Ex-state insurance official targeted

By Bruce Dunford
Associated Press

Senate Minority Leader Fred Hemmings says answers are needed to "serious questions" about the role former state insurance commissioner Linda Chu Takayama, a Democratic Party insider, played in the liquidation of two bankrupt insurance companies following Hurricane 'Iniki.

Sen. Fred Hemmings is questioning a former state insurance commissioner's role in liquidations following Hurricane 'Iniki. Advertiser library photo

The liquidation was handled by Honolulu attorney Jerrold Y. Chun, who last week was arrested on three counts of felony theft and allegations that he diverted more than $12 million from insurance claims and creditor settlements resulting from the 1992 hurricane that devastated Kaua'i.

Takayama, as insurance commissioner, won court approval in 1993 to assign the liquidation of Hawaiian Underwriters Insurance Co. and United National Insurance Co., subsidiaries of Hawaiian Electric Industries' subsidiary the Hawaiian Insurance Group (HIG), to the McCorriston Miho Miller Mukai law firm, where Chun was assigned to handle the case, said Hemmings (R-Lanikai-Waimanalo).

Takayama, an attorney, in 1994 resigned as insurance commissioner to become deputy director of the Department of Commerce and Consumer Affairs.

She later joined Chun to start their own law firm, Chun Chipchase Takayama Nagatani, taking the liquidation case with them, said Schmidt, who has filed a civil claim against Chun, seeking the $12 million for the state. That case doesn't name Takayama.

Takayama did not immediately return a call seeking comment this morning. She also did not return repeated telephone calls seeking comment on Friday or yesterday.

At some point, private attorney Takayama, with the court's approval and probably because of her familiarity with the case, was appointed as a "deputy liquidator," serving "up until we uncovered these misappropriations and what have you, at which time I removed her and Chun and the other folks involved and appointed my own deputy liquidator," Schmidt said yesterday.

"It raises some questions," he said. "Until we get the files and look at it, I'm not sure whether it's improper. If it was improper, then we need to know whether it then led to any improprieties because of the conflict or not."

A deputy liquidator is responsible to the judge overseeing liquidation and is paid out of funds from the liquidated company, Schmidt said.

Schmidt said that the files with details on the HUI/UNICO liquidation have been subpoenaed in the criminal case against Chun and are now sealed.

"We are working to get access for these documents," he said.

"A question that has to be asked is during the tenure of Linda Chu Takayama's partnership with Chun, was she a beneficiary of the business she assigned to him, directly or indirectly," Hemmings said on Friday. "She can claim 'I never collected a direct commission,' but what did she collect?"

However, "if you connect all the dots, there's a lot of politics and conflicts of interest in it," he said. "I'm confident the attorney general and insurance commissioner are going to do what should have been done a long time ago regarding the improprieties in the insurance industry."

Takayama, who is closely allied to U.S. Sen. Daniel Inouye, D-Hawai'i, is a former top aide in the office of the U.S. Senate sergeant at arms. She is also a member of the board of governors of the East-West Center and is chairwoman of the Hawaii Foodbank. Her husband, Gregg Takayama , is a reporter for KHON television news in Honolulu and served for 12 years as Inouye's press secretary, followed by three years as press secretary for then-Lt. Gov. Ben Cayetano.

In 1999, she was named to a four-year term as one of 78 public interest directors of the Federal Home Loan Banks and is registered with the state as a lobbyist for Abbott Laboratories Inc., Hawaii Pacific Health, Hawaii Psychological Association and Pfizer Inc.

The attorney general's office launched a criminal investigation of the HUI/UNICO liquidation after an internal investigation by Schmidt's office found that Chun negotiated substantially lower payouts for three claims and then kept the difference from the original claim amount.

After Hurricane Iniki hit on Sept. 11, 1992, homeowners and property owners flooded the two companies with claims that overwhelmed their reserves, at which time HEI said it would not provide additional capital, which resulted in a Circuit Court order granting Takayama's motion for the state to take possession of the companies and their assets.

In April 1993, Takayama, then the insurance commissioner, filed a complaint against HEI on behalf of creditors and policyholders, alleging the company had misled the public about its financial support of HIG and had mismanaged and drained HIG's financial assets.

In February 1994, HEI agreed to pay a $32 million settlement to reduce the anticipated $73 million deficit faced by its HIG subsidiary.

Schmidt said Chun did such a good job in liquidating the assets of HUI/UNICO that not only will the policyholders will get their claims, the state general fund could end up with a potential windfall of $10 million to $15 million.

"This liquidation is very unusual and will be able to pay 100 percent of policyholders' claims," he said. "Sometimes they only get 10 to 20 cents on the dollar."

Schmidt said Chun doesn't dispute that he received $12 million, but claims former insurance commissioner Wayne Metcalf had verbally approved it as a "success fee" to be paid on top of his hourly rate for negotiating smaller settlements to creditors.

While Schmidt isn't involved in the criminal case, he said defense attorneys may be looking for some kind of "global settlement" involving both the criminal and civil claims, something that would be up to the attorney general's office.

"The fact is, if all the money returns, it does not mean that a crime has not been committed and does not mean from a civil perspective the state has not suffered damages that need to be recompensed," he said.

Correction: Former state insurance commissioner Linda Chu Takayama has never worked for the McCorriston Miho Miller Mukai law firm. A previous version of this story contained incorrect information.