CONFESSIONS OF A WHISTLEBLOWER

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CONFESSIONS OF A WHISTLEBLOWER

Sightings from The Catbird’s Nest

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Confessions of a

WHISTLEBLOWER

Sightings from The Catbird Seat

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August 21, 2006

FINAL JUDGMENT

KESSNER DUCA UMEBAYASHI
BAIN & MATSUNAGA
Attorneys at Law
A Law Corporation

STEVEN GUTTMAN
220 South King Street, 19^th Floor
Honolulu, Hawaii 96813
Email: sguttman@kdubm.com

United States District Court

For the District of Hawaii

JAMES B. NICHOLSON SUCCESSOR TRUSTEE, Plaintiff

vs.

BOBBY N. HARMON, Defendant

– – – – –

JUDGE: The Honorable David Alan Ezra

FINAL JUDGMENT

… Judgment is hereby entered under which Defendant Bobby N. Harmon shall within ten (10 days) from the date of entry of this Final Judgment permanently and forever remove and/or delete from any web-site owned, managed or operated by Defendant Bobby N. Harmon all offensive materials which contains any reference to “Protected Subject Matters”, as that term is described and defined in the Arbitration Award dated October 6, 2004. Defendant HARMON is also ordered to provide the Court with written confirmation, a copy of which shall be served on Plaintiff, that all offensive materials have been removed and/or deleted from any web-site owned, managed or operated by Defendant HARMON.

“Post-judgment interest runs on the total Judgment amount of FOUR HUNDRED TWENTY-TWO THOUSAND NINE HUNDRED SEVENTY DOLLARS AND 54/100 ($422,970.54) at the legal rate of ten percent (10%) per annum on the unpaid principal balance, or $115.88 per day, from the date of entry of this judgment until the judgment is fully satisfied….”

FINAL JUDGMENT

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The website that was found to contain such outrageously “offensive materials” to warrant such drastic punishment was…

THIS WEBSITE:

www.the-catbird-seat.net

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which was

SHUT-DOWN by ORDER

JUDGE DAVID EZRA,

and which has now been replaced by

www.kycbs.net

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This catbird-blogger invites YOU to visit this site and to JUDGE FOR YOURSELF as to whether or not YOU think these materials are “offensive” and should be forever removed and banned from the World Wide Web.

Better hurry, though, before the POWERS THAT BE silence this whistleblower-blogger forever!

Mahalo!

The Catbird

SAMPLE “OFFENSIVE” MATERIALS???

P&C INSURANCE COMPANY, INC.
P.O. Box 38
Honolulu, HI 96810

November 20, 1996

Mr. Cary M. Okawa, C.P.A.
Coopers & Lybrand L.L.P.
2500 Pacific Tower
1001 Bishop Street
Honolulu, Hawaii 96813-3668

SUBJECT: P&C Insurance Company, Inc. – Annual Financial Report

Dear Mr. Okawa:

This is to provide further information regarding issues discussed in my meeting with you and Mr. Dennis Tsuhako in my office on October 18, 1996, regarding P&C Insurance Company’s (P&C) annual financial report.

As you will recall, we discussed my concerns with respect to “arms-length” issues between Kamehameha Schools Bishop Estate (KSBE) and P&C, as they related to what I believed were efforts to direct and control the operations of P&C by my superior, Nathan Aipa, Esq., by Louanne Kam, Esq. and by Henry H. Peters, who is a Trustee of Bishop Estate, as well as Chairman of the Board of Directors for P&C.

As examples, we discussed the blocking of my efforts to have P&C write the blanket property insurance program with reinsurance provided through the Hobbs Group, rather than by Marsh & McLennan, Inc. Also, I commented on what I considered to be excessive fees being charged by Marsh & McLennan, Inc. (MMI), and their failure to provide a satisfactory explanation for the services included in their flat fee of $200,000.

Finally, I related to you and Mr. Tsuhako my concerns regarding attempts being made by individuals at KSBE to direct and control the settlement of P&C’s claims. In addition to the example we discussed, I have recently received a copy of the attached memo from Rocco Sansone dated 11/7/96, regarding a proposed “Consent to Settle (P&C Insurance)” endorsement.

This memo addressed to Louanne Kam, Kamehameha Schools Bishop Estate, states: “The following proposed endorsement is submitted per our discussions and negotiations with Am-Re. This endorsement provides KSBE with the option of controlling the settlement process subject to the indicated agreements. Based on our discussions, we recommend KSBE accept the proposed wording. Please advise if there are any questions and with your approval to add the endorsement.”

This “Consent to Settle Clause” would, in effect, take the control of claims settlements away from P&C’s independent adjuster and turn it over to KSBE. P&C and KSBE would also be exposed to uninsured and unlimited payments of claims due to the condition, “If, however, the Insured shall refuse to consent to any settlement recommended by the Company and acceptable to the claimant and shall elect to contest or continue any proceedings in connection with such claim, the Company’s liability for the claim shall not exceed the amount for which the claim could have been settled plus expenses up to the date of such refusal.”

This recommendation by MMI is, in my opinion, highly unusual and one which could result in significant financial loss to P&C and KSBE. The enclosed documents (some written before our meeting and others afterwards) will provide further examples of what I consider to be improper and deceptive business practices by Marsh & McLennan, Inc. and M&M Insurance Management Services, Inc.

It is due to the fact that these issues have not been resolved, that I am declining to sign my concurrence to P&C’s Annual Financial Report for the fiscal year 1995-96.

Thank you very much for your understanding and concern.

Very truly yours,

Bobby N. Harmon, CPCU, ARM, AAI

President

enclosures

cc: Insurance Commissioner, State of Hawaii (w/encls)

May 17, 1999

Federal Bureau of Investigation
Prince Kuhio Federal Building, Rm. 4307
300 Ala Moana Blvd.
Honolulu, Hawaii 96850

Re: Racketeer Influenced & Corrupt Organizations Act (RICO) Lawsuit:
Civil No. CV 99 00304 – U. S. District Court for the District of Hawaii – Bobby N. Harmon vs. Federal Insurance Company; P&C Insurance Company; Marsh & McLennan Companies; PriceWaterhouse, Coopers & Lybrand; Trustees of Bishop Estate; Nathan Aipa, et al.

Gentlemen:

On September 19, 1998, I wrote to your office requesting that an investigation be made into apparent racketeering activities of Federal Insurance Company, the trustees of the Bishop Estate, et al. The purpose of this letter is to inform you that on April 27, 1999, I filed a civil lawsuit against a number of these entities.

A copy of this lawsuit is being provided to you in hopes that this information will assist you in any criminal investigations that your office may be conducting with respect to alleged racketeering activities involving these organizations.

Please feel free to contact me at the address shown above if I can be of any further assistance in this matter.

Very truly yours,

Bobby N. Harmon, CPCU, ARM

encls.

cc: Internal Revenue Service

Office of the Attorney General, State of Hawaii

Colbert Matsumoto, Esq., Master, KSBE

October 31, 2000

VIA FAX @ (202) 514-7021

Mr. Cliff Rones, Esq.
U. S. Department of Justice
Criminal Division, Fraud Section
P. O. Box 28188, McPherson Station
Washington, DC 20038

RE: Report of Fraud and Racketeering:

— P&C Insurance Company, Inc.

— Federal Insurance Company (Chubb Group)

— Marsh & McLennan, Inc.

— PricewaterhouseCoopers, LLP

— State of Hawaii, Insurance Division

Dear Mr. Rones:

I realize this is a quick follow-up to my letter of October 27, 2000, but an article in today’s Honolulu Star-Bulletin may help explain why the State of Hawaii, and especially the insurance commissioner, took no action on my complaints of fraud and racketeering regarding the subject insurance companies.

Under the front page headline of “Former trustees funneled donations to lawmakers,” reporter Rick Daysog writes:

Former trustees of the Kamehameha Schools operated an underground political network that funneled money to the campaigns of dozens of key Hawaii lawmakers, according to trust documents obtained by the Honolulu Star-Bulletin.

Between 1992 and 1997, the $6-billion estate’s now-defunct government relations department orchestrated contributions to incumbent Democrats friendly to the trust’s interests or to high-ranking politicians with regulatory control over the trust’s massive land and business holdings.

Those on the receiving end of estate contributions included U.S. Rep. Neil Abercrombie, Honolulu Mayor Jeremy Harris and former Mayor Frank Fasi’s Best Party. . . .

The state Campaign Spending Commission is looking into whether the trust illegally laundered contributions through former trustees, employees, relatives and outside contractors….

The list of recipients for that election year reads like a Who’s Who of island politics. They include:

. . . Former state Sen. Rey Graulty: On March 22, 1994, Wong bought $250 worth of tickets for a Graulty fund-raiser … The check was delivered by a staffer. Graulty, now a state Circuit judge, could not be reached for response.

What the article does not say is that after Senator Graulty was defeated in his bid for re-election, he was appointed by Governor Ben Cayetano (D) as Hawaii’s Insurance Commissioner to replace Wayne Metcalf who was appointed to complete the term of another senator who passed away. Graulty was later appointed as a state judge, and Metcalf was re-appointed as the state insurance commissioner.

My complaint letters to both of these regulators received little or no response. To my knowledge, no disciplinary action was taken against any of these companies, and they have been allowed to continue the fraud and theft activities under the current interim-trustees and several top executives who served under the ex-trustees.

The Star-Bulletin article goes on to state:

. . . The ex-trustees deny that they took part in an organized effort to finance the campaigns of isle politicians. They say their political contributions and those of staffers and outside vendors were personal in nature and have nothing to do with trust business. . . .

However, in sworn testimony, some staffers say they not only helped organize the campaign contributions but also used trust facilities to direct the money to local politicians. . . .

I am one of the former staffers who testified under oath during the Attorney General’s investigation of the estate, about how staff were encouraged to assist certain politicians, including ex-trustee Henry Peters, Milton Holt and Robert Herkes.

The full Star-Bulletin articles can be retrieved from the internet at the following addresses:

http://starbulletin.com/2000/10/31/news/story1.html

and

http://starbulletin.com/2000/10/31/news/story2.html

More details regarding my RICO lawsuit, and copies of my letters to the Hawaii and California insurance departments can be found at the following address:

www.the-catbird-seat.net/InsuranceCommissioners.htm

My mailing address and telephone number appear above if I can provide further information, or I can be reached by e-mail at:

bobbyharmon@hotmail.com

In our initial conversation, you indicated that you would probably be contacting the Federal Bureau of Investigation for further action. If this is still the case, then I would appreciate your relaying this information to the proper party.

Again, thank you very much for your assistance.

Very truly yours,

Bobby N. Harmon

www.kycbs.net/AAA-JUSTICE-10-31-0.htm

March 17, 2005

VIA fax @ 808-586-2806

and e-mail: insurance@dcca.hawaii.gov

J.P. Schmidt, Esq.
Hawaii Insurance Commissioner
335 Merchant Street, 2^nd Floor, Rm 213
Honolulu, Hawaii 96813

Re: Complaint Against: Ace Ltd.; Marsh & McLennan; Chubb Group; XL Insurance
Their Insured:Kamehameha Schools; P&C Insurance Co., et al.

Dear Commissioner Schmidt:

Due to new information regarding Ace Ltd. and the other companies listed above, this is to file an amended complaint against these companies for fraud, racketeering, bid-rigging, price fixing, unfair competition, and unfair claims settlement practices. I quote some of the latest information from a Forbes article dated March 16, 2005:

Ace Ltd. Slammed by 43 Subpoenas

Forbes

Ace Ltd., the property and casualty insurer recently implicated in a probe of insurance industry practices, on Wednesday said it received 43 subpoenas and legal inquiries regarding its involvement in bid rigging and price fixing.

The Bermuda-based company said in a filing with the Securities and Exchange Commission it received subpoenas and other inquiries from 9 state attorneys general and one from Washington, D.C. Further, insurance commissioners and other regulators from 10 states also launched some form of legal action.

In addition, Ace said the SEC and New York Attorney General Eliot Spitzer have issued subpoenas for information relating to “non-traditional or loss mitigating insurance products.” The insurer said it will continue to cooperate with such requests, and is also conducting its own internal investigation.

Ace was one of four insurers implicated, but not formally charged, in an investigation of brokerage Marsh & McLennan Co. launched in October by Spitzer. Spitzer filed a lawsuit against the nation’s largest insurance broker accusing it of bid rigging, price fixing, and demanding incentive fees from insurance companies in exchange for sending more business their way….

Ace said Chief Executive Evan Greenberg received a $1 million salary in 2004, with a $2.7 million bonus. He is scheduled to get a raise of $25,000 this year, according to the SEC filing.

Greenberg is the son of Maurice Greenberg, who stepped down this week as CEO of American International Group Inc. Greenberg’s older brother, Jeffrey, was CEO of Marsh & McLennan before being ousted in the wake of Spitzer’s investigation. The insurer said it has received legal inquiries from attorneys general in Connecticut, Florida, Massachusetts, Minnesota, New York, Ohio, Pennsylvania, Texas and West Virginia.

Insurance commissioners and other regulators from California, Florida, Illinois, Maryland, Michigan, Minnesota, New York, North Carolina, Pennsylvania and Texas have also contacted Ace….

< END OF QUOTATION >

You will, no doubt, recall that in 1992, Hawaiian Insurance & Guaranty Co. was declared insolvent largely due to Hurricane Iniki losses, and that the company was later sold to Vesta Insurance Group. In 1998, Vesta was involved in a financial scandal which was reported by the Honolulu Star-Bulletin on June 2, 1998, as follows:

Hawaii insurer’s parent pounded on Wall St.

Vesta Group, which owns Hawaiian Insurance & Guaranty,
reports ‘accounting irregularities’

NEW YORK — Vesta Insurance Group Inc, which owns a major Hawaii insurer, saw it shares plunge 47 percent today, a day after the parent company said “possible accounting irregularities” will force it to restate earnings for the last two quarters.

Vesta’s president and chief executive officer, Robert Y. Huffman, also has resigned.

However, the company’s Hawaii operation, Hawaiian Insurance & Guaranty Co., said it has not been affected by the changes at the Birmingham, Ala.-based parent.

“I expect no impact whatsoever on HIG’s operations,” said Pete Grimes, HIG general manager. HIG had been declared insolvent in 1992 after Hurricane Iniki losses. It was later rehabilitated by the state insurance division and was sold to Vesta in 1995 for $35 million….

* * *

To show you the connection between these entities and Kamehameha Schools, their for-profit captive, P&C Insurance Co., Ltd., and Chubb Group, I quote the following from Vesta Insurance Group’s Form 8-K, dated July 18, 2001:

On July 10, 2001, Vesta Fire Insurance Corporation, an Illinois corporation (“Vesta Fire”) and a wholly owned subsidiary of Vesta Insurance Group, Inc. completed its acquisition of 100% of the outstanding shares of capital stock of Florida Select Insurance Holdings, Inc. for approximately $64.5 million in cash. Vesta Fire acquired the stock of FSIH from FSIH’s four stockholders – Centre Solutions (Bermuda) Limited, Mynd Corporation, Orienta Point Group, L.L.C., and Kamehameha Schools Bernice Pauahi Bishop Estate….

* * *

Vesta Insurance Group, Inc.
Notes to Consolidated Financial Statements

Securities Litigation

Subsequent to the filing of our quarterly report on Form 10-Q for the period ended March 31, 1998 with the U.S. Securities and Exchange Commission (“SEC” or “Commission”), we commenced an internal investigation to determine the exact scope and amount of certain reductions of reserves and overstatement of premium income in our reinsurance assumed business that had been recorded in the fourth quarter of 1997 and the first quarter of 1998. This investigation concluded that inappropriate amounts had, in fact, been recorded and we determined that we should restate our previously issued 1997 financial statements and first quarter 1998 Form 10-Q….

We restated our previously issued financial statements for 1995, 1996, and 1997 and our first quarter 1998 Form 10-Q for the above items by issuance of a current report on Form 8-K dated August 19, 1998. These restatements resulted in a cumulative decrease to stockholders’ equity of approximately $75.2 million through March 31, 1998. Commencing in June 1998, we and several of our current and former officers and directors were named as defendants in several purported class action lawsuits filed in the United States District Court for the Northern District of Alabama. Several of our officers and directors also have been named in a derivative action lawsuit in the Circuit Court of Jefferson County, Alabama, in which Vesta is a nominal defendant. In addition, we received various inquiries and requests for information from various state departments of insurance and other regulatory authorities, including a subpoena issued to Vesta on August 24, 1998 by the 34 Commission as part of a formal, non-public order of investigation….

We have several layers of directors’ and officers’ liability insurance coverage (“D&O insurance”), the terms of which may cover all or a portion of the damages or settlement costs of the class action. These policies provide up to $100 million in D&O insurance to cover damages or settlement costs and an additional policy provides another layer of $10 million D&O insurance to cover any damages awarded by a court in these actions. Cincinnati Insurance Company (“Cincinnati”) issued the primary policy that provides the first $25 million of D&O insurance.

Federal Insurance Company (The Chubb Group) issued an excess D&O insurance policy which provides coverage for the second $25 million in losses, if necessary. The balance of the coverage is provided by a group of insurers and was purchased after the class actions comprising the consolidated class action were filed….

In September 1998, after these actions were filed, Cincinnati, which provides the primary insurance policy, filed a lawsuit in the United States District Court for the Northern District of Alabama seeking to rescind the policy and avoid the coverage….

A dispute has also arisen with CIGNA Property and Casualty Insurance Company (“CIGNA”) (now ACE USA) under a personal lines insurance quota share reinsurance agreement, whereby we assumed certain risks from CIGNA. During September 2000, CIGNA filed for arbitration under the reinsurance agreement, seeking payment of the balances that CIGNA claims are due under the terms of the treaty. In addition, during the fourth quarter, the treaty was terminated on a cut-off basis. Vesta is seeking recoupment of all improper claims payments and excessive expense allocations and charges from CIGNA. This arbitration is in its early stages and the ultimate outcome cannot be determined at this time….

< END OF QUOTATION>

In previous complaints to your office, and in my RICO lawsuit, I have already detailed many of my allegations against Marsh & McLennan, Inc. and Federal Insurance Company. However, since this news related to Ace Ltd. has just been released, and as Ace Ltd. was one of the insurance carriers used by Marsh & McLennan for the insurance programs of Kamehameha Schools and P&C, I am now requesting that you add Ace Ltd. to the list of companies which I have submitted for your investigation.

More information regarding these matters can be found at the following Internet addresses:

www.kycbs.net/Claims-By-Harmon.htm

www.kycbs.net/Claims-Branch-Kamehameha.htm

www.kycbs.net/Claims-Branch-Marsh-McLennan.htm

www.kycbs.net/ACE.htm

www.kycbs.net/ChubbGroup.htm

www.kycbs.net/MarshBirds.htm

www.kycbs.net/Bishop4.htm

Due to these recent revelations, I would also strongly encourage your office to join with the Insurance Commissioners of the other states named in the above article, to pursue recovery of overcharges and other damages from these insurance companies and their agents and brokers, for the benefit of Hawaii’s taxpayers and consumers.

Please feel free to contact me if you have any questions or if I can provide any other information which may be helpful in your investigation of this complaint. Thank you very much for your consideration in this extremely serious matter.

Very truly yours,

Bobby N. Harmon, CPCU, ARM

cc: Fraud Branch, Insurance Division, Dept of Consumer Affairs

(via e-mail: insfraud@dcca.hawaii.gov)

Captive Insurance Branch, Insurance Division, Dept of Consumer Affairs

(via e-mail: captiveins@dcca.hawaii.gov)

National Association of Insurance Commissioners

(via e-mail: www.external-apps.naic.org/fraud)

Michael G. Cherkasky, President and Chief Executive Officer

Marsh & McLennan Companies, Inc. (via fax @ 212-345-4838)

John D. Finnegan, President and Chief Executive Officer

The Chubb Corporation (via fax @ 908-903-2027 and info@chubb.com)