Bobby N. Harmon, CPCU, ARM
Louisville, Kentucky 40229-1655
December 17, 2003
VIA Fax only @ (808) 842-8405
Maryanne Inouye, Mgr, Benefits Administration
Kamehameha Schools
1887 Makuakane Street
Honolulu, Hawaii 96817-1887
RE: Kamehameha Schools’ Retirement Plan
Dear Ms. Inouye:
In my last letter to you dated November 25, 2002, I expressed concerns about the safety and integrity of Kamehameha Schools’ Retirement Plan, and had repeated my earlier request for a complete, independent audit of the Plan because of “my concerns about the known misdeeds involving Kamehameha Schools, Prudential, PricewaterhouseCoopers, Arthur Andersen, Goldman Sachs, Marsh & McLennan, Investors’ Equity, Bank of Honolulu, Westport Advisors, McKenzie Methane and numerous other connected companies.”
Several recent news articles regarding mutual fund and retirement plan frauds have prompted this follow-up letter to you. The following are brief excerpts from just a few of these articles:
November 4, 2003
Funds warned Prudential with massive letter campaign
BOSTON, Nov 4 (Reuters) - You have mail. Make that you have lots and lots and lots of mail.
In what may be one of the biggest letter-writing campaigns in financial history, mutual fund companies from Massachusetts to Texas fired off between 25,000 and 30,000 letters to Prudential Securities Inc. last year, Massachusetts officials said on Tuesday.
The letters warned Prudential that its brokers, many working in Boston, were involved in market timing, a practice by which investors try to buy and sell mutual fund shares fast to profit from stale prices.
Market timing is prohibited at many fund companies because it is seen as driving up trading costs and watering down long-term investors' profits.
The letters, if laid end to end, would ring Boston's financial district, the hub of the world's mutual fund industry. Had they been sent in one batch, a single U.S. letter carrier would have hauled nothing but these warnings for 13 straight days. Altogether they would have cost about $9,000 to post.
Trouble is, no one acted on the letters, Massachusetts regulators said on Tuesday when they accused a handful of former Prudential brokers of civil securities fraud.
Prudential Securities is jointly owned by Wachovia Corp (WB) and Prudential Financial (PRU).
Executives at several mutual fund companies said this warning message was important enough to call for a real letter, not e-mail. But when they learned the entire industry had sent so many, it left people stunned.
< END OF QUOTATION >
December 12, 2003
Prudential Securities Fraud Charged
By Brooke A. Masters and Carrie Johnson, Washington Post
Massachusetts securities regulators charged Prudential Securities yesterday with securities fraud for allegedly allowing several of its Boston brokers to place at least 1,212 illegal after-hours mutual fund trades worth $162 million.
Secretary of the Commonwealth William F. Galvin alleged in an administrative complaint that the giant brokerage firm failed to stop the Boston office from helping clients break a law that requires fund purchase and sales orders placed after 4 p.m. to be filled at the next day's price. Such "late trades" allowed the firm's clients to capitalize improperly on news announced after the New York markets closed....
The Massachusetts regulator's solo action suggests that rivalry between state and federal regulators continues to infect efforts to clean up the $7.1 trillion mutual fund industry. Galvin and SEC officials split publicly last month when he roundly criticized the commission's decision to reach a partial settlement with Boston-based Putnam Investments over allegations of predatory trading by firm insiders....
"This is yet another example of Wall Street putting the interests of favored clients ahead of retail investors. It's a dismaying but by now a familiar pattern," Galvin said.
< END OF QUOTATION >
October 29, 2003
Putnam, 2 ex-officers face fraud charges
By Justin Pope, Associated Press
BOSTON - State and federal regulators accused Putnam Investments and two of its former investment officers of fraud yesterday, the first formal allegations of wrongdoing by a mutual fund company in what is becoming a scandal for a once pristine industry.
The filings by the Securities and Exchange Commission and the Massachusetts Securities Division allege that Boston-based Putnam improperly allowed six employees, including four fund managers, to make market-timing trades using funds they oversaw and information not available to the public.
The civil actions against Putnam mark the first time a fund company has been accused of breaking the law, although New York authorities have accused three other individuals and a hedge fund of fund-related wrongdoing.
Several dozen fund companies have been subpoenaed in the investigation. The situation has become a black mark on the $7 trillion mutual fund industry, which had prided itself on steering clear of the corporate scandals of recent years. Yesterday, authorities indicated more fallout is ahead.
The SEC cited Putnam for failing to deter short-term trading and for fraud in connection with the sale of the funds.
"This should send a clear message to everyone in the fund business they should examine their books, because we will be examining them," Massachusetts Secretary of State William Galvin said....
Putnam is also accused of defrauding customers by allowing members of a New York union retirement plan to engage in market-timing of certain funds even though those funds prohibited the practice...
< END OF QUOTATION >
November 1, 2003
More Clients Dump Putnam in Scandal
Company's future potentially on the line over trading issues
By Justin Pope, Associated Press
BOSTON - Pension funds in Pennsylvania, Iowa and Rhode Island fired Putnam Investments yesterday, joining a growing exodus of customers abandoning the embattled fund company.
They joined Massachusetts, New York and Vermont pension officials, as well as some universities, who are taking their business away from Putnam following accusations by regulators that four of its fund managers engaged in personal short-term investing at clients' expense.
In just two days, public pension funds have announced plans to pull at least $4.4 billion out of the company, which lists $272 billion in assets under management. New England Pension Consultants, a firm that advises 190 pension plans with $150 billion in assets, has recommended clients get out of Putnam international stock funds....
Putnam, a unit of Marsh & McLennan, had no immediate comment yesterday on the latest departures of clients....
< END OF QUOTATION >
November 8, 2003
Investors pulling out of Putnam
By Tim Quinson, Bloomberg News Service
(As posted at http://the.honoluluadvertiser.com)
Putnam Investments’ customers pulled an estimated $9.7 billion of funds in less than two weeks after the mutual-fund manager became the first company charged with fraud in the widening investigation of the $7 trillion industry....
(In Hawaii, the state Employees’ Retirement System voted yesterday to fire Putnam, pulling out $440 million.)
“To lose so much money in such a short time is probably unparalleled,” said Burton Greenwald, an industry consultant in Philadelphia, who estimates that the redemptions at Putnam will result in the loss of at least $32 million in annual management fees....
Putnam’s spokeswoman, Sinead Martin, declined to comment. The company is a unit of New York-based Marsh & McLennan.
Charles Haldeman, 55, Putnam’s new chief executive, has been meeting with clients, along with Marsh & McLennan Chairman Jeffrey Greenberg, to try to assuage their concerns. Haldeman’s predecessor, Lawrence Lasser, 61, was ousted earlier this week.
California’s state treasurer, Philip Angelides, recommended on Tuesday that the California Public Employees’ Retirement System and the California State Teachers’ Retirement System terminate contracts with Putnam, which oversees $1.5 billion for the two pensions.
“Putnam has failed to meet the standards that we, as fiduciaries, should expect from a firm handling billions of dollars on behalf of pensioners and taxpayers,” Angelides said in a statement....
< END OF QUOTATION >
In your letter to me dated July 5, 2002, you indicated that my comments relating to an independent audit of Kamehameha Schools’ Retirement Plan would be shared with the Plan Committee for appropriate consideration and action. Due to these new revelations of fraud, I am again requesting that a thorough, independent audit be performed, and that the names of the current and past retirement plan committee members be disclosed.
More information regarding these issues can be found on the internet at the following web address:
www.the-catbird-seat.net/KSBE-Pension.htm
At this time, I would also like to request copies of the full Annual Reports (Form 5500) for the Kamehameha Schools Retirement Plan for the plan years July 1, 2001 to June 30, 2002, and July 1, 2002 to June 30, 2003, if available. If you will let me know the cost for providing these reports, I will send you a check for payment.
Thank you for your prompt response to this matter which is of utmost importance to all Kamehameha Schools Retirement Plan participants.
Very truly yours,
Bobby N. Harmon, CPCU, ARM
cc’s: U.S. Department of Labor (VIA fax only @ 626-229-1098)
Attn: Mr. Billy Beaver
Pension and Welfare Benefits Administration
Los Angeles Regional Office
1055 E. Colorado Blvd., Suite 200
Pasadena, CA 91106-2341
Mark Bennett (VIA fax only @ 808-586-1239)
Attorney General, State of Hawaii
425 Queen Street, Rm 317
Honolulu, HI 96813
Benjamin M. Matsubara, Esq.
Kamehameha Schools Master
Matsubara, Lee & Kotake
888 Mililani St., 8th Floor
Honolulu, HI 96813-2918
J. P. Schmidt, Esq. (VIA fax only @ 808-586-2806)
Insurance Commissioner, State of Hawaii
P.O. Box 3614
Honolulu, HI 96811-3614
Janet S. Hughes, Manager (VIA fax only @ 303-844-3596)
I.R.S. Employee Plans and Exempt Organizations
1244 Speer Boulevard, Suite 442
MC4900DEN
Denver, CO 80204-3583
Securities & Exchange Commission (VIA fax only @ 202-942-9524)
450 Fifth Street, N.W.
Washington, D.C. 20549-0202
Mary Lou Woo, Trustee (VIA fax only @ 808-529-7177)
c/o Mr. Steven Guttman, Esq.
Kessner Duca Umebayashi Bain & Matsunaga
220 South King Street, 19th Floor
Honolulu, HI 96813
Susan Tius, Esq. (VIA fax only @ 808-521-0400)
Rush Moore Craven Sutton Morrey & Beh
Hawaii Tower, 20TH Floor
745 Fort Street
Honolulu, HI 96813
Ray Blanchard, Operations Mgr., AUR (VIA fax only @ 801-620-4249)
Department of the Treasury
Internal Revenue Service
Ogden, UT 84201
William Francis Galvin
Secretary of the Commonwealth of Massachusetts
State House, Room 337
Boston, MA 02133
Ms. Julie A. Schermerhorn, Supervisor, and
(VIA fax only @ 559-490-1919) Mr. Justin W. Schuck, Case Manager
American Arbitration Association
6795 North Palm Avenue
Fresno, CA 93704
# # #
THIS IS A LEAF FROM >>> KSBE PENSION PLAN
TO GO THE TO TOP OF THE TREE >>> THE CATBIRD SEAT