Bobby N. Harmon, CPCU, ARM
August 9, 2004
VIA fax @ 808-536-6700
Marr Hipp Jones & Pepper
1001 Bishop Street
Suite 1550, Pauahi Tower
Honolulu, Hawaii 96813
RE: Notice of Claim Against Marr Hipp Jones & Pepper, et al.
On June 24, 2002, I sent you, via Certified Mail, a letter in which I stated:
“This is to provide your firm with a formal Notice of Claim for alleged fraud, conspiracy to commit fraud, personal injury, defamation of character, extortion, racketeering, and other wrongful acts, involving Kenneth Hipp, Christopher Yeh, Hamilton McCubbin, Nathan Aipa, Colleen Wong, Louanne Kam, and others yet to be named.
“Please have your INSURANCE COMPANY’S CLAIMS ADMINISTRATOR contact me within 10 days for further details.”
As you are aware, your insurance carrier, which I understand to be St. Paul Insurance Company, through the broker Seabury & Smith, has never contacted me despite several follow-up letters on my part. As a consequence, this claim remains open and unresolved.
Due to the ongoing nature of this case, new information has come to light regarding the joint involvement of your firm, and the law firm of Kessner Duca Umebayashi Bain & Matsunaga, with the bankruptcy case of Hawaiian Air Lines. As background, I quote the following excerpts from my letter dated August 4, 2004, to Steven Guttman, attorney for Trustee Mary Lou Woo, a copy of which was sent to your office:
This is a follow-up to my Notice of Claim reported on December 12, 2003, and my follow-up dated June 19, 2004, against you and the law firm of Kessner Duca Umebayashi Bain & Matsunaga, for racketeering, tax fraud, mail fraud, wire fraud, conspiracy to commit fraud, breach of attorney-client privilege, conflicts of interests, obstruction of justice, and other wrongful acts.... Since I still have not been contacted by your insurance carrier, it appears that I have no choice at this time but to present more details of my claim directly to you. In an attempt to keep this letter as succinct as possible, however, I will concentrate on just two individuals involved in this case: Lyn Flannigan Anzai and Louanne Kam.
The following is quoted from my letter dated July 26, 2000, addressed to Kamehameha Schools former CEO, Dr. Hamilton McCubbin:
July 26, 2000
Dr. Hamilton McCubbin, CEO
567 South King Street, Suite 200
Honolulu, Hawaii 96813
RE: Kamehameha Schools and P&C Insurance Company, Inc. - Equity 2048
Dear Dr. McCubbin:
Thank you for the opportunity to meet with representatives of Morgan, Lewis & Bockius, LLP on this date. As I understand the major focus of your investigation to be the improper use of outside legal counsel, accounting firms and other third-parties, the following is a list of individuals and companies that, in my opinion, colluded to improperly transfer trust assets from the Kamehameha Schools and related companies:
Attorneys and Law Firms
Cades Schutte Fleming & Wright (Michael Hare)
Chee & Markham (Kevin Chee)
Devens Lo Nakano & Youth
Watanabe Ing & Kawashima (Douglas Ing and James Kawashima)
Goodsill Anderson Quinn & Stifel
Law Offices of Stanford Manuia (Stanford Manuia)
Torkildson Katz Jossem Fonseca Jaffe Moore & Heatherington
Carlsmith Ball Wichman Murray Case & Ichiki
Nathan Aipa, Louanne Kam, Lyn Anzai and Colleen Wong often directly engaged these firms to handle insurance claims without the required authorization of the insurance companies, including P&C. Once the firms were engaged, these KSBE employees "controlled" and "managed" the claim directly with outside counsel, deliberately disregarding insurance company guidelines regarding the use and payment of these firms. Nathan Aipa, as principal executive of the Legal Group, had ultimate approval of all legal bills including P&C's.
Aipa would frequently pay these legal fees and costs from his General Counsel Account, without approval from the insurance companies. Often the amounts billed by the law firms exceeded allowable fees and costs provided in the insurance company guidelines. When, if ever, KSBE submitted the legal bills to the insurance company, many of the charges were disallowed. This practice led to the loss of millions of dollars that were never recovered from the insurance companies.
In the case of claims under P&C Insurance Company policies, Nathan Aipa, Louanne Kam or other KSBE attorneys directed that P&C pay the bills even though the outside firms flagrantly disregarded P&C's written guidelines.
These outside legal firms reported directly to in-house counsel, rather than to the insurance companies. In-house attorneys, including Aipa, often would not disclose critical information to the insurance carriers in these "sensitive" claims, resulting in further millions lost to the estate due to "non-cooperation".
This situation became particularly suspect and troublesome when these same KSBE employees handled claims in which they also had participated in the original financial transactions. They may have been potential witnesses-- even defendants-- in resultant lawsuits. These were extremely serious "conflict of interest" situations.
With P&C this became even more critical due to the obvious violation of "arms-length" principles, which potentially exposed the estate to unlimited losses beyond the actual insurance policy coverages and limits of liability....
From all public accounts and from my personal experience, these imprudent practices have continued – unhindered and unabated – from the time of my departure until the present, under both the ex-trustees and the interim trustees.
< END OF QUOTATION >
As you are probably aware, after Lyn Anzai left Kamehameha Schools, she was employed as the General Counsel for Hawaiian Airlines. The following is taken from www.the-catbird-seat.net/Paradise.htm:
April 4, 2002
Advocates Of Casinos Spent Big On Lobbying
Mainland investors who want to open two casinos on O'ahu spent more money touting their agenda before lawmakers at the start of this legislative session than any other group, state Ethics Commission records show.
Marketing Resource Group, of Lansing, Mich., reported spending $108,679 on lobbying through January and February, the period covered by lobbyist expenditure reports due at the commission yesterday....
Hawaiian Airlines reported spending $8,300 on lobbying during January and February. Hawaiian, which sought to merge with rival Aloha Airlines, had reported spending more than $140,000 on lobbying during the previous period.
But Hawaiian later said it had mistakenly inflated that figure by including payments for work other than lobbying. In an amended report, Hawaiian said it really spent only $8,250 on lobbying during the May-December period.
The company had initially reported paying more than $83,000 to lobbyist Lyn Anzai, wife of state Attorney General Earl Anzai, whose office was investigating whether the merger would be legal....
< END OF QUOTATION >
According to a filing in the Chapter 11 bankruptcy case of Hawaiian Airlines, Inc., Case No. 03-00817, proposed counsel for Debtor and Debtor in Possession are NICHOLAS C. DREHER, ESQ. and THEODORE D.C. YOUNG, ESQ, of the firm of CADES SCHUTTE LLC; LISA G. BECKERMAN, ESQ., of the firm of AKIN GUMP STRAUSS HAUER & FELD LLP, New York, NY; and DAVID P. SIMONS, ESQ., of the firm of AKIN GUMP STRAUSS HAUER & FELD LLP, Los Angeles, California.
The filing that I refer to is entitled, “APPLICATION OF DEBTOR FOR ORDER PURSUANT TO SECTION 327(e) OF THE BANKRUPTCY CODE AUTHORIZING THE RETENTION AND EMPLOYMENT OF MARR HIPP JONES & PEPPER AS SPECIAL COUNSEL TO THE DEBTOR...,” to be heard on March 21, 2003, by Judge Robert J. Faris.
You will recall that Cades Schutte is one of the firms that was prominently mentioned in my RICO lawsuit as well as in the above quoted letter. An article in the Honolulu Advertiser dated February 13, 2000, reported:
Estate spent $8 million in 3 years of legal battles;
Ongoing trials likely to tax state’s ability to pay experts
By Sally Apgar, Honolulu Advertiser
Kamehameha Schools has paid more than $8 million to lawyers and accountants over the past three years in the legal fallout from investigations by the state attorney general and Internal Revenue Service into the financial dealings and alleged wrongdoing of the ousted board of trustees.
During 1997 and through October 1999, the estate paid more than $5.6 million to law firms and $2.4 million to the accounting firms PriceWaterhouseCoopers L.L.P. and Arthur Andersen L.L.P., according to sources familiar with the state’s proceedings against the former trustees seeking repayment of millions of dollars to the trust....
The state attorney general is seeking millions in surcharges from the ousted trustees and their insurance companies, alleging that the trustees were overpaid and that their actions caused the estate to lose money though mismanagement and risky investments. The state also is seeking the trustees’ repayment to the trust for alleged improper hiring of lawyers, consultants and friends.
The surcharge proceeding, expected to take more than six months, is scheduled to begin in September. Attorney General Earl Anzai has said the demands could total as much as $200 million, but no more than $75 million could be recouped – the limit of the former trustees’ insurance coverage....
Anzai could not be reached to comment on how much the investigation has cost the state to date. Last year the attorney general told the Legislature it had spent $900,000 on outside investigators and trust experts.
“There is no way that the (attorney general) and the state could afford to match dollar for dollar what the estate spent,” said a source close to the attorney general....
The Advertiser has learned that between 1997 and October 1999 the estate made the following payments:
... Cades Schutte Fleming & Wright, the Honolulu law firm that handles the estate’s major civil litigation – including the controversial lease fee conversions that brought the estate about $1 billion in the early 1990s – was paid $1.26 million. Cades was paid $748,000 for work on the IRS audit, reviewing most of the thousands of pages of documents generated in the investigation. C. Michael Hare, the firm’s lead attorney for the estate, is close to Nathan Aipa, the estate’s chief operating officer and former general counsel. Hare is also a close confidante of ousted trustees Peters and Gerard Jervis....
PriceWaterhouseCoopers L.L.P., an international accounting firm, was paid $1.5 million for work in connection with the IRS audit and $52,000 for the state investigation.
Arthur Andersen L.L.P., an international accounting firm, was paid $911,000 for work in connection with the IRS audit. Arthur Andersen was first retained by Honolulu attorney Colbert Matsumoto, the court-appointed master who reviewed the estate’s finances for 1994-1997. The interim trustees have continued with the firm.
< END OF QUOTATION >
It appears that, although Lyn Anzai had left Hawaiian Airlines some months ago, she still has action pending against the bankruptcy estate, as reported in the following news article:
January 31, 2004
Ex-HAL execs file $1.5 mil in claims
by Dave Segal, Honolulu Star-Bulletin
Two former high-ranking Hawaiian Airlines officers who worked with ousted Chairman and Chief Executive John Adams have filed claims with U.S. Bankruptcy Court totaling more than $1.5 million.
The amounts, which provide a glimpse at how lucrative some executives’ severance packages can be, were among hundreds of claims that poured in just before – or in some cases after – Monday’s filing deadline.
Paul Casey, the vice chairman, president and CEO who left the airline on June 30, 2002, is seeking $993,705. Bob Zoller, the former president and chief operating officer who left the company April 15, 2002, put in a claim for $508,936.51.
The last-minute rush of claims coincided with a Bankruptcy Court hearing yesterday in which parent company Hawaiian Holdings Inc. received a mixed ruling on a discovery motion. Bankruptcy Judge Robert Faris lifted his stay on discovery to enable Hawaiian Holdings to receive financial information it has been requesting from Hawaiian Airlines. However, Faris limited the ruling by keeping in place a stay on discovery related to the suspension of a $4.25 million payment to the Hawaiian pilots’ pension plan.
Faris, at the request of trustee attorney Bruce Bennett and the Air Line Pilots Association, also delayed a scheduled Feb. 27 ruling on the pension payment for approximately one month, or until March 29, so that the two sides can continue discussions.
Hawaiian Holdings attorney Guy Neal, who said the parent company has now received a copy of trustee Joshua Gotbaum’s business plan, argued that Hawaiian Holdings had been attempting to secure certain financial information from Gotbaum since September so that it can prepare a possible reorganization plan. But Bennett argued it was “distractive and expensive” to conduct the discovery that Hawaiian Holdings was seeking....
Among other former Hawaiian executives, John Happ, the former senior vice president for marketing and sales who has a similar job now with Indianapolis-based ATA, is seeking either $437,277.91 as part of his employment agreement or $410,849.34 from his separation agreement....
Lyn Flanigan Anzai, the former vice president for legal and government affairs, is seeking $271,669.04 based on her employment and separation agreements. Anzai is now executive director of the Hawaii State Bar Association....
Among other notable claims:
>> More than $236 million from the Pension Benefit Guaranty Corp., a federal agency that pays retirement benefits when a company’s pension plan fails, for unpaid minimum funding contributions and benefit liabilities, Internal Revenue Service taxes and penalties, and other amounts to be determined....
< END OF QUOTATION >
I would assume that, with the involvement of Marr Hipp Jones & Pepper, Cades Schutte, and Kessner Duca Umebayashi Bain & Matsunaga, in the Hawaiian Airlines bankruptcy proceedings, the decision of whether to grant the requested compensation payment to Lyn Flanigan Anzai would, to some degree, be influenced by one or more of these law firms.
In the best interests of all parties concerned, including your client Kamehameha Schools, I would again urge you to have your professional liability insurance company contact me immediately for further details regarding this claim.
Or, if you and your firm, and other concerned parties such as Kamehameha Schools; P&C Insurance Company; Torkildson Katz Fonseca Jaffe Moore & Heatherington; Kessner Duca Umebayashi Bain & Matsunaga; Susan Tius; Jeffrey Sia; Bradley Tamm; Steven Guttman; Mary Lou Woo, etc., would rather attempt to negotiate a global, out-of-court settlement of all these separate claims (which can be found on the internet at www.the-catbird-seat.net/Claims-By-Harmon.htm), then I would be willing to consider this approach.
In the end, I believe this would be the fastest, least disruptive, and most cost-effective method of bringing this case to absolute, FINAL CLOSURE.
Very truly yours,
Bobby N. Harmon
cc: Mary Lou Woo, c/o Steven Guttman (via fax @ 808-529-7177)
James B. Farris, Senior Case Manager, American Arbitration Association
VIA fax only @ 559-490-1919
Robert Kihune, Douglas Ing, Constance Lau, Diane Plotts, Nainoa Thompson,Trustees of Kamehameha Schools (via fax @ 808-523-6313)
Dee Jay Mailer, CEO, Kamehameha Schools (via fax @ 808-523-6313)
P&C Insurance Co., Inc. (via fax @ 808-523-6313)
Susan Tius, Esq., c/o Rush Moore Craven Sutton Morry & Beh
(via fax @ 808-521-0597)
Jeffrey H.K. Sia, Esq., Ayabe Chong Nishimoto Sia & Nakamura
(via fax @ 808-526-3491)
Robert S. Tameler, ALPS, Claims Administrator for Bradley Tamm and
(via fax @ 406-728-7416)
Lori Chung, Aon Insurance Managers (via fax @ 808-540-4301)
Casimer Fidele, Tradewind Insurance Company (via fax @ 808-521-7489)
Hugh Jones, Deputy Attorney General (via fax @ 808-586-1477)
J.P. Schmidt, Hawaii Insurance Commissioner (via fax @ 808-586-2806)
Janet Hughes, Internal Revenue Service (via fax @ 303-844-3596)
Billy Beaver, Pension & Welfare Benefit Admin. (via fax @ 626-229-1098)
Ralph F. Boyd, Jr., U.S. Dept. of Justice (via fax @ 202-514-1116)
PricewaterhouseCoopers, c/o Warren Price III, Esq. (via fax @ 808-533-0549)
Marsh & McLennan, Honolulu Office (via fax @ 808-585-3510)
Terry Mullen, CEO/Pres., John Mullen & Co. (via fax @ 808-531-0053)
Lyn Flanigan Anzai, Hawaii State Bar Association (via e-mail: firstname.lastname@example.org)