A Big Island public corruption scandal deepened Monday as federal officials announced the felony indictments of two attorneys and a private businessman in a conspiracy involving at least $10.9 million worth of land and affordable housing credits issued by Hawaii County.

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The indictments follow last week’s guilty plea by Alan Scott Rudo, a former county housing official, who admitted taking nearly $2 million in bribes and kickbacks from real estate developers who had promised to build affordable housing in Waikoloa, South Kohala and Kailua-Kona but never did.


On Monday, U.S. Attorney for the District of Hawaii Clare Connors said a federal grand jury last week returned an eight-count indictment against Paul Joseph Sulla and Gary Charles Zamber. Both are Big Island attorneys who face six counts of wire fraud and one count of conspiracy.

Sulla faces an additional charge of money laundering for allegedly attempting to conceal the source, location and ownership of the money he pocketed as part of the scheme.

Rajesh Badhabhatti, described in court papers as a part-time resident of Pahoa, was charged separately with conspiracy to commit wire fraud. The indictment said he and two other individuals – identified at Monday’s press conference as Sulla and Zamber – worked with Rudo to create, own and manage several limited liability companies that purported to build affordable housing.

In his public role as a county housing official, Rudo’s job was to ensure that developers complied with county requirements that they include affordable units in any new housing construction projects or within 15 miles of the site. If they didn’t, they had to contribute to affordable housing elsewhere on the island. If they built beyond the required amount of affordable housing, developers earn credits that can be bought and sold by other developers.

Four men face felony charges in a Big Island public corruption scandal. Anthony Quintano/Civil Beat/2017

Between December 2014 and October 2021, the four men allegedly devised a scheme to make it appear as though Rudo was faithfully discharging his duties of making sure that Hawaii island residents had access to affordable housing.

In fact, Rudo was receiving bribes and kickbacks to shepherd proposed housing developments, which included affordable units his co-conspirators had no intention of building, through the various layers of government bureaucracy, according to court documents.

The four men created fictitious companies that were intended to be used as conduits to receive both land and affordable housing credits that could then be sold, with the proceeds being split among the group, the documents showed.

Rudo used his position with the Office of Housing and Community Development to ensure that county officials approved affordable housing agreements involving three limited liability companies in which he and the others had a stake: Luna Loa Developments, West View Developments and Plumeria at Waikoloa.

“Everyone knew that Rudo had a special position of trust,” Connors said. “That was what was known to these defendants and that’s how they were able to accomplish the conspiracy because the county trusted him.”

After a county employee alerted the FBI to the scheme, the law enforcement agency launched a three-year investigation starting in 2018, dubbed Operation Reverse Robinhood, according to Special Agent in Charge Steven Merrill.

Alan Scott Rudo pleaded guilty to taking nearly $2 million in bribes and kickbacks from real estate developers. LinkedIn

The tip came after the county employee read news coverage about Rudo’s activities and the questionable affordable housing projects in Environment Hawaii, a monthly newsletter, Connors said. The June issue has extensive coverage.

In all, the four men pocketed around $3.2 million. Federal agents were able to seize and recover $2.3 million and 45 affordable housing credits connected to the scam, according to Connors.

Rudo, who will be sentenced on Oct. 31, agreed to forfeit his ill-gotten gains and has agreed to a monetary judgment against him of $2.1 million.

Badhabhatti is scheduled to enter a guilty plea on Aug. 1, Connors said.

Conspiracy and scheming to commit honest services wire fraud each carry a maximum penalty of 20 years imprisonment and a fine of $250,000.  Money laundering carries a maximum penalty of 20 years behind bars and a fine amounting to double the property value. That’s over $1 million in this particular case, according to Connors.

Connors said her office is continuing to investigate the matter but she would not comment further.

“Our team’s work is not done. We rely on all of you to put a stop to criminal activities like this. So, if you come across any suspicious activity, please call the FBI,” said Merrill.

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