The board of directors of the East Hawaii Cultural Center filed a lawsuit in Hilo Circuit Court asking that a judge remove five trustees of an endowment trust set up in 2009.
The civil suit by the board— which is called the East Hawaii Cultural Council — seeks the removal of Sudha Achar, Frances Chang Sherrard, Leslie Taylor Cockerham, Dorothy Heinrich and Linda Levine. The five are trustees of the East Hawaii Cultural Council/Hawaii Museum of Contemporary Art Endowment Trust.
The suit, filed on EHCC’s behalf by Waimea attorney William Houser, also seeks monetary damages from the trustees to the trust “for their breaches of fiduciary duty.” It also requests that EHCC and the trust be reimbursed for attorney fees, expenses and costs.
According to the filing, the trust was established in February 2009 by EHCC’s then-acting board, led by Achar, with a stated purpose to create an endowment that “will produce a reliable stream of income that can be used by EHCC.”
The petition states that EHCC is the trust’s sole beneficiary.
The suit alleges that the board’s meeting minutes indicate the board took $250,000 of EHCC savings and “inexplicably contributed it to the trust, in violation of their duty of loyalty to EHCC.”
“The creation and funding of the trust also removed the trust funds from any control by the EHCC Board of Directors,” the petition states.
The filing alleges EHCC’s current board recently asked trustees for an accounting of the trust, but trustees have refused and “have violated their duty of full disclosure on all matters.”
According to the suit, trustees distributed only $1,465 to EHCC in 2020 and $1,160 in 2019. It further alleges the trust has “only distributed $24,683 to the EHCC since 2009,” and said if the yearly payouts to EHCC of less than 1% of the trust’s $250,000 endowment represent the trust’s net income, “then the trustees are blatantly improperly investing the trust assets or otherwise being financially irresponsible with the trust assets.”
The filing also alleges there is evidence that the trust isn’t a tax-exempt entity — and that could have “adverse income tax consequences” for EHCC. It further states that if the trust isn’t a tax-exempt organization, its administration of funds that once belonged to EHCC is a violation of federal law.
“However, the trustees will not disclose relevant information to EHCC, so EHCC cannot determine what the actual ramifications of this matter may be,” the suit states.
Carol Walker, the board’s vice chairwoman and the organization’s former executive director, said in a separate statement that she asked Achar for proof of the trust’s tax-exempt status, and that Achar provided a 2013 IRS tax-exempt letter with the name “East Hawaii Cultural Center Hawaii Museum of Contemporary Art,” but that neither the trust nor trustees were referred to in the letter.
Walker also claims to be the liaison between EHCC and the trust, and is supposed to be able to attend trustees’ meetings, but has been excluded from or asked to leave shortly after her arrival at those meetings since early 2020.
Houser didn’t return a phone call in time for this story, and Achar’s voicemail box was full and unable to accept a message.
Email John Burnett at jburnett@hawaiitribune-herald.com.