An attorney for Honolulu’s former top attorney Donna Leong wants to depose the retired city budget director to help her fight a federal conspiracy charge, but federal prosecutors argued she shouldn’t be allowed to do that.

Leong is accused of conspiring with former managing director Roy Amemiya and former police commissioner Max Sword to evade the Honolulu City Council and pay $250,000 to then-chief Louis Kealoha, who was under federal investigation. To make the payoff, prosecutors say the defendants misused city funds. All the defendants have pleaded not guilty.

Dept of Budget and Fiscal Services Director Nelson Koyanagi Jr. questioned by Honolulu City Council members.
Former Department of Budget and Fiscal Services Director Nelson Koyanagi spoke to federal investigators twice, they said. Cory Lum/Civil Beat/2018

Leong’s attorney Lynn Panagakos argued last week that she needs to secure former Budget and Fiscal Services director Nelson Koyanagi’s testimony under oath as soon as possible because he has health issues and may not be “available to testify at trial.”

According to Panagakos, Koyanagi is a “critical witness” who can prove her client’s innocence.

Federal prosecutors opposed that motion on Thursday, saying that Panagakos failed to establish that Koyanagi was willing and able to testify.

Koyanagi’s medical records were submitted to the court under seal, meaning they are confidential. But prosecutors said in their filing that the medical information “raises significant concerns about Koyanagi’s fitness, competency, and overall availability to serve as a witness.”

Koyanagi’s attorney Howard Luke declined to comment.

If not for the medical issues, prosecutors said they would welcome Koyanagi’s testimony because they believe it would help their case, not exonerate Leong.

Corporation Counsel Donna Leong has been an integral part of the police commission's decisions on Kealoha's retirement deal.
Former corporation counsel Donna Leong allegedly told other city officials that budget director Nelson Koyanagi would approve the payment. Cory Lum/Civil Beat/2017

According to prosecutors, Koyanagi worked alongside Leong to persuade Honolulu police officials to “misuse funds” to pay for Kealoha’s retirement. His testimony would “only serve to confirm Leong’s guilt,” they said.

The indictment states that HPD told Leong and others that it did not have the money to cover the cost of the payout, but Leong and Sword wanted to use funds from an account for vacant positions, also called the provisional account. Leong allegedly stated that Koyanagi would authorize the payment.

On a conference call among Leong, Sword, Koyanagi, and HPD leadership, Leong allegedly outlined a plan that would require only a “notification” to the city council, “not an approval,” prosecutors state.

HPD would allocate funds for the severance agreement from HPD’s salary fund, and when HPD ran out of salary funds because of the payout, Koyanagi would transfer money from the provisional account to the salary account, according to prosecutors.

“The scheme ultimately relied on the thinly veiled pretense that the provisional account had been emptied due to filling vacancies within HPD and thus needed reimbursement,” prosecutors wrote in their filing.

HPD leadership allegedly objected to the “fib,” prosecutors said.

According to prosecutors, Koyanagi later reiterated what Leong had said, that, “one way to possibly get money to you guys, so you would use your funds that you have now and if you have any vacancies that you, you either filled or need to fill then we can transfer uh, money to, to um, cover that and then that would hopefully supplement the amount that you paid out.”

At one point, Leong allegedly asked Koyanagi to weigh in on whether the payout was appropriate.

“Koyanagi was ready to weigh in, armed with his own memorandum that he later admitted Leong had drafted for him,” prosecutors said.

“In his memorandum, Koyanagi said retirement payments, including those made to resolve an employment dispute, were paid from the applicable salary account of the department to which the employee is assigned. Since Kealoha was assigned to HPD, he concluded, the use of the HPD salary account to pay the amount authorized by the HPC was appropriate.”

Leong, Sword and Amemiya were copied on the letter, prosecutors said.

Koyanagi participated in two interviews with federal investigations, prosecutors said in their filing.

During the first on March 13, 2018, Koyanagi said his only involvement in the payout would have been to process it.

“Koyanagi denied being aware of anyone who raised concerns about the legality of the payout, denied recalling any conversations with HPD about the payout, and denied speaking with Sword about the payout,” prosecutors said.

During a second interview on Oct. 3, 2018, Koyanagi was “confronted about discrepancies in his prior interview,” according to prosecutors.

“Koyanagi stated he had difficulty remembering the events surrounding the payout,” prosecutors said. “He only remembered speaking with Leong, but could not recall the substance of those conversations. He could not recall speaking to others.”

The former budget director said he followed the guidance of the city legal department, which Leong headed, and that the department advised him that the payout didn’t need council approval.

“Koyanagi stated that he vaguely recalled having conversations with Leong about avoiding City Council approval and explained that most City departments avoided City Council if they could do so legally,” prosecutors said.

However, Koyanagi also said that if the provisional account was used solely for Kealoha’s severance payment, it would have had to go to the city council for approval.

Support Civil Beat during the season of giving.

As a small nonprofit newsroom, our mission is powered by readers like you. But did you know that less than 1% of readers donate to Civil Beat?

Give today and support local journalism that helps to inform, empower and connect.

About the Author