Bishop Estate: One Day After the Broken Trust Essay
Price of Paradise · Hawaii Public Radio · aired 1997-08-10
Guests: Samuel P. King (U.S. District Judge; Broken Trust co-author); Walter Heen (retired Judge, Intermediate Court of Appeals; Broken Trust co-author); Ed Case (State Representative)
Duration: 1:04:46

[00:00:00] Randall Roth: This is Randy Roth, host of the Price of Paradise show. We're broadcast live Sunday mornings on KHPR and KKUA, then rebroadcast Sunday evenings, beginning at 8 o'clock on KIFO. Everyone who works to bring this program to you is a volunteer who believes in the importance of lively and informed public dialogue. We believe the brightness of any community's future is directly related to the level of activity in its marketplace of ideas. Our topic this morning has to do with the Bishop Estate, specifically, trustee selection and performance. With me in the studio is Representative Ed Case from the State House of Representatives and Judge Sam King from the Federal District Court. With us by phone is Walter Heen, who is a retired judge from the intermediate court of appeals.
[00:00:47] Randall Roth: Um, if you've looked at the Star Bulletin from yesterday or the advertiser from this morning, you know that there's been an awful lot in print in the last uh 24 hours or so having to do with the Bishop Estate. I think what I'll do to start this conversation is just go around the room, uh picturing Walter as being here. He's at home right now because he had back surgery uh about a week ago, but we'll start with Ed Case here in the studio. Uh, Ed, there's an awful lot that's been in the newspaper. Uh, the the Star Bulletin carried an article by uh, Sam and Walter and Gladys Brant and Monsignor Kekumano and and myself.
[00:01:24] Randall Roth: And then there was an article by Greg Barrett in this morning's advertiser. An awful lot for the people to digest. What does it boil down to in your mind? What's at the heart of this, or what's the single most important point for listeners to to consider?
[00:01:37] Ed Case: Well, I think there's really two issues. The first issue, of course, is the Kamehameha Schools Bishop Estate and how it operates. And the second issue is the involvement of the State Supreme Court and the judiciary in the selection of Bishop Estate trustees. Now, the whole problem is that those two things are interrelated because of the way things are set up. Essentially, my focus is on the latter, which is the appointment of the trustees by the judiciary. I simply don't think it's appropriate.
[00:01:59] Randall Roth: Okay. Uh, Sam King, Federal District Court judge, any reaction to either what Ed has said or your own thoughts on what should be at the core of our conversation?
[00:02:09] Samuel P. King: Well, I had uh, essentially the same approach uh, that the appointment by these justices of the Supreme Court was no longer valid since we became a state. And also that the involvement of the uh, Judicial Selection Commission and the Supreme Court and the Bishop Estate trustees with the legislature created a political politization. I have a terrible time with that word.
[00:02:39] Randall Roth: Politics got into it.
[00:02:40] Samuel P. King: Yeah, which was bad, which is very bad for the state. Uh, I know people ask why is it important. Well, the Bishop Estate is a big outfit.
[00:02:49] Randall Roth: Okay. Walter Heen, can you hear me?
[00:02:51] Walter Heen: Yes, I can hear you, Randy.
[00:02:52] Randall Roth: How are you feeling?
[00:02:54] Walter Heen: Oh, pretty good.
[00:02:54] Randall Roth: Oh, that's good. Uh, you were a co-author of this piece that appeared in the Star Bulletin last night. Uh, what do you think's at the heart of what we should be talking about for the next hour?
[00:03:04] Walter Heen: Well, it's it's difficult not to merely echo what Representative Case and Sam have uh said already. Um, but in my view, the importance of what we discussed in our article is that it should, and hopefully will, bring about some change in this process. I think a danger that people are not really thinking about is that there are forces in the community that would like to see the Bishop Estate destroyed for one reason or another. Uh, and to continue this this kind of policy that uh, of selection and operation of the trustees, I think will lend fuel to that fire.
[00:03:49] Randall Roth: Mm-hmm. The the people who came together to write the article that was in the Star Bulletin, I know, did so because they think the Bishop Estate Kamehameha Schools is terribly important and the last thing that we would want is to see it destroyed.
[00:04:03] Walter Heen: That's right.
[00:04:03] Randall Roth: Okay. Any other thoughts, Walter, before we uh, move on?
[00:04:06] Walter Heen: No, you carry on.
[00:04:08] Randall Roth: Okay. Um, I would just mention to uh, to the audience that in the Star Bulletin piece, there are some real specific recommendations. And um, uh, rather than go through them in any detail, I'll just summarize. First of all, the co-authors of that piece are saying there really needs to be a strategic plan. I think a lot of listeners might be shocked to hear at this stage of the Bishop Estate's existence that there isn't a strategic plan for either the investment side or Kamehameha Schools. We also are calling upon uh, the appropriate parties and personally, we would just assume that the justice is not be involved in this. But if they would like to be involved, so be it.
[00:04:48] Randall Roth: The appropriate party should put together a blue ribbon panel of community leaders that would determine what the appropriate trustee criteria should be and the selection process, and uh, and it should replace the current selection process. We think the Attorney General should immediately begin an investigation. And if the trustees don't cooperate, we think that a lawsuit should be filed by the Attorney General and subpoenas issued and a very, very thorough investigation conducted. If it's determined that there are breaches of fiduciary duty that are serious or repeated, we think that trustee or trustees should be immediately removed from office. And of course, if there are any damages resulting from those breaches, why those trustee should be held personally accountable as well.
[00:05:32] Randall Roth: We think that the term of office should be limited uh, a line in our article is that these are supposed to be, or this is supposed to be a public trust, uh not a a personal fiefdom. Uh, we think that the legislature should repeal the statute that calls for statutory fees that over the last three years have averaged $900,000 per trustee per year. And I want to emphasize the five of us don't feel that the trustees should serve without compensation. We all feel that they should be compensation, compensated, and that that compensation should be reasonable. But to determine what's reasonable, you should look at a lot of different circumstances and facts, rather than simply apply an arbitrary, inflexible statutory schedule.
[00:06:17] Randall Roth: And then finally, we're recommending that the legislature appoint and adequately fund a watchdog, perhaps patterned along the lines of the legislative auditor that could be constantly monitoring that would have expertise and resources to monitor all charitable trusts in Hawaii, which of course would include Bishop Estate. Ed Case in the legislature, you're known as the person who's taken on these issues over a long period of time. Right now, there's a certain amount of momentum, and quite frankly, it doesn't require quite as much courage to uh, step forward today as it did a few years ago when you were out there pretty much alone in the legislature. I think Scott Psyche was standing next to you on a couple of these issues.
[00:06:55] Randall Roth: Uh, any reaction to the recommendations that my co-authors and I have made or anything else that you've heard?
[00:07:01] Ed Case: Well, I think it's an incredible article first of all, because uh, the one thing it does is because of the the real depth and breadth of the sources that uh you and your co-authors uh, consulted with, essentially what you've done is to prove, factually, in my mind, what uh, many of us had suspected for many years, having to do with how, how the some of the details of the judicial selection process and the appointment process uh really panned out and why it was that this uh, selection process needed to be changed. Maybe I can back up just a second and say of course, just by way of background, that uh, Bernice Pauahi Bishop's will does provide for the for the appointment of her trustees by the Supreme Court.
[00:07:40] Ed Case: And over the years they have done that uh since the will was established in in 18, or probated, I should say, in 1884. Uh, the real difficulty has come about in really the past 20, 25 years when the job of trustee has been has become so coveted because of really, I think, [unintelligible — audio glitch] level of compensation that has been paid to the trustees, and so it has really become a political plum in many ways. Now, the Supreme Court has exercised uh that power to appoint, um, if you back up to the beginning, really what you have is if if, and let's take it all the way back to the beginning. The Governor appoints the members of the of the Supreme Court. He appoints them from a list of a list submitted to him by the Judicial Selection Commission.
[00:08:19] Ed Case: The Judicial Selection Commission develops that list. The Judicial Selection Commission in turn, itself is appointed by a variety of politicians, really. The Governor appoints three, the Senate President, House Speaker appoint one each, the Chief Justice appoints two, the members of the bar appoint two. And the judicial Judicial Selection Commission also passes exclusively on the retention of justices and judges. So what has been uh, suspected for many years, of course, and again, your article really lays out the details of that, is that the process of getting from point A to point Z in terms of trustee selection lies through this process. Now the problem is that it that it creates at least the appearance of impropriety in the whole range of aspects of that process.
[00:09:00] Ed Case: There's really two ways of going about this in terms of correcting it, if one agrees that it is a problem. The first way is of course that the Supreme Court justices can choose whenever they want to to withdraw from this process. They can do that. There is nothing, there's there's a misnomer, a miscommunication, if you want to put it that way, that essentially holds that we are all bound to follow [unintelligible — audio glitch] terms of a will and that somehow uh the court system and the legislative system do not uh stand over and above that will. So the first thing is they can do it if they want. The second thing is the legislature can provide by statute, uh and the legislature has there is a bill introduced in the legislature at the moment which says that public employees cannot appoint the trustees of a private charitable trust.
[00:09:40] Randall Roth: Okay, and so the bottom line is the justices should simply get out of what you call the trustee selection business.
[00:09:46] Ed Case: That's true.
[00:09:47] Randall Roth: Sam King.
[00:09:48] Samuel P. King: Well, [unintelligible — audio glitch] think I would like to mention some of the historical background. Um, I'm not sure whether the uh, the will I'm sorry, I don't bring my copy of the will, whether it said the justices of the Supreme Court or the Supreme Court of Hawaii. But at that time, that was the Supreme Court of the Kingdom of Hawaii. And they were appointed by Bernie's Pauahi uh relatives, you know, the king. And things changed when we became a territory. At that time, this issue was brought up then. There were only three justices, and uh the Supreme Court decided that the no, they were acting as individuals and not as a court. Then uh we became a state, and it became even more inappropriate because under the state Constitution, the Supreme Court of Hawaii definitely does not have probate powers.
[00:10:34] Samuel P. King: So oddly enough, they may have the justices acting as individuals as they're fond of saying, may have the right to nominate, but the probate court has the right to remove.
[00:10:46] Randall Roth: The Supreme Court was the probate court back when the Princess wrote her will.
[00:10:49] Samuel P. King: Right, and now it's not. Well, uh I brought that to their attention again in the 1971, and of course, they sitting as uh a court, with new new judges because the Supreme Court disqualified themselves, uh decided that I was wrong, no, they were acting as individuals. Well, this is such an obvious uh non-sequitur. It's a it's a what do they call it? It's a it's a no brainer that they're acting as individuals. Obviously, they're acting as a court because they have several times changed the provisions of the will just as as individuals or as a court? There have been no case pending.
[00:11:29] Randall Roth: Okay, and so uh we haven't uh invented the wheel here back in 1971, what we're now calling the primary theme of this was the subject of a lawsuit that you as an attorney brought. Uh, Walter Heen, what do you think of what you're hearing?
[00:11:43] Walter Heen: Well, I I would like to add a caveat here and and again go back a little into history. One thing about Sam and I, you know, we're we're old, so we know a lot of history. We've lived a lot of history. At the time the Judicial Selection Commission was set up, there were some of us who said, that's not removing politics from the appointment of judges. Uh, prior to that of course, the governor on his own could name anyone he wanted and if the Senate approved, get them named to the courts at all levels, except for the district court. Um, no matter what kind of selection process we set up, it's going to be subject to some kind of politics because politics is politics is politics.
[00:12:28] Walter Heen: And what I'm afraid of is what happened in the judicial selection process is that you removed the politics from the public scrutiny. And what happened in the past several years is that the process was in fact manipulated politically to end up with the result that we have today. And it seems to me that if the Supreme Court justices are acting as individuals with respect to their appointment, I see no reason why the legislature couldn't go further than Mr. Case's bill or proposition and say that the Supreme Court justices will not be allowed to to make the appointments. It has no bearing on the separation of powers with respect to the court and the legislature, it seems to me.
[00:13:21] Randall Roth: Well, let's let's hope by the time the legislature reconvenes, the Supreme Court justices will have voluntarily stepped aside.
[00:13:28] Walter Heen: Good luck.
[00:13:29] Randall Roth: Lots of luck. In in case you tuned in late, you're listening to the Price of Paradise Radio Show. My name is Randy Roth. We're talking about Bishop Estate Trustee selection and performance. If you haven't seen yesterday's Honolulu Star Bulletin, please take a look at it. If you haven't looked at this morning's Honolulu Advertiser, please take a look at it. There's an awful lot of written information out this weekend on the Bishop Estate and a lot of issues surrounding the Bishop Estate. We encourage you to read all of that, think about that. We've invited the justices and the trustees to have this same forum two weeks from today. And since I'm not a neutral party on this issue, I've invited Peter Adler, who is a very highly regarded mediator here in town, to serve as the host for that particular show.
[00:14:17] Randall Roth: I am hoping that the justices and or the trustees or at least some of them will show up to present their perspectives, to share their thoughts. Uh, we would like to initiate a dialogue. Uh, we're not trying to tear anything down. Uh, we really are doing this in an attempt to strengthen two very important institutions, the judiciary and Kamehameha Schools Bishop Estate. If you'd like to ask a question or make a comment, you can now call us at 955-8821. If you're on a neighbor island, it's 1-800-955-8821. If you will watch Channel 2 news tonight at 6:00 and 10:00, Rod Antone and Hans Kolo, the cameraman are here for KHON, they'll be doing a report should be on at 6:00 and at 10:00 tonight.
[00:15:06] Randall Roth: Again, our phone number is 955-8821. We would like to hear a lot of voices this morning, please give us a call. We go to Ed Case.
[00:15:16] Ed Case: Thank you, Randy. I I just want to briefly comment on Judge Heen's prior comments, which I totally agree with. I do want to note that the bill that is pending in the legislature would, in fact, take the Supreme Court out of of the process of selecting um uh Bishop Estate trustees and trustees of any other private trust. And that bill would also, by the way, I think prohibit any public officer, so you couldn't supplanted it with a system where the governor would select them, nor could you supplanted it with a system where the legislature would select them. The whole point here is that because of the particular nature of private trusts, especially the Bishop Estate, and the interrelationship with government, you really have to sever that relationship, especially the trustee appointment.
[00:15:56] Ed Case: I agree with Judge Heen, politics is politics, and if you put it in the leg, any of the other two branches of government, you'd pretty much end up with the same problem, just manifesting itself differently.
[00:16:04] Randall Roth: Okay. Well, the lines are are full. Well, Sam, you got a a comment today?
[00:16:08] Samuel P. King: Oh, a very, very brief comment. Um, I noticed that that Ed said uh, remove the Supreme Court. You see the problem of keeping it's the justices of the Supreme Court as they are fond of saying.
[00:16:20] Randall Roth: It uh it does get a little bit uh complicated.
[00:16:23] Samuel P. King: Well, I agree with him of course, but our lines filled up very quickly.
[00:16:25] Randall Roth: Our lines filled up very quickly. We hope to hear a lot of different voices. Let's start with uh Diana from Hoola. Good morning, Diana.
[00:16:32] Diana: Hi. Um I have really kind of three questions. One is, shouldn't the Hawaiian community solve the problems themselves, come up with their own solution in their own recommended ways of dealing with it? And then the other one is, do any of the people opposed to the trustees have any financial interest in Bishop Estate's affairs like interest in property, employment, etc.? And to me the basic question is who wants to take over Bishop Estates?
[00:16:58] Randall Roth: Okay. Um Diana, I'm going to take those as comments. I think they're they're very good comments. Uh, we'll move on and listen to Libby from Kailua. Good morning, Libby.
[00:17:07] Libby: Uh, good morning, Randy. How are you doing? Glad to see you're back in town.
[00:17:12] Randall Roth: Thank you.
[00:17:13] Libby: Uh, I have a comment and a question. The first comment is the uh, masters that have been appointed to review the accounting of the Bishop Estate have always been, I think, more politically appointed than truly um, attorneys or people who understand what the basics of trust law are. For example, Jim Duffy is very well known as an attorney who's been hired by the um, political powers such as um, Ariyoshi, and I've never seen him in probate court. And it was always a a wonder to me why he would have been appointed a master. So that's just my comment. The second question is I thought it was um, kind of a basic tenant of of uh trust law that in order for a decision to be made, it must be unanimous by the co-trustees.
[00:17:54] Libby: And I was wondering why it's now a majority or why an Oswald Stender can't just put a like a a stop to some of the actions by um, saying no.
[00:18:03] Randall Roth: Uh, very good question, and and I'm going to turn to Sam King in a moment to get an answer to your question. I do want to just mention, uh I think Libby is is right that that Jim Duffy is not known as a a trust specialist, but I must tell you, I personally think he did a better job as master than any other master that that I've looked at in terms of the various reports. So for what it's worth, Libby's point is accurate, but I personally think Jim Duffy did a great job as a master.
[00:18:31] Samuel P. King: Uh, I I do want to support [unintelligible — audio glitch] masters that were appointed. I think it's not really understood that they have a very limited role, and I think Jim Duffy made a very good point when he said it's kind of hard to get your hand around what they're doing because it's uh, they don't give them the information and if they don't have to.
[00:18:49] Randall Roth: I I think the public expects more of the master than what the system is designed to enable the master to do.
[00:18:56] Samuel P. King: Right.
[00:18:57] Randall Roth: Libby, thank you for your call. Makiki, good morning, Andrew.
[00:19:01] Andrew: Good morning. I've got a couple questions here, or comments. One, I think it's ironic that the state would be appointing the trustees when when I don't think the Queen was too friendly with the state. Aren't they the ones that locked her up? And then the second one is this is all about money because this money has been compounded over years. And doesn't the Bishop estate have a fiduciary through Morgan Stanley? Don't they own like 10% of them? I I think I've heard that once. And the third thing is, I recently read a story about a Stephen Gerard in Philadelphia that had almost the same thing. He was a multi-millionaire at the turn of the century.
[00:19:46] Andrew: And they had in his trust that only white males could go to his school and then I guess somebody read into the trust and then they changed it. Any comments on something like that? That was again a large chunk of money for Gerrard College.
[00:20:02] Randall Roth: Okay. Um, why don't we start with the last comment? I know there is or I'm told there is a lawsuit pending right now that is questioning whether it's appropriate for the Kamehameha schools to limit enrollment just to children who are part Hawaiian. And that's not part of today's topic. Ed, other than to simply acknowledge that that lawsuit is going on and it's not part of what the authors have written about, not part of what we're planning to talk about. Any thoughts on that?
[00:20:32] Ed Case: Well, um actually there's a couple of just factual misunderstandings that I think were stated. I think Bishop estate owns 10% of Goldman Sachs as I recall.
[00:20:38] Randall Roth: I was going to come back to the mis- misconceptions but uh so let let's just push aside first you know, that that first comment that that's not part of today's conversation. But then the misconceptions, go ahead.
[00:20:51] Ed Case: Well maybe I can go back to to the general gist of the comment. I and it relates to a comment that was made by a prior caller as well and that's really the question of to what extent we being the legislature or the government I should say, or the community involve ourselves in the affairs of Bishop estate because it's an important question to ask. I personally believe that the school should go on educating only native Hawaiians. I mean, I think that's a good proposition. It was in the will and and as long as it's constitutional, I think it's a worthy thing to do. So the question is, at what point do you say the Bishop estate has gotten to a point because of the exercise of its power? And I agree with the comment that that power money is power, and what we are talking about is money whether it's commissions or whatever or the size of the estate.
[00:21:39] Ed Case: At what point does it become a public consequence to to the actions of the trustees that that requires that we get involved? So I think I guess I would answer it with an observation.
[00:21:50] Samuel P. King: Well, just briefly, he had the wrong queen. Princess Pauahi Bishop was never Queen and she was not that was the legal. And secondly, the will of Princess Bernice Pauahi Bishop does not limit the student body to Hawaiians. It's wide open, it only it does have a provision that they should give preference to orphans and indigent children of Hawaiian ancestry. Otherwise it's wide open.
[00:22:22] Randall Roth: I'm I'm going to say that's just not part of today's discussion in part because I think our five co-authors of our piece in the Star bulletin would probably have some some disagreement among ourselves on on that particular. Well, it's a policy of the trustees and not a provision of the will. That's right. Andrew, thanks for your call. We're going to have to move on. We got to Bob from Hawaii Kai. Good morning, Bob.
[00:22:43] Bob: Good morning, Randy. Let me just comment first. I think the last caller had a good point that [unintelligible — audio glitch] the courts rule that it could not limit admission to whites only, that I think the courts could also rule here that it couldn't be limited to just those of Hawaiian blood.
[00:23:01] Randall Roth: It's it's a complicated legal issue, and as I understand it, it's working its way through the court system and and will be addressed at some point in time.
[00:23:09] Bob: But let me move on to my main to to my question and I guess this is really for Judge King. Since the Bishop estate does not does not allow Catholics to be on the board of trustees, how can the uh how can the Bishop estate retain its uh its tax exempt status? I know there was also a case that came to courts where the Bishop would not allow Catholics to be teachers there. I don't know what the status of that is. Are there any Catholics now teaching at at to at Kame schools?
[00:23:42] Samuel P. King: Oh, I think the I think that that provision was struck down. Now, when you come to the trustees, um, I think um all the trustees rather than face the issue, had instant conversions. So, I think they're all Protestants right now, so the issue has not arisen. And the Supreme Court reached that, the justices of the Supreme Court acting in their individual capacities, reached that decision without a case pending before them.
[00:24:06] Randall Roth: Let me, this is Randy, let me just mention there there is some um differences of opinion as to whether there was a conversion or or just uh something that would be described differently. But at this point in time, all five trustees profess to be of the Protestant religion, which according to the wills, a requirement. And as was mentioned, there is no court case that has said that's unconstitutional, while there is a court case that's saying it's unconstitutional to limit the teachers to just members of the Protestant religion. Walter, we haven't heard from you for a long time. Any thoughts on that or anything else you've been listening to?
[00:24:41] Walter Heen: I'm having some difficulty hearing the questions, um Randy. But, the thought occurs to me as a good Catholic. I think I'm a good Catholic.
[00:24:50] Randall Roth: Well, that's why I went to you. Go ahead.
[00:24:53] Walter Heen: We could we could call it something more than conversion.
[00:24:57] Randall Roth: Okay. Okay. And and I should add too, the will says nothing about Catholics. It just limits certain things to members of the Protestant religion and so uh we could be talking about Buddhists or atheists or a lot of other groups as well.
[00:25:10] Walter Heen: If there is such a religion.
[00:25:12] Randall Roth: Well, okay. We move on to George from Honolulu. Good morning, George.
[00:25:16] George: Good morning, Randy and to uh to Sam and the Walters, George Play out of Honolulu. I want to say uh thank you for doing what should have been done many many years ago. I'm so very proud of what you have done. God bless and good speed. If there's anything that uh me or the my law firm can do, we'll be happy to do it on a pro bono basis for whatever group would like to do uh go forward.
[00:25:41] Randall Roth: George, thank you. George Playton is a very highly regarded well known local attorney and I can guarantee you not everybody in the legal community shares those sentiments, but George, we appreciate uh your words of encouragement.
[00:25:53] George: God bless to y'all. I me he's representation.
[00:25:58] Randall Roth: Okay. We go to uh Steve from Moa.
[00:26:02] Steve: Hi. Good morning. Extremely interesting uh panel and I think uh fraught with history and philosophy although a lot of smaller points been brought up and I'd like to ask a more historical philosophical question for the perusal of your panel. Isn't there something rather special about the case of the Bishop estate, um so-called private trust and contrasting it to the other kinds of estates we know of in the United States and making it rather more similar to large estates that one is familiar with in land law and places like Britain or other state other countries which have had royalty. Because the Bishop estate is essentially land that came to its original owner as government land. It [unintelligible — audio glitch] land which which the princes own because she was a princess.
[00:26:58] Randall Roth: If Steve, my guess in the studio are anxious to comment. Okay. Stay on the line. Let's go first to Ed Case.
[00:27:07] Ed Case: Well, I'm reluctant to bring up history sitting in the presence of Judge King and Judge Heen because I'm going to be easily corrected if I'm wrong.
[00:27:16] Randall Roth: Be careful. They were there.
[00:27:18] Ed Case: I I think you have to go back and recognize that um the was in essence and this is not something that I think most people believe or think about, the was in essence a division between the king and his of the lands of the kingdom. That was the point of the until that point, uh if you want to quantify it under Western principles, which always gets you into trouble, the first owned all of the land of Hawaii and and it went down from there to the third and the was a division of that land and part of the land and the land that was conveyed to the were the lands and that is the source of Pahis land. It is not a government land. It is it is land and that is why this trust is referred to by the native Hawaiian community as an trust, just as other trusts are referred to in that sense. Uh Queen Emma I believe is one of them. You got the the Lunado trust. Um so this this what is special and I and I agree with the caller. I agree that [unintelligible — audio glitch] problem that we're having here is that the the this is fraught with history and this trust is special. And one of the reasons that it is special, especially the native Hawaiian community is because it is a trust uh that came down from really the last um living direct descendant of the first and so it's a it's a direct link back to the first. That's that's really principle.
[00:28:40] Samuel P. King: Well, he's 102% correct.
[00:28:43] Randall Roth: I'm relieved. I'm very relieved.
[00:28:44] Samuel P. King: There there is no government land in the in the original will. As a matter of fact, some land was owned by her husband and he conveyed it to the uh to the state that she set up for $1.
[00:28:58] Randall Roth: Okay. Let's make it real quick because as soon as just one second, just as soon as one person gets off the line, somebody gets on. I think we could take about 1,000 calls this morning if we had the time. So if you could quickly make your other point.
[00:29:09] Steve: Super quick. This really saying this is not government land reminds me of Henry the VIII and his division of what he confiscated from the church in the 16th century. Um it isn't government land. It wasn't government land technically, but but that's how it got there. It was land that was conveyed by one group of very powerful people to another group of very powerful people, regardless of the of the will and the power of the people. So it really was government land in many ways just as the estates that went to the barons in Britain were government land.
[00:29:35] Randall Roth: Steve, you made your point and all I can say is looking at the facial expressions in the room, my guests don't agree.
[00:30:21] Melissa: Melissa, good morning. Good morning, gentlemen. I'd like to address trustee accountability because I haven't heard that much about that just yet.
[00:30:31] Randall Roth: Thank you, Melissa. That's that's at the core of all this.
[00:30:34] Melissa: Yeah. Well, I've just really super quickly. I've been in Hawaii for 16 years, and I've been involved with Schools for about the same. My husband is fourth generation and our son is fifth beginning this year. Um, I'm also a public school teacher and I just wanted to say that I'm very grateful to the trustees and their administration because the schools lack for nothing. There's no comparison to any of the six public schools that I've worked at, and that our sons or that our sons have attended. And this year, we're only going to pay $940 for a $14,000 education. And I just wanted to comment that we took our son to visit the classroom and meet a teacher, so that he could better visualize where he'd be next year, and we could see what a $14,000 education look like.
[00:31:19] Melissa: And we were just amazed at the technology on hand in the classroom, state-of-the-art computers, distance learning, you know, all, I mean, just networks between classrooms and learning centers, internet, everything. And we were touched and proud to see the Hawaiian values such as deep sense of justice and to seek knowledge and five more posted for our son, so that in his daily studies he can see these values is sort of a guiding light in front of him why he's getting this education. And I personally, and this is my opinion, I judge the trustees accountability to what they're providing for our son. And we're just really really grateful that they're providing this awesome education for our son.
[00:32:05] Randall Roth: Okay, and I've got to say I personally think Mike Chun walks on water. I I personally think they have a president out there that is uh second to none anywhere. Um Melissa, thank you for a call. We really appreciate it.
[00:38:00] Caller: caller and her, um, statements about accountability, um, I agree that the school has provided and is providing for the students some of the best, um, equipment and education training possible. Um, but I I I'm not sure that that has any reflection on the accountability of the trustees as we talk about it in the uh, in the article.
[00:38:31] Randall Roth: Let's let's talk about accountability.
[00:38:33] Caller: Well, my view of the accountability of the trustees is how well they're running the estate as as an estate and not so much as to how they're running the school. I think they put a good man in charge of the school and, like all good trustees, they should leave that man alone to run it until something happens or they get some indication that the school is falling down. Uh by the same token, I think they should do the same thing with as we pointed out, with the operation of the estate. In that way, they can determine who's accountable. Right now, you could blame anyone of five trustees perhaps for one or more of the of any shortcomings that you may find.
[00:39:19] Randall Roth: It's impossible to hold them accountable when it's run the way it is now.
[00:39:22] Caller: Yeah.
[00:39:23] Samuel P. King: And Sam King. Furthermore, um, while it's very nice for them to take the uh children who are in there, they have squandered so much money that they could have taken care of a lot more. Yeah, I mean you can you can accomplish a lot of good things with $80 to $100 million a year to spend, but if you had $200 or $300 million, why I guess you could accomplish a great deal more. Ed case, very quickly then we're going to get back to callers.
[00:39:49] Ed Case: No, I I really have no comments here.
[00:39:52] Randall Roth: Okay, let's go to Lela and Ia. Good morning Lela.
[00:39:56] Lela: Good morning. You know, is it realistic to expect the legislature uh to lower the salaries of the trustees? You know, Senator Blair years ago introduced a bill uh to limit the salaries to $300,000 and it died quickly.
[00:40:16] Randall Roth: Lela, let me let me explain something to listeners and then get Ed Case's thoughts and then I'm going to come back to you. Listeners may not realize that as of January 1, 1997, this year, the law has changed so far as private estates are concerned. Right now, the law instead of calling for this arbitrary fixed fee schedule that oftentimes generates a fee that is much too high or much too low for the work that has to be done, the law simply says the fee has to be reasonable. And if anybody who has a financial interest in the estate complains, the court will determine whether or not it's reasonable, and in doing so, they can look at all the facts and circumstances. What the coauthors of the Star Bulletin piece are recommending is that we simply take that same provision that's law now in Hawaii for private estates and law in virtually every other jurisdiction, and we make it the law for trusts, especially for charitable trusts. So the legislature wouldn't be deciding whether $300,500,100 is appropriate. They would say, hey, it depends on the circumstances and it just has to be reasonable. Ed Case, a reaction and then we'll go back to Lela.
[00:41:28] Ed Case: Uh the first thing I want to say is something that many uh people may not agree with and that is that I don't think that the Bishop State trustees would be too highly compensated if everybody felt that they were doing a good job. The level of compensation, obviously, uh should be linked to performance. And um it's difficult for me to sit here and say whether they deserve that money, but if they are doing a good job and obviously your your article raises serious questions along those lines, I don't mind them being highly compensated if it's considered reasonable. I think you have to recognize that the reason the trustees make this money really is not at all linked to performance. It's a basic tenant in the business world that you're that your pay should be linked to performance. The way that the trustees are compensated under the law is by the number really of transactions that occur, the the income that is that is generated by transactions. And that's a basic principle of
[00:42:21] Randall Roth: You know, it just dawned on me, Ed. We didn't make that point in our article, Sam. Ed, that that's that's an important point because the trustees like to say that if they do a good job, they make a lot of money and they imply that if they didn't do a good job, if they had a lot of losses like they have experienced in the last few years, that they would get very little pay or something like that and it's simply not the case.
[00:42:41] Ed Case: Yeah, [unintelligible — audio glitch] the really the reason why [unintelligible — audio glitch] issue of compensation of trustees has come up is because this statutory scheme is in place and it simply relies on the amount of of activity that's going on. You could have a trust that hadn't really was being very well run without a lot of generation of transactions going on and those people would be entitled to good compensation. And these statutory schemes are archaic. They're they're on the way out everywhere. Sam King.
[00:43:08] Samuel P. King: Very briefly, um the uh statutory rate creates a fund which is divided among the five trustees. There is not a determination that each trustee should get so much money. It's it's a lump sum based on [unintelligible — audio glitch] mathematics of how many transactions were done in in income and in property. And actually uh I remember one time, I don't know if they're still doing that, if there was a vacancy, four of them divided up the lump lump sum. Probably took their time filling that vacancy. So it isn't a certain amount per trustee. It's a lump sum for all trustees divided by the number of trustees.
[00:43:47] Randall Roth: Okay. Lela, I I kind of got sidetracked uh, why don't you finish your point and then we'll move on.
[00:44:03] Lela: Number one, I feel that the beneficiaries should have input and it should be strong input. In other words, they should help to develop policy. There should be uh number of people that serve on a board. Secondly, I think the schools are educating only the elite and the will does not say that. If you uh make allowances for orphans and indigenous, then you would make allowances for children with disabilities, and those are the children that really need the greatest help. So I think the schools need to rethink um their policies regarding who they will educate.
[00:44:41] Randall Roth: Well, and and if we simply had a a written plan that the community could look at and either agree with or disagree with or discuss, why it would be a lot easier to to uh discuss this stuff in a satisfying way.
[00:44:54] Lela: I agree, but there should still be two separate entities and there should be a strong business person as Ed Case and others have pointed out to run the money making part.
[00:45:04] Randall Roth: I've got to move on because I've got people waiting and and I just know there a lot of people trying to call in. Aloha. We go to Dina on the Big Island. Good morning, Dina.
[00:45:14] Dina: Yes, good morning. Um my comment is is more of a school. I I think that what the Bishop State says the schools is really fabulous uh and very important. But there's a whole lot of other stuff that goes on in the name of the schools, which really bothers me. This is a tax exempt corporation. They they do huge ugly things with land. Um, I think they need to be limited, as long as they're not um having to pay taxes, they should be limited to dealing with schools. Over here on the big island, they just purchased Hamakua Sugar lands, this over 20,000 acres, and they are committing one of the ugliest possible land uses other than strip malls, which is pulp timber over here. This is a native a quote, native Hawaiian company that's jointing in the name of of the land. This is the worst thing they could do. Besides, I feel they Yeah. I I need to get moving. Wrap it up. Go ahead.
[00:46:07] Dina: Well, I just feel that they they need to be limited to do doing school things as long as they're going to be tax exempt because they're huge. We pay thousands of dollars in taxes, and we make $20,000 a year. This is not fair.
[00:46:20] Randall Roth: Thank you, Dina. Appreciate appreciate your call and I hate to to rush you but I really want to hear a lot of voices.
[00:46:25] Dina: Yeah, thank you for the great show. Thank you.
[00:46:27] Randall Roth: We go to Mark from Tantalus. Good morning, Mark.
[00:46:29] Mark: Good morning gentlemen and uh nice job. My comments and and observation is is that the amount of trustee compensation and the absence of any objective criteria to qualify for the job is at the root of basically all the problems. From the politicians who want to become members of the uh trustee board because they can become friends with the appointing parties to the fact that now we have micromanagement by people who are trying to prove that they are that their salaries are justified and which is a very human emotion. I mean Okay. Trustee Lindsey tries to work very hard to show that she's worth the money that she's being paid, and all the trustees work very hard to try to prove they're worth the money. But of course they're not paid the money because they're worth it.
[00:47:26] Randall Roth: Okay, Mark. I'm going to take all that as a comment, a good comment and we have to move on. Uh one thing I might mention for those of you who haven't read the Star Bulletin piece yet, what what the five of us tried to do more than anything was to provide a a backdrop. We we call it a a mosaic so that the current events like the charges of micromanagement can be put better into perspective. And so we didn't actually address that issue though it's been in the news a lot over the last few months. Uh if you haven't looked at the article, I really encourage you to do so again for purposes of putting timely current events into a context that I think will help you make more sense of it all. Let's go to Tomar, Tomar from Ainahaina. Did I pronounce your name correctly?
[00:48:10] Tomar: No, you didn't. But that's okay, Randy. Listen, I just wanted to applaud all of you for your article. Um it's it's so much needed and there's so many out here in the community that are just thrilling that thrilled that somebody is finally making the call and and calling the the trustees on the carpet. And I just wanted to add one comment which I think Judge King alluded to one another caller comment called in, which was just that um there are so many people of Hawaiian ancestry so deeply in need of education and with this Princess's trust set up for education, it's an absolute crime and this comes back to accountability, an absolute crime that more people of Hawaiian ancestry are not getting educated properly by the estate. Okay. And so I just toss that in to the thing and thank you all so much for for speaking out.
[00:49:03] Randall Roth: Well, thank you. We appreciate uh your sharing your thoughts with us this morning. Let's go to John and Kaimuki. Good morning, John.
[00:49:09] John: Morning, gentlemen and a lady. I'd like to thank you for your article. I thought it was a real profile in courage. I'm an educator and I have two questions about accountability. One is, how do the trustees get decided, or should they be decided that they're competent for the job? And I ask this question because in view of the huge losses they've got. You know, in '95 and '96, state planners were bringing home 25 and 30% for their clients, and the estate can't show the same accrual of wealth. So how do they get chosen for management? And the second thing is, in view of the world economy, shouldn't there be more focus on accountability for education? I mean, the fact that people think that Hawaii's or that uh the Kamehameha schools is doing a good job educationally is reflected in the mirror of the poor job that the DOE does. Why are there educational standards that make them ask if they're as good as Choate or Andover or other places with great educational standards? And I'll take my answer off the air. Thank you.
[00:50:00] Randall Roth: John, I think you've made some real good points. Uh I feel like just leaving them because they're so good. But Sam, do you want to comment on any?
[00:50:06] Samuel P. King: Well, [unintelligible — audio glitch] will of uh the Bernice Pauahi Bishop originally provided for vocational vocational education, with higher education as a secondary purpose. Well, at the time that was quite appropriate. But I'm happy to say that Kamehameha schools has gone way beyond that, and so their students go on to professional schools and higher education in large numbers. So um the the things do change.
[00:50:33] Randall Roth: Well, and that's one of the points we made in in the piece is that sometimes people act as though what's in the will has to be followed religiously, no matter what. It's etched in stone, can never ever be changed. I I would like to think that [unintelligible — audio glitch] couldn't be questioned, but what the princess, if she were here today, would do some things differently. You can't etch something in stone and after a hundred years, uh have it reflect exactly what you would want under those changed circumstances.
[00:51:00] Samuel P. King: Especially a tax-exempt charitable trust.
[00:51:03] Randall Roth: I think you're right. Uh let's move on to uh is it uh Halani from Nunu? Good morning.
[00:51:09] Halani: Good morning. Um good morning Randall. First, first, I'd like to really acknowledge um the panel, the art, all of the the um the framers of the article for for the information that has been provided for the general public.
[00:51:28] Randall Roth: It's almost as though we can at last breathe a little bit. Um, there's so much information that clarifies uh in the minds of uh many of us, uh what's been going on behind the scenes. Uh so I want to make that comment. I have a suggestion to make, and my suggestion is that the article be reprinted for distribution. I I think it's important that everyone read it. I have read it almost uh I think about three times. Uh it's so filled with valuable, valuable information. Now, um in in the article on page three, you refer to a possible way to make the trustees accountable through a lawsuit by a group of individuals who fall within the class of intended beneficiaries. And my question goes to what kind of individuals would you would you would fall within that class? Would it be, for example, Let me let me answer that real quickly.
[00:52:29] Randall Roth: The the Napua group is a perfect example of the kind of group that would fall within that category, and they actually are in court right now, asking for standing and we will find out uh eventually whether or not the court decides to give it to them. But that's a a good example of what we're referring to there.
[00:53:05] Samuel P. King: And may I may I just comment? that uh that suit, if it ever works its way up to the Supreme Court, is really going to bring to an issue whether they're acting as individuals or as the Supreme Court, because they are then going to be asked whether what their stand is on the people they appointed.
[00:53:09] Randall Roth: It's inconceivable to me that the Supreme Court justices would stay involved in this at this point in time, it's just inconceivable. Ed Case?
[00:53:17] Ed Case: I think I think that just simply reflects the problem. Again, we've we've drifted a little bit away from the point of the judiciary as the appointers of the supreme of the uh Bishop State trustees, whether as individuals or in fact, or whatever that is. But um again, the problem is [unintelligible — audio glitch] legal issues having to do with the Bishop Estate, just as as for anybody else in this state, are addressed and resolved by the by the judiciary as they should be. And the problem exists or the appearance of a problem at least exists when those very people are the people that are appointing. And are, as Judge King has very well noted, are the people that are going to have to be called upon for the capability of the trustees that they in so in fact appointed. That's just an inherent conflict.
[00:54:03] Randall Roth: Plus as we've pointed out, they have some potential exposure if if they don't do a good job of picking trustees and the trustees cause some damages to the estate, there actually is a legal theory, sometimes referred to as negligent hire, where the damaged party could go against the justices and judicial immunity wouldn't apply because by their own admission, they're not doing this in their official capacity. So it at a very minimum, it creates a perception of of a conflict of interest. Hey Alani, I I have to move on.
[00:54:32] Halani: Yes. Yes. Do, and I want to acknowledge the the group again. Thank you.
[00:54:37] Randall Roth: Thank you. And I mentioned at the top of the hour and I just want anyone who tuned in late to understand that usually, we will have um and there are more than two sides to to any issue, but normally we try to have different sides to the issue that we're discussing represented in the studio at the same time. This show is different. Uh we have in the studio and by phone, people who really are pretty much lined up on one side of the issue that we're discussing right now. We have offered to the justices of the Supreme Court and to the trustees of the Bishop estate this same form. Two weeks from today, they're invited to come in with a neutral moderator, not me, on this issue, I'm anything but neutral, but with Peter Adler as their host, they're they're invited to come in and share their own thoughts, their own hopes, fears, perspectives, whatever they'd like to do. As the people down at the advertiser and the star bulletin have reminded me lately, I don't own the papers. I can't uh decide just what's going to appear in the papers, but it would shock me if both newspapers didn't give more than adequate space to both the justices and the trustees to express their reaction to what we have written and said, or to express their own thoughts about all of these topics. We move to Robert from Hawaii Kai. Good morning, Robert.
[00:55:55] Robert: Good morning. Just out enjoying paradise this morning and uh that that ought to be one of the investment criteria for the estate to to put some money here to make sure this place stays paradise. But one factual question, one observation. What is the uh the equity investment that the Estate and Goldman Sachs, what is the value of that equity investment today? I know it was 750 million. If you just index that money against the S&P, it would be enormous, but does anybody know what the value of that is? And the second thing is, this will be settled um I think by politics, as as most things of this weight are. And uh I've only been in Hawaii about six years, but this has always been, from my impression, uh the uh died and gone to heaven kind of job as one of these trustees, and uh I would just like to get everybody's observation on that.
[00:56:47] Randall Roth: Died and gone to heaven, we call it a political plum, Sam, but I like died and gone to heaven. Uh let me give you a general answer and then I'm going to ask Ed Case to give you a more specific answer to your question. Generally speaking, the financial statements of the Bishop Estate are incredibly difficult to read and understand for a variety of reasons, one of which, which is particularly irritating to me, is that they've been amazingly slow to adopt generally accepted accounting principles and, in fact, as of today, still haven't completely adopted generally accepted accounting principles. To me, this is inexcusable. It not only makes it unnecessarily difficult to understand what has happened, but it makes it virtually impossible to have a meaningful comparison to other organizations. That's a general answer, Ed Case, or specific answer.
[00:57:34] Ed Case: I don't I don't exactly know what the what the amount of the investment is, but I I would make the comment that just as uh we I think everybody agrees that the Bishop Estate Trustees should not micromanage Dr. Chun in the Kamehameha schools, neither should the community micromanage the trustees. But there should be a level of confidence that that obviously that they're that they're doing a relatively good job. And there should be accountability as you've as as the authors of this piece have uh adequately pointed out.
[00:58:02] Randall Roth: Okay. Let's go to and and Robert, thanks for your call. I want to hear a few more voices and then we're going to give our guests an opportunity to wrap up. Let's go to Ellen in Kaniyohe. Good morning, Ellen.
[00:58:11] Ellen: Hi. I I don't necessarily agree with all of your um your your panelists, but one thing I I am curious about. Um Dr. Chun is given credit for all the things positive that have been happening at the schools uh in the last few years. But he in fact is not the person behind the big technological move, nor the the stride that a lot of uh in changes that a lot of things have happened up there. What I'm concerned about is that you folks um insist on giving him credit for virtually everything that goes right there, but the educational plan that hasn't been forthcoming, which is a legitimate complaint, he is not held accountable for that.
[00:58:51] Randall Roth: Okay. Well, you know, Ellen, and and the whole nature of this show is to let everybody say what they think and and I'll tell you right now that I have a strong bias here. I happen to think Mike Chun is is an inspirational person. If I had an organization and I wanted somebody to represent the values of that organization, I can't think of, I can't think of anyone in the state of Hawaii that I would turn to before I'd turn to Mike Chun. So that's my personal bias. You obviously have different feelings on it, and I'm delighted that you've taken the time to share those with us this morning. Let's go to Bob in Hawaii Kai. Good morning, Bob.
[00:59:26] Bob: Yes, good morning. We know that this whole Kamehameha issue was triggered a few months ago when the trustees departed from their appropriate role as policymakers and took on the non-appropriate role of day-to-day school management, thus undercutting and downgrading the responsibility of the school president Mike Chun, who uh who I agree in my view is one of the best presidents Kamehameha has ever had. Mike is a unique president because even though he's a fine administrator, the center of his concern is the student. And I'm glad this initial issue has now been enlarged to many issues related to trustee investment policies and trustees selection and so forth. And I'm very grateful to the five of you for stepping forward and addressing such a vital concern.
[01:00:13] Randall Roth: Bob, thank you. We really appreciate your call this morning. And hearing Bob mention the five of us, we should probably say hi to Gladys Brandt. I know Gladys is out there listening. Good morning, Gladys. And also uh Monsignor Kekamano is not listening because he says mass beginning at 8 o'clock on Sunday mornings, but those are the uh two co-authors that you're not hearing from on the radio show this morning. Well, we're down to the last few minutes and I want to give my guests an opportunity to make a a closing remark. Let's start with uh Walter Heen, who's with us by phone. Walter, what do you have to say at this point in the show?
[01:00:49] Walter Heen: Um I'd first like to uh echo Representative Case's statement about not micromanaging the trustees and that certainly is not the intent of our article and I'm sure he he understands that. Uh our intent really was to bring forth these matters that we have exposed in the article and show how these things that have occurred directly affect the nature of the appointment that has been made to be to the board and how that reverberates throughout the whole community. Uh I'd also like to comment that I you know the Supreme Court would probably have a reluctance as a court to discuss their operation but if they're in fact operating as Supreme Court just I'm sorry, as individuals rather than justices, then they should have no problem appearing on your show.
[01:02:05] Randall Roth: I'm glad you emphasize that because it would be unfair of us to invite them if what they've been doing has been done in their official capacity. Walter, we're going to have to move on because we're down to about a minute and a half and I've got two more guests that we need to uh hear some closing remarks from Ed Case.
[01:02:06] Ed Case: I think in my um excuse me, closing remarks, what I want to emphasize is an is a is a um question, which is and I started out by saying that I felt that the problem that I wanted to address was the judiciary's involvement in the appointment of trustees of a large trust. It happens to be Bishop Estate here, but my focus is on the judiciary. The concern that many have raised and perhaps this is a concern of the Supreme Court justices as well is that if we don't do it this way, how are we going to do it and still fulfill our collective community mission to the Bishop Estate which we all acknowledge is an important mission. I think the the bill that has been introduced basically proposes that the trustees uh uh in consultation, it doesn't say in consultation, but in consultation I would assume with the beneficiaries, propose a method which would then be evaluated by the probate court. It is simply one other way of doing it. There are a number of good ways of doing it, but we need to find an alternate selection process to make it work to get the justices out of it.
[01:03:04] Randall Roth: Okay, that's Ed Case. Sam King, you got 30 seconds.
[01:03:07] Samuel P. King: Uh I'll take 15. Uh I agree with what uh Ed Case said and my approach to this is that the the plum at the end of the rainbow has uh more or less undermined the function of the Judicial Selection Commission, the uh operations of the Supreme Court of Hawaii, and the uh the legislative and and administrative process in the governor's office. And I see where Justice Moon has asked for suggestions and I recommend that he read our article.
[01:03:37] Randall Roth: Okay, that's Sam King. We heard from Walter Heen and from Ed uh Case. Uh you've been listening to the Price of Paradise Radio show. Watch Channel 2 News tonight at 6 and 10. I'm Randy Roth. Aloha.