Trustees of Hawaii’s Wealthiest Charity Make Changes to Quell Criticism

STEPHEN G. GREENE

The beleaguered trustees of the Bernice Pauahi Bishop Estate in Hawaii, who for months have tried to repel charges of mismanagement and financial impropriety, are now seeking to appease their critics by changing some of their practices.

But deep divisions on the board of Hawaii’s wealthiest charity have added new fuel to the controversy, while two recent reports highly critical of the trustees’ actions have intensified public calls for major reforms — including the ouster of one or more of the five trustees.

The Bishop Estate, Hawaii’s largest private landowner, manages a business empire worth an estimated $5-billion to $10-billion, with wide-ranging interests in real estate, banks, gas wells, factories, and timberland. It also runs the Kamehameha Schools, which educate 3,200 students of native Hawaiian descent.

Princess Pauahi, the last direct descendant of King Kamehameha I, bequeathed her estate in 1884 to finance schools for Hawaiian children. More than a century of relative tranquility ended last year, when the politically powerful estate was thrown into turmoil amid mounting criticism of its volatile investments, high trustee salaries, and school-oversight practices perceived as oppressively heavy-handed by many students and faculty members (The Chronicle, October 2).

A fact-finding report released last month by retired state Circuit Judge Patrick K. S. L. Yim, who was appointed last spring to examine a growing list of complaints about the trustees, placed much of the blame for the current tumult on Lokelani Lindsey, a former public-school administrator who took the lead role among the trustees in supervising school affairs.

Her arbitrary actions, Mr. Yim said, have undermined the position of the schools’ president, Michael Chun, and disrupted the educational process.

What’s more, he said, her abrasive style of “management by intimidation” has created “an oppressive and hostile atmosphere on campus” that has hurt morale among students and teachers alike.

Mr. Yim faulted Mrs. Lindsey for a “basic lack of understanding as to her roles and responsibilities as a trustee,” citing, among other things, her implied threat to spoil the college-admission chances of a student leader who opposed her views.

The trustees subsequently adopted Mr. Yim’s recommendations that the practice of appointing a “lead trustee” with primary responsibility for education be abolished and that Mrs. Lindsey’s direct role in managing school affairs be curtailed.

Two of her fellow trustees — Gerard Jervis and Oswald Stender — then called on Mrs. Lindsey to resign.

They said Mrs. Lindsey had “consistently engaged in a pattern of irresponsible and reckless behavior,” had breached her fiduciary duty, and was “unfit to serve as a trustee.”

Mrs. Lindsey rejected that suggestion, dismissing the charges as baseless rumors and unsubstantiated allegations recycled by Mr. Stender as part of a campaign to discredit her.

Late last month, Mr. Jervis and Mr. Stender asked the Circuit Court to remove Mrs. Lindsey as a trustee. They said she had “lost the confidence, respect, and trust” of the school’s students, faculty members, parents, and alumni and had violated her duty.

None of the trustees would comment on the matter. But Doug Carlson, a media adviser retained by Mrs. Lindsey, said that she was drawing flak for having aggressively challenged school administrators about their lackluster performance. “The more questions she has asked, the more uncomfortable people became, and the more they began to attack the whistle blower,” Mr. Carlson said.

Mrs. Lindsey’s objective all along has been to improve the Kamehameha Schools, he said. At times that has meant making unpopular decisions, such as eliminating an educational outreach program that had employed 170 teachers. But her decisions are not made in a vacuum, he added: “Stender and Jervis are just as responsible as she is for the operation of the school.”

The report by Mr. Yim is just one of several investigations into the Bishop Estate’s affairs.

The Internal Revenue Service is conducting an audit, which could result in sanctions if trustees are found to have profited unreasonably from their positions.

And Hawaii’s Attorney General, Margery S. Bronster, is looking into allegations of financial abuse and other violations of trust law.

Lawyers for the estate have fought to block or modify or delay her subpoenas seeking documents that detail the estate’s affairs. They have criticized the breadth of her request and said that much of the material she seeks contains sensitive or proprietary information.

As a result, Mr. Jervis and Mr. Stender last week asked the Circuit Court to appoint an administrator of the estate “for the sole purpose of expediting and bringing closure to the Attorney General’s investigation.”

Such a person would be authorized to determine what information to release to investigators and to direct the estate’s lawyers “without limitation.”

The two trustees say in their petition that the prompt completion of the Attorney General’s investigation is in the estate’s best interest, to bring an end to the upheaval into which the charity plunged last spring.

They say they are are concerned that “a protracted, open-ended investigation will bring harm to the morale and efficient operation of the schools.”

Some trustees, however, may find it in their personal interest to prolong the investigation by withholding potentially damning information, the petition by Mr. Jervis and Mr. Stender says.

A temporary administrator, they say, would break the impasse created by that conflict of interest, thereby enabling the investigation to proceed much more quickly.

Their petition is scheduled for a hearing February 27.

Some critics of the highly political process of selecting new trustees have welcomed a decision last month by the state’s Supreme Court justices to remove themselves voluntarily from that process.

Justices acting in their private capacities have selected trustees for more than a century, in accordance with Princess Pauahi’s will. Critics charge that the practice has produced trustees selected on the basis of their close ties to the state’s political bosses rather than on their aptitude in financial or educational matters.

Among current trustees, Richard S. H. Wong is a former state Senate President; Henry Peters, a former Speaker of the House; and Mr. Jervis, a close friend and confidant of John D. Waihee III, who appointed the Supreme Court justices when he was Governor.

Four of the five justices said in a joint statement that “continuing to exercise the powers of appointment granted by the Princess will further promote a climate of distrust and cynicism and, more particularly, will undermine the trust that people must have in the judiciary.”

They suggested that leaders of respected indigenous Hawaiian organizations be given the authority to establish a process for choosing trustees, subject to the approval of the probate court. “We believe that the Bishop Estate ultimately ‘belongs’ to the Hawaiian people,” who should therefore have a major voice in its governance, they said.

The fifth justice, Robert G. Klein, disagreed with his colleagues’ decision. “Permitting the selection of Bishop Estate trustees to become an official function of the probate court, rather than the individual action of the justices of the Supreme Court, constitutes a major, unprecedented and uncharted leap of blind faith,” said Mr. Klein.