Bobby N. Harmon, CPCU, ARM
Honolulu, Hawaii 96818
March 4, 2001
Torkildson, Katz, Fonseca, Jaffe, Moore & Hetherington
700 Bishop Street, 15th Floor
Honolulu, HI 96813-4187
RE: Internal Revenue Service Form W-2 and Form 1099-R for Year 2000
Social Security Number: XXX-XX-XXXX
Dear Mr. Tuskazaki:
This responds to your letter dated February 28, 2001 addressed to Arnold Phillips, Roy F. Hughes, and Bradley Tamm. As Mr. Tamm has advised, he no longer represents me in this matter, so I am addressing this response directly to you.
My first comment is that your letter does not contain a statement indicating who you are representing in this matter. In the SETTLEMENT, RELEASE AND INDEMNIFICATION AGREEMENT to which you refer in your letter, three of the interim trustees signed on behalf of Kamehameha Schools. Your firm signed this document “Approving as to Form” stating that you were Attorneys for P&C Insurance Company, Inc. in Case No. 97-0512-02 (DDD) (the State Lawsuit), and Bernice P. Bishop Estate in Supreme Court No. 22624 (the Agency Appeal).
In this same Agreement, however, Jeffrey H. K. Sia signed as Attorney for P&C Insurance Company, Inc., and Kenneth B. Hipp and Christopher S. Yeh signed as Attorneys for the Kamehameha Schools Bishop Estate in Civil No. 94-00304 (DAE) (the RICO Lawsuit).
Although your firm, TORKILDSON, KATZ, FONSECA, JAFFE, MOORE & HETHERINGTON, was named as one of the Defendants in my Racketeering in Corrupt Organizations (RICO) Lawsuit, your firm was not listed by name in the Settlement Agreement and no one from the firm signed this Agreement on behalf of your company. As a layperson, I assume that this means your firm was not a Party to this Agreement.
This brings me to the statement in your letter, “As you know under the Settlement, Release and Indemnification Agreement signed by Mr. Harmon, he agreed to maintain the confidentiality of his settlement (Section J) with Kamehameha Schools and its insurance carriers. We do not believe that Mr. Harmon intentionally sought to breach the confidentiality provision. Rather, we believe that he was not sure to whom he should address his letter and his inquiry.” You continue, “If your legal representation of Mr. Harmon has ceased, as confirmed by your respective offices to my firm, then Mr. Harmon should send all inquires he may have with Kamehameha Schools to my attention.”
You are correct that I did not intentionally seek to breach the confidentiality provision. In fact, as a layperson, I still do not understand how I would be breaching the confidentiality provision simply by writing directly to Kamehameha Schools to question why I had not received the W-2 and 1099-R forms needed to file my income taxes and to apply for Social Security Benefits.
Next, I firmly disagree with your statement that “we note that the settlement payment was not classified as wages and was not compensation in return for services.” During the final settlement conference in Judge Kurren’s chambers, Mr. Tamm definitely stated that the entire settlement could be “characterized” as wages, and all the attorneys present agreed to accept this condition.
You further state, “Obviously, if the settlement payment was designated as payment for services, Mr. Harmon would be required to pay federal and state income taxes on the settlement payment and FICA and possibly other assessments would have to be withheld from the funds. It is our understanding that Mr. Harmon sought to avoid such treatment.”
This statement is not entirely correct. It was clearly explained to me by my then-attorney, Bradley Tamm, that the bankruptcy settlement would NOT relieve us from paying any applicable income taxes. I, and all others in attendance at the settlement conference, agreed to his recommendation that the entire amount be characterized as wages. Therefore, I definitely DID NOT seek “to avoid such treatment.”
I do concur with the portion of your statement that FICA and other assessments would have to be withheld from the funds if the payment was designated wages. This is the reason I requested the W-2 Form from Kamehameha Schools. Without this form, I have no way of knowing how much of the funds were withheld for Income Taxes, Social Security, Medicare and other benefits.
These are the same reasons for my requesting the Form 1099-R. As the settlement would have adjusted my earned income at Kamehameha Schools for the year 2000, this would presumably affect the amount of my retirement benefits.
If your firm was responsible for handling the settlement transactions, as you have indicated, then it appears that someone may have erred by not advising Kamehameha Schools of the agreement that the entire amount of the settlement was to be treated as wage income, which required the proper withholding of taxes, reporting, etc.
I look forward to your early response regarding these comments.
Very truly yours,
Bobby N. Harmon
cc: Personnel Director
Kamehameha Schools
1887 Makuakane Street
Honolulu, HI 96817-1887
Mary Lou Woo
Interim Trustee
91-590 Farrington Hwy, #210 Unit 303
Kapolei, HI 96707
Steve Guttman, Esq.
Attorney at Law
1132 Bishop St., Ste 1404
Honolulu, HI 96813
Gayle Lau, Esq.
Curtis Ching, Esq.
Office of the U.S. Trustee
1132 Bishop St., Ste 602
Honolulu, HI 96813