Ex-HPD Chief Kealoha and wife default on $1M mortgage, lawsuit says

A former Honolulu police chief and his wife — a deputy city prosecutor — who are both facing charges in a corruption case, are being sued for failure to pay their home mortgage.

The lawsuit filed by Hawaii Central Federal Credit Union this week comes as Louis and Katherine Kealoha fight an indictment. The credit union claims the couple defaulted on a $1 million mortgage for their home in Hawaii Kai, an affluent east Honolulu neighborhood.

The Kealohas have pleaded not guilty to a grand jury indictment accusing them of framing Katherine Kealoha’s uncle to discredit him in a family financial dispute. Other current and former officers also were named in the indictment.

In order to maintain the couple’s lavish lifestyle, Katherine Kealoha bilked banks along with her 98-year-old grandmother, an uncle and two children whose trust accounts she oversaw, U.S. prosecutors said.

Among other things, prosecutors say she spent money on Maserati car payments, Elton John concert tickets and a $26,000 brunch at a Waikiki resort when her husband was made police chief.

Jonathan Lai, an attorney for the credit union, declined to say today when the Kealohas stopped paying their mortgage.

It was not clear if the lawsuit would affect their ability to continue receiving taxpayer-funded lawyers in the corruption case. A federal judge in November appointed defense lawyers when he determined the couple’s debts exceed their assets.

U.S. District Judge J. Michael Seabright made the Kealohas fill out financial affidavits and questioned them on their finances.

Mortgage payments on the home consume much of Louis Kealoha’s pension, Seabright said.

If the house is sold and the couple no longer has the burden of those payments, Seabright said at the time, he would likely require the Kealohas to provide partial payment for their defense.

Property records show that the four-bedroom, three-bathroom home is assessed at nearly $1.4 million. The Kealohas purchased the property for $1.2 million in 2013.

The lawsuit names various community associations that may have claims against the home for any unpaid fees. John Morris, an attorney representing the Mariner’s Cove Association, said his clients haven’t yet been served with the lawsuit.

Kevin Sumida, a former attorney for the couple, is also named in the lawsuit as having a possible claim. The Kealohas owe Sumida $400,000 to $500,000, he told Seabright. Sumida couldn’t immediately be reached for comment today.

Cynthia Kagiwada, Katherine Kealoha’s defense attorney, declined to comment on her client’s civil matters. Louis Kealoha’s defense attorney, Rustam Barbee, also said he couldn’t comment on the foreclosure lawsuit.