Bank forecloses on Kealohas’ home

The financial institution that holds a mortgage on the Hawaii Kai home of former Honolulu Police Chief Louis Kealoha and his deputy prosecutor wife, Katherine Kealoha, has filed for foreclosure.

According to a foreclosure lawsuit filed in state court Wednesday by the Hawaii Central Federal Credit Union, the Kealohas are in default. The lawsuit says as of Jan. 26 the Kealohas owe $1,037,837 in principal, accumulated late fees and interest and continue to accrue interest at a rate of $105 per day.

The Kealohas and four former members of the Hono­lulu Police Department’s elite Criminal Intelligence Unit are scheduled to go to trial in U.S. District Court in June on charges that they framed Katherine Kealoha’s uncle for stealing the Kealohas’ mailbox and then lied to cover up their actions. The Kealohas have additional charges accusing them of defrauding financial institutions by knowingly submitting false loan applications and documents.

Court-appointed lawyers represent the Kealohas against the charges. U.S. District Chief Judge J. Michael Seabright approved the appointments in November after privately reviewing the Kealohas’ financial disclosures. He said he determined that the Kealohas are unable to pay for their own lawyers, in large part, because of the mortgage on the Mariners Cove home, which he said the Kealohas can sell to better their situation.

Rustam Barbee, Louis Kealoha’s court-appointed lawyer, said he was not involved in the preparation of the former chief’s financial disclosure and is not involved in the foreclosure.

The Kealohas’ previous lawyers said in their request to withdraw from the case that the Kealohas are living solely off the former police chief’s pension. Kealoha retired in February 2017 in a deal with the Honolulu Police Commission. Katherine Kealoha has been on unpaid leave from her job at the city Department of the Prosecuting Attorney since getting indicted in October.

According to documents on file at the State Bureau of Conveyances, the Kealohas secured a $980,000 mortgage from Hawaii Central FCU in 2013 to buy the 2,123-square-foot, four-bedroom, three-bath Hawaii Kai home for $1.23 million. This was after they sold their Kahala home, from where they reported their mailbox stolen, for $1.7 million. Hawaii Central FCU gave the Kealohas a $90,000 home equity loan in 2014.

The foreclosure is for a 2016 loan of $1.04 million. The home’s latest property tax-assessed value is $1,382,200.

The lawsuit also names as a defendant the Honolulu law firm Sumida Au &Wong LLLC. The Kealohas signed a mortgage with the law firm on the Hawaii Kai home in June 2017 to guarantee payment of their legal fees in various civil matters for which lawyer Kevin Sumida represented them.

It was Sumida who negotiated the $250,000 buyout from the Police Commission for Louis Kealoha’s retirement and has been representing the Kealohas in their lawsuit involving the Honolulu Ethics Commission. A state judge Feb. 23 dismissed the commission from the Kealohas’ lawsuit. The claims against former Executive Director Charles Totto, former investigator Letha DeCaires and the city remain.

Sumida did not respond to a request for comment.