THE MYTH AND THE METHANE

Following the Wampum Trail


 

Sightings from The Catbird Seat

~ o ~

THE MYTH

A group of wealthy pale faces (and some orientals and part-Hawaiians) are selling back the drilling rights that they purchased from a Native American Indian Tribe.

That’s a fact, Jack!

The myth is that the Indians are not getting scalped in the process.

~ ~ ~

THE METHANE

February 3, 2003

Estate sells stake in gas
operation for $160 mil

Bishop Holding Corp. posts a $70 million gain on
an investment once considered risky

By Rick Daysog, Honolulu Star-Bulletin

The Kamehameha Schools sold its controversial investment in a Texas-based methane gas operator today for about $160 million.

Bishop Holding Corp., the trust’s for-profit unit, signed an agreement this morning to sell Kukui Inc. to the Southern Ute Indian Tribe, according to people familiar with the deal.

The deal is part of the $6 billion trust’s strategy to divest itself of the speculative investments that it acquired during the late 1980s and 1990s and invest in more liquid, blue-chip holdings that better suit the trust’s core educational mission.

The $160 million price tag allows the estate to post a $70 million profit on an investment that critics had written off years ago as one of its biggest money-losing holdings, people familiar with the deal said.

Dennis Fern, Kukui’s president, had no immediate comment this morning. An estate spokesman could not be reached.

Representatives of the Southern Ute Tribe, who are in Honolulu this week, could not be reached.

The Southern Ute Tribe owns the fee interest to much of the land on which Kukui’s drilling properties are located.

In the deal, the tribe will acquire the drilling rights and the leases owned by Kukui and will merge Kukui’s assets into its operating company. No land was involved in the sale.

Kukui, formerly known as McKenzie Methane Inc., operates 150 coal bed methane wells in Alabama, Colorado, New Mexico and Texas.

Led by former trustee Matsuo Takabuki, the estate initially acquired a minority stake in the oil and gas operator during the 1980s. At the time it was run by the McKenzie family of Houston.

The Kamehameha Schools took over the venture after McKenzie was forced into bankruptcy protection in 1989.

The estate initially posted an $85 million loss on the venture when McKenzie went into bankruptcy protection. It recorded another $40 million capital loss in 1996.

At the direction of Fern and former trustee Oswald Stender, the estate later restructured Kukui and the company has since become profitable and has acquired additional oil and gas properties.

The Kukui investment also received notoriety when the bankruptcy proceedings revealed that former Kamehameha Schools trustees Takabuki, Myron “Pinky” Thompson, William Richardson and several former staffers invested more than $2 million in McKenzie Methane.

The personal investment was cited by critics as a conflict of interest while others argued that the deal was unsuitable for a charitable trust….

* * *

May 16, 2002

Kamehameha uses Enron firm in audit

By Jim Dooley, Honolulu Advertiser

The beleaguered accounting firm Arthur Andersen, on trial in Houston for obstructing justice in the federal investigation of Enron Corp.’s collapse, was paid $2.1 million last year to help audit Hawaii’s largest nonprofit organization, the $6 billion Kamehameha Schools, according to the organization’s tax return, made public yesterday.

Eric Yeaman, chief financial officer of Kamehameha Schools, was an Arthur Andersen employee, working as “internal auditor” of the schools, when the Kamehameha trustees decided to hire him for the CFO post in July 2000.

Arthur Andersen has continued to serve as internal auditor and provides other services to Kamehameha Schools. The company will receive a slightly lower sum this year than the $2.1 million it was paid last year, according to Yeaman and to the tax return.

Yeaman said he has a conflict of interest in dealing with Arthur Andersen and “leaves the room” when there is any discussion at Kamehameha Schools about a business transaction with the accounting firm.

Hamilton McCubbin, chief executive officer of the schools, said the Honolulu office of Arthur Andersen has demonstrated “outstanding integrity” in its dealings with Kamehameha Schools.

The internal auditing contract with Arthur Andersen expires this summer, and the schools plan to hire their own internal auditing staff rather than rely on an outside company for the work, McCubbin said.

But an outside firm will be needed to help in that transition and to provide independent expertise when needed by the internal auditing staff, McCubbin said.

Arthur Andersen will be free to bid for that work, he said.

Once the fourth-largest accounting firm in the world, Arthur Andersen has lost clients steadily in the wake of the Enron scandal. In addition to the criminal trial now going on in Houston, Arthur Andersen has been named in a class action lawsuit filed by Enron shareholders. The firm has been selling offices and assets around the country, and could face bankruptcy in the near future, according to news reports.

The Kamehameha Schools tax return shows net assets of more than $4 billion. A wholly owned subsidiary, Kamehameha Activities Association, filing a separate return for the first time, listed assets of more than $2 billion….

For more on Arthur Andersen, GO TO > > > P-s-s-t, wanna buy a good audit?

* * *

May 23, 2002

CEO’s daughter gets job at Kamehameha

Hamilton McCubbin played
no role in the hiring, the trust says

By Rick Daysog, Honolulu Star-Bulletin

The Kamehameha Schools has hired the daughter of Chief Executive Officer Hamilton McCubbin to a part-time position in a potential conflict of interest.

In a 38-page report recently sent to the Internal Revenue Service, the estate’s internal auditor Arthur Andersen LLP said that the trust hired “an immediate family member of a top (Kamehameha Schools) executive” to a temporary job, starting March 26.

Arthur Andersen’s report — which also was given to the estate’s five trustees, the Attorney General’s Office and the trust’s court-appointed master Ben Matsubara — did not identify the executive and his relative. But the trust confirmed that McCubbin’s daughter, who is a doctoral candidate at a mainland college, was hired at the estate as a research assistant for the summer….

Peter Hanashiro, an Arthur Andersen partner, declined comment when asked why the firm did not identify McCubbin in the report. Deputy Attorney General Hugh Jones also declined comment.

Arthur Andersen has served as the estate’s internal auditor since February 2000. For the fiscal year ending June 30, 2001, the estate paid the accounting firm $2.1 million.

The report, known as the Closing Agreement Compliance Monitoring Report, was required under the February 2000 closing agreement between the IRS and the Kamehameha Schools.

In the closing agreement, the IRS reaffirmed the estate’s tax-exempt status after the $6 billion charitable trust agreed to implement major management reforms and remove former board members Henry Peters, Richard “Dickie” Wong, Lokelani Lindsey, Gerard Jervis and Oswald Stender.

The IRS and the Attorney General’s Office alleged that the former trustees engaged in numerous conflicts of interest and self-dealing.

The reforms included a strict conflict-of-interest policy.

The Star-Bulletin obtained a copy of Arthur Andersen’s report from the Attorney General’s Office after filing a formal request under the state’s open-records law.

The Star-Bulletin initially asked the estate for a copy of the compliance monitoring report, but trust officials denied the request. The estate said such reports typically cover internal and operational matters that are “often of a sensitive nature.”

The bulk of Arthur Andersen’s report described how trust officials have complied with the terms of the IRS closing agreement.

The report also described a management dispute involving the head of Kukui Inc., a for-profit trust unit which owns McKenzie Methane Corp., a Houston-based natural gas producer.

In a Feb. 27 letter to senior trust executives, Kukui President Dennis Fern alleged that Wendell Brooks, the former head of the estate’s nonprofit Bishop Holdings Corp., abused his power and intimidated Kukui’s management.

Fern, the estate’s former internal auditor, complained that several activities involving Kukui and Bishop Holdings were not conducted at arm’s length and were driven by the estate’s asset allocation strategies, Arthur Andersen said.

Bishop Holding is the parent of Kukui’s sole shareholder.

The estate said it hired an outside law firm to review Fern’s allegations.

The law firm found that the trust did not violate any of its internal policies and that there were sufficient checks and balances to avert potential abuses of power.

Fern, the estate’s former internal auditor, could not be reached.

Brooks declined comment….

– For more on the IRS Closing Agreement, GO TO > > > Harmon’s Letter to the IRS

– For more on Kamehameha’s outside law firms, GO TO > > > Harmon’s Letters to Hamilton McCubbin

< < < FLASHBACK < < <

June 16, 2000

Kamehameha Schools’ statement of losses may provide grist
for a state suit against the ex-trustees

By Rick Daysog, Star-Bulletin

Despite unprecedented financial growth, the Kamehameha Schools recorded more than $335 million in losses and writeoffs during the past decade.

An internal trust document included in recent court filings reveals the $6 billion charitable trust declared more than $235 million in capitol losses and wrote off more than $100 million in bad investments since 1989.

The losses and write-offs — more than three times the Kamehameha Schools’ annual $100 million educational budget — were covered by about $3 billion in revenues that the trust took in during the same 10-year period. But the troubled investments underscore criticisms that the estate’s embattled former trustees mismanaged assets and took ill-advised bets on speculative ventures.

“The former trustees like to tell the public about their home runs but not their strikeouts,” said Randy Roth, University of Hawaii law professor and co-author of the 1997 “Broken Trust” article that prompted the state to open its investigation of the former trustees.

“One gets the impression that the investments were made on an ad hoc basis without much attempt to diversify in meaningful ways.”

A write-off means that the estate considers the complete investment a loss. A capital loss, on the other hand, represents that portion of an investment that is impaired.

The trust’s statement of losses — which covers the period between June 30, 1989 and Jan. 20, 2000 — will likely serve as a key exhibit in Attorney General Earl Anzai’s suit seeking multimillion-dollar surcharges against former trustees Henry Peters, Richard “Dickie” Wong, Lokelani Lindsey, Gerard Jervis and Oswald Stender.

The state’s suit, which is scheduled to go to trial Sept. 18, alleges the ex-board members took excessive pay, mismanaged Kamehameha Schools’ educational programs and incurred more than $200 million in investment losses during their tenures.

The former trustees have denied wrongdoing, citing the estate’s recent string of record revenues. They point to the $552 million windfall from last year’s initial public offering of Goldman Sachs Group, which pushed the trust’s 1999 revenues to more than $800 million.

An estate spokesman had no comment. But the Kamehameha Schools’ interim trustees are taking steps to clean up the trust’s investment portfolio. They recently wrote off $50 million in bad investments and are implementing a new investment policy that focus on blue-chip investments.

The loss statement compiled by the interim board of trustees provides a broad and more detailed look into the estate’s troubled holdings, many of which were initiated in the mid-1980s by former trustee Matsuo Takabuki.

The estate’s largest write-off was for $50 million. It involved a 1987 investment in Cadillac Fairview Corp., a Toronto-based office and retail property developer.

The estate, following the advice of Chicago-based JMB Realty Corp., joined 38 institutional investors in the $2.6 billion leveraged buyout of Cadillac Fairview, but the investment went south after the mainland recession of the early 1990s forced the developer into bankruptcy protection.

In 1996, the Kamehameha Schools suffered a $40 million capital loss in McKenzie Methane Inc., a Houston-based natural gas producer. The loss came after McKenzie Methane was placed under federal bankruptcy protection.

McKenzie Methane has since emerged from bankruptcy and has been producing operating income for the estate.

The estate also recorded a $30 million loss in 1992 from its investment in Pembridge Associates, a mainland investment company that acquired a large England-based paper products and packaging materials conglomerate named DRG in a $900 million leveraged buyout in 1989.

The Kamehameha Schools partners in the deal included Frederick “Ted” Field, an heir to the Marshall Field department store fortune and an investor in McKenzie Methane, and North Carolina investor Clay Hamner.

Hamner figures in a number of money losing ventures for the estate, including Hanford’s Inc., a North Carolina ornament maker founded by the family of former presidential candidate Elizabeth Hanford Dole, and DC Land Group, which developed the posh Robert Trent Jones golf course in Virginia.

During the year ending June 30, 1993, the Kamehameha Schools realized a $7.4 million loss in Hanford’s and a $2 million loss from DC Land.

* * *

July 12, 2000

Kamehameha Schools Hires
Financial Officer

By Rick Daysog, Honolulu Star-Bulletin

The Kamehameha Schools announced today that it has hired accountant Eric Yeaman as its first chief financial officer.

The $6 billion charitable trust said Yeaman, a senior manager in the accounting firm of Arthur Andersen LLP and a director of the estate’s internal audit office, will oversee budget functions, short-term investments, tax issues and financial planning.

Hamilton McCubbin, chief executive officer, said Yeaman will strengthen the trust’s management team as it expands its educational programs.

Mr. Yeaman’s extensive knowledge of the Kamehameha financial and accounting system … his proven integrity and sterling reputation as a leader and financial officer and his consultative management style make him the perfect fit with our ‘go forward’ plans for the future of Kamehameha Schools,” McCubbin said.

Yeaman’s appointment fills the last vacancy on the executive management team. The trust, which has been under court order to implement a CEO-based system of management, recently named local real estate executive Wendell Brooks as chief investment officer and attorney Colleen Wong as chief legal officer.

Retired Brig. Gen. Dwight Kealoha is serving as the trust’s acting chief operating officer, filling in for former general counsel Nathan Aipa.

Aipa took a paid leave of absence in May after the trust initiated an internal investigation into trust’s outside law firms and accountants.

Yeaman, who assumes his new post Monday, was part of the Arthur Andersen team that conducted a court-mandated financial and management audit of the Kamehameha Schools that led to major reforms of the trust’s operations.

The 336-page audit found that the estate under former trustees Henry Peters, Richard “Dickie” Wong, Oswald Stender, Gerard Jervis and Lokelani Lindsey generated subpar investment returns and withheld more than $300 million of trust income from its primary mission of educating native Hawaiian children….

For more on Arthur Andersen, GO TO > > > P-s-s-t, wanna buy a good audit? ; The Story of Enron

* * *

August 1, 1998

Landowners propose methane settlement

Copyright © 1998 The Durango Herald. All rights reserved.

By Bret Bell, Herald Staff Writer

A coalition of non-Indian mineral owners accepted the Southern Ute Tribe’s offer to negotiate a settlement in its coal-bed methane lawsuit Friday, saying it wants a deal identical to the one some other landowners got when the operating companies they leased to decided not to fight the tribe’s claims.

The La Plata County royalty owners, represented by the nonprofit Land Owners Coalseam Committee (LOCC), offered the settlement in a proposal to the tribe sent to the Herald. It came a week after Southern Ute Chairman Clement Frost sent a letter to the Herald asking for a settlement rather than risk further antagonism with the tribe’s neighbors.

The public exchange of letters comes in the aftermath of a July 20 federal appellate court ruling that the Southern Ute Tribe owns the gas landowners had previously thought was theirs. The judges decided that coal-bed methane is part of the coal estate reserved by the federal government for the benefit of the tribe earlier this century.

It is not known whether the tribe will seek or win back-royalties from the 2,000 to 3,000 La Plata County mineral owners, retroactive to when the tribe sued in 1991.

An estimated 30 percent of the royalty owners are protected from suspension of their checks — at least until a final, nonappealable decision favoring the tribe has been reached in the case — because about 10 operators working their leases entered into settlement agreements with the tribe.

But Amoco Production Co. — the largest coal-bed methane producer in the county — and a few other operators decided to fiight it out in court. They stopped making royalty payments directly to the mineral owners last year, placing the money in escrow instead.

The LOCC says it is confident the case will eventually be won on appeals, but concedes it could be more than a decade before a final decision is made — too long of a time for landowners who say they depend on the royalty income.

“If we had to litigate all the way through to the Supreme Court, I feel strongly that we can win. But, I don”t know if at that point you can win,” said Don Gosney, who sits on the LOCC executive committee and is one of the biggest mineral owners in the county. “We”ve got a gun to our heads right now. Personally, I”d really like to settle.”

Members of the Southern Ute Tribal Council and lawyers for the tribe could not be reached for comment Friday.

In addition to the abrupt loss of income, the landowners fear they will have to pay the back-royalties and then be required to repay the Internal Revenue Service tax credits previously taken for natural gas produced from the coal.

“It’s unfortunate not to be leased to (one of the operators) that settled,” Gosney said. “If the tribe goes after the back-royalties, it could cause hardship and damage almost beyond belief.” Gosney said he stands to lose about $1 million annually from royalties if the appellate court ruling stands.

The LOCC’s proposal asks the tribe to extend to all mineral owners the benefit of settlements previously entered into with the 10 or so gas well operators last year.

Among the operators that settled were MarkWest, SG I, SG II, Palo, Arco, Conoco, McKenzie Methane, Tiffany, Meridian and Emerald.

The settlement reached gives the tribe 5 percent of everything those operators produce. As part of the deal, the Southern Utes agreed not to seek back-royalties from the landowners regardless of the court decision and allowed them to continue receiving payments until a definitive court judgment was made.

The LOCC is asking for the same deal, absent the settlement offered to the oil and gas operators. It is asking that Amoco participate in negotiations with the LOCC and the tribe.

“(We) are requesting that the Southern Ute Indian Tribe act out of its generosity, as a good neighbor, to remove at least a portion of the uncertainty and potential hardship from mineral owners affected by the pending litigation,” the proposal said.

Gosney said in exchange, the tribe would gain a friendly neighbor and an end to costly litigation.

“The lawyers are going to be the only ones who really win here if we don’t settle,” he said. “We should all start sending our children to law school.”

He said if the tribe were not to settle, the potential backlash would be severe. He said the animosity might prompt some of those affected to start fighting the long-stalled Animas-La Plata water project or oppose tribal sovereignty.

“There is a change in attitude nationwide that could be influenced by the people in the western United States,” Gosney said.

In his letter calling for a settlement, Frost said he wanted to strike a deal rather than “disrupt the community” and “turn our neighbors against us.”

Gosney said he was glad to see the offer, but now he hopes the tribe will follow through.

“Of course we were pleased, and we are willing to negotiate and interested to see if they’re reasonable or not,” he said. “I hope the tribe and its attorneys are serious and are not doing it just for good public relations.”….


 

Arthur Andersen, LLP – KUKUI, Inc.’s auditor that should write a book entitled, “The Joy of Cooking Books with Methane”.

May 23, 2002

CEO’s daughter gets job at Kamehameha

Hamilton McCubbin played
no role in the hiring, the trust says

By Rick Daysog, Honolulu Star-Bulletin

The Kamehameha Schools has hired the daughter of Chief Executive Officer Hamilton McCubbin to a part-time position in a potential conflict of interest.

In a 38-page report recently sent to the Internal Revenue Service, the estate’s internal auditor Arthur Andersen LLP said that the trust hired “an immediate family member of a top (Kamehameha Schools) executive” to a temporary job, starting March 26.

Arthur Andersen’s report — which also was given to the estate’s five trustees, the Attorney General’s Office and the trust’s court-appointed master Ben Matsubara — did not identify the executive and his relative. But the trust confirmed that McCubbin’s daughter, who is a doctoral candidate at a mainland college, was hired at the estate as a research assistant for the summer.

McCubbin did not return calls, but the trust said he was not involved in his daughter’s hiring and had no influence in the process.

The estate, in a statement approved by trustees, also said the position was advertised internally and externally. The position ends June 30.

Arthur Andersen said the division that hired McCubbin’s daughter reports to the chief executive officer, but the accounting firm described the hiring as an “isolated personnel matter” that was conducted through the normal employment process.

The trust’s in-house lawyers concluded that matter did not violate the estate’s conflict-of-interest policies, Arthur Andersen said.

The trust said McCubbin’s annual conflict-of-interest disclosure form was filed in February and predated his daughter’s hiring.

Subsequently, McCubbin has amended his disclosure form to list her employment.

Arthur Andersen indicated that McCubbin filed his amended disclosure form after the issue was first raised in April by the internal auditing team. The executive did not immediately update his disclosure form “due to an oversight,” Arthur Andersen said.

Peter Hanashiro, an Arthur Andersen partner, declined comment when asked why the firm did not identify McCubbin in the report. Deputy Attorney General Hugh Jones also declined comment.

Arthur Andersen has served as the estate’s internal auditor since February 2000. For the fiscal year ending June 30, 2001, the estate paid the accounting firm $2.1 million.

The report, known as the Closing Agreement Compliance Monitoring Report, was required under the February 2000 closing agreement between the IRS and the Kamehameha Schools.

In the closing agreement, the IRS reaffirmed the estate’s tax-exempt status after the $6 billion charitable trust agreed to implement major management reforms and remove former board members Henry Peters, Richard “Dickie” Wong, Lokelani Lindsey, Gerard Jervis and Oswald Stender.

The IRS and the Attorney General’s Office alleged that the former trustees engaged in numerous conflicts of interest and self-dealing.

The reforms included a strict conflict-of-interest policy.

The Star-Bulletin obtained a copy of Arthur Andersen’s report from the Attorney General’s Office after filing a formal request under the state’s open-records law.

The Star-Bulletin initially asked the estate for a copy of the compliance monitoring report, but trust officials denied the request. The estate said such reports typically cover internal and operational matters that are “often of a sensitive nature.”

The bulk of Arthur Andersen’s report described how trust officials have complied with the terms of the IRS closing agreement.

The report also described a management dispute involving the head of Kukui Inc., a for-profit trust unit which owns McKenzie Methane Corp., a Houston-based natural gas producer.

In a Feb. 27 letter to senior trust executives, Kukui President Dennis Fern alleged that Wendell Brooks, the former head of the estate’s nonprofit Bishop Holdings Corp., abused his power and intimidated Kukui’s management.

Fern, the estate’s former internal auditor, complained that several activities involving Kukui and Bishop Holdings were not conducted at arm’s length and were driven by the estate’s asset allocation strategies, Arthur Andersen said.

Bishop Holding is the parent of Kukui’s sole shareholder.

The estate said it hired an outside law firm to review Fern’s allegations.

The law firm found that the trust did not violate any of its internal policies and that there were sufficient checks and balances to avert potential abuses of power.

Fern, the estate’s former internal auditor, could not be reached.

Brooks declined comment….

See also: Colleen Wong , Wendell Brooks

For more on Arthur Andersen, GO TO > > > P-s-s-t, wanna buy a good audit? ; The Story of Enron

For more on Hamilton McCubbin, GO TO: Part III ; Harmon’s Letters to the New Trustees


 

Colleen Wong – Kamehameha Schools’ Chief Legal Officer.

For more, GO TO > > > RICO in Paradise; Harmon’s Letters to the New Trustees; Woo vs. Harmon – Witness Colleen Wong


 

McKenzie Methane – A Texas methane gas company in which Bishop Estate was the majority investor– AND IN WHICH THE ESTATE’S TRUSTEES, MANAGERS, FRIENDS AND OTHER INSIDERS CO-INVESTED THEIR PERSONAL FUNDS, THEN LET THE ESTATE BAIL THEM OUT WHEN THE DEAL FIZZLED.

~ ~ ~

From the RICO lawsuit, Harmon v. Trustees of Bishop Estate, et al.:

. . . Plaintiff alleges that [Nathan] Aipa’s wrongful acts are multitudinous. These acts include, but are not limited to: . . . Facilitating and concealing co-investments in KSBE deals by the Trustees, employees, family members and business associates.

In 1989 the four KSBE Trustees, Peters, Takabuki, Richardson and Thompson approved of the investment of approximately $85 million in a Houston-based energy venture with McKenzie Methane. (Trustee Lyman had recently passed away and a fifth trustee had not been appointed.)

This same venture also received more than $3 million in personal funds from all four trustees and employees and business associates of the estate. The Honolulu Advertiser reported in their February 26, 1995 issue that: “The troubled deal may cost the estate as much as $65 million in lost capital and at least twice that much in lost earnings and tax benefits.”…

Honolulu businessman Desmond Byrne … called the personal investments by estate trustees and staffers ‘an absolutely improper conflict of interest. It raises the appearance that their official decisions are affected by their own personal financial interests’….

The current board is almost completely different from that of 1989. Only one trustee, Henry Peters, remains. But the current board still holds that the old one did nothing wrong, according to [Nathan] Aipa….

There was no conflict of interest,” Aipa said.

The Texas court files clearly show, however, that the trustees, their employees and associates relied on estate reports and financial data when they decided to put their own money in the deal. Estate personnel have immediate access to the high-priced and sophisticated financial expertise of such firms as First Boston Bank and Goldman, Sachs & Co.

The estate, a non-profit, tax-exempt institution … must be very careful in structuring its investment activities so it won’t imperil its tax-exempt status. The Houston investment was particularly tricky because one of the principal benefits was that the estate would receive federal energy tax credits, which the tax-exempt estate intended to sell.”

This same news article went on to describe other personal investments in estate-related business deals: “According to court records, the estate board of trustees was told in April, 1989 by Aipa, that ‘no conflict (of interest) exists in the personal investments.’

The personal investments were made ‘only after careful review of the issues and advice from the law firm of Rush Moore Craven & Stricklin,’ Aipa said. But current trustee Oswald Stender … said under oath in a 1993 deposition that he would not have made such a personal investment … that he would not invest in activities … that I had self-dealing in.

Takabuki, his wife, three children and family company, Magba Corp., invested $1.5 million….

The investments were made through a series of five partnerships, called the ‘HAK Partnerships’, that were organized and administered by Mitchell Gilbert, Bishop Estate financial assets manager from 1988 to September 1994….

Gilbert and members of his family invested nearly $72,000 in the five partnerships, the court records show. And he invited various influential ‘investment affiliates’ of the estate to invest in the HAK Partnerships. . . In ‘marketing’ the deal to potential investors, he was acting individually and not as a representative of the Bishop Estate, Gilbert said in his deposition… But the letters he wrote were on estate stationery and he signed them as Bishop Estate’s financial assets manager….

A Texas lawyer for Bishop Estate said in Houston bankruptcy court last month that the estate can only hope to recover $20 million at most of its $85 million investment….

According to the Honolulu Advertiser, other co-investors included:

Henry Peters (trustee)

William Richardson (former trustee and subsequent consultant; Sec./Treasurer of P&C)

Myron Thompson (former trustee)

Matsuo Takabuki (former trustee and subsequent consultant)

Dave Thomas (owner of Wendy’s restaurants and co-investor with KSBE on several other projects)

William E. Simon (former U.S. Treasury Secretary, and co-investor with KSBE on several other projects, including HonFed Savings & Loan, Sino Finance, Xiamen Bank (China), and SoCal Holdings)

Wayne Rogers (the “Mash” actor, who later brought many suits against KSBE for the Kona Enterprises deal)

Bruce Nelson (treasurer of the Rockefeller Group)

Raymond Pettit (CFO of the Rockefeller Group)

Frederick “Ted” Field (Big-time movie producer. Three Field employees also invested. Field was the estate’s partner in the corporate takeover of European conglomerate DRG, Inc. He later brought suit against the estate in a co-investment deal involving The Pantry)

Mark McConaghy (Bishop Estate’s principal tax lawyer and lobbyist. McConaghy, who works for the Price Waterhouse accounting firm’s national headquarters in Washington, D.C., was a finalist on the state Supreme Court list of nominees to fill the latest vacancy on the estate board of trustees, losing out to Gerard Jervis.)

Michael Chun (President of Kamehameha Schools)

Gilbert Tam (then-Director of Administration, KSBE; currently, an officer of Bank of Hawaii and director, P&C)

Guido Giacommetti (then Director of Asset Management, KSBE; now court-appointed trustee for the Sukamto Sia mega-bucks bankruptcy)

Anthony Sereno (deceased, then Board of Directors, Royal Hawaiian Shopping Center, Inc.)

Neil Hannahs (head of the estate’s Kakaako development project)

Charles Maeda (head of Information Services Division, KSBE)

Richard Wong (president of RHSC and Pauahi Holdings Corp.)

Wallace Tirrell (then president of Kamehameha Investment Corp.)

Gilbert Ishikawa (KSBE tax manager)

Ed Hendrickson (KSBE Financial Assets Division)

Rodney Park (then KSBE Controller; currently Dir, Administration Group, and President, P&C)

Wally Chin (then Deputy Controller; currently Controller, KSBE)

Donald K. H. Pang (father of KSBE employee, Leeanne Crabbe)

AIPA and others did such a good job of concealing this information, that Plaintiff was unaware of these co-investments until he read about them in the newspaper — even though his job at the estate required him to be informed of the details of mergers and acquisitions for insurance and risk management purposes….

For example, in March 1993, B. M. McKenzie and McKenzie Methane Corporation filed a lawsuit for $2.3 billion against the trustees and KSBE. Additional defendants were the HAK Partnerships I, II, III, IV and V; Smith-Gordy Methane Co.; SG Methane Co., Inc.; Gordy Oil Co.; L. H. Smith; R. D. Gordy; D. A. Barras; Lee H. Henkel, III; Mitch Gilbert; Royal Hawaiian Shopping Center, Inc.; Maralex, Inc.; M. O’Hare; Kukui, Inc.; JGI Resources, Inc; and Northwestern Mutual Life Insurance Co.

AIPA initially did not report this lawsuit to the insurance company, United Educators. Plaintiff learned of this lawsuit several months after it was filed, and only as a result of his inquiring about unreported claims in preparation for the renewal of this policy. When Harmon did report this claim to the insurance carrier, Aipa immediately took control and directed that all correspondence to or from the carrier would be made by him.

AIPA repeatedly refused to furnish information to the insurance company regarding the claim, despite frequent and urgent requests. Eventually, the insurance company closed its files on the case due to Aipa’s failure to respond to the carrier’s request for information. The actual cost to the estate is unknown, but Plaintiff estimates that the loss of legal defense costs alone could easily have been in excess of a million dollars….

* * *

August 20, 1997

Fired exec questioned

State attorneys interview ex-worker
who alleges irregularities

By Bruce Dunford, Associated Press

A Bishop Estate official who says he was fired last year for raising questions about irregular and possibly 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 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.

Harmon’s documents support his proposed settlement for what he claims was his wrongful termination by Bishop Estate. It seeks up to $1.8 million.

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.

Honolulu Star-Bulletinhttp://starbulletin.com/97/08/20/news/story1.html

* * * * *

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 Frederick 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.

(Catbird Note: Judge David Ezra was the same judge assigned to the Bobby Harmon vs. Trustees of Bishop Estate RICO lawsuit, after Judge Samuel King excused himself because he had openly criticized the estate.)

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 Schutte 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.

Harmon is seeking up to $1.8 million in compensation from Bishop Estate for what he claims was his wrongful termination….

Honolulu Star-Bulletinhttp://starbulletin.com/97/08/21/news/story2.html

~ ~ ~

For more on Cades Schutte Fleming & Wright, GO TO > > > The Morgan, Lewis & Bockius Report

* * * * *

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.

– Honolulu Star-Bulletinhttp://starbulletin.com/97/08/26/news/story1.htm

* * * * *

August 27, 1997

Cayetano…

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 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….

Honolulu Star-Bulletinhttp://starbulletin.com/97/08/27/news/story1.html


 

Dan Inouye – The senior senator from Hawaii; called by some Hawaii’s “political god-father.”

For more, GO TO > > > Predators in Paradise


 

Dennis Fern – President of Kukui, Inc.

From the Kukui, Inc. website:

MANAGEMENT OF KUKUI OPERATING COMPANY

Dennis E. Fern – President

Mr. Fern is a graduate of Willamette University in Oregon with a Bachelor’s degree in Mathematics. A Certified Public Accountant, Mr. -Fern worked for PricewaterhouseCoopers (formerly Coopers & Lybrand) in their auditing division.

In 1983, Mr. Fern joined Kamehameha Schools Bishop Estate (KS), the largest private landowner in the state of Hawaii and an education trust, as their Internal Auditor.

In 1991, in his role as Internal Auditor, he became involved in KS’ investment in coalbed methane projects in Alabama, Colorado, and New Mexico. In 1996, he took over responsibility for KUKUI, INC., a wholly owned taxable subsidiary of KS, which had been assigned KS’ interest in the coalbed methane project (a.k.a. the McKenzie Methane deal).

* * *

Testimonial letter to The Woodlands Resort:

“It’s taken me quite a while to calm down after our stay at The Woodlands Resort & Conference Center. I thought it best to take some time to gather my thoughts and I now feel able to put in writing my views on your staff and facility. After Liz Edwards, of our Houston office, and I toured your property and met with you and Dana Denton, I believed The Woodlands would meet our every need. I was wrong! I apologize for the use of some very strong “f” words to describe the experience of our group…………fun, fantastic, fabulous, or some “e” words……exceptional, extraordinary, excellent, or a plain old “g” word……great!

The Woodlands exceeded our every expectation. Bob……Mahalo (Thank you) for making this years annual gathering (our fourth annual holiday gathering) truly a memorable one. We speak of the aloha spirit here in the islands. We found an example of it at The Woodlands.”

Dennis E Fern
President
KUKUI, INC.

* * *

See also: McKenzie Methane ; The Woodlands

For more, GO TO > > > The Sinking of the Ehime Maru; Woo vs Harmon


 

Eric Martinson A Kamehameha Schools manager from 1984 to 1996, at one point managed the estate’s substantial financial holdings, which included a multibillion interest in Goldman Sachs.

From the RICO lawsuit – Harmon v. Federal Insurance Co, Marsh & McLennan, Trustees of Bishop Estate, et al.:

o) Unison Pacific – As a subsidiary of KSBE, General Liability, Directors & Officers Liability and other insurance coverages for this entity were combined under KSBE’s master policies, and premium charges were allocated according to the entity’s risk exposures. After this arrangement had been in effect for several years, Eric Martinson, KSBE Assets Manager and officer of Unison Pacific, directed KSBE’s accounting department to reallocate Unison’s premiums. This had the effect of KSBE paying the premiums for this subsidiary.

~ ~ ~

From Harmon’s letters to the Hawaii Insurance Commissioner:

Deceptive Business Practices; Conflicts of Interest; Mail Fraud.

At the direction of Henry Peters and other managers for KSBE, premiums that should have been charged to subsidiaries were actually paid by KSBE. One example is Eric Martinson’s memorandum of September 24, 1996 to Ramona Hinck regarding the reallocation of premiums for the SoCal, AFCO, Unison and SINO subsidiaries. As a result of this directive, premium charges that had been previously allocated by me to these subsidiaries were transferred to KSBE. Eric Martinson was the Financial Assets Manager for KSBE, and was also the Secretary/Treasurer, Sino Finance Group LLC, and Vice President, Unison Pacific Investment (US) Limited.

Under the lease agreements for various commercial properties that are owned and managed by the estate, insurance costs are directly passed on to the lessees and tenants through monthly maintenance fees. As a result of the overcharges by M&M, and the improper allocations of premiums and claims costs to the various subsidiaries, these lessees and tenants were wrongfully and deceptively billed a share of these higher costs. The various commercial properties would include Royal Hawaiian Shopping Center, Windward Mall, Bishop Commerce Center (Georgia), Desert Springs Marketplace (California), and Velvet Cloak Inn (North Carolina), among others.

These monthly maintenance billings and payments are normally done by mail and involve interstate commerce since many of KSBE’s properties, and the home offices of various lessees, are located on the mainland. As a result, these acts may be subject to the 1994 Federal Insurance Crimes Act, which covers crimes by persons engaged in the business of insurance whose activities affect interstate commerce….


 

Gale Norton – Bush’s Secretary of the Interior who’s leading the charge for drilling for oil on Native American lands.

For more, GO TO > > > The Bureau of Indian Affairs


 

Gene and Nora Lum – Democratic fund-raisers and gas pipeline wheeler-dealers.

From freerepublic:

Lum Pleads Guilty to Tax Fraud

Tulsa, Okla (AP) 8/13/98 – Democratic fund-raiser Gene K.H. Lum changed his plea in a tax fraud case to guilty Thursday as part of an agreement that seeks his cooperation in other investigations.

Lum, who pleaded guilty in 1997 to making illegal donations to Democratic campaigns, admitted he filed tax returns that claimed more than $7.1 million in false deductions for him and his wife.

Lum, 59, faces up to six years in prison and $500,000 in fines at a Nov 23 sentencing….

Under the pleas agreement, the government agreed not to seek indictments against his wife, Nora, or their corporations….

The Lums, who operated a Tulsa-based gas pipeline company at the time of the violations, pleaded guilty last year to a charge of felony conspiracy for laundering $50,000 in illegal donations to 1994 congressional campaigns.

Their daughter, Trisha C. Lum, pleaded guilty to a misdemeanor violation in a separate campaign finance incident.

Gene and Norn Lum each received 10 months in prison and $30,000 fines in that case.

The tax charges stemmed from information uncovered by independent counsel Daniel S. Pearson during his investigation of Commerce Secretary Ronald H. Brown.

Pearson closed his inquiry when Brown was killed in an airplane crash. He transferred his findings about other people to the Justice Dept for continued investigation and prosecution.

* * *

Comments in the freerepublic forum: . . . Of some interest to me was the fact that the golf course Michael Brown (son of Ron Brown) was given a membership to (and which Bill Clinton often uses …) in suburban Virginia was owned by the Bishop Estate of Hawaii. . . . Bishop put close to 100 million into a company called McKenzie Methane Gas a few years before Dynamic. Bishop also bought into a Red Chip bank with Mochtar Riady’s brother in law. Bishop hired as its Washington law firm Verner Liipert whose lobbyist is ex Gov. John Waihee. Waihee appointed 4 of the 5 Bishop Trustees. Waihee attends Clinton coffees. Waihee appointed Sen. Akaka. Verneer Liipert has another big name partner ex Sen. George Mitchell. Mitchell’s son in law was president of Lum’s company Dynamic Energy. Bishop owns 11% of Goldman Sachs. Sec of Treasury Robert Rubin’s blind trust managed by Bishop, etc, etc. (abwehr, 8/13/98)

* * *

See also: John Waihee ; Mochtar Riady ; Sports Shinko ; Yakuza


 

Gilbert Tam – A former principal executive of Kamehameha Schools/Bishop Estate; Director, P&C Insurance Company; Officer, Bank of Hawaii. Currently, Mr. Tam is an officer for Sandwich Isles Communications.

* * *

From RICO lawsuit Harmon v. Federal Insurance Company; P&C Insurance Company; Marsh & McLennan, Inc. et al.:

Gilbert Tam is a Director, P&C Insurance Company, Inc. and the former Administrative Group Director for Kamehameha Schools Bishop Estate. Tam is currently an officer with Bank of Hawaii, which has substantial financial connections with KSBE.

Tam was also a co-investor in the McKenzie Methane deal at the time he was a KSBE manager. Plaintiff alleges that Tam’s actions, through his complicity, deceptions, and breach of fiduciary duties, in collusion with some or all of trustees of KSBE, with other managers and employees of KSBE, with other officers and directors of P&C, and with outside contractors, attorneys, politicians and others, constituted a conspiracy to defraud P&C and the beneficiaries of the Estate of Bernice Pauahi Bishop; racketeering; mail fraud; wire fraud; extortion; and violation of IRS interim sanctions regulations….

* * *

For more, GO TO > > > Vultures of the Sandwich Isles


 

Kukui, Inc. – A for-profit oil and gas subsidiary formed by the Kamehameha Schools Bishop Estate to take over the operations of the bankrupt business venture McKenzie Methane.

September 28, 2001

EuroGas Shareholder-Information No. 11

==> LETTER TO THE SHAREHOLDERS <==

Ladies and Gentlemen,

The terrorist attack in New York and Washington on September 11, 2001 changed the world. We silently mourn our friends in New York and the members of their families who lost their lives or were injured through this cowardly deed.

But life must go on, and we must try to forget these terrible occurrences from time to time, so that we can concentrate on our daily affairs….

Of all the company’s legal disputes during the past six months, the one with Kukui Inc. was finally resolved and dismissed in court. The suit brought years ago before the Houston court by the bankruptcy trustee of the McKenzie family, Trustee Smith, is still proceeding.

Settlement discussions on this matter have been going on for almost a year. No other major legal disputes are underway.

* * *

From their website:

MANAGEMENT OF KUKUI OPERATING COMPANY

Dennis E. Fern – President

Mr. Fern is a graduate of Willamette University in Oregon with a Bachelor’s degree in Mathematics. A Certified Public Accountant, Mr. Fern worked for PricewaterhouseCoopers (formerly Coopers & Lybrand, CPAs) in their auditing division. In 1983, Mr. Fern joined Kamehameha Schools Bishop Estate (KS), the largest private landowner in the state of Hawaii and an education trust, as their Internal Auditor. In 1991, in his role as Internal Auditor, he became involved in KS’ investment in coalbed methane projects in Alabama, Colorado, and New Mexico. In 1996, he took over responsibility for KUKUI, INC., a wholly owned taxable subsidiary of KS, which had been assigned KS’ interest in the coalbed methane.

Steve Sandlin – Vice President Land

Mr. Sandlin is a 1974 graduate of the University of Oklahoma with a BBA degree in Petroleum Land Management. A Certified Professional Landman, Mr. Sandlin began his professional career as a Petroleum Landman with Amoco Production Company in Houston, Texas, in their Texas Coast (east and south Texas and north Louisiana) District. In 1977 he joined American Petrofina Company of Texas. As the Assistant Land Manager, he negotiated the acquisition of exploration prospects submitted to Fina by the industry in all of the major geologic basins in the lower forty-eight states and offshore Gulf of Mexico. Mr. Sandlin was employed by Harry H. Cullen, Oil Operator, a small Houston exploration company, in 1981. He supervised all land department activities connected with exploration prospects in the Texas and Louisiana Gulf Coast, South Texas and Oklahoma. In 1992 he was assigned to Quintana Petroleum Services, Inc., a Cullen family owned operating company, and named the Project Land Manager over a coalbed methane project in which KUKUI, INC. owns an interest involving wells located in Alabama, Colorado and New Mexico. In 1995 Steve joined KUKUI Operating Company (KOC) and in 1998 was made Vice President-Land of KOC and Vice President of KUKUI, INC.

John W. Wessels – Vice President Operations

Mr. Wessels is a licensed professional engineer with BS and MS degrees in Petroleum Engineering from the University of Texas at Austin. Mr. Wessels has over twenty-seven years of experience in the upstream side of the oil and gas industry. His responsibilities have included various engineering and management positions with Quintana Petroleum Corporation, President of WPS, Inc., Vice President-Operations of KUKUI Operating Company and Vice President of KUKUI, INC.….

Larry K. Strider – District Operations Manager

Mr. Strider is a 1981 graduate of Auburn University with a BS degree in Agricultural Engineering. He has over nineteen years of experience primarily in the Southeastern and Gulf Coast areas. Mr. Strider worked as a field engineer for Halliburton Services (U.S. Vice-Pres. Dick Cheney’s company) for six years in the Laurel, Mississippi and Mobile, Alabama districts. In 1986 he joined Graves Well Drilling Company as Operations Manager supervising drilling and workover activities in the coalbed methane industry in the Black Warrior Basin. He also worked on industrial and community water well systems and waste disposal well projects. In 1990 Larry joined AMPCO Resources and operated a sucker rod pump and supply store. He joined Quintana Petroleum in 1992 and KOC upon inception in 1995….

David A. Petty – Manager of Regulatory Affairs

Mr. Petty is a graduate of Sam Houston State University in Huntsville, Texas, with a BBA in Accounting and is a CPA with the state of Texas. Mr. Petty has 20 years experience in the oil and gas industry in the areas of accounting, auditing, finance and regulatory. Mr. Petty began his career with Coastal Corporation from 1981-1987. In 1987 he began his private accounting practice with Petty & Campise. From 1988-1995 David joined Quintana Petroleum Company as an Internal Auditor, Accounting Supervisor and Assistant Treasurer. In 1995 David moved to KUKUI Operating Company as Manager of Regulatory Affairs. David has served as President of the Petroleum Accounting Society of Houston from 1993-1994, Chairman of the Coalbed Methane Association of Alabama from 1998-2000, Chairman of the COPAS Education Committee from 1990-1993 and is a current member of the Texas Society of CPA’s.

* * *

Coincidently, one of the ‘Distinguished Visitors’ taking a taxpayer-funded joyride on the ‘USS Greeneville’ at the time it accidently sank the ‘Ehime Maru’ was HELEN CULLEN, of Houston, Texas.

The Cullen Family owns Quintana Petroleum. According to http://www.opensecrets.org/, they are big backers of both G.W. Bush and the GOP.

HELEN CULLEN comes from a family that has business links with Clinton-pardoned felon MARC RICH.

Cullen’s father-in-law, ROY CULLEN, is the owner of Quintana Petroleum of Houston, which, the New York Daily News reports, created a business partnership in Argentina with Rich’s Suedelektra Holdings during the 1980s.

One unidentified White House source told the New York Daily News that there was a “tremendous amount of nervousness at the White House about who these guys are.”

The Cullen family has donated tens of thousands of dollars in soft money to the Republican Party.

And Roy Cullen donated $1,000 to George W. Bush‘s presidential campaign….

* * *

For more on Trustee Robert Kihune and the Distinguished Visitors, GO TO > > > The Sinking of the Ehime Maru


 

Lee H. Henkel – A Republican, was Treasury Dept. & IRS Counsel in the Nixon Administration; later a tax attorney and real estate developer in Atlanta.

From Equity No. 2048 – Report of Master [Robert P. Richards] Regarding Retention of Non-Staff Counsel:

IV. NON STAFF LEGAL EXPENSES

A. GENERAL CONSIDERATIONS

Billing invoices from various law firms, as well as much of the correspondence to and from involved members of the firms, contain both an assignment title and a billing reference number. Both were generated by KSBE. Either or both of these are useful in cross-referencing the various involved firms, as well as the scope of work.

During the time period in question the legal work done by non staff counsel with reference to the IRS Examination was titled by KSBE “Tax/Audit II”. Its reference number was 000088A. Defense of the action by the Attorney General, which began in 1997 after the Governor announced his intention to have the Attorney General investigate the Trustees, was titled either “AG Review” or “Trustee/AG Review”. Its reference number was 010414.

In some but not all cases a retention letter was authored by Nathan T.K. Aipa, General Counsel, to the involved firm, describing the scope of retention. In other cases there is an acknowledgment letter from the retained firm describing the scope of work. In all cases the involved firm received and followed a set of KS/BE billing guidelines, which make comparison and analysis of the billings decidedly easier and more meaningful….

E. LEE H. HENKEL III

Lee Henkel had originally been retained in 1991 in connection with controversies respecting the Trust’s investment in certain coal bed methane drilling programs.

In 1992 he had been involved in the formation of KUKUI INC, a Texas corporation that was a profit subsidiary of the Trust.

There were issues related not only to the original propriety of the investment, but also conflicts because of trustee co-investments and, of equal importance, the failure to pursue individuals who may have been responsible for losses sustained by the Trust.

This was a consideration for the IRS in its ongoing investigation. As noted in Mr. Henkel’s time entry for 1/29/99:

“Research of ‘private inurement’ and ‘private benefit’ rules and effective date and general purpose of ‘intermediate sanctions’ rules in connection with IRS position that KSBE failing to pursue fraud claims against SG Methane Company and Lester Smith and Russell Gordy constituted a ‘private benefit’; discuss same with Dennis Fern and in particular, effective date provisions of intermediate sanctions laws.”

Beginning in 1998 Mr. Henkel was asked to assist in responding to IRS inquiries aboutthe various aspects of the above described past events. … Invoices were submitted which predate our “starting” date but which we included because a detailed review shows a similarity in the scope and nature of work done…. [Invoices totaled $98,544.31]

Obviously, entities subject to governmental inquiries, including those from the IRS may have to utilize the services of third parties to “recreate the past” and/or “explain” transactions. In many instances that is part and parcel of ordinary administrative duties. That is not the case here. This IRS inquiry was anything but routine, in scope or substance.

The issue at the heart of the overall inquiry, as well as the inquiry into the methane gas investment history, was that of alleged trustee “misconduct”.

If it was “misconduct” of prior trustees then it was the duty of the responding trustees to seek reimbursement of the cost from those trustees. Otherwise there is a waste of trust assets.

Accordingly, this Master recommends that the trustees be surcharged with the above enumerated amounts….

* * *

From CENTURY CAPITAL GROUP website:

Lee H. Henkel, Jr., Managing Director, has over 40 years experience in the tax, merger and acquisition fields both as a lawyer and broker representing primarily the owners of closely held businesses. He is widely known as a dealmaker and is comfortable discussing the various elements of selling a business. . . .

In 1971 he was appointed by President Nixon as the ranking Assistant General Counsel of the U.S. Treasury Department and Chief Counsel for the Internal Revenue Service, Washington, D.C. In this position, he served under Secretaries of the Treasury John B. Connally, George P. Schultz, and William E. Simon . . .

* * *

From http://www.jailhurwitz.com/ :

In 1980, Lee Henkel and the infamous Charles Keating were the East & West Coast financial chairs for ‘John Connally for President’.

Henkel was Keating’s attorney.

In October 1983, ACC buys the infamous Lincoln Savings with DBL issued junk bonds.

In 1984, Lincoln makes $70,000 loan to Connally on a land deal near Austin, TX and $134,000 loan to Henkel; Connally defaulted leaving Lincoln (and not the taxpayers) holding a $70,000 loss (Nation 11/19/90).

In February 1987, WSJ reports Lincoln S&L made at least $619,000 in loans to corporations & partnerships in which Lee Henkel had an interest. In mid-August 1987 the records of the records of Southmark, San Jacinto SA, Strauss, Barnes, Connally and about 200 others were seized according to the Dallas Times Herald….

In 1988, SEC v. MDC Holdings; MDC (has close ties with Silverado), is caught in shady deal with Lincoln S&L.

Neal Bush is loaned $550,000 for a house.

Connally was elected to Maxxam BOD.

* * *

From The Daisy Chain: How Borrowed Billions Sank a Texas S&L, by James O’Shea:

A lot of money went into Tony Coelho’s DCCC.

More than $200,000 flowed in between early 1985 and mid-1986 from Vernon, other high-flying thrifts, and their supporters. The contributions to senators and House members came in as the donors were having trouble with regulators and felt threatened by pending legislation. The political body also added to the S&L losses, meaning that half the American taxpayers eventually picked up the tab by funding a massive government bailout designed to restore solvency to thrifts such as Vernon.

Of course, Lowery, Kemp, Wright, Coelho, DeConcini, Riegle Cranston, Glenn, McCain, and many others say they did nothing wrong. If contributions were somehow illegal, they say they didn’t know it. Some, such as DeConcini and Riegle, have given the money back….

But none of these public-spirited refunds came until the lawmakers got caught….

Indeed, when he was asked whether he thought the campaign money influenced any of the lawmakers, Keating replied, “I certainly hope so.”

Charles Keating was right. The S&L executives did get something for their money. Barnard held hearings and gave Keating a forum from which he could criticize the bank board. The Treasury legislation that the industry and high-fliers opposed went nowhere, either. When powerful congressmen such as Majority Leader Wright and senators such as Cranston want a bill passed they can get the job done. Obstacles don’t stop the Congress when powerful leaders want legislation.

The administration’s bill started working its way through the bureaucracy in mid-1985. It was introduced into the Congress in early 1986, just before the start of the primary season for mid-session elections. . . .

Although both the Senate and House played a role in blocking the legislation, the House Democratic leadership played a crucial role in the developments that led to the abandonment of the legislation. During the same time frame in which the Democratic leaders stalled the bill, Dixon, Vernon employees, and the thrift’s major borrowers gave Coelho’ DCCC $48,000.

Another $62,500 flowed in from other high-flying S&L’s and developers in Texas. An additional $56,500 landed at the DCCC courtesy of Michael Milken and his company, Drexel Burnham, and $29,100 flowed in from Columbia Savings and Loan, the California thrift and big advocate of Milken’s junk bonds.

Keating and his employees chipped in another $8,000, and people associated with Silverado gave $4,000….

To ordinary working folks, the contributions may seem like a lot of money. But to the Dixons and Keatings of the world, it was peanuts. What were a few hundred thousand dollars in political contributions if the money bought access to politicians who helped protect S&Ls with billions of dollars in federally insured savings deposits? Vernon had assets of close to $2 billion; Lincoln more than $3.5 billion….

As the S&Ls tossed money around Washington, the impact of their influence peddling fell unevenly on their customers….

But the parties that really paid the price were the American taxpayer and the honest S&L operator. By delaying the legislation, the Congress and the Reagan-Bush administrations simply increased the cost of eventually resolving the industry’s problems. Deposit-insurance premiums remained high for the honest and dishonest segments of the industry alike. Good thrift operators, who were the majority of the industry, paid for the insolvencies generated by the bad….

The losses of the thrifts such as Vernon widened every day as they took in more federally insured deposits to compensate for the plunging value of their assets….

Reagan’s White House displayed an astonishing tons of indifference to the problems. Donald Hovde’s October 1986 resignation from his $72,500-a-year-job as a board member left Gray without any authority to take any kind of official action. Mary Grigsby had resigned from the three-member board two months earlier, and Gray couldn’t act unless he had at least one other board member. Yet the White House left him alone and without power for nearly a month as more and more S&Ls hit trouble.

In November, at the request of Sen. Mack Mattingly, a Georgia Republican who had received more that $10,000 in campaign funds from Keating and his associates, Reagan filled one of the bank board vacancies with Lee Henkel, an Atlanta attorney and real estate developer who had done more than $60 million worth of business with Keating’s S&L….

Henkel wasted no time showing the flag. Reagan made Henkel a recess appointment after Congress had adjourned, meaning he could take his seat immediately. Once the Senate reconvened, Henkel would have to be confirmed. In one of his first actions in December, though, he proposed a rule that would have immunized Lincoln Savings from any enforcement actions in a dispute with the bank board over $615 million worth of direct investments that Lincoln had made in real estate and other risky deals.

By January, incoming Senate Banking Committee chairman William Proxmire of Wisconsin announced that he would oppose the Henkel nomination, when it came before the Senate.

Proxmire also asked for a Justice Department investigation of Henkel’s actions.

Henkel asked Reagan to withdraw his nomination a few months later….

* * *

From http://www.dcia.com/

BILLIONS WON BY INVESTORS

The Arizona Republic

Damages and out of court settlements won by investors in Charles H. Keating Jr.’s American Continental Corp. who filed a $1.2 billion fraud and racketeering lawsuit in U.S. District Court in Tucson:

DAMAGES AWARDED BY JURY:

Defendants will share in a judgement of $1.8 billion in compensatory damages returned by a jury Friday against:

Charles Keating, former chairman of American Continental, who also owes $1.5 billion in punitive damages.

[ Editor’s note: Now that really sounds wonderful but what does it mean? Since Keating says he is broke that $1.5 billion just disappears form the equation. Now there is just chicken feed left for the investors. This headline is a lie. Notice (burried at the very end of the article!) the amount Michael Milken had to pay and remember he was making $550 million per year when he was stopped. That is what it means to have attorneys like the Dershewitz brothers, Melvin McDonnald, and John Dowd. I can think of about 200 million people who would think serving a few years in the pen and keeping all that loot was a pretty good deal!! ]

Saudi European Investment Corp. of Paris, was a financial partner.

Conley Wolfswinkel of Tempe, was a borrower from Lincoln Savings and Loan Association, an American Continental subsidiary.

Continental Southern Inc., Atlanta, was a Lincoln borrower.

SETTLEMENTS REACHED

Former executives of American Continental and Lincoln Savings, $4.75 million.

Law firms and individual lawyers

Jones, Day, Revis & Pogue, Cleveland: helped Lincoln prepare for a 1986 federal examination, $24 million.

Kaye, Scholer, Fierman, Hays & Handler, New York: represented Lincoln in its disputes with federal regulators, $20 million.

Parker, Miliken, Clark, O’Hara & Samuelian, Los Angeles: worked with American Continental’s Lincoln subsidiary in connection with investigations by California regulators, $5.65 million

Sidley & Austin, Chicago: represented Lincoln in dealings with federal regulators, $4 million.

Mariscal, Weeks McIntyre & Freidlander, Phoenix: represented Lincoln in dealings with federal regulators, particularly in disputes over appraisals of properties, including the Phoenician Resort, $2 million.

Barbara Thomas, New York, $90,000.

Accountants

Arthur Young & Co. (succeeded by Ernst& Young); audited Lincoln and Continental’s financial statements for 1986 and 1987, $63 million.

Arthur Andersen & Co.: audited Lincoln and American Continental’s financial statements for 1984 and 1985, $22.8 million.

Touche, Ross & Co.: audited Lincoln and American Continental from November 1988 until April 1989, $7.5 million, plus $1 million in services for accounting and distribution of payments to investors.

Lincoln borrowers

MDC Holdings, Denver, $1 Million

Isaac Heimbinder, US Homes president, Houston, $1 million.

C.V. Nalley, Atlanta, $750,000

Lee H. Henkel Jr., Atlanta, $100,000

E.C. Garcia & Co., Phoenix $90,000

Others

Offerman & Co., Minneapolis, investment bankers, $1.5 million.

Lexecon Inc., Chicago Financial Consultant, $1 million in services for investors.

Jeffery C. Patch, PHX, appraiser, $500,000

Richard Fenn, former vice chairman of Saudi European Investment Corp. a financial partner, $16,000

ANTICIPATED SETTLEMENTS

Drexel Burnham Lambert Inc. Investment bankers, $40 to $50 million

Michael Milken, former head of junk bond sales for Drexel, $35 million to $50 million.

Emerald Homes, PHX, Lincoln borrower, $200,000

* * *

See also McKenzie Methane ; The Smith-Gordy Partnerships ; William Simon

For more on Harken Energy and Aloha Petroleum, GO TO > > > Aloha, Harken Energy!

For more on Charles Keating and Investors Equity Life Insurance Co., GO TO > > > Vultures in the Meadows


 

Leon Panetta – Leon Panetta served as White House Chief of Staff under President Clinton from 1994 to 1997.

PBS Online, 11/8/96: Presidential Press Conference . . . President Clinton held a news conference, the first since his re-election victory Tuesday. The major announcement was that of Erskine Bowles to replace Leon Panetta as White House Chief of Staff….

PRESIDENT CLINTON: . . . I must begin by announcing that Leon Panetta, who has been my chief of staff since 1994, will be resigning . . .

REPORTER: The election is over. . . . but some questions remain. One of them is: How do you explain the obsession with fund-raising, especially from dubious Asian sources, and how do you overcome the image created by your opponent that you are a President who cannot be trusted?

PRESIDENT CLINTON: Let me answer the second question first. I think the American people, since they’ve been hearing this for five years, took a long, hard look at it, and they measured that against what they saw in terms of the work of this administration, in terms of the people who were laboring hard to make their lives better, and in terms of the President. And I think they made their judgment that I have worked hard for them, I will keep working hard for them … and I think that they gave me their trust, and I’m going to do my best to be worthy of it.

Now, with regard to the contribution issue, the Democratic Party and the Republican Party raised a lot of money under the rules which now exist. The Democratic Party received over a million different contributions in two years. They determined two things: One is that a relatively small number of them – I think – I don’t know exactly what the number is but quite a small number out of a million, they should not have taken, and they have returned them.. They also- the Democratic Party said that they should have a tighter screen on contributions when they come in, and they’ve implemented an improvement so that they won’t receive contributions they shouldn’t give they can determine it at all. (Huh?) I think that’s a good thing. . . . Terry.

REPORTER: Mr. President. Attorney General Reno is considering whether to appoint an independent counsel to investigate these allegations of improper fund-raising by your campaign. She says that she’s got-

PRESIDENT CLINTON: Wait, wait, wait. There have been no allegations about improper-

REPORTER: Well, by-

PRESIDENT CLINTON: That’s correct- by the Democratic Party- let’s-

REPORTER: She says that she’s-

PRESIDENT CLINTON: That was the other campaign that had problems with that- not mine.

REPORTER: General Reno says she’s caught between a rock and a hard place and that she’ll be criticized no matter what she does. I know that it’s her decision, but what do you think? Do you think that these- these allegations should be investigated by an independent counsel, and secondly, do you think that General- would you like to see General Reno stay on for a second term?

PRESIDENT CLINTON: I think on the first question I should have no comment on that. On the second question, I should have no comment on any personnel decision until I have had a chance to meet with the cabinet members….

* * *

From PBS Online, 1/17/97: Panetta Heads West … On his last day in office he talks to Margaret Warner about ethics, money in politics, and Clinton’s Presidency….

MARGARET WARNER: . . . Now one of this group of problems did happen on your watch, and that is the Democratic National Committee fund-raising, and let me just ask you whether you think, in retrospect, you all put too much pressure on the DNC to raise these millions and millions for the presidential year and that there was also maybe something a little unseemly about the way you involved the President in all these special things for the donors or the nights in the Lincoln Bedroom or the coffees here at the White House….

LEON PANETTA: Well, obviously, I think the President and all of us were disappointed at what happened with regards to how the DNC checked the contributions and the fact that they had a check system in place and then ignored it or put it aside….

* * *

The Detroit News, 1/29/98: . . . Negotiations to get Monica Lewinsky’s cooperation in the sexual scandal surrounding President Clinton inched forward Wednesday while investigators cast a wide net to gain corroborating evidence.

Independent counsel Kenneth Starr’s team called the biggest figure yet to testify before a federal grand jury sifting through charges that Clinton had sex with Lewinsky while she was a White House intern and then encouraged her to deny it under subpoena….

“I am personally not aware of any improper relationship, sexual or otherwise, by this president and any of the White House interns or anyone else for that matter,” Panetta said later.

Panetta’s testimony is seen largely as a building block for the investigation because of his access to Clinton and because Lewinsky worked for him when the alleged sexual encounters occurred.

Panetta, though, recently said he didn’t recall Lewinsky….

* * *

The Starr Report Evidence, edited by Paul Kuntz: Monica Lewinsky’s First Interview with Investigators:

Office of the Independent Counsel – 07/27/98

LEWINSKY first met the President of the United States, WILLIAM J. CLINTON, in July 1995, soon after beginning her job as an intern in LEON PANETTA’s Office in the White House. The occasion was the departure of the President from the South Lawn of the White House….

LEWINSKY began her personal relationship with the President on Nov 15, 1995. … LEWINSKY, who was still an intern working for LEON PANETTA in the West Wing of the White House, saw the President when he came to the West Wing to see PANETTA and HAROLD ICKES. . . .

* * *

The Honolulu Advertiser, 02/05/00:

Trustees helped by Inouye, Akaka in fighting pay limit

By Sally Apgar

The ousted trustees of Kamehameha Schools enlisted the aid of Sens. Dan Inouye and Daniel Akaka in 1995 to influence fellow members of Congress to vote against a bill that threatened the trustees’ $1 million-a-year paychecks, according to internal trust documents obtained by The Advertiser….

Thirteen confidential memos during the fall of 1995 through April 1996 detail the trustee’s strategy against the bill, which called for intermediate sanctions that penalize high-ranking insiders of charitable organizations for taking excessive personal benefits….

The memos express the trustees’ intent to “kill the measure” and their recruitment of influential contacts, such as Inouye, Akaka and the Rev. Jesse Jackson.

They also targeted others, including Senator Patrick Moynihan of New York and even White House insiders such as Leon Panetta, then President Clinton’s chief of staff, to win support….

The memos give a glimpse of the behind-the-scenes political power and influence the former trustees once wielded and describe a costly, intensive effort to protect their interests….

Mark McConaghy of PricewaterhouseCoopers, a longtime tax adviser to the trust, was charged with contacting Leslie Samuels, then assistant secretary for tax policy….

* * *

Zenith National Insurance Corp. Press Release, 5/18/00: LEON PANETTA JOINS ZENITH’S BOARD OF DIRECTORS. Zenith National Insurance Corp announced today that Leon E. Panetta has been elected a Director of Zenith and its wholly-owned subsidiary, Zenith Insurance Company….

See also: Dan Inouye ; Leon Panetta

See in Part II: Zenith National Insurance


 

Lloyd Bentsen – Former U.S. Secretary of Treasury.

Bentsen sat on the Board of Directors of American International Group at the time Governor Clinton’s Arkansas Finance & Development Authority (with help from Goldman Sachs and Robert Rubin) invested in AIG’s Coral Reinsurance in Barbados.

Bentsen, along with Hawaii’s ex-governor (and FOB) John Waihee, are also lobbyists with the Washington, D.C.-based law firm Verner Liipfert Bernhard McPhearson Hand which was hired by Bishop Estate to lobby against the federal “interim sanctions” legislation. The state Attorney General’s Office disclosed that the trust paid the firm more than $900,000 for its unsuccessful lobbying efforts on intermediate sanctions legislation between 1995 and 1998.

* * *

New Holland N.V. Press Release, 10/29/96: Former U.S. Treasury Secretary Bentsen appointed Chairman of New Holland N.V. New Holland N.V. announced today that Lloyd Bentsen, the 69th U.S. Treasury Secretary, who played a pivotal role in the Clinton Administration during 1993 and 1994, and former U.S. Senator from Texas, has been appointed Chairman of the Board of Directors of New Holland.

Senator Bentsen was appointed Treasury Secretary by U.S. President Clinton in Jan, 1993, and served in the Clinton Administration until December, 1994. As Secretary he was a major policy adviser to the President and was credited with playing a key role in the Administration’s successful efforts to reduce the federal deficit and to increase trade and economic opportunity through NAFTA (North American Free Trade Agreement) and GATT (the General Agreement on Trade and Tariffs.)

Mr. Bentsen said: “As one who has for may years owned farms, I can attest to the high quality of New Holland’ agricultural equipment. I am pleased to become a board member of this leading international manufacturer.” . . .

Before joining President Clinton’s Cabinet, Lloyd Bentsen, born in Texas, was one of the most powerful members of the U.S. Senate where he served from 1971 until his appointment as Secretary of the Treasury. He was Chairman of the Senate Finance Committee, which has the responsibility for tax and trade issues. He also served as Chairman of the Joint Committee on Taxation and the Joint Economic Committee. In 1988, he was the Democratic Party’s nominee for Vice President of the United States.

Mr. Bentsen began his public service as a Texas County Judge, then served three terms in the U.S. House from 1948 to 1954. After that he pursued a successful business career. . . .

NEW HOLLAND – THE INITIAL PUBLIC OFFERING: As previously announced, New Holland has filed with the U.S. Securities and Exchange Commission a registration statement for a global initial public offering for 46,500,000 Common Shares . . . A registration statement relating to the Common Shares has been filed with the U.S. Securities and Exchange Commission but has not yet become effective . . .

* * *

J.P. Morgan Press Release, 11/12/99: J. P. Morgan, as New York transfer agent and registrar, is pleased to announce the name change for New Holland N.V.’s NYSE listed shares of New York registry to CNH Global N.V. The name change coincides with the closing of the company’s merger with Case Corporation. . . .

The world’s largest ADR depository and a global financial services firm, J.P. Morgan serves clients through an integrated range of advisory, financing, trading, investment management, and research capabilities. . . .

See also: Dan Inouye


 

Robert E. Ogle – Mr. Ogle is a Managing Director in the Corporate Advisory Services practice of Huron Consulting in Houston, where he focuses on corporate restructuring. Prior to his association with Huron, Mr. Ogle was a partner with Arthur Andersen LLP, and also a partner with Spicer & Oppenheim, where he led its litigation support and bankruptcy practice.

When McKenzie Methane filed for bankruptcy, Robert Ogle (with Arthur Andersen at the time), and Walter Crow of Miller & Lents, reportedly helped develop the asset valuations for “The Kukui Plan” in McKenzie’s bankruptcy. Discovery in the bankruptcy proceedings later revealed documents that provided earlier valuations of the wells by Huddleston & Company which were substantially higher than those in The Kukui Plan.

Kukui reportedly knew of the higher valuations shown in the Huddleston Reports at the time Kukui put forth it’s plan to liquidate MMC, but allegedly failed to disclose this information.

~ ~ ~

February 20, 2003

EOTT Energy Restructures Board; New Board Provided for Under EOTT’s Plan Of Reorganization, as Company Emerges From Chapter 11

Press Release, EOTT Energy Partners, L.P.

HOUSTON — EOTT Energy Partners, L.P. (OTC Pink Sheets: EOTPQ ) announced today that it has identified individuals to serve on the Board of Directors of EOTT Energy LLC upon implementation of its Plan of Reorganization. The Plan is expected to become effective on March 1, 2003.

Under the terms of the Plan of Reorganization, EOTT Energy Partners, L.P. will emerge from bankruptcy as a new entity, EOTT Energy LLC, as the owner of the limited partnerships through which EOTT’s business is operated.

Joining the Board are: J. Robert Chambers, a managing director at Lehman Brothers, Inc.; Julie H. Edwards, executive vice president, finance and administration and chief financial officer of Frontier Oil Corporation; Robert E. Ogle, a managing director in the Corporate Advisory Services practices of Huron Consulting Group; S. Wil VanLoh, Jr., president, co-founder and managing partner, Quantum Energy Partners; and Daniel J. Zaloudek, founder of multimedia content company IMEDIA, and a former senior executive with international oil and gas operations of Koch Industries. Thomas M. Matthews, the former chief executive officer of Avista and former president of NGC Corporation, and James M. Tidwell, chief financial officer and vice president of finance for WEDGE Group Incorporated, will also join the new Board.

Mr. Matthews and Mr. Tidwell currently serve on the Board of EOTT Energy Corp., the General Partner of EOTT Energy Partners, L.P. Mr. Matthews will serve as Chairman of the new board.

Commenting on the prospective Board reorganization, EOTT’s President and Chief Executive Officer, Dana R. Gibbs said, “The members of the new board are distinguished by their extensive expertise and relevant business experience. Drawing on backgrounds in energy services, finance and business reorganization, we look forward to their individual contributions to our strong framework for competing in the future, with solid customer relationships, a stronger financial position and a clear plan for growth.”

EOTT Energy Partners, L.P. and its subsidiaries filed for protection under Chapter 11 of the U.S. Bankruptcy Code on October 8, 2002 in the United States Bankruptcy Court for the Southern District of Texas, Corpus Christi Division, under a “fast track” process to significantly reduce its debt, restructure its finances, and formalize a complete separation from Enron Corp.

Following is background information about each of the members of EOTT’s new board…

ROBERT E. OGLE

Mr. Ogle is a Managing Director in the Corporate Advisory Services practice of Huron Consulting in Houston, where he focuses on corporate restructuring. Prior to his association with Huron, Mr. Ogle was a partner with Arthur Andersen LLP, and also a partner with Spicer & Oppenheim, where he led its litigation support and bankruptcy practice. Earlier in his career, he served in the internal audit department of Gulf Oil Corporation and in private accounting practice….

A member of the Association of Insolvency Accountants, Mr. Ogle is a Turnaround Manager of the Association of Certified Turnaround professionals, member of the American Bankruptcy Institute and of the National Association of Bankruptcy Trustees, and a Certified Fraud Examiner….

For more, GO TO > > > The Story of Enron


 

Rodney Park – Executive formerly in charge of Bishop Estate’s Administration Group. Park was the estate’s controller at the time of their $85 million investment in McKenzie Methane.

Park was also a co-investor in the deal.

Park was also made president of the estate’s captive insurance company, P&C Insurance Co, Inc., replacing the fired president, Bobby Harmon.

* * *

From: RICO LAWSUIT: Harmon v. Federal Insurance Company , P&C Insurance Co, Marsh & McLennan, PricewaterhouseCoopers, Henry Peters, Nathan Aipa, Rodney Park, et al: . . .

Rodney Park, is Director, Administration Group, KSBE, and President, P&C.

From Equity No. 2048, Petition of the Attorney General on Behalf of the Trust Beneficiaries to Remove and Surcharge Trustees:

“. . . Since 1996, the Trustees’ compensation has also been limited by federal law, specifically the Intermediate Sanctions provision of the Internal Revenue Code (IRC) 4958.

In 1996, based in part on an agreement between the Attorney General and the Trustees, the Trustees agreed that they would take no commissions based on monies spent on the construction of Kamehameha Schools facilities (classified as Final Disbursements of Capital or FDOC).

Between November 1993 and May 1994 the Trust incurred investment losses of over $45 million, which would have reduced each Trustee’s compensation by more than $225,000.

Rather than reduce compensation, retroactive adjustment were made in June and July 1994 to generate commissions on FDOC amounting to more than $98,000 to each Trustee. The retroactive adjustments were made at the direction of Peters, general counsel Nathan Aipa, and the principal executive of the administration group, Rodney Park (emphasis added).”…

Park was also a co-investor with KSBE in the McKenzie Methane deal described above, at the time he was acting as the Controller for KSBE. In this position, Park had fiduciary responsibilities to expend trust funds in a prudent and legal manner, and to properly account for these expenditures to the beneficiaries, the trustees, the master, the IRS and others.

Plaintiff alleges that Park’s actions, through his complicity, deceptions, and breach of fiduciary duties, in collusion with some or all of trustees of KSBE, with other managers and employees of KSBE, with other officers and directors of P&C, with officers and managers of Federal, M&M, Mullen and PricewaterhouseCoopers, and with outside contractors, attorneys, politicians and others, constituted a conspiracy to defraud P&C and the beneficiaries of the Estate of Bernice Pauahi Bishop; racketeering; mail fraud; wire fraud; extortion; and violation of IRS interim sanctions regulations.

* * *

January 24, 2001

Estate’s Managers Shuffled in Shake-up

By Rick Daysog, Honolulu Star-Bulletin

Kamehameha Schools’ senior management team has undergone a major shake-up.

Rodney Park, former head of the $8 billion charitable trust’s Administration Group, left Dec. 31 after his $160,000-a-year position was eliminated….

For more, GO TO > > > RICO in Paradise; Woo vs. Harmon


 

The Smith-Gordy Partnerships – More methane nests in which Kamehameha Schools and its trustees and executives were involved.

From Equity No. 2048 – Report of Master [Robert P. Richards] Regarding Retention of Non-Staff Counsel:

Lee Henkel had originally been retained in 1991 in connection with controversies respecting the Trust’s investment in certain coal bed methane drilling programs.

In 1992 he had been involved in the formation of KUKUI INC, a Texas corporation that was a profit subsidiary of the Trust.

There were issues related not only to the original propriety of the investment, but also conflicts because of trustee co-investments and, of equal importance, the failure to pursue individuals who may have been responsible for losses sustained by the Trust.

This was a consideration for the IRS in its ongoing investigation. As noted in Mr. Henkel’s time entry for 1/29/99:

“Research of ‘private inurement’ and ‘private benefit’ rules and effective date and general purpose of ‘intermediate sanctions’ rules in connection with IRS position that KSBE failing to pursue fraud claims against SG Methane Company and Lester Smith and Russell Gordy constituted a ‘private benefit’; discuss same with Dennis Fern and in particular, effective date provisions of intermediate sanctions laws.”

See also: Lee Henkle

For more, GO TO > > > RICO in Paradise


 

Wally Chin – Currently president of Kamehameha Activities Association.

March 13, 2002

Hawai’i trust sees WCI stock boom

Honolulu Advertiser Staff and News Services

Kamehameha Schools’ investment in Florida development company WCI Communities Inc. paid big dividends this week when WCI raised more than $130 million in an initial public stock offering.

WCI Communities Inc.’s shares rose 19 percent after the stock sale for the builder of residential communities and luxury condominium towers in Florida. Shares of WCI rose $3.67 to $22.67 in New York trading.

The offering raised the value of the 7.1 million shares owned by Kamehameha Activities Association, a subsidiary of Kamehameha Schools, to $160 million. Kamehameha, the largest single shareholder, with more than 16 percent of WCI shares, invested in the Bonita Springs, Fla., company in 1995. Kamehameha Schools’ initial investment in WCI was worth about $37 million, trust officials said.

The Kamehameha Schools trust and its subsidiaries have about $3 billion invested in stocks, bonds and other securities. The value of its WCI investment now makes up about 5 percent of that portfolio, which is the main asset base for the $4.4 billion non-profit network of private schools serving Hawaiians.

The trust has not decided what to do with its stock after the expiration of a six-month “lock-out” period, after which initial investors in WCI can sell shares, said Wally Chin, president of Kamehameha Activities Association. . . .

WCI originally filed with the Securities and Exchange Commission to go public Sept. 7, a plan that was delayed by the terrorist attacks four days later.

The shares sold represent a 16 percent stake. The IPO values WCI at $822 million.

The company, which traces its roots back to 1946, was once a unit of Westinghouse Electric Corp. The company is now headed by chief executive officer Alfred Hoffman, 67, who was the national co-chairman of finance for George W. Bush’s presidential campaign.

Citigroup Inc.’s venture capital unit, the John D. and Catherine T. MacArthur Foundation and Kamehameha Activities Association own about 43 percent of the shares.

A Bloomberg News story was used in this report.

See also: McKenzie Methane

For more, GO TO > > > A Connecticut Yankee in King Kamehameha’s Court ; How to Pluck a Non-Profit; Woo vs. Harmon: Witness Wally Chin


 

Wayne Berman – One of the money men.

From The Money Men: . . . You’ve probably never heard of Wayne Berman, Peter Terpeluk, Beth Dozoretz, or Alan Solomont. But you should. Certainly anyone who wants to be president or a member of Congress has. They are among the key people to see in the powerful world of political solicitors. … Whoever these people blessed were the candidates who had the best chances to become our next president. The ones they rejected didn’t have any chance at all. . . .

The wall of fund-raiser Wayne Berman’s office was papered with photos of himself glad-handing with virtually all of the big-name Republicans of the past two decades. As a longtime lobbyist, Berman knew– and was liked and trusted by– everyone from Ronald Reagan to Newt Gingrich and from George Bush to George W. Bush. They respected him both for his political savvy and for his ability to raise money– as much or more money, in fact, than almost anyone else in town.

It was no surprise, then, that a colleague of his, Scott Reed, interrupted my interview with Berman one day to ask for a favor. Reed was a Washington player in his own right; he had served as campaign manager for the 1996 Dole for President campaign. But Berman had the access that Reed lacked. Reed was pushing a “technical” amendment for a client that needed to be affixed to an appropriations bill that was on the verge of completion in the Senate.

So Berman picked up the telephone and called the chairman of the Senate Appropriations Committee, Ted Stevens of Alaska….

A half hour or so later, Stevens called back. I didn’t hear everything that was said, but it was obvious that Berman’s reminder was all that was needed to insert the amendment into the bill….

* * *

March 6, 2000

Treasurer Scandal’s Tentacles Reach Texas

By Don Michak, Journal Inquirer

SOME KEY PLAYERS in Connecticut’s Paul Silvester scandal also are embroiled in a controversy over conflicts of interest and political favoritism in Texas under the governorship of Republican presidential candidate George W. Bush.

At the center of the controversy are hundreds of millions of dollars of investments by the University of Texas Investment Management Co., or UTIMCO, a tax-exempt, quasi-public corporation said to be the brainchild of former University of Texas regent Thomas O. Hicks, the Dallas merchant banker who served as UTIMCO’S first chairman. . . .

In Texas, Donald I. Evans, finance chairman of the Bush presidential campaign, is a Bush-appointed university regent, as is Tom Loeffler, a San Antonio lawyer and former congressman. Evans is now chairman of the regents, who approved the creation of UTIMCO in 1996.

Loeffler, one of Bush’s biggest financial backers in his 1988 gubernatorial race, also has been a registered lobbyist for Hicks, Muse, Tate & Furst, and he joined Hicks on the UTIMCO board in 1996.

Loeffler and several others involved in the UTIMCO controversy also are among the people Bush calls his “pioneers,” supporters who each helped him raise at least $100,000 in presidential campaign contributions.

The group includes R. Steven Hicks, the brother of Thomas Hicks; three people whose investment partnerships had received UTIMCO funds; two partners in the law firm that counsels UTIMCO; and Wayne L Berman, a Washington lobbyist….

Last fall … Berman, who is finance chairman of the national Republican Governors Association, “voluntarily” suspended his activities on behalf of the Bush campaign, pending the results of the continuing federal investigation of Silvester’s crimes in Connecticut….

Berman is a central figure in the Silvester scandal, having apparently “bundled” campaign cash to Silvester, including a contribution from another big Republican fundraiser and his co-chairman of the governors association’s Finance Committee, Washington lobbyist Peter Terpeluk.

Three of Berman’s colleagues, among Bush’s “pioneers” — corporate chieftains Maurice R. Greenberg of American International Group, Herbert Collins of Boston Capital Partners, and Thomas Foley of … NTC Group– also helped bankroll Silvester’s failed election bid.

And Berman hired both the former treasurer and his closest aide soon after Silvester’s narrow 1998 election defeat. A survey of the treasury’s business partners last fall also showed Berman to have collected $1.5 million in “finder’s fees” on two pension fund deals he helped broker with Silvester….

The bulk of Berman’s fees– $1 million … came from The Carlyle Group, a Washington merchant bank run by several prominent Republicans in the Reagan and Bush administrations, including former Secretary of Defense and CIA Deputy Director Frank Calucci, Secretary of State James A. Baker, and Office of Management and Budget Director Richard G. Darmon.

Former President Bush also advises one of Carlyle’s investment partnerships, and the firm reportedly has paid him for speeches….

The UTIMCO controversy and the Silvester scandal also are both marked by the involvement of corporate and legal elites whose Republican pedigrees trace back to the Nixon administration.

The most obvious link is Thayer Capital Partners, an investment group headed by Frederic V. Matek, the former head of personnel in the Nixon White House, deputy director of Nixon’s Committee for the Re-election of the President, and president of Marriott Hotels, Northwest Airlines, and Coldwell Banker Commercial Group….

Silvester invested $75 million with Thayer, and UTIMCO initially approved a $20 million commitment, but the Texans backed out of their deal….

In Connecticut the Carlyle payment to Berman amounted to 1 percent of Silvester’s $100 million investment in Carlyle European Partners.

Thayer Equity Advisor IV LP, to which Connecticut committed $75 million, arranged to pay Merrill Lynch & Co. $2 million and North Cove Ventures, a company organized by former House Majority Leader William DiBella, a Democratic power broker and confidant of Silvester’s, $374,500….

Meanwhile, Silvester, who last September pleaded guilty to racketeering and money laundering as the key figure in the kickback scheme involving such fees, faces a federal prison term of as much as six years.

The U.S. Securities and Exchange Commission also has launched a broad investigation of the financial transactions that Silvester authorized during his 17-month tenure as treasurer. Two months ago it sought records concerning his private-equity investments as well as his hiring of investment managers and bond underwriters….

For more on the Paul Silvester scandals, GO TO > > > A Connecticut Yankee in King Kamehameha’s Court

For more on the Carlyle Group, GO TO > > > Birds that Drink from Cesspools


 

Wayne Metcalf – Hawaii’s Insurance Commissioner.

From RICO Case Statement, Harmon v. Federal Insurance Co ; P&C Insurance Co; Marsh & McLennan, Inc; PricewaterhouseCoopers; Trustees of Bishop Estate, et al.:

Plaintiff alleges that the following persons and agencies have a duty in law to act upon complaints of citizens, yet failed to act, pretended to act but did not act, or misled or deceived Plaintiff in other ways when, in good faith, he brought to their attention evidence and suspicions of serious ongoing criminal activity endangering the citizens of the United States. By their acts and omissions they either sanctioned or perpetuated the crimes. It was clearly within the duties and functions of these people and agencies to act and take seriously the allegations plaintiff had set forth:

a) Insurance Commissioner’s Office, State of Hawaii.

b) Wayne Metcalf, Insurance Commissioner, State of Hawaii

c) Rey Graulty, former Insurance Commissioner, State of Hawaii

d) California Department of Insurance

e) Chuck Quackenbush, Insurance Commissioner, State of California . . .

For more, GO TO > > > Vultures in the Meadows


 

Wendell Brooks – Former head of Bishop Holdings Corp.

May 23, 2002

CEO’s daughter gets job at Kamehameha

Hamilton McCubbin played
no role in the hiring, the trust says

By Rick Daysog, Honolulu Star-Bulletin

The Kamehameha Schools has hired the daughter of Chief Executive Officer Hamilton McCubbin to a part-time position in a potential conflict of interest.

In a 38-page report recently sent to the Internal Revenue Service, the estate’s internal auditor Arthur Andersen LLP said that the trust hired “an immediate family member of a top (Kamehameha Schools) executive” to a temporary job, starting March 26.

Arthur Andersen’s report — which also was given to the estate’s five trustees, the Attorney General’s Office and the trust’s court-appointed master Ben Matsubara — did not identify the executive and his relative. But the trust confirmed that McCubbin’s daughter, who is a doctoral candidate at a mainland college, was hired at the estate as a research assistant for the summer.

McCubbin did not return calls, but the trust said he was not involved in his daughter’s hiring and had no influence in the process.

The estate, in a statement approved by trustees, also said the position was advertised internally and externally. The position ends June 30.

Arthur Andersen said the division that hired McCubbin’s daughter reports to the chief executive officer, but the accounting firm described the hiring as an “isolated personnel matter” that was conducted through the normal employment process.

The trust’s in-house lawyers concluded that matter did not violate the estate’s conflict-of-interest policies, Arthur Andersen said.

The trust said McCubbin’s annual conflict-of-interest disclosure form was filed in February and predated his daughter’s hiring.

Subsequently, McCubbin has amended his disclosure form to list her employment.

Arthur Andersen indicated that McCubbin filed his amended disclosure form after the issue was first raised in April by the internal auditing team. The executive did not immediately update his disclosure form “due to an oversight,” Arthur Andersen said.

Peter Hanashiro, an Arthur Andersen partner, declined comment when asked why the firm did not identify McCubbin in the report. Deputy Attorney General Hugh Jones also declined comment.

Arthur Andersen has served as the estate’s internal auditor since February 2000. For the fiscal year ending June 30, 2001, the estate paid the accounting firm $2.1 million.

The report, known as the Closing Agreement Compliance Monitoring Report, was required under the February 2000 closing agreement between the IRS and the Kamehameha Schools.

In the closing agreement, the IRS reaffirmed the estate’s tax-exempt status after the $6 billion charitable trust agreed to implement major management reforms and remove former board members Henry Peters, Richard “Dickie” Wong, Lokelani Lindsey, Gerard Jervis and Oswald Stender.

The IRS and the Attorney General’s Office alleged that the former trustees engaged in numerous conflicts of interest and self-dealing.

The reforms included a strict conflict-of-interest policy.

The Star-Bulletin obtained a copy of Arthur Andersen’s report from the Attorney General’s Office after filing a formal request under the state’s open-records law.

The Star-Bulletin initially asked the estate for a copy of the compliance monitoring report, but trust officials denied the request. The estate said such reports typically cover internal and operational matters that are “often of a sensitive nature.”

The bulk of Arthur Andersen’s report described how trust officials have complied with the terms of the IRS closing agreement.

The report also described a management dispute involving the head of Kukui Inc., a for-profit trust unit which owns McKenzie Methane Corp., a Houston-based natural gas producer.

In a Feb. 27 letter to senior trust executives, Kukui President Dennis Fern alleged that Wendell Brooks, the former head of the estate’s nonprofit Bishop Holdings Corp., abused his power and intimidated Kukui’s management.

Fern, the estate’s former internal auditor, complained that several activities involving Kukui and Bishop Holdings were not conducted at arm’s length and were driven by the estate’s asset allocation strategies, Arthur Andersen said.

Bishop Holding is the parent of Kukui’s sole shareholder.

The estate said it hired an outside law firm to review Fern’s allegations.

The law firm found that the trust did not violate any of its internal policies and that there were sufficient checks and balances to avert potential abuses of power.

Fern, the estate’s former internal auditor, could not be reached.

Brooks declined comment….

* * *

May 16, 2002

Kamehameha top pay went to lawyer in 2001

Nathan Aipa earned more than the trust’s
CEO, IRS data show

By Rick Daysog, Honolulu Star-Bulletin

The Kamehameha Schools paid its former top lawyer $413,630 during its last fiscal year, making him the estate’s highest-paid employee, according to records filed with the Internal Revenue Service.

Attorney Nathan Aipa’s 2001 compensation was nearly $100,000 higher than the $321,026 paid to estate Chief Executive Officer Hamilton McCubbin and was more than double the $170,636 paid to the trust’s current chief legal officer, Colleen Wong, for the year ending June 30, 2001.

It is also double the $195,000 that the $6 billion charitable trust paid Aipa during its previous fiscal year.

Aipa, who left the estate last year and is now in private practice, said his compensation included his base salary as well as a severance package. Trust officials declined comment, saying it was a personnel matter.

Aipa, who served as the estate’s first chief operating officer before stepping down, has been criticized for his role in the estate’s three-year legal battles with the state, the IRS and members of the local Hawaiian community.

Robert Richards, a special master appointed by the probate court, faulted Aipa’s handling of the trust’s outside law firms, which represented interests of the estate’s former trustees at the expense of the estate.

Aipa is just one of several former and current employees who received big payouts in 2001. According to the estate’s Form 990 filing with the IRS:

>> Former Chief Investment Officer Wendell Brooks earned $300,000.

>> Ex-Chief Administrator Rodney Park received $260,023.

>> Gilbert Ishikawa, the estate’s former tax director, was paid $271,610.

>> Eric Yeaman, the estate’s current chief financial officer, earned $224,532.

>> Michael Chun, Kamehameha Schools’ president, earned $188,718.

Current estate trustees Doug Ing, Diane Plotts and Nainoa Thompson, who joined the board on Jan. 1, 2001, earned $51,000 each, while trustees Robert Kihune and Constance Lau received $122,000 and $100,500, respectively. Former interim trustees Ronald Libkuman, the Rev. David Coon and Francis Keala each received $49,500.

Lau and Kihune also served as interim trustees.

Prior to their removals in 1999, former trustees Richard “Dickie” Wong, Lokelani Lindsey, Henry Peters, Oswald Stender and Gerard Jervis each earned as much as $1 million a year.

The estate’s annual Form 990 filing also provided a broad look of the estate’s investment and educational operations.

The nonprofit Kamehameha Schools posted total revenues of about $303.6 million during the 12 months ending June 30, while the Kamehameha Activities Association, a tax-exempt support organization, recorded total revenues of about $1.3 billion thanks to the recent sale of stock in Goldman Sachs Inc.

On a consolidated basis, the two organizations grossed about $1 billion during its 2001 fiscal year, up from $936.3 million in the year-earlier period.

The trust said it spent about $192 million for educational programs and school construction last year and is poised to spend an extra $200 million this year.

The estate said it paid the local architecture firm Group 70 International $2.82 million largely for work related to its Maui and Big Island campuses, which are under construction.

The trust also paid $2.1 million to the accounting firm of Arthur Andersen LLP and $1.85 million to the Washington, D.C., law firm of Miller & Chevalier to resolve various tax issues with the IRS.

The Kamehameha Activities Association also paid Miller & Chevalier $488,091 during the 2001 fiscal year….

For more on Arthur Andersen LLP, GO TO > > > The Story of Enron


 

William S. Richardson – Former Chief Justice of the Hawaii Supreme Court; retired Bishop Estate trustee; Sec/Treas of P&C Insurance Co.

From: RICO LAWSUIT: Harmon v. Federal Insurance Company , P&C Insurance Co, Marsh & McLennan, PricewaterhouseCoopers, Henry Peters, Nathan Aipa, William S. Richardson, Rodney Park, et al: . . .

William S. Richardson is a retired Trustee, a salaried consultant to KSBE, and serves as a Director and Sec./Treas., P&C. As Treasurer, Richardson had a fiduciary responsibility to P&C that expenditures and other financial records of the company be honest and accurate. Plaintiff refused to approve the 1995-96 fiscal year financial report, as prepared by Peter Lowe, as he was aware that these records were not honest and accurate. Plaintiff alleges that Richardson, as Treasurer, had the responsibility to review the financial records and raise questions about any entries that may have been fraudulent or misleading.

Richardson was also a co-investor in the McKenzie Methane deal during the time he was a Trustee. Plaintiff alleges that Richardson’s actions, through his complicity, deceptions, and breach of fiduciary duties, in collusion with some or all of trustees of KSBE; with other managers and employees of KSBE; with other officers and directors of P&C; and with outside contractors, attorneys, politicians and others, constituted a conspiracy to defraud P&C and the beneficiaries of the Estate of Bernice Pauahi Bishop; racketeering; mail fraud; wire fraud; extortion; and violation of IRS interim sanctions regulations.

For more, GO TO > > > Woo vs. Harmon


 

William E. Simon – Financier, businessman, and Secretary of the Treasury during the Nixon and Ford administrations. He was also a member of the Committee of 300.

A partial business career listing: Partner, Solomon Brothers (1964); Deputy Sec of the Treasury (1973); Secretary of the Treasury (1974-77); Sr Consultant, Booze Allen & Hamilton (1977-79); Consultant, Allstate Insurance Co.; Pres, John M. Olin Foundation; Director, Kissinger Associates; Founding Board Member, Robert Trent Jones International Golf Club; Senior Trustee, University of Rochester; Director, Xerox Corp.

William Simon died on June 3, 2000 of heart and lung ailments. He was 72.

* * *

William Simon was a co-investor with Bishop Estate in several business ventures, including HonFed Savings & Loan, Sino Finance Group, Xiamen International Bank (China), SoCal Holdings, and the now-infamous McKenzie Methane deal.

For much more, GO TO > > > William Simon Says…


 

The Woodlands George P. Mitchell, Chairman and CEO of Mitchell Energy & Development Corp, founded “The Woodlands” a 25,000-acre planned community located 25 miles north of Houston.

Opened in 1974, The Woodlands was sold in 1997 to a partnership of Cresent Real Estate Equities Company and Morgan Stanley Real Estate Fund II.

Recommended Reading: Conspirators Hierarchy, by Dr. John Coleman.

See also: Dennis Fern ; McKenzie Methane


 

Xiamen International Bank On Sept 28, 1974, Luso International Bank was incorporated in Macau. In 1975, it was acquired by Panin Group (renamed Min Xin Group in 1988), Hong Kong.

In Nov 1985, Panin Group, with three PRC-based institutions, Industrial and Commercial Bank of China; Fujian Investment and Enterprise Corp (renamed Fujian International Trust & Investment Corp); and Construction and Development Corp of Xiamen Special Economic Zone (renamed Xiamen Construction and Development Corp, Ltd.) jointly founded Xiamen International Bank, the first joint venture bank in the People’s Republic of China.

Luso International Bank was injected as part of the capital to the bank, thus becoming a wholly-owned subsidiary of Xiamen International Bank.

In Nov 1991, XIB was joined by three more shareholders: Asian Development Bank; The Long-Term Credit Bank of Japan, Ltd.; and Sino Finance Group, Ltd. (owned by Bishop Estate and former U.S. Treasury Secretary, William Simon)….


 

Yakuza – The huge nest of organized crime based in Japan.

From tripod.com: Yakuza Stretch Tentacles Overseas . . .

Like most growth-oriented enterprises, the yakuza have not confined their illegal — and legal — business activities to Jappan. In the late 1960’s the Japanese mob took advantage of the sharp rise in Japanese tourism and began organizing “sex tours” to various countries in Southeast Asia.

The yakuza also began to recruit — or, more probably, to coerce — women from the Philippines, Taiwan, South Korea and other Southeast Asia countries to work as “hostesses” in mob-controlled brothels in Japan. The overseas push proved similarly lucrative for drug trading — primarily of Korean, Taiwanese and other sources of methamphetamine (known as “speed” on U.S. streets).

Gunrunning also evolved into a profitable activity since the sale of guns is controlled so strictly in Japan that the black market price for handguns can be as much as $5,000 to $7,000.

Gangsters typically have bought the guns abroad, mostly from criminal elements in China, Taiwan, Hong Kong, the Philippines and the United States, and sold for exorbitant prices on the black market back home. . . .

American law enforcement officials maintain that until 1974 yakuza activities in the U.S. were relatively limited, both in nature and scope. Not surprisingly, given its geographic proximity and brisk tourist trade, Hawaii initially attracted Japanese gangsters. Their focus there was on fleecing their own countrymen on yakuza-organized tours that included patronizing yakuza-run bars, restaurants, brothels and other entertainment.

As the yakuza’s economic power has grown, however, they have focused greater attention on picking other fruits from the U.S. market. In this regard, mobsters found that, partly due to its heavy tourist traffic, the fiftieth state was a prime market for selling Asian-made methamphetamine (usually at a cut-rate price compared to U.S.-made speed) and/or trading these drugs for handguns….

For more, GO TO > > > Yakuza Doodle Dandies!


 

Yukio Takemoto – Takemoto is a former Hawaii State Budget Director who resigned under a thunderstorm of criticism in late 1993 to become Bishop Estate’s chief executive for budget and review. The Trust paid him $163,010 in 1997.

From Equity No. 2048 – Petition of the Attorney General on Behalf of the Trust Beneficiaries to Remove and Surcharge Trustees:

Yukio Takemoto is the principal executive of the budget and review group of the Trust and reports directly to Peters. After the 1996 primary election, Milton Holt owed Starr Seigle McCombs (SSM), his media and advertising consultants, $18,690.72 that SSM had paid the Vendor on behalf of Holt. . . .

Takemoto asked another non-bid contractor of the Trust, Akinaka & Associate, Ltd., to help with Holt’s unpaid campaign expenses. When Akinaka agreed to help, Takemoto said that Kajioka would be in touch. . . .

Shortly thereafter, a Trust employee instructed the Vendor to send four invoices (each for $4,672.68, or one-fourth of the campaign debt of $18,690.72) to each of: Kajioka; Ho; Akinaka; and Okita, Kunimitzu and Associates….

The Vendor followed this instruction and sent false invoices to the four non-bid contractors for goods and services that were never provided to them.

Each of the four non-bid contractors paid the false invoice from the Vendor, and the Vendor then paid in full Holt’s campaign debt to SSM….

All the firms that participated in the instruction of the Trust in making illegal campaign contributions by sending or paying bogus invoices were receiving, have received, and continue to receive lucrative non-bid contracts from the Trust….

* * *

Honolulu Star-Bulletin, 1/24/01, by Rick Daysog: Estate’s Managers Shuffled in Shake-Up

Kamehameha Schools’ senior management team has undergone a major shake-up …

Yukio Takemoto, former state budget director who previously headed the Kamehameha School’s office of Budget and Review, was reassigned several months ago to a new position …

Takemoto is now director of the Kamehameha Schools’ Facilities Development and Support Division

For more, GO TO > > > Woo vs. Harmon

# # #


 

QUESTION

Do you think the Southern Ute Indian Tribe got a fair deal,
or did they get
scalped?

THE CATBIRD’S FORUM

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OR, TO FOLLOW MORE SMELLY WAMPUM TRAILS, YOU CAN

START SNIFFING HERE

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ALOHA, HARKEN ENERGY!

VULTURES IN THE MEADOWS

THE BUREAU OF INDIAN AFFAIRS

BUZZARDS OF PARADISE

A CONNECTICUT YANKEE IN KING KAMEHAMEHA’S COURT

THE INDONESIAN CONNECTION

IT’S THE OIL, STUPID!

RICO IN PARADISE

THE STORY OF ENRON

THE TURNSTONE BIRDS

PARADISE PAVED

PREDATORS IN PARADISE

P-S-S-T, WANNA BUY A GOOD AUDIT?

THE PUNA CONNECTION

THE SINKING OF THE EHIME MARU

WHAT PRICE WATERHOUSE?

WILLIAM SIMON SAYS…

WOO VS. HARMON

YAKUZA DOODLE DANDIES

~ ~ ~




 

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Last update March 26, 2006, by The Catbird

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