Sex and suicide shock for Hawaiian charity
Andrew Gumbel charts how a foundation set up to educate the poor has been corrupted by riches
Sunday 11 April 1999
That's quite a litany of troubles for what is, at least on the surface, a fat, contented charitable trust in the carefree tropical breezes of Hawaii. But, as the islanders are finding out with every shocking new twist, the shenanigans of the Bishop Estate are proving to be far murkier, far more corrupt and far more personally vindictive than anything the Clinton White House ever had to deal with.
One estate trustee has been indicted on charges of theft for his role in a property kickback scandal, and a second is fighting off indictment in the same affair. Two of the other trustees, meanwhile, have turned against a third, accusing her of gross mismanagement and intimidation of students and teachers at Kamehameha Schools, the estate's primary responsibility, which sits on a wooded hillside overlooking Honolulu and is among the richest educational establishments in the world.
Melodramatic enough, you might think, but the rumblings of corruption and political interference pale in comparison to the fall-out from an altogether more sordid episode: the discovery of trustee Gerard Jervis having sex in a men's toilet cubicle at Honolulu's Hawaii Prince Hotel last month with a married employee, estate lawyer Rene Ojiri Kitaoka.
The next day, Kitaoka was found dead in the garage of her home after she left her car engine running. A week later, as the illicit liaison was about to be made public, Mr Jervis took an overdose of sleeping pills. He has since recovered and apologised for his "mistakes".
All this could not be further from the intentions of the trust's founder, the 19th century Hawaiian princess, Bernice Pauahi Bishop, who left 378,000 acres of prime island real estate and other assets in a fund for the education of native Hawaiian children.
Certainly, the princess got her school, which currently educates more than 3,000 children from kindergarten up to high school, but what she could not have foreseen was the wealth that her estate would accumulate. Thanks to the soaring price of Hawaiian real estate, plus benefits such as a 10 per cent stake in the investment house Goldman Sachs, the Bishop Estate has swelled in value to an estimated $10bn (pounds 6bn).
And that's where the problems start. The trustees are appointed by Hawaii's state supreme court, which in turn is in the pocket of the island's solidly Democrat political elite. The estate has thus been vulnerable to cronyism of the worst kind - and, to judge by the comings and goings in the island's courts, has fallen victim to it in calamitous fashion.
In July 1997, five of Hawaii's most prominent citizens published a denunciation of the trustees in the local paper, the Honolulu Star Bulletin, arguing that the estate's financial affairs were riddled with conflicts of interest and stunning incompetence. In 1989, for example, they invested $85m in a Texas methane gas deal, into which they had also sunk more than $2m of their own private funds. Not only was that a breach of their duty to keep personal and trust interests separate, the denunciation argued; it also lost the estate more than $60m.
Meanwhile, trustee Henry Peters used estate money to start an elite golf club that charged a $70,000 initiation fee. When the estate decided to sell the golf club to its members, it was Peters, this time in his guise as a golf enthusiast, who conducted the negotiations on behalf of the buyers - effectively brokering a deal with himself.
The newspaper report, headed "Broken Trust", unleashed a torrent of new scandals, starting with the news that the Internal Revenue Service had been investigating the trust's activities since 1995. Then came the deal in which Mr Peters sold a flat for almost $200,000 above the market price to a real estate speculator who had business dealings with the trust and happened to be the brother-in-law of fellow trustee Dickie Wong. Mr Peters was indicted on charges of theft in November, and Mr Wong's indictment appears imminent after a judicial ruling against him last week.
Two of the trustees are pressing for the removal of a third, Lokelani Lindsey, following a row also involving the principal of Kamehameha School. Her alleged misdemeanours include ordering a $5m computer system, including satellite link-up to the continental US, that turned out to be unusable.
Much of the credit for uncovering these scandals goes to Hawaii's attorney general, Margery Bronster, who wants to remove all five trustees on the grounds that they have not spent enough of the estate's money on education. The trustees closed a community education programme in 1996 on the grounds that money was tight, but have still managed to pay themselves annual salaries of almost $1m each.
Ms Bronster is not immune to criticism herself, and indeed lawyers for the trustees argue that she has her own conflict of interests in her dual roles as public prosecutor and legal guardian for the Bishop Estate. Conflict of interest is a recurring theme throughout this shoddy tale; even the IRS investigation is tarnished by the fact that the US Treasury Secretary, Robert Rubin, is a former co-chairman of Goldman Sachs with continuing business links to the Bishop Estate.
The saddest reflection on the complex knot of relationships between the trustees and the Hawaiian establishment is that not one of the five has felt moved to resign, even temporarily. The first trial, of Mr Peters, is not due to start until next year, so this scandal will run and run.
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