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For
$6 Billion Hawaii Legacy, a New Day
By TODD S. PURDUM
Three days earlier, a state
probate court judge had ordered the ouster of four of the five trustees of the
mighty Bishop Estate, a charitable trust that owns 8 percent of the land in
Hawaii and investments from China to Wall Street -- more than $6 billion total
-- all for the benefit of the Kamehameha Schools, a 3,000-student institution
for boys and girls in the green hills above the harbor here.
The estate, an institution of almost medieval power, was long a source of intense native pride, but in recent years had come to be seen as the embodiment of Hawaii's brand of inbred, closed-door politics, as secretive and suspect as it was impregnable.
The trustees were closely connected to the state's ruling political establishment, so their dramatic ouster -- and the long fight that led to it -- has resulted in predictions of sea changes in institutions from the Legislature to the State Supreme Court, whose members used to select the trustees.
''I think there's an important message here that the system does work,'' said Randall Roth, a professor at the University of Hawaii Law School, president of the State Bar Association and co-author of ''Broken Trust,'' a scathing manifesto published in The Honolulu Star-Bulletin in 1997 by five Hawaiian elders that called for the removal of the four trustees.
''I think a lot of people in Hawaii have a lot more confidence in the system than they did a week ago,'' Mr. Roth said. ''There really is an uplifting side.''
When Mr. Roth's group came together with friends and faculty members of Kamehameha Schools at the La Mariana Sailing Club the other night, tears flowed, cheers went up and heartfelt cries of ''Mission accomplished!'' rang out.
But the case has taken a terrible toll. One trustee attempted suicide after being caught in a sexual tryst in a hotel restroom with a lawyer for the trust, who killed herself with carbon monoxide. Barely a week before the probate court's ruling ousting the trustees, the State Senate retaliated against State Attorney General Margery Bronster, who had headed up the investigation, by declining to confirm her for a second term. Old friends were pitted against one another in a state where Democrats have ruled supreme since statehood, including Gov. Benjamin J. Cayetano, who served in the legislature with two of the trustees yet ordered the inquiry.
''What's happened is sad and tragic for their families, and I feel badly about it,'' Mr. Cayetano said in an interview. ''But in a job like this, you do what has to be done.''
In many ways, the Bishop Estate is a telling reminder of just how much Hawaii still stands apart from other states. The trust was created -- under conditions that could never be re-created in the modern world -- by Princess Bernice Pauahi Bishop, the last direct descendant of Kamehameha I, the 18th-century king who had unified the islands. Against her family's wishes, the Princess married an American adventurer and banker named Charles Bishop, and when she died in 1884, she left more than 400,000 acres of royal lands in trust to create a school.
The Princess wanted to benefit Hawaiians, whose population had been decimated by diseases brought by white settlers. She did not specify that the school should give preference to native children, but that has been its practice, which has itself sparked debate and drawn the attention of regulators. For most of its 115 years, the estate was land-rich and cash-poor, but in the early 1980's, the United States Supreme Court upheld a state law that forced the trust to sell off land to homeowners who had leased it for years, generating a huge cash windfall for investment.
In recent years, the estate has been dominated by the state's all-Democratic political establishment. One of the ousted trustees, Henry H. Peters, is the former speaker of the State House of Representatives, while another, Richard S. H. Wong, is the former president of the State Senate. A third, Lokelani Lindsey, is a former public school official and mayoral candidate from Maui, while the fourth, Gerard A. Jervis, the trustee who tried to kill himself by taking an overdose of sleeping pills, is a close friend of former Gov. John Waihee. Only Oswald Stender, the trustee who helped fight his colleagues and resigned, had experience managing a large, for-profit land trust here -- and only he is a graduate of Kamehameha.
The bill of particulars against the four ousted trustees is extensive. It includes evidence of a lack of a coherent professional management system and accusations that the trustees created conflicts of interest by investing trust money in ventures in which they had a personal stake. In the process, officials say, they shortchanged the school, while enriching themselves and passing lucrative business to their friends. That is a particularly sensitive charge since Kamehameha Schools serve only a small fraction of island children, and native Hawaiian children in particular are often under-privileged and lack access to adequate education.
Mr. Peters and Mr. Wong both face criminal charges related to a suspected kickback scheme involving estate land. Mrs. Lindsey was permanently removed from her trustee post by a state judge in a mismanagement lawsuit brought by Mr. Stender and Mr. Jervis just one day before Judge Kevin Chang of Probate Court ordered the interim removal of the trustees in favor of a special panel he had named earlier when the Internal Revenue Service had refused to deal with the trustees.
The ousted trustees contend that they have managed the estate's investments wisely, and point to the $600 million the trust made last week, just days before their ouster, as a result of the initial public stock offering of Goldman, Sachs, the Wall Street investment partnership in which the estate held a 10 percent stake. They also accuse the I.R.S., which has been auditing the estate for nine years, of judging them without due process, and some have talked of suing the I.R.S.
''I thought I was living in Russia,'' Mrs. Lindsey said in a telephone interview. ''I'm just completely floored by the heavy-handedness of the I.R.S.''
But the implications of the case reach well beyond the trustees.
''It's not only the trust that's broken,'' said Ms. Bronster, the former attorney general, who since her ouster has been stopped on the street and thanked by strangers. ''I think it's the whole political culture of the island. It takes people a long time to anger here, but I'm hopeful that this will be the beginning of something important, that people will not stand for disconnection and arrogance in their institutions.''
Beadie Kanahele Dawson, a lawyer who helped a Kamehameha alumni group organize its campaign against the trustees two years ago after Mrs. Lindsey angered school officials by interceding in day-to-day affairs, agreed.
''This political disease that has permeated the boardroom of the Bishop Estate also permeates our government,'' Mrs. Dawson said. ''But we have been absolutely unable to do anything about it. But I believe that the Bishop Estate controversy, a small in-group being benefited at the expense of the larger group, I believe that you're going to find in Hawaii a much more passionate electorate.''
Not all local experts are so sure. Governor Cayetano noted that it was his Democratic administration that began the investigation, though he readily acknowledged, ''this cannot endear anyone to politics.''
Dan Boylan, a professor of history at the University of Hawaii-West Oahu, said he thought the current turmoil was mainly the result ''of a particularly bad board of trustees.'' ''I think it may be harder to draw any bigger lessons,'' Mr. Boylan said. ''I think only time is going to tell. I hope that what at least comes out of this is that the estate goes to a professional C.E.O. form of governance and the trustees are paid a relative pittance.''
That seems assured. A special court-appointed master has already recommended such a course, and last week the probate court judge scolded the ousted trustees for failing to follow through. Similarly, the process of selecting trustees, long a subject of criticism, seems certain to change. In her will, the Princess stipulated that the trustees, who may serve until they turn 70, should be chosen by a majority of the justices of the State Supreme Court, which at the time was also the probate court. But in recent years, that practice has led to the appointment of politically connected insiders like Mr. Peters and Mr. Wong, and since the debate erupted, a majority of the justices have said they would no longer participate in selecting trustees.
That would leave the probate court in charge. Judge Chang's order last week gave the interim trustees, who include a retired admiral and the former Honolulu police chief, or the attorney general's office 90 days to seek permanent removal of the ousted trustees, and that is expected to happen.
''As a practical matter,'' Mr.
Roth said, ''the five trustees are out for good.''
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