Behind the Blinds at...

The Estate of
Samuel Mills Damon


Sightings from The Catbird Seat

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August 3, 2007

Timothy E. Johns Named
Bishop Museum President:

International Search Lands Damon Estate Exec

Honolulu, HI - Bishop Museum has named Timothy E. Johns as President, Director and Chief Executive Officer, effective October 1, 2007 . The announcement was made today by the Chairman of the Board of Directors, David Hulihe‘e....

“I am delighted to announce the appointment of Tim Johns as Bishop Museum ’s new President, Director and CEO,” said David Hulihe‘e, Chairman of Bishop Museum’s Board of Directors. “Tim has over two decades of leadership experience with environmental and cultural issues in Hawai‘i , which will serve well him as the leader of Hawai‘i ’s State museum of natural and cultural history. I couldn’t be more pleased.”

Bishop Museum was founded in 1889. It maintains the world’s largest collection of Hawaiian and Pacific cultural and natural history objects and since its founding has as been a premier institution for research and public education. It is designated as Hawai‘i ’s State Museum of Natural and Cultural History.

Johns most recently served as Chief Operating Officer for the Estate of Samuel Mills Damon, a position he has held since 2000. Prior to that, he was the Chairperson of the State Department of Land and Natural Resources. He has also served as Vice-President and General Counsel for AMFAC Property Development Corporation. He has been a Lecturer in Business Law at the University of Hawai‘i and Windward Community College and has held the position of Director of Land Protection with the Nature Conservancy of Hawai‘i....

Johns is very active in environmental issues. His memberships include the State of Hawai‘i Board of Land and Natural Resources and the Northwestern Hawaiian Islands Coral Reef Ecosystem Reserve Advisory Council. A Rotarian, Johns is a member of the Rotary Club of Honolulu....

Johns serves on the Board of Directors for Grove Farm Company, Inc., Hawaiian Electric Company, Inc., YMCA Honolulu, Hawai‘i Nature Center, St. Andrew’s Priory School , Child and Family Services, Helping Hands Hawai‘i, Diamond Head Theatre, and Hawai‘i Public Television Foundation. In June 2005, he was named a Trustee of Parker Ranch Foundation Trust.

“We are delighted the Board of Directors has chosen a candidate with a deep commitment to the preservation and perpetuation of Hawaiian culture and respectful sensitivity to cultural issues. He is well known in the community and is held in high regard, and this will surely be beneficial in many ways,” said Betty Lou Kam, Vice President of Cultural Resources for Bishop Museum .

Johns was selected after a seven-month executive search by the international search organization Morris & Berger from Glendale , California . Founded in 1984, Morris and Berger is a generalist executive search firm that has developed a specialty practice serving the nonprofit sector, including performing and visual arts and institutions of higher learning....

Members of the Executive Search Committee included Bishop Museum Trustee Dr. Charman J. Akina (Chairman), David C. Hulihe‘e, Isabella A. Abbott, Ph.D., Haunani Apoliona, H. Mitchell D’Olier, Russell K. Okata, Gulab Watumull, Walter A. Dods, Jr., Allen Allison, Ph.D., and Amy Miller Marvin....

Johns will assume the top leadership position for the largest museum in the State of Hawai‘i in the midst of an unprecedented era of renovation and revitalization. Bishop Museum is presently undertaking a $21 million renovation of its iconic Hawaiian Hall complex with the support of world-class museum designer Ralph Appelbaum and Associates of New York.

In 2005, Bishop Museum opened the Richard T. Mamiya Science Adventure Center , an award-winning $17 million, 19,000-square-foot interactive science and cultural exploration center. Major traveling and cultural exhibitions are presented in the Castle Memorial Building year-round. Bishop Museum hosts nearly 400,000 visitors and students each year. Bishop Museum also administers the Amy B. H. Greenwell Ethnobotanical Garden in Captain Cook, Hawai‘i and the Hawaii Maritime Center in Honolulu .

“I am thrilled and honored to be given the opportunity to join this wonderful institution. The Museum has long been one of Hawai‘i ’s most important and cherished treasures. It is blessed with a wonderful staff, great board of directors, and widespread support throughout our community. This is a dream job for me, “ says Timothy E. Johns, newly named President, Director and Chief Executive Officer of Bishop Museum.


January 16, 2007

Museum gets $1M
gift of artifacts

The donation from the Damon Estate
includes more than 600 items

By Rosemarie Bernardo, Star-Bulletin

The Samuel Mills Damon Estate has donated to the Bishop Museum $1 million in Hawaiian and Pacific artifacts including gourds, fish baskets, kapa beaters, anvils, spears and hair combs.

"We are deeply grateful and humbled by the magnitude and cultural significance of this exquisite offering," said Bill Brown, president of Bishop Museum, in a news release.

The collection, made up of more than 600 Hawaiian and Pacific artifacts, is one of the largest gifts from old Hawaii that Bishop Museum has received. A larger bequeathal was a set of items including heirlooms belonging to Princess Bernice Pauahi Bishop and Queen Liliuokalani given to the museum at its inception, Brown said yesterday.

Damon, who died in 1924, and Bishop's husband, museum founder Charles Reed Bishop, were friends and business partners in Bishop & Co. Damon also served as a trustee for Bishop Museum, according to a news release.

Damon's last grandchild, Joan Damon Haig, died on Nov. 9, 2004, marking the end of the estate.

Among the properties held in trust was the collection that was on a series of loans to Bishop Museum, the earliest loan dating to the 1920s.

Timothy Johns, chief operating officer for the Estate of Samuel Mills Damon, said Damon family members wanted to give the artifacts to the museum to ensure that the collection of historical and cultural significance remains available to museum officials, students and the public for future generations.

Relatives dubbed the collection the "S.M. Damon Collection."

I am very pleased to see that the Damon Estate trusts the Bishop Museum to be a good steward of these objects and keep them in perpetuity for the people of Hawaii and to visit, see and learn about," Brown said.

One of the artifacts in the collection is a wooden shark figure displayed near the museum's entrance. Some are described as predating Capt. Cook's arrival in the islands in 1778.

Most of the artifacts in the collection are kept in vaults at the museum with controlled temperature and humidity, Brown said.

Museum officials plan to put some of the artifacts on display at the museum's Hawaiian Hall when renovations of the structure are slated to be completed in the fall of 2008.

In a news release, museum cultural resources Vice President Betty Lou Kam said, "It's exciting to have the S.M. Damon Collection as a permanent part of the museum. It not only provides a significant sampling of things Hawaiian, this gift is a statement of Mr. Damon's interest in Hawaiian culture and his desire to preserve and provide these treasures for use by future generations for their enjoyment and instruction."


January 4, 2007

Damon heir buys
Moanalua Gardens for $5M

By Gordon Y.K. Pang, Advertiser Staff Writer

Uncertainty over the future of one of O'ahu's most historically and culturally significant spots has been resolved with the sale of Moanalua Gardens by the Estate of Samuel Mills Damon to an heir who intends to keep it open to the public.

John Philip "JP" Damon, a great-grandson to the namesake of the $900 million estate, bought the 22-acre, one-time home of Prince Lot, who became Kamehameha V, for $5.05 million. Damon, 45, took title to the property Friday.

One of Hawai'i's earliest public parks, it hosts the annual Prince Lot Hula Festival, the largest noncompetitive hula festival. It also is home to the so-called "Hitachi tree," one of two exceptional monkeypod trees on the property that are on the National Historic Register. The tree's nickname comes from its use in television commercials by Japan's Hitachi Corp., making it a popular photo stop for Japanese visitors here.

The historic site has been operated by the Damon Trust for public use since 1924, but the impending dissolution of the trust has had many worried that it could fall into the hands of an entity that would be insensitive to its role as a place for public respite, disrespectful of its past, or both.

The new owner does not intend to make any such changes , said Jim Wright, his attorney.

"Under the will, the trustees kept it open to the public and the trust paid the expense," he said, noting that the gardens cost about $600,000 annually to maintain.

"The buyer has retained all of the (five to 10) employees and is working on a plan with corporate sponsorship to continue to operate the park and keep the facility open to the public as it has been."

Wright said details of the plan will be provided this month.


The property, as was the entire Moanalua Valley, was willed by Princess Bernice Pauahi Bishop when she died in 1884 to Samuel Mills Damon, her husband's business partner and a close friend of the couple.

Damon, a banker and the son of missionaries, died in 1924. His will stipulated that the trustees of his estate make the gardens available during the existence of the trust. The estate ended in November 2004 at the death of his last grandchild and is in the process of being dissolved.

JP Damon, in a prepared statement, said: "The gardens have always been a part of my life. I am honored to be taking on this responsibility to the community."

Among the parties that had been interested in purchasing the property was the state Office of Hawaiian Affairs, which has been buying parcels with historic, cultural and natural value across the state in recent years from O'ahu's Waimea Valley to the Wao Kele o Puna Rainforest on the Big Island.


Yesterday, trustee Oswald Stender said he was disappointed that OHA was not successful in its Moanalua bid.

"(JP Damon's) mission is preservation, which is what we want to do," Stender said. "After he's gone, then what happens?"

If OHA was able to purchase the property, either the agency or a Native Hawaiian entity would be responsible for using its resources to keep the facility open to the public in perpetuity, he said.

Stender said he hopes the new owner will be able to do the same, as well as continue hosting the Prince Lot Hula Festival.

"It is the buyer's hope and expectation that there will be a face-to-face discussion with trustee Stender and others at OHA who share his interest," Wright said.

Tim Johns, Damon's chief operating officer, said price was the biggest factor in the decision to sell it to JP Damon. "The trustees have the obligation to get the best value they can for the beneficiaries," he said.

But trustees and family members also are concerned about the future of the gardens. And while the purchaser is under no obligation to keep it public, "they're hopeful that the new owner will respect the legacy (of the site)," he said.


Other attractions at the gardens include a taro patch and koi pond, as well as historically significant buildings, including Lot's former summer cottage. Later, Samuel Mills Damon imported an entertainment hall from China, now known as the Chinese Hall, as well as a Japanese teahouse and garden.

JP Damon said he also is considering restoring the summer cottage and the Chinese Hall.

"This property has been part of the Damon family for nearly 123 years," he said. "I hope my children will also choose in time to take on this responsibility."

The Moanalua Gardens Foundation runs the Prince Lot Hula Festival, conducts tours of Moanalua Valley and maintains an office at the gardens.

Foundation president Alex Alika Jamile said in a statement that he was pleased with the sale.

"This continues the legacy established by Samuel Mills Damon to preserve a very special place ... one that has historical and cultural meaning," Jamile said. "We look forward to working in partnership with the new owner and to continue MGF's environmental education and cultural programs."


The estate also has been in the process of selling 3,714 acres in the back of Moanalua Valley. Johns said yesterday that the Trust for Public Lands and the state Department of Land and Natural Resources are under contract to purchase the valley and he expects that deal to close in the next four months.

Kamana Nui and Kamana Iki valleys are known collectively as Moanalua Valley. The area is considered a sanctuary for endangered and rare birds and plants. In the 1600s, the area was designated by O'ahu's King Kakuhihewa as the center of hula and chanting.

It is believed that Kamehameha the Great rested in Moanalua following the major battles of Nu'uanu and Kahauiki during his conquest of O'ahu.


August 9, 1999


Bishop Estate
long a power
-- and a target

Critics point to the Bishop Estate board of trustees as the logical result of a political spoils system run by the high and mighty of Hawaii society.

For more than a century, trustees were appointed by the state Supreme Court. Then, recently, furor over the selection system and charges of trustee misconduct spurred the court to remove itself from the process.

Estate controversy continues, including a petition by ousted trustees to get their jobs back from a temporary board now in charge.
The modern turmoil, though, only underscores the fact that the Bishop Estate has always been one of the most powerful forces in Hawaii's history.

In 1935, for instance, federal Labor Department investigator Elwyn Eagen pointed out that the estate controlled 20 percent of the most fertile, valuable land in the Territory. But, he warned, it refused to sell, and leased land only to those who played ball with the Big Five companies.

By Bob Dye
Special to the Star-Bulletin

Charles Reed Bishop once told fellow Bishop Estate trustee Sam Damon, "You must, my dear Damon, be patient with the other trustees including myself, for we must treat each other openly and frankly, and try to work together, even if we cannot think alike about everything."

He prophesied to another, "There will be constant attack upon the estate and the trustees will need to be on the defensive always."

Those early trustees may not have thought alike about everything, but in most every other way they were very much alike. Until Bishop's death, every trustee was a white male born of American parents, Protestant, and all except Bishop wed a white woman born to American parents.

Bishop's wife was Princess Bernice Pauahi Bishop, whose will created the trust to benefit Kamehameha Schools.

Most also had strong ties to missionaries through birth or marriage, and to the sugar industry via ownership or employment. They were the ruling oligarchs.

Charles Bishop died in 1915 -- and future trustees would no longer be from the same missionary mold. Over the next 40-some years, Hawaiians and Democrats were appointed to the board.

In 1920, the trustees (and years of service) were:

William Owen Smith (1884-1886, 1897-1929). Born on Kauai, eldest son of missionary Dr. James W. Smith, he had been a sheriff of Kauai and Maui, and a legislator. Prominent in the overthrow of the monarchy, Smith served as attorney general of the Provisional Government and the Republic of Hawaii. He founded Guardian Trust Co., which later merged with Bishop Trust and became its president. A director of a half-dozen corporations and an owner of Koloa Sugar Co., he was secretary and treasurer of the Hawaiian Sugar Planters Association for many years. He died in 1929 and was succeeded by John Kirkwood Clarke.

Eben Faxon Bishop (1904-1940), a nephew of Charles Bishop. He joined C. Brewer upon arriving in 1883, serving as its secretary, treasurer then president from 1909-1930. He was president of Mutual Telephone Co. and a director of the Bank of Hawaii, Hilo Sugar Co., Matson Navigation Co. and other corporations. A first lieutenant of Company "B", Honolulu Rifles, he participated in the 1887 revolution against King Kalakaua. He was elected to the Territorial Senate in 1904, and its president in 1907. In 1921 he became president of the Hawaii Sugar Planters Association. He retired in 1940, succeeded by ex-Gov. Joseph B. Poindexter.

Albert Francis Judd (1908-1939). A missionary descendant and son of a Hawaii Supreme Court chief justice, he trained at Yale Law School, then served in the Territorial Senate. Edwin P. Murray succeeded him.

William Williamson (1916-1928). A Williams College graduate, he came here in 1899 to teach at Punahou Schools. He went on to work in the sugar industry and owned a stock brokerage. Williamson served as a Commissioner of Public Instruction and was a member of the Territorial House of Representatives. He died in 1928, succeeded by George M. Collins.

Richard Henderson Trent (1917-1939). A Democrat, he was elected in 1905 as the first treasurer of the County of Oahu, at a salary of $200 a month, then re-elected for two more terms. After organizing Trent Trust Co. in 1907, he was accused of depositing county funds in banks under the firm's name. He successfully defended himself. From 1912 to 1914, he was president of the Honolulu Stock Exchange. During WWI, his firm was the depository of the U.S. Alien Property Custodian. He later was secretary of Mutual Building and Loan, and a Bank of Hawaii director. When he died in 1939, Frank E. Midkiff succeeded him as a trustee.

The men appointed to fill the four vacancies that occurred between 1928 and 1940 were of the oligarchy -- but not its top leaders. Three were former estate employees:

George Miles Collins (1928-1957). An engineer, he came here to work on the Waiahole tunnels system for Oahu Sugar Company. In 1914 he was named assistant engineer for the city, and three years later, joined Bishop Estate as superintendent of its land department. He was also associated with E.E. Black Construction Co., and served from 1931-35 as chairman of the Board of Commissioners of Public Instruction. When Collins resigned in 1957 to become a Campbell Estate trustee, he was succeeded by Samuel Wilder King.

John Kirkwood Clarke (1929-1951). A Hawaiian, he was treasurer of Waterhouse Trust Co., a trustee of Campbell Estate, secretary and treasurer of Robert Hind, Ltd., and a director of several firms. He also was chairman of the Commissioners of Public Instruction from 1925-29. He was succeeded as a Bishop trustee by Atherton Richards.

Frank Midkiff (1939-1983), who came in 1913 to teach and direct athletics at Punahou. He served as a captain of infantry at Schofield Barracks in WWI, leading "M" Company. He was Kamehameha Schools president from 1923-1932, and in 1934 became treasurer of J.B. Atherton Estate and Juliette M. Atherton Trust. In 1940 he was named a Punahou Schools. trustee. He died in 1983. Succeeded by Henry Peters.

Edwin Puahaulani Murray (1940-68) was born on Kauai. A Kamehameha Schools graduate and Democrat, he worked on finances for Kamehameha Schools from 1923-1932. He was elected auditor of Honolulu in 1932, and was re-elected in '34, '36, and '38. In 1940 he resigned to accept the Bishop trusteeship. He died in 1968, succeeded by Hung Wo Ching.

Bob Dye is a Hawaii-based freelance writer and historian. He taught at the University of Hawaii and Western Michigan University. He is the author of "Merchant Prince of the Sandalwood Mountain," "Afong and the Chinese in Hawaii," and editor of "Hawaii Chronicles, Island History from the Pages of Honolulu Magazine."

Bishop Estate archive


October 4, 1996

Hawaii's Damon Estate
quietly making millions

The state's fourth-largest private
landowner keeps surprisingly low profile

By Rick Daysog, Star-Bulletin

The jumble of light industrial and commercial properties in Mapunapuna and Moanalua is a constant reminder of the blue-collar nature of those neighborhoods.

But for the Estate of Samuel Mills Damon, those 235 acres of leasehold land are a financial workhorse for the real estate and banking empire that Forbes magazine described as one of the richest family fortunes in the country.

Publicity shy and risk averse, this $800 million family trust in many ways embodies the unassuming characteristic of its Oahu land holdings.

The estate, established in 1924, operates for the benefit of the heirs of Samuel Damon, one of the early of pioneers of First Hawaiian Inc. The estate also is Hawaii's fourth-largest private landowner, behind Kamehameha Schools/Bishop Estate, the Richard S. Smart Trust and Dole Food Co. And Damon Estate is the biggest shareholder in First Hawaiian.

Unlike its high-profile counterparts such as Bishop Estate and the Estate of James Campbell, this big landowner shuns the often-speculative land development business, opting instead to live off rents from its land and dividends from its stock holdings.

"It must be like clipping coupons," said Desmond Byrne, a longtime watcher of Hawaii's big land trusts and chairman of Common Cause Hawaii. "They're just collecting rent."

And they've collected a lot of rent lately. Last year, the trust's distributable income was $35.5 million, up about 1.2 percent from the previous year's $35.071 million, according to Michael Haig, a member of the Damon family.

Distributable income is the amount of money disbursed to Damon beneficiaries.

Assets growing

Meanwhile, the trust's asset value has grown at a 12 percent annual rate during the past several years, Forbes estimated. That's much faster than the growth of Hawaii's economy, which has increased at an annual rate of 7 percent during the past decade.

The estate declined comment, saying that as a private trust it is not required to disclose its finances. But a representative for the trust did verify some of the data uncovered by the Star-Bulletin.

The estate's healthy bottom line has meant hefty commissions for its trustees. Last year, each Damon trustee - First Hawaiian Chairman and Chief Executive Officer Walter Dods, local attorney Paul Mullin Ganley, businessman David Haig and former First Hawaiian executive Fred Weyand - received slightly more than $600,000, according to a source involved in the trust.

Bishop Estate paid its trustees $938,000 last year, while Campbell Estate trustees earned $840,000.

For Dods, the trustee commission are in addition to the $1.35 million he received last year at First Hawaiian.

"Being a trustee must be a cruise," Byrne said.

Much of the trust's income comes from the lease rent it receives from the 121,600 acres of land the estate owns in Hawaii.

Mike Sklarz, research director at The Prudential Locations Inc. real estate brokerage, said based on government tax records, the estate's lands in Hawaii alone are worth $472 million.

The estate also receives substantial income from its 8 million shares, or 25.7 percent, of First Hawaiian, the state's oldest and second-largest financial institution. Last year, Damon earned more than $9.4 million in dividends from its First Hawaiian holdings, which are valued at about $240 million.

Dual roles in question

But the links between First Hawaiian and Damon Estate go beyond that of a passive investor. All four of the estate's trustees sit on the bank holding company's 15-member board of directors. That includes Dods.

For one Damon family member, Dods' dual role as trustee and First Hawaiian's boss, as well as the trust's management of its First Hawaiian shares, have been sore spots.

Michael Haig, 48, has complained that trustees haven't done enough to maximize the estate's investment in the bank.

In an Aug. 30 letter to trustees, Haig, who is entitled to a 1/32nd share of the estate when it is terminated, said trustees should "make a reasonable effort" to pursue a takeover or merger of First Hawaiian by a third party.

Haig has urged Dods to resign as a Damon trustee or to resign from First Hawaiian, citing a conflict of interest.

"On one hand he has a fiduciary duty to the trust to make a reasonable effort to bring about a sale or merger of the bank prior to or upon the termination of the trust," Haig said. "On the other hand he has a duty to the stockholders."

Dods defended himself, saying that his actions as chief executive of First Hawaiian show he is maximizing shareholder value. He also said he would never do anything that would harm the interests of the trust or the bank.

A July 1995 report by the trust's court-appointed master, attorney Leighton Wong, said Hawaii's estate law allows Damon trustees to serve on First Hawaiian's board. Wong also noted that in the past, several First Hawaiian executives have served as Damon trustees and that the current trustees "have done a diligent job" of managing the trust's assets.

Heirs at odds over end date

Challenges to the trust are nothing new for Michael Haig. Back in the early 1990s, he and his mother, Joan Damon Haig, 77, of New Jersey, took the trust to the Hawaii Supreme Court over the issue of the trust's termination date. They won.

The Haigs argued that the Damon Estate should end with the death of Samuel Damon's last grandchild, which the trust estimated could occur in about 14 years. Three grandchildren are still alive: Joan Haig, Harriet Damon Baldwin of Maui and Francis Damon Holt of Oahu.

Others heirs, however, said the breakup should occur 21 years after the death of the last grandchild. That would have extended the termination date to about the year 2031. The trustees were neutral on the dispute.

In 1992, Circuit Judge Patrick Yim ruled that the trust would end 21 years after the death of the last grandchild, but that decision was reversed two years later by the state Supreme Court.

Haig said he opposed the later termination date because it went against the intent of his great-grandfather's will. The later termination date also would deprive younger heirs such as him of the use of the trust's assets during the prime of their lives, he said.

Haig said he now favors a termination plan in which the assets of the estate are converted into a publicly traded real estate investment trust, or REIT. That way, shares of Damon Estate would be sold on an open market, just like other securities. Investors, in turn, would be entitled to receive 95 percent of any income earned by the trust.

A REIT would allow beneficiaries to sell shares or borrow against their shares, Haig said.

A source within the Damon Estate said the board is examining several options, including a REIT.

"They have a duty to convey the transfer of the assets of the trust to the (heirs) as efficiently as possible and in such a way that creates a maximum value," Haig said.


January 17, 2007

Damon Estate gives
artifacts to museum

Honolulu Advertiser Staff

As the Bishop Museum undergoes a $20 million makeover of its Hawaiian Hall, Tim Johns, CEO of the estate of Samuel Mills Damon, has announced that the beneficiaries and trustees of the estate are giving a collection of more than 600 Hawaiian and Pacific artifacts to the museum.

The collection — including kahili, adzes, poi pounders, spirit cups (kapuahi kuni 'ana'ana) and 'aumakua — is estimated to be worth more than $1 million.

The son of missionary Samuel Chenery Damon, Samuel Mills Damon joined the Bank of Bishop & Company in 1870. In 1895, after his friend and partner Charles Reed Bishop left Hawai'i for California, he became the bank's sole owner.

Damon also served as minister of finance during the reign of King Kalakaua and was a founding trustee of Bishop Museum.

Upon the death of Joan Damon Haig, the last living grandchild of Samuel Mills Damon, in 2004, the estate was terminated, and a substantial part of its trust was distributed.

The trust included the long-term loan to the Bishop Museum of the estate's collection of Hawaiian and Pacific artifacts, which will now join the museum's permanent holdings.

"In a most generous and magnanimous decision, all the Damon family members have agreed to make an outright gift of this historically important collection to the Bishop Museum and ultimately, to all the people of Hawai'i," said Bishop Museum president Bill Brown.

Last March, the Damon Estate sold coins, medals and bank notes from its collection through the auction house Doyle New York. The sale brought in $3.8 million, including $268,000 for an 1880 Kingdom of Hawai'i banknote.


November 9, 2005

Bank of New York Settles U.S. Inquiry Into Money Laundering

By Timothy L. O’Brien, New York Times

Federal prosecutors said yesterday that the Bank of New York agreed to pay $38 million in penalties and victim compensation in a deal stemming from a six-year investigation of fraud and money laundering involving suspect Russian and American bank accounts and other fraudulent transactions.

Prosecutors said the bank, one of the nation’s oldest, did not adequately monitor and report suspect accounts at the bank.

The bank agreed to make what prosecutors described as “sweeping internal reforms to ensure compliance with its antifraud and money laundering obligations.”

Authorities sad that the bank has “accepted responsibility for its criminal conduct” and that it will not be prosecuted as long as it complies with the terms of the deal for three years.

Bank of New York also agreed to allow an independent examiner to monitor its operations.

The investigation, which began in 1998 and ended last year, first became publicly known in the summer of 1999 when Russia’s pell-mell rush to privatize formerly state-owned assets resulted in widespread criticism of insider deals and possible corruption among Russia’s business elite and officials of the Kremlin.

The fine, which is among the largest ever assessed against an American bank for money laundering violations, consisted of $14 million for failing to supervise suspect Russian accounts and $24 million for a separate series of fraudulent activities involving a branch on Long Island.

Riggs Bank, a subsidiary of the Riggs National Corporation, paid $41 million in federal penalties this year and last to settle a high-profile investigation of money laundering problems at that institution.

Prosecutors withe the United States attorneys’ offices in Manhattan and Brooklyn noted that the money laundering scheme at the Bank of New York involved unlicensed transmissions of about $u billion that originated in Russia, passed through American accounts, and then moved into other accounts worldwide.

Authorities said that at least nine individuals, including a former Bank of New York vice president, had been convicted for their roles in the two cases.

The Bank of New York acknowledged in the settlement that it had failed to adequately police and intentionally failed to report suspect accounts at the bank. Moreover, according to the settlement, the bank’s general counsel, managing counsel, and other senior executives repeatedly ignored requirements to report illicit transactions until authorities began arresting suspects in its investigations.

The agreement also said that the Bank of New York subsequently provided incomplete reports about suspect activities and failed to report separate transactions that resulted in the defrauding of other banks - even though the Bank of New York had already reached an agreement with regulators to overhaul its troubled monitoring operations.

“We are satisfied that reaching this agreement is in the best interest of our company and all of our constituents,” the bank’s chief executive, Thomas A. Renyl, wrote in a statement. “We are taking the right steps in today’s environment to ensure sound business practices.”

Two Russian emigres - Lucy Edwards, a former vice president at the bank, and her husband, Peter Berlin - originally opened the suspect accounts at the bank in 1996. The couple pleaded guilty to fraud charges in early 2000, conceding that they helped two Moscow banks conduct illegal operations through Bank of New York accounts....

In 1999. the Bank of New York suspended Natasha Gurfinkle Kagalovsky, a senior executive who oversaw Ms. Edwards. Federal investigators were exploring Ms. Kagalovsky’s possible role in the money laundering scheme at the time and she subsequently resigned from the bank and moved to London. she has never been charged with wrongdoing in connection with the investigation....

Ms. Kagalovsky’s husband, Konstantin Kagalovsky, served in secure government and corporate posts in Russia. He once worked for two large companies, Menatep and Yukos, which the Russian billionaire Mikhail Khodorkovsky formerly controlled. Mr. Khodorkovsky, once one of Russia’s most prominent and powerful figures, was convicted in Moscow in May on fraud and tax evasion charges in a highly disputed case pitting him against the Kremlin.

J. Michael Shepherd, who was general counsel at the Bank of New York during the money laundering investigation, left the bank last year to become general counsel of the BancWest Corporation.

He did not return a telephone call seeking comment.


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Confessions of a Whistleblower

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The Grand (and dirty) Ko Olina

The Harmon Arbitration

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Paradise Paved

Predators of Paradise

The Puna Connection

Pointing the Finger at WorldPoint

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The Harmon Arbitration

The Eagle Hooded

The Great Nest Egg Robberies

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The Indonesian Connection

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The Sinking of the Ehime Maru

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The Vampires on Jupiter Island

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The Vultures in Maunawili Valley

Vultures in the Merger Markets

Vultures of the Sandwich Isles

Office of the U.S. Trustee vs Harmon

Yakuza Doodle Dandies



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Last update January 1, 2008, by The Catbird Seat.