A major chapter has closed in Honolulu’s largest-ever public corruption investigation after Katherine Kealoha, a former deputy city prosecutor, and her husband, former HPD chief Louis Kealoha, signed separate plea agreements with federal prosecutors in court Tuesday.
Katherine Kealoha pleaded guilty to three felonies in two federal criminal cases involving bank fraud, aggravated identity theft and “misprision” of a felony for aiding and not reporting her brother’s alleged drug trafficking.
Aggravated identity theft has a mandatory two-year minimum sentence. Sentencing guidelines for the other felonies vary, and a series of hearings are expected to take place to determine which ones apply.
Louis Kealoha formally pleaded guilty to one felony count of bank fraud at a later court appearance Tuesday afternoon. He will remain out of custody on bail until his sentencing.
Louis Kealoha and his attorney, Rustam Barbee, made a statement to the press following Katherine Kealoha’s guilty plea Tuesday morning.
“During the evolution of this case, Louis Kealoha has come to slowly realize the extent of the deception and theft perpetrated by then-beloved spouse and lifetime partner who had assured him of her innocence, ” Barbee said of Katherine Kealoha.
Louis Kealoha said he would try to redeem himself.
“I’m not even thinking about myself right now,” he said. “I’m thinking about the negative impact that all of this had on the community, the police department and family and friends.”
According to the Kealohas’ plea agreements, each of the four defendants in the conspiracy case will pay a quarter of the restitution of more than $46,000 to Katherine Kealoha’s uncle, Gerard Puana, and more than $243,000 to her grandmother, Florence Puana.
Louis and Katherine Kealoha will also have to pay more than $165,000 in restitution to Ransen and Ariana Taito, the children whose trust funds were stolen.
Among the assets that the Kealohas must forfeit is a gold Rolex watch and about $229,000 that the defendants gained from criminal acts.
They would also be required to fully cooperate with the government in the ongoing federal investigation into public corruption in Hawaii.
“Today’s pleas will bring some vindication for additional victims of the Kealohas’ fraud and allow us move on to continue our investigation. Contrition is always the first step on the road to dealing with your issues. The Kealohas took that step today,” Assistant U.S. Attorney Michael Wheat, the lead prosecutor, told the press. “Hopefully this will help this community heal after what it’s gone through the past couple of years.”
Asked what he’s expecting from Katherine Kealoha’s cooperation based on her history of lies and fraud, Wheat said, “we’ll see what comes from it.”
Earle Partington, Katherine Kealoha’s attorney in the conspiracy case, said not much has been revealed about how she would cooperate or what information she would be required to disclose.
Louis Kealoha also agreed to cooperate with the investigators.
During Tuesday’s court proceeding, Katherine Kealoha had to answer a series of questions to demonstrate that she understood the terms of the plea agreement, including recounting the crimes she was pleading guilty to.
Seabright at one point asked if she had used the alias Alison Lee Wong to represent herself. At first, Katherine Kealoha said she used that person’s email address, then admitted to using the name.
The judge also pointed out that the prison sentence may be harsher than she may be hoping for.
“There’s no buyer’s remorse, you understand that?” Seabright said.
Possible prison terms for the Kealohas are unclear. Seabright said during their hearings that the prosecution and defense are at odds over what factors should go into deciding whether they should receive harsher sentences.
He scheduled a status conference on Oct. 31 to set hearings to air out those disputes. Seabright, who will ultimately decide the sentences, repeatedly asked both Louis and Katherine Kealoha if they understood what he decides may be more severe than what was promised by attorneys.
Gary Singh, Katherine Kealoha’s attorney in the cases involving bank fraud and drug charges, told reporters after the court hearing that “she took responsibility, which is important.”
Katherine Kealoha passed on a handwritten note through her lawyer to reporters after her plea hearing, which read, “Today I took responsibility for my actions and I sincerely hope that the court and the community will see that Louis had no part in my criminal conduct.”
In the bank fraud case scheduled for a January trial, the Kealohas were accused of defrauding banking institutions and stealing from the trust funds of children entrusted to Katherine Kealoha. She also pleaded guilty to an identity theft charge in that case.
Katherine Kealoha was also involved in another federal criminal case with her younger brother, Rudolph Puana, a Hawaii island anesthesiologist.
The siblings were indicted on charges of running a prescription drug ring using Puana’s access to drugs, such as fentanyl, and Katherine Kealoha’s position as deputy city prosecutor to keep him out of trouble.
Katherine and Louis Kealoha, currently going through divorce proceedings in state court, were also convicted of conspiracy and obstruction charges in June after being found guilty by a 12-member jury of conspiring to frame Katherine Kealoha’s uncle, Gerard Puana, for the theft of their mailbox.
Two HPD officers — Derek Hahn and Minh-Hung “Bobby” Nguyen — were also convicted in that trial. Retired Maj. Gordon Shiraishi, who was also charged, was acquitted. Two others — Niall Silva and Daniel Sellers — pleaded guilty before the case went to trial.
A motion for a new trial in that case was withdrawn Tuesday morning by Partington. “I think she just wanted to get this over with, move on,” he said.
Alexander Silvert, a federal public defender who represented Gerard Puana, acknowledged the prosecutors were able to save resources by getting the Kealohas to sign the plea agreements. But the fact that the public didn’t get to see and hear the full story through a trial was a “disservice,” he said.
The negotiations for the plea agreements for the bank fraud and drug cases happened behind closed doors, unlike the first conspiracy case, which unfolded in a jury trial, he said. As a result, many details about public corruption may remain unknown, Silvert added.
“That’s a sad, sad fact,” he said. “But it’s the reality of how this works.”
Meanwhile, a civil lawsuit filed by Katherine Kealoha’s uncle, Gerard Puana, and grandmother, Florence Puana, in 2013 remains unresolved as the Puanas are asking for a new trial.
A state court initially ruled in Kealoha’s favor and awarded her more than $650,000 in damages. However, following her June conspiracy conviction, a state judge sided with her grandmother and uncle, saying evidence shows Kealoha misrepresented herself and committed fraud during court proceedings for the civil case, so they should be granted a new trial.
Gerard Puana attended Katherine Kealoha’s change of plea hearing Tuesday.
“I just really needed to be there for closure,” he said. “I really visually wanted to see her in a jumpsuit.”
However, Puana said he didn’t feel like his niece was taking full responsibility. While she was recounting her crimes during the court proceeding, Puana said he felt that she was not being fully truthful.
“I just wanted to see her take responsibility,” he said. But he did not hear her apologize to her grandmother or him.
Other Honolulu officials have also received target letters from federal investigators in the public corruption investigation, including Honolulu Prosecutor Keith Kaneshiro, and Corporation Counsel Donna Leong. Honolulu’s top deputy prosecutor, Chasid Sapolu, received a subject letter.
All three of those officials are on leave from their city posts.
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