Ka Wai Ola - Office of Hawaiian Affairs, Volume 15, Number 5, 1 May 1998 — Trustee Beamer's last project [ARTICLE+ILLUSTRATION]

Trustee Beamer's last project

ĪRUSTEE BEAMER'S last project was the fiscal relationship between First Honolulu Securities (FHS) and the Office of Hawaiian Affairs. She was working on this issue in her hospital bed. I received her extensive records, including the document "OHA's Financial Operations." Tmstee Beamer's eolleehon was substantial on FHS. Correspondence with Hawai'i Commissioner

of Securities, Russell Yamashita, and Marion Higa's notatēd Febmary 1997 State Auditor's Report were documented. The auditor's findings raised key points on FHS: • The auditor found no formal contract between OHA and FHS, only a poorly constructed Sept. 21, 1991 letter of aeeeptance from then-Chair-man Hee that does not

list FHS' contractual obligations. • The auditor noted she was not provided sufficient documentation to determine the process through whieh OHA selected FHS as its broker of record. Therefore, no observations about the origins of this relationship were possible. • The auditor said further that the contract between the two parties, "while apparently legal and binding, bears little resemblance to the eontracts OHA has had with its money monitor or any of its nine investment managers." • The auditor recommended the agreement be formalized to define responsibilities, qualifications, eom-

pensation and reporting to "serve OHA's interests both in the short and long run." How did OHA get into a relationship without a contract when all our other financial agreements have lengthy specifications? In 1991, David Kirkeby of Bishop Tmst, who also served as OHA's investment monitor, began to advise Tmstee Aiona, then Budget and Fianance Committee chair, and the Board of Tmstees on financial operations. A new stmcture was suggested with the creation of the

broker ot record. OHA s long-term investment portfolio was then restmctured with nine investment managers, a broker of record, custodian and a money monitor. On Oct. 29, 1994, an Advertiser article's headlines read "Hee friend prvbed by State." The article said two former employees had charged FHS with improper activities and that four of the investment companies doing

business with OHAjust happened to have eontributed to then-Chair-man Hee's political campaign, and that Tmstee Akana had also solicited these companies. However it was Tmstee Akana who, in 1995, first raised issues regarding FHS and the investment managers by asking Mr. Yamashita of the Securities Commission for copies of the money manager contracts. Mr. Yamashita directed her back to OHA. Trustee Beamer, as part of her due diligence investigation, also found past securities infractions had caused fines to be levied on FHS in the 1980s. In a memo to then-B&F Chair Aiona, she asked why the previous investment monitor, David Kirkeby, or then-Chairman Hee, had not Continued on page 14

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mentioned FHS' problems. Was Trustee Aiona's B&F Committee making all Hnaneial matters available to trustees? Trustee Beamer didn't think so, and when she requested information, FHS Chairman Gregory Kowal wrote to Trustee Aiona asking for written authorization before sending Trustee Beamer anything, a very different interpretation of disclosure and trustees' obtaining full access to records. Now we have a hnaneial relationship with FHS without an understanding of its role. Trustee Aiona never resolved this matter, even after the state auditor's 1997 findings and the 1994 newspaper report questioning the relationship! Why didn't then-Chairman Hee insist on a formal contract with FHS? Instead, in a Feb. 27, 1 997 response to Marion Higa, he made vague reference to strengthening contracts in "the next iteration of our agreement with FHS." When was that supposed to take plaee? Why wasn't there a new contract in the eight months between the audit and the change in leadership? Does Trustee Hee want to eome back as chairman so he ean tie up loose investment ends? One thing is for sure. Trustee Beamer was following a trail and had eome to a decision. Clearly, during her last days, FHS was important to her. In a draft letter dated Dec. 17, she terminated FHS as OHA's broker of record. Our leadership will not ignore Trustee Beamer's tenacious efforts on behalf of all beneficiaries. ■

Machado From oaae 13