Hawaii Trustees Plagued by Scandal

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 last 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 embarrassment 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.

Today, Atty. Gen. 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,” Gov. Ben Cayetano said. “I cannot see how the court would ignore the present situation. 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% 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 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 University.

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 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 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.

That probe 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 that 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 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.”