HARMON’S LETTERS TO THE
NEW KAMEHAMEHA SCHOOLS’
TRUSTEES
Sightings from The Catbird Seat
~ o ~
May 8, 2003
VIA fax only @ (808)523-6313
Trustee Robert K.U. Kihune
Trustee J. Douglas Ing
Trustee Constance H. Lau
Trustee Diane J. Plotts
Trustee C. Nainoa Thompson
Kamehameha Schools
567 South King Street, Suite 200
Honolulu, Hawaii 96813
RE: Dr. McCubbin’s Resignation and Colleen Wong’s Appointment as Acting CEO
Dear Trustees:
This is to comment on the article in the May 5, 2003 edition of the Honolulu Advertiser that appeared under the headline, “McCubbin out as CEO of Kamehameha trust,” as it relates to your selection of Colleen Wong to serve as interim CEO. This article read, “a person familiar with the situation said the trustees for months had been investigating a complaint of an inappropriate relationship between McCubbin and a female employee. The person asked not to be identified because of the sensitivity of the situation and the fact the trustees did not plan to talk publicly about the allegation.”
As you no doubt are aware, I was a named witness in the Attorney General’s case for the removal of the former trustees, and have provided information concerning that case, and other activities regarding the Estate, to Dr. McCubbin, the Attorney General’s office, the Master, the Hawaii Insurance Commissioner, the FBI, the SEC, the IRS, and others. Excerpts from some of my letters to Dr. McCubbin and Ms. Wong will give you some background for my concern regarding selection of Colleen Wong as acting CEO:
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:
McKenzie Methane
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.
Accounting Firms/Representatives
Coopers & Lybrand LLP (Dennis Tsuhako)
Price Waterhouse (Mark McConoghy)
The roles that these two firms played in questionable activities are documented in my own RICO lawsuit, Chronology, and Documents.
Insurance Companies and Agent/Brokers
Marsh & McLennan (Hawaii) (Rocco Sansone, Christine Lee)
M&M Insurance Management Services (Peter Lowe)
Federal Insurance Company
The roles of these firms are also detailed in my RICO lawsuit, Chronology, and Documents.
Outside Contractors (Other)
Stay and Sons
The role of this “hazardous waste contractor” is detailed in the enclosed documents.
Kamehameha Schools’ Executives and Employees
Nathan Aipa
Colleen Wong
Louanne Kam
Allen Yee
Rodney Park
Wally Chin
Yukio Takemoto
Milton Holt
Mitch Gilbert
Gilbert Ishikawa
Dennis Fern
Bruce Nakaoka
Eric Martinson
Christine Lee
It is clear that the ex-trustees did not operate alone in the alleged theft of hundreds of millions of dollars from the estate. It takes the consent and cooperation of key executives and managers to facilitate such a broad misuse— even embezzlement— of trust funds. The enclosed documents provide details.
Henry H. Peters, Chairman, Board of Directors
Gilbert Tam, Director
William Richardson, Director, Secretary/Treasurer
Peter Lowe, Vice-President
Nathan Aipa, Asst. Secretary/Asst. Treasurer
Rodney Park, President
Louanne Kam, Officer
Marsh & McLennan, Inc.
Bank of Hawaii
William M. Mercer, Inc.
Again, details are provided in the enclosed documents.
I hope this information will be helpful in your investigation. If I can be of any further assistance, please feel free to contact me.
<s> Bobby N. Harmon, CPCU, ARM
encls: Harmon vs. Trustees, et al. - RICO Case Statement
Harmon Chronology
Harmon Documents
August 22, 2000
Dear Dr. McCubbin:
This is in response to Colleen Wong’s letter dated August 15, 2000, which read:
“. . . The Interim Trustees and Dr. McCubbin recognized the concerns you have raised. They have authorized the filing of a petition to apprise [sic] and to seek direction from the Probate Court on these matters. In response, a special master was appointed to review and to formulate recommendations to the Court. The Probate Court has now ruled.”
“With this ruling, guidance and direction has been provided to us. The Interim Trustees and staff are all committed to abiding and complying with the Court’s ruling.”...
Although I appreciate the fact that the Interim Trustees are committed to complying to the Court’s ruling (whatever that might be), I believe there is a larger issue here— which is, to restore honesty and accountability to the estate and to “stop the stealing!”
I seriously doubt that many of the concerns that I expressed in my letter were presented to the Probate Court, such as:
1. “Just as the interim trustees should not be involved in this lawsuit (against the ex-trustees), neither should any officers, directors or employees of Kamehameha Schools or P&C Insurance Company, such as Nathan Aipa, Colleen Wong, Louanne Kam or Rodney Park. Since it is the duty of the liability insurance companies, including P&C, to provide defense for the ex-trustees, all of these individuals have serious conflicts-of-interest by being involved.”
2. “The conflicts-of-interest issues in this case, however, appear to go beyond just the mechanics of handing the claims. The purpose of these deviations from procedures appears to be the intentional cover-up of thefts of trust funds by current employees of the estate in collusion with the ex-trustees and certain outside contractors. Some of these individuals and outside firms are known to me and were specifically named in my RICO lawsuit, so I will not repeat them all here. However, it is worthy of note that Aipa, Kam, Wong, Park, Federal Insurance Company, P&C Insurance Company, PricewaterhouseCoopers and Marsh & McLennan were all named as co-conspirators.”
3. “There are other reasons that ‘deals’ should not be made with only Federal, XL and P&C at this time. It appears that all potential insurance carriers may not have been notified in this case. Specifically, SoCal and McKenzie Methane should also have Directors & Officers liability coverages. If Henry Peters or other trustees or employees of KSBE also served as Directors & Officers of these entities there may be coverages applicable under these policies.”
4. “Also, if it is eventually found that Marsh & McLennan, Federal Insurance Company, PricewaterhouseCoopers, Mid Ocean Reinsurance, Underwriters Capital or others did, in fact, collude to defraud the estate, then the insurance policies of these entities may also be applicable.”
5. “There are other types of insurance policies carried by the estate which provide for substantial recovery of losses. Many of the alleged acts involved theft of trust monies by the ex-trustees in collusion with other KSBE executives and staff members, and with outside individuals or firms. These situations are covered by KSBE’s Employee Dishonesty insurance policy. To collect under these Employee Dishonesty policies, these claims must be reported to the insurance carrier. . . . Therefore, it would be the responsibility of the interim trustees and the Chief Executive Officer or Chief Operations Officer to report these claims to the insurance carrier. . . . One example of this type of claim would be the elaborate scheme to reimburse Milton Holt for the theft of his campaign funds and subsequent legal defense costs. . . . This is only one example. From the Attorney General’s investigation, and other investigations, and from my personal experience, there are dozens of similar cases of fraud which should have been reported to the insurance companies, but were not. If the current interim trustees and principal executives continue to ignore, or cover-up, these thefts, they are also exposing themselves (and the insurance carriers) to further claims of theft and breach of fiduciary duties.”
6. “Another source of potential recovery would be the Trustee Bonds of each of the five individual ex-trustees. This could possibly lead to another $500,000 recovery.”
7. “I would also like to comment briefly on the payment of fees for Trustees’ separate legal counsel as discussed in Davis Wright Tremaine’s memorandum dated 11/21/97 . . . and John Langbein’s letter of 11/23/97. . . . All that would have been required of Mr. Aipa would have been simply to report the claim to the insurance carriers. From that point on, these issues would have been handled by the insurance companies at their expense. . . .”
As mentioned, I do not know what matters were discussed with the Probate Court; consequently, if these issues were indeed presented to the Court in the manner I presented them in my letter, then I apologize for my skepticism. However, since Colleen Wong and all the other individuals mentioned in my letter of July 21st appear to continue to exercise control over all insurance issues involving the estate, then serious conflicts of interest and questions of propriety still remain.
My purpose in continuing to bring these issues to your attention is my hope that you and the interim trustees will yet act to “stop the stealing” and restore trust and integrity to Princess Pauahi’s legacy.
<s> Bobby N. Harmon, CPCU, ARM
cc: Ms. Dorothy Sellers, Esq., Deputy Attorney General
September 11, 2000
Colleen I. Wong, Chief Legal Officer
Office of the Chief Legal Officer
Kamehameha Schools
567 South King Street
Honolulu, Hawaii 96813-3036
Re: Kamehameha Schools Pension and Insurance Plans
Dear Ms. Wong:
Thank you for your letter of September 7, 2000. Since this appears to be your final “dialogue” on these issues, as a matter of courtesy I am responding directly to you rather than to Dr. Hamilton McCubbin....
You state that in the past I have made numerous allegations of fraud, conspiracy, collusion and misconduct relating to actions of Kamehameha Schools’ employees, consultants, including external and internal legal counsel. This is an absolutely accurate statement.
Your letter continues: “You have raised questions of misconduct, conflicts of interest and impartiality with respect to myself and my legal staff as well as outside counsel retained to assist us in reviewing your allegations including such reputable law firms as Torkildson Katz Fonseca Jaffe Moore & Hetherton; Miller & Chevalier and most recently the Carlsmith Ball law firm.”
The only word I would question in this statement is “reputable”....
You go on to state in your letter, “To my knowledge, none of these complaints or allegations of wrongdoing have resulted in any adverse actions taken by any of those offices, agencies or courts against KS employees and/or service providers.”
Perhaps, again, it depends on what you mean by “adverse actions”. By my understanding of this term, however, I would say that the removal of the five ex-trustees, the conviction of Milton Holt, and the pending trials of Henry Peters, Richard Wong, Jeff Stone, and Marshall Ige would be considered by some to be “adverse actions”.
It may be true that no legal actions have yet been taken against Marsh & McLennan, Rocco Sansone, PricewaterhouseCoopers, Mark McConaghy, William Richardson, Gil Tam, Rodney Park, Yukio Takemoto, Gil Ishikawa, Nathan Aipa and others named in my letters; however, to the best of my knowledge, investigations are still ongoing— including the one by Miller & Chevalier which I understand is not due to be submitted until September 30, 2000.
You state in your letter, “It is clear that any investigations performed by internal KS staff members and/or outside service providers to review your allegations will be met with further claims by you of conspiracy, collusion and other allegations of wrongdoing.”
This is not entirely correct. There are still many persons inside Kamehemaha Schools which I feel are trustworthy — at least one of whom is in the Legal Group. As for outside service providers, I have trust in the extensive investigations that were performed by Goodenow & Associates, and in the investigations by the court-appointed Master, Robert P. Richards, as detailed in his thoroughly researched and documented EQUITY NO. 2048 - REPORT OF MASTER REGARDING RETENTION OF NON-STAFF COUNSEL, filed May 18, 2000.
I do agree with the Master’s numerous conclusions, including: “MILLER & CHEVALIER. This is another Washington D.C. law firm that was retained to work on the IRS examination. The retention letter dated 11/25/98, [was] after the date the Attorney General had filed its action seeking removal. The firm invoiced the following amounts, which were paid ($653,511.71 Total). . . . It does not appear that this firm had done any previous work for the Estate and was then brought into the Audit for purposes of ‘explaining’ that work to the IRS. . . . In so doing they, according to their 12/1/98 acknowledgment letter, were to ‘coordinate with [CPA] Mark McConaghy’. . . . The Special Purpose Trustees appointed by this Court continued the services of Miller & Chevalier to defend with regard to the IRS Audit. As stated above, it is the recommendation that all fees of Miller & Chevalier be surcharged the trustees.”
Based upon personal knowledge, I am in even greater agreement with these comments by the Master: “In January 1998, Cades Schutte Fleming & Wright began work with reference to the IRS audit. There is no applicable trustee minute authorization or retention letter, but we do know from later correspondence to Miller & Chevalier that, pursuant to the instructions of the trustees, Michael Hare was to act as ‘local contact/counsel’ with reference to the audit. During the pendency of this action the firm billed ... $735,605.19 Total. ... This Master does not recommend surcharging the entire amount. ... The remaining sum, $511,609.94, is, however surcharged to all trustees, jointly and severally.”...
“Randy Roth was one of the authors of the Broken Trust article which criticized the actions of the trustees. In August (1997) his ‘claims were investigated.’ Then the claims of employee [Bobby] Harmon, who also criticized trustee conduct, were investigated.”
“Senior Federal Judge Sam King was also one of the authors of Broken Trust. In what can only be described as chilling and wholly inappropriate legal work, the firm spent 16 hours researching and drafting a memo ‘limits on freedom of federal judge regarding public statements on social issues and conclusions of law.’ This best illustrates the conclusion of this Master that no stone would be left unturned by the trustees in attempting to silence or at least discredit their critics. To charge the trust for such legal work is outrageous!” . . .
“This firm researched the issues of remedies in the event Mr. Harmon spoke about the conduct of trustees, in violation of the injunction gotten against him. What was the benefit to the trust? It is clear what the benefit to the trustees was, hope that employees would be silenced by fear of reprisal.”
You conclude your letter by stating, “Since we have attempted to explain and/or correct inaccuracies in your allegations which you continue to ignore, I believe it would not be fruitful to continue any further dialogue with you. However, any external investigations pursued by agencies or offices who have valid legal authority over the operations of the Kamehameha Schools will be met with our full cooperation.”
It pleases me to learn that your office is now committed to providing “full cooperation” with all legal agencies in their investigations. As you and I and these agencies well-know, this has not always been the case in the past....
<s> Bobby N. Harmon, CPCU, ARM
encl: Sept 7, 2000 letter to Trustee Screening Committee
cc: Robert K.U. Kihune, Trustee
Ronald D. Libkuman, Trustee
Constance H. Lau, Trustee
David P. Coon, Trustee
Francis A. Keala, Trustee
Dr. Hamilton I. McCubbin, CEO
Dorothy Sellers, Esq.
Billy Beaver, U.S. Dept of Labor
Trustee Screening Committee
May 29, 2002
Dear Dr. McCubbin:
This letter is to further comment on the Morgan Lewis & Bockius investigation as respects the handling by Kamehameha Schools’ in-house attorneys of reports of sexual abuse of students....
As I do not wish to state anything in this letter that might be misconstrued as being libelous, I will simply list what I feel are relevant and important questions that should be asked of the persons who were responsible for approval of the Morgan Lewis & Bockius report:
1. Did the Morgan Lewis & Bockius investigation disclose any incidents of alleged sexual molestation of students?
2. Did their investigation disclose any information regarding the alleged suicide of one of Kamehameha’s female students, which allegedly resulted from an affair with a school department head?
3. Did they review the Legal Department’s files regarding any of these cases?
4. Who were the in-house attorneys charged with investigating these cases?
5. If any determinations were made that sexual abuse was involved, what disciplinary action was taken against the perpetrator?
6. Were damages ever paid to injured parties in any of these case, or were they simply “covered-up” or denied.
I mention the case of the alleged suicide because I was never officially informed of the sex abuse allegations, although I was KSBE’s Risk, Insurance & Safety Manager at the time of the incident. I also mention this because, at last report, the teacher was still employed by Kamehameha Schools.
As is evident with the current Catholic Church sexual abuse scandals, attempting to “cover-up” incidents of sexual molestation is not only extremely costly, but, even worse, can perpetuate the activity and place current and future students at extreme risk of injury. In many states, the failure of schools to report pedophiles to law enforcement agencies is a crime.
I would also point out that employees (or outside attorneys) of the Schools should NOT be involved in CRIMINAL INVESTIGATIONS (as they have done in other cases).
If the Morgan Lewis & Bockius investigation did not cover this issue of child abuse, you should be able to find several reports of sexual molestation cases in the Legal Group files (if they have not been destroyed).
If you are unable to find these files and would like me to provide further details, I would require a guarantee from the estate, and its insurance companies, that you will protect and hold me harmless from lawsuits that might arise from any actions you may decide to take in these cases.
<s> Bobby N. Harmon, CPCU, ARM
cc: Dorothy Sellers, Esq.
Deputy Attorney General, State of Hawaii
Mary Lou Woo, Trustee, c/o Mr. Steven Guttman, Esq., Kessner Duca Umebayashi Bain & Matsunaga
Janet S. Hughes, Mgr., Employee Plans & Exempt Organizations, Internal Revenue Service
< END OF QUOTES>
Dr. McCubbin chose not to respond personally to my letters; instead, he apparently referred them to Colleen Wong, who then referred them to Matt Tsukazaki, Esq. or Robert Katz, Esq. of Torkildson Katz Jossem Fonseca Jaffe Moore & Heatherington. In an ongoing effort to suppress my criticisms, Mr. Tsukazaki complained about my “letter writing campaign” to my bankruptcy trustee, Mary Lou Woo, and her attorney, Steven Guttman, and asked that they take action against me under the threat of sanctions.
These complaints have resulted in the current Demand for Arbitration, initiated by Trustee Woo, in which one of the five issues to be decided is, “Whether Mr. Harmon’s letter writing campaign constituted a breached [sic] of the covenant of good faith and fair dealing and if so, whether he should be enjoined from writing such letters to the Trustee, her counsel, the parties to the Settlement agreement and their employees, representatives and others.”
There are other letters which space will not allow for inclusion here. I would suggest, therefore, that you request the complete files regarding my case from your legal department. In addition, you may wish to obtain further background on my RICO lawsuit – and my “letter writing campaign” – at this website:
I will be happy to provide you further information regarding these matters as time – and the Arbitration proceedings – permit. In the meantime, if you have any questions or comments, please feel free to contact me.
Sincerely yours,
<s> Bobby N. Harmon, CPCU, ARM
cc’s: Atty. Gen. Mark Bennett, State of Hawaii (VIA fax @ 808-586-1239)
Dr. Randy Roth, Office of the Governor (VIA fax @ 808-586-0006)
Benjamin M. Matsubara, Esq., Kamehameha Schools Master
Mr. J. P. Schmidt, Hawaii Insurance Commissioner (VIA fax @ 808-586-2806)
Cliff Rones, U.S. Dept. of Justice, Criminal Div. (VIA fax @ 202-514-7021)
Tai K. Lee, Special Agent, U.S. Dept. of the Treasury (VIA fax @ 808-539-2810)
Wade Clark, IRS, Criminal Investigation, Tempe (VIA fax @ 602-207-8010)
Janet S. Hughes, Mgr., IRS (VIA fax @ 303-844-3596)
Billy Beaver, Pension & Welfare Benefit Admin. (VIA fax @ 626-229-1098)
P&C Insurance Company, c/o Aon Insurance Mgrs (VIA fax @ 808-540-4301)
P&C Insurance Company, Inc., c/o Ayabe, Chong ... (VIA fax @ 808-526-3491)
X.L. Insurance Co., Attn: Patrice A. Fray, AIC (VIA fax @ 441-295-7524)
Kenneth B. Hipp, Esq., Marr, Hipp, Jones & Pepper (VIA fax @ 808-536-6700)
John Mullen & Co., c/o James V. Myhre, Esq. (VIA fax @ 808-524-2556)
Federal Insurance Company, Claims Dept. (VIA fax @ 213-833-5200)
Marsh Management Services, Inc. (VIA fax @ 808-585-3513)
PricewaterhouseCoopers, LLP, c/o Warren Price III (VIA fax @ 808-533-0549)
Morgan, Lewis & Bockius, Attn: T. M. Kittredge, Esq. (VIA fax @ 215-963-5299)
Miller & Chevalier (VIA fax @ 202-628-0858)
Susan Tius, Rush, Moore, Craven ... (VIA fax @ 808-521-0597)
Mary Lou Woo, Trustee, c/o Steven Guttman, Esq. (VIA fax @ 808-529-7177)
Matt Tsukazaki, Esq., Torkildson, Katz ... (VIA fax @ 808-523-6001)
Arnold T. Phillips, Esq. (VIA fax @ 808-528-5006)
Roy F. Hughes, Esq. (VIA fax @ 808-521-7489)
Gregg Dunn and Bradley R. Tamm, Esq. (VIA fax @ 808-524-4844)
Robert S. Tameler, ALPS (VIA fax @ 406-728-7416)
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