Bulk of $63,000 from sale of Louis and Katherine Kealoha’s east Honolulu home goes to uncle

The bulk of the money from the foreclosure sale of a house owned by a former Honolulu police chief and his estranged wife convicted of conspiracy must go to the relatives they bilked, a U.S. judge ruled today.

U.S. District Judge J. Michael Seabright granted a magistrate judge’s findings on what to do with about $63,000 leftover from the $1.3 million sale of a home in east Honolulu owned by Louis Kealoha, who retired as police chief in the midst of a federal corruption investigation, and his wife Katherine Kealoha, a former deputy prosecutor.

Seabright last year sentenced Katherine Kealoha to 13 years in prison, saying she was the mastermind behind the scheme to frame her uncle for the theft of the couple’s home mailbox to hide fraud that included stealing from her own grandmother. Her husband was sentenced to seven years in prison.

The ruling said about $62,000 should go to the trust for Katherine Kealoha’s uncle, Gerard Puana, and his now-deceased mother, Florence Puana, as partial fulfillment of the more than $289,000 restitution the Kealohas owe them.

About $1,100 will go to the Hawaii Central Federal Credit Union, which asked to recover more than $100,000 in attorneys’ fees and costs from the sale.

U.S. Magistrate Judge Wes Reber Porter found that while the credit union and the Puanas both have legal interests in the proceeds, the credit union already recovered more than $1 million for the balance of the mortgage while the Puanas haven’t received any proceeds from the sale.