The terms of Louis Kealoha’s retirement package were clear: The Honolulu police chief could resign with a $250,000 payout while under federal investigation, but if he were convicted of a crime, he’d have to pay the money back. 

Since that deal was signed in 2017, Kealoha was convicted in one of Hawaiʻi’s biggest corruption scandals and served prison time. He is now back in the islands on house arrest, as first reported by Hawaii News Now.

But he hasn’t paid back a dime of his severance package, even as he continues to collect his $150,000 annual pension.

The county put a lien on Kealoha’s property but has not been successful in collecting anything yet, according to Ian Scheuring, a spokesman for the mayor’s office.

“Now that he is out of prison, we have other options to consider,” he said. 

Loretta Sheehan, a former police commissioner who opposed Kealoha’s retirement deal, said the county should work strenuously to retrieve what it is owed.

“This is taxpayer money,” she said. “We earned this, and we pay taxes, and we don’t want it spent like this.”

Civil Beat was unable to reach Kealoha for comment. His Salt Lake condo is in a gated community, so on a visit there it was not possible to reach his front door, and a message left for him with the Hawaiʻi federal probation office on Tuesday was not returned. 

However, Kealoha expressed his intent to pay back the money in February 2021 during an interview with journalist Mary Zanakis, who is his wife’s cousin.

“I don’t know how I’m going to do it,” he told Zanakis, according to a transcript she shared with Civil Beat. “But I have to do it.”

The city is not able to touch Kealoha’s pension. A state law passed in 2021 allows for the garnishment of a public employee’s pension if they’ve been convicted of a job-related felony, but that law doesn’t apply to Kealoha. When it was being written in 2021, the Senate watered down the bill so that officials could take only 50% of a convict’s pension, and it exempted crimes committed before the law was passed. 

Political observers have noted that those changes benefited then-Senate Majority Leader J. Kalani English, who knew he was under federal investigation for bribery during that legislative session. The law took effect about six months after he took his last bribe, HNN reported.

The amendment also spares Kealoha’s pension. 

‘They Just Wanted To Pay Him’ 

Kealoha received the money as an inducement to retire after the FBI informed him in 2016 that he was the target of a corruption investigation. 

Kealoha and his wife, former deputy prosecutor Katherine Kealoha, were ultimately convicted three years later alongside two Honolulu police officers for their involvement in a criminal conspiracy packed with family drama.

Katherine had swindled money from her grandmother, Florence Puana, and Katherine’s uncle, Gerard Puana, had sought to hold her accountable in court. To discredit Gerard in that lawsuit, Katherine conspired with her husband and his subordinates to frame her uncle for a crime he didn’t commit: stealing the Kealohas’ mailbox. 

Katherine also pleaded guilty to helping her anesthesiologist brother run a drug ring on the Big Island. And both Kealohas pleaded guilty to stealing the inheritance of two children for whom Katherine was a financial guardian.

But in 2017, many of these facts were not publicly known. All the Honolulu Police Commission knew was that Kealoha was under investigation for corruption and on paid leave, and that Mayor Kirk Caldwell’s administration was eager to get rid of him. 

The idea for the severance payment came from Kealoha’s attorney, according to a transcript of one of Zanakis’ interviews with the former chief. 

“I thought it was a little unusual so I said, ‘Is that normal?’” Kealoha said. “And he said, ‘Yes, because you didn’t serve out the rest of your contract so they should pay you out the rest of the contract.’ So I said OK.” 

According to Kealoha, the payout was originally going to be $600,000, but it was negotiated down to $250,000. He said he agreed to the stipulation about paying it back because he never thought he would be convicted. 

“I agreed because I felt that we never did anything wrong and that we would be exonerated,” he said. “And then everybody would move on.” 

Three Caldwell appointees — City Attorney Donna Leong, Police Commission Chair Max Sword and Managing Director Roy Amemiya — arranged to cut Kealoha loose with a quiet payoff that would avoid the Honolulu City Council.

“Had the public been informed as far as what was going on, and had the matter been brought before the City Council, my sense is that people would have come forward to oppose it,” Sheehan said. “If you are honest with the public, you’re far more likely to have a correct result.”

Sheehan, a member of the police commission at the time, felt the body could’ve fired Kealoha for cause, but others were concerned he would drag the city into an expensive lawsuit.

Even if the city did want to pay Kealoha, Sheehan said it could do so through an annuity that would pay Kealoha in installments that could be reversed in the event of his conviction. Sheehan said she suggested that, but other commissioners weren’t interested. 

“We’re in this mess because they just wanted to pay him and shut it down,” she said. “And I thought it was a bad idea from the jump, but if you have to do it, at least be smart about it.”

Ultimately, the Police Commission approved the deal, with a lone no vote from Sheehan. 

Leong, Sword and Amemiya were themselves indicted on federal conspiracy charges in 2022 for arranging the payment. Last year, Leong and Sword pleaded guilty to evading council members to seal Kealoha’s deal. Amemiya admitted to wrongdoing but avoided a conviction with a deferred prosecution agreement.

The trio was ordered to pay a collective $250,000 in restitution to the city.  

‘Don’t Think They’ll Ever Get It Back’ 

Honolulu has been trying to collect the $250,000 from Kealoha for several years. 

A lien against any of Kealoha’s property was filed in June 2021. By then, the Kealohas’ Hawaiʻi Kai home had already sold at foreclosure.

As part of their sentence, the Kealohas were ordered to pay almost $700,000 in restitution to their victims and forfeit property that represents proceeds of fraud, including their home, a Rolex watch and approximately $230,000. 

The city’s existing lien should already apply to the Kealohas’ Salt Lake condo, but the city is preparing an amended lien to specifically reference that property, according to Scheuring.

Katherine Kealoha still owes $18,392.50 in restitution to Gerard Puana and the estate of Florence Puana., according to Puana attorney Eric Seitz’s office.

Louis Kealoha paid his restitution to the Puanas in full but also still owes them $500,000 from a federal civil rights lawsuit judgment.

“We are taking steps to collect on that judgment,” said attorney Jonathan Loo, who works for Seitz.

The Bureau of Prisons office in Sacramento did not respond to questions about the terms of Kealoha’s release from prison. 

Hawaiʻi’s Chief U.S. Probation Officer Tim Jenkins said Kealoha is required to check in with a Bureau of Prison contractor in person every day but couldn’t confirm other details.

Depending on the conditions, Kealoha may be able to go to the grocery store and even work a job, according to Ali Silvert, a former federal public defender who represented Katherine Kealoha’s uncle, Gerard Puana. And requirements can loosen up as the offender proves themself trustworthy.

“The point is to reintegrate you into your community,” Silvert said. 

The city can take several steps to recoup its $250,000, according to Silvert. While pension payments cannot be garnished, Kealoha’s bank account isn’t necessarily safe, he said. If he makes money again, that could be subject to payments to the city.

However, there are limitations to how much a lienholder can take at one time. 

“You can’t leave a person destitute,” Silvert said.

In a 2023 phone call from prison, Kealoha told Zanakis he was financially depleted and on the verge of bankruptcy. 

“I’m going to do my best to pay what I owe,” Kealoha said, according to Zanakis’ book. “That’s all I can do.” 

If Kealoha does declare bankruptcy, Silvert said the city won’t be able to collect at all. Overall, Silvert isn’t optimistic about the return of the $250,000. 

“I don’t think they’ll ever get it back,” he said.