Katherine and Louis Kealoha were back in federal court Tuesday where they pleaded not guilty to an updated indictment on bank fraud and identity theft charges.
Trial has already been set in the case for January but attorneys say a plea deal with the feds is on the table.
Katherine Kealoha, a former city prosecutor, and her husband, ex-Honolulu Police Chief Louis Kealoha, appeared before U.S. Magistrate Judge Wes Reber Porter. The case is part of a large-scale public corruption probe that has already resulted in the couple’s conviction last June on conspiracy and obstruction charges.
Two Honolulu Police Department officers, Derek Hahn and Minh-Hung “Bobby” Nguyen, were also convicted of framing Katherine Kealoha’s uncle, Gerard Puana, for the theft of the couple’s mailbox.
The Kealohas are scheduled to be sentenced on Oct. 31, while sentencing for Hahn and Nguyen is set for Nov. 4.
The Kealohas face a slew of accusations in the bank fraud case, including that they allegedly stole the inheritance of children for whom Katherine Kealoha was a legal guardian and that they defrauded numerous banking institutions.
The children, who are now adults, were ages 12 and 10 when Katherine Kealoha became their legal guardian in 2004. According to the indictment, Katherine Kealoha allegedly used almost all of the money in both children’s trust accounts, each containing more than $83,884, for personal expenses.
The indictment also accuses Katherine Kealoha of lying to obtain loans from banks. Federal prosecutors submitted a new indictment last week with new allegations, including that she told the Hawaii Central Federal Credit Union that she was dying in order to get a loan for $7,940.
Katherine Kealoha’s attorneys said she is indeed very sick. Earle Partington, an attorney hired by her family who only represents her in the conspiracy case, previously said his client has had to get treatment. Kealoha also was able to delay the first trial, saying she needed cancer treatment.
Meanwhile, a plea offer is on the table and negotiations are in the works, Katherine Kealoha’s attorneys say. If an agreement is reached, the January trial would be off.
However, Partington said the deal that the prosecutors have offered isn’t a particularly enticing one.
“The only thing in it for her was trust the government and we’ll do good things for her,” he said.
His client is still in the process of reviewing documents and drumming up a counter offer, Partington said.
Kealoha’s other attorney, Gary Singh, who represents her in all the other cases, was more cautious. “We’re still negotiating,” he said after the arraignment Tuesday.
Rustam Barbee, who represents Louis Kealoha, declined to comment.
Assistant U.S. Attorney Michael Wheat could not be reached for comment.
Katherine Kealoha also faces trial in another case involving her younger brother, Rudolph Puana, a Big Island anesthesiologist who is scheduled to be arraigned Wednesday afternoon. The siblings are accused of running a prescription drug ring. That trial is set for May.
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