Confessions of a


Sightings from The Catbird Seat

~ o ~

August 21, 2006



Attorneys at Law
A Law Corporation

220 South King Street, 19th Floor
Honolulu, Hawaii 96813


United States District Court

For the District of Hawaii


vs. “EVERYMAN” (obvious alias), Defendant

– – – – –

JUDGE: The Honorable David Alan Ezra


… Judgment is hereby entered under which Defendant “EVERYMAN” shall within ten (10 days) from the date of entry of this Final Judgment permanently and forever remove and/or delete from any web-site owned, managed or operated by Defendant “EVERYMAN” all offensive materials which contains any reference to “Protected Subject Matters”, as that term is described and defined in the Arbitration Award dated October 6, 2004. Defendant “EVERYMAN” is also ordered to provide the Court with written confirmation, a copy of which shall be served on Plaintiff, that all offensive materials have been removed and/or deleted from any web-site owned, managed or operated by Defendant “EVERYMAN”.

“Post-judgment interest runs on the total Judgment amount of FOUR HUNDRED TWENTY-TWO THOUSAND NINE HUNDRED SEVENTY DOLLARS AND 54/100 ($422,970.54) at the legal rate of ten percent (10%) per annum on the unpaid principal balance, or $115.88 per day, from the date of entry of this judgment until the judgment is fully satisfied….”


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The website that was found to contain such outrageously “offensive materials” to warrant such drastic punishment is THIS WEBSITE:

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This catbird-blogger invites YOU to visit this site and to JUDGE FOR YOURSELF as to whether or not YOU think these materials are “offensive” and should be forever removed and banned from the World Wide Web.

Better hurry, though, before the POWERS THAT BE silence this whistleblower-blogger forever!


The Catbird



P.O. Box 38
Honolulu, HI 96810

November 20, 1996

Mr. Cary M. Okawa, C.P.A.
Coopers & Lybrand L.L.P.
2500 Pacific Tower
1001 Bishop Street
Honolulu, Hawaii 96813-3668

SUBJECT:      P&C Insurance Company, Inc. – Annual Financial Report

Dear Mr. Okawa:

This is to provide further information regarding issues discussed in my meeting with you and Mr. Dennis Tsuhako in my office on October 18, 1996, regarding P&C Insurance Company’s (P&C) annual financial report.

As you will recall, we discussed my concerns with respect to “arms-length” issues between Kamehameha Schools Bishop Estate (KSBE) and P&C, as they related to what I believed were efforts to direct and control the operations of P&C by my superior, Nathan Aipa, Esq., by Louanne Kam, Esq. and by Henry H. Peters, who is a Trustee of Bishop Estate, as well as Chairman of the Board of Directors for P&C.

As examples, we discussed the blocking of my efforts to have P&C write the blanket property insurance program with reinsurance provided through the Hobbs Group, rather than by Marsh & McLennan, Inc. Also, I commented on what I considered to be excessive fees being charged by Marsh & McLennan, Inc. (MMI), and their failure to provide a satisfactory explanation for the services included in their flat fee of $200,000.

Finally, I related to you and Mr. Tsuhako my concerns regarding attempts being made by individuals at KSBE to direct and control the settlement of P&C’s claims. In addition to the example we discussed, I have recently received a copy of the attached memo from Rocco Sansone dated 11/7/96, regarding a proposed “Consent to Settle (P&C Insurance)” endorsement.

This memo addressed to Louanne Kam, Kamehameha Schools Bishop Estate, states: “The following proposed endorsement is submitted per our discussions and negotiations with Am-Re. This endorsement provides KSBE with the option of controlling the settlement process subject to the indicated agreements. Based on our discussions, we recommend KSBE accept the proposed wording. Please advise if there are any questions and with your approval to add the endorsement.”

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. P&C and KSBE would also be exposed to uninsured and unlimited payments of claims due to the condition, “If, however, the Insured shall refuse to consent to any settlement recommended by the Company and acceptable to the claimant and shall elect to contest or continue any proceedings in connection with such claim, the Company’s liability for the claim shall not exceed the amount for which the claim could have been settled plus expenses up to the date of such refusal.”

This recommendation by MMI is, in my opinion, highly unusual and one which could result in significant financial loss to P&C and KSBE. The enclosed documents (some written before our meeting and others afterwards) will provide further examples of what I consider to be improper and deceptive business practices by Marsh & McLennan, Inc. and M&M Insurance Management Services, Inc.

It is due to the fact that these issues have not been resolved, that I am declining to sign my concurrence to P&C’s Annual Financial Report for the fiscal year 1995-96.

Thank you very much for your understanding and concern.

Very truly yours,




cc: Insurance Commissioner, State of Hawaii (w/encls)


May 17, 1999

Federal Bureau of Investigation
Prince Kuhio Federal Building, Rm. 4307
300 Ala Moana Blvd.
Honolulu, Hawaii 96850

Re:      Racketeer Influenced & Corrupt Organizations Act (RICO) Lawsuit:
Civil No. CV 99 00304 – U. S. District Court for the District of Hawaii – [Name Redacted] vs. Federal Insurance Company; P&C Insurance Company; Marsh & McLennan Companies; PriceWaterhouse, Coopers & Lybrand; Trustees of Bishop Estate; Nathan Aipa, et al.


On September 19, 1998, I wrote to your office requesting that an investigation be made into apparent racketeering activities of Federal Insurance Company, the trustees of the Bishop Estate, et al. The purpose of this letter is to inform you that on April 27, 1999, I filed a civil lawsuit against a number of these entities.

A copy of this lawsuit is being provided to you in hopes that this information will assist you in any criminal investigations that your office may be conducting with respect to alleged racketeering activities involving these organizations.

Please feel free to contact me at the address shown above if I can be of any further assistance in this matter.

Very truly yours,



cc:       Internal Revenue Service

Office of the Attorney General, State of Hawaii

Colbert Matsumoto, Esq., Master, KSBE



March 17, 2005

VIA fax @ 808-586-2806

and e-mail:

J.P. Schmidt, Esq.
Hawaii Insurance Commissioner
335 Merchant Street, 2nd Floor, Rm 213
Honolulu, Hawaii 96813

Re:      Complaint Against: Ace Ltd.; Marsh & McLennan; Chubb Group; XL Insurance
Their Insured:Kamehameha Schools; P&C Insurance Co., et al.

Dear Commissioner Schmidt:

Due to new information regarding Ace Ltd. and the other companies listed above, this is to file an amended complaint against these companies for fraud, racketeering, bid-rigging, price fixing, unfair competition, and unfair claims settlement practices. I quote some of the latest information from a Forbes article dated March 16, 2005:

Ace Ltd. Slammed by 43 Subpoenas


Ace Ltd., the property and casualty insurer recently implicated in a probe of insurance industry practices, on Wednesday said it received 43 subpoenas and legal inquiries regarding its involvement in bid rigging and price fixing.

The Bermuda-based company said in a filing with the Securities and Exchange Commission it received subpoenas and other inquiries from 9 state attorneys general and one from Washington, D.C. Further, insurance commissioners and other regulators from 10 states also launched some form of legal action.

In addition, Ace said the SEC and New York Attorney General Eliot Spitzer have issued subpoenas for information relating to “non-traditional or loss mitigating insurance products.” The insurer said it will continue to cooperate with such requests, and is also conducting its own internal investigation.

Ace was one of four insurers implicated, but not formally charged, in an investigation of brokerage Marsh & McLennan Co. launched in October by Spitzer. Spitzer filed a lawsuit against the nation’s largest insurance broker accusing it of bid rigging, price fixing, and demanding incentive fees from insurance companies in exchange for sending more business their way….

Ace said Chief Executive Evan Greenberg received a $1 million salary in 2004, with a $2.7 million bonus. He is scheduled to get a raise of $25,000 this year, according to the SEC filing.

Greenberg is the son of Maurice Greenberg, who stepped down this week as CEO of American International Group Inc. Greenberg’s older brother, Jeffrey, was CEO of Marsh & McLennan before being ousted in the wake of Spitzer’s investigation. The insurer said it has received legal inquiries from attorneys general in Connecticut, Florida, Massachusetts, Minnesota, New York, Ohio, Pennsylvania, Texas and West Virginia.

Insurance commissioners and other regulators from California, Florida, Illinois, Maryland, Michigan, Minnesota, New York, North Carolina, Pennsylvania and Texas have also contacted Ace.


You will, no doubt, recall that in 1992, Hawaiian Insurance & Guaranty Co. was declared insolvent largely due to Hurricane Iniki losses, and that the company was later sold to Vesta Insurance Group. In 1998, Vesta was involved in a financial scandal which was reported by the Honolulu Star-Bulletin on June 2, 1998, as follows:

Hawaii insurer’s parent pounded on Wall St.

Vesta Group, which owns Hawaiian Insurance & Guaranty,
reports ‘accounting irregularities’

NEW YORK — Vesta Insurance Group Inc, which owns a major Hawaii insurer, saw it shares plunge 47 percent today, a day after the parent company said “possible accounting irregularities” will force it to restate earnings for the last two quarters.

Vesta’s president and chief executive officer, Robert Y. Huffman, also has resigned.

However, the company’s Hawaii operation, Hawaiian Insurance & Guaranty Co., said it has not been affected by the changes at the Birmingham, Ala.-based parent.

“I expect no impact whatsoever on HIG’s operations,” said Pete Grimes, HIG general manager. HIG had been declared insolvent in 1992 after Hurricane Iniki losses. It was later rehabilitated by the state insurance division and was sold to Vesta in 1995 for $35 million….

* * *

To show you the connection between these entities and Kamehameha Schools, their for-profit captive, P&C Insurance Co., Ltd., and Chubb Group, I quote the following from Vesta Insurance Group’s Form 8-K, dated July 18, 2001:

On July 10, 2001, Vesta Fire Insurance Corporation, an Illinois corporation (“Vesta Fire”) and a wholly owned subsidiary of Vesta Insurance Group, Inc. completed its acquisition of 100% of the outstanding shares of capital stock of Florida Select Insurance Holdings, Inc. for approximately $64.5 million in cash. Vesta Fire acquired the stock of FSIH from FSIH’s four stockholders – Centre Solutions (Bermuda) Limited, Mynd Corporation, Orienta Point Group, L.L.C., and Kamehameha Schools Bernice Pauahi Bishop Estate….

* * *

Vesta Insurance Group, Inc.
Notes to Consolidated Financial Statements

Securities Litigation

Subsequent to the filing of our quarterly report on Form 10-Q for the period ended March 31, 1998 with the U.S. Securities and Exchange Commission (“SEC” or “Commission”), we commenced an internal investigation to determine the exact scope and amount of certain reductions of reserves and overstatement of premium income in our reinsurance assumed business that had been recorded in the fourth quarter of 1997 and the first quarter of 1998. This investigation concluded that inappropriate amounts had, in fact, been recorded and we determined that we should restate our previously issued 1997 financial statements and first quarter 1998 Form 10-Q….

We restated our previously issued financial statements for 1995, 1996, and 1997 and our first quarter 1998 Form 10-Q for the above items by issuance of a current report on Form 8-K dated August 19, 1998. These restatements resulted in a cumulative decrease to stockholders’ equity of approximately $75.2 million through March 31, 1998. Commencing in June 1998, we and several of our current and former officers and directors were named as defendants in several purported class action lawsuits filed in the United States District Court for the Northern District of Alabama. Several of our officers and directors also have been named in a derivative action lawsuit in the Circuit Court of Jefferson County, Alabama, in which Vesta is a nominal defendant. In addition, we received various inquiries and requests for information from various state departments of insurance and other regulatory authorities, including a subpoena issued to Vesta on August 24, 1998 by the 34 Commission as part of a formal, non-public order of investigation….

We have several layers of directors’ and officers’ liability insurance coverage (“D&O insurance”), the terms of which may cover all or a portion of the damages or settlement costs of the class action. These policies provide up to $100 million in D&O insurance to cover damages or settlement costs and an additional policy provides another layer of $10 million D&O insurance to cover any damages awarded by a court in these actions. Cincinnati Insurance Company (“Cincinnati”) issued the primary policy that provides the first $25 million of D&O insurance.

Federal Insurance Company (The Chubb Group) issued an excess D&O insurance policy which provides coverage for the second $25 million in losses, if necessary. The balance of the coverage is provided by a group of insurers and was purchased after the class actions comprising the consolidated class action were filed….

In September 1998, after these actions were filed, Cincinnati, which provides the primary insurance policy, filed a lawsuit in the United States District Court for the Northern District of Alabama seeking to rescind the policy and avoid the coverage….

A dispute has also arisen with CIGNA Property and Casualty Insurance Company (“CIGNA”) (now ACE USA) under a personal lines insurance quota share reinsurance agreement, whereby we assumed certain risks from CIGNA. During September 2000, CIGNA filed for arbitration under the reinsurance agreement, seeking payment of the balances that CIGNA claims are due under the terms of the treaty. In addition, during the fourth quarter, the treaty was terminated on a cut-off basis. Vesta is seeking recoupment of all improper claims payments and excessive expense allocations and charges from CIGNA. This arbitration is in its early stages and the ultimate outcome cannot be determined at this time….


In previous complaints to your office, and in my RICO lawsuit, I have already detailed many of my allegations against Marsh & McLennan, Inc. and Federal Insurance Company. However, since this news related to Ace Ltd. has just been released, and as Ace Ltd. was one of the insurance carriers used by Marsh & McLennan for the insurance programs of Kamehameha Schools and P&C, I am now requesting that you add Ace Ltd. to the list of companies which I have submitted for your investigation.

More information regarding these matters can be found at the following Internet addresses:

Due to these recent revelations, I would also strongly encourage your office to join with the Insurance Commissioners of the other states named in the above article, to pursue recovery of overcharges and other damages from these insurance companies and their agents and brokers, for the benefit of Hawaii’s taxpayers and consumers.

Please feel free to contact me if you have any questions or if I can provide any other information which may be helpful in your investigation of this complaint. Thank you very much for your consideration in this extremely serious matter.

Very truly yours,


< Name Withheld >, CPCU, ARM

cc:       Fraud Branch, Insurance Division, Dept of Consumer Affairs

(via e-mail:

Captive Insurance Branch, Insurance Division, Dept of Consumer Affairs

(via e-mail:

National Association of Insurance Commissioners

(via e-mail:

Michael G. Cherkasky, President and Chief Executive Officer

Marsh & McLennan Companies, Inc. (via fax @ 212-345-4838)

John D. Finnegan, President and Chief Executive Officer

The Chubb Corporation (via fax @ 908-903-2027 and

William K. Slate II, President/CEO, American Arbitration Association

(via fax @ 212-716-5905 and

Mark Appel, Senior Vice President, International Centre for Dispute Resolution

(via e-mail:

Harry Kaminsky, Vice President, Neutrals’ Services, Phoenix, AZ

(via e-mail:

James B. Farris, Senior Case Manager, American Arbitration Association

(via fax @ 559-490-1919 and e-mail:

Mary Lou Woo, c/o Steven Guttman, Kessner Duca Umebayashi, et al.

(via fax @ 808-529-7177 and e-mail:

           Mark Bennett, Attorney General, State of Hawaii 

(via fax @ 808- 586-1239 and e-mail: )

Dee Jay Mailer, CEO, Kamehameha Schools (via fax @ 808-523-6313)

Board of Directors, P&C Insurance Co., Inc. (via fax @ 808-523-6313)

Matt A. Tsukazaki, Esq., Torkildson Katz Fonseca Jaffe Moore & Hetherington

(via fax @ 808-523-6001 and e-mail:

Governor Linda Lingle, State of Hawaii (via fax @ 808-586-0006)

Hugh Jones, Deputy Attorney General (via fax @ 808-586-1477)

Janet Hughes, Internal Revenue Service (via fax @ 303-844-3596)

Billy Beaver, Pension & Welfare Benefit Admin. (via fax @ 626-229-1098)

Ralph F. Boyd, Jr., U.S. Dept. of Justice (via fax @ 202-514-1116)

Lyn Flanigan Anzai, Hawaii State Bar Association (via e-mail:

Susan Tius, Esq., c/o Rush Moore Craven Sutton Morry & Beh

(via fax @ 808-521-0597)

Gerard Jervis, Lokelani Lindsey, Henry Peters, Oswald Stender, and Richard Wong, c/o Kenneth Hipp, Esq., Marr Hipp Jones & Pepper

(via fax @ 808-536-6700)

Jeffrey H.K. Sia, Esq., Ayabe Chong Nishimoto Sia & Nakamura

(via fax @ 808-526-3491)

           Robert S. Tameler, ALPS, Claims Admin for Bradley Tamm and Greg Dunn
(via fax @ 406-728-7416)

           Mike Coulter, Deputy Managing Director, Aon Insurance Managers
(via fax @ 808-540-4301 and e-mail:

           Casimer Fidele, Tradewind Insurance Company
(via fax @ 808-521-7489)

           Colbert Matsumoto, CEO, Island Insurance Co.
(via fax @ 808-564-8456)

Roy F. Hughes, Esq. (via e-mail:

           PricewaterhouseCoopers, c/o Warren Price III, Esq.
(via fax @ 808-533-0549)

Terry Mullen, CEO/Pres., John Mullen & Co. (via fax @ 808-531-0053)

National Association of Consumer Advocates (

(via e-mail:

Public Citizen (via e-mail through website:

U.S. Public Interest Research Group (

(via e-mail:

First Amendment Center (

(via e-mail:

Trial Lawyers for Public Justice, National Headquarters (

(via fax @ 202-232-7203)

Consumer Action (via e-mail through their website:

Consumers Union, DC Office (

(via fax @ 202-265-9548)

Honolulu Community-Media Council (via e-mail:

Mark Burch, University of Hawaii (via e-mail:

CPCU Society (

(via e-mail:

Hawaii Chapter, CPCU (

(Joseph Hu, CPCU, President:

(Jeff Bronaugh, CPCU, President Elect:

(Wayne Hikida, CPCU, V.P.: fax: 808-564-8456)

(Ann Donohue, CPCU, Sec.:

(Janet Ng, CPCU, Treas.: fax: 808-540-4301)

(Marian Brown, CPCU, Past Pres.:

(Gloria Sumitani, CPCU, Past Pres.:

(Bruce McEwan, CPCU, Education Chairperson:

(Greg Tsuda, CPCU, Membership Chairperson:

Risk and Insurance Management Society, Inc.

(via e-mail through their website:

Risk and Insurance Management Society, Inc., Hawaii Chapter

(Nahua Maunakea, ARM, President: via fax @ 808-921-6505)

(Bruce McEwan, ARM, CPCU, Director: via fax @ 808-543-9458)

(Denice Goto, CPA, RIMS Delegate: via fax @ 808-836-4795)

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Recommended Books

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< < < FLASHBACK < < <

August 21, 1997

Keeping lawsuits mum
exposes estate, says
former Bishop official

The trust is vulnerable to millions
in damage claims and legal fees

By Bruce Dunford, Associated Press

The $10 billion Bishop Estate trust that supports Kamehameha Schools is exposed to hundreds of millions of dollars in damage claims and millions of dollars in legal fees because trustees wanted to keep a lid on embarrassing lawsuits, according to a former executive of the trust.

Failure to disclose details of these lawsuits to insurance companies jeopardized insurance coverage of damage judgments or settlements as well as legal fees in defending against them, said Bobby Harmon, who headed the estate’s insurance program until last year.

Harmon, who was fired last November as president of the estate’s for-profit captive insurance subsidiary, P&C Insurance Co. Inc., has been talking to state attorneys investigating allegations of irregularities in the management of Bishop Estate by its five trustees.

Gov. Ben Cayetano ordered the probe.

The Bishop Estate won’t respond to Harmon’s specific allegations but is prepared to challenge them in court, said estate spokeswoman Elisa Yadao.

The estate’s 1989 $85 million investment in McKenzie Methane Inc., a Houston-based energy venture in which several trustees and estate executives piggybacked another $3 million of personal investment, resulted in a $2.3 billion lawsuit brought in Texas in 1993 against the trustees, the Bishop Estate and other investors.

The venture went into bankruptcy, whittling Bishop Estate’s investment down to some $20 million, according to attorneys in Texas.

The estate, its involved subsidiaries, the trustees and estate officers were entitled to legal defense under United Educators Insurance Co., which carries the estate’s legal liability policy, Harmon said.

Despite repeated efforts of the insurance company’s claims manager to get details on the lawsuit from Bishop Estate’s top attorney, Nathan Aipa, no information was provided and the company closed its files, not paying some $500,000 in legal fees that would have been covered, Harmon said.

It could also foreclose the insurance company paying for a settlement or judgment, he said.

Another $500,000 was spent defending against a $86.7 million lawsuit brought in 1995 by movie producer Fredrick Field stemming from his partnership with Bishop Estate in investments dating to 1984, Harmon said.

Actor Wayne Rogers, an investment partner with Bishop Estate and several trustees in Kona Enterprises, filed a lawsuit in North Carolina in 1993 that was not reported to United Educators, which therefore paid no defense costs, Harmon said.

Although a subsequent lawsuit filed in Utah was reported to the insurance company, the company disallowed many of the legal fees due to noncompliance with the policy terms, he said.

U.S. District Judge David Ezra dismissed Rogers’ lawsuit last year, but his ruling was reversed on appeal, and the case remains pending.

Total costs of defending Rogers’ lawsuit could have been limited to Bishop Estate’s $250,000 self-insured retention, Harmon said.

While the total costs of the defense covered by insurance are not yet known, one Honolulu firm, Cades Shutte Fleming & Wright, had billed the estate more than $750,000 as of September of last year, he said.

A lawsuit was brought in March of 1996 by members of the exclusive Robert Trent Jones Golf Club near Washington, D.C., in which Bishop Estate was a development partner and guarantor on a $40 million loan.

Bishop Estate trustee Henry Peters became a director and trustee of the golf club and negotiated the sale of the golf course and adjacent residential property to club members, according to the lawsuit, which has since been settled.

The lawsuit says those buying memberships were not informed that the club was stuck with the $33 million development loan from Bishop Estate.

Harmon said he doesn’t know who paid for the legal defense fees in that case or how much they totaled.

Yadao said Harmon was fired last year for work-associated misconduct and therefore was denied unemployment compensation….

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For more, GO TO > > > Broken Trust: The Book


August 20, 1997

Fired exec

State attorneys interview ex-worker
who alleges irregularities

Honolulu Star-Bulletin

By Bruce Dunford, Associated Press

A Bishop Estate official who says he was fired last year for raising questions about irregular and possible illegal activities has been interviewed by state attorneys ordered by the governor to investigate the estate.

Bobby Harmon served for eight years as head of the estate’s insurance programs and ultimately served as president of P&C Insurance Co., a for-profit subsidiary of the $10 billion charitable trust that supports Kamehameha Schools. 

He said he questioned:

           >         An annual payment the estate made without accounting for why it was made;

           >         His salary for the profit-making organization being paid by the nonprofit trust in apparent violation of IRS rules;

           >         The company’s legal work being parceled to certain lawyers.

Harmon met for 1-1/2 hours yesterday with Senior Deputy Attorney General Lawrence Goya and the attorney general’s auditor, he said.

They expressed interest in obtaining a 50-page document he prepared detailing questionable and possibly illegal activities by Bishop Estate’s trustees and top executives, Harmon said.

Bishop Estate, however, earlier obtained a Circuit Court injunction against the release of the document, claiming it contains confidential and proprietary information that should not be made public.

Harmon has also offered to share his papers with retired Circuit Judge Patrick Yim, who is also conducting an investigation into the management of Bishop Estate and Kamehameha Schools at the request of the probate court.

Harmon said he was fired in November after he refused to sign off on a required financial report involving the estate’s contract with Marsh & McLennan Inc. as the estate’s insurance broker.

He said he was worried about a $200,000 annual flat fee superiors wanted him to pay to MMI because there was no accounting why it was being paid, Harmon said.

Harmon said he felt if he “looked the other way” as encouraged by his superiors, “I would be breaching my fiduciary duties to the organization.”

Harmon also questioned why his salary was from the nonprofit trust when almost all his time was spent working for the for-profit P&C captive insurance company.

This appears to violate IRS rules against using tax-exempt trust funds to subsidize a profit-making company, he said.

It appeared that Bishop Estate attorney Nathan Aipa, Harmon’s direct supervisor, and trustee Henry Peters wanted to maintain tight control over all insurance matters, including parceling out related legal work to selected attorneys, he said.

Estate spokeswoman Elisa Yadao has declined to comment on Harmon’s allegations, but said they will be challenged in court….

The use of trust funds to support Bishop Estate’s various taxable subsidiaries was common, yet not reported on IRS forms as required, Harmon said.

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For more, GO TO > > > Broken Trust: The Book


August 26,1997

Estate Tries To Muzzle Fired Exec

It seeks contempt-of-court charges
against Bobby Harmon

By Jim Witty, Star-Bulletin

Bishop Estate is seeking to silence Bobby Harmon again.

The trust has filed an emergency motion in Circuit Court seeking contempt of court charges against the fired Bishop Estate executive for allegedly violating a previous injunction that blocked him from disclosing “confidential” information about his former employer.

Matt Tsukazaki, attorney for the $10 billion charitable trust, asked for a closed hearing “to protect the confidentiality of the information that may be discussed.”

This morning, Circuit Court Judge Bambi Weil continued the matter to Sept. 26; Bishop Estate attorneys are scheduled to conduct a deposition with Harmon Sept. 12.

“We’re not dealing with the formula of Coca Cola,” quipped Harmon’s attorney, Roy Hughes. “We’re dealing with business documents.”

John Goemans, who is representing Harmon in his $1.8 million wrongful-termination suit against Bishop Estate, told Weil: “Anything that Harmon has said has been either a matter of opinion or in aid of law enforcement.”

Bishop Estate attorneys contend that Harmon released a confidential and proprietary document that contained “false and defamatory allegations” and disclosed facts concerning his employment with Bishop Estate to “outside third parties.”

Harmon, who was fired last year after serving eight years as president and chief executive officer of Bishop Estate subsidiary P&C Insurance Co., has said his questions about irregular and possibly illegal activities led to his ouster. The Attorney General has interviewed Harmon as part of its investigation into the estate’s dealings.

“Here’s a guy who brought to the attention of his company things that were of benefit to the company,” Goemans said. “Instead of being rewarded for his diligence, the whole machinery of the estate came down on him like a ton of bricks, ending his career, to which he’d reached the pinnacle.”

Harmon said he questioned an annual payment the estate made without accounting for why it was made, his salary as chief of the for-profit insurance subsidiary being paid by the nonprofit trust in apparent violation of IRS regulations, and the parceling out of legal work to selected lawyers.

Harmon is out of state and did not attend today’s hearing.

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For more, GO TO > > > Broken Trust: The Book


August 27, 1997


The estate’s confidentiality provision isn’t meant
to protect the trustees, he says

By Mike Yuen and Jim Witty, Star-Bulletin

Gov. Ben Cayetano says the Bishop Estate cannot use confidentiality agreements to bar employees from cooperating with the state’s investigation into whether trustees breached their fiduciary responsibilities.

Cayetano’s remarks yesterday came an hour after a hearing in Circuit Court on the estate’s emergency motion for a contempt finding against a fired executive for allegedly violating an injunction that prevented him from revealing “confidential” information about his former employer.

The hearing was recessed to Sept. 26.

Bobby Harmon, who was fired last year after working eight years as president and chief executive officer of the estate’s for-profit subsidiary, P&C Insurance Co., was questioned last week by state attorneys.

They talked with Harmon after Cayetano ordered Attorney General Margery Bronster to begin an investigation into the $10 billion charitable trust, the largest private landowner in Hawaii.

Estate attorneys are also alleging that Harmon talked with reporters, leaking sensitive information.

“The confidentiality provision, in my view as an attorney,” said Cayetano, “will not hold any weight or water if the information that’s coming out is used to demonstrate or prove that there has been in fact a breach of fiduciary duty. You cannot hide information. The confidentiality provision should stand only if it is in fact protecting the trust and the beneficiaries – and not the trustees.”

Moreover, the law giving the attorney general subpoena powers outweighs any confidentiality provision an employer may have with employees, Cayetano added.

“I think if it should then happen that people bring a civil action against this employee for damages for breach of contract, the defense is he was required to do so by law,” Cayetano said.

Several hours after Cayetano spoke with reporters, Harmon’s attorney, John Goemans, filed a writ with the state Supreme Court, challenging Circuit Judge Bambi Weil’s jurisdiction to enforce the injunction against his client.

The injunction, Goemans claims, “denies Harmon’s established First Amendment right to express his opinion as to the corruption and criminality of the officers and directors of the Bishop Estate in matters of public concern and in aid of law enforcement by the attorney general of the state of Hawaii and others.”

Bishop Estate spokeswoman Elisa Yadao said the estate intends to cooperate with the attorney general’s investigation, but insisted that the inquiry should not be tied to Harmon’s case.

“It is not appropriate to discuss that case. That’s separate from the attorney general’s inquiry,” Yadao said. “He is under injunction from the court because of his unauthorized removal of estate property.”

Yadao expressed surprise that state investigators have not yet contacted estate officials, given that two weeks have passed since Cayetano announced Bronster’s inquiry.

As a result, estate attorney Nathan Aipa has called Bronster’s office, asking how to proceed, said Yadao.

Asked if estate employees and staff at its educational arm, Kamehameha Schools, will be allowed to talk to state investigators without being held to the confidentiality provision, Yadao declined to answer the question directly.

She would only say: “We have a long history of working with court-appointed masters. We’ve always cooperated fully with the masters. We have a good working relationship with the current master, who has spoken with current employees.”

Bronster has said she won’t talk to estate trustees or attorneys until she fully sorts out the allegations.

The Kamehameha Schools/Bishop Estate employee handbook, a copy of which was obtained by the Star-Bulletin, tells employees they must “keep institutional information confidential unless there are good reasons and authorization for its release.”

They are also told the release of information pertaining to the estate and the schools is handled through the trust’s public relations department, which must also clear any speeches or interviews “which might contain sensitive and/or confidential information.”

The employee handbook itself is labeled “CONFIDENTIAL.”

Cayetano said that during a talk with Bronster on Monday, there was concern expressed over “the resources” needed for the investigation, given the state’s tight fiscal situation.

“What we talked about was using some personnel from the state’s Tax Department, for example. Certainly in her investigation she will need to have people with accounting and auditing backgrounds,” Cayetano said.

“My inclination,” Cayetano said, “is to make the (preliminary) report public, because I think it will become public anyway if we do go to court.”

Cayetano stressed that Bronster is focusing on what might appear to be clear violations of fiduciary duties.

Trustees have said the preliminary report should not be released until they can meet with Bronster to respond to allegations.

Cayetano added that while Bronster can subpoena Bishop Estate trustees and even state Supreme Court justices, who appoint the trustees, he believes they will come forward voluntarily.

~ ~ ~

For more, GO TO > > > Broken Trust: The Book


September 26, 1997

Former Bishop exec admits contempt

Honolulu Star-Bulletin

The attorney for Bobby Harmon acknowledged to a Circuit Court judge that the fired executive for Kamehameha Schools Bishop Estate violated a court order by talking to others about possible improprieties at the estate.

Harmon attorney Roy Hughes, under questioning from Circuit Judge Bambi Weil, admitted Friday that Harmon was in contempt of court in two instances – for meeting with another former KSBE official and for writing a letter to an accounting firm hired by the estate.

Hughes said, however, that Bishop Estate attorneys had not shown any harm done to the $10 billion trust and argued that the motion barring Harmon from revealing information be lifted.

KSBE attorneys succeeded, at least for the time being, in keeping the gag on Harmon, who was fired last year after eight years as president and chief executive officer of Bishop Estate subsidiary P&C Insurance Co.

Weil said she needs more time to review documents and continued arguments until Oct. 10.

But she did admonish Harmon for releasing documents without seeking court clearance and ordered him not to do it again – under risk of losing his standing in his $1.8 million wrongful-termination lawsuit against the estate – until the court could determine what is privileged and confidential.

For the latest news regarding “keeping the gag on”, GO TO > > > Office of the United States Trustee vs. Harmon


October 3, 1997

Reporters Object to
Bishop Estate Subpoenas

By Gordon Y.K. Pang, Star-Bulletin

Kamehameha Schools Bishop Estate will have to go to court if it wants the notes and documents of three reporters who have written on the estate.

Attorneys for the reporters are objecting to subpoenas served by Bishop Estate two weeks ago.

Paul Alston, who is representing reporters Jim Dooley of KITV News4 and Sally Apgar of the Honolulu Advertiser, yesterday filed formal objections in Circuit Court.

Both he and Corey Park, attorney for Associated Press reporter Bruce Dunford, have sent letters to the estate refusing to release any documents.

Bishop Estate alleges that information obtained by the reporters came from Bobby Harmon, an executive who was fired by the estate.

Harmon, who served as president and chief executive for Bishop subsidiary P&C Insurance Co. was sued by the estate to stop him from releasing information he gathered or learned while still in its employment.

The estate says Harmon stole documents from its offices.

Harmon countersued, claiming wrongful termination.

Alston said the subpoenas served to his clients were improperly issued and violate the First Amendment.

He added that Harmon never claimed to have given reporters anything more than a synopsis of information which wrote.

Park said it didn’t matter even if Harmon had given his client documents that were stolen.

“The press in this case was not a party to any kind of alleged improper activity in obtaining the information.”

The estate must now ask a judge to intercede if it wants the documents.

Estate spokeswoman Elisa Yadao would not say if the estate would go to court to seek the documents.

“We are going to do what is appropriate and prudent in our attempts to get the information back,” she said.

For more, GO TO > > > Broken Trust: The Book


January 8, 2000

Trustees gone, case still going:
Atty. general seeks bigger budget

The state is pursuing $100 million
in alleged mismanagement costs

Associated Press, Honolulu Star-Bulletin

The state’s legal costs in the Bishop Estate case “are going up, not down,” Attorney General Earl Anzai says.

In reviewing Anzai’s supplemental budget proposals, House Finance Committee Chairman Dwight Takamine, D-North Hilo-Hamakua, asked yesterday if there might be some money left now that the five trustees of the estate have resigned.

Anzai said the opposite is true as the state pursues the former trustees for up to $100 million for alleged losses from questionable investment of trust funds. The state expects a judgment to include paying the state’s legal costs, he said.

The state is now entering a more difficult phase of the case, Anzai said. “To pursue those claims, we need experts who are going to cost hundreds of dollars an hour. For example, we’ll need experts on return on investments, real property investments on the partnerships investments they entered into, etc.”

The state’s claim focuses on getting money from the insurance company covering liabilities for the trustees, Anzai said.

“I don’t think any of the trustees have personal assets that even come close to the losses we are claiming.”


May 18, 2000

Report: Ex-trustees tried to
‘destroy the opposition’

A special master’s report says they ran an expensive and
well-orchestrated plan that targeted judges and others

By Rick Dayson, Star-Bulletin

Lawyers for the former Bishop Estate trustees took part in a costly “destroy the opposition” campaign that targeted state and federal judges, law enforcement agencies, the Honolulu Star-Bulletin and the trust’s own beneficiaries, according to a court-appointed special master.

In a blistering, 67-page report expected to be filed today in state Circuit Court, attorney Robert Richards said the estate’s former majority trustees Henry Peters, Richard “Dickie” Wong and Lokelani Lindsey wasted thousands of dollars of trust money in failed attempts to muzzle U.S. District Judge Samuel King’s criticisms of the former trustees and to disqualify Probate Judge Kevin Chang from cases involving the estate.

One of the trust’s law firms, Cades Schutte Fleming & Wright, investigated former trustee Oswald Stender’s role in an unsuccessful Maui business deal and reviewed photographs of Kamehameha Schools alumni and parents who marched in protest to the former trustees in May 1997, in an apparent attempt to intimidate critics.

Richards, appointed by Judge Chang in March 1999 to review the estate’s legal bills, found that the law firm of McCorriston Miho Miller Mukai drafted lawsuits against the Internal Revenue Service and the attorney general’s office and conducted research into a possible racketeering suit against the attorney general’s office.

The McCorriston firm also conducted legal work in an attempt to prosecute the Star-Bulletin and this reporter for disclosing sensitive details of the IRS investigation, according to Richards.

The intense civil and criminal investigations by the IRS and the attorney general’s office prompted the former board members to resign from their $1 million-a-year posts last year.

“The conclusion of this master (is) that no stone would be left unturned by the trustees in attempting to silence their critics,” Richards said. “There was … the adoption of a ‘destroy the opposition’ strategy. There was a constant effort made, nearly always unsuccessful, to take steps to silence or discredit what was perceived to be the ‘opposition,’ whether that was an employee, a reporter, the attorney general, a judge or a master.”

Attorney William McCorriston defended his firm’s legal representation of the trust, saying his firm eventually recommended against filing actions against the IRS and the attorney general’s office.

McCorriston added that many of his challenges to the attorney general’s investigation were made on sound constitutional grounds.

The McCorriston firm billed the trust for $1.4 million in legal work in 1998-1999, and all of that is subject to a surcharge on the part of the former trustees. Mike Heihre, a Cades partner whom Richards described as the estate’s “shadow general counsel,” did not return calls.

“I’m not embarrassed about anything,” said McCorriston, who resigned as trust counsel last year. “I’m pretty well convinced that if the trustees followed my advice, they’d still be there.”

Critics have long argued that the estate’s steep legal bills were inappropriate for a charitable trust established to educate children of native Hawaiian ancestry. They also believe the trust hired its high-profile lawyers to stonewall the IRS and state investigations.

That sentiment is echoed in Richards’ report, which recommended that the Probate Court surcharge the former board members for about $5 million in legal work done by its outside firms.

Much of the attorneys’ work, he said, was the result of the former trustees’ alleged misconduct and was done to benefit the individual board members and not the trust. The special master also found that some of the work was so egregious that the law firms should refund part of their fees to the trust.

Little benefit to trust

For instance, Richards recommended that Cades Schutte disgorge about $880,000 of the $1.3 million that it billed the trust between August 1998 and May 1999. He also said that former Gov. John Waihee’s firm, Washington D.C.-based Verner Liipfert Bernhard McPherson & Hand, should be ordered to refund the estate $347,564 for work Richards said was of little benefit to the trust.

“When one reviews the legal invoices one is drawn to the inescapable conclusion that the trustees thought of the assets of the trust as their own. No real thought was given to the advisability of spending money on lawyers,” Richards said.

Richards’ report is based on an exhaustive review of legal billings from 12 of the estate’s local and mainland legal and accounting firms. The study, which covered the August 1998 through May 1999 period in which the Kamehameha Schools controversy was at its height, found that several of the law firms conducted duplicative work and that much of it was done for the defense of alleged misconduct by the former trustees.

Richards also noted that the former trustees and their law firms engaged in a “Herculean effort” to stall and avoid full disclosure in investigations by the attorney general and the estate’s court-appointed master.

In many cases, the retention of the law firms was approved by Nathan Aipa, the trust’s then-general counsel. Aipa currently serves as chief operating officer.

“There were monumental efforts made to keep trustee conduct from coming to light or, if it did come to light, to rationalize it,” Richards said.

“In fact, one can easily conclude, as this master has, that a strategy was adopted to obstruct the legal process, to delay where ever possible, to object where ever possible, to utilize so many lawyers and so many arguments that the opposition would be overwhelmed and would choose to give up….

Read the complete article at…

~ ~ ~

For more, GO TO > > > The Silence of the Whistleblowers


August 12, 2000

State deal with trustees rumored

By Sally Apgar, The Honolulu Advertiser

The state Attorney General’s Office has not yet reached a final settlement with the former trustees of the Kamehameha Schools, designed to avert a complicated civil trial in which the state seeks to recover more than $300 million from the former trustees on claims they mismanaged the charitable trust.

Lawyers for the five former trustees and the attorney general’s office have been meeting behind closed doors since last month with mediators, Honolulu attorneys David Fairbanks and James Duffy to settle and avoid a costly year-long trial that was scheduled to begin Sept. 18. The attorneys and trustees have been ordered by the court to keep their discussions confidential.

However, Eric Seitz, one of the attorneys representing former trustee Richard “Dickie” Wong in related criminal matters, filed a sworn statement in the Hawaii Supreme Court on Thursday that said a settlement had been reached Aug. 4 and put under seal with the court….

Seitz has represented Wong on criminal matters and has not been a participant in the negotiations to settle the civil surcharge suit.

But the negotiations could affect Seitz, because the outcome could determine whether he gets fully paid for past legal work. The payment would be made from a $25 million policy the estate has with Federal Insurance Co.

Yesterday Seitz said Federal Insurance has paid him $60,000 and he is still owed $20,000….

Seitz wrote in his statement filed at the Supreme Court that also on Aug. 4, Attorney General Earl Anzai was requested to inform the court of the settlement and withdraw the petition to surcharge the former trustees for alleged mismanagement of the trust. He wrote that “the attorney general’s knowing and deliberate failure” to inform the court of a settlement “is contemptuous and sanctionable.”

Seitz also wrote that just after the Aug. 4 meeting, Deputy Attorney General Jones informed him that the issue of producing certain documents, including ones concerning how much Federal Insurance had paid him for Wong’s criminal case, was “moot” because of the settlement.

The insurance policy has been paying criminal defense costs for ousted trustees Wong and Henry Peters. The attorney general wanted documents from Seitz showing how much of the insurance money had paid Wong’s legal fees, as that was one subject of the September surcharge trial.

Seitz successfully defended former Bishop Estate Trustee Richard S.H. “Dickie” Wong on theft charges last year, and is suing the state Attorney General’s Office in federal court for alleged malicious prosecution for reindicting Wong in December 1999.

The surcharge trial has created tensions between the attorney general’s staff and the trust. As parens patriae, the attorney general is responsible for protecting charitable trusts. Typically, when the attorney general pursues such litigation using state money, it is seeking repayment to the state. In this case, the attorney is seeking repayment from the trustees to the $6 billion charitable trust for alleged financial mismanagement and other alleged misdeeds.

Further complicating the situation is the issue of the insurance money that would be used to pay for the trial and some of the damages. Terms of the $25 million insurance policy with Federal Insurance are an ongoing subject of debate.

However, the interim trustees have been advised that legally they cannot help the attorney general gather evidence for the trial because it would nullify the insurance policy.

The Honolulu Advertiser


September 25, 2000

Kamehameha Schools gets decent settlement

An Editorial in The Honolulu Advertiser

None of the parties to the settlement finalized last week between the state and the five former Bishop Estate trustees hit a “home run,” but all sides received substantially more in settling than they risked in taking the case to trial:

>         The Former trustees, Richard Wong, Henry Peters, Lokelani Lindsey, Oswald Stender and Gerard Jervis, are spared admitting any wrongdoing – not a minor consideration in light of the names they’ve been called – and from having to pay any restitution to the estate from their pockets.

>         The trust supporting Kamehameha Schools receives $14 million, its share of the $25 million insurance policy that covered the former trustees. Had the case gone to trial, that $14 million likely would have been consumed by legal costs, leaving the trust to collect – assuming a judgment were winnable – from the former trustees, who may or may not have recoverable assets remaining after their many months of legal wrangling.

>         The state and the taxpayers are spared the great expense of an extended trial, which might have produced a Pyrrhic victory in nailing the hides of the former trustees to the wall while recovering no money from them. More important, the state now has in place, as a result of this case, a far less politically disruptive mechanism for the selection of new trustees.

>         The Kamehameha Schools ‘ohana receives, as Gov. Benjamin Cayetano put it, a new start. After all, this case wasn’t so much about punishing former trustees as it was about giving the schools a new governance structure, expanded educational programs, a more stable investment policy, more reasonable compensation for trustees and preservation of the schools’ tax-exempt status. All of that is happening.

If there is a loser in the settlement, it might be the Internal Revenue Service, which appears quietly to have agreed to let the former trustees off the hook for substantial penalties for their “excessive compensation,” which approached $1 million a year. The IRS may have decided it needed a more solid case with which to make its first court test of the new intermediate sanctions law.

With that possible exception, all of the parties to the settlement owe a debt of thanks to mediators Clyde Matsui, David Fairbanks and James Duffy for discerning common ground in a swamp of disagreement, and to circuit Judge Kevin Chang, who forced serious negotiating by refusing to further delay the trial….

~ ~ ~

– Catbird Note: This Honolulu Advertiser Editorial overlooks the big winner in this case: XL Insurance Company, which carried a $50 MILLION Excess Liability Policy for Kamehameha Schools. It appears that XL may have paid $ZIP in this case. Wonder WHY?

The answer may be in the following OBJECTION OF ATTORNEY GENERAL in EQUITY NO. 2088 in the Matter of the Estate of BERNICE P. BISHOP… filed in the Circuit Court of the First Circuit on June 20, 2000, to be heard by Judge Kevin S.C. Chang on June 23, 2000:




The Interim Trustees assumed office fourteen months ago. At the instant of assuming office, they assumed all fiduciary duties owed to the Beneficiaries of Kamehameha Schools. The primary fiduciary duty is of course the duty of loyalty, defined as the duty to administer the Trust solely in the interest of the Beneficiaries….

The duty of loyalty to the Beneficiaries encompasses both the duty to enforce and collect claims and the duty to redress the breaches of trust committed by the former trustees….

The Interim Trustees have failed their duty of pursuing claims (including surcharge claims) against the former trustees. Rather, the Interim Trustees have unilaterally and without seeking prior court approval accorded priority to an insurance contract with Federal Insurance Company.

Now, in June 2000, the Interim Trustees are before the court seeking retroactive validation of their fourteen-month course of allegiance to an insurance contract rather than to the trust Beneficiaries.

The court should deny the petition. The court should not countenance having trustees at the helm without the polestar of immutable fiduciary duties. And, there is a serious question whether the court, whose duty by virtue of separation of powers is to enforce the law rather than to write it, is empowered to grant the relief requested of exempting trustees from fiduciary duties.


A.      Insurance

The former trustees purchased (with trust funds) from Federal Insurance Company an association liability policy for the period July 1, 1997 to July 1, 1999 (the Policy).

The Policy defines “loss” to include “defense costs,” and hence the defense costs continuously deplete the limits of liability ($25 million each loss; $25 million each policy year).

The Interim Trustees base their refusal to pursue claims against the former trustees or even to cooperate with the Attorney General in his Surcharge Petition on behalf of the Beneficiaries on one specific provision of the Policy. It is a coverage exclusion that applies to any loss in connection with any claim made against any insured “by or on behalf of an Insured for an Insured For-profit Organization…” (The insured versus insured exclusion) and does not apply to any claim that is “a derivative action on behalf of an Insured Organization by one or [more] persons who are not Insured Persons and who bring and maintain the claim without the solicitation, assistance, or participation of any Insured Person.” (Policy [Ex.B] at Endorsement 4).

In 1994, at the recommendation of J&H Marsh & McLennan, Inc. (Marsh), Kamehameha Schools formed a captive insurance company, P&C Insurance Company (P&C). P&C was entirely operated by Marsh pursuant to management agreement. As of September 1, 1997, P&C issued an excess lines policy, including the excess for the association liability policy issued by Federal Insurance Company. At the same time, P&C reinsured its excess lines policy by purchasing from a joint venture of Cigna and XL Insurance companies an integrated risk financing policy covering P&C’s entire excess policy risk. As to association liability, the risk was $50 million excess of $25 million.

XL takes the position that no coverage is available under the reinsurance policy based on an allegedly incorrect “warranty of no known loss” at the inception of the reinsurance policy, an alleged continuing failure to give timely notice of claims (including the Surcharge Petition), and an alleged failure to cooperate with XL’s investigation of the claims that were tendered for coverage.

B. Prior Proceedings

Two prior proceedings bear on the petition before the court. First, on November 2, 1999 the Interim Trustees filed a petition for instructions concerning estate liability insurance and related matters (the Insurance Petition).

The Insurance Petition was referred to a master on the day of filing. The master has never filed a report, and the hearing has been continue seven months. As matters now stand, the report is due July 14, and the hearing is scheduled for August 11, 2000. Prior to the most recent extension of the report date and the hearing date, the parties to the Insurance Petition were ordered to mediation.

In the Insurance Petition, the Interim Trustees sought instruction on the vague question: “What are Petitioners’ [Interim Trustee] fiduciary obligations with respect to the Estate Insurance?”… Of course, the fiduciary obligations of the Interim Trustees run to Beneficiaries, not to insurance policies. As the Attorney General pointed out in response to the Insurance Petition, the Interim Trustees “have the same duties to the Beneficiaries as would exist if there were no insurance.”… In any event, the prior petition did not mention Endorsement 4 or, for that matter, anything more specific than “estate insurance.”

The second proceeding is the Attorney General’s petition, joined by the Interim Trustees and granted by the court, for an order reserving any surcharge claims relating to the Interim Trustees’ petition for removal of the former trustees (Pet. Sept. 8; Joinder, Sept. 13; Order, Nov. 2, 1999). That petition did not address, much less resolve, the question of the Interim Trustees’ ultimate responsibility for pursuing the reserved claims.

Indeed, the order states:

In their petition, the Interim Trustees expressly reserved the right to intervene in the Attorney General’s pending petition for permanent removal and to prosecute in the future any surcharge claims they may have against the Incumbent Trustees. Essentially, the present petition filed by the Attorney General confirms the Interim Trustees’ reservation of rights and claims…

C.      Mediation

After the court announced its intention to order mediation and pursuant to the court’s direction, the Attorney General and all five former trustees submitted to the court on March 2, 2000 a proposed stipulation and order for mediation of the Surcharge Petition. The proposed order did not include the Interim Trustees as a party to the mediation….


The interim Trustees seek instruction concerning the mediation order and concerning the Interim Trustees’ duties to pursue surcharge claims against the former trustees and to keep the Beneficiaries informed as to the administration of the Trust.

A.      Mediation

The Attorney General does not know what, if any, positions have been taken by Federal Insurance Company or the Interim Trustees or any of the former trustees concerning the participation of the Interim Trustees in the mediation…

The court entered its mediation order fifteen weeks ago and no mediation has commenced…

B.      Breach of Fiduciary Duties

1.      Duties to Pursue Claims against Former Trustees

The Surcharge Petition was filed in September 1998, when the five former trustees were still in office. The five former trustees are the target of the surcharge claims. The Attorney General filed the surcharge claims on behalf of the trust Beneficiaries solely because the former trustees were obviously conflicted in pursuing surcharge claims against themselves.

The situation changed dramatically of May 7, 1999 when the five former trustees were removed from office (permanently as it turns out) and were replaced by the Interim Trustees, who remain in office.

The Interim Trustees are not the target of the Surcharge Petition and are not conflicted or otherwise legally disable from pursuing it.

The duties of the Interim Trustees with respect to breaches of trust by the former trustees are clear. The Interim Trustees have an affirmative duty to use reasonable care to preserve the Trust property and protect it from loss and damage… The Interim Trustees have an affirmative duty to enforce and collect claims belonging to the Trust…

The Interim Trustees especially have the affirmative duty to redress the breaches of trust committed by the Former Trustees…

For fourteen months, the Interim Trustees have simply failed their duties to the Beneficiaries by taking no action to enforce and collect the surcharge claims (other than agreeing to preserve their right to someday take action) and by steadfastly adhering to a policy of non-stop non-cooperation with the Attorney General on the Surcharge Petition…

It is true that the Policy was purchased by the former trustees, not the Interim Trustees. But if Endorsement 4 is an impediment to the proper discharge of the Interim Trustees’ duties to the Beneficiaries, the solution is neither to breach those duties for fourteen months nor to annually file vague petitions for instruction in proceedings in which Federal Insurance Company is not a part (and is not even on the service list of the Interim Trustees)…

We ask the court to view the situation from the vantage point of the Attorney General. Unlike the former trustees, the Interim Trustees are not legally disabled from pursuing the surcharge claims. The Interim Trustees have multiple affirmative duties to pursue those claims. They have not pursued any surcharge claim, covered or uncovered. They have, by determined non-stop non-cooperation, negatively affected the Attorney General’s efforts in the Surcharge Petition on behalf of Hawaiian children.

The Interim Trustees apparently believe that, to preserve the common fund of the insurance money, they may impose on the good offices of the Attorney General to discharge what is rightfully their own responsibility of seeking redress from the former trustees.

It is fair for the Attorney General to question why the already overburdened taxpayers of Hawaii should provide legal services to the richest organization in Hawaii (and one that is already taxpayer subsidized in the form of the tax exemption)

DATED: Honolulu, Hawaii, June 20, 2000.

Deputy Attorney General

For more, GO TO > > > Marsh & McLennan Complaint Letter; Nests of The Insurance Vampires; RICO in Paradise


May 20, 2000

Kamehameha fires law firms

A special master’s report says much legal work served
board members’ interests, not the trust’s

By Rick Daysog, Star-Bulletin

Kamehameha Schools has terminated several of its law firms, one day after a court-appointed special master issued a scathing report on their roles in the three-year trust controversy.

In a brief statement yesterday, the estate’s interim board and Chief Executive Officer Hamilton McCubbin said they would immediately discontinue the firms’ services pending the completion of an internal investigation.

The estate said it would decide what action, if any, it would take against the firms once its inquiry is completed.

“The report of the special master … raises question about the propriety of services rendered by some of these advisors,” the estate said.

The charitable trust did not identify which firms were terminated, but one, Cades Schutte Fleming & Wright, confirmed its suspension. At least one other firm, Ashford & Wriston, also was terminated, a person close to the trust said….

In a report* filed in Circuit Court on Thursday, court-appointed special master Robert Richards said several of the estate’s outside attorneys assisted in a “Herculean effort” to circumvent disclosure to the attorney general’s investigation and took part in a “destroy the opposition” effort by former majority trustees Henry Peters, Richard “Dickie” Wong and Lokelani Lindsey.

The Richards study, which examined legal work by 12 of the estate’s outside firms in the 1998-1999 period, also recommended that the probate court surcharge the former trustees for nearly $5 million in fees, saying much of the law firms’ work served the interests of the board members and not the trust.

Richards singled out Cades Schutte’s work as “the most troubling” and urged the probate court to order the disgorgement of $880,000 of the $1.3 million that it earned between 1998 and 1999.

Richards said the firm spent considerable trust funds researching the free-speech limitations of senior U.S. District Judge Samuel King, an outspoken critic of the trust, and looked into possible remedies against Bobby Harmon, the former head of the estate’s insurance subsidiary, in an apparent attempt to silence criticism.

Cades Schutte strongly disagreed with the master’s findings and said its work for the trust was appropriate….

The firm, which has represented the estate for at least 30 years, said it expects to be vindicated once the Probate Court hears its side of the story….

Meanwhile, the attorney general’s office applauded the estate’s decision to suspend some of their outside firms in light of the disclosures in Richards’ report.

“This is a prudent course of action,” said Deputy Attorney General Hugh Jones.

“The attorney general strongly supports the announcement by the estate’s chief executive officer.”

~ ~ ~

* For more of the Richards Report, GO TO > > >

Pages 1-26; Pages 26-49; Pages 50-75; Exhibit 2; Exhibit 2b


September 29, 2000

Probate judge Oks settlement between
state, ex-Bishop trustees

The agreement still need approval from
the Internal Revenue Service

By Rick Daysog, Star-Bulletin

A state judge today approved a $20.1 million settlement between the attorney general’s office and the five former trustees of the Kamehameha Schools.

Probate Judge Kevin Chang said the settlement is in “the best interest” of the $6 billion charitable trust, which has been wracked by controversy during the past three years.

“This puts the things behind us and allows the new board of trustees that will be coming in soon to focus on what truly is the purpose of the Kamehameha Schools, which is the education of children,” added retired Adm. Robert Kihune, chairman of the interim board of trustees.

Under the plan, the Kamehameha Schools will receive about $14 million to cover alleged mismanagement of trust assets by former board members Henry Peters, Richard “Dickie” Wong, Lokelani Lindsey, Oswald Stender and Gerard Jervis.

The state will receive about $1.3 million to cover their litigation costs while $4 million of the former trustees’ legal fees will be picked up by the settlement.

The five former trustees will pay no out of pocket expenses, since the settlement will be covered by the estate’s $25 million insurance policy with Federal Insurance Co.

The deal is contingent upon approval from the Internal Revenue Service.

The attorney general’s office had been seeking millions of dollars in surcharges against the former trustees, saying that the ex-board members took excessive compensation, mismanaged the estate’s educational programs and incurred more than $200 million in investment losses.

The suit had been scheduled to go to trial on Sept. 18 but was canceled after the settlement was reached.

Clyde Matsui, the court-appointed discovery master and mediator in the case, said the settlement avoids a lengthy, costly and complex trial.

Today’s hearing was attended by interim trustees Kihune, Constance Lau and Ronald Libkuman and former trustee Henry Peters. Peters was unapologetic about his tenure at the trust….



October 4, 2000

Robert Kihune, chairman of Kamehameha Schools’ interim board of trustees, says the settlement will allow the board to focus on what truly is the purpose of the Kamehameha Schools, which is the education of children.

Wishful thinking? Or artful spin? If things are truly behind them:

> Why are the corrupt practices that began years ago still continuing?

> Why are the co-conspirators in the ex-trustees schemes still employed by the estate or acting as highly paid consultants?

> Why have CEO Hamilton McCubbin and the interim trustees not yet complied with the recommendations of Master Robert Richards in his May 18 report regarding retention of non-staff counsel?

In my opinion, this settlement was a very good deal – for Federal Insurance Co, Marsh & McLennan, the lawyers and the ex-trustees. It was a very bad deal for the beneficiaries and the citizens of Hawaii.

We may never know how bad, however, because the settlement documents will be sealed under court order.

Bobby N. Harmon

~ ~ ~


Kamehameha trustees must clean house

The Kamehameha Schools, under its new trustees, will certainly better its educational programs for Hawaii’s children. Less certain is the trustees’ promise that “reforms already in place will prevent abuses…from recurring.”

Educational programs were so severely abused under the old system that it became evident to everyone. The greater abuse of Pauahi’s trust, however, came from huge losses in questionable financial deals.

These were not evident because they remained hidden from the IRS, the masters, the public and even other employees until exposed by Attorney General Margery Bronster.

Yes, the five Bishop Estate trustees are now gone but so is Bronster. Most of the ol’ boys who were instrumental in the financial schemes, however, still hold key trust positions.

Many of the outside companies that masters have said participated in the schemes and cover-ups are apparently still doing big business with the estate.

Will the new trustees be forced to assume their seats in the same old dirty house? That is the $6 billion question.

Bobby N. Harmon


December 8, 2000

Court: Kamehameha does not have
to sue trustees for legal fees

However, the trustees and the estate’s
outside law firms were not exonerated

By Rick Daysog, Star-Bulletin

The Kamehameha Schools is not required to pursue its former trustees for millions of dollars in legal fees racked up during the three-year trust controversy, under a ruling today by a state judge.

But Probate Judge Kevin Chang also declined to exonerate the former trustees and the trust’s outside law firms for their conduct during the controversy.

Chang said that the recent settlement between the attorney general’s office and former trustees Richard “Dickie” Wong, Henry Peters, Lokelani Lindsey, Oswald Stender and Gerard Jervis made moot any surcharge claims.

Court-appointed special Master Robert Richards, in his May 18 report, took the trust’s outside law firms to task for their work in defending the ex-trustees and recommended the surcharge claims.

Chang did not rule on the specific allegations raised by the Richards report nor did he rule on any of the recommendations raised by a mainland firm hired by the trust to investigate allegations raised by the report. The mainland firm, Morgan Lewis & Bockius, found that the work by the firms retained by the former trustees was largely appropriate and benefited the trust.

After the Richard’s report was made public, the estate suspended many of its outside firms, pending an internal investigation. With the Morgan Lewis report, the estate will likely retain some of the firms that it had suspended but not all, said Hamilton McCubbin, the estate’s chief executive officer.

For more, GO TO > > > Harmon’s Letter to McCubbin re the Morgan Lewis Report


December 8, 2000

Kamehameha Schools to rehire
some law firms let go last May

A $500,000 investigation contradicts findings that
legal work personally benefited former trustees

By Rick Daysog, Star-Bulletin

The Kamehameha Schools will rehire several of the outside law firms that it terminated when a report by a court-appointed special master raised serious questions about the firms’ legal work.

But Hamilton McCubbin, the Kamehameha Schools’ chief executive officer, said the estate will not retain all of the firms that it suspended in May.

The firms were let go as a result of special master Robert Richards’ report, which alleged that several of the trust’s outside lawyers conducted millions of dollars of work that personally benefited the estate’s former trustees….

McCubbin’s comments were in response to Probate Judge Kevin Chang ruling yesterday that the $6 billion estate is not required to pursue former trustees Henry Peters, Richard “Dickie” Wong, Oswald Stender, Gerard Jervis and Lokelani Lindsey and the trust’s outside law firms for the millions of dollars in legal fees.

The Richards report recommended the surcharges, saying that the ex-trustees and several of the law firms took part in a “Herculean effort” to stonewall the state attorney general’s investigation of the trust.

All firms deny wrongdoing

The Richards report singled out the Cades Schutte Fleming & Wright and McCorriston Miho Miller Mukai firms from taking part in a “destroy the opposition” campaign by former majority trustees Peters, Wong and Lindsey.

Richards alleged Cades Schutte spent considerable estate funds researching the free-speech limitations of senior U.S. District Judge Samuel King, an outspoken critic of the former trustees. Cades Schutte also reviewed sets of photographs taken of a 1997 protest march against the ex-trustees, in an apparent attempt to identify critics, Richards said.

As a result of the special master’s report, the estate terminated its contracts with Cades Schutte, Ashford & Wriston, Verner Liipfert Bernhard McPherson & Hand and PriceWaterhouseCoopers. The McCorriston firm resigned after the former trustees were temporarily removed from the estate by Chang in May.

All of the firms denied wrongdoing.

McCubbin’s decision to rehire some of the law firms is largely based on a trust investigation, conducted by the Washington, D.C. firm of Morgan Lewis & Bockius L.L.P., that contradicted several of the finding made by Richards.

The 252-page Morgan Lewis study, which was completed on Oct. 31 and reportedly cost $500,000, concluded that there are no grounds to pursue claims against the law firms and that work conducted by most of the firms benefited the trust….

David Schulmeister, a Cades Schutte partner, argued in court yesterday that the Morgan Lewis report found no evidence that his firm protected the personal interests of the former trustees.

In yesterday’s ruling, Chang did not address Schulmeister’s request to strike portions of the Richards report.

The judge also did not adopt the findings of either the Richards report or the Morgan Lewis report as a court finding.

Instead, Chang said that the recent settlement between the ex-trustees and the attorney general’s office, which had sued the former board members in an effort to recover millions of dollars in damages, made moot any surcharge claims for legal fees.

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Meanwhile, for some more “birds of a feather” that
you’ll find building nests in this tree…



ACT 221















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Part IPart IIPart IIIPart IVPart VPart VI

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THE GRAND (and dirty) KO OLINA



















































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An index to more…

Confessions of a Whistleblower!

(Note: Some of the following sites are password protected as they involve ongoing litigation and may contain attorney-client privileged information.)

~ ~ ~


(Julie Schermerhorn; Justin Schuck; James Farris;
William K. Slate, II; Judith Neustadter Fuqua)











(Jeffrey Sia, Esq; Ronald Libkuman, Esq; St. Paul Insurance Co.)



(Michael Heihre, f.k.a. Mike Hare; Peter Olson)





(John D. Finnegan)



(Mufi Hannemann, Mayor)





(Attorney Liability Protection Society; Peter Olson, Cades Schutte)



(Janet Hughes, Carolyn Woods)



(Colbert Matsumoto; Roy Hughes; Michael Tanoue, Pacific Law Group;
David Nakashima, Alston Hunt Floyd & Ing)



(Terry Mullen; Robert Kuroda; Rina Stone, Zurich Insurance)



(Henry Peters, Richard Wong, Hamilton McCubbin, Dee Jay Mailer, Nathan Aipa,
Colleen Wong, Louanne Kam, and a Cast of Thousands)



(Steven Guttman, Robert Kessner, James Duca)





(Kenneth Hipp; Christopher Yeh; St. Paul Insurance Co.; Stewart-Smith)



(Rocco Sansone; Christine Lee; Ron Poepoe; Robert Miller, Esq.)







(Clyde Mark; Ron Poepoe; Rocco Sansone; Rodney Park; Jeffrey Sia,
Ayabe Chong Nishimoto Sia & Nakamura;
Matt Tsukazaki, Esq., Torkildson Katz Fonseca Jaffe & Moore)







(Susan Tius, Esq)



(Arthur Levitt)





(Robert Katz and Matt Tsukazaki)







(Robert Rubin, John Snow, Henry Paulson)





(Terry Mullen; Robert Kuroda; Rina Stone, Zurich Insurance;
PricewaterhouseCoopers, LLP)



Last Update October 15, 2006, by The Catbird