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Summary: The Bishop Estate, a 501(c)(3) nonprofit and Hawaii’s largest privatelandowner, operates the racially separatistKa...
FoundationWatch2 May 2008Editor: Matthew VadumPublisher: Terrence ScanlonFoundation Watchis published by Capital ResearchC...
3May 2008FoundationWatchRace at KamehamehaThe Princess’s will requires that her trustgive preference in charitable giving ...
FoundationWatch4 May 2008nity to buy the land, regardless of the wishesof the Estate. The Estate was provided “justcompens...
5May 2008FoundationWatchjudiciary.” In addition, Judge Bambi Weil ruledthat Lindsey could no longer serve as trustee.In Ma...
FoundationWatch6 May 2008admissions policy by supporting the measure.(Editor’s note: On October 24, 2007, during aspeech o...
7May 2008FoundationWatchPlease rememberCapital Research Centerin your will and estateplanning.Thank you for yoursupport.Te...
FoundationWatch8 May 2008PhilanthropyNotesWhat’s wrong with this picture? Senator Hillary Clinton (D-New York) is urging P...
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Racial Separatism in the Aloha State: The Bishop Estate Trust and Hawaii’s Kamehameha Schools

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The Bishop Estate, a 501(c)
(3) nonprofit and Hawaii’s largest private
landowner, operates the racially separatist
Kamehameha Schools, the wealthiest secondary
educational institution in the U.S. The
121-year history of the Estate and Schools is
a story of race, politics and ultimately, the
corrupting nature of power in Hawaii. But
issues concerning Hawaiian identity and
culture have now reached the mainland. The
school system is backing a bill inspired by
one of Hawaii’s Democratic senators, Daniel
Akaka, that would grant special privileges
based on race. The bill, which would give
Native Hawaiians the right to create their
own government, is now pending in the U.S.
Senate.

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Transcript of "Racial Separatism in the Aloha State: The Bishop Estate Trust and Hawaii’s Kamehameha Schools"

  1. 1. Summary: The Bishop Estate, a 501(c)(3) nonprofit and Hawaii’s largest privatelandowner, operates the racially separatistKamehameha Schools, the wealthiest sec-ondaryeducationalinstitutionintheU.S.The121-yearhistoryoftheEstateandSchoolsisa story of race, politics and ultimately, thecorrupting nature of power in Hawaii. Butissues concerning Hawaiian identity andculture have now reached the mainland. Theschool system is backing a bill inspired byoneofHawaii’sDemocraticsenators,DanielAkaka, that would grant special privilegesbased on race. The bill, which would giveNative Hawaiians the right to create theirown government, is now pending in the U.S.Senate.Racial Separatism in the Aloha State:The Bishop Estate Trust and Hawaii’s Kamehameha SchoolsMay 2008CONTENTSRacial Separatism in the Aloha StatePage 1ErrataPage 7Philanthropy NotesPage 8By Phil Brand, James Dellinger, and Karl CrowLast February, Hawaii’s KamehamehaSchools system paid $7 million to settlea lawsuit by a student who was deniedadmissiontothesystem’sboys’schoolbecauseof its policy of giving first preference to NativeHawaiians. The settlement short-circuited amuch-anticipated review of the school’s policyby the U.S. Supreme Court. That ruling mighthave had a profound impact on many federaland state public policies and programs thattarget Native Hawaiians for assistance. Thereis some disagreement about what constitutes aNativeHawaiian,butitisgenerallyagreedthata Native Hawaiian is someone who can tracehisorherancestrytotheindigenouspeopleliv-ingintheHawaiianislandsatthetimeCaptainJamesCookdiscoveredtheminthelate1700s.But while the Supreme Court was shut outof the issue of Hawaiian race and ethnicity, theU.S.Congresswasgettinginontheaction.OnOctober 24, 2007, the House of Representa-tives passed by a vote of 261 – 153, the NativeHawaiian Government Reorganization Act of2007(H.R.505).ASenateversionofthebill(S.310), known as the Akaka bill after its sponsor,U.S.SenatorDanielAkaka(D-Hawaii),maybevotedoninthecomingweeks.SenatorAkakaisan alumnus of the Kamehameha Schools. If thebill passes and becomes law, it will grant Na-tive Hawaiians a legal status comparable to thatenjoyed by Native American Indian tribes, andallow them to create their own separate gov-ernment based merely on their racial ancestry.It will exempt government offices and policiesStanding in the schoolhouse door blocking integration in 1963, Alabama Gover-nor George Wallace claimed to be defending principle too: Hawaii Governor Lin-da Lingle (at right in photo at upper left) and Lieutenant Governor James “Duke”Aiona Jr. (at left in photo at upper left) lead an August 6, 2005 rally at Honolulu’sIolani Palace against a Ninth Circuit Court decision that ordered KamehamehaSchools to desegregate. The other three photos show other scenes at the rally.
  2. 2. FoundationWatch2 May 2008Editor: Matthew VadumPublisher: Terrence ScanlonFoundation Watchis published by Capital ResearchCenter, a non-partisan education andresearch organization, classified bythe IRS as a 501(c)(3) public charity.Address:1513 16th Street, N.W.Washington, DC 20036-1480Phone: (202) 483-6900Long-Distance: (800) 459-3950E-mail Address:mvadum@capitalresearch.orgWeb Site:http://www.capitalresearch.orgReprints are available for $2.50 pre-paid to Capital Research Center.Capital Research Center’snext online radio showsair live onMay 6, 3:05 p.m.June 3, 3:05 p.m.July 1, 3:05 p.m.(Eastern time)at http://www.rightalk.comReplays follow at5 minutespast the hour for thefollowing 23 hours, orlisten later at your conve-nience at http://www.capi-talresearch.org/podcast/affecting Native Hawaiians from the equalprotection provisions of the U.S. Constitution.And it will give Native Hawaiians the sortof sovereign immunities enjoyed by Indiantribes that are exempted from the full author-ity of our founding document. The Akakabill does not lay out in detail what form thenew governmental entity will take, nor doesit require that the new entity be subject to thesame taxes, health, safety, environmental, andhomeland security regulations and laws thatapply to other citizens of the United States.To understand the origins and likely con-sequences of the Akaka bill you need to knowsomething about how native Hawaiians re-late to other Hawaiians. And that brings upthe crucial role played by the Bishop Estateand the Kamehameha Schools. The storiesof politics and race and the accusations ofabuse of power that circulate in Hawaii to-day only scratch the surface of the centu-ry-long saga of the Kamehameha Schools.The Kamehameha SchoolsThe history of the Schools dates back toOctober31,1883,whenPrincessBernicePaua-hi Bishop, a member of Hawaii’s royal familyand Hawaii’s largest private landowner, signedher will. She bequeathed her estate to the careof five trustees, including her husband, CharlesR. Bishop, a businessman and philanthropist.SheindicatedthattheBishopEstate—whichin1883hadanestimatedvalueof$470,000—wasto be used to “erect and maintain” two schools,one for boys and one for girls, to be called theKamehameha Schools, named after her great-grandfather, the legendary Hawaiian king.The two-page testament dictated that theSchools were “to devote a portion of eachyear’s income to the support and education oforphans, and others in indigent circumstances,giving the preference to Hawaiians of pure orpartaboriginalblood.”Bishopgavethetrusteesthepowerto“regulatetheadmissionofpupils.”Since its founding —the boys’ school in1887 and the girls’ school seven years lat-er—the Kamehameha Schools has wrestledwith the meaning and intent of Bishop’s will.In accordance with the will, the Schools’earlycurricularfocuswasheavilyvocational—reflecting the thinking of the time—and mili-tarytrainingwasprominentattheboys’school.In the early decades of the 20th century, the fo-cus began to shift away from vocational train-ing and towards academic excellence. In orderto raise standards, the Schools implemented IQtests and admission exams. By the early 1940s,less than 2% of Hawaii’s 26,000 Hawaiianchildren were admitted into the Schools. TheHawaiian community responded bitterly, ac-cusing the system and its trustees of ignoringthe will’s clear command to improve the plightofallNativeHawaiians,particularlythosemostin need. The policy again changed. During thenexttwodecadesentranceexamsweredroppedand the Schools’ student population ballooned.Inthe1960stheSchoolsmovedbacktowardsamerit-basedpolicy.Thelotteryadmissionsys-tem was dropped and entrance exams were re-instated. To preempt the community’s accusa-tionsofelitism,thesystemaddedan“outreach”program to help Hawaiian students in the pub-lic schools who were rejected by Kamehame-ha. But in the 1990s the Schools again reversedcourse, as a micromanaging trustee, LokelaniLindsey, reintroduced testing and cut many ofthe system’s programs to help poor Hawaiians.Has the Schools system done enough tohelp those it was established to help? Thathas been the enduring debate. Some com-plain that the system isn’t putting enoughmoney into operating the Schools. And of themoney that goes to educational programs,they say administrative costs take a dispro-portionately high percentage of the costs.Accordingtoits2005IRSForm990,Kame-hameha’s income for the year was $656 mil-lion, but it spent only about $255 million on theSchools. Program services for the Schools con-sumed$176million,whileadministrativeover-headwas$78million,nearlyathirdofthetotal.Compare that to other large private non-profit schools in Hawaii: the Iolani School,with 2005 income of $34 million, spent $33million, $30 million of which went to programservices; the Mid-Pacific Institute with 2006income of $23 million, spent $21 million, $16.5million of which went to program services;and the Punahou School with $71 million inincome, reported expenses of $68 million, ofwhich $57 million went directly to programs.With an income more than double its ex-penses, why doesn’t Kamehameha expand thenumber of students it serves? Any answer re-quires a consideration of Hawaii’s complex ra-cialhistoryandtheroleoftheBishopEstateinit.
  3. 3. 3May 2008FoundationWatchRace at KamehamehaThe Princess’s will requires that her trustgive preference in charitable giving to or-phans and indigent Hawaiians of “pure orpart aboriginal blood,” but it does not listrace as an explicit criterion for admission tothe Schools. The trustees were granted “fullpower…to regulate the admission of pupils,”and they established an admission policyof racial-preference for Native Hawaiians.As a result, applicants must first meet thesystem’s academic standards, and then verifythattheypossessaboriginalblood.TheSchoolsthen employs a “Hawaiians first” policy, whereany qualified applicant with at least a drop ofNative Hawaiian blood is admitted beforeeven the most highly qualified non-NativeHawaiian. This policy of racial preference iswell established at Kamehameha, though itclashes with the multiracial reality of Hawaii.Hawaii is a melting pot of people of dif-ferent races and ethnicities. Hawaii was firstsettled by Polynesians, around 1000 A.D. Thefirst European to discover the islands was Cap-tain James Cook in 1778, who called them theSandwich Islands. In 1810 King KamehamehaI (Princess Pauahi was the last Hawaiian royalwho was a direct descendant of the king) unit-ed the Islands for the first time, but relied onBritish protection. The King included foreign-ers as full members of society, and gave highgovernment positions to non-Hawaiians. Inthe early 19th century, the work of Americanmissionaries helped to convert Hawaii into amajority Christian nation. As the century pro-gressed, demand for Hawaiian sugar rose dra-matically, and a large influx of Asian workersmigrated to Hawaii to work on the plantations.Interracial and interethnic marriage was com-monplace, and the population of Hawaii wasdiverse long before its inhabitants voted over-whelmingly (94%) for U.S. statehood in 1959.The Office of Hawaiian Affairs, which isa state agency, defines Native Hawaiians aspeople who can trace some ancestry to theislands prior to Captain Cook’s arrival. The2000 U.S. census puts the number of Na-tive Hawaiians living in Hawaii at just under240,000, about 20% of the state’s total popu-lation of some 1.3 million. Many Native Ha-waiians –160,000— live on the mainland.In order to facilitate the verification of Ha-waiian ancestry, the Kamehameha Schoolssystem founded the Ho’oulu Hawaiian DataCenter in 2003. According to the system, “Thecenter verifies the Hawaiian ancestry of pro-gram applicants who wish to be consideredunder the schools’ preference policy. Duringthe 2005 fiscal year, the center received a to-tal of 19,200 ancestry verification applications.Since its inception, the center has reviewedover 42,000 applications resulting in the veri-fication of nearly 26,000 Hawaiian learners.”Of the nearly 70,000 school-age chil-dren with Hawaiian blood, the KamehamehaSchools enrolled about 5,400 students last year.Kamehameha has accepted only a handful ofnon-Native Hawaiians in its 121-year history.The Bishop EstateThe official name of the tax exempt 501(c)(3) entity that manages the KamehamehaSchools is “Trustees of the Estate of BernicePauahi Bishop.” The Estate’s tax return for2005, the most recent year available on theonline database, Guidestar, reveals total assetsof $6.1 billion, though a Honolulu Advertiserarticle in February reported that the system’snet assets are now closer to $9.1 billion. Ac-cording to a January 2008 New York Timesarticle, Kamehameha’s endowment outranksthose of all secondary institutions nationwide,and is comparable in size to the endowmentsof America’s wealthiest universities. Thewealth of the Estate during its early years wasderived mostly from land holdings through-out the Hawaiian Islands. At its peak, the Es-tate controlled over 9% of all land in Hawaii.Until the 1990s the schools were fundedfrom revenue derived directly from the land.The Estate, a tax exempt charity, was al-lowed to generate revenue only through pas-sive investment. This meant the Estate wasnot allowed to develop or systematically sellits property. It was allowed only to rent its un-developed land. In the post-WWII era, landfor housing and resort development became apremium asset in Hawaii. The Estate, as thestate’s largest private landowner, was posi-tioned to make huge profits if it could find away around the passive investment regulation.It found a loophole and began leasing tractsof land to developers for unusually long-termleases that ran anywhere from 50 to 99 years.But an Estate land development project inthe 1970s stoked public resentment. Flush withcash and eager to take advantage of rising landvalues, the Estate looked to develop the areaaround the Kalama Valley, which was hometo many low-income and working class NativeHawaiian families. The Estate began clearingitslandtopreparefordevelopment,anddrivingout those who resisted. When lawyers couldn’tevict inhabitants, the Estate systematically shutoff their power and water. Residents sued butlost in court. Whether or not the Estate was act-ing illegally was largely irrelevant at this pointbecauseithadalreadylostinthecourtofpublicopinion. The irony of the non-profit Bishop Es-tate, whose mission was “educating and better-ing Native Hawaiians,” was not lost on the resi-dentsoftheAlohaState:Theysawitclearingitslandforcommercialdevelopmentattheexpenseof Native Hawaiians who were living on it.In 1967 the state’s legislature enacted theHawaii Land Reform Act, a law that abridgedthe Estate’s property rights by giving lease-holding renters on Estate lands the opportu-Gamblingman:MatsuoTakabuki(left)in1971athisfirstmeetingoftheEstate’sboard.Alsoshown are Frank E. Midkiff, Richard Lyman Jr., Hung Wo Ching, and Atherton Richards.
  4. 4. FoundationWatch4 May 2008nity to buy the land, regardless of the wishesof the Estate. The Estate was provided “justcompensation” for the forced sales. The Es-tate fought the law, taking its legal challengeall the way to the U.S. Supreme Court. In adecision that helped set the stage years laterfor the infamous Kelo v. New London deci-sion (2005), the high court upheld Hawaii’sland-redistributionscheme.InHawaiiHousingAuthority v. Midkiff (1984), the court deferredto the judgment of the state legislature whichhad found that land ownership in Hawaii wastoo concentrated and needed to be broken up.Thecompelledsaleofthelandstolong-termlease holders brought in a windfall of $2 billionmoretotheBishopEstate.TheEstate,whichhadlong been a land-based trust, now had amassedalargeamountofliquidcapital—cash.Accord-ing to its critics, the influx of cash quickly ledto the Estate’s politicization and corruption.More Money Than BrainsIn the 1970s, Jack Burns, a Democrat, wasbeginninghisthirdtermasgovernorofHawaii.He had appointed all five of the state’s sittingSupreme Court justices, who in accordancewith Bernice Bishop’s will, were designatedto appoint Bishop Estate trustees. In 1971 thecourt appointed Matsuo Takabuki, a politi-cal operative with ties to the governor, to be aBishop trustee. Activists sued to block the con-troversial appointment, but a panel named bythe court’s chief justice unanimously upheld it.Takabuki’s appointment was a turningpoint in the history of the Bishop Estate be-cause it was clearly political. Hereafter, trusteeopenings were treated as patronage posts,sinecures for the well-connected. Moreover,Takabuki was an activist trustee who tookthe lead in making what many consideredfinancially reckless investment decisions.In 1991, the current governor of New Jer-sey, Democrat Jon Corzine, at that time a part-ner in powerhouse investment bank GoldmanSachs, reached out to Takabuki, urging himto invest $250 million of the Bishop Estate’smoney. Two years later, Corzine came backto Takabuki hat in hand to beg him for an-other $250 million cash infusion for GoldmanSachs, which had recently fallen on hard timesand was teetering on the brink of collapse.Although Goldman Sachs nowadaysis the King Midas of investment banks, atthat time, the investment was consideredrisky. Takabuki got lucky. When GoldmanSachs had a public stock offering in 1999,the Estate’s $500 million investment wassuddenly worth a whopping $1.5 billion.Takabuki was outgunned when he metwith outgoing Goldman Sachs co-chairmanRobert Rubin in 1992, according to Samuel P.King and Randall W. Roth, authors of BrokenTrust (University of Hawaii Press, 2006). Ru-bin, who was leaving the bank in order to be-come Bill Clinton’s treasury secretary, neededto dispose of his private holdings and managedto convince Takabuki to have the Estate enterintoanunusual,potentiallydisadvantageousfi-nancial transaction. Rubin, the master negotia-tor, had the Estate guarantee a promissory notecovering his interest in the bank, estimatedthen at$50million, in exchange forRubin’san-nual payment to the Estate of a mere $200,000.Let’srecap:theEstateisonthehookfor$50million in the event a shaky bank failed, and inexchange, it receives an annual payment equiv-alent to 0.4% of the total amount at risk. Not abad deal – for Rubin, that is. In the end, Taka-bukigotluckyagainandGoldmanSachsrecov-eredfromatemporarycrisisandwentontobe-come the world’s preeminent investment bank.In 1993, when three trustee positions be-came vacant, Democratic Governor JohnWaihe’e appointed Richard Sung Hong “Dick-ie” Wong, Lokelani Lindsey, and Gerard Jervisto the board. Their primary qualification wasa close friendship with the governor. Lind-sey, a retired gym teacher, was put in chargeof education and communications at the Es-tate, while Dickie Wong, a former state sena-tor, headed government relations, and GerardJervis, a lawyer with little knowledge of trustlaw,assumedcontroloftheTrust’slegalaffairs.The trustees made what observers consid-ered unusual and ethically questionable invest-ments and appeared to violate their fiduciaryresponsibility to act in the best interests of theEstate. In one case, the trustees invested $12million of the Estate’s funds in a methane ex-ploration company. The trustees also investedtheir own personal funds in the same company.As the company floundered, the trustees triedto keep it afloat by directing more Estate mon-ies to it. Though Bishop’s will stated that shewanted theEstate’sfinancial affairs to be trans-parent, the trustees shrouded the investmentin secrecy, repeatedly citing attorney-clientprivilege and refusing to produce requests fordocuments. By the time the company failed,the Estate had invested almost $80 million.Theboardmembers’compensationalsosky-rocketed. By the 1990s, the trustees were eachpocketing$1millionannuallyintrusteeservicefees. King and Roth observed in their book:“Trustees at prominent private schools inHawaii, such as Punahou, ‘Iolani, and Mid-Pacific Institute on O’ahu; Seabury Hall onMaui; and Hawaii Preparatory Institute onthe Big Island, took no compensation. Neitherdid members of the governing boards at well-endowed universities, such as Harvard, Yale,and Stanford. It had always been that way.Why would the Bishop Estate be different?”Curiously,in1995,theBishopEstatepartedways with essentially the entire nonprofit sec-tor to oppose a proposed change in the taxcode that would have given the IRS the powerto pursue “intermediate sanctions” against in-dividual wrongdoers at an organization. Theproposal, which became law in 1996, enjoyedwidespread support among nonprofit leadersbecause it gave the IRS the option when prob-ing wrongdoings at an organization to go afterindividuals rather than take the more dras-tic step of revoking nonprofit status. BishopEstate trustees, perhaps fearing what mighthappen if the corporate veil were pierced andthey were made answerable for their conduct,called it a terrible idea, and, according to Kingand Roth, spent nearly $1 million to defeat it.In a bizarre incident in the 1990s, reportssuggest the Estate was searching for ways toavoid government scrutiny. “In an apparent at-tempttocircumventstateandfederaloversight,the Bishop Estate paid Washington D.C.-basedVernerLiipfertBernhardMcPhersonandHandmore than $200,000 to look into moving theestate’s legal domicile, or corporate address, tothemainland,sourcessaid,”accordingtoaHo-nolulu Star-Bulletin report (October 12, 1999).Hawaiians eventually became suspiciousof the Estate’s business dealings. In an articlein a local Hawaiian newspaper, five respectedHawaiians wrote about the politically riggedselection process and serious breaches of trust,including “excessive compensation and inade-quatepursuitofthetrust’scharitablemission.”In1997 Patrick Yim, a retired judge, was broughtin to look for mismanagement at the Schools.His initial report in November found that the“trustees were nowhere near compliance eitherwith the law or with Pauahi’s will.” Caught upin the Estate’s ongoing controversies, the Su-preme Court of Hawaii in 1999 announced thatit would no longer select Trustees, citing “a cli-mate of distrust and cynicism” that would “un-dermine the trust that people must have in the
  5. 5. 5May 2008FoundationWatchjudiciary.” In addition, Judge Bambi Weil ruledthat Lindsey could no longer serve as trustee.In May 1999, a federal judge ordered the otherfour trustees removed from the Estate’s board.Admission Policy in JeopardyWhile the Bishop Estate was losing thetrust and esteem of Hawaiians of all races andethnicities, the state of Hawaii was increas-ingly caught up in legal disputes over raceand ethnicity. In 1997, Harold Rice, a Hawai-ian rancher not of Native Hawaiian descent,sued the state of Hawaii and then-GovernorBen Cayetano, a Democrat. Rice challengeda state law that allowed only Native Hawai-ians to vote in statewide elections for the Of-fice of Hawaiian Affairs (OHA), an agencycreated in 1978 to handle policy related to theNative Hawaiian population. OHA receivesand distributes federal funding specificallyearmarked for Native Hawaiian programs.In 2000, the case reached the U.S. SupremeCourt, which ruled in Rice v. Cayetano thatthe election policy was unconstitutional be-cause it violated the Fifteenth Amendment.Because there are over 150 federal stat-utes that relate specifically to Native Hawai-ians, the Rice decision opened up a Pandora’sbox. The decision also affected the privateKamehameha Schools, calling into questionthe system’s Native Hawaiian-first policy.Building on Rice, attorney Eric Grant chal-lenged the school system’s race-testing policy.He represented an anonymous Hawaiian stu-dent whose application to Kamehameha wasrejected on the grounds that he had no aborigi-nal blood. In 2003, a federal district judge ruledagainst the student and in favor of the Schools.But the U.S. Court of Appeals for the NinthCircuit overturned the decision in John Doe v.Kamehameha Schools (2005), ruling 2-1 thata policy of race-based discrimination was un-constitutional. The judges noted that althoughCongress had established a special relationshipwith Native Hawaiians, it does not give “blan-ket approval for private race discrimination.”Kamehameha supporters were outraged.Robert Kihune, chairman of the five-mem-ber board of trustees, said, “Let me makethis clear, as long as our admissions policyis at risk, we will do whatever is necessaryto protect our right to offer preference in ad-missions to our native Hawaiian people.”University of Hawaii professor LilikalaKame`eleihiwa sounded strangely like an Az-tlan-embracingracialseparatistwhenshecom-mented on the decision:“There are only two kinds of Hawai-ians that live in Hawaii: the ones who likeHawaiians and the ones who don’t like Ha-waiians. Good Hawaiians will never try tosteal from the Hawaiian people by applyingto Kamehameha Schools and to take a placeof a Hawaiian child who needs education.The non-Hawaiians who are bad and againstus, we ask them to please leave our country.”The outrage had its desired effect, and onDecember 6, 2006, a 15-judge panel of theNinth Circuit voted 8-7 to uphold the schoolsystem’s policy. Encouraged by the split de-cision, on March 1, 2007, Grant filed papersasking the U.S. Supreme Court to review thedecision. But before the high court could ruleon the request, the parties reached a settlementout of court. In February 2008 the Kame-hameha Schools paid $7 million to “JohnDoe,” the anonymous student, leaving its ad-mission policy in place for the time being.The Akaka BillThe Rice decision in 2000 spurred legisla-tive action in the U.S. Congress. Senator Aka-ka introduced a bill a few months after Riceto grant Native Hawaiians the right to createtheir own separate government. The thinkingwas that by giving Native Hawaiians a kind oftribal status, the legislation could preserve theconstitutionality of the race-based preferencespracticed by the Kamehameha Schools. Akakahas re-introduced the measure in every Con-gress since. His bill, which would also createa U.S. Office for Native Hawaiian Relationswithin the Office of the U.S. Secretary of theInterior, was approved by the Senate IndianAffairs Committee in February. The measurecould come up for a Senate vote at any time.Passedinthefallof2007bytheU.S.Houseof Representatives, the proposed Native Ha-waiian Government Reorganization Act of2007, introduced by U.S. Representative NeilAbercrombie (D-Hawaii), could be taken upby the Senate as soon as this May. The fed-eral legislation confers on Native Hawaiiansa tribe-like status and creates a nine-memberboard which will have “expertise in the de-termination of Native Hawaiian ancestry andlineal descendancy.” This racial purity panelwill determine who is a Native Hawaiian andthus eligible to be a beneficiary of any entitle-ments or programs created by the new office.The House bill provides that the exist-ing state Office of Hawaiian Affairs (OHA)would help transfer lands that are held by thestate of Hawaii for the benefit of Native Ha-waiians to the new entity that the bill wouldcreate. Abercrombie, who represents Ho-nolulu, told the House Committee on Natu-ral Resources (May 2, 2007), “The bottomline here is that this is a bill about the con-trol of assets. This is about land, this is aboutmoney, and this is about who has the admin-istrative authority and responsibility over it.”Between 2003 and November 2006, OHAspent over $2 million of ceded lands trustfunds on its congressional lobbying effortsfor the Akaka-Abercrombie measure. Thatamount does not include the $900,000 thatOHA spent to maintain a Washington office.“It paid $660,000 in 2005 to Patton Boggs,helping the firm finish first in the race for lob-bying revenue last year,” reported Jim Snyderin The Hill newspaper in 2006. OHA alsoappears to have spent millions of dollars onadvertising campaigns to win public support.Balkanizing, multi-culturalist groups alsosupport Akaka’s bill. According to www.na-tivehawaiians.com, a website established bythe Office of Hawaiian Affairs to promote thebill, the measure is endorsed by: the MexicanAmerican Legal Defense Education Fund(MALDEF); the National Council of La Raza;the League of United Latin American Citizens(LULAC); and the National Association for theAdvancement of Colored People (NAACP).ItshouldalsosurprisenoonethattheKame-hameha Schools system, arguably the mostpowerfulprivateentityinHawaii,wantstosafe-guard its privileges and racially discriminatoryLeading the charge for Hawaiian apart-heid: Senator Daniel Akaka (left) andRepresentative Neil Abercrombie (right)at a 2006 banquet.
  6. 6. FoundationWatch6 May 2008admissions policy by supporting the measure.(Editor’s note: On October 24, 2007, during aspeech on the U.S. House floor, RepresentativeMazieK.Hirono,aHawaiiDemocrat,readintothe official record a document called “Standingtogether for justice” that identifies the Kame-hameha Schools as an endorser of both theAkaka and Abercrombie bills. The documentHirono referenced appears at page H11967 ofthe Congressional Record for the 110th Con-gress. Until recently, an OHA website also dis-played the same document, but as of April 18,2008, a modified version of the document wasdisplayed. On the altered document, the nameof endorser Kamehameha Schools is conspicu-ously absent. The web page appears at http://www.nativehawaiians.com/listsupport.html.)Congressional horse-trading has allowedAkaka-Abercrombie supporters to securethe support of several Republican lawmak-ers. Surprisingly, four of the Senate bill’s ninecosponsors are Republicans: Norm Cole-man (Minnesota), Gordon Smith (Oregon),and both Alaska senators, Ted Stevens andLisa Murkowski. Among the House bill’sseven cosponsors are two Republicans: TomCole (Oklahoma), and Don Young (Alaska).Hawaii’s Republican state legislators havejoined Democrats in supporting the measure.Governor Linda Lingle, a Republican, whole-heartedly backs the bill and has aggressivelylobbied federal lawmakers.Are Native Hawaiians Really an “IndianTribe”?Invoking the authority of the CommerceClause of the U.S. Constitution, the Akaka billgives Native Hawaiians an Indian tribe-likestatus. Since the Founding of the AmericanRepublic, Indian tribes have been treated bythecourtsandthefederalgovernmentasquasi-sovereign; neither a state nor an independentnation. Following the defeat of the western In-dian tribes after the Civil War, Congress exer-cised more power than ever over Indian tribes.Tribes were confined to reservations and grewincreasingly dependent on government subsi-dies to survive. That dependency theme domi-nated federal Indian law for the early part ofthe 20th century as Congress attempted to as-similatethedefeatedIndiantribemembersintoAmerican society. American citizenship wasconferred on all American Indians in 1924.By 1934, however, Congress had re-em-braced the sovereignty approach. Congressreorganized the Indian tribes, granting themgreater autonomy in their affairs. Trying tomesh sovereignty with American citizenship,however, revealed some ugly inconsisten-cies. How can one be an American citizen,but not have to follow the U.S. Constitution?The schism led Congress in 1968 to pass theIndian Civil Rights Act, requiring tribal con-stitutions to include similar constitutionalprotections found in the Bill of Rights. TheAct sought to extend widely accepted con-stitutional norms like free speech, due pro-cess, and equal protection, to tribal territory.But over time, tribal sovereignty hastrumped the individual rights that the Act wascreated to preserve. In Santa Clara Pueblo v.Martinez (1978), the Supreme Court affirmeda Navajo tribal decision denying membershipto children whose mother, but not father, wasa tribe member. Under a tribal law, membersmust have both a father and a mother whoare tribe members. And in 2006, a Cherokeecourt ruled in Lucy Allen v. Cherokee NationTribal Council that tribe membership mustbe open to descendants of slaves held by theCherokee prior to the outbreak of the CivilWar. These so-called “Freedmen” had beenregistered as tribe members during the as-similationist period of the early 20th centuryand were often living side by side on triballand. Following the controversial 2006 deci-sion, the entire Cherokee tribe membershipvoted the Freedmen out of the tribe, leavingthem second-class citizens on their own land.TheAkakabill’sawardofakindoftribalsta-tustoNativeHawaiiansposessimilarproblems.Enactmentofthemeasurecoulddisenfranchisemany Hawaiian residents whose lineage datesback centuries. Furthermore, the bill leaves is-suesoflandallocationandclaimsagainstHawaiiand the United States up for future negotiation.This ominous ambiguity relies significantlyon the 1993 Apology Resolution, in whichthe federal government officially apologizedfor alleged American complicity in the non-violent overthrow of the Hawaiian monarchy.The Akaka bill sets a dangerous prec-edent. Could ethnic activists in the Ameri-can Southwest argue that they deserve tribalstatus? What about ethnic Cajun or Creolepeoples in Louisiana, who trace their rootsin the Mississippi Delta to the exodus fromFrench Nova Scotia before the LouisianaPurchase? The federal government has aconstitutional duty to protect the individualequality of all Americans on the basis of theircitizenship. It should not balkanize neighborson the basis of their race or ethnic heritage.Opposition to the BillIn 2006, the U.S. Commission on CivilRights held hearings on the Akaka bill andpublished a report recommending stronglyagainst it. Gerald Reynolds, chairman of thecommission, observed that the bill “wouldauthorize a government entity to treat peopledifferently based on their race and ethnic-ity…This runs counter to the basic Americanvalue that the government should not preferone race over another.” The Project 21 blackleadership network, a nonprofit organiza-tion sponsored by the National Center forPublic Policy Research, said the Akaka billwould represent a step backwards in the civilrights struggle for equality under the law.Conservative columnist George Will hasbeen a vocal opponent of the legislation. Af-ter the bill passed the House, he wrote thatNative Hawaiians don’t meet the criteria laidout in federal law for recognition as a tribe:“Tribes were nations when the Constitutionwas written and are geographically separateand culturally distinct communities whosegovernments have long continuous histories.”However, Will notes that Native Hawaiiansare interwoven in the nation’s most multieth-nic and multiracial state. “As the state of Ha-waii has said, ‘The tribal concept simply hasno place in the context of Hawaiian history.’”Senator John Kyl (R-Arizona) is the lead-ing opponent of the legislation in the Sen-ate. He characterizes the bill as a “recipe forpermanent racial conflict ... motivated by adesire to immunize government preferencesfor Native Hawaiians from constitutionalscrutiny.” Senator Lamar Alexander (R-Ten-nessee) has also denounced the Akaka bill.In 2006, he said “It is about sovereignty. It isabout race. We are taking a step toward beinga United Nations and not the United States.”An Uncertain FutureThe legal question of Kamehameha’s race-basedadmissionspolicyalsoremainsunsettled.The Schools recently dodged a bullet when thelawsuit challenging its policy was settled outof court. It would make things a lot easier forKamehameha if Akaka’s bill succeeded in re-defining Native Hawaiians as an Indian tribe:then the Schools wouldn’t have to worry aboutlegal challenges. The Bishop Estate could con-tinue to stash away its cash while enforcing a
  7. 7. 7May 2008FoundationWatchPlease rememberCapital Research Centerin your will and estateplanning.Thank you for yoursupport.Terrence Scanlon,PresidentFWrace-based admissions policy at its Schools.And the Akaka bill, which narrowlyfailed in a June 2006 procedural vote in theU.S. Senate, faces an uncertain future. Al-though Akaka is hoping this year he willfinally have enough votes in the Senate topass the bill, President Bush has promisedto veto the measure should it reach his desk.Members of the current field of presidentialcandidates have differing views on the Akakabill. Republican Senator John McCain of Ari-zona previously seemed to flirt with support-ing the bill but now opposes it. Suggesting hewould vote in favor of the bill, McCain said in2005, “Here in Washington, it’s hard for us togo against the view of the governor, the Leg-islature — Republican and Democrat — thesenators and the congressmen,” (HonoluluAdvertiser, June 29, 2005). But on the Sen-ate floor (June 8, 2006) McCain blasted thebill because it “would lead to the creation ofa new nation based exclusively—not primar-ily, not in part, but exclusively—on race.”Democratic Senators Hillary Clinton andHonolulu-born Barack Obama both supportthe legislation. Clinton told reporters earlierthis year that she supported the 1993 ApologyResolution and now supports Akaka’s legisla-tion that “remedies a long history of problems.”(Honolulu Star Bulletin, February 14, 2008)Obama spoke in favor of the bill on theSenate floor on June 7, 2006, suggesting itsenactment would promote “liberty, justice, andfreedom,”bygiving“NativeHawaiianstheop-portunity to recognize their governing entityand have it recognized by the federal govern-ment.” Obama also said the bill enjoys the sup-port of “the indigenous peoples of America, in-cludingAmericanIndiansandAlaskanatives.”Phil Brand is Director of EducationWatch,and James Dellinger is Executive Directorof GreenWatch at Capital Research Center.Karl Crow is a student at Temple UniversityBeasley School of Law. Colin Dunn, an in-tern at Capital Research Center in 2008 whois studying Political Science at AmericanUniversity, assisted in researching this ar-ticle. The article relies heavily on the work ofSamuel P. King and Randall W. Roth in Bro-ken Trust (University of Hawaii Press, 2006).ERRATAA conservative film organiza-tion mentioned in “George So-ros, Movie Mogul: ‘Social Jus-tice’ Cinema and the SundanceInstitute,” by Rondi Adamson,Foundation Watch, March 2008,was misidentified. Its name isthe Moving Picture Institute.And a clarification: The August2007 Foundation Watch articleby Deborah Corey Barnes called“Al Gore’s Carbon Crusade: TheMoney and Connections BehindIt,” contained unclear wordingin one instance. It indicated thatHenry (Hank) Paulson, the Gold-man Sachs CEO who is nowU.S. Treasury Secretary, was“co-founder” of Generation In-vestment Management (GIM).Paulson played a role in the cre-ation of GIM, but the firm doesnot identify him as a co-founder.$14.95 (plus shipping)To order, call 202-483-6900, or visitwww.amazon.com/shops/capital_researchor mail your check and book order to:Capital Research Center1513 16th Street, NWWashington, DC 20036GOOD DEEDS,SQUANDEREDLEGACIESA cautionary tale first published in 1994, thisthirdeditionbyMartinMorseWoostertestifiestothecontinuingimportanceoftheissueofdo-norintent. ItcontainsnewmaterialfocusedontheongoingRobertsonFoundationv.PrincetonUniversity case and an update on the tragicbattleovertheBarnesFoundation.AnExecutiveSummary is also included.Wooster, senior fellow at Capital ResearchCenter,tellsacautionarytaleofwhathasgonewrong with many of this country’s preeminentfoundations. Buthealsoshowsthatotherfoun-dations,suchasthoseestablishedbyLyndeandHarry Bradley, James Duke, and Conrad Hilton,safeguard their founders’ values and honortheir intentions.
  8. 8. FoundationWatch8 May 2008PhilanthropyNotesWhat’s wrong with this picture? Senator Hillary Clinton (D-New York) is urging President George W. Bush toboycott the opening ceremonies of the upcoming Beijing Olympics in order to protest China’s crackdown in occupiedTibet. Meanwhile, the Los Angeles Times reports Bill Clinton’s foundation has been taking money from Alibaba, aChinese Internet company alleged to be part of the same crackdown in Tibet. The report came after Mrs. Clinton’scampaign disclosed that the former First Couple have earned $109 million since leaving the White House. FormerPresident Clinton refuses to disclose the names of donors to the William J. Clinton Foundation but put some ofthe names up for sale to direct marketers. Other donors gave money while pushing the Clinton administration forpolicy changes, and two donors pledged $1 million each while they or their companies were undergoing Justice De-partment probes, as Deborah Corey Barnes and Matthew Vadum wrote in the February 2008 Foundation Watch.Lynne Munson, a fellow at the Center for College Affordability and Productivity, argued in her FoundationWatch article last month that colleges and universities should start spending their endowments in order to keep thecost of tuition down. A New York Times article April 13 quoted Munson debunking the schools’ claims that they’re notlegally allowed to spend more. “It is simply false to claim that donor restrictions prevent increased spending. Almosthalf of endowment funds at private institutions are unrestricted, as are nearly a quarter of endowment dollars atwealthy public institutions.” Congress is considering legislation to require colleges to spend at least 5% of their as-sets each year, a requirement similar to the law governing private foundations.Harvard Business School marketing professor Gail J. McGovern was appointed president of the American RedCross last month. “This is a brand to die for,” McGovern said. “It creates a visceral reaction. When people see it,they know that help is on the way.” She replaces interim president Mary S. Elcano, the group’s general counsel.Elcano stepped in after Mark Everson was allowed to resign as president last November following revelations thatthe married man had an affair with the head of a Red Cross chapter who became pregnant.Pilar O’Leary, who headed the Smithsonian Latino Center, quit in February following an internal probe thatdetermined she abused her expense account, attempted to steer a contract to her friend, and sought free tickets tofashion shows and other events, the Washington Post reported April 15. An internal report released following thenewspaper’s Freedom of Information Act request said O’Leary expensed “extravagant” and “lavish travel expenses”along with personal purchases. The Washington, D.C., socialite who graced the cover of Washington Life magazinetwo years ago when she won the publication’s annual Substance & Style Award along with Senator Barack Obama(D-Illinois) and environmentalist Philippe Cousteau, denied any wrongdoing.Chevron Corp. took the unusual step of protesting the award of the 2008 Goldman Environmental Prize to Ecua-doran personal injury lawyer Pablo Fajardo and his associate, Luis Yanza, the San Francisco Chronicle reports.The two men received the award and $150,000 a piece from the Goldman Foundation last month, which praisedthem for “leading an unprecedented community-driven legal battle against a global oil giant” in connection withoil contamination in the Amazon rain forest. Chevron said the contest judges were misled and that the award win-ners are going after it because it has deep pockets. The lawsuit claims Texaco, which Chevron acquired in 2001,dumped crude oil-tainted water that contaminated part of Ecuador. Texaco left Ecuador in 1992 and performed a$40 million government-approved cleanup. Chevron says Petroecuador, which still pumps oil in the region, is re-sponsible for the rest of the problem.Nonprofit hospitals are outperforming for-profit rivals, the Wall Street Journal reported April 4. The combined netincome of the 50 biggest nonprofit hospitals skyrocketed from 2001 to 2006, rising almost 800% to $4.27 billion.According to a WSJ analysis, 77% of the 2,033 U.S. nonprofit facilities were profitable, compared to just 61% offor-profit hospitals. According to Senator Charles Grassley (R-Iowa) the tax breaks nonprofit hospitals receiveamount to a taxpayer subsidy, and some nonprofit providers aren’t giving enough back to their communities. Lastyear Grassley, ranking Republican on the Senate Finance Committee, threatened to introduce legislation requiringnonprofit hospitals to provide a minimum amount of charitable care.

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