Source: https://www.the-catbird-seat.net/rico-bh/
Timestamp: 2018-12-12 06:10:48
Document Index: 355143894

Matched Legal Cases: ['§431', '§ 431', '§ 431', '§ 431', '§ 431', '§ 431', '§ 431', '§ 431', '§ 431', '§ 431', '§431', '§ 1962', '§ 1962', '§ 1962', '§ 1962', '§ 1962']

RICO Bh - The Catbird SeatThe Catbird Seat
CIVIL NO. CV 99 00304 – DAE
BOBBY N. HARMON, CPCU, ARM,
FEDERAL INSURANCE CO., INC.;
TORKILDSON, KATZ, FONSECA, JAFFE, MOORE & HETHERINGTON, A LAW CORPORATION;
HENRY H. PETERS, RICHARD S. H. WONG, LOKELANI LINDSEY, GERARD JERVIS AND OSWALD STENDER,
NATHAN AIPA; LOUANNE KAM; RODNEY PARK; WILLIAM S. RICHARDSON; GILBERT TAM; PETER LOWE;
JOHN & JANE DOES 1 – 1000, et al.
KAMEHAMEHA SCHOOLS BISHOP ESTATE; HENRY PETERS, RICHARD S.H.WONG, LOKELANI LINDSEY, GERARD JERVIS AND OSWALD STENDER, TRUSTEES OF THE ESTATE OF BERNICE PAUAHI BISHOP
“Using or investing the proceeds of any income derived from a pattern of racketeering or the collection of an unlawful debt, in which that person participated as a principal, to establish, operate or acquire any interest in any enterprise engaged in or affecting interstate commerce.”
Defendants Federal, et al., did knowingly, unlawfully, and intentionally combine, confederate, conspire and agree together with each other, and with co-conspirators and others whose names are both known and unknown, to benefit and use proceeds from Defendants pattern of racketeering activity for the furtherance of the legitimate aspects of the organizations, as stockholder dividends, employee and executive salaries, bonuses and operating expenses, to purchase and acquire goods and services, direct the proceeds of the racketeering activity into the general funds of these Defendant organizations, their employees, their executives, their stockholders, their subcontractors and others. This violation was in concert with lax and/or corrupt regulatory and law enforcement agencies and officials, constituting an association in fact for the purpose of racketeering activity. After being apprized of the illegal activities by Plaintiff, none of these regulatory and law enforcement agencies or individuals made adequate, if any, effort to investigate, report or remedy the illegal activities, although they are legally obligated by statute and fiduciary duty to do so.
“acquiring an interest in or control of an enterprise through a pattern of racketeering activity or through the collection of unlawful debt.”
Defendants Federal, et al., did knowingly, unlawfully, and intentionally combine, confederate, conspire and agree together with each other, and with other co-conspirators whose names are both known and unknown, participate in a conspiracy to acquire and to maintain markets in the insurance industry through the sale of fraudulent policies of insurance; to acquire ownership interest and/or control of financial institutions, insurance companies and other business enterprises; to unfairly compete with other insurance companies, agents, brokers, accounting firms, claims adjusters and attorneys to gain market advantage through a pattern of racketeering activity; and to affect interstate and foreign commerce through a pattern of racketeering activity. This violation was in concert with corrupt and/or inept regulatory and law enforcement officials, constituting an association in fact for the purpose of racketeering activity. After being apprized of the illegal activities by Plaintiff, these persons made little, if any, effort to investigate, report or remedy the illegal activities, although they are legally obligated by statute and fiduciary duty to do so.
“conducting the affairs of an enterprise through a pattern of racketeering activity or through collection of an unlawful debt.”
Federal, et al., in concert with all other defendants and each of them, did knowingly, unlawfully and intentionally combine, confederate, conspire, and agree together with each other, with named co-conspirators and with others whose names are both known and unknown, to conduct the affairs of an enterprise through a pattern of racketeering activity to promote the affairs of the enterprise. After being apprized of the illegal activities by Plaintiff, none of the defendants made reasonable effort to investigate, report or remedy the illegal activities, therefore condoning the activities.
“unlawful for any person to conspire to violate Sections 1962 (a), 1962 (b), and 1962 (c).”
Federal, et al., in concert will all other defendants and each of them, did knowingly, unlawfully and intentionally combine, confederate, conspire, and agree together with each other, with named co-conspirators and with others whose names are both known and unknown, commit violations of the Racketeer Influenced and Corrupt Organizations Act, and to prevent the conspiracy from becoming known to the public. After being apprized of the illegal activities by Plaintiff, none of the defendants made reasonable effort to investigate, report or remedy the illegal activities, therefore engaging in a conspiracy by condoning the activities through their inactions..
2. THE DEFENDANTS AND THE ALLEGED MISCONDUCT AND BASIS OF LIABILITY OF EACH DEFENDANT.
a) Defendant Federal Insurance Company, Inc. (Federal), a member of The Chubb Group, conducts business in the United States and was, at all times, registered with the Insurance Commissioner, State of Hawaii, as an admitted foreign insurance company. Federal conducts business through insurance brokers as well as through licensed general agents of the company. In Hawaii, one of Federal’s licensed general agents is Marsh & McLennan, Inc. (M&M).
Federal’s schemes are multitudinous. On or about October 27, 1995, Plaintiff, in his capacity as Risk/Insurance & Safety Manager for Kamehameha Schools Bishop Estate (KSBE), caused Federal, through its agent M&M, to bind coverages under an Association Liability Insurance policy. Harmon obtained this “Errors & Omissions” insurance on behalf of KSBE and the majority of its subsidiaries, based on written proposals containing representations by Federal and M&M that this policy would protect KSBE, its trustees and employees, and the officers and directors of the for-profit subsidiaries of KSBE, against claims for “Wrongful Acts” as defined in the policy.
These proposals; the subsequent binders and policies; and premium invoices and payments were transmitted by mail and/or wire. Plaintiff relied upon these inducements and representations when obtaining this insurance on behalf of KSBE and its subsidiaries, and when accepting the position as P&C’s president.
Plaintiff alleges that the failure of Federal, and its agent, M&M, to provide defense coverage to Harmon in Civil No. 97-0512-02 constitutes mail fraud, wire fraud, misrepresentation and fraudulent inducement to purchase this insurance.
Defendant Federal, its officers, directors and employees benefitted financially from the premiums charged for this policy in the form of salaries, commissions, bonuses, or other means of compensation.
As detailed in Plaintiff’s complaint, there was collusion among the Defendants, the primary purpose of which was to increase their profits through the awarding of non-bid insurance contracts to Federal and its agent, M&M. Profits were further enhanced by Federal through reduction in their claims payments by means of fraudulently “back-dating” an exclusion endorsement in their Association Liability Policy in order to wrongfully deny defense coverages to Plaintiff in Civil No. 97-0512-02, P&C et al. vs. Bobby N. Harmon. Federal further engaged in misrepresentations, deceptions, delays, and continual denials of Plaintiff’s legitimate claims, and refused to respond to Plaintiff’s numerous good-faith offers to negotiate an out-of-court settlement. These wrongful acts constitute extortion, and extortion by color of official right, and the wrongful denial of money and benefits rightfully owed to Plaintiff.
b) Defendant P&C Insurance Company, Inc. (P&C), is a single parent captive insurance company formed in September, 1994, and was a wholly-owned subsidiary of Pauahi Holdings Corporation which, in turn, was a wholly-owned, for-profit subsidiary of KSBE. Plaintiff Harmon was instrumental in the formation of P&C, and was named its president shortly after its formation.
Although Harmon was the president of P&C, he alleges that he was actually set up as a “straw man” to be controlled by Henry H. Peters, Trustee of KSBE and Chairman of the Board of P&C; Nathan Aipa, KSBE General Counsel and Assistant Secretary/ Assistant Treasurer of P&C; Louanne Kam, Esq., Litigation Manager for KSBE, and others known and unknown. Although it was Harmon’s firm understanding that he was to be transferred from his employment as Risk/Insurance & Safety Manager at KSBE, to President of P&C, due largely to “arms-length” requirements of the I.R.S., Peters and Aipa never allowed this transition to materialize. Harmon remained as a paid employee of the tax-exempt charitable trust, KSBE, and an unpaid officer of the for-profit insurance company, P&C, despite written opinions from KSBE’s and P&C’s professional tax advisor, Price Waterhouse, that this arrangement could jeopardize KSBE’s tax-exempt status, and have other detrimental consequences to KSBE. This arrangement continued until Plaintiff was terminated from both positions on November 20, 1996.
Plaintiff Harmon alleges that a major reason for his terminations was his refusal to follow the directives of Henry Peters, Nathan Aipa and Louanne Kam for P&C to pay M&M substantial service fees for work that was not under contract and which could not be justified, in addition to KSBE’s payments of premiums to M&M for insurance which could be obtained through other insurance brokers at substantially lower cost. Aipa, Kam and Trustee Richard Wong, were also attempting to improperly influence the settlement of a P&C claim involving flood damages to the property of a Bishop Estate lessee, Larry Ching.
These “sweetheart deals” with M&M, the attempted claims settlement with Ching, and the threats to Harmon that he could be terminated for failing to follow the directives of Peters, Aipa and Kam to “go along” with these improper deals, constitute conspiracy to defraud P&C and the beneficiaries of the Estate of Bernice Pauahi Bishop; racketeering; mail fraud; wire fraud; extortion; breach of fiduciary duties; and violations of the “interim sanctions” regulations of the I.R.S., as detailed in Plaintiff’s complaint.
c) Defendant Marsh & McLennan Companies, Inc. (M&M) is the world’s largest insurance brokerage firm that conducts business throughout the United States and in many foreign countries, and is a licensed General Agent for Federal in the State of Hawaii.
Defendants M&M and M&MIMS, their employees, Rocco Sansone and Peter Lowe, and others in their organizations benefitted financially from these excessive fees in the form of salaries, commissions, bonuses, or other manner of compensation. Plaintiff alleges that M&M’s acts in collusion with some or all of trustees of KSBE, with officers and directors of P&C, and with Federal constitutes a conspiracy to defraud P&C and the beneficiaries of the Estate of Bernice Pauahi Bishop; racketeering; mail fraud; wire fraud; extortion; and violations of the “interim sanctions” regulations of the IRS, as detailed in Plaintiff’s complaint.
d) Defendant PricewaterhouseCoopers, LLP, (Pricewaterhouse) is one of the nation’s largest accounting firms, and conducts business in Hawaii and throughout the United States.
Despite written opinions from Pricewaterhouse that P&C should operate at “arms-length” from KSBE, all or some of the Trustees of KSBE, and all or some of the directors and officers of P&C, conspired to disregard these opinions and to conceal violations of I.R.S. “interim sanctions” regulations. Plaintiff Harmon personally reported his concerns regarding the apparent “sweetheart deals” with M&M at the direction of Peters, Aipa and Kam, to representatives of Coopers & Lybrand in October, 1996, and followed this up in writing on November 20, 1996. At this meeting and in his letter, Plaintiff explained that he would not sign P&C’s annual financial statements due to the apparent conspiracy between certain trustees, managers, directors and officers at KSBE, P&C and M&M, to defraud KSBE, P&C, and the I.R.S. Plaintiff also sent a copy of this letter to the Insurance Commissioner, State of Hawaii, along with all enclosures which provided documentary evidence of these wrongful activities. Neither entity responded to this report. Plaintiff later learned that Nathan Aipa had approved P&C’s annual financial statements, and that Coopers & Lybrand had not disclosed in their review the information that M&M was charging excessive fees, and that certain claims were intentionally inadequately reserved.
Plaintiff alleges that Pricewaterhouse had knowledge of these improper activities and financial statements, had a professional duty to report improper and illegal conduct regarding the preparation of these financial statements, and knowingly and wrongfully colluded with some or all of trustees of KSBE, with officers and directors of P&C, in a conspiracy to defraud the beneficiaries of the Estate of Bernice Pauahi Bishop and P&C; racketeering; mail fraud; wire fraud; and violations of the “interim sanctions” regulations of the I.R.S., as detailed in Plaintiff’s complaint.
e) Defendant Torkildson, Katz, Fonseca, Jaffe, Moore & Hetherington (Torkildson, Katz) is a law corporation conducting business in the State of Hawaii.
In a letter dated January 30, 1997, Robert S. Katz, Esq. of Torkildson, Katz, wrote regarding Plaintiff’s Wrongful Termination Settlement Proposal:
“I have been retained by Kamehameha Schools Bishop Estate (“KSBE”) to assist and advise it in connection with your December 29, 1996 settlement proposal in the above referenced matter. Due to the extent and complexity of your settlement proposal, it will not be possible for KSBE to respond by your requested date of January 31, 1997. . . Although I cannot provide you with a specific date, I wish to assure you that every effort will be made to provide a reasonably prompt response to your settlement proposal (emphasis added).
“In the meantime, your settlement proposal raises a serious matter that requires immediate action. Your settlement proposal discloses confidential, privileged and/or proprietary KSBE internal documents, memoranda and discussions to third parties because of its distribution to various insurance agencies, and also evidences your retention of such memoranda and documents.
“. . . Your unauthorized retention and usage of confidential KSBE documents and memoranda may result in serious legal sanctions, including civil claims for Hawaii’s Trade Secrets Law (H.R.S. Chapter 482B) which provides for injunctive relief and payment of reasonable attorney’s fees to the prevailing party, common law contract and tort claims for breach of contract, violation of fiduciary duty, and misappropriation of confidential business records. Accordingly, you should consult with legal counsel and return by no later than February 4, 1997 all KSBE documents, records, memoranda, in whatever format . . . you may possess such material. . .”
“. . . I find it difficult to accept your explanation that it was due to the ‘extent and complexity of my proposal’ that it was not possible for KSBE to respond to my settlement proposal by the January 31, 1997 deadline, or even to provide me with a specific date for a response . . .
“Your letter does not disclose other information which is important in my responses to you and in my pursuit of these claims:
1. You state that you have been retained by Kamehameha Schools Bishop Estate. You do not indicate that you are also representing P&C Insurance Company, Inc. (P&C). Does this mean that your comments regarding disclosure of confidential information, etc. apply only to KSBE documents? Could you please provide me a copy of your retention letter in order to confirm your appointment.
2. Could you please clarify your statement that you have been retained by KSBE ‘to assist and advise it’ in connection with my claims. Does the scope of your responsibilities extend to actual settlement negotiations?
3. Has your engagement by KSBE been approved by the insurance carrier(s). If so, may I please have a copy of any letter evidencing this fact.
“. . . You do not specify which internal documents, memoranda and discussions you consider to be confidential, privileged and/or proprietary. My settlement proposal contains thirty-one exhibits and over three hundred fifty pages. Many of these documents are contained in my Personnel File as a consequence of my performance evaluation and responses to Pers-9 reprimand letters from Nathan Aipa and Louanne Kam. Some are copies of correspondence addressed to me, or copies provided to me in my capacity as Risk/Insurance & Safety Manager for KSBE or as President of P&C Insurance Company. Most, if not all, of these documents deal with risk, insurance or safety matters which relate directly to my claim. I am not aware of any information which may violate Hawaii’s Trade Secrets Law (H.R.S. Chapter 482B). However, if you will specify which documents you believe may be in violation of either KSBE’s policies or any applicable statutes, and detail valid reasons, I will certainly consider their immediate return.
“. . . Your letter states that my settlement proposal discloses this information to third parties because of its distribution to various insurance agencies. Since this is an insurance claim, and these insurance agencies and companies are parties to the claim, I fail to see why disclosure of this information to these parties would be considered improper or illegal. To the contrary, insurance contracts require the full cooperation of the insureds in claims matters and disclosure of all relevant information. Please advise which documents, in your opinion, should not be released to specific insurance agencies or companies.
“As I am preparing to release certain information regarding this matter to other parties as early as February 4, 1997, it is important that you respond by this date. As you may consider it appropriate to provide certain information to certain entities but not to others, the following is a partial list of intended contacts:
“Although the deadline for acceptance of my settlement proposal has passed, I am still hopeful that KSBE and P&C, and their insurance carriers, are willing to enter into meaningful settlement negotiations in order to avoid litigation. However, these negotiations must be in earnest and begin immediately if we are to make any progress in settling this out-of-court.”
Copies of this letter were sent to Henry Peters, Richard Wong, Lokelani Lindsey, Gerard Jervis, Oswald Stender, Sandie Wicklein, Michael Goolsby (Chubb Group), David Loo (John Mullen & Co.), and Pat Onogi, (Marsh & McLennan, Inc.).
“In response to your February 2, 1997 letter, I wish to advise you as follows. First our law firm is representing both P&C Insurance Company, Inc. and Kamehameha Schools Bishop Estate. For convenience I will refer to them collective as ‘KSBE’. Our representation of KSBE would include settlement negotiations as deemed appropriate by KSBE. Finally, our representation of KSBE does not require approval by any insurance carrier.”
“. . . we believe you should return all KSBE documents in your possession that relate to or discuss KSBE activities excepting only personnel documents related to your own performance that were issued to you. . . .”
“. . . your announced intention to disclose confidential KSBE documents and information to various private and governmental agencies seems to be at odds with your stated desire to seek a settlement of your claims against KSBE. While no decision has been made by KSBE regarding your settlement proposal, any further disclosure by you may eliminate any incentive for KSBE to pursue a settlement. Accordingly, we again urge you to obtain legal counsel as quickly as possible if for no other reason than the fact that your stated intention to make additional disclosures of confidential KSBE documents and information leaves KSBE no choice but to pursue appropriate legal protection.”
The only indicated copy of this letter was sent to Colleen I. Wong, Esq. There was no indication that Katz sent any copies to the trustees of KSBE, the officers and directors of P&C, or to any insurance carriers or their independent claims adjusters.
On 04/11/97, Plaintiff, and his then-attorney, John Marshall, met with Katz and Sandie Wicklein, Personnel Director, KSBE, to discuss a settlement proposal. The outcome of that meeting was that Trustees might approve a settlement package, as discussed, but that Wicklein would be required to submit a Staff Report to Trustees.
On 05/08/97, Plaintiff made a counter-offer to P&C/KSBE via fax from John Marshall to Katz. The offer was to remain open until midnight, 05/15/97.
Plaintiff received NO WRITTEN RESPONSE from Defendants to this settlement proposal, or to numerous subsequent proposals, as detailed in Plaintiff’s Complaint.
Plaintiff alleges that Torkildson, Katz, through its complicity; deceptions; threats; failure to disclose settlement proposals to all interested parties and insurance carriers; and failure to respond to Plaintiff’s good faith settlement proposals, acted in bad faith and in collusion with some or all of trustees of KSBE, with managers and employees of KSBE, and with officers and directors of P&C, constituted a conspiracy to defraud the beneficiaries of the Estate of Bernice Pauahi Bishop and P&C; racketeering; mail fraud; wire fraud; extortion; and violation of I.R.S. interim sanctions regulations as detailed in Plaintiff’s complaint.
f) Defendant John Mullen & Co., Inc. (Mullen) is an independent claims adjuster operating in Hawaii and contracted by KSBE and P&C to handle automobile, property, general liability and workers’ compensation claims.
On numerous occasions prior to his termination, Plaintiff had discussions with Mullen with regard to improper interference by Aipa, Kam and others in the handling of claims. After his termination, Harmon reported his wrongful termination claim against KSBE and P&C directly to Mullen by way of a copy of his letter dated December 27, 1996 to Trustees. Mullen acknowledged receipt of the claim, but advised that they were excusing themselves as the adjuster as some of their employees had been named as potential witnesses should the case proceed to litigation.
Plaintiff alleges that Mullen, through its complicity and failure to meet its contractual obligations to handle P&C’s general liability claims, wrongfully acted in collusion with some or all of trustees of KSBE, with managers and employees of KSBE, and with officers and directors of P&C, in a conspiracy to defraud the beneficiaries of the Estate of Bernice Pauahi Bishop and P&C; racketeering; mail fraud; and wire fraud, as detailed in Plaintiff’s complaint.
g) Defendant Trustee Henry H. Peters, was appointed in 1984 by the Justices of the Supreme Court of the State of Hawaii, acting as individuals, and was entrusted with the fiduciary duty to administer the Estate of Bernice Pauahi Bishop for the education of the children of Hawaii.
At the time of appointment and until 1992, he was a member of the Hawaii House of Representatives. He also served as speaker of the House of Representatives form 1981 to 1986. His latest annual compensation for 1998 has been reported to exceed $1,000,000.
Defendant Peters is also Chairman of the Board of Directors of P&C. Peters has also served on the Board of Directors of Mid-Ocean Reinsurance Co. (a Bermuda company); Underwriters Capital (Merritt) Insurance Co. (a Bermuda company); SoCal Holdings, Inc.; and numerous other companies owned by, or related to, KSBE.
From Equity No. 2048, Petition of the Attorney General on Behalf of the Trust Beneficiaries to Remove and Surcharge Trustees:
“The Trustees have been unfaithful to the Will and the purpose of the Trust. They have failed to comply with clear directives of the Will. They have subordinated the sole purpose of the Trust to their personal gain. They have squandered Trust assets intended for education by their excessive compensation, and by imprudent and improper Trust management and investments. They have violated Hawaii statutes and court orders. They have engendered hostility between themselves and the Beneficiaries whose interests the Trustees were appointed to serve.
. . . Peters became lead trustee for asset management in 1993 and assumed responsibility for Trust investments and for due diligence on prospective investments.
Peters as lead trustee purposely withheld information on existing and potential investments from his co-Trustees, dismantled the Trust’s internal audit function, instructed staff employees to withhold information from the co-Trustees, and used his position to approve Trust payment of improper non-Trust expenditures.
. . . As to Peters, the effect of these violations has been that Trust assets have been mismanaged and misspent to the detriment of the Trust purpose.
. . . Trustees Peters, Wong, and Lindsey have violated their duty of loyalty to the Beneficiaries by using their positions as Trustees and by using Trust assets and opportunities to benefit themselves and their relatives and friends.
. . . In 1992, the Trust invested approximately $31 million in Mid Ocean, Ltd. (Mid Ocean), a Bermuda-based insurance company, and acquired 310,000 Mid Ocean Class A shares.
In 1993, when Matsuo Takabuki retired as a Trustee of the Trust, Peters succeeded to Takabuki’s seat as a director of Mid Ocean.
Peters’ service as a Mid Ocean director fell within his duties as Trustee and was a Trust opportunity.
While a director of Mid Ocean, Peters received substantial director’s fees and received options to acquire 6,000 shares of Mid Ocean stock.
(Note: Marsh & McLennan, and its subsidiary, Guy Carpenter, were major players in the creation and management of Mid-Ocean.)
. . . During his 1986, 1988, 1990, and 1992 political campaigns while a Trustee, Peters used Trust employees to photograph his and his supporters for his campaign materials, in violation of Trust restrictions on political activity by the Trust and its employees.
. . . The Trust presently qualifies as a charitable non-profit entity under the Internal Revenue Code and thus is exempt from federal, state, and local income and other taxes.
Maintaining the tax exempt status is critical to the Trust and its ability to serve its intended purpose.
The Trustees’ duty to protect the interests of the Beneficiaries includes zealously protecting the Trust’s tax-exempt status.
By taking excessive compensation and by using Trust assets for private inurement, the Trustees have imperiled the Trust’s tax-exempt status and hence the full effectuation of the Trust’s purpose.”
Beginning around March 1996, Harmon began questioning what appeared to be excessive premium charges being made by M&M for KSBE’s property insurance, and for the fees M&M was billing to P&C. He again raised the issue of his job transfer from KSBE to P&C.
For the next several months, Plaintiff was subjected to threats, intimidation and various abuses from Aipa and Kam for questioning the excessive fees of M&M and his transfer to P&C. In a meeting in early 1996, with Aipa and Sansone, Harmon asked Aipa about the status of his transfer. Aipa’s response was that it wasn’t going to happen because “arms-length was no longer an issue,” (referring to previous legal opinions from Price Waterhouse that the IRS might revoke the Trust’s tax-exempt status if it did not maintain arms-length from its taxable subsidiaries).
On October 11, 1996, Harmon was called into a meeting with Peters and Aipa. At this meeting, Peters instructed Harmon that he was to report to Aipa on all matters relating to P&C. Peters also stated that he would hold Aipa responsible for all matters relating to P&C. He also informed Harmon that he could be replaced as President of P&C if he failed to follow Aipa’s directives.
On November 20, 1996, Peters made good with his threat and terminated Harmon’s appointment as President of P&C. No explanation was given for the termination.
Harmon was also terminated by Aipa from his position as Risk/Insurance & Safety Manager for KSBE, allegedly due to “differences in philosphy”.
Plaintiff Harmon alleges that a major reason for his terminations was his refusal to follow the directives of Henry Peters, Nathan Aipa and Louanne Kam for to pay M&M substantial fees for work that was not under contract and which was not justified.
These “sweetheart deals” with M&M, and the threats to Harmon that he could be terminated for failing to follow the directives of Peters, Aipa and Kam to “go along” with these improper deals, constitute conspiracy to defraud the beneficiaries of the Estate of Bernice Pauahi Bishop; racketeering; mail fraud; wire fraud; extortion; breach of fiduciary duties; and violations of the Interim Sanctions provisions of the IRS Code, as detailed in Plaintiff’s complaint.
h) Defendant Trustee Richard S. Y. Wong, was appointed in 1993 by the Justices of the Supreme Court of the State of Hawaii, acting as individuals, and was entrusted with the fiduciary duty to administer the Estate of Bernice Pauahi Bishop for the education of the children of Hawaii. He acts as Chairman of the Board of Trustees. Prior to his appointment, he was a member of the Hawaii Senate and served as its president from 1979 to 1992. His annual compensation as trustee was reported to exceed $1,000,000 in 1998.
Although Plaintiff alleges that Wong’s wrongful acts, both known and unknown, are multitudinous, only one of the most documented cases is presented herein as an example:
Louanne Kam, in a letter dated November 12, 1996, reprimanded Harmon for allegedly failing to follow an alleged directive of Aipa to Harmon to allow Kam to handle the Larry Ching flood damage claim. Ching leased his residential property in Kauai from Bishop Estate. After heavy rains, flooding caused damages estimated around $7,000 to his home and contents. After being reported as a liability claim under the general liability insurance policy issued by P&C Insurance Company, Mullen’s adjuster, Neal Seamon, investigated the claim and concluded that the flooding was an “act of God”, and that KSBE was not liable for the damages.
Ching reportedly had gotten word to Trustee Wong that he was hiring an attorney to sue the estate for approximately $70,000 in damages. Wong reportedly asked Kam to “see what she could do” to settle the claim. Kam subsequently proceeded to become directly involved in the handling of the claim, which breached the trustees policy of maintaining an “arms-length” relationship between KSBE and its for-profit subsidiaries. Kam initiated a meeting with Neal Seamon and Bob Kuroda of John Mullen & Co.; Kapu Smith of KSBE, and Plaintiff. At this meeting it was everyone’s opinion, except Kam’s, that Mullen had made the right decision in denying the claim. Kam suggested that P&C should hire a hydrologist to make a study and report in order to obtain an “expert” opinion. The cost of an expert’s report, according to Seamon, might be $10,000 or higher. He indicated that it would not be economical to pay for an experts report at that time and recommended that P&C wait to see if Ching actually litigated the case.
Aipa and Kam’s improper interference and involvement in the handling of the claim eventually resulted in Kam’s reprimand letter to Plaintiff which was used to intimidate and threaten Harmon with termination from his employment.
Plaintiff alleges that this proposed “sweetheart deal” with Ching, and the threat to Harmon that he could be terminated for failing to follow the directives of Aipa and Kam, constitute conspiracy to defraud P&C and KSBE; racketeering; mail fraud; wire fraud; extortion; breach of fiduciary duties; and violations of the Interim Sanctions provisions of the IRS Code, as detailed in Plaintiff’s complaint.
i) Defendant Trustee Lokelani Lindsey, was appointed in 1993 by the Justices of the Supreme Court of the State of Hawaii, acting as individuals, and was entrusted with the fiduciary duty to administer the Estate of Bernice Pauahi Bishop for the education of the children of Hawaii. Her annual compensation for his services as trustee was reported to exceed $1,000,000 in 1998.
Plaintiff alleges that Lindsey’s wrongful acts were multitudinous. The following is only one documented example:
In early 1995, KSBE undertook the environmental cleanup of the Waterpark Tower site in Kakaako. As KSBE’s general liability insurance policy excluded coverages for environmental damage or pollution claims, Harmon advised Neil Hannahs, manager of KSBE’s Kakaako development, that KSBE should make certain that either the contractor hired for the cleanup, or KSBE, itself, should obtain insurance for the project.
At the time Harmon was initially advised of the cleanup operation, KSBE had already entered into a contract with Stay & Sons, Inc. (Stay) to handle the job. Harmon requested copies of the bid specifications for the project, the bid bond, and copies of Stay’s insurance policies to ascertain what coverages, if any, Stay was providing for environmental impairment liability. These were not provided, and Harmon learned through his investigations that Stay & Sons, Inc. was not listed in either the yellow or white pages of the telephone directory; that they were not licensed with the Contractors’ Licensing department of the State; that their insurance agent was unaware that their client was doing this type of work (they were told that the firm was doing composting work); and that the firm had no environmental impairment liability insurance. Harmon called other reputed bidders for the project to inquire if their bids had included environmental liability insurance, and was advised by some of those contacted that coverages were included. One contractor, however, advised that there were no bid specifications, and that the bid was basically done “over the phone”.
Ed Tabangay, a former employee in the Engineering Department of KSBE, was hired by Nathan Aipa as an independent contractor to handle certain aspects of KSBE’s environmental projects, including the Waterpark Tower site. When Harmon inquired for a copy of Tabangay’s contract, he was advised that there was none. When Harmon asked for a copy of Stay’s bid bond, Tabangay stated that he had waived the bid bond requirement.
Stay’s original bid for the project was around $700,000. After Stay’s initial cleanup efforts of the site were unsuccessful, another staff report was submitted to Trustees to authorize an additional $700,000 or so to haul the contaminated soil to another site on Oahu for further remediation. Harmon later learned that Trustee Lindsey’s stepson was employed by Stay, creating the appearance, at least, of a conflict of interest and of yet another “sweetheart” deal.
After careful investigation, this project appeared to Plaintiff to actually be a non-bid contract, which was fraudulently concealed by presenting it in a staff report to the Trustees as a “bid” situation with Stay being the low-bidder. Plaintiff alleges that Lindsey, Stay, Aipa, Kam, Tabangay, Allan Yee and others engaged in a conspiracy to defraud KSBE; racketeering; mail fraud; wire fraud; extortion; and violations of the Interim Sanctions provisions of the IRS Code. The failure of the Trustees to take prompt and proper action to remediate the environmental hazards at this site also endangered public safety and health.
j) Defendant Trustee Gerard Jervis, was appointed in 1994 by the Justices of the Supreme Court of the State of Hawaii, acting as individuals, and was entrusted with the fiduciary duty to administer the Estate of Bernice Pauahi Bishop for the education of the children of Hawaii. His annual compensation for 1998 was reported to exceed $1,000,000. Jervis also served as the Chairman of the Board of Directors of Kamehameha Investment Corporation.
Plaintiff alleges that Jervis’ duties and fiduciary responsibilities as a Trustee required his honest and diligent attention to the proper management and expenditures of estate assets. Plaintiff alleges that to the extent Jervis failed to sufficiently investigate and halt the fraudulent expenditures of the estate, he breached his fiduciary duties and participated, either directly or indirectly, in a conspiracy to defraud KSBE; racketeering; mail fraud; wire fraud; extortion; and violations of the “interim sanctions” regulations of the I.R.S.
k) Defendant Trustee Oswald Stender, was appointed in 1989 by the Justices of the Supreme Court of the State of Hawaii, acting as individuals, and was entrusted with the fiduciary duty to administer the Estate of Bernice Pauahi Bishop for the education of the children of Hawaii. His annual compensation for his services as trustee was reported to exceed $1,000,000 for 1998.
Plaintiff alleges that Stender’s duties and fiduciary responsibilities as a Trustee required his honest and diligent attention to the proper management and expenditures of estate assets. Plaintiff alleges that to the extent Stender failed to sufficiently investigate and halt the improper expenditures of the estate, he breached his fiduciary duties and participated, either directly or indirectly, in a conspiracy to defraud KSBE; racketeering; mail fraud; wire fraud; extortion; and violations of the “interim sanctions” regulations of the I.R.S.
In fairness to Trustee Stender, however, Plaintiff states that he has no knowledge of any improper or self-serving acts committed by him. Based on his limited contacts with Trustee Stender during his employment at KSBE, Plaintiff was, in fact, of the opinion that Stender was possibly the only trustee that was trustworthy. Subsequent media reports regarding Stender’s efforts to expose the wrongdoing of the “majority trustees” has reinforced this opinion.
∙ Facilitating and concealing co-investments in KSBE deals by the Trustees, employees, family members and business associates. According to newspaper reports, in 1989 the four KSBE Trustees, Peters, Takabuki, Richardson and Thompson approved of the investment of approximately $85 million in a Houston-based energy venture with McKenzie Methane. (Trustee Lyman had recently passed away and a fifth trustee had not been appointed.) This same venture also received more than $3 million in personal funds from all four trustees and employees and business associates of the estate. The Honolulu Advertiser reported in their February 26, 1995 issue that: “The troubled deal may cost the estate as much as $65 million in lost capital and at least twice that much in lost earnings and tax benefits. . . Honolulu businessman Desmond Byrne. . . called the personal investments by estate trustees and staffers ‘an absolutely improper conflict of interest. It raises the appearance that their official decisions are affected by their own personal financial interests’. . . The current board is almost completely different from that of 1989. Only one trustee, Henry Peters, remains. But the current board still holds that the old one did nothing wrong, according to Aipa. ‘There was no conflict of interest,’ Aipa said. The Texas court files clearly show, however, that the trustees, their employees and associates relied on estate reports and financial data when they decided to put their own money in the deal. Estate personnel have immediate access to the high-priced and sophisticated financial expertise of such firms as First Boston Bank and Goldman, Sachs & Co. The estate, a non-profit, tax-exempt institution . . . must be very careful in structuring its investment activities so it won’t imperil its tax-exempt status. The Houston investment was particularly tricky because one of the principal benefits was that the estate would receive federal energy tax credits, which the tax-exempt estate intended to sell.” This same news article went on to describe other personal investments in estate-related business deals: “According to court records, the estate board of trustees was told in April, 1989 by Aipa, that ‘no conflict (of interest) exists in the personal investments.’ . . . The personal investments were made ‘only after careful review of the issues and advice from the law firm of Rush Moore Craven and Stricklin,’ Aipa said. But current trustee Oswald Stender . . . said under oath in a 1993 deposition that he would not have made such a personal investment . . . that he would not invest in activities . . . that I had self-dealing in. . . Takabuki, his wife, three children and family company, Magba Corp., invested $1.5 million . . . The investments were made through a series of five partnerships, called the ‘HAK Partnerships’, that were organized and administered by Mitchell Gilbert, Bishop Estate financial assets manager from 1988 to September 1994. . . Gilbert and members of his family invested nearly $72,000 in the five partnerships, the court records show. And he invited various influential ‘investment affiliates’ of the estate to invest in the HAK Partnerships. . . In ‘marketing’ the deal to potential investors, he was acting individually and not as a representative of the Bishop Estate, Gilbert said in his deposition. . . But the letters he wrote were on estate stationery and he signed them as Bishop Estate’s financial assets manager. . . A Texas lawyer for Bishop Estate said in Houston bankruptcy court last month that the estate can only hope to recover $20 million at most of its $85 million investment. . . According the Honolulu Advertiser article, other co-investors included:
∙ Failure to disclose large personal co-investments in KSBE projects, and huge lawsuits, to the courts, the Attorney General’s office, the IRS, and other regulatory agencies. An article in the February 27, 1995 issue of The Honolulu Advertiser, under the headline, “Monitoring Groups Not Told About Deals,” reported: “Both the state Probate Court and the state Attorney General’s Office are required to annually review Bishop Estate operations. Neither agency knew about the personal investments estate trustees and employees made in connection with the estate’s McKenzie Methane investment, according to court records and interviews. . . Peter Trask (the court appointed Master) . . . made no mention of the McKenzie Methane or HAK Partners investments in his report to the court. ‘The investment portfolio appears complete and well-maintained,’ Trask wrote. . . .‘More than adequate information is presented to provide the master with an appropriate understanding of the investments,’ Trask reported. . . James Duffy, who reviewed Bishop Estate operations last year for the state Probate Court, said he was unaware of the McKenzie Methane investment and had never heard of the HAK partnerships. Asked if he thought the personal investments by trustees and estate employees were appropriate, Duffy said, ‘I would rather not comment.’ . . .Benjamin Matsubara, the current court master, also said he was unaware of the HAK Partnerships but intended to look into the matter. . . Deputy Attorney General Kevin Wakayama, who reviews Bishop Estate activities for the state, said personal investments by estate trustees and staffers in estate-related business deals have ‘never be publicly reported by the estate’.” A follow-up article in the February 28, 1995 edition of The Honolulu Advertiser, under the headline, Bishop Estate Tax-Exempt Status Scored, discloses: “. . . Peters (attorney Ronald Peters, not Henry Peters) pointed out yesterday that the estate trustees told James Duffy, court-appointed master for the estate’s 1989-90 fiscal year, that ‘they have not undertaken any transactions with members of their families, business associates, employees of the estate, or member of immediate families of employees of the estate except such as are disclosed to the master. . . The estate had no comment yesterday on questions about why the existence and activities of the HAK partnerships were not reported to court masters since 1989. . . The estate also had no immediate comment on whether it was obligated to report the HAK partnership transactions on its federal income tax returns. . . As reported Sunday, in 1989 then-trustee Matsuo Takabuki, his wife, three children, family corporation and a longtime company employee invested $1.5 million in the HAK Partnerships. . . . Then-trustees Myron ‘Pinky’ Thompson and William Richardson, invested $510,000 and $210,000, respectively. Trustee Henry Peters . . . invested $220,000. . . The estate, as a charitable institution, files a ‘Form 990′ federal tax return. One section of that return requires the estate to report whether it has furnished ‘goods, services or facilities’ to any taxable organization in which a trustee or estate principal officer has a management affiliation. . . The estate reported nothing about the HAK partnerships on tax returns filed with the IRS since 1989. . . The HAK partnerships were organized and administered by Mitchell Gilbert, financial assets manager of the estate from 1988 to September 1994, according to Texas court records. Gilbert and his relatives invested $72,000 in the HAK partnerships. . . The mailing address for all five partnerships was Bishop Estate headquarters at Kawaiahao Plaza…”
m) Louanne Kam, Esq., is the manager of the Risk & Litigation Dept., in the Legal Group, KSBE, and reports to Nathan Aipa. Kam was, at the time of Harmon’s termination, his direct supervisor and was involved in similar activities as described above for Aipa, often taking her orders directly from Aipa, or from one or more of the Trustees. Plaintiff alleges that Kam’s actions, through her complicity, deceptions, threats, and intimidations, in collusion with some or all of trustees of KSBE; with other managers and employees of KSBE; with officers and directors of P&C; with officers, managers and employees of Federal, M&M, Mullen and PricewaterhouseCoopers; and with other outside contractors, attorneys, politicians and others, constituted a conspiracy to defraud P&C and the beneficiaries of the Estate of Bernice Pauahi Bishop; racketeering; mail fraud; wire fraud; extortion; and violation of IRS interim sanctions regulations.
“. . . Since 1996, the Trustees’ compensation has also been limited by federal law, specifically the Intermediate Sanctions provision of the Internal Revenue Code (IRC) 4958.
In 1996, based in part on an agreement between the Attorney General and the Trustees, the Trustees agreed that they would take no commissions based on monies spent on the construction of Kamehameha Schools facilities (classified as Final Disbursements of Capital or FDOC).
Between November 1993 and May 1994 the Trust incurred investment losses of over $45 million, which would have reduced each Trustee’s compensation by more than $225,000.
Rather than reduce compensation, retroactive adjustment were made in June and July 1994 to generate commissions on FDOC amounting to more than $98,000 to each Trustee. The retroactive adjustments were made at the direction of Peters, general counsel Nathan Aipa, and the principal executive of the administration group, Rodney Park (emphasis added).”
Plaintiff alleges that these wrongful acts constitute a conspiracy to defraud, mail fraud, wire fraud, racketeering, and violation of the Intermediate Sanctions provisions of IRC 4958.
Park was also a co-investor with KSBE in the McKenzie Methane deal described above, at the time he was acting as the Controller for KSBE. In this position, Park had fiduciary responsibilities to expend trust funds in a prudent and legal manner, and to properly account for these expenditures to the beneficiaries, the trustees, the master, the IRS and others. Plaintiff alleges that Park’s actions, through his complicity, deceptions, and breach of fiduciary duties, in collusion with some or all of trustees of KSBE, with other managers and employees of KSBE, with other officers and directors of P&C, with officers and managers of Federal, M&M, Mullen and PricewaterhouseCoopers, and with outside contractors, attorneys, politicians and others, constituted a conspiracy to defraud P&C and the beneficiaries of the Estate of Bernice Pauahi Bishop; racketeering; mail fraud; wire fraud; extortion; and violation of IRS interim sanctions regulations.
o) William S. Richardson, is a retired Trustee, a salaried consultant to KSBE, and serves as a Director and Sec./Treas., P&C. As Treasurer, Richardson had a fiduciary responsibility to P&C that expenditures and other financial records of the company be honest and accurate. Plaintiff refused to approve the 1995-96 fiscal year financial report, as prepared by Peter Lowe, as he was aware that these records were not honest and accurate. Plaintiff alleges that Richardson, as Treasurer, had the responsibility to review the financial records and raise questions about any entries that may have been fraudulent or misleading.
p) Gilbert Tam is a Director, P&C, and the former Administrative Group Director for KSBE. Tam is currently an officer with Bank of Hawaii, which has substantial financial connections with KSBE.
Tam was also a co-investor in the McKenzie Methane deal at the time he was a KSBE manager. Plaintiff alleges that Tam’s actions, through his complicity, deceptions, and breach of fiduciary duties, in collusion with some or all of trustees of KSBE, with other managers and employees of KSBE, with other officers and directors of P&C, and with outside contractors, attorneys, politicians and others, constituted a conspiracy to defraud P&C and the beneficiaries of the Estate of Bernice Pauahi Bishop; racketeering; mail fraud; wire fraud; extortion; and violation of IRS interim sanctions regulations.
q) Peter Lowe is Vice-President, P&C, and a Sr. V.P., M&M. Lowe was instrumental in preparing the feasibility study for the creation of P&C, and in its subsequent formation and operations. It was with Lowe that Plaintiff negotiated the original captive management contract for P&C, and it was this contract that was breached by M&M by charging excessive and unwarranted fees. Plaintiff alleges that Lowe’s actions, through his complicity, deceptions, and conflicts of interests, in collusion directly or indirectly with some or all of trustees of KSBE; with other officers, managers and employees of KSBE, M&M, Mullen and PricewaterhouseCoopers; with other officers and directors of P&C; and with other outside contractors, attorneys, politicians and others, constituted a conspiracy to defraud P&C and the beneficiaries of the Estate of Bernice Pauahi Bishop; racketeering; mail fraud; wire fraud; and violation of IRS interim sanctions regulations.
List One — Plaintiff alleges that the following persons and agencies have a duty in law to act upon complaints of citizens, yet failed to act, pretended to act but did not act, or misled or deceived Plaintiff in other ways when, in good faith, he brought to their attention evidence and suspicions of serious ongoing criminal activity endangering the citizens of the United States. By their acts and omissions they either sanctioned or perpetuated the crimes. It was clearly within the duties and functions of these people and agencies to act and take seriously the allegations plaintiff had set forth:
a) John Sinnott, President and CEO, M&M. On January 5, 1997, Plaintiff sent a letter to Sinnot in order to inform M&M’s top management of Plaintiff’s claims of fraud and misrepresentation, and to give M&M a direct opportunity to investigate Harmon’s claims. Plaintiff alleges that Sinnott failed to conduct a reasonable investigation of his claims and failed to respond with any reasonable settlement offers.
b) Rocco Sansone, CPCU, Vice-President, M&M. Sansone was the agent and account executive for M&M who, working in collusion with Peters, Wong, Aipa, Kam, Tam and others, was primarily responsible for the multitudinous wrongful acts of fraud and misrepresentation perpetrated upon the Plaintiff, the estate of Bernice Pauahi Bishop, P&C Insurance Company and countless others, as detailed in the Complaint.
c) Milton T. Perkins, Underwriter, Federal Insurance Company. Perkins was the underwriter with whom Plaintiff negotiated the terms of Federal’s original Association Liability policy, and is the underwriter who purportedly signed the fraudulently back-dated policy endorsements cited to wrongfully deny defense coverages due Plaintiff in Civ. No. 97-0512-02.
d) Tony Rangel, Claims Representative, Chubb Group. Rangel was the adjuster that Federal assigned to investigate and handle Plaintiff’s tender of P&C’s claims against him in Civ. No. 97-0512-02. Plaintiff alleges that Rangel knowingly and wrongfully denied insurance coverages to Harmon based upon fraudulent, back-dated changes to the policy.
e) Stay & Sons, Inc., Independent Contractor which did the Waterpark Tower environmental remediation work for KSBE, under a fraudulent bid process. Trustee Lokelani Lindsey’s stepson, Steve Lindsey, is an employee of this firm. Plaintiff has knowledge of the fraudulent bid process in the Waterpark Tower project, and believes he can provide written evidence thereof in the discovery process.
f) Jeffrey Stone, Real Estate Developer – indicted in 1998, along with Henry Peters, Richard Wong and others for grand theft in an alleged kick-back scheme involving the Kapalele condominium project which was built on land leased from KSBE. In early 1998, while Plaintiff was employed by American Mutual Underwriters, Ltd. as its Marketing Manager, American Mutual was asked to arrange for insurance coverages for National Housing Corporation which had formed a partnership (believed to be named Ko’olina Partners) which was in the process of purchasing a large real estate development property at Ko’olina on Oahu. A meeting was held with Kevin Showe, one of the owners and officers of National Housing, attended by Carl Tanaka, American Mutual’s Account Executive for this account, and Harmon. A few days after this meeting, while in the process of arranging to submit the risk for proposals, Tanaka was advised by National Housing’s mainland agent that American Mutual should “shut down” the proposals. When Harmon and the agent inquired about the reason for the about-face decision, they were told it was “political”.
Upon further inquiry, Plaintiff learned that National Housing allegedly had been told that they needed to get their insurance through their local partner’s agent because of certain political connections. Harmon later learned that the local partner was Jeffrey Stone, brother-in-law of Richard Wong, and the local agent was Rocco Sansone of Marsh & McLennan.
It was later on that Harmon learned that National Housing was also a 50% partner, along with Pacific Northwest, Ltd., an entity owned and controlled by Jeffrey Stone, in the Kalele Kai project. It may also be worthy to note that the purchase of the Kalele Kai project was financed in part with a loan from Bank of Hawaii and in part by negotiating with the Trust a restructuring of the original note.
g) National Housing Corporation – See: h) Jeffrey Stone, above.
h) Kevin Showe, National Housing Corporation – See: h) Jeffrey Stone, above.
i) Milton Holt, is a KSBE employee and former legislator. From Equity No. 2048, Petition of the Attorney General on Behalf of the Trust Beneficiaries to Remove and Surcharge Trustees:
“Milton Holt is a friend of Peters and served with him in the Hawaii Legislature. Holt has been an employee of the Trust since 1987, first as assistant athletic director and more recently as a special projects officer.
Holt has been paid as a full time employee. He has not worked full time for the Trust.
From 1992 until early 1998, Holt repeatedly used a credit card issued to the Trust for charges at Honolulu adult entertainment nightclubs and to obtain cash advances at Nevada casinos.
Peters and Wong were informed by senior Trust executives of the improper nature of the charges and of the difficulties in obtaining repayment from Holt.
Peters and Wong concealed from the other Trustees Holt’s personal charges on the Trust credit card and rejected suggestions to confiscate the card.
In 1994, the Trust gave Holt a retroactive pay raise of $12,325. The retroactive pay raise was not related to the value of Holt’s services for the Trust but, rather, was calculated to pay off the improper expenses charged by Holt.
The Trust did not timely pay employment taxes on the retroactive salary increase to Holt.”
j) Robert Rubin, U.S. Secretary of Treasury, and former co-senior partner in Goldman Sachs & Company – From an article in the February 28, 1995 edition of The Honolulu Advertiser: “Robert Rubin, U.S. Treasury Secretary, has an important personal financial connection to Hawaii’s Bishop Estate, as does one of Rubin’s predecessors at the Treasury, former secretary William E. Simon. . . The estate has guaranteed an undisclosed rate of return on Rubin’s holdings in Goldman, Sachs & Co., the giant New York-based investment bank in which Bishop Estate has invested $500 million. . . Rubin was co-chairman of Goldman, Sachs from 1992 through 1994, the same period in which the Bishop Estate made two separate $250 million investments in the firm. When Rubin left the bank to join President Bill Clinton’s cabinet last month as Treasury Secretary, he secured an ‘insurance policy’ from the estate that underwrites the value of his personal holdings in Goldman Sachs.”
k) Goldman Sachs & Company – Goldman Sachs & Company has been involved in several financial ventures involving KSBE and Marsh & McLennan which Plaintiff believes have resulted in unfair competition; opportunities for “insider trading” abuses; excess benefit transactions to certain Trustees; money-laundering and other illegal activities. As a practical matter, however, Plaintiff is cognizant of the realty that he personally does not have adequate financial means to obtain evidence, through the discovery process in this case, of wrongdoing on the part of Goldman Sachs. However, as investigations by the IRS, the FBI and the Attorney General’s office are continuing, Plaintiff requests the opportunity to introduce as evidence any findings of these law enforcement agencies, as they may become available. Also see j) Robert Rueben, above.
l) William E. Simon – Simon has been involved in several financial ventures involving KSBE, Marsh & McLennan and Goldman Sachs, both during and after the period Plaintiff was employed by KSBE and P&C, which Plaintiff believes involved unfair competition; opportunities for “insider trading” abuses; excess benefit transactions to certain Trustees; fraud; money-laundering and other illegal activities.
Plaintiff, as a practical matter, realizes that he personally does not have the resources to obtain additional evidence, through the discovery process in this case, of wrongdoing on the part of Simon. However, as investigations by the IRS, the FBI and the Attorney General’s office are continuing, Plaintiff asks the Court for the opportunity to introduce into evidence any findings of these law enforcement agencies, as they may become available.
m) Bank of Hawaii – KSBE and many of its subsidiaries use Bank of Hawaii as their primary banking facility. When P&C was formed, Bank of Hawaii was selected, presumably by P&C’s board of directors, to handle its accounts. To the best of Plaintiffs knowledge, all three directors, Peters, Richardson and Tam, had personal financial connections with Bank of Hawaii, which would appear to constitute a conflict of interest situation. Tam was employed by Bank of Hawaii before coming to KSBE. He quit KSBE to return to Bank of Hawaii. This occurred prior to his being named as a director for P&C.
All three directors were co-investors in the McKenzie Methane deal, and it was reported that personal loans to finance acquisitions were arranged for some of the investors by Bank of Hawaii. It appears from newspaper reports, that similar loans were arranged for other business partners, friends and families of the trustees, and other managers and employees of KSBE. Plaintiff learned while he was employed by KSBE, that KSBE often guaranteed personal loans at Bank of Hawaii, and that the personal stock or partnership interests that were purchased with these loans were used as collateral in exchange for KSBE’s guarantee. As happened with many of these high-risk, speculative investments (such as the HAK Partnerships, McKenzie Methane, Nationwide Industries, Accessory Place, etc.), when the businesses started losing money and faced bankruptcy, these individual investors defaulted on their loans and KSBE ended up having to take over payment of the loans and taking possession of the collateral stock or partnership interests. It would appear, at least, that this is a conflict of interest situation, and that the Trustees breached their fiduciary duties in personally entering into these loan guarantee arrangements.
n) SoCal Holdings, Inc. – SoCal was a holding company for Southern California Savings & Loan, in which KSBE acquired a majority ownership interest. William Simon was another major partner in this enterprise. As the majority owner, certain property insurance coverages for SoCal were combined under KSBE’s blanket insurance policies. A portion of the premiums for these coverages were allocated to SoCal, which were never paid. These premium charges were later ordered, presumably by Peters, to be transferred back to KSBE.
o) Unison Pacific – As a subsidiary of KSBE, General Liability, Directors & Officers Liability and other insurance coverages for this entity were combined under KSBE’s master policies, and premium charges were allocated according to the entity’s risk exposures. After this arrangement had been in effect for several years, Eric Martinson, KSBE Assets Manager and officer of Unison Pacific, directed KSBE’s accounting department to reallocate Unison’s premiums. This had the effect of KSBE paying for the premiums for this subsidiary.
p) KDP Limited – From Equity No. 2048, Petition of the Attorney General on Behalf of the Trust Beneficiaries to Remove and Surcharge Trustees:
“COUNT 2 – PETERS, WONG AND LINDSEY HAVE ENRICHED THEMSELVES FROM THE TRUST AT THE EXPENSE OF THE BENEFICIARIES.
. . . In early 1997, the Trustees agreed to invest up to $2 million of Trust assets in a start up company, KDP Technologies, LLC (KDP-Tech).
The Trust assets were invested through KDP Limited (KDP-Trust), a subsidiary of Royal Hawaiian Shopping Center, in turn a for-profit subsidiary of the Trust.
. . . Lindsey suggested that the Trust invest in KDP-Tech based on her acquaintance with a principal of KDP-Tech. The acquaintance was a co-investor with Lindsey in a speculative, failed personal investment.
Within a week of the Trust’s initial investment of $500,000, KDP-Tech began negotiating a consulting agreement with Wong’s brother-in-law, Randy Stone.
KDP-Tech entered into a consulting agreement with Randy Stone as of July 15, 1997. KDP-Tech agreed to pay Randy Stone $150,000 a year and to grant him options to purchase interests in STAR*BOOK.
Within a few months of the Trust’s investment, KDP-Tech had serious financial and managerial problems.
On October 23, 1997 Richard Wong, president of Royal Hawaiian Shopping Center (and not the same person as Trustee Wong) wrote to Peters informing him of the need to pay Randy Stone $50,000 to keep the company operational.
Peters arranged for KDP-Trust to loan KDP-Tech $105,000, and KDP-Tech then paid $50,000 of the loan proceeds to Randy Stone. The loan has never been repaid.
KDP-Trust continued to advance Trust money to KDP-Tech until its treasurer, Lindsey’s acquaintance, was indicted for federal mail fraud and money laundering crimes (for which he was subsequently convicted and sentenced).
Peters and Wong used their positions as Trustees to help Wong’s brother-in-law Randy Stone, obtain a consulting contract from KDP-Tech and to secure payment of Randy Stone’s consulting contract with Trust funds from KDP-Trust.”
q) KDP Technologies, LLC – see: p) KDP Limited
r) Randy Stone – see: p) KDP Limited
s) Mid Ocean Ltd. – Mid-Ocean is a reinsurance company incorporated in Bermuda. Guy Carpenter, a Marsh & McLennan subsidiary, was instrumental in the formation and management of the company. See also: g) Henry H. Peters.
t) Yukio Takemoto – From Equity No. 2048, Petition of the Attorney General on Behalf of the Trust Beneficiaries to Remove and Surcharge Trustees:
“. . .Yukio Takemoto is the principal executive of the budget and review group of the Trust and reports directly to Peters.
After the 1996 primary election, Holt owed Starr Seigle McCombs (SSM), his media and advertising consultants, $18,690.72 that SSM had paid the Vendor on behalf of Holt.
Takemoto asked another non-bid contractor of the Trust, Akinaka & Associate, Ltd. (Akinaka), to help with Holt’s unpaid campaign expenses.
. . . Shortly thereafter, a Trust employee instructed the Vendor to send four invoices (each for $4,672.68, or one-fourth of the campaign debt of $18,690.72) to each of Kajioka; Ho; Akinaka; and Okita, Kunimitsu and Associates (Okita).
The Vendor followed this instruction and sent false invoices to the four non-bid contractors for goods and services that were never provided to them.
Each of the four non-bid contractors paid the false invoice from the Vendor, and the Vendor then paid in full Holt’s campaign debt to SSM.
All the firms that participated at the instruction of the Trust in making illegal campaign contributions by sending or paying bogus invoices were receiving, have received, and continue to receive lucrative non-bid contracts from the Trust.
The charges to entertain legislators were lobbying expenses of the Trust that have not been disclosed to the State Ethics Commission and have not been disclosed in any IRS Form 990 submitted by the Trust.
All or some of the Trustees know of the Trust’s participation in the illegal campaign contribution scheme to benefit Ige and Holt and of the Trust’s lobbying activities. All or some of the Trustees violated their duty of care, their duty to prevent co-Trustees from committing breaches of trust, their duty to administer the Trust in compliance with all applicable law, and their duty to protect the Trust’s tax-exempt status.”
u) Kukui, Inc. – This subsidiary company was created to handle the Trust’s interests in McKenzie Methane. KSBE’s managers and employees were used extensively in the operations and management of Kukui, Inc., in effect subsidizing the for-profit company. KSBE’s internal auditor, Dennis Fern, played a major role initially in this company, and was later transferred over as the company’s president. )See also: l) Nathan Aipa.
v) Kukui Operating Company, Inc. – This subsidiary company was formed to operate the methane gas drilling operations for Kukui, Inc. (See also: l) Nathan Aipa and u) Kukui, Inc.)
w) Dennis Fern, Pres., Kukui, Inc., and former Internal Auditor, KSBE (See also: l) Nathan Aipa; u) Kukui, Inc. and v) Kukui Operating Company, Inc)
x) Kona Enterprises – This was another financially troubled acquisition, which resulted in a lawsuit brought by Wayne Rogers. In the initial suit, filed in North Carolina, Aipa did not report the claim to the insurance carrier. In subsequent suits filed in Utah and Hawaii, Plaintiff did become aware of the lawsuits, and filed the claim. However, Aipa and Lyn Anzai directed the handling of the lawsuit with outside law firms. As was common in these situations, the outside and in-house attorneys “controlled” the litigation, and the insurance companies disallowed much of the legal costs due to the Legal Groups disregard for the insurance policy conditions.
y) McKenzie Methane, Inc. – (see: l) Nathan Aipa)
z) Glenn Hara, Treasurer, Pauahi Holdings, Inc. – The financial statements for KSBE and most of its subsidiaries were consolidated. Pauahi Holdings, Inc. was the parent company of P&C. Hara was responsible for the review and approval of the financial statements of those consolidated financial statements.
aa) Robert Katz, Esq. – A partner in the law firm of Torkildson, Katz, Fonseca, Jaffe, Moore & Hetherington, Katz was the lead attorney retained to handle “all matters relating to Bobby Harmon”. Harmon alleges that Katz, Matt Tsukazaki, and Sabrina Toma of Torkildson, Katz, in collusion with Aipa and Colleen Wong of KSBE, acted in bad faith and made a number of misrepresentations and threats in the handling of his unemployment and liability claims against KSBE and P&C. Katz failed to respond in a timely manner, if at all, to Harmon’s many offers to settle his claims out-of-court, knowingly and deliberately failed to inform the insurance companies and other involved parties of Harmon’s settlement proposals, and generally acted in “bad faith” on behalf of the P&C and Federal in his handling of these insurance claims.
bb) Matt Tsukazaki, Esq. – An attorney with the law firm of Torkildson, Katz. See: aa) Robert Katz
cc) Sabrina Toma, Esq. – An attorney with the law firm of Torkildson, Katz. See: aa) Robert Katz
dd) Colleen Wong, Esq. – Wong is head of the corporate law department of KSBE, and as such her department, which included Allan Yee, Lyn Anzai, Rene Kitaoka, and others, had responsibility for such legal matters as mergers and acquisitions, compliance with ADA, environmental laws, and employment matters. See also: l) Nathan Aipa and aa) Robert Katz
ee) Alan Yee, Esq. – Yee is an in-house attorney reporting to Colleen Wong. Yee was primarily responsible for compliance with environmental laws. See also: l) Nathan Aipa, and dd) Colleen Wong.
ff) Gilbert Ishikawa – As Tax Manager for KSBE, Ishikawa reports directly to Nathan Aipa and has responsibility for compliance with IRS rules and regulations. Ishikawa was a co-investor along with KSBE in the McKenzie deal. See also: 1) Nathan Aipa.
gg) Mark McConoghy, Price Waterhouse – McConoghy is the tax expert hired by KSBE and advises KSBE and its subsidiaries on matters of tax law. McConoghy was a co-investor with KSBE in the McKenzie deal, which had the appearance of, if not actual, conflict of interest. Plaintiff believes McConoghy also may have personally benefitted in other KSBE deals, including one or more of the HAK partnerships, and the Benson Forest purchase, and intends to obtain more evidence during discovery. See also: l) Nathan Aipa.
hh) Myron Thompson, retired Trustee, was a co-investor with KSBE in the McKenzie Methane gas investment deal, and possibly other ventures unknown to Plaintiff at this time. Even as a retired trustee, Thompson, who served as a trustee from 1974 to 1994, received $221,786 in five payments from KSBE for the fiscal year July 1, 1995 to June 30, 1996. Plaintiff does not know the reason for the payments at this time, but expects to obtain this information upon discovery.
ii) Matsuo Takabuki, retired Trustee, was a co-investor along with KSBE in the McKenzie Methane gas investment deal, the HAK partnerships, Kona Enterprises, and possibly other ventures. Even as a retired trustee, Takabuki, who served as a trustee from 1971 to 1993, received $221,786 in five payments from KSBE for the fiscal year July 1, 1995 to June 30, 1996. Plaintiff does not know the reason for the payments at this time, but expects to obtain this information upon discovery. Takabuki was previously a director of Mid Ocean, Ltd., and was a Trustee in 1992, when the Trust invested approximately $31 million in Mid Ocean, and acquired 310,000 Mid Ocean Class A shares. While a Mid-Ocean director, Henry Peters, who succeeded Takabuki, reportedly received substantial director’s fees and stock options. Plaintiff does not know the amounts of director’s fees and stock options that Takabuki may have received during his tenure as a director, but believes he may be able to obtain this information during discovery.
kk) Ed Tabangay – Tabangay was a KSBE employee in the engineering department and later became an independent consultant, reporting directly to Aipa, in ADA and environmental projects. See also: l) Nathan Aipa
ll) Marsh & McLennan Capital, Inc. (M&MCI) – A subsidiary of M&M, this company originates, structures and manages insurance and related industry investments. According to an IRS Form 990 submitted by the Trust, M&MCI was a co-investor with KSBE in the short-lived Underwriters Capital (Merritt) Ltd., a Bermuda company which had losses of several million dollars in its first year of operation. Henry Peters was a director for Underwriters Capital, and another M&M subsidiary managed the company. M&MCI was acquired by another insurance company, Terra Nova, in which KSBE also heavily invested. Plaintiff alleges that these co-investments may represent a conflict of interest, and may involve tax fraud and violate IRS interim sanctions regulations.
mm) Marshall Ige – From Equity No. 2048, Petition of the Attorney General on Behalf of the Trust Beneficiaries to Remove and Surcharge Trustees:
“The Trust has participated in a scheme of illegal campaign contributions benefitting Marshall Ige and Milton Holt.
The Trust, a public charitable trust, has incurred and not reported lobbying expenses.
After Ige was defeated for re-election to the Hawaii House of Representatives in the 1994 primary election, he owed $18,262.71 to a vendor of campaign goods and services (the Vendor).
Holt worked at the Trust in the government relations division, which reported to Peters.
The Vendor contacted Holt for help in collecting the unpaid $18,262.71 from Ige.
Shortly thereafter, a Trust employee called the Vendor and instructed him to bill Ige’s campaign debt to the firm of Kajioka, Okada, Yamachi Architects, Inc. (Kajioka), a recipient of non-bid contracts from the Trust.
The Vendor followed this instruction and sent a false invoice to Kajioka in the amount of the campaign debt for goods and services never provided to Kajioka.
Kajioka paid the false invoice and thus paid the full amount of Ige’s campaign debt to the Vendor. Ige was elected to the Hawaii Senate in 1996.
After Holt was defeated for re-election to the Hawaii Senate in the 1996 primary election, he owed the Vendor approximately 12,334.44 for campaign goods and services.
A Trust employee instructed the Vendor to divide the balance of Holt’s campaign debt into three equal parts and to send an invoice for one-third of the balance to each of three non-bid contractors of the Trust: Kajioka; Ronald N. S. Ho & Associates, Inc (Ho); and Sato and Associates, Inc. (Sato)
The Vendor followed the Trust’s instruction, and sent false invoices to the non-bid contractors for goods and services that were never provided to them.
Each of the three non-bid contractors paid the false invoice by sending the Vendor a check for$4,111.48 to pay off Holt’s campaign debts.
Yukio Takemoto is the principal executive of the budget and review group of the Trust and reports directly to Peters.
Takemoto asked another non-bid contractor of the Trust, Akinaka & Associates, Ltd. (Akinaka), to help with Holt’s unpaid campaign expenses.
Holt used a credit card issued to the Trust to charge lunches and dinners for himself and members of the Hawaii Legislature at various Honolulu restaurants.
The Trust paid these charges with Trust assets. The Trust did not consider these expenditures to be Holt’s personal expenses and has neither sought nor received reimbursement from Holt for them.
Plaintiff alleges that these schemes constitute Mail Fraud and Wire Fraud under RICO, and violates IRS interim sanctions regulations.
nn) Kajioka, Okada, Yamachi Architects, Inc. – see mm) above.
oo) Ronald N. S. Ho & Associates, Inc. – see mm) above.
pp) Okita, Kunimura and Associates – see mm) above.
qq) Hawaii Protective Association – From Equity No. 2048, Petition of the Attorney General on Behalf of the Trust Beneficiaries to Remove and Surcharge Trustees:
“Larry Mehau, a principal shareholder of Hawaii Protective Association (HPA), is a friend of Wong and Lindsey.
In July 1996, the Trustees hired . . .HPA to provide additional security personnel at the Kamehameha Schools. There was no operational necessity to hire any outside security contractor.
. . . The Trustees did not solicit competitive bids for HPA’s security services. There is no written contract with HPA.”
rr) Dura Constructors, Inc. – From Equity No. 2048, Petition of the Attorney General on Behalf of the Trust Beneficiaries to Remove and Surcharge Trustees:
“Peters is a former employee of Dura Constructors, Inc. (“Dura”). Dura renovated Peters’ Maili residence.
Dura received $465,000 for work on the athletic locker room at the Kamehameha Schools. The work was so deficient that the building was unsafe for student use. The Trust corrected Dura’s work itself rather than pursue Dura for the deficiencies.”
ss) Rhino Roofing – From Equity No. 2048, Petition of the Attorney General on Behalf of the Trust Beneficiaries to Remove and Surcharge Trustees:
“Rhino Roofing also worked on Peters’ Maili home renovation. Peters’ nephew is the owner of Rhino Roofing.
Beginning in 1995, the Trust awarded construction contracts under which Rhino Roofing received more than $1.3 million, customarily without competitive bidding or as the hand-picked roofing subcontractor.”
tt) Al Jeremiah, Jr. From Equity No. 2048, Petition of the Attorney General on Behalf of the Trust Beneficiaries to Remove and Surcharge Trustees:
Peters was instrumental in the Trust entering into a consulting services contract with Jeremiah, initially at $5000 per month and then at $7000 per month, without regard to whether any work was performed, with an additional $125 for each hour worked in excess of 40 hours per month.
In 1996, the Trust acquired a collection of photographs and books known as the Baker/Van Dyke collection.
Jeremiah was paid at least $35,000 at his attorney rate of $125/hour for performing menial and clerical labor in connection with inventorying the Baker/Van Dyke collection.”
During the time of his employment with KSBE, Plaintiff was asked by in-house attorney, Stacy Rezentes, to assist in obtaining insurance for the Baker/Van Dyke collection. Plaintiff advised Rezentes that a professional appraisal of the collection would be required by the insurance carrier in order to provide the insurance. Harmon never received this appraisal and now believes, in light of information in the Attorney General’s report, that the Trust’s money that should have been going to obtain professional appraisals, was instead going to an attorney for merely cataloging the items.
uu) Clayton Hee. From Equity No. 2048, Petition of the Attorney General on Behalf of the Trust Beneficiaries to Remove and Surcharge Trustees:
“Clayton Hee is a friend of Peters and served with him in the Hawaii Legislature.
Peters was instrumental in the Trust, by its subsidiary Royal Hawaiian Shopping Center (RHSC), hiring Hee as a Cultural Affairs Researcher with negligible duties.”
vv) Terrance Tom. From Petition of the Attorney General on Behalf of the Trust Beneficiaries to Remove and Surcharge Trustees:
“Terrance Tom served with Peters in the Hawaii Legislature, as was hired by the Trust at a monthly legal retainer of approximately $4000 for providing negligible, if any, legal services to the Trust.”
ww) Richard Wong (not Trustee Wong) – Wong was President of Royal Hawaiian Shopping Center, Inc. (RHSC), and of Pauahi Holdings Corp. (PHC), parent of P&C, during the period Plaintiff was employed by KSBE and P&C. Wong had knowledge of, and oversight responsibility for, the proper expenditures of the assets of these companies.
Plaintiff alleges that Wong failed to report to proper authorities, known instances of wire fraud and mail fraud in the fraudulent billings of insurance premiums and losses to the various lessees and tenants of RHSC owned and/or managed commercial properties.
a) Plaintiff Bobby N. Harmon has been injured through economic losses of wages, life and medical insurance benefits, retirement benefits, unemployment insurance benefits, costs of lawsuits fraudulently brought against him, and various other costs resulting from his wrongful job termination. Harmon and his family have suffered mental stress and health problems due to the wrongful termination and Defendants’ false public statements that Harmon had “stolen” documents and trade secrets, and had libeled his previous employer.
b) Certain known and unknown injured employees of KSBE and its subsidiaries, were wrongfully denied Workers Compensation benefits though the improper control of the Workers Compensation claims process by Colleen Wong, Carol Koza and other non-objective KSBE personnel.
c) Tenants and lessees of KSBE’s commercial properties that have been overcharged for their insurance premiums and self-insured losses, due to the overcharges made to KSBE by Marsh & McLennan which are passed on to these lessees and tenants in their monthly maintenance costs.
d) Customers of the commercial businesses located on KSBE properties due to the excessive insurance costs being added to the costs of merchandise and services purchased by these consumers.
e) All taxpayers who have been victimized by KSBE due to the loss of tax revenue resulting from the various tax fraud and tax evasions schemes of the Trustees and other conspirators named and unnamed in this complaint.
5. DETAILED DESCRIPTION OF THE PATTERN OF RACKETEERING ACTIVITIES ALLEGED FOR EACH RICO CLAIM.
Plaintiff is filing a merged complaint of violations of State of Hawaii Insurance Statutes, violations of Hawaii General Laws and violations of the Federal Civil Racketeer Influenced and Corrupt Organizations Act (RICO) to encompass the criminal activities engaged in by Defendants. Although Plaintiff’s underlying claims are Fraud, Extortion, Misrepresentation, Breach of Contract and Bad Faith, he contends that Federal Insurance Company, Inc. (hereafter “Federal”) and P&C Insurance Company, Inc. (hereafter “P&C”), in concert with all Defendants, acted wilfully, intentionally, maliciously, and as part of an organized Racketeering Enterprise involving multiple schemes. Defendants carry out these schemes through a series of Predicate Acts, including Mail and Wire Fraud, Extortion, Extortion by Color of Official Right, and other Predicate Acts constituting Racketeering in violation of the Federal Racketeer Influenced and Corrupt Organizations Act (hereafter “RICO”) enacted in 1970 as Title IX of the Organized Crime Control Act of 1970. Using a Pattern of Predicate Acts as defined by RICO, Defendants can collude to overcharge their insureds and others for insurance coverages and services, and can wrongfully deny and/or improperly limit the payments for legitimate claims.
Racketeering Act No. 1 – Mail Fraud, Wire Fraud, Fraudulent Inducement, Misrepresentation.
On or about May 25, 1994, Plaintiff, in his capacity as Risk/Insurance & Safety Manager for KSBE, obtained a Captive Management Fee Proposal from Peter Lowe, VP, M&M Insurance Management Services, Inc. (M&MIMS), which detailed their proposed services and fees for managing P&C. Their services were to be on a time and expense basis, with an estimated annual cost of around $70,000. There was no mention in this proposal that M&M would charge an additional flat annual fee of $200,000 for providing “brokerage”, “risk management” or other services to the captive.
This proposal, the subsequent contract, and periodic invoices from M&MIMS were transmitted by mail and/or wire. Plaintiff relied upon this proposal, its costs and representations, as an inducement to contract for these captive management services with M&MIMS. Plaintiff alleges that M&M’s failure to disclose in their proposal an additional flat annual fee of $200,000 constitutes wire fraud, mail fraud, fraudulent inducement and misrepresentation.
Defendants M&M and M&MIMS, their employees, Rocco Sansone and Peter Lowe, and others in their organizations benefitted financially from these excessive fees in the form of salaries, commissions, bonuses, or other manner of compensation.
Racketeering Act No. 2 – Wire Fraud, Mail Fraud, Fraudulent Inducement, Misrepresentation
On or about October 27, 1995, Plaintiff, in his capacity as Risk/Insurance & Safety Manager for KSBE, caused Federal, through its agent M&M, to bind coverages under an Association Liability Insurance policy. Harmon obtained this “Errors & Omissions” insurance on behalf of KSBE and the majority of its subsidiaries, including P&C, based on written proposals containing representations by Federal and M&M that this policy would protect KSBE, its trustees and employees, and the officers and directors of the for-profit subsidiaries of KSBE, including P&C, against claims for “Wrongful Acts” as defined in the policy.
These proposals; the subsequent binders and policies; and premium invoices and payments were transmitted by mail and/or wire. Plaintiff relied upon these inducements and representations when obtaining this insurance, and when accepting the position as P&C’s president. Plaintiff alleges that the failure of Federal, and its agent, M&M, to provide defense coverage to Harmon in Civil No. 97-0512-02 constitutes mail fraud, wire fraud, fraudulent inducement, and misrepresentation to purchase this insurance.
Defendants Federal and M&M, their officers, directors and employees benefitted financially from the premiums charged for this policy in the form of salaries, commissions, bonuses, or other means of compensation.
Racketeering Act No. 3 – Bribery, Extortion, Conspiracy
On November 20, 1996, Plaintiff was wrongfully terminated from his dual positions as Risk/Insurance & Safety Manager for KSBE, and President of P&C, because he would not consent to go along with the directives of Henry Peters, Richard Wong, Nathan Aipa, Louanne Kam and others to commit tax fraud, pay excessive fees and premiums to Marsh & McLennan, or to “look the other way” while his “superiors” committed these Racketeering Acts.
In an attempt to buy Harmon’s silence, Aipa’s termination letter contained the following offer which constituted bribery and extortion:
“In addition, if you execute the Employment Separation and Release Agreement (‘Agreement’), attached hereto, you will receive an additional separation payment of four (4) months’ wages in the amount of $23,650.72, and be eligible to receive outplacement services in an amount up to $5,000.00, both of which are subject to reduction for all applicable payroll taxes.
“By signing the Agreement, you agree to (among other things) relinquish your rights to sue KSBE based on any claims arising from your employment with KSBE and separation from KSBE employment in return for the additional monetary benefits provided to you.”
The “Employment Separation and Release Agreement” that Plaintiff would be required to sign in order to collect these additional monies, read, in part, as follows:
“4. Confidentiality. Employee and Employer represent and agree that they will not make any disparaging comments about the other and will keep the terms, amount and fact of this Agreement completely confidential. . . . Furthermore, Employee and Employer agree that any and all information obtained by Employee or disclosed to Employee during his employment with the Employer which is not generally known to the general public, including byt not limited to the Employer’s litigation, claims, projects, customers, programs, methods of operations, processes, practices, policies and procedures are strictly confidential and proprietary to the Employer, shall be treated as trade secrets and Employee covenants in perpetuity that such information shall not be disclosed, discussed or revealed to any persons, entities or organizations. . . .”
All Defendants would benefit financially from this bribery and extortion attempt, in that they would be able to continue with their illegal conspiracy schemes.
Racketeering Act No. 4 – Extortion, Conspiracy
On February 7, 1997, P&C Insurance Company, Inc., and Richard S. H. Wong, et al. filed a lawsuit, Civil No. 97-0512-02, against Harmon alleging Breach of Fiduciary Duty, Injunctive Relief, Misappropriation of Trade Secrets, and Conversion.
On February 8, 1997, Harmon tendered defense of this claim to Federal, under the terms of their Association Liability Policy No. 8146-79-11. In a letter addressed to Michael Goolsby, Esq., Chubb Group, Harmon stated: “This lawsuit arises out of my employment as an employee of KSBE and as an officer of P&C. As an insured person . . . I am requesting that your company provide defense for this lawsuit.” Harmon further advised Federal of the need for an immediate response by stating: “I understand an answer to the complaint is due within twenty days of service. As I have not yet selected an attorney, I would appreciate your immediate response and recommendations.”
On Saturday, February 15, 1997, Harmon was served with Plaintiffs’ Motion for Preliminary Injunction and Notice of Hearing of Motion. By facsimile transmission and certified mail, on February 15, 1997, Harmon notified Goolsby of the hearing and requested an immediate response: “The hearing is scheduled for this Tuesday, Feb. 18, 1997 at 1:30 p.m. As I have not had a response to my tender letter to you dated Feb. 8, 1997, or a return of my phone calls to your office, and as Monday, February 17th is a holiday, I am very concerned that this hearing may be held before I have the time and opportunity to obtain adequate and proper legal advice. . . . I have not yet selected or retained an attorney. I have been awaiting Chubb’s response and advice before taking this action as I am unaware if the company intends to appoint an attorney of its choosing, or if I am to be permitted to select the attorney, subject to your approval.” (Exhibit R)
The hearing was scheduled for 02/18/97. As no response was received from Chubb, Harmon had no choice but to retain John Marshall, Esq. at the last minute in order to have representation. Marshall filed a counterclaim on Harmon’s behalf for wrongful termination.
Plaintiff alleges that Federal’s undue delay in responding to his tender of defense was intentional, and in conspiracy with other Defendants in order to force him into a situation where he would not have adequate time to obtain counsel and prepare a proper response to P&C/KSBE’s civil lawsuit. This intentional delay in responding to Plaintiff’s tender of defense was designed to intimidate, terrify and extort him into dropping his “whistle-blower” lawsuit and/or to force settlement on the terms of P&C/KSBE.
Defendants Federal, M&M, Torkildson Katz, and their officers, directors and employees benefitted financially from the premiums charged for this policy in the form of salaries, commissions, fees, bonuses, or other means of compensation, and Defendants Federal and P&C/KSBE benefitted financially from not paying Plaintiff’s defense costs.
Racketeering Act No. 5 – Wire Fraud, Mail Fraud, Conspiracy
In a letter dated 02/19/97, one day after the hearing, Patrick Richard, Technical Assistant, Chubb Group, wrote: “This will acknowledge receipt of the captioned matter tendered by way of correspondence received 02/19/97. This claim will be handled by Mr. Tony Rangel in our Western Zone Office. . . Mr. Rangel will be conducting an investigation and evaluation of the facts and policies issued to Kamehameha Schools Bishop Estate to determine the availability of coverage.”
On 02/25/97, Rangel contacted Marshall by phone and advised that he had only a renewal binder so he could not be certain what coverages are afforded under the actual policy. He thinks the actual policy should be issued and he is working with the underwriters. He will “China Wall” re all communications.
In a letter dated 03/04/97, Rangel wrote to Marshall, enclosing a copy of the renewal policy, and stating: “I anticipate being able to provide you with our coverage opinion within the very near future, or at least within the next 30 days.”
In a letter dated 03/27/97, addressed to Marshall and sent via Certified Mail, Rangel notified Harmon of Federal’s decision to decline coverage. Rangel cited Endorsements No. 1, 8 and 9 which amend Section 8.1, Definitions, and Endorsement No. 6 which amends Section 3.1, Exclusions (the so-called “Insured vs. Insured” exclusion), as a primary reason for denying coverages: “…In the instant matter, the individual Trustees are Insureds bringing suit, on behalf of KSBE also an Insured, coterminously on all counts with P&C, an Insured For-Profit Organization, as Plaintiffs against Mr. Harmon, another Insured. Neither of the exceptions to Exclusion (H) apply to Plaintiffs’ claims against Mr. Harmon, therefore, Exclusion (H) will apply to preclude coverage in its entirety for the captioned matter, including Defense Costs. . . . The coverage analysis contained herein is not meant to be exhaustive as certain other applicable policy provisions have not been fully discussed in light of the absence of coverage for Mr. Harmon pursuant to the application of Endorsement No. 6 (emphasis added), the ‘Insured vs. Insured’ exclusion. . . .”
On 04/14/97, Harmon sent by Certified Mail his response to Rangel, which pointed out that ENDORSEMENT NO. 6, shown to be EFFECTIVE OCTOBER 27, 1995, WAS ACTUALLY ISSUED ON FEBRUARY 13, 1997 — SIX DAYS AFTER P&C’s LAWSUIT WAS FILED AGAINST HIM. In effect, Endorsement No. 6 changed the “Insured vs. Insured” exclusion to an “Insured vs. Insured or an Insured For-Profit Organization” exclusion. Harmon stated in his response: “. . . As you are aware, P&C is a for-profit organization, and is not an Insured under the policy definition. Therefore, P&C’s claim against me would not be excluded under the ‘Insured vs. Insured’ exclusion as contained in Endorsement No. 4. In Endorsement No. 6, the wording Insured For-Profit Organization has obviously been added in order to exclude coverages in the referenced civil action.”
Federal’s responses and the back-dating of Endorsement No. 6 constituted mail fraud, wire fraud, misrepresentation and conspiracy. The fact that this illegal back-dating of changes to the policy contract could not have occurred without the knowledge and consent of M&M and P&C/KSBE, gives evidence of a conspiracy to defraud Plaintiff.
Racketeering Act No. 6 – Wire Fraud, Mail Fraud, Extortion, Conspiracy
On 04/22/97, Rangel responded in a letter to Marshall: “This will acknowledge Mr. Harmon’s letter of April 14, 1997 . . . We are undertaking a review and anticipate being able to provide you, and him, with our response within the next 30 days. . . In the interim, the denial of coverage remains in effect until and unless it is revoked in writing.” In a letter dated 05/19/97, H. Paul Breslin, Esq., of Archer, McComas, Breslin, McMahon & Chritton, a Professional Law Corporation, stated: “. . . We have been retained by Federal Insurance Company to represent its rights in connection with this coverage dispute. . . We have once again reviewed the provision of KSBE’s Association Liability Insurance Policy No. 8146 79 11 in light of the facts and circumstances set forth in the complaint as well as the information provided by Mr. Harmon. Once again, for the reasons detailed below, our review has resulted in a decision to decline coverage to Mr. Harmon for this litigation. . .” Breslin further stated: “. . . In his letter Mr. Harmon has claimed that various endorsements issued on February 13, 1997 were added to the policy for the sole purpose of depriving him of coverage for the complaint brought against him by P&C Insurance Company. Mr. Harmon is not only incorrect but his unfounded allegations against Federal are libelous per se (emphasis added).”
Plaintiff alleges that this continuing denial of defense coverages, even after he had pointed out the obvious back-dating of amendments to the contract, constituted mail fraud, wire fraud, misrepresentation and conspiracy to defraud. Breslin’s threat that Harmon’s “unfounded allegations against Federal are libelous per se,” is another attempt to extort Plaintiff through the threat of yet another lawsuit.
Racketeering Act No. 7 – Wire Fraud, Mail Fraud, Extortion, Conspiracy
In a letter dated 06/12/97, Harmon responded to Breslin, stating, in part: “. . . In your conclusion you reiterate, ‘There was never any discussion whatsoever between Federal on the one hand and Marsh on the other concerning the change in the Insured v. Insured endorsement.’ . . . If this is true, then it appears that (you) are admitting that Federal unilaterally made these changes without discussion with Marsh and without the mutual consent of the Insured. . . .In what appears to be a contradiction, however, you indicate that Federal ‘suggested certain changes to the Insured v. Insured exclusion’ when they began to construct the exact language of the requested endorsements. You do not disclose the date these suggestions were made, or who was involved in the discussions and approval of these suggestions. I must assume, however, that these suggestions were made to Marsh and/or the Insured, and were made sometime prior to the issuance of Endorsement No. 6. If so, then this would bring us right back to collusion among these parties in the back-dating of this endorsement. Then it would appear that this is even further evidence of misrepresentation, wrongful denial of claims, unfair and deceptive claims practices, and bad faith. . . .”
Racketeering Act No. 8 – Wire Fraud, Mail Fraud, Extortion, Conspiracy
On 07/10/97, H. Paul Breslin responded to Harmon’s letter of 06/12/97. In his letter, Breslin states:
“ . . . At the outset let me say that the letter of May 19, 1997 correctly states Federal’s coverage position in this matter. . . . We see no useful purpose in attempting to respond to each and every allegation by Mr. Harmon . . .Mr. Harmon asks seven questions concerning the drafting of Endorsement No. 6. Since Mr. Harmon is no longer employed by the Association and since the Association has full authority to act on all endorsements on behalf of all Insureds, we do not believe that Mr. Harmon has the right to this information. Suffice it to say that a series of endorsements were added to the policy with the mutual consent of the authorized representatives of the Association and of Federal. (Emphasis added.)
“. . . His earlier letter reached several unfounded conclusions relative to allegations of specific wrongdoing . . .This allegation goes far beyond the statement of beliefs or opinions and, as we noted in our prior letter, is libelous per se. In addition, Mr. Harmon simply ignores the law pertaining to defamation; as well as the fact that he has not only made accusatory statements, but unnecessarily published them to a variety of third parties. . . . Federal again takes exception to the allegation on page 7 of the letter that Federal has in some way colluded with other parties to back-date Endorsement No. 6. . . . Federal renews its demand that Mr. Harmon cease and desist from continued publication of such libelous statements regarding Federal.”
“. . . You state: ‘Mr. Harmon alleges that Marsh & McLennan is an agent of Federal. As Mr. Harmon well knows, Marsh & McLennan is an independent insurance broker which in this case acted as an agent of P&C Insurance and other Insureds. Therefore, Federal had a perfect right to negotiate with and rely on Marsh & McLennan regarding this insurance contract.’
“THIS IS A COMPLETELY FALSE AND MISLEADING STATEMENT! According to the Insurance Commissioner’s records, Marsh & McLennan, Inc. is an appointed agent of Federal Insurance Company in the State of Hawaii. . . .”
Federal DID NOT RESPOND to Harmon’s letter of 07/23/97.
Plaintiff alleges herein that the back-dating of Endorsement No. 6, was a deliberate act involving a conspiracy among Federal, M&M, P&C, one or more Trustees, and others both known and unknown, to commit fraud in order to deny Plaintiff coverages under the policy. Plaintiff alleges that the misrepresentations in Federal’s above described correspondence, and the non-response to his questions and allegations in his letter of 07/23/97, is further evidence of Mail Fraud, Wire Fraud, Extortion, Misrepresentation, Conspiracy and Bad Faith on the part of Defendants, and constitutes violation of HRS §431:13-103
(10) Unfair claim settlement practices…(A) Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue… (B) With respect to claims arising under its policies, failing to respond with reasonable promptness, in no case more than fifteen working days, to communications received from: (i) The insurer’s policyholder; or (ii) Any other persons, including the commissioner, or (iii) The insurer of a person involved in an incident in which the insurer’s policyholder is also involved. The response shall be more than an acknowledgment that such person’s communication has been received, and shall adequately address the concerns stated in the communication; (C) Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies; (D) Refusing to pay claims without conducting a reasonable investigation based upon all available information. . . .(O) Failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage; (P) Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a comprise settlement. . .”
Racketeering Act No. 9 – Tax Fraud, Mail Fraud, Conspiracy
At all times material to this Racketeering Act, Defendants were acting within the scope of their employment of their respective agencies. Their acts were willful, malicious, outrageous, unconscionable and intolerable in a decent society and intended to harm Plaintiff and others.
On or about 10/18/96, Harmon met with Cary Okawa and Dennis Tsuhako, Coopers & Lybrand, to discuss a draft of P&C’s annual financial statement for the fiscal year ending 06/30/96. During this meeting, Harmon advised Okawa and Tsuhako of his serious concerns regarding IRS “arms-length” issues between KSBE and P&C; Aipa’s, Kam’s and M&M’s efforts to block his efforts to write property coverages in P&C; excessive fees being paid to M&M without a contract; and attempts by Aipa, Kam, and others at KSBE to direct settlement and control of P&C’s claims. Harmon asked Okawa and Tsuhako to keep this meeting confidential as he was “putting his job on the line” by discussing these concerns with them.
On 11/20/96, Harmon wrote to Okawa to provide further information, including numerous documents, which gave evidence regarding the serious issues discussed in their meeting of 10/18/96. A copy of this letter, with all enclosures, was sent to the Insurance Commissioner, State of Hawaii.
Neither Coopers & Lybrand nor the Insurance Commissioner acknowledged receipt of, or responded to, Harmon’s letter. Harmon was later told by Okawa that Nathan Aipa had approved P&C’s annual financial statement, and that the Insurance Commissioner’s office had advised that an officer’s signature was all that was necessary for them to accept the statement. Harmon alleges that these actions constitute a conspiracy among these persons with the intent to conceal tax fraud and theft from the trust beneficiaries, the Internal Revenue Service, and the lessees of Bishop Estate commercial properties that unknowingly paid these additional and fraudulent insurance costs in their monthly maintenance fees. This fraud, and the concealment thereof, also victimized members of the general public who paid higher prices for the goods and services they purchased from these businesses which leased properties from Bishop Estate. The billings for these monthly maintenance fees were customarily sent through the U.S. Postal Service, which constitutes mail fraud.
Defendants Pricewaterhouse, et al., and their officers, directors, partners and employees benefitted financially from the fees charged for their services in the form of salaries, commissions, fees, bonuses, or other means of compensation, and Defendants Federal and P&C/KSBE benefitted financially from not paying Plaintiff’s defense costs.
Racketeering Acts No. 10 – 36 — Wire Fraud, Mail Fraud, Extortion, Obstruction of Justice, Witness Intimidation, Conspiracy
10) On 12/29/96, Plaintiff submitted his first proposal to settle his claims for wrongful termination against KSBE and P&C by way of a letter addressed to each of the five trustees. Plaintiff’s letter consisted of approximately 50 pages, and 31 Exhibits consisting of approximately 100 pages. Plaintiff is unable to provide a copy of this letter, or its enclosures, to the Court, as KSBE and P&C obtained an injunction for the return of this letter and all enclosures, in Civil No. 97-0512-02, Court of the First Circuit, State of Hawaii. Plaintiff alleges that this action was a deliberate attempt by Defendants to delay and obstruct justice. However, this letter and its enclosures were bate-stamped with identifying numbers [3073 – 3129], and should be made available to the Court in the discovery process.
Plaintiff, by copies of his letter dated 12/29/96 to the Trustees, submitted Notice of Claim directly to Michael Goolsby, Claims Department, Chubb Group (Federal is one of the insurance carriers in the Chubb Group); Robert Kuroda, John Mullen & Co. (P&C’s contracted independent claims administrator); and Patricia Onogi, Claims Manager for M&M. (Federal’s Agent and captive manager for P&C).
On January 10, 1997, David Loo, Vice President, John Mullen & Co., responded to Plaintiff:
“We acknowledge receipt of your letter dated 12/29/96 directed to the trustees of the Bishop Estate with a carbon copy to Robert Kuroda of our office. Various employees of our company have been listed as potential witnesses should the matter proceed to litigation. Under the circumstances, we have disqualified ourselves from handling this claim and have notified the insured and the insurer of our decision.”
Plaintiff received NO WRITTEN RESPONSE to this settlement proposal from Federal, or from any other alternate independent claims adjuster for P&C.
Plaintiff herein alleges that this failure to respond to Plaintiff’s settlement proposal in a timely and meaningful manner, violated HRS § 431:13-103, and constituted wire fraud, mail fraud, extortion, obstruction of justice and conspiracy.
11) On January 5, 1997, Plaintiff sent a letter to John Sinnot, President and Chairman of the Board, Marsh & McLennan, Inc., in which he offered an out-of-court settlement proposal for fraud and misrepresentation claims. This letter stated, in part:
“The purpose of this letter is to present my claim for damages directly to you and your insurance carriers in an effort to negotiate a fair and reasonable settlement and to avoid the adverse publicity and high cost of a lawsuit. . .”
“On November 29, 1996, Kamehameha Schools Bishop Estate wrongfully terminated my employment. Rocco Sansone, Vice-President, Marsh & McLennan, Inc. significantly contributed to this wrongful termination by:
1. Misrepresenting to my employer that MMI could provide the same property insurance program with Arkwright Insurance Company as proposed by Hobbs Group if I would give MMI an exclusive Broker of Record letter;
2. Conspiring with Nathan Aipa and Louanne Kam of KSBE to defraud the estate and related entities by overcharging insurance premiums.
3. Conspiring with Nathan Aipa, Louanne Kam and Peter Lowe, Sr.Vice-President, M&M Insurance Management Services, Inc. to defraud P&C by overcharging service fees;
4. Conspiring with Nathan Aipa, Louanne Kam and Peter Lowe to deliberately breach “arms-length” rules of the IRS by permitting Henry Peters, Nathan Aipa and Louanne Kam to manage and control the daily operations of P&C.”
“These actions have resulted in financial damages, loss of reputation, mental stress and other emotional injuries to me and my immediate family.”
Plaintiff enclosed a copy of his letter dated 12/29/96 addressed to KSBE’s trustees, including all enclosures.
“This is in reply to your letter dated January 5, 1997, addressed to John T. Sinnott, President and Chief Executive Officer of Marsh & McLennan, Incorporated (“MMI”). I am litigation counsel to MMI and Marsh & McLennan Insurance Management Services, Inc. (“IMS”) in the Legal Department of the parent company’s headquarter in New York.”
“. . . I can assure you MMI and IMS have considered this matter quite seriously, and although I must state our investigation is not yet complete (emphasis added), my clients are confident they have not breached any legal duty owed to you. . .”
“. . . Moreover, MMI and IMS are confident that the services they have provided to KSBE and P&C Insurance Company, as insurance brokers and insurance company managers, respectively, have complied with all applicable standards of professional conduct, and were rendered consistently in the best interest of their clients and with the utmost good faith (emphasis added).”
“. . . I can assure you my clients will vigorously defend their professional reputations against the unfounded charges set forth in your January 5, 1997 letter.”
Plaintiff received NO FURTHER RESPONSE from M&M to his settlement letter dated 01/05/97. Plaintiff alleges that this failure to respond to Plaintiff’s settlement proposal in a timely and meaningful manner, violated HRS § 431:13-103, and constituted wire fraud, mail fraud, extortion, obstruction of justice and conspiracy.
12) On 04/11/97, Plaintiff, and his then-attorney, John Marshall, met with Katz and Sandie Wicklein, Personnel Director, KSBE, to discuss a settlement proposal. The outcome of that meeting was that Trustees might approve a settlement package, as discussed, but that Wicklein would be required to submit a Staff Report to Trustees. Harmon stated that he would need to discuss the proposal with his wife before making a decision to accept the offer.
Plaintiff received NO RESPONSE from Defendants to his fax settlement proposal dated 05/08/97.
Plaintiff alleges that this failure to respond to Plaintiff’s settlement proposal in a timely manner, violated HRS § 431:13-103, and constituted wire fraud, mail fraud, extortion, obstruction of justice and conspiracy.
13) On 06/18/97, Plaintiff wrote to Katz and presented another out-of-court settlement proposal in Civil No. 97-0512-02.
16) On 09/21/98, Plaintiff sent another settlement offer to KSBE/P&C. Plaintiff received NO RESPONSE to this offer before its expiration date.
18) On 10/03/98, Plaintiff made another settlement proposal.
19) On 10/16/98, Plaintiff sent another settlement proposal.
Plaintiff received NO RESPONSE to this offer from Torkildson Katz by the expiration date.
Plaintiff alleges that Torkildson Katz’s failure to respond to Plaintiff’s settlement proposal in a timely manner, violated HRS § 431:13-103, and constituted wire fraud, mail fraud, extortion, obstruction of justice and conspiracy.
“It appears that Mr. Tsukazaki has not yet acknowledged receipt of, responded to, or submitted counter-offers to my settlement proposals dated September 27, 1998; October 3, 1998; October 11, 1998; October 16, 1998, and October 23, 1998. While awaiting a response, I am presenting this revised settlement proposal for consideration…”
“Mr. Tsukazaki has not yet acknowledged receipt of, responded to, or submitted counter-offers to my settlement proposals dated September 27, 1998; October 3, 1998; October 11, 1998; October 16, 1998, October 23, 1998 and October 31, 1998. I do acknowledge receipt of a letter response dated October 29, 1998 from David Loo, Vice President, John Mullen & Co., and a letter response dated October 29, 1998 from Elizabeth K. Kellner, Esq., Marsh & McLennan Companies, Inc. I will be responding to these letters very soon under separate cover. In the meantime, I am taking these responses into consideration and thus presenting the following revised settlement proposals . . .
“This offer will remain open until 12:00 noon, November 13, 1998.
“I trust that Mr. Katz and/or Mr. Tsukazaki, in their capacities as third-party claims administrators, will relay this revised settlement offer to all parties concerned. Therefore, I am not sending courtesy copies to the above named entities at this time.”
23) On 11/14/98, Harmon sent a settlement proposal to Rodney Park, Pres., P&C:
“As I have received no response from the law firm of Torkildson, Katz, Fonseca, Jaffee, Moore & Hetherington to my most recent insurance claim settlement proposals dated September 27, 1998; October 3, 1998; October 11, 1998; October 16, 1998; October 23, 1998; October 31, 1998; and November 7, 1998, this is to inform you that I will be sending future settlement proposals directly to you. . . .”
Plaintiff alleges that Park’s failure to respond to Plaintiff’s settlement proposal in a timely manner, violated HRS § 431:13-103, and constituted wire fraud, mail fraud, extortion, obstruction of justice and conspiracy.
24) On 11/18/98, Harmon wrote to Katz/Tsukazaki via Hughes:
“As I have received no response to my settlement proposals dated September 27, 1998; October 3, 1998; October 11, 1998; October 16, 1998; October 23, 1998; October 31, 1998; and November 7, 1998, I am presenting the following revised settlement proposals. . . .
“I trust that Mr. Katz and/or Mr. Tsukazaki, in their capacities as third-party claims administrators, will relay these revised settlement offers to all concerned parties.”
25) On 11/18/98, Harmon wrote to directly to Federal Insurance Co., Claims Dept.:
“RE: Proposal for Settlement of “Bad Faith” Claims Arising Under Federal Insurance Company – Association Liability Policy No. 8146 79 11 – Kamehameha Schools/Bishop Estate; P&C Insurance Company”
“For reasons stated in my letter of November 12, 1998, addressed to Roy Hughes, Esq., with a copy sent to your office, I am offering the following settlement proposal for your consideration:
“I will agree to release from all fraud, bad faith, unfair and deceptive claims practices, misrepresentation, etc. claims, Federal Insurance Company; P&C Insurance Company, Inc. (P&C); Marsh & McLennan Companies, Inc. and the officers, directors, employees and representatives of these entities, for the sum of seven hundred fifty thousand dollars ($750,000).
“As I am not represented by counsel in this matter, you or your legal representative may respond directly to me at the address shown above. This offer will expire at 12:00 noon, November 30, 1998.”
NO RESPONSE was received from Federal by the expiration date.
Plaintiff alleges that Federal’s failure to respond to Plaintiff’s settlement proposal in a timely manner, violated HRS § 431:13-103, and constituted wire fraud, mail fraud, extortion, obstruction of justice and conspiracy.
“RE: Proposal for Settlement of Misleading, Unfair and Deceptive Insurance Acts and Practices/Bad Faith Claims Against P&C Insurance Company, Inc. – Comprehensive General Liability Policy”
“For reasons stated in my letter dated November 14, 1998, I am sending this settlement proposal directly to you in your capacity as president of P&C Insurance Company, Inc.:
I will agree to release from all bad faith, misrepresentation, unfair and deceptive claims practices, etc., P&C Insurance Company, Inc. (P&C); American Reinsurance Company; Marsh & McLennan Companies, Inc. and the officers, directors, employees and representatives of these entities, for the sum of seven hundred fifty thousand dollars ($750,000).
Please be advised that I am not represented by counsel in this matter. Therefore, you, or P&C’s contracted third-party claims administrator, may respond to me directly.”
NO RESPONSE was received to this settlement offer of 11/18/98.
Plaintiff alleges that P&C’s failure to respond to Plaintiff’s settlement proposal in a timely manner, violated HRS § 431:13-103, and constituted wire fraud, mail fraud, extortion, obstruction of justice and conspiracy.
27) On 11/18/98, Matt Tsukazaki, Esq., Torkildson, Katz, sent a letter to Hughes and Goemans:
“We have again received copies of letters dated October 31 and November 7, 1998 from your client Bobby Harmon (transmitted by Mr. Hughes’ office) demanding from Robert S. Katz and myself a sum of money in settlement of Harmon’s claims against the Trustees of KSBE and P&C.
“We are unaware of any claim in the pending action being asserted directly against Mr. Katz and myself. Therefore, please clarify your intent in sending the letters. Are you intending on behalf of Harmon or any other party to assert any claim related to the above-entitled matter against Mr. Katz, myself or any other attorney at Torkildson Katz? If your answer is anything but an unequivocal “no,” provide: (1) on whose behalf do you intend to bring such claims; (2) the nature and basis for the claims; and (3) against whom do you intend to assert each claim.
“Regardless of your response, we consider any claim asserted by or on behalf of Harmon to be frivolous, without any factual or legal basis whatsoever. Such allegations and claims are a violation of Rule 11, Haw. R. Civ. P. The assertion of the claim and the demand for money from KSBE’s and P&C Insurance’s counsel are attempts to create a conflict of interest between Torkildson Katz and its clients. We demand that you both confirm that you are unaware of and do not intend to assert any claim against Torkildson Katz or any member of this law firm related to the Harmon litigation. Should such frivolous claims be filed, we shall hold both of you and the insurance carrier who is funding Harmon’s defense responsible for any damages and costs Torkildson Katz may suffer or incur in defense of such frivolous claims. Unless we receive the written confirmation as requested herein, we will be forced to take appropriate steps to protest the interests of KSBE. Any and all costs incurred by Torkildson Katz shall be charged and assessed against Harmon, you, and the insurance carrier.
“As a final note, Harmon insists on communicating directly with our office or our client. Enclosed please find copies of a November 12, 1998 letter from Harmon, which he sent to Robert Katz and Nathan Aipa, and a November 14, 1998 letter from Harmon to Robert Katz, which is addressed to Rodney Park of P&C Insurance. Harmon is again ignoring prior requests from our office to stop all direct communications and instructions from your office that all communications related to this case must be made through counsel.
“If such activities do not stop we will ask the court to issue a temporary restraining order against Harmon prohibiting such conduct. On behalf of KSBE and P&C Insurance we have rejected all prior settlement demands from Harmon. Enclosed please find our prior rejection letters dated September 30 and October 23 and 26, 1998. Harmon’s settlement demand letters of October 31 and November 7, 12 and 14, 1998, are identical to his prior letters, which were rejected by KSBE and P&C Insurance. No further response is necessary.”
Plaintiff alleges that this threat of further legal action to be an act of Extortion.
28) On 12/07/98, Harmon sent another settlement proposal via fax to Rodney Park, President of P&C.
30) On 12/11/98, Harmon sent another settlement proposal to KSBE/P&C, via Hughes.
Plaintiff alleges that KSBE/P&C’s failure to respond to Plaintiff’s settlement proposal in a timely manner, violated HRS § 431:13-103, and constituted wire fraud, mail fraud, extortion, obstruction of justice and conspiracy.
31) On 01/04/99, not yet having received Pozin’s letter of 12/23/98, Harmon sent a new settlement offer to Michael Goolsby, Claims Department, Chubb Group:
33) On 01/17/99, Harmon sent a revised settlement proposal to Park.
34) On 01/19/99, Matt A. Tsukazaki, Esq., Torkildson, Katz, wrote to Harmon, Hughes, and Goemans:
“We have again received a copy of a letter dated January 5, 1999 from Bobby Harmon to Rodney Park, President of P&C Insurance Co., Inc. To the extent that Mr. Harmon believes that the matters addressed by his letter are completely unrelated to the current lawsuit between himself and the Trustees of Kamehameha Schools Bishop Estate (“KSBE”) and P&C Insurance Co., Inc., we have addressed this letter to him to make our point very, very clear.
My office is legal counsel to KSBE for all matters directly dealing with or concerning Mr. Harmon. My office is legal counsel to P&C Insurance Co., Inc. for all matters directly dealing with or concerning Mr. Harmon.
To the extent that Mr. Harmon believes that his letter addresses other claims not covered by his current lawsuit against KSBE and P&C Insurance, he shall NOT communicate with or contact any trustee, officer, manager, employee or agent of KSBE and P&C Insurance about any matter, issue or claim without the express written consent of my office. Mr. Harmon shall NOT communicate with or contact anyone at KSBE or its affiliated and related entities about any matter related to his employment with KSBE or P&C Insurance or about any allegations or alleged claims he believes he may have against KSBE and P&C Insurance. Mr. Harmon shall STOP sending letters or other correspondence to Mr. Park at P&C Insurance. That means no more facsimile transmissions, letters, telephone calls, e-mails, or other types of communication.
Finally, Mr. Harmon’s letter again asserts a claim for settlement against Torkildson Katz. As we stated in my November 18, 1998 letter, such assertions and allegations are a violation of Rule 11, Haw. R. Civ. P. The assertion of the claim and the demand for money by Mr. Harmon from KSBE’s and P&C Insurance’s counsel is viewed as an attempt to create a conflict of interest between Torkildson Katz and its clients, where none exists. Should such frivolous claims be filed, Torkildson Katz shall hold all of you, including Mr. Harmon’s insurance carrier, who is funding Harmon’s case against KSBE and P&C Insurance, responsible for any damages and costs it may suffer or incur in defense of such frivolous claims.
We will not tolerate any further attempts by Mr. Harmon to communicate or contact KSBE and P&C Insurance employees or agents. Mr. Harmon has been repeatedly warned and instructed to stop contacting our clients. If such activities do not stop we will ask the court to issue a temporary restraining order against Harmon prohibiting such conduct.
On behalf of KSBE and P&C Insurance, we have rejected all prior settlement demands from Mr. Harmon. On behalf of KSBE and P&C Insurance, we hereby reject the proposed settlement as reflected in the January 5, 1999 letter.”
Plaintiff alleges that Torkildson/Katz’s failure to respond to Plaintiff’s settlement proposal in a timely manner, violated HRS § 431:13-103, and that the tone and contents of Tsukazaki’s constituted extortion, obstruction of justice, witness intimidation and conspiracy.
35) On 02/02/99, Harmon sent a revised proposal to Tony Rangel, Esq., Federal:
“. . . As I have not received a response to my settlement proposals dated January 17, 1999, those proposals expired on January 31, 1999. Consequently, I am offering the following new proposals. . .”
On 02/03/99, Rodney J. Park, President, P&C, wrote Harmon:
“In response to your February 2, 1999 letter and all previous related correspondence, all matters raised in your letters including any issues you believe to exist between you and P&C Insurance, should be addressed to Robert S. Katz or Matt A. Tsukazaki at the law firm of Torkildson, Katz, Fonseca, Jaffe, Moore & Hetherington, at 700 Bishop Street, 15th Floor, Honolulu, Hawaii 96813, telephone (808) 523-6000 or facsimile (808) 523-6001. I will not respond separately to your February 2, 1999 letter.”
“This is in response to your February 3, 1999 letter addressed to me, with copies to Matt A. Tsukazaki, Esq. and Roy F. Hughes, Esq. With due respect, I must point out several statements in your letter which do not adequately respond to my letter of February 2, 1999.
“First, your reference is to P&C Insurance Company, Inc. et al. v. Bobby N. Harmon, Civil No. 97-0512-02, while my letter referenced the above matter. This is a completely separate and different claim not covered in Civil No. 97-0512-02.
“Second, I requested in my letter, “If I am to correspond or negotiate with any third party, please provide me with a copy of your specific written authorization agreement for the handling of these claims with such third party or parties.” If I am to address Robert S. Katz or Matt A. Tsukazaki directly on these “bad faith” claims against P&C, then I will require a copy of P&C’s engagement letter to the law firm of Torkildson, Katz, Fonseca, Jaffe, Moore & Hetherington evidencing that they have been retained to handle these specific claims.
“Third, I am of the opinion that there would be a conflict of interest on the part of this law firm if they were to handle both my “whistle-blower” wrongful termination claim, and the referenced bad faith claim. In fact, Torkildson, Katz would be a named defendant in any law suit that may be filed in the referenced matter. This fact, in itself, would probably be sufficient cause for them to have a conflict of interest.
“Fourth, now that all five trustees have been removed by the court from handling any matters related to the I.R.S. audit, and Trustee Henry Peters has been indicted on grand theft, will Mr. Peters, through Nathan Aipa and Louanne Kam, be allowed to continue to direct the operations of P&C, including the handling of claims and the awarding of non-bid contracts, such as to Marsh & McLennan and Torkildson, Katz?
“Until the above issues have been resolved, I do not believe it would be appropriate for me to correspond directly with Mr. Katz or Mr. Tsukazaki. Therefore, I anticipate that you will either personally respond to my February 2, 1999 letter, or that you, P&C’s authorized third-party claims administrator or designated attorney for this matter will respond to my proposal and adequately address the four issues stated above.
“As previously advised, I am not represented by counsel in this matter. Therefore, it may be inappropriate for you to send copies of any correspondence to Roy F. Hughes, Esq., at this time as he is involved only in Civil No. 97-0512-02.”
Plaintiff alleges that the misrepresentations in the above described correspondence from Federal, P&C, and Torkildson Katz; the non-response to his questions and allegations in his letter of 07/23/97; and the non-response to his many settlement offers, provides a preponderance of evidence of Mail Fraud, Wire Fraud, Extortion, Misrepresentation, Conspiracy and Bad Faith on the part of Defendants, and constitutes violation of HRS §431:13-103.
Plaintiff alleges that for Racketeering Acts 10 – 36, Defendants Federal, et al., and their officers, directors, stockholders, partners, managers, employees and independent contractors benefitted financially from the insurance premiums and service fees charged, in the form of salaries, commissions, fees, bonuses, or other means of compensation.
c. Time, Place and Substance of the Alleged Misrepresentations, and the Identity of Persons to Whom an by Whom the Alleged Misrepresentations were Made:
Due to the long list of Counts and Defendants, this information has been incorporated into Item 5b above in order to simplify this RICO Case Statement.
Although Henry Peters, Richard Wong, Mari Wong, Jeffery Stone and Milton Holt
have been indicted for crimes of grand theft, these cases have not yet come to trial.
(Note: As of this date, all five KSBE Trustees have been removed by the Court from their Trust appointments. Trustees Peters, Wong and Jervis have been removed on a temporary basis pending a show-cause order why they should not be permanently removed. Trustee Lindsey has been removed on a permanent basis, due to a lawsuit brought by Trustees Stender and Jervis alleging mismanagement, breach of fiduciary duties, et al. Trustee Stender voluntarily resigned on a temporary basis.)
e. State Whether Civil Litigation has Resulted in a Judgment for any Predicate Act:
Plaintiff alleges that Federal, P&C, their directors, officers, employees and independent contractors are denying legitimate insurance claims by fraudulently altering the insurance contract by “back-dating” amendments to the contract; using the legal system for extortion by filing motions for injunctions to obtain the return of Plaintiff’s evidence of Defendants’ illegal activities; excessive taking of depositions to harass and intimidate Plaintiff and Plaintiff’s family; using the legal system for extortion by filing motions that they know will be overturned by higher courts and that Plaintiff is not in a financial position and lacks adequate legal counsel to answer; and incurring continuing delay for the purpose of harassment and to put Claimant in further financial and emotional peril in order to deny claims and/or to force reduced settlements.
g. State whether the alleged predicate acts relate to each other as part of a common plan and, if so, a description of the alleged relationship and common plan in detail:
As the Defendant enterprises are so large and diverse, and because they carry out their schemes in secrecy and on an international basis, Plaintiff has no reasonable means to offer evidence of all the common plans that have been constructed and implemented by these enterprises.
In their October 13, 1997 issue, in an article by Gavin Souter, Business Insurance reported:
J&H/M&M CURBS LOCAL OFFICE OPTIONS – Regional brokering to Chubb sparks client concern.
A J&H Marsh & McLennan, Inc. directive to channel property/casualty insurance placed with Chubb Corp. through regional rather than local brokerage is sparking fears among some risk managers that the world’s largest insurance broker increasingly may dictate how all their accounts are handled. . . . In the memo written by Mr. (Robert J.) Newhouse (III) (executive vp and chairman of U.S. operations at J&H M&M), and sent to regional J&H M&M managers, he noted that the business placed with Chubb through the Global Broking Centers is subject to a ‘placement service agreement,’ or PSA. . . . The PSA grants J&H Marsh & McLennan an additional commission for the placement of large volumes of business through the centers. . . . Based on 1996 placements, J&H Marsh & McLennan has determined that $60 million in premiums this year would be placed locally and not produce the additional commission provided for in the PSA. Mr. Newhouse would not say how much additional commission the PSA agreement provides. . . . Offices that don’t place their Chubb property/casualty business through the Global Broking Centers will forfeit their commission. . . .Risk Managers contend the memo could indicate that J&M Marsh & McLennan increasingly will use its clout and influence in the market to push more of its large policyholders and their insurers to use its Global Broking Centers. . The memo runs contrary to the predictions made by large brokerages that they would be able to provide better service as a result of the consolidation among brokerages, said Mark A. DeLillo, vp-risk management at Celotex Corp in Tampa, Fla, and first vp of RIMS. . . ‘It would seem to me that they are looking at things from a perspective that puts the policyholders’ interests second,’ he said. . . . “I think they will use their clout to extract larger commissions. One would hope that they would also use their clout to secure lower rates for policyholders, but the memo doesn’t indicate that,’ Mr. DeLillo said. . . . J&H Marsh & McLennan’s Global Broking Centers are an example of how large brokers may try to control the market, said Scott K. Lange, director of risk management at Microsoft Corp. in Redmond, Wash.”
In The Great Insurance Hoax, Richard Guarino and Richard Trubo stated, “The operations of major insurance companies are concealed in secrecy and silence, leaving a majority of Americans completely ignorant about the industry and the product it provides.”
Only a few of the schemes will be mentioned here since they are so multitudinous and constantly changing:
1) The original policy is sold on the fraudulent premise that when a legitimate claim is made, that claim will be paid fully and fairly. The client is not told that the insurance company is willing, inter alia, to break the law; to wrongly interpret the contract provisions to deny coverage; and to use any prejudicial but not probative information they can find to intimidate the claimant. The client is not told that the claims process will be conducted in an adversarial manner and may be handled by attorneys, rather than by processing clerks. The client is not told that they may have their claim fraudulently denied and be forced to hire a lawyer and sue for benefits.
2) Plaintiff, being informed herein alleges that Federal, in collusion with M&M and certain Trustees, executives, employees, attorneys, auditors and sub-contractors, intentionally and fraudulently “back-dated” an exclusion endorsement in order to deny coverages. Plaintiff, being informed, further alleges that P&C/KSBE filed Complaints against Harmon TWICE in order to obtain the return of incriminating evidence of their illegal activities, and to prevent him from disclosing this evidence to regulatory and law enforcement agencies. These Complaints were also for the purpose of using the legal system as a means for denying and/or delaying Harmon’s access to this evidence which was needed by him in order to pursue his Unemployment Insurance claim; his Wrongful Termination (“Whistleblower”) Counterclaim against P&C/KSBE. (Civil No. 97-0512-02 in the Circuit Court of the First Circuit, State of Hawaii); and for the instant lawsuit Plaintiff has brought before this court. Plaintiff alleges that these acts constitute Obstruction of Justice.
3) Many claimants, such as the Plaintiff, resort to and rely upon the Insurance Commissioner for help at some point. Despite the fact that people in this department should know about the tenets of insurance law, and what constitutes deception, they often fail to act in a reasonable manner to investigate the complaint and to act upon it. Often all they do is forward the complaint letters to the very company that is abusing the claimant. Whatever the insurance company or agent writes back in answer to the complaint is often accepted without question and a letter is sent to the claimant that the Insurance Commissioner has investigated and the case is closed. Plaintiff, being informed, herein alleges that the Insurance Commissioner, State of Hawaii, failed to adequately investigate Harmon’s complaints against Federal and P&C; failed to respond to the complaints; and failed to take reasonable action to halt the deceptive and illegal insurance practices of these companies and their executives, managers, employees, agents, auditors, attorneys, and third-party claims adjusters. Plaintiff, being informed, further alleges that the California Department of Insurance, Consumer Services Division, failed to adequately investigate Harmon’s complaints against Federal; failed to adequately respond to the complaints; and failed to take reasonable action to halt the deceptive and illegal insurance practices of this company and its executives, managers, employees, agents, attorneys and third-party claims adjusters.
4) If an attorney is hired or a lawsuit is filed, Federal and P&C abuse the legal system, abuse the rules of discovery, file frivolous motions, and engage in any tactic they can think of to prolong the litigation, drive up the costs, keep the case from ever being heard in court, and force claimants and their lawyers into positions of financial and emotional distress whereby they may accept a settlement of a sum far less than that to which they are entitled. Out-of-court settlement agreements are usually sealed with gag clauses that may state that neither the claimants nor their family members and others may mention Federal or P&C, the settlement amount, or anything related to the insurance claim, essentially cloaking the entire matter from the world.
5) Defendants Federal, P&C and Trustees, in concert with their attorneys, conceals witnesses and illegal activities by “redacting” information that is released to claimants and to law enforcement and regulatory agencies, in order to hide evidence and obstruct justice.
At all times material to this complaint, Federal, et al., together with their
executive and employee defendants, subcontractors, and the selling brokers and/or agents each constitute an “enterprise,” as that term is defined in Title 18, U.S. Code, Section 1961 (4), which enterprise was engaged in, and the activities of which affected interstate and foreign commerce. These “enterprises” conduct their affairs against legitimate claimants by fraud, deceit, deception, harassment, delays, intimidation, implicit and explicit threats; the goal of which is to induce fear, despair, and economic hardship in claimants so they will drop their claims or settle for less than they are rightfully owed. There is every indication that these “enterprises” will continue indefinitely, and continue to spread to other companies through mergers, acquisitions, and corrupt influence.
These “enterprises” fall under the definition of a RICO “enterprise” as “a group of persons associated together for a common purpose of engaging in a course of conduct,” and as an “ongoing organization, formal or informal [with] . . . various associates function[ing] as a continuing unit.”
7. STATEMENT AND DESCRIPTION OF WHETHER PLAINTIFF IS ALLEGING THAT THE PATTERN OF RACKETEERING ACTIVITY AND THE ENTERPRISE ARE SEPARATE OR HAVE MERGED INTO ONE ENTITY.
The “enterprises” are currently separate entities, although certain entities may have ownership or management interests in other related enterprises.
8. DESCRIPTION OF ALLEGED RELATIONSHIP BETWEEN THE ACTIVITIES OF THE ENTERPRISE AND THE PATTERN OF RACKETEERING ACTIVITY.
The Defendants’ schemes are multitudinous. Viewed from an “outsider’s” perspective, they may appear random due to variations in policy terms and premium costs from company to company due to: the individual interpretation of policy terms and conditions by one or two employees; varying legal opinions by different attorneys; the occasional problems people have with computers, the postal service, fax machines, human error, etc.; but viewed from an “insider’s” perspective and with insider knowledge and experience with many similar claims handled by these Defendant enterprises, two obvious and predictable patterns emerge: 1) the “overcharging” of premiums and fees in order to give illegal “kick-backs” or “rebates” to the insured organizations or individuals within these organizations; and 2) collusion among the Defendants, the purpose of which is to increase their profits through reduction in their “loss ratios” by means of relentless economic and psychological harassment; deceptions, delays, and denials of legitimate claims; making excessive, unreasonable, and sometimes illegal demands as a condition of payment; forcing claimants to give up, accept less, or sue; and then further using the legal system for extortion and duress. The schemes and tactics used to minimize their claim payments may vary somewhat with each victim in an attempt by Federal, et al., to avoid revealing a pattern, but almost always involve lies, fraud, distortions, delays, deceit, and misrepresentations, among other things; the end result being extortion, and extortion by color of official right, of money and benefits rightfully owed the claimant.
Through the “overcharging” of premiums, and the “underpayment” of claims, the agents of, or brokers for, insurance companies often stand to receive substantial bonuses from the company in the form of “contingent commissions” for maintaining a good “loss ratio” in their total “book of business” with that particular company. Individual insureds and claimants generally have no knowledge or understanding of how this profit incentive operates; how much this increases the premiums they pay, and how much they lose through fraudulent claims practices in order to increase the profits of the insurance company and their agents and brokers. Furthermore, the individual insureds and claimants generally have no knowledge that this “bonus” commission can run into the hundreds of thousands of dollars for large brokerage firms like Marsh & McLennan.
9. DESCRIPTION OF BENEFITS, THE ALLEGED ENTERPRISE RECEIVES FROM THE ALLEGED PATTERN OF RACKETEERING.
Defendants’ Motives were at all times financial. Plaintiff believes that, through the discovery process and the production of documents previously denied Harmon under court injunction in Civ. No. 97-0512-02, in the Circuit Court of the First Circuit, State of Hawaii, a preponderance of evidence to support this allegation will be presented to this Court.
Defendants Federal, P&C, M&M, Torkildson Katz, and their officers, directors and employees benefitted financially from the premiums charged for this policy in the form of salaries, commissions, fees, bonuses, or other means of compensation, and Defendants Federal and P&C/KSBE benefitted financially from not paying Plaintiff’s claims.
Plaintiff alleges that monies from fraudulently billed insurance premiums and fees, and fraudulently denied insurance claims were used in the furtherance of the legitimate activities of Federal; P&C; M&M; Pricewaterhouse; Torkildson, Katz; Trustees; and Mullen in the form of salaries, commissions, expenses, stockholder dividends, and other expenses of legitimate insurance businesses and were also used in the furtherance of the Racketeering enterprise and schemes.
10. DESCRIPTION OF THE EFFECT OF THE ACTIVITIES OF THE ENTERPRISE ON INTERSTATE OR FOREIGN COMMERCE.
Defendants Federal, Marsh & McLennan, Pricewaterhouse and the Trustees conduct sizable business operations in most States and in foreign countries. The schemes described herein are conducted throughout the world.
11. STATEMENT OF WHO RECEIVED INCOME DERIVED FROM THE PATTERN OF RACKETEERING ACTIVITY, AND DESCRIPTION OF THE USE OR INVESTMENT OF SUCH INCOME IN VIOLATION OF U.S.C. § 1962(a).
Defendants Federal, et al., did knowingly, unlawfully, and intentionally combine, confederate, conspire and agree together with each other, and with co-conspirators and others whose names are both known and unknown, to benefit and use proceeds from Defendants pattern of racketeering activity for the furtherance of the legitimate aspects of the organizations, as stockholder dividends, employee and executive salaries, bonuses and operating expenses, to purchase and acquire goods and services, direct the proceeds of the racketeering activity into the general funds of these Defendant organizations, their employees, their executives, their stockholders, their subcontractors and others. This violation was in concert with lax and/or corrupt regulatory and law enforcement agencies and officials, constituting an association in fact for the purpose of racketeering activity. After being apprized of the illegal activities by Plaintiff, none of these agencies or individuals made adequate, if any, effort to investigate, report or remedy the illegal activities, although they are legally obligated by statute and fiduciary duty to do so.
12. DESCRIPTION OF THE ACQUISITION OR MAINTENANCE OF ANY INTEREST IN OR CONTROL OF THE ALLEGED ENTERPRISE IN VIOLATION OF U.S.C. § 1962(b).
Defendants Federal, et al., did knowingly, unlawfully, and intentionally combine, confederate, conspire and agree together with each other, and with other co-conspirators whose names are both known and unknown, participate in a conspiracy to maintain and acquire markets in the insurance industry through the sale of fraudulent policies of insurance; unfairly competed with other insurance companies, agents, brokers, accounting firms, claims adjusters and attorneys to gain market advantage through a pattern of racketeering activity; and affected interstate and foreign commerce through a pattern of racketeering activity. This violation was in concert with corrupt and/or inept regulatory and law enforcement officials, constituting an association in fact for the purpose of racketeering activity. After being apprized of the illegal activities by Plaintiff, these persons made little, if any, effort to investigate, report or remedy the illegal activities, although they are legally obligated by statute and fiduciary duty to do so.
13. STATEMENT OF WHO IS EMPLOYED BY OR ASSOCIATED WITH THE ALLEGED ENTERPRISE, AND WHETHER THE SAME ENTITY IS BOTH THE LIABLE “PERSON” AND THE “ENTERPRISE” UNDER U.S.C. § 1962(c).
Federal, et al., in concert with all other defendants and each of them, did knowingly, unlawfully and intentionally combine, confederate, conspire, and agree together with each other, with named co-conspirators and with others whose names are both known and unknown, to conduct the affairs of an enterprise through a pattern of racketeering activity to promote the affairs of the enterprise. After being apprized of the illegal activities by Plaintiff, none of the defendants made reasonable effort to investigate, report or remedy the illegal activities, therefore condoning the activities. The same entities are the same liable “persons” and the “enterprise”.
14. DESCRIPTION OF THE FACTS SHOWING THE EXISTENCE OF THE ALLEGED CONSPIRACY IN VIOLATION OF U.S.C. § 1962(d).
15. DESCRIPTION OF THE ALLEGED INJURY TO BUSINESS OR PROPERTY.
As a direct and proximate result of Defendants Federal and all of them, inclusive, Harmon has suffered severe emotional distress including humiliation, mental anguish, emotional and physical distress and has been injured in mind and body, all to Plaintiff’s damages, including but not limited to those outlined herein below.
As a further direct and proximate result of the actions of Defendants Federal, and all of them, inclusive, a series of events transpired which also deprived Plaintiff of being able to avail himself of legal counsel, as he could not find any who was willing or financially able to take on these wealthy, powerful, politically influential and corrupt organizations. He has been forced, at great emotional and mental effort, to have to learn about the law and attempt to represent himself, Pro Se, in an environment that has proven to be unfamiliar and hostile. Furthermore, in preparing for and trying his multiple civil actions, Harmon has experienced additional emotional and mental distress from the high degree of publicity in the press, radio and television media; the untruthful public accusations of being a thief and a blackmailer; and from the numerous “horror” stories he has heard from teachers, other employees, and ex-employees of KSBE, and from parents of students who attend, or who have attended, Kamehameha Schools. These “horror” stories include racial discrimination in employment, favoritism in the employment and student admissions processes, the attempted suicide of one student, and the actual suicide of another student — allegedly the result of an affair with her teacher. Plaintiff, himself, has some periods of suicidal ideation as a direct result of his experiences with Defendants, and the necessity of filing of this lawsuit is sure to cause more severe emotional duress.
Plaintiff has incurred expenses to investigate and litigate and, being informed, believes and thereon alleges that he will incur additional expenses and emotional distress in bringing this case to trial, the exact amount of which is, as of yet, unknown. Given the fact that Harmon has been unemployed since September 15, 1998, any expenses whatsoever will certainly create additional financial burdens and emotional distress to Harmon and his family.
Defendants, and all of them, and each of them, by their extreme and outrageous conduct intended to cause severe emotional distress to another, the possibility of bodily harm resulting as a result of this distress, as a means to silence Plaintiff from disclosing information about Defendants’ illegal and corrupt conduct.
The Defendants knew, or should have known, that their intentional conduct as described herein is outrageous and beyond all bounds of decency and civilized behavior, utterly intolerable in a civilized community, unconscionable, extremely malicious and would cause the Plaintiff to suffer the highest levels of severe emotional distress, shock, horror, fear, grief, anger, mental humiliation, distress of mind, alarm, disappointment, despair, worry, physical injury and illness and might have led to suicide. Defendants were well aware that their conduct would cause distress so severe and of such a nature that no reasonable person could be expected to endure it and, in fact, that was their intention.
Defendants, and each of them and all of them, subjected Plaintiff to repeated harassment, compounding the outrageousness of their underlying Breach of Contract.
Plaintiff experienced physical manifestations of mental distress in 1997 and 1998, after he became aware of the extent of Defendants’ persecution and defamation. He has had to incur medical expenses by visits to doctors and prescriptions of tranquilizers and the drug, Paxil, as the emotional effect of dealing with these CORRUPT organizations and the courts under these circumstances is quite upsetting to him and will be severe and ongoing for several years.
The conduct of the Defendants in bringing a lawsuit against Plaintiff in order to prevent disclosures of documents evidencing Defendants’ illegal activities; failing to conduct reasonable investigation of Plaintiff’s claims; committing fraud by illegally altering the insurance contract; and repeatedly refusing to negotiate an out-of-court settlement, is and was intentional, conspiratorial, part of a regular plot, malicious and done for the purpose of causing Plaintiff to suffer extreme public and private humiliation, mental anguish, fear, terror, torment, and emotional and physical distress. Defendants and each of them, by their conduct in ratifying the conduct of each other, acted with knowledge that the Plaintiff’s emotional, physical and financial distress would thereby increase and their acts were done in a wanton, willful, and unconscionable manner with reckless disregard constituting malice aforethought of the consequences to Plaintiff.
The Defendants’ conduct and Federal’s intentional breach of contract have caused Harmon to suffer some physical injury and illness, and the highest levels of severe emotional distress, shock, horror, fear, grief, anger, torment, disappointment, despair, and worry.
The Plaintiff’s injuries and emotional distress were a foreseeable and direct result of the Defendants’ acts and were meant to cause intentional infliction of emotional distress.
There are and were no other factors in Plaintiff’s life, being that he had a stable income and family life, and had managed to save adequate amounts over the years for a comfortable retirement, capable of causing the emotional distress and fear he endured at the hands of the Defendants, and each of them and all of them.
As a direct and proximate result of the aforementioned acts, Plaintiff suffered and continues to suffer severe emotional distress including anxiety, worry, fear, mental anguish, torment, despair, and emotional and physical distress, and has been injured in his body and mind, all to their damages in a total amount to be proven at the time of trial.
Plaintiff required medication for anxiety as a direct result of Defendants and his having to file lawsuits in order to attempt to receive benefits to which he is and was entitled.
16. DESCRIPTION OF THE DIRECT CAUSAL RELATIONSHIP BETWEEN THE ALLEGED INJURY AND THE VIOLATION OF THE RICO STATUTE.
The Defendants have conspired to act against Plaintiff in order to prevent him from discovering and disclosing their illegal activities. This conspiracy resulted in the termination of Plaintiff from his position as Risk/Insurance & Safety Manager for KSBE, and from his position as President of P&C, and further extortion, intimidation, and unjustified lawsuits after his termination in order to silence him. The enterprises accomplished this through a pattern of racketeering activities involving mail fraud, wire fraud, extortion, intimidation and other violations of the RICO statute.
17. LIST OF DAMAGES SUSTAINED BY REASON OF THE VIOLATION OF § 1962, INDICATING THE AMOUNT FOR WHICH EACH DEFENDANT IS ALLEGEDLY LIABLE.
Plaintiff is entitled to recover damages for intentionally inflicted emotional distress and has demonstrated that somehow he was able to withstand and rise above distress so severe and of such nature that no reasonable person could be expected to endure it.
The aforesaid outrageous conduct by Defendants, and each of them, conspiratorially, was done intentionally for the purpose of depriving Plaintiff of monies due him, and to inflict upon him emotional distress during times when he was unemployed, or employed in a position in which he was paid far less than what he previously earned while employed by KSBE/P&C. Defendants knew that by denial of Unemployment Benefits, and for the Plaintiff to attempt to recover his benefits through the courts would require an amount of time, expense and energy on the part of the Plaintiff that would effectively preclude him from seeking and holding a position comparable to his position at KSBE/P&C, and would leave him in such financial difficulties that he would be unable to obtain adequate legal counsel.
As a further direct and proximate result of the above described acts, plaintiff was required to conduct extensive research and investigation, travel, including, but not limited to, those herein described, the total amount of which will be proven at the time time of trial.
The above-mentioned acts of the Defendant, Federal, and all Defendants, inclusive, and each of them, are willful, wanton, unconscionable, malicious and oppressive, beyond all bounds of decency in a civil society, and justify the ordering of exemplary and punitive damages.
Wherefore, Plaintiff Harmon prays judgement against the Defendants as follows: As to all counts/causes of action for compensatory and punitive damages against Defendants according to proof, legal costs incurred and other damages to be determined at trial.
18. LIST OF ALL OTHER FEDERAL CAUSES OF ACTION, IF ANY, AND RELEVANT STATUTE NUMBERS.
Plaintiff is currently unaware of any Federal causes of action, other than those under RICO as cited herein.
20. REQUESTED INFORMATION WHICH CANNOT PRESENTLY BE PROVIDED DUE TO LACK OF DISCOVERY, SET FORTH WITH SPECIFICITY.
The misdeeds of the Defendants are so wide ranging, multitudinous and guarded so secretively by the Defendants, that Plaintiff is of the belief that facts regarding all of their misdeeds will be not be uncovered through discovery or otherwise for years to come. Plaintiff is of the belief, however, that evidence of many more illegal activities will be forthcoming as a result of the ongoing investigations of the IRS, the FBI and the Attorney General’s office.
b) The nature of the discovery Plaintiff plans to undertake to develop such facts:
As Plaintiff has limited financial means to conduct extensive discovery into the misdeeds of these financial giants, he intends to rely largely upon the current investigations of the defendants by the IRS, the FBI and the Attorney General’s office, and the results of any subsequent criminal or civil court cases which arise from these investigations. At the present time, Plaintiff intends to engage in limited discovery, with the request for documents and written interrogatories.
Plaintiff intends to take limited discovery from each of the Trustees; an undetermined select few of the Defendants’ officers, directors and employees; and an undetermined select few of the co-conspirators not named as Defendants.
d) When Plaintiff intends to commence and/or complete discovery:
Time is of the essence and Plaintiff intends to commence discovery as soon as possible. Plaintiff hopes to complete discovery within 90 days after commencement.
FOR HARMON’S ORIGINAL CLAIM LETTER TO JOHN SINNOTT
CLAIM AGAINST MARSH & McLENNAN
FOR THE LATEST ON HARMON’S RICO LAWSUIT
HARMON’S LETTER TO THE SEC
FOR SIGHTINGS OF ROBERT KIHUNE, GIL TAM, AND STEVEN GUTTMAN
TO SEE OTHER BIRDS IN THE ROBERT KIHUNE, DAN INOUYE AND DONALD RUMSFELD FLOCK
Originally Posted on January 28, 2001 by The Catbird