Broken Trust: Greed, Mismanagement &

¶ … Broken Trust: Greed, Mismanagement & Political Manipulation at America's Largest Charitable Trust" by: Samuel P. King & Randall W. Roth. Specifically it will discuss how the law sought to work in Hawai'i in both the management of the Bishop Estate and in the efforts to address mismanagement. "Broken Trust" is an amazing story of the Bishop Estate, a trust set up in Hawai'i to administer the estate of Princess Bernice Pauahi Bishop, one of the last ruling leaders of Hawai'i.

She bequeathed her estate to the trust, in order to provide for the education of Hawaiian children, and the trust helped form and support the Kamehameha Schools, according to Princess Pauahi's last wishes. The first trustees of the school created two boys' and girls' trade schools, and the legacy began from there. However, by the mid-1990s, the Trust was ripe with corruption, mismanagement, and illegal activities and it took quite a public outcry to end the abuses going on at the trust.

The law sought to work in the Bishop Estate case in several ways. Outcry against the Trust began in the 70s, particularly about how trustees were appointed and how funds were managed, but nothing ever came of these public protests. By 1997, things were so bad at the Trust that investigative reporters began to analyze how the Trust worked, from how trustees were appointed to the salaries trustees paid themselves, and details began to come out that would shock the state and overhaul the trust.

In 1998, the Hawaiian Legislature passed a bill limiting trustee pay to "reasonable compensation." This came about because the trustees were paying themselves exorbitant salaries ($120,000 for the head trustee), when the trustees of many other non-profit corporations made approximately $6,000 per year (King and Roth 7). This went against common law and the reputation of most trusts to manage their money effectively and inherently for the good of the trust. The authors note, "Under English common law, trustees were expected to serve without compensation unless the trust document said otherwise" (King and Roth 100).

However, since there was no accountability or review of the trustees and their actions, they continually gave themselves high salaries, raised those salaries whenever they chose, and kept the numbers secret so the public would not protest where the money was going. Also in 1998, Hawaiian Governor Benjamin Cayetano instructed Attorney General Margery Bronster to investigate the Bishop Estate (King and Roth 167).

This came about after the essay "Broken Trust" ran in the Honolulu Star Bulletin, breaking the story that the trust was corrupt, had no oversight, and one of the trustees was literally making the Kamehameha School into a living nightmare for students and staff because of her iron will and erratic decision.

Also under scrutiny were the State's Supreme Court justices, because they appointed the trustees, and they did not appoint CEOs or other businesspeople, as would be expected, they appointed "powerful politicians" and friends who would do them favors (King and Roth 162). In 1999, the law again intervened when Judge Bambi Weil removed trustee Lindsey permanently (Lindsey was the trustee who had taken over management of the Kamehameha School and caused so much chaos at the school) (King and Roth 251).

In addition, early in 1998, Judge Kevin Chang accepted another trustee's temporary resignation and removed the other trustees temporarily (King and Roth 254). All this was an attempt to finally reign in the Trust and the trustees, and to give a measure of fiscal control to a trust that was literally out of control and rampant with corruption and abuse.

All of this corruption, although it finally was controlled, was allowed to go on for decades, and millions of dollars of money that should have gone to the schools was squandered as a result. Eventually, the trustees were all charged with over $200 million in surcharges, but in a plea deal, those charges were thrown out (King and Roth 279).

The authors had a clear purpose in writing this book, and it was to make public the convoluted case of the Bishop Estate, and how it came to be so full of mismanagement, greed, and corruption, and how that traveled all the way up the ladder to the State Supreme Court. They created a book that cried out for justice, and they offered specific examples of the corruption and arrogance of the trustees.

For example, they report on Trustee Lindsay's failure to report for a bankruptcy prison sentence after she lost her trusteeship, because she was "taking care of her husband," who had been spotted at a Las Vegas casino rather than at home on his deathbed (King and Roth 265). This is just one example of how the trustees conducted themselves both before and after the first "Broken Trust" essay hit the newspapers, and how they seemed to think they were above the law.