BERNICE PAUAHI BISHOP; JOHN MULLEN & CO., INC.; NATHAN AIPA; LOUANNE KAM; RODNEY PARK; WILLIAM S. RICHARDSON; GILBERT TAM; AND PETER LOWE’. ... Please take note that LOUANNE KAM was one of the Defendants named in this RICO lawsuit. Consequently, any participation by Ms. Kam in the settlement negotiations for this claim constituted a very serious conflict-of-interest. The clear conclusion that one can make from Ms. Kam’s statement is that this insurance claim was being handled by Louanne Kam, in direct contact with outside legal counsel for Kamehameha Schools. She makes no mention of any involvement of an independent Claims Adjuster acting on behalf of Kamehameha Schools’ insurance company or companies. Therein lies the basic problem. The Claims Adjuster has the primary responsibility, and authority, to settle claims under the terms of the insurance company’s insurance polity. The Claims Adjuster has the authority to hire outside legal counsel, if necessary, and to direct their activities. The Claims Adjuster and legal counsel then REPORT TO and are PAID BY the INSURANCE COMPANY – not the INSURED. An insured DEFENDANT in a lawsuit does NOT directly negotiate settlement with the plaintiff or the judge – regardless of whether he, or she, might be a lawyer. ... Kam states that she ‘...secured the approval of the settlement from the Trustees of Kamehameha Schools.’ When an insurance company is paying claims of this type under their insurance policy, it is generally not necessary for the company to secure the approval of the Insured – another indication that Kam was personally handling this claim without the involvement, or prior approval, of Kamehameha’s insurance company. ... In answer to the question, ‘Who represented Kamehameha Schools in the settlement negotiations?’ ... Kam states: ‘Because there were different legal actions, Kamehameha Schools had different attorneys involved in the negotiations. Matt Tsukazaki represented Kamehameha Schools and P&C Insurance as it related to the state injunction action and the unemployment insurance claim. Jeffrey Sia represented P&C Insurance in the RICO action. Ken Hipp represented Kamehameha Schools in the RICO action. Susan Tius represented Kamehameha Schools as it related to Harmon’s bankruptcy.’ ... It is significant to note that at no time does Louanne Kam mention that she was ever working with the insurance company’s Claim Administrator – only the outside attorneys and the Trustees – regarding the Settlement negotiations. ... This is another indication that Ms. Kam, and possibly Nathan Aipa, were working directly with outside legal counsel in the settlement of this claim without the authorization or approval of the insurance company. This explains why none of the attorneys have been able to produce the Attorney of Record letters that I have requested numerous times during my ‘letter writing campaign.’ ... It also explains why Kenneth Hipp told me, as collaborated by Kam’s statement above, that he was representing the interim trustees in my RICO lawsuit. Yet, when it came to signing the STIPULATION FOR DISMISSAL OF COMPLAINT AS TO ALL CLAIMS AND ALL PARTIES WITH PREJUDICE, pertaining to the RICO lawsuit ... KENNETH HIPP, ESQ. and CHRISTOPHER S. YEH, ESQ., signed as Attorney for Defendants HENRY H. PETERS, RICHARD S.H. WOND, LOKELANI LINDSEY, GERARD JERVIS AND OSWALD STENDER, TRUSTEES OF THE ESTATE OF BERNICE PAUAHI BISHOP. ... Still yet, I can find no court records to evidence that Kenneth Hipp or Christopher Yeh ever appeared on the behalf of these individual Defendants in my RICO lawsuit. ... This would explain, again, why these attorneys have never been able to produce Attorney of Record letters proving that they were, in fact, ever appointed to represent these former trustees, or that their appointment was ever approved by the insurance carrier, which would have been required. It explains why Kenneth Hipp, when I asked him who he was reporting to, responded, ‘Louanne Kam,’ rather that an independent claims adjuster. It may also explain why none of the former Trustees signed the Settlement Agreement, even though they were the individuals name in the RICO lawsuit. ... Last, but not least, is Susan Tius, the attorney who ‘represented Kamehameha Schools as it related to Harmon’s bankruptcy.’ It is, first of all, unclear to me why Kamehameha Schools would need an outside bankruptcy attorney to assist them, IF the insurance company’s claim adjuster was handling what was basically a liability claim. ... Second, there is the question of the relationships of Susan Tius to other parties in this case, especially Mary Lou Woo, Guido Giacometti, Sukamto Sia, Jeffrey Case, Aon Risk Services, Steven Case, Grove Farms, Hiluhilu Developments, LLS, Guy Lam, Torkildson Katz, et al., Sterling & Tucker, and Aloha Tower Partners, one of the creditors in this bankruptcy case. ... For more details on the relationships between the above entities, refer to the following Exhibits: www.the-catbird-seat.net/AAA-Guttman-5-29-1.htm; www.the-catbird-seat.net/AAA-Guttman-6-7-1.htm; www.the-catbird-seat.net/AAA-9-19-3.htm; www.the-catbird-seat.net/AAA-10-2-3.htm. ... For a more detailed description of how insurance claims were mishandled by Louanne Kam, Nathan Aipa, Colleen Wong, and the outside legal counsel for Kamehameha Schools, refer to Respondent’s Exhibit 8. ... at the following address: www.the-catbird-seat.net/AAA-McCubbin-7-21-0.htm“ ... (For the complete Answer, please see: www.the-catbird-seat.net/AAA-HarmonAnswer-6-14-4.htm)

01/13/05         Application by Plaintiff-Trustee Mary Lou Woo for Confirmation of Arbitration Award and for Entry of Judgment Against Defendant Harmon: “...Plaintiff-Trustee MARY LOU WOO, by and through her attorney, Steven Guttman, respectfully applies to this Honorable Court for confirmation of the Findings of Fact, Conclusions of Law, and Award of Arbitrator Judith Neustadter, Esq., dated October 6, 2004, and a judgment of the amounts awarded therein. ... On March 23, 2003, the Trustee filed a Demand for Arbitration against Defendant with the American Arbitration Association (“AAA”) due to Defendant’s violations of the Settlement, Release and Indemnification Agreement dated April 24, 2000 (“Settlement Agreement:), which settled various lawsuits and legal proceedings involving Defendant and various entities and individuals ... The issues submitted by the Trustee for arbitration were: ... Whether Defendant’s letter writing campaign constituted a breach of the covenant of good faith and fair dealing and, if so, whether he should be enjoined from writing such letters to the Trustee, her counsel, the parties to the Agreement and their employees, representatives and others. ... On August 4, 2003, following its procedure for the selection of an arbitrator, AAA appointed Judith Neustadter, Esq. as the Arbitrator. ... The arbitration was held on June 14 and 15, 2004, before the Arbitrator. ... On or about August 23, 2004, the Arbitrator issued her Interim Arbitration Award in favor of the Trustee. ... On or about Oct 6, 2004, the Arbitrator issued her Final Arbitration Award in favor of the Trustee. ... The Award allowed the Trustee her attorneys’ fees of $48,000 and her costs of $970.54 but obligated the Trustee to pay for the Arbitrator’s fees, including that portion which should have been paid by the Defendant. ... The Arbitrator ruled that the Award may be enforced by any party to the Settlement Agreement. The Arbitrator found and held that the parties to the Agreement are the Real Parties in Interest and include: the Kamehameha Schools; P&C Insurance Company; Marsh & McLennan Companies, Inc.; Federal Insurance Company; Pricewaterhousecoopers, LLP; John Mullen & Co., Inc.; Island Insurance Company; Nathan Aipa; Louanne Kam; Rodney Park; William S. Richardson; Gilbert Tam; and Peter Lowe.” ... Exhibit B in this filing, “FINDINGS OF FACT, CONCLUSIONS OF LAW, AND AWARD,” signed by Arbitrator Judith Neustadter, states: “Claimant testified at the Arbitration Hearing. Claimant presented the testimony of witness Louanne K.L. Kam, Esq., Director, Litigation Legal Division of KS. Respondent testified at the Arbitration Hearing. ... With respect to Respondent’s treatment of settlement money as wages issue, Respondent was told, among other things, the money was paid as general damages, general damages are not taxable, and, hence, there was no obligation to deliver the tax documents Respondent was requesting [IRS Forms W-2 and 1099-R]. ... The explanations given to Respondent on these issues were factually supported and legally correct. ... Respondent disagreed with the responses given him on these issues by his bankruptcy counsel, Bradley Tamm, Esq. Mr. Tamm filed a motion to withdraw as Respondent’s counsel in the Chapter 7 Case, which motion was granted by the Bankruptcy Court on February 28, 2001. ... After Mr. Tamm’s withdrawal, Respondent continued to disagree with the explanations he was given on these issues. Respondent continued to engage in a letter writing campaign, writing and sending many letters to Claimant, her counsel, and other individuals and entities. Respondent’s letter writing campaign extended to the Trustees and Chief Executive Officer of KS, the Internal Revenue Service, the Hawaii Department of Taxation, the Insurance Commissioners in the States of California and Hawaii, the United States Department of Justice, KS’s insurance carriers and agents, and government employees in the States of New Jersey and New York. Many of the Respondent’s letters extended beyond the two main points, setting forth other matters related to the Settlement Agreement and his former employment with KS and relationship with P&C. ... After the Arbitration was initiated, Respondent wrote and sent letters to many people, entities, and government agencies about the Arbitration, and the process by which the Arbitrator had been selected. Respondent also demanded, and continued to demand after disagreeing with any responses – or non-responses – he had received, that KS, and its insurance carriers, defend and indemnify him in this Arbitration. Respondent sent copies of his letter to many people, entities, and government agencies, with no identifiable relationship to this Arbitration or the Settlement Agreement. ... Respondent created and maintains a website, www.the-catbird-seat.net . Respondent created and maintains sub-directories on the website. Respondent’s website contains letters and other documents drafted by Respondent, which include, among other things, disclosures about his employment with KS, his relationship with P&C, the Underlying Litigation, further claims arising therefrom, the Settlement Agreement, and this Arbitration. ... The parties to the Settlement Agreement did not agree that money paid to Respondent thereunder would be deemed wages. ... By writing and sending letter demanding indemnification and asserting claims, Respondent violated the terms of the Settlement Agreement. ... Despite no evidence of positive or encouraging responses from recipients of Respondent’s letters, the sole evidence presented in the Arbitration being lack of interest or response to the letters, or requests to stop sending letters, Respondent has failed and refused to stop his letter writing campaign. ... The letters written by Respondent and the postings on Respondent’s website, described hereinabove, are violations of the Settlement Agreement. ... Respondent’s violations of the Settlement Agreement have injured Claimant and the bankruptcy estate. The bankruptcy estate has been forced to expend substantial resources to address issues arising from Respondent’s failure to stop writing letters in violation of the Settlement Agreement, to the detriment of the estate’s creditors. ... Respondent is forever barred and prohibited from disclosing, discussing, disseminating, or communicating, the following ‘Protected Subject Matters’: ... Any of the claims, issues, and allegations and/or the basis for the claims, issues, and allegations which relate in any way to the treatment of the settlement proceeds as wages and its tax consequences; ... Any of the claims, issues, and allegations and/or the basis for the claims, issues, and allegations which relate in any way to perceived conflicts of interests among the attorneys who have entered appearances in the Underlying Litigation and any of the parties in said proceedings; Any of the claims, issues, and allegations and/or the basis for the claims, issues, and allegations which relate in any way to this Arbitration, including, but not limited to, the Arbitrator’s rulings and/or awards, the basis for those rulings and/or awards, and the arguments and statements made by Claimant and Respondent in connection with this Arbitration; and, Any of the claims, issues, and allegations and/or the basis for the claims, issues, and allegations which relate in any way to Respondent’s claims, or notices of claim, for a right to defense and indemnification from KS or its insurance carrier for any cost, expense, or damage incurred or awarded against Respondent in this arbitration. ... This Arbitration is an action by Claimant to enforce the terms of the Settlement Agreement. ... Respondent shall immediately remove all material relating in any way to a Protected Subject Matter from his website www.the-catbird-seat.net, and shall immediately terminate the website sub-directory identified as www.the-catbird-seat.net/HarmonArbitration.htm.... Respondent will be assessed, and will pay to Claimant and/or to such other person or entity as may be determined by a Court in which the Award is filed, $500.00 per day for each calendar day, commencing on and after June 30, 2004, on which he has not: (a) removed all material from, and terminated, the website sub-directory identified as www.the-catbird-seat.net/HarmonArbitration.htm; or (2) expunged any and all material presently accessible at the www.the-catbird-seat.net website or any other website, which references or mentions any claim, issue, or allegation of a Protected Subject Matter; Respondent shall be assessed and shall pay $500.00 to Claimant and/or to such other person or entity as may determined by a Court in which this Award is filed, per letter, multiplied by the number of listed recipients of copies of the letter, for every letter that he issues or transmits in violation of this Award, commencing on and after June 28, 2004. ... This Arbitration Award may be enforceable by any party to the Settlement Agreement, as each party is held to be a real party-in-interest to the Arbitration and the Arbitration Award. ... Claimant is awarded her reasonable attorneys’ fees in the amount of $48,000.00.... Attached as “Exhibit B”, is a copy of my letter dated January 12, 2005, addressed to Mark Bennett, Attorney General, State of Hawaii, RE: Request for Criminal Investigation of Marsh & McLennan, et al., and Breach of Agreement by Kamehameha Schools/Bishop Estate. In this letter, I state: “This is to provide further information relating to my letters of December 10, and December 27, 2004, regarding the overcharges to Kamehameha Schools by Marsh & McLennan, and the breach of Bishop Estate’s agreement with your office that they would not destroy files or retaliate against any employee who came forward with information to aid in the Attorney General’s investigation. ... The document that I am providing herein is my letter to Carolyn Woods, an auditor for the Internal Revenue Service, dated November 10, 1997. ... (This letter to the IRS can be found on the Internet at: www.the-catbird-seat.net/IRS-11-10-97.htm )

It is my understanding from the Master’s Reports and EQ2048, that one of the main reasons for eliminating the “lead trustee system” at Kamehameha Schools, and for hiring a CEO, was so that the trustees would not be responsible for running the day to day operations of the organization, as that duty should fall to the CEO. From Louanne Kam’s testimony in the arbitration proceedings that she reports directly to the trustees on P&C Insurance Company’s claims - rather than to the CEO - it would appear that nothing has changed from the old system in this respect. Furthermore, according to Ms. Kam’s testimony, Clyde Mark, who was the president of P&C Insurance Company, had left the company several months previously, and, at the time of the hearings, no replacement had been appointed. Also, as in my case as president of P&C, Mr. Mark was an employee of Kamehameha Schools during the time he was serving as P&C’s president - possibly reporting directly to Louanne Kam.

Since Kamehameha Schools has never provided a copy of the opinion letter that Nathan Aipa and Louanne Kam claim to have received that indicated that “arms length is no longer an issue” in the relationships between Kamehameha Schools and P&C Insurance Company, Inc., I am therefore making this request to the IRS to provide me with a private ruling letter, or, if this is not possible, to provide any information you can which would give a clear indication of whether, or not, arms length relationships between charitable trusts and their for-profit subsidiaries are prohibited under IRS Section 4958, or any other IRS regulation.

As I have been ORDERED to appear for a Scheduling Conference/Status Conference on April 11, 2005 before Judge Kevin Chang, I respectfully request that this information be provided as soon as possible in order that I may have adequate time to prepare for this Conference.

Thank you very much for your kind assistance.

Sincerely yours,

Bobby N. Harmon, CPCU, ARM

cc:       Mary Lou Woo, c/o Steven Guttman, Kessner Duca Umebayashi, et al.

(via fax @ 808-529-7177 & e-mail: sguttman@kdubm.com)