Hawaiian Trust Hit by Wave of Legal Woes

Five of Hawaii’s most prominent citizens are locked in a legal battle royal over their management of a Hawaiian princess’ $10-billion charitable trust, defending themselves from one another as well as the state attorney general.

One trustee of the Bishop Estate was indicted this week on theft charges. Another is being tried on colleagues’ accusations that she abused her power overseeing the estate’s Kamehameha Schools, the wealthiest private school in the nation.

And all five are accused by the attorney general of improperly using estate assets to create a self-serving economic empire.

“It is my firm belief that so long as the current trustees remain in power they will deploy the resources of the estate and its influence to protect their personal interests over those of the beneficiaries,” Atty. Gen. Margery Bronster said after a yearlong inquiry ordered by Gov. Ben Cayetano.

Bronster has petitioned the courts to remove the five well-paid and politically powerful trustees.

She accuses them of engaging in kickback schemes, awarding improper contracts, making sweetheart deals for family and friends and using other improper business practices.

Attorney Renee Yuen, who represents indicted trustee Henry Peters, said the removal petition is another step in “the government’s orchestrated campaign” to control estate assets.

“In the future, this dismantling of the Bishop Estate will be seen as the ultimate robbery of the native people directed by non-Hawaiians,” Yuen said.

The Bishop Estate trust was established in 1884 by the will of Princess Bernice Pauahi Bishop, a descendant of King Kamehameha, the chief who unified the islands in the late 18th century.

The trust, estimated to be worth about $10 billion, is fueled by revenues from 337,000 acres of once-royal lands. The princess’ will established the Kamehameha Schools, a kindergarten through 12-grade institution open only to students of Hawaiian ancestry, as the sole beneficiary. Today, the 600-acre campus overlooking Honolulu serves 3,100 students, with smaller schools planned for Maui and the big island.

The estate trustees, selected by the state Supreme Court, are:

* Former state Senate President Richard Wong.

* Former state House Speaker Henry Peters.

* Former top state schools administrator Lokelani Lindsey.

* Oswald Stender, former chief executive officer of Hawaii’s other major private land trust, the James Campbell Estate.

* Gerard Jervis, former chairman of the state Judicial Selection Commission.

Trustees, who earn about $850,000 a year based on a percentage of trust earnings, are under attack on several fronts, including one from within their own ranks.

On Wednesday, Peters was indicted by an Oahu grand jury on a first-degree theft charge.

He sold his Honolulu condominium to developers for $192,500 more than its appraised value in exchange for giving those developers control of a separate condominium project on Bishop Estate land, the indictment said.

Peters faces up to 10 years in prison if convicted, but his attorney says his client “has done nothing criminally wrong.”

Meanwhile, Stender and Jervis had a falling-out with their colleagues, complaining that they have been isolated from management of the trust.

They have since sued Lindsey in Circuit Court, seeking her removal for allegedly mismanaging Kamehameha Schools since 1994.

This week, teacher Randie Fong testified that Lindsey swore and screamed “at the top of her lungs” during an April 1997 meeting in which he raised concerns about her management style. The trial is expected to last six months.

Also, the IRS has been investigating the Bishop Estate for three years. The subject is secret, but trustees’ actions are believed to be a major focus.

If the IRS finds wrongdoing, it can penalize the trustees. Depending on the findings, the agency could remove the trust’s tax-exempt status.