Campbell Estate heiress Abigail Kawananakoa accuses her ex-lawyer of stealing $1.4M

Campbell Estate heiress Abigail Kawananakoa is accusing her former lawyer of stealing $1.4 million in fees and court costs in a move her attorneys say nearly drained the trust of its liquid assets and left it unable to pay its tax obligations.

James Wright, trustee of the $215 million Abigail K.K. Kawananakoa Revocable Living Trust, not only took the money, but hid the fact from Kawananakoa and her representatives for nearly three months, according to a petition filed in court Thursday.

Kawananakoa and her wife, Veronica Gail Worth, are asking 1st Circuit Court Judge R. Mark Browning to make Wright repay $1.1 million in trustee fees and to have the law firms representing Wright return $300,000 in retainers.

Asked to respond, Wright said the law provides for trustee fees, and he was following the law — especially after Browning declined an earlier “emergency” request by Kawananakoa and Worth to block him from taking fees without the court’s consent.

What’s more, he’s taken less than a third of what he’s entitled in an effort to accommodate Kawananakoa’s sporadic cash flow, Wright said, and he didn’t take any money from the trust between July 2017 and January 2018, forcing him to cash in a retirement account to pay for his own bills.

“There is a trust obligation to provide for the welfare of the beneficiary, which I’ve done,” he said. “I have a right to be paid, and I was paid.”

A hearing on the matter will be heard in Browning’s courtroom April 4.

In September, Browning ruled that Kawananakoa, 92, is incapable of making complex changes to the trust or of being able to revoke her trust or even fire and replace its trustee.

A battle over control of the estate erupted in 2017 after Kawananakoa suffered a stroke. Browning granted Wright, the successor trustee, control of the estate after doctors indicated the heiress was incapacitated. The move was challenged in court by Worth, who said Kawananakoa had recovered from the stroke.

Kawananakoa’s attorneys declined to talk about their latest petition, citing the judge’s ban on talking to the media.

According to their filing, Wright paid himself $1.1 million within hours of the court’s Sept. 10 verbal order removing him as trustee. (He remains trustee until a successor, likely First Hawaiian Bank, agrees to take over.) At the same time, Wright advanced his personal attorneys a total of $300,000 for his possible defense.

“He had no ‘right’ to keep $1.1 million in fees just because he took the money while he could,” the petition says. “He has no ‘right’ to pre-pay his attorneys to defend his breaches of fiduciary duty, rather than paying the taxes owed by the Trust beneficiary.”

According to the filing, Wright refused to turn over check registers showing how much money he spent after Aug. 31.

“When those check registers were finally turned over, they revealed that Wright had diverted $1.1 million of trust funds to himself, purportedly as payment for ‘trustee fees,’ and $300,000 to his attorneys, purportedly as an ‘additional retainer.’”

The move left just over $15,000 in the trust account, but Wright should have known that the trust was obligated to pay Internal Revenue Service audit fees for tax year 2015 and 2016 and that the trust had to pay federal and state estimated taxes due Jan. 15 totaling $927,691, the filing says.

“Wright’s self-taking of fees without notice or Court approval is effectively a theft of Trust assets, without any regard for its potentially devastating effect” on Kawananakoa, the petition says.

The document went on to cite state Supreme Court precedent that obligates trustees to put beneficiary interests over their own.

But Wright said a trustee has no duty to ensure every obligation is paid immediately.

“It doesn’t mean that Gail Worth’s Outrigger bill gets paid before the trustee,” he said. “If a trustee pays for every obligation before himself immediately, there will be no trustees anymore.”

Wright said he will raise enough money for Kawananakoa’s taxes by April 15 just as he has for the last nine years he’s been responsible for paying them.

Wright said the court filing is “a lot of noise” designed to ruin his reputation and discourage no-nonsense First Hawaiian Bank from taking over as successor trustee.

The reality is Kawananakoa and Worth’s attorneys paid themselves more than $1 million from tax refunds intended for the trust, he said.

Wright denied hiding any check registers. Rather, he said, he decided to protect a court-ordered accounting process from disruption and harassment.

Wright added that the court filing is irresponsible because it shines a spotlight on the heiress’s failure to file and pay gift taxes over the years.

“If they’re going to taunt the IRS, they better bring her into compliance immediately because it threatens her financial security and her entire charitable legacy,” he said.

At least half of the trust is expected to underwrite the Abigail K.K. Kawananakoa Foundation, which was set up by Kawananakoa to become a charity to fund Native Hawaiian causes following her death.