"The revenue from 337,000 acres of Hawaii land -- and investments that
include 10 percent of the Wall Street firm Goldman Sachs & Co. -- is used
'solely' to finance one elite campus for Hawaiian students. But it also pays
more than $840,000 a year in commissions to EACH of six politically powerful
trustees ..."
Rich Hawaii Trust Mired in Scandal
By BRUCE DUNFORD
.c The Associated Press
HONOLULU (AP) -- What would Princess Bernice Pauahi Bishop think?
She left an estate now estimated at $10 billion, one of the world's richest
trusts. Its sole purpose: to educate children of native Hawaiian ancestry.
But for the past two years, the trustees of the Bishop estate have been
embroiled in a public tangle of boardroom intrigue, questionable investments,
IRS audits and allegations of criminal acts.
It all tumbled into a tawdry mix of sex and suicide in early March when an
estate attorney killed herself after being caught in a tryst with a trustee in
a hotel men's room. The trustee then attempted suicide.
On Monday, Attorney General Margery Bronster intends to ask a judge to remove
at least four of the five once untouchable trustees from their posts, alleging
they withheld $350 million from the schools.
The board of trustees is dysfunctional ``and it's not servicing the
beneficiaries and it cannot in this atmosphere,'' said Gov. Ben Cayetano.
``I cannot see how the court would ignore the present situation,'' Cayetano
said. ``It's an unworkable situation.''
Bishop Estate, Hawaii's largest private landowner, was created in 1884 by the
will of the princess, a descendant of King Kamehameha, the man who unified the
islands in the late 18th century.
The revenue from 337,000 acres of Hawaii land -- and worldwide investments
that include 10 percent of the Wall Street firm Goldman Sachs & Co. -- is used
solely to finance Kamehameha Schools, a 600-acre campus for 3,100 Hawaiian
students that sits on a wooded hillside overlooking downtown Honolulu.
It also pays more than $840,000 a year in commissions to each of the estate's
politically powerful Hawaiian trustees -- Gerard Jervis, 50; Henry Peters, 58;
Richard ``Dickie'' Wong, 65; Oswald Stender, 67; and Lokelani Lindsey, 60.
The estate became the center of public melodrama in 1997 when the school
community learned of a private confrontation between Lindsey, the lead trustee
for education, and student body president Kamani Kuala`au, who was bound for
Princeton.
Kuala'au said Lindsey lectured him for 2 1/2 hours because he supported school
president Michael Chun, who was feuding with Lindsey.
``How would you feel if I wrote a letter to Princeton and told them that
you're a rabble-rouser?'' he said Lindsey told him.
About 1,000 demonstrators associated with Kamehameha took to the streets,
demanding that Lindsey quit meddling.
Five prominent community leaders then wrote an August 1997 essay in the
Honolulu Star-Bulletin. They alleged mismanagement of trust assets, conflicts
of interests by individual trustees and poor selection of trustees, who are
named by members of the Hawaii Supreme Court.
Bronster, ordered to investigate by the governor, accused the trustees of
using trust assets to create an economic empire, engaging in kickback schemes,
awarding improper contracts, making sweetheart deals for relatives and friends
and using improper business practices, ``all of which have hurt the trust.''
That investigation led to Peters' indictment in November for allegedly
receiving a $192,500 kickback in an estate land deal involving Wong's brother-
in-law. Wong is being investigated in the same scheme.
Bronster's investigation also revealed the IRS had been reviewing trust
operations, including trustee compensation and the schools' racial exclusivity
policy, for at least three years. After preliminary findings were delivered in
January, a judge declared the trustees in conflict of interest and named a
separate panel to negotiate with the IRS.
An internal dispute became public when Stender and Jervis sued to oust Lindsey
for allegedly mismanaging Kamehameha Schools and intimidating teachers and
students. A judge's verdict on the lawsuit is pending.
And last year, a court-appointed special master said the estate lost $242
million during three fiscal years ending in 1996 and could have done better by
opening a standard savings account.
Then, on March 3, Jervis and estate lawyer Rene Ojiri Kitaoka, 39, were caught
having sex in a men's restroom at the Hawaii Prince Hotel. Kitaoka was chief
legal counsel for estate subsidiary Kamehameha Investment Corp. Jervis, as a
trustee, is chairman of the corporation.
The next day, Kitaoka died of carbon monoxide poisoning in the garage of her
home.
A week later, Jervis swallowed an overdose of sleeping pills. He was released
from a hospital March 22 and promptly apologized for ``the mistakes I have
made.''
``I do not know what the future may bring,'' Jervis said. ``But I have always
believed that I should be held accountable for all the good and bad that I
do.''
