Fixing what is broken
Last Wednesday, Small Business Hawaii and [HawaiiReporter.com] co-hosted ‘Broken Trust: An Historic Forum on Political Corruption in Hawaii.’ The discussion panel included five individuals who were key to exposing and righting the wrongs that occurred in the Bishop Estate/Kamehameha Schools scandal that became Hawai’i’s juiciest story in the second half of the ’90s, including University of Hawai’i law professor Randall Roth and federal Judge Samuel King, the co-authors of Broken Trust: Greed, Mismanagement & Political Manipulation at America’s Largest Charitable Trust. Also in attendance were tarnished trustees Henry Peters and Dickie Wong.
The panelists chronicled the events that eventually forced the ouster of the five trustees in 1999, underscoring the abuses of the charitable trust established by Princess Bernice Pauahi Bishop and the absence of accountability. The main issue that surfaced during the discussion questioned whether the existing $10 billion trust would be better managed as a not-for-profit corporation.
‘The trust is a horse-drawn buggy cartÖno longer fit for the 21< +>st< +> century,’ Judge King said. He pointed out that numerous provisions of Pauahi’s have already been breached, from the requirement that trustees be Protestant to the appointment of trustees by the Hawai’i Supreme Court–implying that changing its structure would be copasetic. He added that unlike trustees, the board of directors at the Bishop Museum, Harvard, Yale and Punahou–all structured as corporations–serve as active fundraisers and don’t collect any fee.
During audience questioning time, Henry Peters stood up to face what he called ‘the den of lions.’ ‘This attack against the trustees was very calculated, very maliciousÖI have no problems with people writing books, but this leaves out very important facts,’ he said. ‘If they had a case, we would have been behind bars.’
Peters insisted that Princess Pauahi established the trust purposefully, knowing she had the option of creating a corporation–at the time, Harvard and Punahou had already been established. ‘Who’s this ‘we?’ What can ‘we’ do?’ he said. ‘This belongs to a single individual, and that’s the princess. She wanted five judges, five trustees.’ According to Peters, changing the structure would subject the entity to a tax code that would put the emphasis on liquidity as opposed to the accumulation of wealth (the basis of which, for Bishop Estate, has always been real estate).
In a codicil to her will, Pauahi directed the trustees not to sell any property unless it was necessary to maintain the schools. ‘That is the most underhanded way of restructuring the will,’ says Peters.
In light of the current case involving Kamehameha Schools’ admission policy, state Sen. Colleen Hanabusa asked what would happen to the Hawaiian restriction. Roth responded that there were various ways that admissions could still be conducted to derive the desired student body even if blood quantum was not a criterion, if in fact, that’s what the structure dictates.
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