Former Honolulu police chief Louis Kealoha sentenced to 7 years in prison; Katherine Kealoha gets 13 years

UPDATE 2:55 p.m.:

Former Honolulu Police Chief Louis Kealoha was sentenced to seven years in prison for his role in one of the worst public corruption scandals in Hawaii history.

Chief U.S. District Judge J. Michael Seabright handed down the sentence this afternoon just a few hours after sentencing Kealoha’s estranged wife, former Deputy Prosecutor Katherine Kealoha, to 13 years in prison for masterminding the scheme that bilked her grandmother out of her home, and framed her uncle for a crime he did not commit.

Louis Kealoha will be free on bail until 2 p.m. April 12 because of COVID-19 concerns, Seabright said.

After being released, he would be under three years of supervised release. He must also pay $238,198.56 in restitution, Seabright ruled.

>> PHOTOS: Looking back: Lives of Louis and Katherine Kealoha before sentencing on corruption charges and PHOTOS: Louis and Katherine Kealoha sentenced to prison on corruption charges

The once-powerful Honolulu couple has acknowledged their crimes, including bank fraud, which they used to fund a lavish lifestyle.

In Louis Kealoha’s hearing, Seabright repeatedly referred to Katherine Kealoha as the “mastermind” in the scheme to engineer a reverse-mortgage on her grandmother’s home and then frame her uncle, Gerard Puana, and imprison him to cover it up.

Seabright said the former police chief had opportunities to prevent the rail-roading of her innocent uncle.

“Katherine is more culpable, that’s pretty obvious,” Seabright told him.

But, the judge said, her husband’s actions cannot be excused and he could have told Katherine, “You’ve taken this too far. You need to end this.”

Before his sentencing today, Louis Kealoha, 60, read a statement to the court expressing shame and remorse for his actions. He also apologized and said he accepts his punishment.

12:25 p.m.

Katherine Kealoha — the former deputy prosecutor-turned-convicted-felon — was sentenced to 13 years in prison today for her role in masterminding a reverse mortgage scheme that cost her grandmother her house and then concocted a botched cover-up that led to federal convictions for herself, her estranged husband —former Honolulu Police Chief Louis Kealoha — and two Honolulu police officers who reported to him.

Chief U.S. District Judge J. Michael Seabright, who presided over the 16-day trial in June 2019, today also ordered Katherine Kealoha to pay $455,684.78 in restitution and serve nine years of supervised release once she is freed.

Former Honolulu police chief Louis Kealoha is scheduled for sentencing before Seabright later today.

He currently receives a pension and Seabright told Katherine Kealoha that he did not know how any potential settlement in the couple’s pending divorce may affect Katherine Kealoha’s financial ability to make restitution.

Two Honolulu Police Department officers who were simultaneously convicted by a federal jury along with the Kealohas — Lt. Derek Wayne Hahn and officer “Bobby” Minh-Hung Nguyen — face their own sentences in separate hearings before Seabright on Tuesday.

Kealoha has been held at the Federal Detention Center near Daniel K. Inouye International Airport and appeared for her sentencing in an off-white, short-sleeve prison jumpsuit over a tan T-shirt, wearing black athletic shoes with white soles on her feet. Unlike at least one other appearance before Seabright, Kealoha was not shackled.

She blew a kiss to a long-time family friend in the front row before the session began.

Katherine Kealoha used a reverse mortgage to cheat her grandmother out of her home and then organized a conspiracy to frame her uncle when he and his mother learned of the scheme, while also accusing her uncle of being a drug addict to further discredit him.

In a statement before she was sentenced, Kealoha stood and turned to her uncle, Gerard Puana, and apologized to him for the first time.

Puana was seated in the front row and did not look at the niece who betrayed and framed him.

Kealoha said she was “truly, truly” sorry to Puana and said she prayed for him every day and begged for forgiveness “for all the destruction and devastation I’ve caused.”

She hoped “that one day” Puana could forgive her.

One of Kealoha’s aunt’s — Charlotte “Charlee” Puana Malott — then read a victim impact statement in the words of her mother, the late Florence Puana who was Kealoha’s grandmother whom Kealoha conned to continue to fuel the Kealoha’s facade of a wealthy lifestyle.

“You betrayed me,” Malott read.

Florence Puana was forced to sell her home of 58 years in 2013 and had to move in with her daughter and son-in-law, all the while feeling that she had let down her late husband and their children.

She later felt “humiliated, frustrated and depressed” when Kealoha began conservatorship proceedings against Florence Puana to help cover up the reverse-mortgage scheme, which meant accusing her grandmother of impaired mental capabilities.

The “final blow,” according to Florence Puana’s statement, was the “dreadful and ruthless scheme. … You framed my son Gerrie and unlawfully arrested him.” Florence Puana died at age 100 in February.

Gerard Puana was unable to read his own victim impact statement. Puana put his left hand up to cover his face as attorney Eric Seitz read his statement to the court.

“It wasn’t bad enough that you stole from my mother — your own grandmother — but you also harassed, mocked and humiliated her. … You will be released someday Katherine, to start your life over. But you can never erase the pain, grief and tremendous damage you caused us. It still remains.” (Read Gerard Puana’s full statement below.)

Just before he imposed Kealoha’s sentence, Judge Seabright went over the key evidence in the 16-day trial and repeatedly said that Kealoha had accused her uncle, an innocent man, and tried to put him in prison to discredit him.

Seabright also said the Kealohas tried to malign Chuck Totto, the former Honolulu Ethics Commission executive director, who was retaliated against when he began investigating complaints of the Kealoha’s improper use of video surveillance equipment at their home.

Outside of court, Gerard Puana said he did not accept his niece’s long-overdue apology, thanked Seabright for repeatedly clearing his name in open court, and said the prison sentence for his niece was appropriate.

But he does not expect to see any of the restitution money Kealoha now has been ordered to pay.

The cover-up ensnared three officers in the HPD’s once-elite intelligence unit that reported directly to then-Chief Kealoha. The third officer was found not guilty.

In his separate plea agreement, Louis Kealoha said the former couple spent more than $591,000 that rightfully belonged to Katherine Kealoha’s grandmother, two children for whom Katherine Kealoha managed their finances, and from fraudulent loans to bankroll a lavish lifestyle.

The couple was convicted in U.S. District Court in June 2019.

Louis Kealoha was 59 and Katherine Kealoha was 49 when they separately reached plea agreements in their convictions five months later, in October 2019.

They waived their rights to appeal and agreed to pay $289,714.96 in restitution to their victims, including $46,261 to Katherine Kealoha’s uncle — Gerard Puana; and $243,453 to her late-grandmother — Florence M. Puana, who turned 100 years old after the Kealohas were convicted.

At the time of their plea agreements in October 2019, Katherine Kealoha also pleaded guilty in federal court to bank fraud, aggravated identity theft and drug charges. Louis Kealoha, in a separate hearing, pleaded guilty to bank fraud.

The guilty pleas eliminated the need for subsequent bank fraud trials for the duo and a third trial for Katherine Kealoha on drug charges.

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Check back for updates on this breaking news story.

RELATED: Read the Star-Advertiser’s coverage of the Kealoha scandal

Gerard Puana's statement to Louis and Katherine Kealoha by Honolulu Star-Advertiser on Scribd

PREVIOUS COVERAGE:

Former Honolulu Police Chief Louis Kealoha and former city Deputy Prosecutor Katherine Kea­loha will be sentenced today in federal court in one of Hawaii’s most stunning public corruption cases.

Among their crimes, Katherine Kealoha’s elaborate scheme to bilk her grandmother out of her home to bankroll the former couple’s lavish lifestyle.

Her late grandmother, Florence M. Puana, who had an eighth-grade education from Makawao, Maui, had trusted Kealoha — a lawyer and deputy prosecutor — to manage a reverse mortgage on her Honolulu home that Kealoha engineered and Puana had little understanding of.

Kealoha also took charge of an equally elaborate — but equally bungled — plot to frame her uncle to cover up her malfeasance. The conspiracy led to the convictions of the Kealohas and two officers in the Honolulu Police Department’s once-elite Criminal Intelligence Unit. The officers were hand-picked by Louis Kealoha and the unit reported directly to him.

Louis Kealoha was 59 and Katherine Kealoha was 49 when they separately pleaded guilty to additional federal crimes in October 2019, four months after a jury returned guilty verdicts in June 2019 at their trial in U.S. District Court.

Along with the Kealohas, HPD Lt. Derek Wayne Hahn and officer “Bobby” Minh-Hung Nguyen were convicted of conspiracy and three counts each of attempted obstruction of an official proceeding.

A third HPD officer, retired Maj. Gordon Shiraishi, was found not guilty.

The Kealohas, who are now estranged, are scheduled to be sentenced separately today. Hahn and Nguyen face their own sentencings in separate hearings on Tuesday.

The trial of all five defendants encompassed 16 days of often highly detailed and technical testimony from 71 witnesses. Despite the plethora of evidence, the jury needed only one full day of deliberations to reach guilty verdicts against the four.

After their convictions, only Katherine Kealoha was remanded into custody at the Federal Detention Center near Daniel K. Inouye International Airport, where she remains. The others were released on bond until sentencing.

The jury’s verdicts made Louis and Katherine Kealoha convicted felons, and Katherine Kealoha subsequently was disbarred from practicing law.

She then pleaded guilty in federal court in October 2019 to stealing a $165,000 inheritance from two children for whom she served as financial guardian. She also pleaded guilty to bank fraud, aggravated identity theft and federal drug charges involving her brother, eliminating the need for two more trials.

The Kealohas separately agreed to pay $165,269 to the children and to forfeit $63,476 from the sale of the home they once shared. They also each agreed to make restitution related to their earlier convictions.

The pair waived their rights to appeal and each agreed to pay $289,714 to their victims, including $46,261 to Gerard Puana — Katherine Kealoha’s uncle — and $243,453 to her grandmother, Florence Puana.

Whether the children, Kealoha’s uncle or the estate of her dead grandmother will ever receive any of the money is unclear, given the pace that they spent the ill-gotten funds.

In 2009, Katherine Kealoha helped Florence Puana arrange for a reverse mortgage on her home valued at more than $513,000. The money was gone in six months.

The Kealohas used all of the proceeds from the reverse mortgage and more to pay their own mortgage and repay tens of thousands of dollars in bank loans. They also used the money for car payments for a Mercedes and a Maserati, Elton John concert tickets, travel expenses and restaurant meals, a trip to Disneyland, donations to charity and a brunch at the Sheraton Waikiki to celebrate Louis Kealoha’s induction as Honolulu police chief in 2009.

The bill for the celebratory brunch alone was $23,976.

Florence Puana testified in a videotaped deposition that Katherine Kealoha promised she would never lose her home. But she did.

In a five-page, neatly handwritten letter dated Tuesday and addressed to U.S. District Court Judge J. Michael Seabright, Katherine Kealoha never mentions the children she stole from, the grandmother she conned or the uncle she accused of being a drug addict and tried to frame, discredit and send to prison.

Instead, she pleaded with Seabright, who presided over her trial, that she solely be punished for the crimes of all those convicted as a result of her machinations.

“All three of them are good family men, who do not deserve to go to prison,” she wrote from the Federal Detention Center. “I took advantage of their friendships and of our relationships, and their only mistakes were in trusting me and associating with me. … I sincerely ask this court to give me the time and sentences for Louis, Derek and Bobby, and let them go home to their families.”

She wrote that her husband stood by her after her extramarital affair with Hawaii County Fire Battalion Chief Jesse Michael Ebersole, who pleaded guilty in U.S. District Court to lying about their relationship to a federal grand jury. And she blamed much of her poor judgment on a 19-year addiction to painkillers, as first reported by the Associated Press.

“I accept full responsibility for my widespread destruction that I’ve caused, and I am not going to make any excuses for my behavior,” Kealoha wrote in her pre-sentencing letter to Seabright. “I wish I could explain it or even understand it, but I can’t; The only thing I know for certain is that I alone am responsible for all of the damage and destruction.”

Kealoha also wrote she has been diagnosed with an undisclosed “rare form of cancer, with a high probability of return, even after surgery and treatment … ”

During her 2019 trial in U.S. District Court, federal prosecutors brought in from San Diego to handle the case suggested that Kealoha was the ring leader of an elaborate-yet-sloppy attempt to frame her uncle to discredit him after he began unraveling the reverse-­mortgage scheme.

The plan played out over 12 days in June 2013 to accuse Gerard Puana of the federal crime of stealing the Kealohas’ mailbox that month.

The HPD officers who reported to Louis Kealoha produced phony evidence against Puana in the form of shadowy black-and-white home surveillance video of someone uprooting the mailbox in front of the Kea­lohas’ home and then driving away with it.

Katherine Kealoha also led a subsequent police search of Puana’s bedroom while he was in custody and removed several items.

Long before, in 2008, Katherine Kealoha created a fictitious notary using the name Alison Lee Wong, which she used for several purposes, including in the effort to steal the proceeds from Florence Puana’s reverse mortgage and portray her grandmother as incompetent in the process.

In 2008, “Alison Lee Wong” also wrote a letter of support to state officials for Katherine Kealoha to become director of the state Office of Environmental Quality Control, a post she was appointed to before later returning to the Honolulu Prosecutor’s Office.

At her trial, the president and founder of the Houston-based American Association of Notaries Inc. testified about a one-time, online order in May 2008 for a “Hawaii Notary Seal Metal Embosser” to be shipped to “OEQC,” the acronym for the Office of Environmental Quality Control.

The notary embosser was shipped to the OEQC office on South Beretania Street and the order listed the “director” as “c/Katherine Aloha.” On the notary company’s computer-based customer profile to make purchases was the notation “Director K. Aloha.”

“Alison Lee Wong” later vouched for bogus and error-filled documentation in the reverse-mortgage scheme. In one instance, “Alison Lee Wong” notarized a forged revocable living trust in the name of Gerard Puana — supposedly signed by Puana — that misspelled his name.

Probably the most damaging evidence during the trial came at the beginning, when federal prosecutors presented a powerful videotaped deposition by Florence Puana, whom they feared would not live long enough to testify in person.

Puana did learn of the guilty verdicts before she died in February at the age of 100 but did not live long enough to see her granddaughter and the former Honolulu police chief punished for their crimes.

Even after their convictions, the Kealohas faced additional federal charges and more trials.

In October 2019, after they were convicted by a jury, Katherine Kealoha pleaded guilty in federal court to bank fraud, aggravated identity theft and drug charges. Louis Kealoha, in a separate hearing, pleaded guilty to bank fraud.

The guilty pleas eliminated the need for subsequent bank fraud trials for the duo and a third trial for Katherine Kealoha on drug charges.

Federal prosecutors said at the time that Katherine Kealoha “was involved in an elaborate bank fraud scheme and a drug trafficking conspiracy with her brother, anesthesiologist Rudolph B. Puana, who wrote medically unnecessary prescriptions for controlled substances such as oxycodone and fentanyl in order to resell them. When her brother came under police suspicion, Katherine Kealoha used her law enforcement position to take control of the investigation and ensure that she and her brother were not prosecuted.”

Both Kealohas admitted in their separate pleas that they defrauded multiple financial institutions with elaborate schemes in order to obtain loans to fund their lifestyle.

Louis Kealoha said the couple spent more than $591,000 derived from the stolen proceeds from Florence Puana’s reverse mortgage, fraudulently obtained loans and funds stolen from the two children Katherine Kealoha was supposed to protect.