One morning this month, a friend and I got together and our chat turned to the most vexing scandal in Hawaii’s statehood history — yes, worse than the Kealoha Caper. This one involved highest-level political influence and the $10 billion money pot of the Bishop Estate.
Everything seemed to revolve around Gov. John Waihee when the inside spread of the scandal went public. But he managed to leave office unscarred while trustees tagged by the uproar over you-pat-my-back-and-I’ll-pat yours left in shame. But they also kept their mouths shut about Waihee’s part in the whole debacle that brought down one of the planet’s wealthiest charities, working for Native Hawaiians and Kamehameha Schools but also paying the connected-to-the-governor trustees an average of $900,000 a year.
As the saying goes, “those who know don’t talk, and those who talks don’t know.”
There was an effort during successor Gov. Ben Cayetano’s time to look at Waihee’s involvement through State Attorney General Margery Bronster’s probe, but the still-Waihee-loyalist Legislature denied her a second term to keep digging.
It was politics and high-level influence at its worse. We’ll never live it down. The people who could have blown the whistle on Waihee, Henry Peters and Dickie Wong, sealed their lips and disappeared from public view.
Peters, Wong and Waihee’s close lawyer friend Gerard Jervis advised Waihee on whom to nominate to the State Judicial Selection Committee for filling State Supreme Court openings. The tradition back then was for the JDC to go with the governor’s wishes. The justices, in turn, chose the Bishop Estate trustees — someone on the governor’s wish list.
Randall Roth, one of the authors of the book Broken Trust, said “It’s a sweetheart deal.”
The political powers weren’t about to let it end. In 1994, the Commission on Judicial Conduct issued an advisory opinion commenting upon the propriety of the justices’ involvement in the appointment of the trustees. It favored a blue ribbon committee to screen judge candidates. The then-sitting Supreme Court justices rejected the panel’s recommendation.
When Cayetano came into office, the BE trustees sensed the old boy system might be coming to the end of its lifespan. So in 1995, they toyed with the idea of moving KSBE’s headquarters to the Cheyenne River Sioux Indian reservation in South Dakota. It would be away from any Hawaii or even federal oversight.
The trustees paid the law firm of Verner Liipfert Bernhard McPherson and Hand $200,000 to look into moving the estate’s home. Verner Liipfert, whose local office was then headed by former Gov. Waihee, picked the Cheyenne River Sioux Reservation after reviewing the legislative, tax and judicial environments all mainland states plus Alaska.
That would have quickly killed AG Bronster’s probe into these highly-suspect trustee doings:
*Giving themselves significant pay raises, even while programs at the school were being cut;
*Moving profits from the estate’s taxable subsidiaries back into the (non-profit) estate to lessen the subsidiaries’ tax burdens;
*Investing in questionable ventures recommended by a trustee’s personal acquaintances, including an Internet directory of would-be-adult-film actors and casting agents;
*Frequenting adult entertainment clubs and casinos using money from the charitable trust’s coffers, reportedly inviting state legislators on such trips; and
*Lobbying Congress to defeat or alter legislation designed to give the IRS more authority to penalize their multi-million dollar compensation packages.
But then Bronster was sidelined by the nearly-all-Democratic Legislature heavily empaneled with long-time Waihee boosters, and the immediate threat ended.
Not for long, though. Two unexpected events unraveled the trustees cozy connection with state government and support by Hawaiians and the general public.
One was new trustee Lokelani Lindsey’s bungled attempt to micro-manage Kamehameha Schools. The school rebelled. The other came out of the blue. A full disclosure of what had been going on between governors, lawmakers, Supreme Court justices and those riches-endowed trustees.
Gladys Brandt, Charles Kekumano, Walter Heen, Samuel King and Randall Roth had taken their Broken Trust treatment (not yet a book) to the Honolulu Advertiser. It declined to publish. They took it to the Honolulu Star-Bulletin. It did publish.
The rout was on. The trustees, except for Oswald Stender, were soon out. Bishop Estate became known just as Kamehameha Schools — the prime beneficiary.
Waihee escaped scrutiny about his private conversations and the perception that there had been a deal — I appoint a justice I’ve told you I want on your recommended list, and he or she will work to appoint a Bishop trustee we all want.
That nagging issue should not be allowed to just go away while Waihee passes comfortably in history without more investigation.
He, Henry Peters and Dickie Wong need to tell the real story.