Update 1:30 p.m.

A Honolulu Police Department spokeswoman said Sgt. Daniel Sellers, who was also arrested as part of the Kealoha investigation, will be placed on leave without pay pending the investigation. Sellers was released on $50,000 unsecured bond in federal court today after pleading not guilty. He is alleged to have given false testimony to the federal grand jury and the FBI about the Kealoha case. Sellers has 20 years of service with HPD and is currently assigned to the Windward Oahu district.

Update 1 p.m.

Acting HPD Chief Cary Okimoto, who was at the federal building for today’s proceeding, was asked by reporters about department morale in the face of the Kealoha scandal. “It can’t be good,” he said. “I know my morale is not too good.”

Update 12:50 p.m.

Louis and Katherine Kealoha, both wearing lei, left the federal court building shortly after being released on bond and were greeted by a large media gathering. “We appreciate the continued community support, and we look forward to our day in court,” the former HPD chief told reporters.

Update 12:20 p.m.

Honolulu Special Agent in Charge Paul D. Delacourt said at a news conference outside the federal court building in Honolulu that “this is far more than a case of a stolen mailbox.”

Alana Robinson, acting U.S. Attorney for the southern district of California, said the Kealohas swindled hundreds of thousands of dollars to support their lifestyle. She said the Kealohas and a handful of HPD officers staged mailbox theft and falsified reports. “No one is above the law,” she said.

Update 12:12 p.m.

City deputy prosecutor Katherine Kealoha was released on $100,000 unsecured bond after prosecutors unsuccessfully argued that she should not be freed. They argued that she met with a co-conspirator in the city prosecutor’s office to agree to “a false narrative” and that she has at least 10 phone lines, which they considered evidence she’s tried to hide her previous conduct. U.S. Magistrate Judge Richard Puglisi said prosecutors did not present adequate proof, and released her and her husband, former HPD Chief Louis Kealoha.

Update 12:05 p.m.

Statement from Mayor Kirk Caldwell: “The FBI investigation has reached the highest levels in the Honolulu Police Department and Prosecutor’s Office, and this shows that no one is above the law. Oahu residents deserve to know what happened and expect justice to be served. I thank the men and women of our police force who have continued to do their jobs every day with professionalism and without hesitation. Throughout this investigation I believe the department has been managed well under Acting Police Chief Cary Okimoto and his team at HPD. Honolulu remains one of the safest large cities in the entire country and that won’t change with these arrests.”

Update 11:45 a.m.

Former HPD Chief Louis Kealoha and city deputy prosecutor Katherine Kealoha plead not guilty to federal charges in their initial appearance in court. Chief Kealoha will be released on $100,000 unsecured bond. Federal prosecutors ask the judge not to let Katherine Kealoha free, saying she has a “proven track record” of obstructing evidence and intimidating witnesses.

Update 11:30 a.m.

Retired Honolulu Police Chief Louis Kealoha and his wife, Katherine, a city deputy prosecutor, are expected to appear soon in federal court for their initial appearance on charges filed after the arrest this morning.

As the news speads, city officials are reacting to the arrests:

>> City Councilman Ernie Martin: “These are very serious allegations against public servants responsible for keeping our community safe. It’s a dark chapter in HPD’s history but let the judicial process play out before we pass too much judgement. And remember, the majority of HPD’s nearly 2,000 sworn officers put that uniform on and work hard every day to help make Honolulu one of the safest major cities in America and these indictments do not, in any way, reflect the hard work they do for our community.”

>> Honolulu Police Commission Chairman Max Sword: “It is the Commission’s understanding that the federal grand jury has decided that there is enough evidence of criminal conduct occurring at HPD under the leadership of Chief Kealoha to return an indictment. We at the Police Commission respect the decisions that the grand jury has made and leave the question of whether crimes were committed to the criminal justice system. We at the Police Commission will focus on the future, on selecting a new Chief, and on supporting the men and women of HPD as best we can.”

PREVIOUS COVERAGE

FBI agents arrested retired Honolulu Police Chief Louis Kealoha and his wife, Katherine, a city deputy prosecutor, this morning in connection with a public corruption case tied to an alleged theft of their mailbox in 2013.

The Kealohas’ attorney, Myles Breiner, said they “self-surrendered” to agents at one of their Honolulu homes at 6 a.m. Breiner said the Kealohas are scheduled to appear at Honolulu federal court this afternoon.

FBI agents today also arrested HPD Sgt. Daniel Sellers, who is the fifth former or current HPD officer, including the former chief, arrested in connection with the case this week.

The Kealohas are charged with conspiracy, making false statements to federal officers, obstruction and bank fraud. The bank fraud is related to a mortgage refinancing. In addition, Katherine is charged with aggravated identity thefts.

Sellers joined the Police Department in 1997. According to a court document, he served in the Criminal Intelligence Unit from 2009 to 2011. The document further stated Sellers and Katherine Kealoha have known each other since high school. They “met in high school, dated for several years, and continued a social and professional relationship for over 20 years.”

The arrests come two days after FBI agents executed search warrants at two homes where the Kealohas reside, and more than seven months after Chief Kealoha retired under the cloud of the federal investigation, reaching a $250,000 settlement agreement with the Honolulu Police Commission.

A spokesman for the city Department of the Prosecuting Attorney said today that Katherine Kealoha has been placed on leave without pay pending the outcome of the federal case.

Earlier this week three current and former HPD officers were arrested in connection to the case, and the formal charges detailed what prosecutors alleged to have occurred.

The case revolves around the allegation that the Kealohas and other HPD officers, specifically in the Criminal Intelligence Unit, framed Gerard Puana, Katherine Kealoha’s uncle, for the theft of the mailbox in front of their then Kahala home in June 2013 and that they conspired to cover it up when the matter was investigated by federal agencies.

When the incident occurred, Puana and the Kealohas were involved in a civil lawsuit over family money. Prosecutors believe the frame job was instigated to discredit Puana’s standing in the lawsuit.

Puana was charged with stealing the mailbox. HPD started the mailbox-theft investigation but later handed the completed investigation to the U.S. Postal Inspection Service.

The chief caused a mistrial during Puana’s federal trial on a mailbox destruction charge in December 2014 when he gave the federal jury unsolicited testimony about Puana’s criminal history. Puana’s lawyer, first assistant federal defender Alexander Silvert, alleged that Kealoha deliberately caused the mistrial, and said the prosecutor dismissed the case after Silvert delivered evidence of police misconduct that was going to be presented in the trial. Kealoha has denied causing the mistrial on purpose.

After the case dismissal, Silvert said he gave the FBI that evidence of police misconduct during HPD’s mailbox-theft investigation.

A grand jury investigation into the Kealohas began in late 2015 and was headed by Michael Wheat, a federal prosecutor from San Diego. In the grand jury process, prosecutors present evidence to jury members, who decide whether the material is sufficient to warrant criminal charges. But the suspects are not there to defend themselves.

Chief Kealoha retired Feb. 28 under an agreement reached with the Police Commission. The commission voted 5-1 on Jan. 18 to approve the $250,000 severance payment for the chief. Under the deal, the chief must return the money if he is convicted of a felony within seven years.

The chief placed himself on paid administrative leave Dec. 20, the day he was informed by the FBI that he was the target of an investigation. HPD Acting Chief Cary Okimoto has been running the department since then, and the commission’s search for a permanent replacement continues.

The FBI notice to Kealoha came after retired HPD officer Niall Silva became the first defendant in the case involving HPD’s handling of the mailbox-theft investigation.

On Dec. 16, Silva pleaded guilty to conspiring with others to defraud the government by falsifying records, lying to federal investigators and on the witness stand in Puana’s criminal trial. The plea agreement does not name Silva’s co-conspirators. However, five days after Silva was charged with conspiracy, Puana filed a federal civil lawsuit against the Kealohas, Silva and three former and current police officers accusing them of framing him with stealing the mailbox.

The Kealohas have been on the offensive against the investigation and their accusers. Last year, Breiner filed a request in U.S. District Court to have Wheat disqualified for allegedly leaking information about the case to the media. Grand jurors, interpreters, people involved in recording the proceeding and government attorneys participating in the proceedings are prohibited from disclosing matters before the grand jury. The Federal Rules of Criminal Procedure do not, however, prohibit disclosure by witnesses called to testify.

Also in 2016, the Kealohas sued the city, the Honolulu Ethics Commission and the commission’s former executive director and former investigator for investigating them. The lawsuit, filed in state court, alleged that former Executive Director Chuck Totto and former commission investigator Letha DeCaires “since 2013 (have) conducted a series of unfounded, vindictive, unsubstantiated and illegal investigations,” which have caused destruction, terror and irreparable harm to city’s police and prosecuting attorney departments.

The Kealohas allege that Totto and DeCaires committed serious ethical, moral and professional violations with “callous disregard for the lives and reputations of others and the demoralizing effect their vicious conduct has had on a number of county agencies and employees.” The Kealohas said they were served with notices of alleged ethics violations, but that the commission later dismissed them and settled the cases.

This was also the second time the Kealohas sued the city Ethics Commission. Katherine Kealoha sued the commission under the pseudonym “Public Servant” in July 2015, asking for a copy of whatever ethics complaint had been filed against her.

Louis and Katherine Kealoha Indictment by Honolulu Star-Advertiser on Scribd