Once one of Oahu’s preeminent power couples, Louis and Katherine Kealoha’s stunning fall from grace continued Tuesday with both pleading guilty to additional federal charges.
With some complicated sentencing issues still to be resolved, it’s not clear when the retired police chief will join his former deputy prosecutor wife behind bars.
But when he does, they will remain in prison for a long time. Just how long is still to be determined.
As part of separate plea deals with the federal government, the Kealohas each pleaded guilty Tuesday to a single count of bank fraud.
They also agreed to pay more than $450,000 in restitution to multiple victims, with Katherine Kealoha responsible for the largest portion.
Katherine Kealoha also pleaded to one count each of aggravated identity theft and “misprision” of a felony — or a failure as a law enforcement officer to report a felony to federal authorities.
Both counts, like the bank fraud one, are felonies.
All the remaining charges they faced will be dismissed.
“Today another page is turned in the long saga that has plagued this community for some time,” lead federal prosecutor Michael Wheat told reporters following Tuesday’s hearings. “Today’s pleas will bring some vindication for additional victims of the Kelohas’ fraud and will allow us to move on to continue our investigation.”
The Kealohas’ guilty pleas represented a significant milestone in that investigation — one that started over a basic report of a 2013 mailbox theft but eventually transformed into one of the largest public corruption investigations in state history.
At least two high-ranking city officials have been publicly identified as additional targets: Prosecutor Keith Kaneshiro, Katherine Kealoha’s old boss, and Donna Leong, the city’s top civil attorney, who approved a controversial severance deal when Louis Kealoha retired from the Honolulu Police Department several years ago. Kaneshiro and Leong are on paid leave.
Before Tuesday the last major development in the federal case came in June when a jury found the Kealohas and two police officers guilty of conspiracy and obstruction of justice.
Using their positions of public trust, the four tried to frame Katherine Kealoha’s uncle, Gerard Puana, with the theft of the Kealohas’ mailbox and then lied to federal investigators about their actions.
Prosecutors said the four schemed to frame Puana to undermine him in a financial dispute he and his mother, Florence Puana, were having with the Kealohas — a dispute that threatened to expose the couple’s fraudulent ways that funded their lavish lifestyle.
For the Kealohas, Tuesday’s court appearance marked the first time that they publicly admitted to committing felonies — stunning admissions for two people who held such high-ranking law enforcement jobs.
Among other things, they both admitted to spending more than $591,000 from January 2009 to December 2014 on their extravagant lifestyle, which was supported with stolen funds, according to the plea agreements.
The money was stolen from a reverse mortgage obtained by Florence Puana, Katherine Kealoha’s grandmother; from funds belonging to Ransen and Ariana Taito, two minor children Kealoha represented as their court-appointed guardian; and from bank and credit union loans obtained through fraudulent schemes, including inflating their monthly income and claiming to own assets that belonged to others, the agreements show.
Kealoha also admitted for the first time that she wrote an email as part of the bank fraud scheme using the alias Alison Lee Wong — a name prosecutors highlighted in the June trial as a fictitious person Kealoha used.
In addition, Kealoha told U.S. District Chief Judge J. Michael Seabright that she withheld key information from Honolulu detectives investigating a drug-dealing ring to protect her younger brother, Dr. Rudolph Puana, and failed to inform federal authorities once she learned the information. Kealoha had been assigned to the case.
Federal prosecutors have since charged Rudolph Puana with multiple drug-related charges.
The Kealohas’ plea deal requires them to pay restitution of nearly $290,000 to Florence and Gerard Puana and more than $165,000 to the Taitos. If Katherine Kealoha can’t cover the full amount due the Puanas, the couple and the two officers convicted with them in June would be equally liable.
The couple admitted that they obtained more than $228,000 from the bank fraud scheme and agreed that the amount is subject to forfeiture.
They also agreed to forfeit more than $63,000 that remains from the foreclosure sale of their Hawaii Kai home — the court is holding those funds — and a two-tone Rolex watch “with blue dial large karat gold,” the documents say.
It’s not clear what assets, if any, the Kealohas still own that the government can go after through forfeiture.
As part of the plea deals, the Kealohas agreed to cooperate with the ongoing federal probe.
Asked what he expects to get of value from Katherine Kealoha’s planned cooperation, Wheat declined to answer specifically.
“Contrition is always the first step on the road to dealing with your issues,” he responded instead, “and the Kealohas took that step today. And hopefully, this will help this community heal after what it has gone through for the last couple of years.”
Just how many years the Kealohas will get is unclear because of a complicated set of issues that still needs to be resolved.
One is whether the sentencing guidelines should be based on violations of civil rights or obstruction of justice. The former comes with guidelines that call for substantially longer prison terms.
A hearing is set for Oct. 31 to begin sorting through that issue.
What Seabright decides regarding the guidelines will affect not just the Kealohas’ sentences, but those of the two convicted police officers, Lt. Derek Wayne Hahn and officer Minh-Hung “Bobby” Nguyen, who are free on bail.
Given the severity of the Kealohas’ crimes, they both are expected to get multiple years in prison, with Katherine Kealoha facing the longest time behind bars. Her aggravated identity theft conviction requires a mandatory two-year term to be served consecutive to the sentence she receives for her other crimes.
Bank fraud, the most serious of the charges, comes with a possible sentence of up to 30 years’ imprisonment and a fine of up to $1 million.
But the Kealohas are expected to get credit for taking responsibility for their actions based on Tuesday’s plea deal. If they provide assistance with the federal investigation, that also could help lessen their prison time — if prosecutors deem the assistance substantial.
Ultimately, the sentences will be up to Seabright.
Katherine Kealoha, 49, who remains in federal custody, told Seabright she wanted to come clean.
“I just want to be upfront with the court and make sure I’m telling you everything that occurred,” she said.
Tuesday’s court proceedings revealed some new details in the case.
Kealoha, for instance, said an unidentified Honolulu police officer signed the name of another police officer on a report she used to help obtain a credit union loan.
Knowing that the signature was false, Kealoha said she arranged to have the document sent to the financial institution to help her and her husband get the loan.
Wheat would not say whether the officer who signed the document is under investigation.
Kealoha also said a friend at American Savings Bank provided her with a bank statement for the Taitos’ account that did not include the children’s name, but Kealoha’s, making it appear that the $160,000-plus was hers.
Kealoha used that statement to help her and her husband get another loan, she admitted.
According to the terms of the plea agreement, the Kealohas give up their right to appeal their convictions and the sentences to be imposed by Seabright.
Following her court appearance but before her husband had his separate session to plead guilty, Kealoha issued a statement through her attorney, saying she wanted to take responsibility for her actions.
“I sincerely hope that the court and the community will see that Louis had no part in my criminal conduct,” she said.
But Louis Kealoha at his later court appearance admitted to multiple offenses, including from the conspiracy case. He also admitted that he and his wife provided false information to a financial institution about rental income.
“You knew that was false?” Seabright asked him.
“Yes,” Louis Kealoha replied.
Before Louis Kealoha pleaded guilty, he and his attorney spoke briefly to reporters outside the courthouse. His lawyer, Rustam Barbee, largely blamed Katherine Kealoha.
“During the evolution of this case, Louis Kealoha has come to slowly realize the extent of the deception and theft perpetrated by his then-beloved spouse and lifetime partner, who had assured him of her innocence,” Barbee told reporters. “Mr. Kealoha is deeply sorry for the victims in this case, financial and otherwise, and hopes to turn the page and start a new chapter in his life once the case is over.”
When asked about the case, Kealoha, 59, choked up.
“I’m not even thinking about myself right now,” he said. “I’m thinking about the negative impact that all of this had on the community, the Police Department and family and friends.”
Asked what he would say to the police officers who served under him and believed in him, Kealoha said, “You know, all I know is that I’m going to do my best to redeem myself and … I’m sorry.”
He couldn’t continue and walked away. He remains free on bail.