Katherine Kealoha once posed for a photo with a line of cocaine on her husband’s desk while he was Honolulu’s police chief to win a bet, according to newly filed court records.

The revelation from federal prosecutors is part of an ongoing criminal case involving Kealoha’s brother, Rudolph Puana, a Big Island pain doctor, who’s been accused by the U.S. Justice Department of running an illegal prescription drug ring in which he and his friends traded opioids for cocaine and cash.

Kealoha, a former city prosecutor, has already pleaded guilty for her part in the conspiracy, which included trying to hide her brother’s alleged criminal activities from law enforcement by manipulating an accused drug dealer into remaining silent about the origin of prescription drugs found in her house during a police raid.

HPD Kealoha case Federal Investigator Michael Wheat exits US District Court.
Assistant U.S. Attorney Michael Wheat has spent years investigating corruption in the Aloha State. Cory Lum/Civil Beat

Puana is now scheduled for trial Sept. 14 when he will face dozens of counts of distributing controlled substances, including oxycodone and fentanyl, as well as additional charges of health care fraud and being an addict in possession of firearms.

In court papers, federal prosecutors, who are led by Assistant U.S. Attorney Michael Wheat of San Diego, detailed some of the evidence they hope to present during Puana’s upcoming criminal trial.

They said that from 2012 to 2017 Puana, a double-board certified anesthesiologist, was the owner of a Big Island pain clinic and that he distributed nearly 25% of all his oxycodone prescriptions — about 7,000 pills in total — to his close friends, Christopher McKinney and Joshua DeRego, who then sold the pills or traded them for cocaine.

“The staggering number of pills flowing from Puana to these individuals demonstrates these prescriptions were beyond the usual course of professional practice and not for legitimate medical purposes,” Assistant U.S. Attorney Colin McDonald wrote in the government’s pleading.

“Indeed, as those friends confirm in sworn testimony, Puana’s prescriptions had nothing at all to do with the practice of medicine. Rather, Puana prescribed the monthly supply of pills so his friends could resell them on the black market to earn some easy cash (some of which then went towards funding cocaine parties with Puana).”

McKinney and DeRego, while named in court documents, have not been charged.

McKinney, who is a well-known writer in Hawaii, was Puana’s childhood friend from Oahu. Together they wrote a book together about Puana’s upbringing titled, “The Red-Headed Hawaiian: The Inspiring Story about a Local Boy from Rural Hawaii Who Makes Good.”

Prosecutors said McKinney told them that while the two were collaborating on the book they were using “large quantities of cocaine.” According to investigators, Puana eventually wrote a prescription for McKinney for oxycodone and told him he could sell the pills for $15 a piece.

DeRego and Puana were similarly close, “almost brotherly,” prosecutors said. DeRego and Puana would golf, drink and do cocaine together. Their children also attended the same private school.

According to court records, Puana and his then-wife sponsored a scholarship for DeRego’s children to attend the school because he was struggling to pay the tuition himself. Puana then allegedly offered DeRego and his wife, Elena Rodriquez, oxycodone that they could sell to pay for their childrens’ school.

He also connected them with a Big Island drug dealer identified by prosecutors only as “the Hawaiian,” and told them they could sell the prescription pills for $20 each. Between 2013 and 2015, prosecutors said Puana prescribed more than 4,000 tablets of oxycodone to Rodriquez and that the pills were covered by Medicaid.

Katherine Kealoha and former HPD Chief Louis Kealoha arrive to District Court. June 20, 2019
Katherine Kealoha allegedly posed with a line of cocaine on her husband’s desk while he was still Honolulu’s police chief. Cory Lum/Civil Beat

Kealoha was a key part of the drug distribution scheme, according to the Justice Department, and admitted as much in a plea agreement in October 2019.

The former deputy prosecutor said her brother would write “medically unnecessary” prescriptions for her and others so that they could turn around and resell the drugs on the street or barter for cocaine that they could then use for themselves.

Kealoha used her position as a prosecutor to misdirect law enforcement after HPD raided an alleged drug dealer’s house in 2015 and seized drugs that had come from her brother. She also cultivated an inappropriate relationship with the accused dealer, Tiffany Masunaga, in an attempt to keep her quiet and protect Puana.

When McKinney was subpoenaed to testify before a federal grand jury in 2018 about the relationship with Masunaga, he called Puana who allegedly told him, “just remember, it’s our word against hers.”

Throughout it all, McDonald wrote that Puana was addicted to cocaine, painkillers and alcohol.

“Puana’s use of controlled substances spiraled to the point of challenging his fellow users to take a photo of themselves using cocaine in an outrageous place,” McDonald wrote. “Puana’s sister, Katherine Kealoha, ‘won’ by submitting a picture with a line of cocaine on the desk of the Honolulu Police Chief Louis Kealoha.”

The Kealohas are currently serving federal prison sentences for their roles in a series of crimes that were uncovered after they were caught trying to frame a family member for the theft of their mailbox.

The new filings from prosecutors relate to evidence the Justice Department wants to use to help prove its case against Puana. Prosecutors say they want the chance to use statements Puana made during two meetings with them in October 2018 in which they offered him the chance to cooperate.

In those meetings, which occurred just after Puana returned from a Betty Ford rehabilitation clinic in Minnesota, Puana admitted he was a “big-time cocaine user” and that as a physician he “took advantage of his position.” He also told the prosecutors that he was treating some of his patients “off the books” and that he tracked those transactions in a notebook he kept hidden in a locked closet at his pain clinic.

The prosecution is also seeking permission from a judge to use the notebook as evidence, describing it as a “secret ledger” that tracked his illegal activity. The Justice Department also wants to rely on the use of expert witnesses, including doctors, who can speak to Puana’s addictions and his abdications as a medical provider.

Puana’s ex-wife and business partner, Lynn Welch, is also expected to be called as a witness during the trial, according to the documents.

Read the latest court filings here:

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