Report rejects trustee’s petition

An independent court master is recommending that Probate Judge Derrick Chan not reappoint Janeen-Ann Olds to a second term as a Kamehameha Schools trustee because she’s lost the support of her fellow trustees in the wake of scandals involving telecommunications company Sandwich Isles Communications and its parent company, Waimana Enterprises.

Olds currently serves as CEO of Sandwich Isles and was previously general counsel for Waimana. The companies’ founder, Al Hee, was convicted earlier this year on seven counts of tax fraud after federal prosecutors accused him of skimming millions of dollars from Waimana to pay for personal expenses.

The conviction has spurred ongoing investigations by the Federal Communications Commission into the companies’ operations and expenses.

Attorney Malia Schreck was hired by the court to review Olds’ request to be reappointed to the board of the $11 billion land trust and issue a recommendation to the court, which was expected to rule on the petition today.

In her report to the court, submitted Tuesday, Schreck said she is “concerned that an essential solidarity amongst the trustees has been irreparably damaged, if not completely lost.”

She continued: “While a Kamehameha Schools trustee is chosen for the unique qualities and perspectives he or she brings to the trust, all five trustees must be able to work together, in the best interests of the trust and its beneficiaries, with mutual trust and support. Without the support and respect of one’s co-trustees, the effectiveness of the trustee individually and the board as a whole will suffer and be compromised.”

For these reasons, Schreck told the court that she was unable to support Olds’ request for reappointment.

It’s ultimately up to Chan to decide, but Schreck’s report is expected to weigh heavily on his decision. There are three official parties to the court proceeding: the court master, Kamehameha trustees and the attorney general.

The attorney general hasn’t taken a position on Olds’ petition.

Last month, Olds’ fellow trustees — Robert Nobriga, Corbett Kalama, Micah Kane and Lance Wilhelm — withdrew their support for Olds, telling the court that her continuing on as trustee jeopardized the reputation of Kamehameha Schools.

The trustees said that significant concerns had been raised about Olds’ “management, background, expertise, reputation, credibility, integrity and leadership.”

Olds has worked for Waimana Enterprises and Sandwich Isles since 2008. Prior to that, she assisted Hee in setting up a number of affiliated companies while employed as an attorney at Honolulu law firm Kobayashi, Sugita & Goda.

Sandwich Isles provides phone and Internet service to Hawaiian Home Lands and is supported heavily by federal subsidies derived from fees tacked on to phone bills. The subsidies are designed to aid telecommunications companies in providing services to remote communities.

Both Sandwich Isles and Waimana, as well as its affiliates, have come under heavy scrutiny from federal regulators. In 2013, the FCC slashed Sandwich Isles’ federal subsidy, citing exorbitant corporate expenses and unjustified payments made by Sandwich Isles to affiliated companies, many of which were owned or operated by Hee or his family members.

Regulators said certain expenses appeared “grossly excessive and unreasonable,” while noting that the company’s corporate expenses were about seven times higher than companies of similar size that have the highest level of expenses.

Separately, the Internal Revenue Service began investigating Hee and concluded that he had used millions of dollars from Waimana to pay for various personal expenses, such as family vacations, his children’s college tuition, personal massages and expensive jewelry. Hee was convicted on tax fraud charges in July and is expected to be sentenced at the end of the year.

Federal prosecutors didn’t implicate Olds in the scam, but her involvement with the companies over the years has raised concerns about whether she was involved or aware of what was going on.

“I don’t know what would be worse: If she knew what was going on and didn’t do anything about it or didn’t know what was going on,” said Randy Roth, a trusts and estates attorney who was a pivotal figure in launching investigations into mismanagement of the trust in the late 1990s.

Olds’ petition to be reappointed is also being opposed by numerous Kamehameha alumni who have written letters to the court, including Michael Chun, who was president of Kamehameha Schools for 24 years before retiring in 2012.

Chun said Olds had exercised “questionable judgment” and taken “questionable actions” as an executive at Sandwich Isles.

Olds “cannot separate what she does at Sandwich Isles from what she does at Kamehameha,” he wrote. “She is not viewed as two different people; she is viewed as one leader.”

Former Kamehameha trustee Doug Ing, along with alumni William Blaisdell, Kamani Kualaau, Kristin Pratt, Tina Maragos and David Kauinohea Alama also submitted a joint letter to the court opposing Olds’ reappointment.

“Sandwich Isles’ excessive and unreasonable spending of federal funds, coupled with purposeful nontransparency, is appalling,” they wrote. “It is not the fiduciary training ground, not the foundation for reasonable business judgment and not the leadership experiences of one seeking appointment as trustee of Kamehameha Schools in 2015.”

Olds, who according to court filings earned $207,000 last year as trustee chairwoman, did not respond to a request for comment. Her initial term is up at the end of January and she is seeking another term of 6-1/2 years.

In a Sept. 24 letter addressed to the probate court judge, Schreck, Attorney General Doug Chin and Kamehameha trustees, Olds defended her request to be reappointed.

She characterizes the objections to her reappointment as twofold: that her “employer’s business model involves receiving large amounts of federal support to bring telecommunication services to Hawaiian Home Lands that would not otherwise receive such services” and Hee’s tax fraud convictions.

Neither “of these ‘objections’ provides any rational basis for rejecting my application to continue serving as a Kamehameha Schools trustee,” she writes. “Upon serious factual, and not emotional, consideration, I believe the court will agree.”

Olds says she found out about the allegations involving Hee during the IRS investigation and that she wasn’t involved in overseeing the financial statements and tax returns of Waimana and Sandwich Isles until late 2013.

Further, she suggests that the large telecommunications companies — Sand- wich Isles’ competitors — are in some way behind the mounting opposition to her reappointment.

“It is true that the major telecommunications companies (e.g., Hawaiian Telcom and Doug Ing’s client, Time Warner Cable) have a certain hostility toward Sandwich Isles Communications and there will probably continue to be struggles between them,” she writes. “However, it is disappointing that the trustees would elect to make this process another forum for those business disputes to be debated.”

This is the first time since 2000, when the appointment process was changed, that Kamehameha trustees have opposed a fellow trustee’s petition to be reappointed, according to court records.