Bobby N. Harmon, CPCU, ARM
October 1, 2004
VIA facsimile only @ (808) 529-7177
Mary Lou Woo, Trustee
c/o Steven Guttman, Esq.
Kessner Duca Umebayashi Bain & Matsunaga
220 South King Street, 19th Floor
Honolulu, HI 96813
RE: Notice of Claim - Mary Lou Woo, Trustee
Ref. Mary Lou Woo, Trustee v. Bobby N. Harmon
Dear Ms. Woo:
As I have not received a response from your insurance carrier to my first Notice of Claim dated July 20, 2004, against you, Steven Guttman, Esq., and the law firm of Kessner Duca Umebayashi Bain & Matsunaga, I regret that I find it necessary to direct this follow-up letter regarding newly discovered information to your attention.
In Steven Guttman’s Declaration in Support of Claimant’s Request for Fees and Costs, received on September 2, 2004, I noted that a large percentage of the charges itemized in his time sheets resulted from direct conferences, telephone calls, letters and e-mails between Steven Guttman and other parties who had been named in my Racketeer Influenced and Corrupt Organizations (RICO) lawsuit. Since there are too many entries in Steven Guttman’s Declaration to list here, I will limit my discussion in this letter to those contacts with two individuals only – my attorney Bradley Tamm and his purported attorney, Peter Olson, Esq., of the law firm of Cades Schutte – as pertains to the following entries:
10/16/03
SG CONF. W/ATTY TAMM RE ARBITRATION
SG TC FROM ATTY PETER OLSEN [OLSON] RE TAMM REPRESENTATION
10/17/03
SG PREP FAX TO P. OLSON RE CLAIM SUBMITTAL TO ARB & RESP WITNESS LIST.
11/06/03
SG TC FROM ATTY OLSON RE ARBITRATION /TAMM TESTIMONY
11/18/03
WI TCS WITH ATTY OLSON RE ARBITRATION
11/19/03
WI RVW LTR FROM ATTY OLSON & MEMO TO SG RE SAME
11/20/03
SG REVIEW LTR FROM ATTY OLSON RE TAMM TESTIMONY
04/30/04
WI COMPILE ENCLS & DRAFT LTR TO BRAD TAMM’S ATTORNEY
SG OUTLINE/REVIEW LTR TO ATTY OLSON RE TAMM TESTIMONY
05/03/04
SG REVIEW LTR TO ATTY OLSON RE TAMM TESTIMONY
05/10/04
SG TC FROM ATTY OLSON RE TAMM TESTIMONY
06/09/04
SG TCs W/ATTY OLSON RE TAMM TESTIMONY
06/10/04
WI DRAFT/PROCESS INSTRUCTIONS TO SHERIFF RE TAMM SUBPOENA
WI MEMO TO ATTY TAMM RE ARB DEMAND & WEBSITE DATA
SG TC TO BRAD TAMM RE ARBITRATION; TC W/ATTY TIUS RE ARBITRATION ISSUES
SG TC FROM ATTY OLSON RE TAMM TESTIMONY
06/11/04
SG MTG W/TAMM RE SUBPOENED TESTIMONY (1.40)
06/14/04
SG TC W/PETER OLSON RE TAMM TESTIMONY
The following biography was taken from www.cades.com on September 28, 2004:
Peter W. Olson is a partner in the Litigation Department of Cades, Schutte. His practice focuses on personal injury and product liability defense, mass media law, insurance law, and professional liability litigation...
Mr Olson was an Adjunct Professor at the University of Hawaii at Manoa where he taught Media and the Law.
The following is from my RICO lawsuit located at www.the-catbird-seat.net/RICO-BH.htm :
... Plaintiff alleges that the following persons, corporations, partnerships and other business entities knowingly participated in, and improperly benefitted by, the Racketeering Activities of Defendants. By their acts or omissions, they either sanctioned or perpetuated the crimes:
... x) Kona Enterprises - This was another financially troubled acquisition, which resulted in a lawsuit brought by Wayne Rogers. In the initial suit, filed in North Carolina, Aipa did not report the claim to the insurance carrier. In subsequent suits filed in Utah and Hawaii, Plaintiff did become aware of the lawsuits, and filed the claim. However, Aipa and Lyn Anzai directed the handling of the lawsuit with outside law firms. As was common in these situations, the outside and in-house attorneys “controlled” the litigation, and the insurance companies disallowed much of the legal costs due to the Legal Groups disregard for the insurance policy conditions....
The following are excerpts from a few of the dozens of news articles relating to Cades Schutte and Kamehameha Schools/Bishop Estate:
July 12, 2000
A.G. faults Kamehameha interim board
Kamehameha Schools’ probe of its outside law firms
is said to undercut a court-ordered report
By Rick Daysog, Star-Bulletin
The cold war between the attorney general’s office and Kamehameha Schools’ interim board of trustees is showing no signs of thawing.
In the latest skirmish, the attorney general’s office is accusing the estate’s interim board of attempting to protect its own interests by undercutting the recent findings of court-appointed special master Robert Richards.
Deputy Attorney General Dorothy Sellers, in court papers filed yesterday, also faulted the interim board’s recent hiring of mainland lawyers and trust law experts to investigate the conduct of its outside attorneys as a waste of money.
“(The) interim trustees’ sudden desire to ‘investigate’ is consistent with a desire to protect their own actions by undercutting the Richards report,” Sellers said. “The interim trustees do not need a high-priced investigation to decide whether or not to continue the services of any professional firm.”
In a May 18 report, Richards charged that several of the estate’s outside law firms obstructed the attorney general’s investigation of the trust and conducted millions of dollars in legal work that personally benefitted former trustees Henry Peters, Richard “Dickie” Wong, Oswald Stender, Gerard Jervis and Lokelani Lindsey.
Richards also recommended that the probate court order the Cades Schutte Fleming & Wright firm to disgorge more than half of the $1.3 million that it billed the trust between August 1998 and May 1999....
www.starbulletin.com/2000/07/12/news/story2.html
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My hand-delivered letter of July 26, 2000 to Dr. Hamilton McCubbin describes my personal involvement with the investigation into the actions of KSBE’s attorneys:
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.
During my years at KSBE, the following are just some cases in which KSBE and P&C funds were misused in the handling of insurance claims:
Kona Enterprises
Ted Fields
Robert Trent Jones Golf Club
McConnell vs. KSBE
William Rosehill
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....
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Note: The full text of the above letter can be found at www.the-catbird-seat.net/McCubbin.htm
December 9, 2000
Kamehameha Schools to rehire some
law firms let go last May
A $500,000 investigation contradicts findings that legal work personally benefited former trustees
By Rick Daysog, Star-Bulletin
The Kamehameha Schools will rehire several of the outside law firms it terminated when a report by a court-appointed special master raised serious questions about the firm’s legal work.
But Hamilton McCubbin, the Kamehameha Schools’ chief executive officer, said the estate will not retain all of the firms it suspended in May.
The firms were let go as a result of special master Robert Richards’ report, which alleged that several of the trust’s outside lawyers conducted millions of dollars of work that personally benefited the estate’s former trustees.
McCubbin said the trust is looking at the firms on a case-by-case basis and has not yet decided which firms it plans to rehire.
McCubbin’s comments were in response to Probate Judge Kevin Chang ruling yesterday that the $6 billion estate is not required to pursue former trustees Henry Peters, Richard “Dickie” Wong, Oswald Stender, Gerard Jervis and Lokelani Lindsey and the trust’s outside law firms for the millions of dollars in legal fees.
The Richards report recommended the surcharges, saying that the ex-trustees and several of the law firms took part in a “Herculean effort” to stonewall the state attorney general’s investigation of the trust.
All firms deny wrongdoing
The Richards report singled out the Cades Schutte Fleming & Wright and McCorriston Miho Miller Mukai firms for taking part in a “destroy the opposition” campaign by former majority trustees Peters, Wong and Lindsey.
Richards alleged Cades Schutte spent considerable estate funds researching the free-speech limitations of senior U.S. District Judge Samuel King, an outspoken critic of the former trustees. Cades Schutte also reviewed sets of photographs taken of a 1997 protest march against the ex-trustees, in an apparent attempt to identify critics, Richards said.
As a result of the special master’s report, the estate terminated its contracts with Cades Schutte, Ashford & Wriston, Verner Liipfert Bernhard McPherson & Hand and PriceWaterhouseCoopers....
McCubbin’s decision to rehire some of the law firms is largely based on a trust investigation, conducted by the Washington, D.C., firm of Morgan Lewis & Bockius L.L.P., that contradicted several of the findings made by Richards.
The 252-page Morgan Lewis study, which was completed on Oct. 31 and reportedly cost $500,000, concluded that there are no grounds to pursue claims against the law firms and that work conducted by most of the firms benefited the trust....
In yesterday’s ruling, Chang did not address Schulmeister’s request to strike portions of the Richards report.
The judge also did not adopt the findings of either the Richards report or the Morgan Lewis report as a court finding.
Instead, Chang said that the recent settlement between the ex-trustees and the attorney general’s office, which had sued the former board members in an effort recover millions of dollars in damages, made moot any surcharge claims for legal fees.
www.starbulletin.com/2000/12/09/news/story3.html
December 9, 2000
Other Views, by Randall Roth
Honolulu Star-Bulletin Editorial
Where were Bishop’s lawyers?
THE leading trust law textbook in the country was revised this year to include a special section on Bishop Estate, calling the record of the former trustees a “debacle.” Its author, and other trust experts outside Hawaii, have expressed amazement that so much abuse could go on for so long and not be detected.
They have asked, “Where were the lawyers for the trust?”
This question does not refer to the lawyers hired specifically to represent the personal interests of the former trustees. These lawyers – called personal counsel – owed no duties to Kamehameha Schools or to trust beneficiaries.
The question refers to those lawyers hired specifically to assist the trustees in the administration of the trust estate. Such lawyers – called trust counsel – have a legal responsibility to serve the interests of the trust, as opposed to the personal interests of the trustees.
In addition to a dozen or more trust counsel, the former trustees had the services of the estate’s staff of in-house lawyers. Like outside trust counsel, these in-house lawyers had duties to serve the trust, not the personal interests of the trustees.
The in-house lawyers were well-paid, but their compensation paled in comparison to the tens of millions of dollars that were paid to outside trust counsel over the years of abuse.
None of these may lawyers – neither in-house nor outside trust counsel – managed to stop the abuses or reveal them to the probate court. Didn’t they recognize breaches of trust or did they recognize them and do nothing about it?
If they did not recognize the breaches, they did not earn the fees and salaries they were paid. If they knew but chose to do nothing about them, they breached their duties to the trust and its beneficiaries.
Perhaps they knew of the breaches but chose to do nothing on the theory of attorney-client privilege; lawyers are not supposed to disclose client confidences.
This is not an acceptable excuse. There are time, such as this one, when lawyers are both legally and ethically obligated to blow the whistle on corrupt clients. In the case of Bishop Estate, trust counsel were required to report to the probate court any and all serious breaches of trust that their trustee bosses refused to correct. This is Probate Rule 42 ( c ).
It seems obvious that Bishop Estate trust counsel never reported any of the many abuses to the court.
That is one among many reasons why court-appointed master Bob Richards recommended in his detailed report earlier this year that some of these lawyers be sued for millions of dollars in fees that ought not to have been paid....
Within hours of receiving Richards’ report, the interim trustees voted unanimously to discharge certain trust counsel, pending the outcome of an internal investigation.
But who carried out the internal investigation? And how were the investigating lawyers chosen?
When the interim trustees took over, one of their first acts was to turn control of the organization over to the lawyer who had been chief in-house trust counsel during the years of abuse. This put him in a direct conflict of interest and a dangerous position to control the flow of information to and from the interim trustees.
Then, when it came to choosing lawyers for the internal investigation, the interim trustees gave the investigation to a team of lawyers that included a firm that had worked for the former trustees.
And when these investigating lawyers chose an expert to guide them in evaluating other lawyers who had worked for the former trustees, they picked yet another lawyer who had worked for the former trustees.
This hopelessly conflicted group of lawyers produced a phone-book-size report (for which they are reported to have charged the trust $500,000) saying in essence that most trust counsel for the former trustees had dealt skillfully and honorably with a very difficult situation. They should not be sued and Probate Rule 42( c ) simply did not apply to anything they had done, according to the report.
Absent from the report was any evidence that trust counsel ever told the probate court about what has been described in national media as a world record for breaches of trust.
Richards, the court-appointed master who had concluded that million of dollars of trust funds were wasted on lawyers trying to serve the personal interests of the former trustees rather that the interests of Kamehameha Schools or trust beneficiaries, was criticized in the report for not being more understanding of the difficult position in which trust counsel had found themselves.
THIS report went even further, saying that some of the old trust counsel would be hard to replace, and that it would cost the interim board a lot of time and money to bring replacement trust counsel up to speed.
In other words, the strong suggestion was to rehire many of the old trust counsel who either did not recognize breaches of trust or did not properly report them.
Meanwhile, in-house lawyers for the Bishop Estate are now asserting attorney-client privilege to prevent anyone from seeing critical documents on which this questionable report is premised. Even lawyers from the attorney general’s office, whose job it is to represent the beneficiaries, have been denied access to these old documents with no significance apart from their role in holding former counsel accountable.
The interim board is about to be replaced by a new permanent board. These new trustees will be in a position to give the trust a genuine fresh start. This would logically begin with a total replacement of in-house and outside lawyers who either failed to detect obvious abuses or chose not to report them as they were required by law to do.
Without a fresh start, in the immortal words of Yogi Berra, it could be “deja vu all over again.”
www.starbulletin.com/2000/12/09/editorial/otherviews.html
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To update Dr. Randy Roth’s question, “Where were Bishop’s lawyers,” I would ask you, Trustee Woo and Mr. Guttman: “Where are Bishop’s lawyers today?” Of course, you well know the answer to this question, because the only witness you called to the arbitration was the old-guard, in-house attorney, Louanne Kam, along with her old-guard attorney, Matt Tsukazaki Esq., of Torkildson Katz, et al.
And, now, we have an attorney from KSBE’s controversial old-guard law firm, Cades Schutte, advising my attorney, Roy Hughes – and both holding secret conferences with Steven Guttman in preparation for the arbitration proceedings in this case.
As dismaying and shocking as the above conflict-of-interests were, however, they pale in comparison with what I uncovered in my “follow the money” investigation of Peter Olson’s old-guard law firm Cades Schutte, as it relates to my RICO case. I quote the following excerpts from various news articles:
August 21, 1997
Keeping lawsuits mum exposes estate,
says former Bishop official
The trust is vulnerable to millions
in damage claims and legal fees
By Bruce Dunford, Associated Press
The $10 billion Bishop Estate trust that supports Kamehameha Schools is exposed to hundreds of millions of dollars in damage claims and millions of dollars in legal fees because trustees wanted to keep a lid on embarrassing lawsuits, according to a former executive of the trust.
Failure to disclose details of these lawsuits to insurance companies jeopardized insurance coverage of damage judgments or settlements as well as legal fees in defending against them, said Bobby Harmon, who headed the estate’s insurance program until last year.
Harmon, who was fired last November as president of the estate’s for-profit captive insurance subsidiary, P&C Insurance Co. Inc. has been talking to state attorneys investigating allegations of irregularities in the management of Bishop Estate by its five trustees.
Gov. Ben Cayetano ordered the probe.
The Bishop Estate won’t respond to Harmon’s specific allegations but is prepared to challenge them in court, said estate spokeswoman Elisa Yadao.
The estate’s 1980 $85 million investment in McKenzie Methane Inc., a Houston-based energy venture in which several trustees and estate executives piggybacked another $3 million of personal investment, resulted in a $2.3 billion lawsuit brought in Texas in 1993 against the trustees, the Bishop Estate and other investors. The venture went into bankruptcy, whittling Bishop Estate’s investment down to some $20 million, according to attorneys in Texas.
The estate, its involved subsidiaries, the trustees and estate officers were entitled to legal defense under United Educators Insurance Co., which carries the estate’s legal liability policy, Harmon said.
Despite repeated efforts of the insurance company’s claims manager to get details on the lawsuit from Bishop Estate’s top attorney, Nathan Aipa, no information was provided and the company closed its files, not paying some $500,000 in legal fees that would have been covered, Harmon said.
It could also foreclose the insurance company for a settlement or judgment, he said.
Another $500,000 was spent defending against a $86.7 million lawsuit brought in 1995 by movie producer Fredrick Field stemming from his partnership with Bishop Estate in investments dating to 1984, Harmon said.
Actor Wayne Rogers, an investment partner with Bishop Estate and several trustees in Kona Enterprises, filed a lawsuit in North Carolina in 1993 that was not reported to United Educators, which therefore paid no defense costs, Harmon said.
Although a subsequent lawsuit filed in Utah was reported to the insurance company, the company disallowed many of the legal fees du to noncompliance with the policy terms, he said.
U.S. District Judge David Ezra dismissed Rogers’ lawsuit last year, but his ruling was reversed on appeal, and the case remains pending.
Total costs of defending Rogers’ lawsuit could have been limited to Bishop Estate’s $250,000 self-insured retention, Harmon said.
While the total costs of the defense covered by insurance are not yet known, one Honolulu firm, Cades Schutte Fleming & Wright, had billed the estate more than $750,000 as of September of last year, he said....
Yadao said Harmon was fired last year for work-associated misconduct and therefore was denied unemployment compensation.
Harmon is seeking up to $1.8 million in compensation from Bishop Estate for what he claims was his wrongful termination.
www.starbulletin.com/97/08/21/news/story2.html
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March 12, 1999
Jervis recovering after overdose
Bishop Estate trustee Gerard Jervis is hospitalized after taking an overdose of sleeping pills
Details were about to be revealed of a sexual encounter in
a hotel restroom stall with an estate employee
Rick Daysog and Christine Donnelly, Star-Bulletin
Bishop Estate trustee Gerard Jervis remained hospitalized a day after overdosing on sleeping pills as his involvement with a woman who apparently committed suicide last week was about to become public.
The 50-year-old Jervis, who was rushed to Castle Medical Center from his Kailua home around noon yesterday, was expected to recover but intends to take a medical leave of absence from his $843,000-a-year post, according to his lawyer, Ronald Sakamoto. The lawyer said he did not know whether the overdose was intentional.
The overdose came about a week after the death of Bishop Estate lawyer Rene Ojiri Kitaoka, who died from apparent carbon monoxide poisoning in the garage of her Kaneohe home on March 3, police said. The night before, Jervis and Kitaoka had been thrown out of the Hawaii Prince Hotel after security guards found them in a compromising position in a stall in a men’s restroom, according to a source familiar with the incident....
Kekoa Paulsen, a spokesman for the Bishop Estate, said that co-workers regarded the 39-year-old Kitaoka, who was born on Maui, as a bright and hardworking employee.
A 1984 graduate of Georgetown Law School, she came to the Bishop Estate from the Cades Schutte Fleming & Wright law firm and later became general counsel for the estate’s for-profit Kamehameha Investment Corp. subsidiary. At KIC, she worked with Jervis, who was chairman of the company....
www.starbulletin.com/1999/03/12/news/story1.html
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From FindLaw for Legal Professionals:
U. S. 9th Circuit Court of Appeals
KONA ENTERPRISES v ESTATE OF BERNICE PAUAHI BISHOP
9916295
KONA ENTERPRISES, INC.,
individually and derivatively on
behalf of Hanford’s Inc., and
Nationwide Industries, Inc.;
BALANCED VALUE FUND, TACH ONE,
on behalf of Montrose Nationwide
Limited Partnership; WAYNE M.
ROGERS; and JACK M. GERTING,
Plaintiffs-Appellants
v.
ESTATE OF BERNICE PAUAHI BISHOP,
by and through its trustees, Henry H.
Peters, Myron B. Thompson, Oswald K.
Stender, Richard S.H. Wong, and
Lokelani Lindsey .... et al.
Appeal from the United States District Court
for the District of Hawaii
DAVID A. EZRA, DISTRICT JUDGE, PRESIDING
... COUNSEL
... David Schulmeister and Kelly G. LaPorte, Cades Schutte Fleming & Wright, Honolulu, Hawaii, for the defendants-appellees.
... On March 9, 1998, defendants filed their fourth motion to dismiss based on the two grounds not previously addressed by the district court or by this court in the earlier appeal. ... On June 4, 1999, a different panel of the Ninth Circuit affirmed the district court’s decision on the merits. ... Upon the second entry of judgment and while plaintiffs’ appeal on the merits was pending, defendants timely moved for attorneys’ fees and costs under Fed. R. Civ. P. 54(d). The district court appointed Magistrate Judge Kurren as Special Master to hear defendant’s motion. On January 5, 1999, the Special Master issued a report recommending that defendant’s be awarded fees of $490,660.28 and costs in the amount of $24, 696.30, for a total award of $625,356.58. The Special Master further recommended that Kona, BVF, Tach One, Rogers, and GerLine be jointly and severally liable for 50% of the total award, or $312,678.28 ...
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It was during this same period of time that Judge David Ezra and Magistrate Barry Kurren were the judges in the Kona Enterprises case, that I was engaged in various lawsuits and settlement negotiations with KSBE - including my filing of my RICO lawsuit on April 27, 1999.
The following is an abbreviated chronology of events during this six-month period:
01/04/99 Harmon wrote to Michael Goolsby, Claims Dept., Federal: “As I have not received a response to my settlement proposal dated December 7, 1998, addressed to your office, that proposal expired on December 24, 1998. Therefore, I am offering the following revised settlement proposal for your consideration: I will agree to release from all claims of fraud, bad faith, unfair and deceptive claims practices, misrepresentation, etc., Federal Insurance Company; Marsh & McLennan Companies, Inc. and the officers, directors, employees and representatives of the entities, for the sum of _______. . . . As I am not represented by counsel in this matter, you or your legal representative may respond directly to me. . . This offer will expire at 12:00 noon, January 15, 1999.”
01/04/99 Harmon wrote the IRS re: “Investigation Into Activities of KSBE and P&C.”
01/05/99 Harmon wrote directly to Park, P&C: “As I have not received a response to my settlement proposal dated December 7, 1998, I am sending these revised settlement proposals . . . These offers will expire at 12:00 noon, January 15, 1999. . . . As previously advised, I am not represented by counsel in this matter. Therefore, you, or P&C’s contracted third-party claims administrator may respond to me directly.”
A copy of this letter was sent to Michael Goolsby, Federal Insurance Company.
NO RESPONSE was received in the open period — another act of bad faith.
01/17/99 Harmon wrote Park: “As I have not received a response to my settlement proposals dated January 5, 1999, those proposals expired on January 15, 1999. Consequently, I am offering the following new proposals. . . . ” cc: Tony Rangel, Federal Insurance Co.
01/19/99 Matt Tsukazaki (Torkildson, Katz, etc.) in a letter addressed to Harmon, Hughes and Goemans::
“We have again received a copy of a letter dated Jan 5, 1999 from Bobby Harmon to Rodney Park, President of P&C Insurance Co., Inc. See attached letter. To the extent that Mr. Harmon believes that the matters addressed by his letter are completely unrelated to the current lawsuit between himself and the Trustees of Kamehameha Schools Bishop Estate. . . and P&C . . . we have addressed this letter to him to make our point very, very clear.”
“My office is legal counsel to KSBE for all matters directly dealing with or concerning Mr. Harmon. My office is legal counsel to P&C ... for all matters directly dealing with or concerning Mr. Harmon.”
“To the extent that Mr. Harmon believes that his letter addresses other claims not covered by his current lawsuit against KSBE and P&C Insurance, he shall NOT communicate with or contact any trustee, officer, manager, employee, or agent of KSBE and P&C Insurance about any matter, issue or claim without the express written consent of my office. Mr. Harmon shall NOT communicate with or contact anyone at KSBE or its affiliated and related entities about any matter related to his employment with KSBE or P&C Insurance or about any allegations or alleged claims he believes he may have against KSBE and P&C Insurance. Mr. Harmon shall STOP sending letters or other correspondence to Mr. Park at P&C Insurance. That means no more facsimile transmissions, letters, telephone calls, e-mails, or other types of communication.”
“Finally, Mr. Harmon’s letter again asserts a claim for settlement against Torkildson Katz. As we stated in my November 18, 1998 letter, such assertions and allegations are a violation of Rule 11, Haw. R. Civ. P. The assertion of the claim and the demand for money by Mr. Harmon from KSBE’s and P&C Insurances’s counsel is viewed as an attempt to create a conflict of interest between Torkildson Katz and its clients, where none exists. Should such frivolous claims be filed, Torkildson Katz shall hold all of you, including Mr. Harmon’s insurance carrier, who is funding Harmon’s case against KSBE and P&C Insurance, responsible for any damages and costs it may suffer or incur in defense of such frivolous claims.”
“We will not tolerate any further attempts by Mr. Harmon to communicate or contact KSBE and P&C Insurance employees or agents. Mr Harmon has been repeatedly warned and instructed to stop contacting our clients. If such activities do not stop we will ask the court to issue a temporary restraining order against Harmon prohibiting such conduct.”
“On behalf of KSBE and P&C Insurance, we have rejected all prior settlement demands from Mr. Harmon. On behalf of KSBE and P&C Insurance, we hereby reject the proposed settlement as reflected in the January 5, 1999 letter.”
cc: Colleen I. Wong, Esq. (KSBE)
01/21/99 Harmon responded to Tsukazaki’s letter of 01/19/99: “. . .First, as you are already aware, these ‘bad faith’ claims are separate claims relating to the misleading, unfair and deceptive acts of the insurance carrier and its independent contractors. These are not the same as my wrongful discharge and whistle-blower claims. These ‘bad faith’ claims did not arise until after Civil No. 97-0512-02 was initiated and my wrongful discharge counterclaim was filed.”
“As both Roy Hughes and I have repeatedly advised you, I am not represented by counsel in the filing of these claims against P&C Insurance Company. Neither Roy Hughes nor John Goemans represent me in this matter. As I have repeatedly advised you, the purpose of my settlement proposals is merely a good faith attempt to reach an out-of-court settlement with all parties involved . . .”
“ . . . as the purported counsel for P&C in the handling of these claims, I believe that your actions, and those of Mr. Katz and your law firm, may have contributed significantly to the commission of these wrongful insurance practices. I refer specifically to, among other things:
— Your failure to respond, or to respond in a timely manner, to my many settlement proposals;
— Your apparent neglect in transmitting my settlement proposals in a timely manner, if at all, to the responsible independent claims adjuster for P&C, or to its reinsurance carrier.”
“You claim that your office is legal counsel to P&C for all matters directly dealing with or concerning Mr. Harmon. In accordance with P&C’s Operating Procedures, only their independent third-party claims administrator (TPA) has the duty and authority to engage outside counsel to handle insurance claims covered under P&C policies. . . . I respectfully request that you provide me a copy of your engagement letter from P&C’s claims administrator in order to evidence your claim that you have been authorized by P&C to act on its behalf in negotiation or defending these ‘bad faith’ claims.”
“You again state in your letter that my settlement proposal asserts a claim for settlement against Torkildson Katz, and that such assertions and allegations are a violation of Rule 11, Haw. R. Civ. P. . . your statement, ‘Should such frivolous claims be filed, Torkildson Katz shall hold all of you, including Mr. Harmon’s insurance carrier, who is funding Harmon’s case against KSBE and P&C Insurance, responsible for any damages and costs it may suffer or incur in defense of such frivolous claims’ is, first of all, inaccurate, as you are well aware. My insurance carrier, and Mr. Hughes, are defending me in P&C’s et al. claim against me in Civil No. 97-0512-02.”
“. . . I consider the content and tone of your letter to be a clear, blatant attempt to threaten and intimidate me, my present attorneys, my insurance company, and any future prospective attorneys that I might be able to persuade to take on my case. As you well know, I have given evidence and testimony of what I consider to be wrongful and illegal acts on the part of various trustees, directors, officers, employees and independent contractors to the Attorney General’s office, the Insurance Commissioner, the Master, the IRS and the FBI. You are fully aware that I may be called as a witness in criminal or civil cases against one or more of the trustees, officers, directors employees or other entities connected with these alleged criminal or civil wrongs. Under these circumstances, I do consider that you may be in a conflict of interest situation. Under these same circumstances, I also consider your threats of further legal actions against me to be an attempt to intimidate me as a potential witness in any criminal or civil trials of these individuals or entities.”
“Your final paragraph states that on behalf of KSBE and P&C Insurance, you have rejected all prior settlement demands from me, and that you hereby reject the proposed settlement as reflected in my January 5, 1999 letter. Again, may I request a copy of your authorization and/or engagement letter from P&C to evidence that are authorized to negotiate or reject the settlement of my ‘bad faith’ claims against this insurance company. Also, would you please provide the letter from P&C’s reinsurance carrier approving your firm as counsel in this case, as I believe is required under the reinsurance contract. Would you also provide evidence, or a statement to the fact, that this claim has been reported to the company that is providing P&C’s . . . Errors & Omissions insurance, including the name of the carrier and their policy number. Last of all, would you please confirm that you have relayed these rejected settlement offers to all concerned parties other than KSBE and P&C, and that all of these parties have rejected my proposals.”
cc: Hughes; Goemans; Ins Commissioner, State of Hawaii; Colbert Matsumoto; IRS; FBI
NO RESPONSE was received to this letter — a further instance of bad faith.
01/22/99 Harmon wrote to the Hawaii Insurance Commissioner, re: “Complaint/Request for Inquiry - P&C Insurance Company, Inc.”: This transmission is to provide you with a copy of my latest correspondence dated January 21, 1999, addressed to Matt Tsukazaki, Esq. of the law firm of Torkildson, Katz, Fonseca, Jaffe, Moore & Hetherington. . . . This additional information is to supplement my original complaint letters to your office dated January 28, 1998, and February 5, 1998. Commissioner Rey Graulty acknowledged receipt of these letters on February 24, 1998. . . . In his letter, Commissioner Graulty stated: ‘We will investigate your complaint to determine whether provisions of the insurance laws were violated.’ . . . I would greatly appreciate your informing me of the status of the investigation. . .”
Copies were sent to M. Bronster, Atty Gen; Colbert Matsumoto, Master; Oswald Stender, Trustee; Gerard Jervis, Trustee; Rodney Park, Pres., P&C.
NO RESPONSE was received to this letter of 01/22/99 to the Insurance Commissioner.
02/02/99 Harmon responded to Pozin, Federal Insurance Co.:
“This responds to your letter of December 23, 1998, addressed to Roy Hughes, Esq. and John Goemans, Esq.”
“First, let me state again that neither Mr. Hughes nor Mr. Goemans represent me in these “bad faith” type claims. I respectfully request that to the extent you are addressing these claims, you correspond directly with me. It is not necessary for you to send copies to Mr. Hughes or Mr. Goemans, but I have no objection if you wish to do so.”
“In your letter you state that it is not clear whether I am making these allegations against Federal in my capacity as an insured or purported insured under the Policy, or rather in my capacity as a claimant against the Trustees. My global settlement proposal is that I will release all named parties for all claims of fraud, bad faith, unfair and deceptive claims practices, misrepresentation, etc. I have described these claims in great detail in previous correspondence. . . . Let me say, however, that I consider the apparent collusion among Henry Peters, Nathan Aipa, Louanne Kam, Rocco Sansone, Peter Lowe and Milton T. Perkins in wrongfully back-dating the amended “Insured vs. Insured” Exclusion (Endorsement No. 6 of Policy No. 8146 79 11), and the failure to respond in a timely manner to my initial tender to Federal to defend me in this case, to be the most evident and serious examples of fraud, breach of contract, unfair and deceptive claims practices and bad faith.”
“In your letter you state that Federal has decided that Tony Rangel, or his designee, will respond to any claims I purport to have against Federal based on Federal’s alleged actions as my insurer or purported insurer with respect to the claims made against me by the plaintiffs in the P&C litigation. . . . I have not as yet received any response to my settlement proposals dated December 7, 1998, and January 4, 1999, from Mr. Rangel or his designee. (My January 4th letter was addressed to Michael Goolsby as I had not yet received your letter of 12/23/98.)
“Finally, as to Federal’s suggestion that to the extent I wish to advance any settlement proposals to P&C and/or Marsh & McLennan, I should submit these proposals directly to P&C (or its counsel, Mr. Katz) and/or to Marsh & McLennan, please be advised that I have previously submitted proposals to these entities. However, I must also point out that Marsh & McLennan is an agent (not a broker) for Federal in Hawaii. As such, I respectfully submit that Federal may be legally liable for the acts of its agent, Marsh & McLennan. . .”
02/02/99 Harmon wrote to Park, P&C: “As I have not received a response to my settlement proposals dated January 17, 1999, those proposals expired on January 31, 1999. Consequently, I am offering the following new proposals . . . As previously advised, I am not represented by counsel in this matter. Therefore, you, P&C’s contracted third-party claims administrator, or authorized counsel may respond to me directly. If I am to correspond or negotiate with any third party, please provide me with a copy of your specific written authorization agreement for the handling of these claims with such third party or parties. . . These offers will expire at 12:00 noon, February 15, 1999.” cc: Tony Rangel, Federal Ins Co.
02/03/99 Park wrote Harmon: “In response to your February 2, 1999 letter and all previous related correspondence, all matters raised in your letters including any issues you believe to exist between you and P&C Insurance, should be addressed to Robert S. Katz or Matt A. Tsukazaki at the law firm of Torkildson, Katz, Fonseca, Jaffe, Moore & Hetherington . . . I will not respond separately to your February 2, 1999 letter.”
02/06/99 Harmon responded to Park:
“This is in response to your February 3, 1999 letter addressed to me, with copies to Matt A. Tsukazaki, Esq. and Roy F. Hughes, Esq. With due respect, I must point out several statements in your letter which do not adequately respond to my letter of February 2, 1999.”
“First, your reference is to P&C Insurance Company, Inc. et al. v. Bobby N. Harmon, Civil No. 97-0512-02, while my letter referenced the above matter. This is a completely separate and different claim not covered in Civil No. 97-0512-02.”
“Second, I requested in my letter, ‘If I am to correspond or negotiate with any third party, please provide me with a copy of your specific written authorization agreement for the handling of these claims with such third party or parties.’ If I am to address Robert S. Katz or Matt A. Tsukazaki directly on these ‘bad faith’ claims against P&C, then I will require a copy of P&C’s engagement letter to the law firm of Torkildson, Katz, Fonseca, Jaffe, Moore & Hetherington evidencing that they have been retained to handle these specific claims.”
“Third, I am of the opinion that there would be a conflict of interest on the part of this law firm if they were to handle both my ‘whistle-blower’ wrongful termination claim, and the referenced bad faith claim. In fact, Torkildson, Katz would be a named defendant in any law suit that may be filed in the referenced matter. This fact, in itself, would probably be sufficient cause for them to have a conflict of interest.”
“Fourth, now that all five trustees have been removed by the court from handling any matters related to the I.R.S. audit, and Trustee Henry Peters has been indicted on grand theft, will Mr. Peters, through Nathan Aipa and Louanne Kam, be allowed to continue to direct the operations of P&C, including the handling of claims and the awarding of non-bid contracts, such as to Marsh & McLennan and Torkildson, Katz?”
“Until the above issues have been resolved, I do not believe it would be appropriate for me to correspond directly with Mr. Katz or Mr. Tsukazaki. Therefore, I anticipate that you will either personally respond to my February 2, 1999 letter, or that P&C’s authorized third-party claims administrator or designated attorney for this matter will respond to my proposal and adequately address the four issues stated above.”
“As previously advised, I am not represented by counsel in this matter. Therefore, it may be inappropriate for you to send copies of any correspondence to Roy Hughes, Esq., at this time as he is involved only in Civil No. 97-0512-02.”...
Harmon received NO RESPONSE to this letter from any parties.
03/??/99 Hearing on KSBE’s Motion to Dismiss Harmon’s Wrongful Termination Countersuit before Judge B. Weil. Goemans had moved to Washington, D.C.; did not receive Notice of Hearing. Harmon appeared on his own behalf; made oral motion to Continue hearing to enable him to find substitute counsel. Weil denied motion and dismissed Harmon’s countersuit with prejudice.
03/11/99 Trustee Jervis is rushed to a hospital after taking an overdose of sleeping pills a week after a trust employee died in an apparent suicide. The day before her death, Jervis and the female worker were caught having sex in a men’s restroom by security workers at the Hawaii Prince Hotel.
03/29/99 Unemployment Insurance Appeal - Oral Argument, Judge B. Eden Weil presiding. Harmon appeared by telephone on his own behalf, with Katz appearing on behalf of Bishop Estate. Judge Weil ruled in Harmon’s favor.
04/12/99 Trustee Wong is indicted on charges of first-degree theft, perjury and conspiracy.
04/27/99 Harmon filed pro se RICO Civil No. CV99-00304 DAE against Federal Insurance Co.; P&C Insurance Co.; Marsh & McLennan, Inc.; Pricewaterhouse, Coopers & Lybrand; Torkildson, Katz, Fonseca, Jaffe, Moore & Hetherington; 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; Peter Lowe; John & Jane Does 1-1,000.
04/27/99 IRS files a report saying it may revoke the tax-exempt status of the estate if the five trustees do not step down.
04/29/99 Senate votes to reject Atty General Bronster and Budget Director Earl Anzai for a second term.
05/06/99 Judge Bambi Weil permanently removes Lindsey as trustee.
05/07/99 Probate Court Judge Kevin Chang temporarily removes four trustees and accepts Stender’s resignation on an interim basis.
05/08/99 Judge Chang appoints five interim trustees.
05/27/99 Judge Bambi Weil issues Order Reversing Employment Security Appeals Office’s Decision 9701016 filed in 1st Circuit Court:
“. . . The first issued raised is the appeals officer’s failure to allow Appellant’s request to subpoena records and witnesses. The Court notes that the answering brief filed by Employer . . . states . . . that Appellant, who was a participant in conversations with many of the proposed witnesses, should have produced or could have testified to the documents that he authored and could have testified about his conversations. . .”
“. . . The Court finds it appropriate to take judicial notice of Civ. 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 [vs. Bobby N. Harmon]: Therefore, an action brought by Employer as well as by P&C Insurance Co.”
“In Civ. No. 97-0512-02, on Feb. 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 Aug 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 Civ. No. 97-0512-02. On Aug. 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 Mar. 5, 1998, the Appeals Office decision was entered.”
“On Mar. 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.”
“In requesting the additional subpoenas along with the previously requested subpoenas, Appellant included a justification, among others that the court order he was under would not allow him to provide it himself.”
“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 law regarding subpoenas is found at Hawaii Administrative Rules § 12-5-93(e)(20(1997) and reads, “upon a showing of necessity by any party for the issuance of a subpoena to compel the attendance of a witness or the production of account records and documents at any hearing, a subpoena shall be issued by the referee.” It is not a matter of discretion.”
“. . . the Court finds there was a showing of necessity. Appellant was under court order so he did not have the documents and had no way to compel the testimony of Employer. The Court also finds that the information sought to be subpoenaed was relevant to the underlying unemployment case, inter alia, because it could go to reasons for Appellant’s actions, the importance of non-compliance, the importance of being in non-compliance to Employer KSBE, and whether Appellant was acting with wilful and wanton disregard of Employer’s best interest. The Court also finds that it is beyond cavil that it is against the best interest of a charitable trust, namely KSBE, to lose its tax exempt status.”
“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 relevant issue is whether Appellant exercised good faith discretion as KSBE’s risk manager, because KSBE was Employer.”
“The Court additionally finds that there was 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. Ms. Kam testified and the Appeals Office found at the Certified Record on Appeal page 248 that Appellant had a genuine concern for the organization and that concern was understandable.”
“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 § 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. . .”
05/27/99 Harmon filed his RICO Case Statement.
07/23/99 Milton Holt incarcerated after admitting he used crystal meth, thus violating his bail agreement.
07/30/99 Harmon filed a Motion to Allow Amendment to RICO Complaint.
??/??/99 First RICO case hearing before Federal Judge David A. Ezra, District of Hawaii.
08/09/99 Judge David A. Ezra’s Order Granting Plaintiff’s Motion to Voluntarily Dismiss Action Against Defendants Federal Ins Co, Inc, Marsh & McLennan Companies, Inc.; PricewaterhouseCoopers, LLP; John Mullen & Co., Inc.; Torkildson, Katz, Fonseca, Jaffe, Moore & Hetherington....
08/14/99 Initial meeting with Arnold Phillips.
08/17/99 RICO Rule 16 Pretrial Scheduling Conference, Judge Barry Kurren. Conference continued until after Hearing on Harmon’s Motion to Allow Amendment to Complaint.
08/24/99 Milton Holt pleads guilty to one count of felony mail fraud related to illegally spending about $15,000 of his campaign money for personal use. Holt is currently in prison on drug charges. He faces up to 5 years in prison when he is sentenced by U.S. Dist. Judge Alan Kay on 12/06/99....
Looking back now at the chronology of these events, it is evident that JUDGE DAVID A. EZRA and MAGISTRATE JUDGE BARRY KURREN had conflicts of interests at the time they accepted their appointments to my RICO lawsuit. Yet NEITHER of them DISCLOSED these conflicts or RECLUSED themselves, as I believe they were ethically and legally required to do.
There are additional conflicts regarding Kamehameha Schools, Cades Schutte and Judge Barry Kurren to be considered, but I will hold these for my next letter or until I am contacted by an authorized claims representative from your insurance carrier. As I have indicated in previous correspondence, I am hopeful that the parties in this case can come together to discuss a global settlement of all claims.
Your prompt attention to these overdue matters will be greatly appreciated.
Very truly yours,
Bobby N. Harmon
cc: James B. Farris, Case Manager, American Arbitration Association
(via fax @ 559-490-1919)
Dee Jay Mailer, CEO, Kamehameha Schools, and President, P&C Insurance Co.
(via fax @ 808-523-6313)
Casimer Fidele, Tradewind Insurance Company (via fax @ 808-521-7489)
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