Kamehameha Schools quietly selecting new board trustee

A quarter-century after a major scandal purged the Kamehameha Schools Board of Trustees and changed the way members are chosen, the latest version of the panel is quietly going about its business and awaiting its next member.

Three finalists are being considered to join a board that oversees one of the world’s largest charitable trusts, with a net worth of $15.1 billion and holdings that include hundreds of thousands of acres and schools on three islands giving preference to Native Hawaiian children.

The deadline for public comment on the candidates is 4 p.m. Monday.

They are University of Hawaii-West Oahu Chancellor Maenette Ah Nee- Benham, entrepreneur Olin Kealoha Lagon and Michelle Kauhane, senior vice president of the Hawai‘i Community Foundation.

The new trustee will be selected by the state Probate Court to replace development consultant Lance K. Wilhelm, whose term on the board expires June 30.

The trustees continuing their terms on the board are UH-Manoa administrator Jennifer Goodyear- Ka‘opua, hotel executive Elliot K. Mills, business executive Robert K.W.H. Nobriga and corporate attorney Crystal K. Rose.

In accordance with the 1883 will of Bernice Pauahi Bishop, the governance of Kamehameha Schools rests with a board of trustees. Under the current management structure, the board’s sole purpose is to set a policy that aligns with the institution’s vision, mission and values, while day-to-day management rests with the board-appointed CEO, Livingston “Jack” Wong.

Twenty-five years ago, the trustees were making headlines describing a raft of corruption, mismanagement and favoritism. The scandal was exposed in the “Broken Trust” essay published in the Honolulu Star-Bulletin in December 1997. The essay described how the trustees were running the show, micromanaging the schools and paying themselves nearly $1 million a year while doing it.

Conflicts of interest were rampant. Trustees were passing lucrative business to their friends and investing in ventures in which they had a personal stake.

They also were shortchanging the schools and other educational services.

“Funds were diverted to pay for other investments instead of going to education,” said attorney Douglas Ing, who was one of the permanent trustees named to replace the ousted trustees.

An investigation led then-state Attorney General Margery Bronster to seek the permanent removal of Lokelani Lindsey, the board’s first female member, and fellow trustees Richard Wong and Henry Peters.

In May 1999, Lindsey was permanently removed following a six-month trial. A day later, Wong, Peters and Gerard Jervis were also removed. The fifth trustee, Oswald Stender, voluntarily resigned. An interim board was appointed by the Hawaii Probate Court to run the estate.

Lindsey was later sentenced in 2002 to six months in federal prison for an unrelated 1995 bankruptcy fraud scheme involving her sister, Marlene.

Randall Roth, one of the “Broken Trust” authors, said the corruption really started with the way the trustees were selected — by the state Supreme Court.

The former UH-Manoa law school professor and president of the Hawaii State Bar Association said the process was rigged in favor of political insiders.

Bernice Pauahi Bishop’s will called for the justices of the monarchy to make the trustee selection. But that was over a century in the past. Despite law that prohibited the high court from selecting trustees of any trust, the Supreme Court decided to continue with the Bishop Estate tradition.

In the end, he said, there was strong evidence of a payback link between the justices who picked the trustees and the people who chose the justices. Was it coincidence the board ended up with a former speaker of the state House — Peters — and a state Senate president — Wong?

“Individuals who had played a major role in selecting Supreme Court justices were being rewarded with trusteeships. It was a mutual back-scratching arrangement that was producing self-seeking trustees and corrupting the Judiciary,” Roth said.

After the “Broken Trust”-era trustees were ousted, the Probate Court was given the task of finding a new set of trustees assigned to right the ship.

Ing, the veteran Honolulu attorney, was appointed to the board along with Nainoa Thompson of the Polynesian Voyaging Society, retired Adm. Robert Kihune and business executives Diane Plotts and Constance Lau.

“The group was exceptional and committed to doing the best we could,” he said. “The days of the trustees who were five CEOs came to an abrupt end.”

Ing said there was a lot of pressure in the early days to enact reforms, to be transparent and satisfy the demands of the Probate Court and the Internal Revenue Service, which was demanding back taxes for alleged violations of the law, including the use of tax-exempt charitable trust assets for political lobbying.

Ing said that with a new CEO in place, the board could act like a normal charitable trust board and simply set policy.

“Previously, there was a lot of micromanagement by the trustees. This had to stop,” he said.

Among the projects the new trustees undertook was the development of a first-of-its-kind strategic plan, the hiring of financial and investment managers, and overhauling the estate’s woefully inadequate information technology systems.

While the new trustees earned considerably less than their “Broken Trust” counterparts, they still were making up to $97,500 a year, while the board’s chair received no more than $120,000 a year.

Today, the pay has gone up to $174,000 annually, with the chairperson making $218,000 a year. The trustees meet twice a month and attend other events and obligations.

Under the court-mandated trustee selection process, the Probate Court assembles a committee of at least seven people to screen and identify qualified applicants. The committee interviews the top six candidates and recommends three finalists to the court, which makes the final selection for a trustee for a five-year term, with the right to petition the court for an additional five-year term.

The selection process, with the help of Honolulu executive search firm Inkinen, has remained the same since it was established in 2000.

But there have been pressures to change the way Kamehameha trustees are selected. In fact, both houses of the state Legislature passed a resolution in 2019 calling on the Probate Court to be more transparent in the selection of trustees and to involve more of the Kamehameha Schools community.

One of those who lobbied lawmakers for the measure is Julian Ako, a former Kamehameha School high school principal, teacher and student, who is now president of the Kameha­meha Schools Alumni Association-Oahu Region.

While he doesn’t have any problem with the quality of the current board or any of the prospective trustees, Ako said the selection process needs to change to align more closely with the legacy of Bernice Pauahi Bishop.

“I just think there has to be more transparency in the process and a larger role for Kamehameha stakeholders,” said Ako, who added that he wasn’t speaking for the alumni association.

In August, Probate Court Judge R. Mark Browning appointed a three-member panel to review the selection process once the current appointment has been made.

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Kamehameha Schools trustee search finalists

The deadline for public comments on the finalists is 4 p.m. Monday. Comments must include the sender’s legal name and contact information; anonymous comments will not be accepted. Email comments to executives@inkinen.com and find more information at 808ne.ws/kstrustees.

Maenette Ah Nee- Benham has been the chancellor of the University of Hawaii-West Oahu since 2017. Previously, she was the first dean of the Hawai‘inuiakea School of Hawaiian Knowledge at University of Hawaii at Manoa.

Olin Kealoha Lagon is co-founder and chief technology officer at Honolulu software company Shifted Energy. He calls himself a serial social entrepreneur, who splits his time starting social ventures and working on community initiatives primarily focused on educational opportunities for Hawaii keiki.

Michelle Kauhane is the former CEO of the Council for Native Hawaiian Advancement who is now senior vice president of the Hawai‘i Community Foundation. She previously served as deputy director of the Department of Hawaiian Home Lands.