Honolulu City Councilwoman Kym Pine suspected something was off. 

It was Jan. 10, 2017, in the City Council committee room. Honolulu Police Commission Chair Max Sword was being asked about a retirement deal being brokered with then-Police Chief Louis Kealoha, who was under federal investigation for using his position to frame an innocent man. 

The problem was Sword refused to tell the council members anything about the deal. He wouldn’t say whether he would ask the council for approval nor what pot of money a payment might be coming from.

“How come?” Pine asked. “A lot of people that I’ve spoken to would disapprove of any additional payout to the police chief that’s in addition to what he already has a right to based on our hiring laws.” 

Former Honolulu Police Chief Louis Kealoha is currently serving a federal prison sentence. Cory Lum/Civil Beat/2016

That meeting is now part of a federal indictment in which Sword and two of the city’s most senior officials — former Corporation Counsel Donna Leong and former Managing Director Roy Amemiya — are accused of conspiring to illegally bypass the city council to pay Kealoha a $250,000 severance. The former chief is now serving a seven-year sentence in a federal prison in Oregon after being convicted on felony charges of conspiracy and obstruction of justice and pleading guilty to bank fraud.

All three defendants have pleaded not guilty. But the criminal charges for the former high-ranking city officials have drawn new attention to long-held suspicions that the payment was improper. 

“I felt that something very wrong had happened,” Pine said in an interview last week. 

The payment itself was widely reported at the time as city officials grappled with how to deal with a police chief who had just been named as a target in a federal corruption probe.

One of his officers, Niall Silva, had just pleaded guilty to helping to frame the police chief’s wife Katherine Kealoha’s uncle for a crime he didn’t commit. That case, the falsified theft of the Kealoha’s mailbox, would ultimately be the couple’s downfall. 

Kealoha put himself on paid leave. The severance agreement, ostensibly aimed at persuading the police chief to retire early from his post to avoid further embarrassment to the city, was reached in secret negotiations between Kealoha, his attorney, Sword and Leong.

Ultimately, the police commission approved the payment on Jan. 18, 2017 with the only no vote coming from attorney Loretta Sheehan. 

HPD Police Commission Chair Max Sword media
Former Honolulu Police Commission Chair Max Sword helped negotiate Kealoha’s retirement. Cory Lum/Civil Beat/2017

Even though Kealoha wouldn’t be convicted for years to come, there was still justification to terminate Kealoha for cause, according to Sheehan, a former federal prosecutor.

And she said as much in executive session, according to minutes that were obtained through a lawsuit by the Civil Beat Law Center for the Public Interest. 

But on Jan. 4, 2017, Sword urged his colleagues to allow him to talk to Kealoha and see if he could get him to retire. Two days later, the minutes show Sword had held several meetings with the chief, his attorney and others. Again, the commissioners discussed firing Kealoha until Leong joined the meeting, according to the minutes.

Leong, the city’s top attorney, presented a proposed retirement agreement that she had helped draft, that would give Kealoha $250,000 in addition to his pension, the minutes show. The commission allowed Sword and Leong two more weeks to finalize the deal before taking a vote. 

Leong expressed concern about a wrongful termination lawsuit, Sheehan recalled in an interview. Sheehan felt the city could defend itself if it came to that. 

“That was definitely a reason advanced by Max and Donna and everybody kind of latched onto it,” Sheehan said. “But I’m like, we have a free lawyer: you. What’s the problem? She didn’t want to do it.”  

Whether Kealoha or his attorney actually threatened a lawsuit or asked for a certain amount of money, Sheehan said she doesn’t know. “Maybe they met in the middle. Maybe Louis was asking for a million,” Sheehan said.

HPD Chief Kealoha Acting Mayor Roy Amemiya2. 20 dec 2016
Former managing director Roy Amemiya is accused of trying to tamp down HPD’s criticism of the allegedly illegal payout. Cory Lum/Civil Beat/2016

Alexander Silvert, a former federal public defender who cracked the Kealoha conspiracy case, said there was good reason to believe Louis Kealoha would sue if he were fired.

Kealoha was represented by an attorney, Kevin Sumida, and had already filed suit against the Honolulu Ethics Commission in 2015 to stop its investigation into him. 

“I’m sure the threats of a possible lawsuit were real,” said Silvert, who authored a book on the Kealoha case called “The Mailbox Conspiracy: The Inside Story of the Greatest Corruption Case in Hawai’i.”

Sumida did not respond to a request for comment. Neither did lawyers for the defendants, who were all appointed by former Mayor Kirk Caldwell.

It’s possible that Leong, Sword and Amemiya were legitimately looking out for the city’s best financial interests, Silvert said. And that’s what Leong’s attorney Lynn Panagakos said in a statement to the media last week. 

An alternate theory, in Silvert’s view: “The city desperately wanted him out because he was an embarrassment, and maybe there was more going on behind the scenes than we know.” 

Caldwell, who is running for governor this year, has not publicly commented on the latest charges and did not respond to emailed questions.

Early Suspicions

While the details of Kealoha’s involvement in the mailbox frame job weren’t yet clear in early 2017, there was apprehension at the time among public officials and community members about giving him money beyond his pension. 

The City Council regularly votes on settlements of lawsuits and legal claims and has the power to deny payment. Additionally, any payments exceeding $100,000 need city council approval, according to city law. 

Pine and council chair emeritus Ernie Martin, who is an attorney, questioned the proposed Kealoha settlement in that January 2017 council committee meeting, before the police commission approved the deal. 

“A normal public employee, when they retire, they don’t have the right to negotiate additional terms and conditions,” Martin said. 

“So in this particular situation, when there are statements made to the effect that there are other terms and conditions applicable to the retirement, it’s technically not a retirement. It’s more of a settlement. Would you say that’s a correct statement?”

“I’m not a lawyer,” Sword responded.

“I think it’s a mischaracterization to say this is a retirement,” Martin continued. 

“Again, we’re splitting hairs here on that, and I’m not a lawyer, again, to understand what is and what isn’t,” Sword said.  

Then-Councilman Trevor Ozawa also requested that the Police Commission provide more detail to the council. Sword said that was a reasonable request.  

Pine asked a follow-up question: Had Kealoha or his attorney threatened a lawsuit? 

“I can’t comment on that,” Sword said.

“Ok,” Pine said. “I tried.” 

The deal never did go before the council for its approval.

Corp Counsel Donna Leong speaks to media following hearing at District Court
Former Corporation Counsel Donna Leong is accused of working to circumvent the Honolulu City Council to pay off Kealoha. Cory Lum/Civil Beat/2018

The same day of the committee meeting, Sword allegedly met with the interim police chief, Cary Okimoto, as well as some HPD deputy chiefs to discuss the retirement deal.

According to the indictment, Sword informed them that the Police Commission was planning to pay Kealoha a quarter-million dollars, to which the HPD officials responded: We don’t have that money in our budget. 

On Jan. 11, an HPD official allegedly told Leong that a payout to Kealoha would require City Council approval. Leong declined, according to the indictment, and suggested that council review could be avoided by falsely claiming that the money was needed to hire new employees. 

Okimoto again told Leong that the payment could not be covered with HPD funds, according to the indictment. 

The next day, Leong and Okimoto reiterated their arguments, the indictment states. Leong allegedly advised Okimoto to request a transfer of money from a fund for vacant positions, but the indictment states Okimoto noted that diverting money from HPD would lead to cutting law enforcement services.  

Meanwhile, then-City Council Chair Ron Menor requested a briefing on the agreement before the Police Commission’s vote, the indictment states, but Sword said that wouldn’t be necessary. 

In a Jan. 13 letter drafted by Leong, Sword said approval was not required because the payment was “based on Kealoha’s employment and retirement concerns, and did not solely or primarily concern the use of city funds,” according to the indictment. 

More Questions

The indictment is also raising questions about what the former mayor knew about the situation. Caldwell had a reputation for being a hands-on manager, leading some to question his involvement. 

“Everyone has been asking me: Is the mayor involved?” Silvert said.  

Civil Beat sent Caldwell and his campaign attorney Lex Smith written questions about whether the mayor was aware that his appointees were allegedly working to circumvent the City Council, whether he directed them to do so, whether he has received a subject or target letter from the FBI and whether he has been questioned by federal authorities.  

Neither responded. 

Caldwell has avoided answering questions about the Kealoha case for years, and after the couple’s conviction, he famously said it was time to “move on.” 

“Before the Kealohas were convicted, he kept saying that he wouldn’t judge anybody, we’ve got to wait to see what happens. That was his mantra,” Silvert said. “Then it happened, and then his mantra was: We don’t look back, we only look forward.” 

HPD Memorial Walk with Mayor Kirk Caldwell, Mayor Bernard Carvalho and HPD Chief Louis Kealoha as they march down South Beretania Street. 17 may 2016
Former mayor Kirk Caldwell, pictured in 2016 with Louis Kealoha to his right, hasn’t said much about the scandal. Cory Lum/Civil Beat/2016

Another unanswered question: Will taxpayers ever get their money back?

The agreement included a stipulation that Kealoha was required to refund the $250,000 if he was found guilty or pleaded guilty to a job-related felony within six years. Following his 2019 conviction, a Circuit Court judge ordered him in 2020 to return the funds to the city. 

Mayor Rick Blangiardi’s office said none of Kealoha’s retirement funds has been returned to date. Given the fact that, during his trial, Kealoha obtained a free court-appointed private attorney, a service provided only to indigent defendants, hopes are not high that he’ll ever pay up. 

According to state law, the city cannot garnish Kealoha’s pensionAnd any income Kealoha may be earning in prison is paltry. Federal inmates only make between 12 and 40 cents per hour, according to the Bureau of Prisons. At that rate, Kealoha would have to work over 2 million hours to pay back the settlement. 

The indictment also raises a new question of whether taxpayers will have to cover the legal defense costs for Leong, Sword and Amemiya who, one could argue, were acting within the scope of their city duties. 

Blangiardi’s office said the city attorney is currently analyzing whether the city will be required to cover those legal bills. 

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