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The Honolulu Advertiser
Posted on: Saturday, February 28, 2009

Kamehameha Schools trustees take 10% pay cut, reject raise

By Rick Daysog
Advertiser Staff Writer

Trustees of Kamehameha Schools have taken a 10 percent pay cut, citing the charitable estate's weakened financial condition.

Trustees Douglas Ing, Corbett Kalama, Robert Kihune, Diane Plotts and Nainoa Thompson also rejected a controversial plan, approved yesterday by state Probate Judge Colleen Hirai, that would have increased their maximum pay by as much as 69 percent.

"Given the current financial condition of the trust at this time, the Kamehameha Schools trustees will not accept any increase until the situation improves," board members said in a news release yesterday.

"In addition, each trustee has elected to take a 10 percent decrease in current compensation, effective immediately."

The moves come after Kamehameha Schools reported in January that the value of its endowment had declined by more than $1.7 billion, or about 18 percent, during the first four months of its latest fiscal year because of the meltdown in the nation's financial markets.

The financial crisis has prompted the trust to place under review several major construction projects at its Kapalama Heights and Neighbor Island campus, trust spokesman Kekoa Paulsen said.

"It was pono for them to do this," said Jan Dill, a 1961 graduate and former president of Na Pua a Ke Alii Pauahi, which includes students, parents, teachers and alumni of Kamehameha Schools.

Kamehameha Schools is a charitable trust founded by the 1883 will of Princess Bernice Pauahi Bishop to educate children of native Hawaiian ancestry.

The decision to turn down the pay raises unravels months of work by a Probate Court-appointed trustee compensation committee.

The committee which includes Kamehameha Schools alum Michael Rawlins, insurance executive Douglas Goto and attorney Rosanne Goo had recommended pay increases of 65 percent to 123 percent.

Yesterday, Hirai approved a pay increase plan advocated by the estate's court-appointed master David Fairbanks.

Fairbanks recommended increasing trustees' maximum pay from $97,500 a year to $165,000 a year. Fairbanks also called for the board's chairman maximum pay to increase from $120,000 a year to $207,000 a year.

In 2004, trustees turned down a similar pay increase plan that had been approved by Hirai.

The attorney general's office, which serves as a legal guardian for the trust, has said it opposes any pay increases.

The issue of trustee compensation has been one of the biggest controversies surrounding Kamehameha Schools.

During the late 1990s, trustees' pay soared to as high as $1 million, prompting the state attorney general's office and the Internal Revenue Service to conduct investigations into the trust.

As a result of IRS investigation, then-trustees Henry Peters, Richard "Dickie" Wong, Oswald Stender, Gerard Jervis and Lokelani Lindsey were forced to resign after the tax authority threatened to revoke Kamehameha Schools' tax-exempt status.

HARSH CRITICISM

News of Hirai's approval of a pay raise prompted harsh criticism yesterday by some members of Kamehameha Schools 'ohana. An Advertiser online story about the ruling generated negative comments from dozens of readers.

Dill, the 1961 Kamehameha graduate, and Roy Benham, a 1941 graduate and a former president of the Kamehameha Schools Alumni Association, said they were disappointed by Hirai's ruling, saying a huge pay raise is difficult to justify given the tight economy.

They argued that the trust's assets could be better spent on its main mission of educating Native Hawaiian children.

When told of the trustees' plan to reject the pay increase, Dill faulted board members for not coming out sooner against any raises.

"It's an issue that shouldn't have gone this far, given the history of where we've been and all the struggles where we've gone through," Dill said.

Former Gov. Ben Cayetano, who in 1997 ordered Attorney General Margery Bronster to investigate the trust, said yesterday that the trustees did the right thing in turning down the pay.

But he believes that the trust should have a better, long-term pay policy in place to avoid a repeat of the types of scandals that rocked the trust in the late 1990s.

"They really should think about having a permanent policy because no other charitable trust in the nation pays people like this," Cayetano said.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.