ANALYSIS
Kamehameha trustees torn between duty and law

By Jennifer Hiller
Advertiser Education Writer

Caught between protecting the tax-exempt status of Kamehameha Schools and the outrage of the Native Hawaiian community, Kamehameha Schools trustees are facing the biggest public crisis of their two-year tenure.

"There is a boundary, there is an edge to which we can talk. If I say anything further it would put the institution at greater legal risk. Our duty is to protect this trust," said Nainoa Thompson, Kamehemeha Schools trustee. Eugene Tanner • The Honolulu Advertiser

School alumni and other community leaders say they have grown increasingly frustrated with the secrecy with which the decision was made and have expressed a growing discontent for the elitism of the school campuses, which were set up as competitive, college preparatory academies.

Pohai Ryan, a member of the board of directors for the Kamehameha Schools Alumni Association O'ahu Region, said at an alumni meeting Monday night the issue is not about the disappointment of people turned away from the school, but about the failure of the schools to meet the educational needs of more Hawaiian children.

"This is a very serious decision," she told trustees. "This is a test case and you know it."

Trustees will only allude to the larger legal issues that could threaten both the tax-exempt status of the trust and the Hawaiian preference policy of the schools, though.

"There is a boundary, there is an edge to which we can talk," Trustee Nainoa Thompson told school alumni this week. "If I say anything further it would put the institution at greater legal risk. Our duty is to protect this trust."

Thompson noted that the trust faced no legal threats until 1971. But between 1971 and 1995 it faced three legal challenges, and since 1995 has faced an additional 11 legal challenges.

Thompson said a 1992 audit by Arthur Andersen showed that if the estate were to lose its tax exempt status, it would cost $1 billion in back taxes and cause the estate to lose 42 percent of its earnings each year to federal taxes.

The Supreme Court held in a 1983 case, Bob Jones University v. United States, that if a school's admissions rules violated a national public policy against racial discrimination, the IRS could revoke the school's tax-exempt status.

Trustees have already relinquished several federally supported programs to avoid challenges to their requirement that school applicants have Hawaiian blood.

They gave up federal money for the popular JROTC program, the free- and reduced-price lunch program, scholarships, college counseling sessions, and a drug awareness and education program.

The schools had been receiving between $2.2 million and $2.5 million a year from federal sources, but planned to continue many of those programs with their own money.

"This issue of admission is one of great legal sensitivity," Trustee Constance Lau said. "And the one thing we cannot do is allow the trust to fail."

The Bishop Estate was established in the 1884 will of Princess Bernice Pauahi Bishop, who sought to create a perpetual, private, charitable trust to run Kamehameha Schools. Preference would be given to the indigent, orphans and those of "pure or part aboriginal" blood.

Estate trustees have steadily defended the school's mission in the face of challenges to its Hawaiians-only admission policy, arguing that children of all racial or ethnic backgrounds are allowed to apply as long as they have at least one Hawaiian ancestor.

Although the IRS in 1999 upheld its 1975 position that Kamehameha Schools' policy was not discriminatory and reaffirmed the estate's tax-exempt status, there have been an increasing number of threats to Native Hawaiian programs and entitlements.

In 1997, Big Island cattle rancher Harold "Freddy" Rice challenged the Kamehameha Schools admission policy with two federal lawsuits. One challenged the policy as a violation of constitutional civil rights.

The other was filed against the IRS and charged that the policy violates tax laws. Rice's attorney voluntarily withdrew both suits because he did not have the money to proceed with the cases.

But a separate lawsuit by Rice and its success before the U.S. Supreme Court shocked the Hawaiian community.

Rice sued the state in 1996 after he was barred from voting in an Office of Hawaiian Affairs election. In response, the nation's highest court struck down the agency's Hawaiian ancestry restriction for violating the 15th Amendment ban on race-based voting limits.

That decision opened the door to more constitutional challenges, including a federal lawsuit filed by Patrick Barrett, 53, of Mo'ili'ili. The disabled California native was seeking to invalidate a 1978 amendment that created OHA, adopted the federal Hawaiian Home Lands program and provided for native gathering rights on private property. He says such race-based programs violate 14th Amendment equal protection guarantees.

Although a federal judge dismissed the lawsuit, finding that Barrett had not suffered a "concrete injury" that the court could remedy, his attorneys have promised to continue with the legal fight.

In Washington, D.C., a Native Hawaiian recognition bill has remained stalled for more than a year by Republicans in the House and Senate, confounding members of Hawai'i's Democratic congressional delegation.

The bill would allow the creation of a Native Hawaiian government similar to those of American Indian tribes, and many advocates hope it would help protect Native Hawaiian entitlements and possibly create more.

Reach Jennifer Hiller at jhiller@honoluluadvertiser.com or 525-8084.