HARMON’S ANSWERS TO TRUSTEES’ INTERROGATORIES
A Sighting from The Catbird Seat
~ o ~
CIVIL NO. 97-0512-02
P&C INSURANCE COMPANY, 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,
Plaintiffs,
v.
BOBBY N. HARMON,
Defendant.
HARMON’S ANSWERS TO PLAINTIFFS’ INTERROGATORIES
1. With respect to Paragraph 3 of the Counterclaim, please state the specific citation to the federal and/or State of Hawaii laws, regulations and/or rules, you allege were violated by Plaintiffs.
ANSWER:
A. Tax fraud: Failure to disclose financial information in Federal Tax Returns regarding personal investments of Trustees and executives in companies controlled by KSBE. Breach of IRS rules regarding the maintaining of “arms-length” relationships between a tax-exempt charitable organization and its for-profit subsidiaries, including the improper allocation of insurance premiums and claims costs among the estate and its various for-profit subsidiaries (e.g., SoCal Holdings, Southern California Savings & Loan, AFCO, Paradise Petroleum, Unison Pacific and Sino Finance), and KSBE control of the operations of P&C Insurance Company, Inc. by the actions of Henry H. Peters, Nathan Aipa and Louanne Kam. Trustees, managers and independent contractors engaged in “excess benefit” transactions (e.g. payments to Marsh & McLennan, Inc., and Stay & Sons for non-bid or improperly bid contracts). Improper financial reporting in annual financial statements prepared by Coopers & Lybrand (e.g., failure to disclose large claims; improper reserves). Failure to report to the IRS, the state tax director, the court-appointed Master, the Probate Court and to the Attorney General conflicts of interest and financial transactions among KSBE, its trustees, employees, independent contractors, government officials, and officers and directors of P&C and other for-profit subsidiaries which resulted in unjust enrichment, private inurement, and private benefit to these individuals and entities.
B. Intentional non-compliance with State and Federal Regulations under the Americans with Disabilities Act; the Environmental Protection Act; the Occupational Safety and Health Act; and the Civil Rights Acts regarding equal employment opportunity.
C. Violation of State of Hawaii insurance regulations, Act 431: Article 13: Unfair Methods of Competition and Unfair and Deceptive Acts and Practices in the Business of Insurance. Fraudulent claims practices.
D. Coercion of employees by means of threats of discipline or termination to violate laws or to “look the other way” while superiors engaged in illegal or unethical acts; unlawful altering, falsifying and/or destruction of staff reports, board minutes, contracts and other legal documents; collusion with independent contractors to conceal and cover-up wrongful acts; and misuse of the “attorney-client privilege” to prevent the disclosure of wrongful acts.
2. With respect to Paragraph 3 of the Counterclaim, please list each act or practice which you allege was a violation by Plaintiffs of federal and/or State of Hawaii laws, regulations and/or rules, and in which you refused to participate.
a. Identify all persons having knowledge, information or belief of such facts or evidence; and
ANSWER:
A. Tax fraud: Breach of Arms-Length Principles between KSBE, P&C and other Subsidiaries; Failure to Report to the IRS and to the Hawaii State Tax Collector, Conflicts of Interest; Private Benefit and Private Inurement Transactions.
KSBE--
Henry Peters, Trustee
Richard S.H. Wong, Trustee
Oswald Stender, Trustee
Lokelani Lindsey, Trustee
Gerard Jervis, Trustee
Matsuo Takabuki, (former) Trustee and current consultant
William Richardson, (former) Trustee and current consultant
Myron Thompson, (former) Trustee
Rodney Park, Director of Administration Group
Wally Chin, Controller
Yukio Takemoto, Budget Director
Leeann Crabbe, Budget Mgr.
Gilbert Ishikawa, Tax Manager
Myron Mitsuyasu, Asst. Tax Manager
Dennis Fern, (former) Internal Auditor
Andrea Oshiro, (former) Internal Audit Dept.
Ramona Hinck, Accounting Mgr.
Doyal Davis, (former) Budget Mgr.
Bruce Nakaoka, Real Estate Investments Department Manager
Eric Martinson, Financial Assets Manager
Aaron Au, Financial Assets Division
Daniel Jones, Financial Assets Division
Nathan Aipa, General Counsel & Director, Legal Group
Louanne Kam, Director, Litigation and Risk Management Division
Gilbert Tam, (former) Director, Administration Group
Guido Giacommetti, (former) Director, Asset Management Group
Mitch Gilbert, (former) Financial Assets Manager
Sydney Keliipuleole, Asset Management Div.
Charles Maeda, Information Systems Div.
Neil Hannahs, Asset Management Group
Michael Chun, Pres., Kamehameha Schools
Ed Tabangay, (former) Engineering Dept.
Henry H. Peters, Chairman, Board of Directors
Gilbert Tam, Director
William S. Richardson, Director & Secretary/Treasurer
Peter J. Lowe, Vice-President
Rocco Sansone, Marsh & McLennan, Inc., Broker
Nathan T. K. Aipa, Asst. Sec./Asst. Treasurer
PAUAHI HOLDINGS CORPORATION:
Richard Wong, President
Glenn Hara, Treasurer
Henry Peters, Chairman, Board of Directors
ROYAL HAWAIIAN SHOPPING CENTER, INC:
Richard Wong, President
Glenn Hara, Treasurer/Controller (?)
COOPERS & LYBRAND
Cary M. Okawa, C.P.A.
Dennis Tsuhaka, C.P.A.
Carl Kobayashi, C.P.A.
MASTERS
Peter Trask, Esq.
James Duffy, Esq.
Benjamin Matsubara, Esq.
Colbert Matsumoto, Esq.
STATE OF HAWAII
Rey Graulty, Insurance Commissioner
Wayne Metcalf, (former) Insurance Commissioner
Margery Bronster, Attorney General
Kevin Wakayama, Deputy Attorney General
B. Intentional non-compliance with State and Federal Regulations under ADA; EPA; OSHA; Civil Rights Acts:
KSBE--
Henry Peters, Trustee
Richard S.H. Wong, Trustee
Oswald Stender, Trustee
Lokelani Lindsey, Trustee
Matsuo Takabuki, (former) Trustee and current consultant
William Richardson, (former) Trustee and current consultant
Myron Thompson, (former) Trustee
Rodney Park, Director of Administration Group
Nathan Aipa, General Counsel & Director, Legal Group
Louanne Kam, Director, Litigation and Risk Management Division
Colleen Wong, Esq.
Neil Hannahs, Asset Management Group
Michael Chun, Pres., Kamehameha Schools
Sam Hata, Director of Administration
Allen Young, Engineering Dept.
Ed Tabangay, (former) Engineering Dept.; current Consultant
Gil Tam, (former) Director, Administration Group
ROYAL HAWAIIAN SHOPPING CENTER, INC:
Richard S. H. Wong, President
Glenn Hara, Treasurer/Controller
Jonathan Kim, Property Manager
C. Insurance Fraud: Violation of State of Hawaii Insurance Regulations, Act 431: Article 13; Failure to disclose information to insurance carriers. Unfair Methods of Competition. Deceptive Claims Practices. Unfair Discrimination in the Settlement of Claims.
KSBE
Phillip Chang, Esq.
Lyn Anzai, Esq.
Colleen Wong, Esq.
Nathan Aipa, Esq.
Louanne Kam, Esq.
Kathie Reis
Kapu Smith
Patricia Onogi
Rocco Sansone
Christine Lee (former employee)
M&M INSURANCE MANAGEMENT SERVICES, INC.
Peter Lowe, Sr. Vice-Pres.
Garrett Liu
STATE OF HAWAII
Wayne Metcalf, (former) Insurance Commissioner
Rey Graulty, Insurance Commissioner
UNITED EDUCATORS INSURANCE GROUP
Milton T. Perkins
Michael Goolsby
M. Tony Rangel
ARKWRIGHT INSURANCE COMPANY/HOBBS GROUP
John McGrath
Tim McGrath
Mary Brieghner
D. Coercion of employees to violate laws or to “look the other way” while superiors engaged in illegal or unethical acts; unlawful tampering with, or destruction of, legal documents; collusion to conceal wrongful acts through threats of discipline or termination; and misuse of the “attorney-client privilege.”
KSBE--
Henry Peters, Trustee
Richard S.H. Wong, Trustee
Lokelani Lindsey, Trustee
Emalia Keohokalole, Secretary
Rodney Park, Director of Administration Group
Yukio Takemoto, Budget Director
Nathan Aipa, General Counsel & Director, Legal Group
Louanne Kam, Director, Litigation and Risk Management Division
Colleen Wong, Esq.
Phil Chang, Esq.
Lyn Anzai, Esq.
Allan Yee, Esq.
Neil Hannahs, Asset Management Group
Michael Chun, Pres., Kamehameha Schools
Sam Hata, Director of Administration
Allen Young, Engineering Dept.
Sandie Wicklein, Director of Personnel
Pat Chalfin, (former) Personnel Dept.
David Dunigan, Litigation & Risk Management Div.
Julie Kawakami, Litigation & Risk Management Div.
Kim Kanalaupuni, Litigation & Risk Management Div.
Daniel Pires, Documentary Dept.
Leslie Yamashita, Notary Public
Werylend Tomczyk, Notary Public
Luana Sala, Notary Public
Lori Loo, Notary Public
Linda Jacobs, Legal Assistant and Notary Public
Shevon Garnett, Legal Group Administrator
Marcia Diver, Information Services Division
Henry H. Peters, Chairman, Board of Directors
Gilbert Tam, Director
William S. Richardson, Director & Secretary/Treasurer
Nathan T. K. Aipa, Asst. Sec./Asst. Treasurer
Dennis Fern, Internal Auditor
Louanne Kam, Litigation Manager
Peter Lowe, M&M Insurance Management Services, Inc.
Garrett Liu, M&M Insurance Management Services, Inc.
Rocco Sansone, Marsh & McLennan, Inc.
b. Identify each and every document which refers to or relates to these allegations.
ANSWER :
A. Tax fraud: arm’s length issues/conflicts of interest/private benefit/private inurement:
Federal and State Tax Returns, Audited Financial Statements, and records of all invoices, credit memos, receipts and disbursements pertaining to insurance premium transactions, payments for insurance claims including legal expenses, and payments to independent contractors related to insurance brokerage, claims handling, safety and loss control services for Kamehameha Schools Bishop Estate (KSBE), Pauahi Holdings Corporation (PHC), and P&C Insurance Company, Inc. (P&C) for 1994, 1995, 1996.
Copy of my letter to Coopers & Lybrand dated 11/20/96, with all enclosures, and any written response or record of discussion between Coopers & Lybrand and Plaintiffs, or with M&M and/or M&MIMS, regarding this letter, including records of phone conversations, minutes of P&C Board of Director meetings, and staff reports to Trustees.
P&C’s application to the Insurance Commissioner, State of Hawaii, for a license to operate as a captive insurance company, including all supporting documents.
All minutes from P&C’s Board of Directors meetings.
P&C’s Operations Manual.
Plaintiff’s draft of P&C’s “Arms-Length Guidelines”.
All sections in KSBE’s Policy and Procedures Manual which relate to: risk, insurance and safety; compliance with the ADA, EPA, OSHA, DOSHA and Civil Rights Acts; conflicts of interest; maintaining arms-length relationships; bidding and contract procedures for third party contracts.
The following documents relating to the Waterpark Tower Environmental Remediation project: Bid Specifications; List of Bidders; Bid Bonds; Contracts; Performance Bonds; Staff Reports; Certificates of Insurance from all independent contractors; Evidence of Environmental Impairment Liability (Pollution) insurance carried by all independent contractors; invoices; copy of Ed Tabangay’s contract for services.
All sections of KSBE’s Employee Manual which relate to: risk, insurance and safety; conflicts of interest; and the ADA, EPA, OSHA, DOSHA and Civil Rights Acts.
All KSBE Staff Reports; IRS correspondence, internal and external letters, memorandum, and written opinions relating to “arms-length” and conflicts of interest issues.
All information, correspondence and staff reports relating to the “Taxpayers Bill of Rights II”, including KSBE’s lobbying activities and funds expended in its unsuccessful efforts to defeat the bill.
All information, correspondence and staff reports relating to compliance with the ADA, EPA, OSHA and Civil Rights Acts.
The following Bate-stamped documents which were returned to KSBE under court injunction:
Document numbers:
6-50; 139-141; 142-151; 152-153; 154-155; 156-157; 158-159; 160-162; 165; 167; 176; 177-180; 182; 183-184; 185-188; 225-226; 227; 228; 229; 230; 242; 243; 258-259; 260; 261-262; 263; 264; 265; 266; 267; 268; 269-270; 271; 272; 274-275; 276-279; 281-282; 283-344; 391; 393-394; 397; 407-408; 409; 410-421; 440-441; 442-453; 454; 459; 461; 462-472; 473-474; 475-476; 477-478; 479-498; 543; 544-545; 546-547; 548; 549; 550-552; 553; 554; 562-564; 565-569; 621; 622-624; 733-734; 840-925; 976-977; 978-979; 980-991; 1008-1009; 1019-1023; 1076-1077; 1078-1079; 1080; 1081-1082; 1089; 1133-1150; 1151-1212; 1260-1261; 1270-1272; 1273; 1422-1427; 1428-1429; 1430-1433; 1434; 1435-1444; 1445; 1446; 1447; 1451-1458; 3073-3129; 3130.
B. Insurance Fraud: Deceptive Business Practices /Misrepresentations /Unfair Methods of Competition /Deceptive Claims Practices
Copy of my letter to Coopers & Lybrand dated 11/20/96, with all enclosures, and any written response or record of discussion between Coopers & Lybrand and KSBE/PHC/P&C, and between these entities and M&M or M&MIMS, regarding this letter, including records of phone conversations, computer records, minutes of P&C Board of Directors and staff reports to Trustees.
P&C’s application to the Insurance Commissioner, State of Hawaii, for a license to operate as a captive insurance company, including all supporting documents.
All minutes from P&C’s Board of Directors meetings.
P&C’s Operations Manual.
My draft of P&C’s “Arms-Length Guidelines”.
All sections of KSBE’s Policy and Procedures Manual which relate to risk, insurance, claims and safety.
All KSBE Staff Reports; internal and external letters, memorandum, and written opinions relating to the formation of a captive insurance company.
The following Bate-stamped documents which were returned to KSBE under court injunction:
Document Numbers:
61-63; 64-121; 160-188; 198; 232-235; 236-239; 240; 241; 242; 243; 274-275; 276-279; 281-282; 283-344; 391; 398-399; 410-421; 422-423; 424-432; 434-436; 442-453; 459; 461; 462-472; 473-474; 479-498; 546-547; 548; 549; 550-552; 553; 554; 562-564; 565-569; 570-571; 572; 573-620; 621; 622-624; 639-675; 688-689; 690; 691; 692; 693; 694; 695; 696; 698; 699-703; 704; 706-710; 711; 713-717; 719-720; 721; 722; 723; 724; 725-726; 727; 728-729; 730; 731-732; 733-734; 735-737; 738-739; 740-741; 742; 743-747; 748-753; 754; 755; 756; 757-760; 761-762; 768; 773; 773-786; 787-792; 793-794; 795-798; 799-801; 802; 804-805; 835.
C. Unjust Enrichment/ Private Inurement/ Private Benefit/ Conflicts of Interest between KSBE, its trustees, employees, independent contractors, government officials, and officers and directors of P&C and other for-profit subsidiaries/Breach of fiduciary duties to the Estate of Bernice Pauahi Bishop/Breach of fiduciary duties to P&C Insurance Company, Inc.
Copy of my letter to Coopers & Lybrand dated 11/20/96, with all enclosures, and any written response or record of discussion between Coopers & Lybrand and KSBE/PHC/P&C, or between these entities and M&M and M&MIMS, regarding this letter, including records of phone conversations, computer records; minutes of P&C Board of Director meetings, and staff reports to Trustees.
P&C’s application to the Insurance Commissioner, State of Hawaii, for a license to operate as a captive insurance company, including all supporting documents.
All minutes from P&C’s Board of Directors meetings.
P&C’s Operations Manual.
My draft of P&C’s “Arms-Length Guidelines”.
All sections in KSBE’s Policy and Procedures Manual which relate to: conflicts of interest; maintaining arms-length relationships; bidding and contract procedures for third party contracts.
The following documents relating to the Waterpark Tower Environmental Remediation project: Bid Specifications; List of Bidders; Bid Bonds; Contracts; Performance Bonds; Staff Reports; Certificates of Insurance from all independent contractors; Evidence of Environmental Impairment Liability (Pollution) insurance carried by all independent contractors; invoices; copy of Ed Tabangay’s contract for services.
All sections of KSBE’s Employee Manual which relate to conflicts of interest.
All KSBE Staff Reports; IRS correspondence, internal and external letters, memorandum, computer records and written opinions relating to “arms-length” and conflicts of interest issues..
All information, correspondence and staff reports relating to the “Taxpayers Bill of Rights II”, including KSBE’s lobbying activities and funds expended in its unsuccessful efforts to defeat the bill.
All information, correspondence and staff reports relating to compliance with the ADA, EPA, OSHA and Civil Rights Acts.
The following Bate-stamped documents which were returned to KSBE under court injunction:
Document Numbers:
6-50; 61-63; 64; 65-66; 67-80; 81; 82; 83; 84; 85; 86; 87; 88; 89-90; 91; 92-93; 94; 103-105; 106; 107; 108; 109; 110-111; 112-114; 115-116; 117; 118-119; 120-121; 139-141; 142-151; 152-153; 154-155; 156-157; 158-159; 160-162; 163-164; 165; 166; 167; 168; 169; 170; 172-173; 174; 175; 176; 177-180; 181; 182; 183-184; 185-188; 190-192; 193-197; 199-201; 202; 203-205; 225-226; 227; 228; 229; 230; 232-235; 236-239; 253-254; 255; 258-259; 260; 263; 264; 265; 266; 267; 268; 269-270; 271; 272; 274-275; 276-279; 281-282; 283-344; 391; 393-394; 397; 398-399; 407-408; 410-421; 424-432; 434-436; 440-441; 442-453; 454; 459; 461; 462-472; 473-474; 475-476; 477-478; 479-498; 546-547; 548; 549; 550-552; 562-564; 565-569; 570-571; 572; 621; 622-624; 688-689; 691; 719-720; 733-734; 740-741; 761-762; 835; 840-925; 976-977; 978-979; 980-991; 1008-1009; 1010-1012; 1013; 1014-1018; 1019-1023; 1061-1067; 1081-1082; 1083-1086; 1104-1106; 1107-1111; 1112; 1113-1114; 1115-1118; 1208-1212; 1260-1261; 1270-1272; 1273.
D. Coercion of employees to violate laws or to “look the other way” while superiors engaged in illegal or unethical acts; collusion to conceal wrongful acts through threats of discipline or termination and misuse of the “attorney-client privilege”.
Document Numbers:
1-3; 4-5; 6-50; 61-63; 65-66; 67-80; 89-90; 183-184; 185-188; 274-275; 276-279; 454; 546-547; 549; 550-552; 565-569; 621; 688-689; 1428-1429; 1434; 1435-1444.
3. With respect to Paragraph 4 of the Counterclaim, were you in contact or communication with any federal or state governmental agency, authority and/or representative, at any time prior to your termination of employment by Plaintiffs about the matters listed in response to Interrogatory No. 2, above? If the answer is anything but an unequivocal "no," please:
a. Identify each governmental authority and/or person(s) which whom you were in contact;
ANSWER:
Insurance Commissioner, State of Hawaii
b. State the matters discussed with the person(s);
ANSWER:
No discussions.
c. Identify each and every document exchanged between you and the person(s).
ANSWER:
A copy of my letter dated 11/20/96, addressed to Coopers & Lybrand, with enclosures, was sent to the Insurance Commissioner, State of Hawaii.
4. With respect to Paragraph 4 of the Counterclaim, list the specific acts and practices which were allegedly engaged in by Plaintiffs and which you were asked to participate in or to proceed with some follow-up action, and in which you refused to participate or to proceed with the requested action.
ANSWER:
I was directed by Nathan Aipa and Louanne Kam to have P&C pay Marsh & McLennan, Inc. (M&M) a flat annual fee for services to be performed for KSBE and its subsidiaries as well as services to be performed for P&C, in direct disregard of “arms-length” tax guidelines which were provided by Price Waterhouse and incorporated in P&C’s application to the State of Hawaii for license to operate as a captive insurance company; and in violation of the “Taxpayers Bill of Rights II” guidelines provided by KSBE’s and P&C’s auditors, Coopers & Lybrand. This directive was given to me even though I was acting in my capacity as president of P&C, and in spite of the fact that P&C had not entered into any contract with M&M for these services. M&M refused to give me a satisfactory accounting of what services had been performed for this fee, and refused to provide to P&C a fee proposal for these services on a time and expense basis, even after my repeated requests for such a proposal. In my capacity as president of P&C, I refused to pay M&M’s invoice for these services, for the reasons that I believed it would be a breach of my fiduciary duties and payment would constitute a “private benefit” transaction to M&M. I also obtained fee proposals for these same “captive management” services from two other captive managers which were over $200,000 less than M&M’s charges. In my capacity as president of P&C, and on P&C’s letterhead, I wrote to Rocco Sansone of M&M advising him of my findings, and again requested a proposal on a time and expense basis. This letter was rescinded by Louann Kam without any prior consultation with me, and I was given a reprimand letter indicating that I could be terminated for failing to follow her, and Aipa’s, instructions regarding P&C’s operations. Despite this reprimand and warning, I still refused to allow P&C’s captive manager (M&MIMS) to pay M&M for unspecified services for which I had not contracted.
I had also refused to follow Aipa’s and Kam’s directives regarding giving M&M an “exclusive agent of record letter”, which Rocco Sansone had misrepresented would allow M&M to take over Hobbs’ Group’s proprietary bid proposal for the organization’s property insurance. The Hobbs’ proposal substantially improved KSBE’s property insurance program and reduced the cost by over $600,000 a year. I also refused Kam’s directions to falsify my staff report to trustees regarding the Hobbs’ proposal.
According to Kam, I refused to follow Aipa’s directive to have Kam hire an attorney and an expert to handle a flood damage claim filed by Larry Ching. In keeping with P&C’s “arms-length” guidelines and Operations Manual, only P&C’s contracted independent adjuster, John Mullen & Co., was authorized to hire attorneys and experts. This involvement by Aipa and Kam in the handling of claim was stated by Kam to be at the direction of Trustee Richard Wong who wanted to see what we could do to “settle this claim”, which had previously been denied by Mullen based on their findings that the flood damage was due to “an act of God”.
I refused to permit Kam, in collusion with M&M, to have P&C’s insurance policies endorsed with a “consent to settle” clause, which would have had the effect of giving control of P&C’s claims settlements to KSBE, and would have exposed KSBE to being liable for unlimited payments of P&C’s claims.
I refused to sign the annual financial statements prepared by Coopers & Lybrand for P&C, based on efforts by Henry Peters, Nathan Aipa and Louann Kam to direct P&C’s operations and investments in defiance of IRS tax regulations, including the payment of claims to favored individuals, and payments to third-party contractors without bids or contracts. These directives, if followed, would also result in unfair claims settlement practices, and in falsified claims reserves and financial reports in violation of Hawaii insurance codes. I discussed these irregularities with Coopers & Lybrand in October, 1996, and followed-up with a letter dated November 20, 1996, in which I enclosed documents which provided evidence of these wrongful acts. A copy of this letter, with enclosures, was sent to the Insurance Commissioner, State of Hawaii.
5. With respect to Paragraph 5 of the Counterclaim, please list and describe in detail the mandates of public policy you claim were violated by Plaintiffs.
ANSWER:
Public policy mandates that employees not be bribed or coerced into:
not reporting dishonest acts of fellow employees; concealing and not reporting safety hazards to appropriate department heads or OSHA; concealing and not reporting ADA or EPA violations to proper authorities; concealing and not discussing improper sexual advances by supervisors, teachers and staff toward students, or sexual harassment to staff members; concealing and not reporting third party liability insurance claims to the insurance carriers; altering and falsifying financial audits and reports; falsifying tax returns; or violating “arms-length” principles.
6. With respect to Paragraph 6 of the Counterclaim, please describe in detail, with reference to specific facts, dates, topics, and participants, how Plaintiffs violated Hawaii Whistleblowers' Protection Act, HRS Chap. 378.
ANSWER :
On October 18, 1996, I met with Cary M. Okawa and Dennis Tsuhako of the accounting firm of Coopers & Lybrand L.L.P., which audits the financials of P&C as well as KSBE and Pauahi Holdings Corporation, to discuss my concerns regarding violations of “arms-length” relationships between KSBE and P&C, as they related to what I believed to be efforts by Henry Peters, Nathan Aipa and Louann Kam to direct and control the operations of P&C.
We discussed unfair trade practice of blocking of my efforts to have P&C write the blanket property insurance program with reinsurance provided through the Hobbs Group, rather than by the incumbent agent, Marsh & McLennan, Inc. (M&M).
I also reported what I considered to be excessive fees being charged by M&M, and their failure to enter into a contract for these services, with fees to be on a “time and expense” basis, and their failure to provide a satisfactory explanation for the services included in their prior annual flat fee charge of $200,000. M&M’s delay and failure to provide a requested fee proposal for their “risk management” or “brokerage” services had delayed the development of premiums to be charged on P&C’s October 1, 1996 renewal policies, and had made it necessary to estimate a cost of $50,000 (rather than $200,000) in order to finalize the renewal premiums, issue the policies, and allocate and bill the premiums to KSBE and related companies.
We also discussed attempts being made by Aipa, Kam and Trustee Wong to direct and control P&C’s claims, which was in violation of P&C’s Operating Guidelines as well as the company’s “arms-length” guidelines. The specific claim discussed was the Larry Ching claim, which our independent claims adjuster, Neal Seamon. of John Mullen & Co. had already denied when Trustee Wong intervened and asked the Legal Group to see what could be done to help Mr. Ching.
We also discussed Rocco Sansone’s (M&M) memo dated 11/07/97 to Kam regarding a proposed “Consent to Settle (P&C Insurance)” endorsement which had been negotiated between Kam and Sansone without my knowledge or concurrence as president of P&C. This “Consent to Settle” clause would, in effect, take the control of claims settlements away from P&C’s independent adjuster and turn it over to KSBE. If so endorsed, P&C and KSBE would be exposed to uninsured and unlimited claims payments. This recommendation by M&M could result in significant financial loss to P&C and KSBE, and would violate P&C’s own Operations Manual guidelines relating to “arms-length” relationships between the parent and subsidiaries, and the contract between P&C and its independent claims adjuster, John Mullen & Co.
To document these discussions, on November 20, 1996, I wrote to Coopers & Lybrand and enclosed copies of invoices and correspondence which gave proof of the discussed irregularities.
A copy of this letter, with its enclosures, was sent to the Insurance Commissioner, State of Hawaii.
7. Please describe in detail your damages under Hawaii Whistleblowers' Protection Act, HRS Chap. 378.
ANSWER :
Lost wages, reasonable attorney’s fees and costs; mental injuries; treble damages; punitive damages.
8. With respect to Paragraph 7 of the Counterclaim, is it your contention that you were a party to a written contract or agreement of employment with Plaintiffs? If the answer is anything but an unequivocal "no," please:
a. State the terms and condition of the written contract or agreement;
ANSWER:
No.
b. State the date upon which the written contract or agreement was entered into and the name of the individuals who executed the agreement; ANSWER :
Not applicable.
c. Identify each and every document related to or evidencing this written contract or agreement.
ANSWER:
Not applicable.
9. With respect to Paragraph 8 of the Counterclaim, if different from the written contract or agreement of employment describe in Interrogatory No. 8, above:
a. Identify the written contract or agreement of employment with Plaintiffs, which you allege was breached.
ANSWER :
Not applicable.
b. State the terms and condition of the written contract or agreement;
ANSWER :
Not applicable.
c. State the date upon which the written contract or agreement was entered into and the name of the individuals who executed the agreement;
ANSWER :
Not applicable.
d. Describe in detail how the contract or agreement was "tortiously" breached; and
ANSWER :
Not applicable.
e. Identify each and every document related to or evidencing this written contract or agreement.
ANSWER:
Not applicable.
10. with respect to Paragraph 9 of the Counterclaim, what specific statutory section of HRS Chap. 480 do you base your claim upon, and state the facts and evidence upon which your claim is based.
ANSWER:
I understand HRS Chapter 480 to prohibit unfair and deceptive methods of competition in Hawaii. I consider the following to be an unfair and deceptive practices:
∙ The operations of P&C were being subsidized by KSBE, a tax-exempt charitable trust, by providing free labor and paying other operating costs to the for-profit entity which competes with other insurance companies.
∙ At the direction of Nathan Aipa, Louanne Kam, Eric Martinson, and others, KSBE paid premium charges, legal fees and claims costs that should have been paid by for-profit subsidiaries (e.g. Kukui, Sino Finance, Unison, SoCal, AFCO, Paradise Petroleum, etc.), or by individual trustees, officers, directors or employees;
∙ P&C entered into a contract with M&MIMS for captive management services to be provided for stated rates on a time and expense basis. The first year’s billings were $60,000+. Yet a related company, M&M, billed P&C an additional flat $200,000 fee, for which P&C had not contracted, and for which no satisfactory explanation was given. One belated explanation given was that this fee included safety and loss control services and “brokerage” services. However, as I pointed out in correspondence with M&M and M&MIMS, P&C had paid M&M Protection Services, Inc. (another related company) under a separate “time and expense” contract for the safety and loss control services, and M&M had received commissions from the reinsurance carrier for their “brokerage” services.
∙ Insurance premium and loss costs being charged to lessees and tenants of KSBE properties were improper. Many of the insurance policies for KSBE and its subsidiaries combine coverages for all entities under the same policies. These insurance premiums, as well as the claims costs which were paid under self-insured retentions and deductibles, were allocated to the Kamehameha Schools, to Bishop Estate, and to covered subsidiaries. These charges, in turn, were further allocated to specific commercial projects, such as Royal Hawaiian Shopping Center, Windward Mall, Keauhou Shopping Village, Bishop Commerce Center (Georgia), Desert Springs Marketplace (California), etc., in accordance with procedures set forth in KSBE’s Policies & Procedures Manual and under P&C’s operating guidelines. These costs which were allocated to the commercial projects were nearly 100% recovered from the lessees and tenants, through their monthly maintenance fees in accordance with their lease or rental contracts. Due to directives of Nathan Aipa, Louanne Kam, Eric Martinson and others, these insurance costs were being improperly allocated, resulting in unfair and improper charges to the tenants and lessees of these projects. Furthermore, the improper overcharges being made by M&M were also included in the insurance charges that were passed through to these tenants and lessees.
11. With respect to Paragraph 10 of the Counterclaim, concerning your alleged mental and emotional distress:
a. State each and every fact, symptoms, disorders, upon which you maintain supports the allegations stated herein;
ANSWER:
As a result of stress from almost continual harassment and intimidation during the last four to five years of my employment at KSBE, I have suffered from chronic anxiety, headaches, insomnia, chronic fatigue, irritability, loss of confidence and self-esteem, and thoughts of suicide. My wife has suffered from chronic anxiety, headaches, insomnia, extreme irritability, uncontrollable anger, and chronic fatigue.
b. Identify all persons having knowledge, information or belief of such facts or evidence, including all physicians, psychologists or psychiatrists from whom you have sought treatment; and
ANSWER: REDACTED
c. Identify each and every document which refers to or relates to these allegations.
ANSWER:
None.
12. With respect to your allegations of damages in Paragraphs 6, 11, 12 and 13 of the Counterclaim:
a. State the specific amount of damages (monetary value) as calculated as of the date of your response to this request, along with the identity of the type or nature of damages (i.e., lost profits, wages, compensatory, special, etc.);
ANSWER:
Lost wages: $ 92,000.00
Attorney’s Fees & Costs:
— John Marshall $ 3,879.70
— John Goemans $ 15,000.00
Compensatory: Unknown
Special: Unknown
Treble: Unknown
Punitive: $10,000,000.00
b. For each amount claimed as damages, state with specificity the method of calculation, including a complete statement of each and every fact and assumption, if any, that entered into the calculation;
ANSWER:
Lost wages are an estimate based on an annual salary of $75,000 plus an estimated $25,000 in lost benefits.
Attorney’s fees are based on billings from John Marshall, and estimate of fees and costs to date from John Goemans.
I am not able to calculate the total amount of compensatory, special or treble damages.
Punitive damages are based on the shocking, egregious, corrupt and criminal behavior of an organization and individuals that should serve as an sufficient example to others.
c. Identify all persons having knowledge of the damages sustained by you as a result of alleged conduct of Plaintiffs and state the knowledge for each such person; and
ANSWER:
Sandie Wicklein, Personnel Director, KSBE, has knowledge of wages I was receiving prior to my termination, as well as knowledge of the salary increase and bonus I would have received except for the unfair performance evaluation given me in August, 1996, by Nathan Aipa.
My attorneys and family have knowledge of the legal costs incurred.
d. Identify each and every document which refers to or relates to your alleged damages.
ANSWER:
Bill dated July 11, 1997 from John D. Marshall showing fees for professional services of $3,150.00, and total costs of $557.81.
13. With respect to Paragraph 13 of the Counterclaim and the allegation of "wilful and wanton" conduct:
a. State each and every fact and piece of evidence upon which Plaintiff bases this allegation;
ANSWER :
As detailed in my letter dated November 20, 1996 to Coopers & Lybrand, and in my letter dated December 29, 1996 to KSBE trustees.
b. Identify all persons having knowledge, information or belief of such facts or evidence; and
ANSWER :
As identified in my letter dated November 20, 1996 to Coopers & Lybrand, and my letter dated December 29, 1996 to KSBE trustees.
c. Identify each and every document which refers to or relates to this allegation.
ANSWER :
As identified in my letter dated November 20, 1996 to Coopers & Lybrand, and my letter dated December 29, 1996 to KSBE trustees; and in documents returned to KSBE under order of the court.
14. As to any witness you expect to call as an expert at trial, identify such expert, provide a detailed statement of his or her credentials, and state the subject matter on which the expert is expected to testify, the substance of the facts and opinions to which the expert is expected to testify and a summary of the grounds for each opinion.
ANSWER :
Not determined at this time.
15. State whether or not prior to the filing of the Complaint Defendant has conducted any investigation concerning any matter relating in any way to this litigation, and, if so state or describe with respect to each such investigation:
a. The date and subject matter thereof;
ANSWER:
No investigation was conducted.
b. The name, address, and job title of each person who conducted or participated in the investigation;
ANSWER:
Not applicable.
c. Its purpose;
ANSWER:
Not applicable.
d. Its finding;
ANSWER :
Not applicable.
e. Whether any records were prepared in connection with such investigation, and, if so, the name and address of the person who has custody of such records; and
ANSWER :
Not applicable.
f. Each and every document which refers or relates to such investigation.
ANSWER:
Not applicable.
16. With respect to your duty to mitigate your damages:
a. Describe your attempts to mitigate your damages, and if you have not taken any steps, please explain "why not."
ANSWER:
Upon termination, KSBE offered a severance pay package. I did not accept this offer due to the fact that I considered it insufficient, and due to the stated condition that I would not bring suit against KSBE if I accepted the offer.
On December 29, 1996, I wrote a letter to the five individual trustees disclosing the unreasonable and unjust reasons behind my discharge. By copies of this letter, I filed wrongful termination and personal injury claims with KSBE/P&C’s insurance carriers, Federal Insurance Company and P&C Insurance Company. As stated in my letter to the individual trustees, “The purpose of this letter is to present my case for damages directly to you and your insurance carriers in an effort to negotiate a fair and reasonable settlement and to avoid a lengthy and costly lawsuit.”
When P&C and KSBE trustees filed suit against me on February, 7, 1997, I immediately tendered defense of the suit to the Federal Insurance Company (Chubb Group), under the terms of KSBE/P&C’s Executive Liability Policy. In a letter dated March 27, 1997, the Federal declined coverage for this litigation, basing their declination on an “Insured vs. Insured” exclusion endorsement to the policy. As I did not discover until a later date, KSBE, M&M and Federal Insurance Company had wrongfully backdated this endorsement nearly eighteen months. In a letter dated April 28, 1997, I reported this unfair claim settlement practice to the California Department of Insurance, with a copy to the Insurance Commissioner, State of Hawaii. On May 24, 1997, I sent a follow-up letter referenced, “Complaint - Unfair Claims Settlement Practices” to Cecelia Chock, Investigator, State of Hawaii Insurance Division, with copies to the California Department of Insurance, Federal Insurance Company, Marsh & McLennan, Inc., P&C Insurance Company, Trustees of KSBE and Pauahi Holdings Corporation.
On April 11, 1997, my attorney, John Marshall, and I met with Plaintiffs’ Attorney, Robert Katz, of Torkildson, Katz, Fonseca, Jaffe, Moore & Hetherington, and Sandie Wicklein, Personnel Director, KSBE, to discuss an out-of-court settlement. A settlement proposal was made by Katz on behalf of KSBE/P&C which I agreed to consider and discuss with my wife before reaching a decision.
It was not until after this meeting, in the course of my review of the case, that I discovered that the exclusion endorsement upon which Federal had based their denial of coverage had been back-dated to be effective prior to my claim. Due to this discovery, and due to the facts that: (1) Federal Insurance Company had denied defense; (2) P&C Insurance Company had not responded to my claim; and (3) John Marshall was withdrawing from the case, I made a counter-offer for settlement to KSBE and P&C on May 8, 1997. This counter-offer was not accepted by KSBE and P&C, so on June 18, 1997, I made another counter-offer which remained open until midnight, June 25, 1997. Katz notified me by phone on June 26, 1997, that trustees had rejected my settlement proposal; however, he indicated that he believed trustees would be willing to settle for the original amount proposed on April 11, 1997.
From the time of my discharge on November 20, 1997 (and even before this date), I was actively seeking other employment. I responded to several help- wanted announcements for Risk Manager in the RIMS newsletter prior to my dismissal, but received no responses. I looked in the help-wanted advertisements in the local newspapers for risk-management openings, but found none.
On January 22, 1997, I filed for unemployment insurance with the State of Hawaii, Department of Labor and Industrial Relations. This claim was denied on March 13, 1997, based on KSBE’s statement that I was discharged for misconduct connected with work. On March 20, 1997, I filed an appeal of this decision. The outcome of this appeal is still pending.
From the date I filed for unemployment insurance, I was not able to find any job openings for risk managers or insurance company executives. Consequently, I applied for five lower level positions in the insurance business. I was hired on April 7, 1997 by American Mutual Underwriters, Ltd. in the position of Marketing Manager. American Mutual Underwriters was my former employer for 17 years. I left this company as a vice-president when I accepted the risk manager position at KSBE over 8 years ago.
b. Identify the persons contacted about work or the companies and businesses where you submitted an employment application.
ANSWER:
Timothy McGrath, Hobbs Group
Pyramid Insurance Center, Ltd
Wayne Arakaki, Island Insurance Company
50th State Insurance
Peter Inouye, American Mutual Underwriters, Ltd.
17. Identify each person who assisted or participated in preparing and/or supplying any of the information given in answer to or relied upon in preparing answers to these Interrogatories.
ANSWER :
No person assisted.
VERIFICATION
STATE OF HAWAII )
) SS
CITY AND COUNTY OF HONOLULU )
BOBBY N. HARMON, being first duly sworn upon oath, deposes and says:
That I am the Defendant in this action and that I have read the foregoing responses, know the contents thereof, and that the same is true to the best of my information and belief.
FURTHER AFFIANT SAYETH NAUGHT.
_________________________
Bobby N. Harmon
Subscribed and sworn to
before me this___________day of
_________________, 1997.
______________________________
Notary Public, State of Hawaii
My Commission Expires: _______________
FOR MORE, JUST SQUEEZE YOUR MOUSE TO GO TO
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A CONNECTICUT YANKEE IN KING KAMEHAMEHA’S COURT
AIG: THE UN-AMERICAN INSURANCE GROUP
CONFESSIONS OF A WHISTLEBLOWER
DIRTY MONEY, DIRTY POLITICS & BISHOP ESTATE
HARMON’S LETTERS TO INSURANCE COMMISSIONERS
HARMON’S LETTER TO KSBE MASTER
HAWAIIAN AIRLINES: FLYING WITH THE BANKRUPTCY BUZZARDS
MARSH & McLENNAN: THE MARSH BIRDS
RON REWALD: FLYING HIGH IN HAWAII
SUKAMTO SIA: THE INDONESIAN CONNECTION
Last Updated June 15, 2007 by The Catbird