Attorneys for former Honolulu officials seek documents in Kealoha corruption case

Attorneys representing two former top city officials — both accused of violating federal law by orchestrating the $250,000 retirement settlement for former Police Chief Louis Kealoha — are attempting to introduce evidence they believe exonerates their clients.

Former Corporation Counsel Donna Leong, former Managing Director Roy Amemiya and former Honolulu Police Commission Chairman Max Sword were indicted by a federal grand jury Dec. 16 for allegedly conspiring to pay Kealoha with federal funds and money from the Honolulu Police Department’s salary pool in order to avoid City Council scrutiny.

The trio was taken into custody at the FBI’s Kapolei headquarters Jan. 12, the latest arrests in a long-running public corruption investigation targeting the intersection between politics, government and private business in Honolulu.

Each entered pleas of not guilty and are free on $50,000 bonds ahead of their March 14 trial.

Leong’s attorney, Lynn E. Panagakos, filed a “motion to take deposition of a critical witness” Thursday to compel the testimony of the former director of the Department of Budget and Fiscal Services, Nelson Ko­ya­nagi, who is currently battling cancer.

Panagakos does not believe Koyanagi will be available to testify at Leong’s trial.

The motion was filed after Panagakos reviewed the first round of discovery documents turned over by Assistant U.S. Attorney Michael Wheat’s team. The evidence includes memos, letters, emails, indications of the existence of a 47-minute recorded interview with Koyanagi and a 15-page report of a second interview of Koyanagi.

“If deposed, Mr. Koyanagi is expected to testify that the city ordinances provide ways to process transactions legally, without going to City Council for approval, and this is not unusual,” wrote Panagakos. “ … Mr. Koyanagi is expected to testify that severance payments are paid through salaries and payroll, and do not require City Council approval.”

The U.S. Department of Justice alleged in the Dec. 16 indictment that Leong conspired to transfer funds from an account for vacant positions to HPD after urging the police officials to falsely claim the money was needed to pay for new hires.

“Mr. Koyanagi is the essential witness who can exculpate Ms. Leong on these allegations,” according to Panagakos’ motion.

Koyanagi is expected to testify that he never agreed to disburse funds from the vacant positions account to pay for new hires. He will also testify that his only discussions concerning the vacant positions account in relation to the Kealoha severance payment were about how the funds could lawfully be transferred from the account to HPD.

HPD never tried to recover the money from the account, according to the motion, despite having $6 million in unspent funds for fiscal year 2017, the year the payment was made to Kealoha, according to the motion.

Panagakos also wrote that recordings of Leong’s conversations do not match the language in the DOJ indictment, and she accused federal authorities of misinterpreting Leong’s actions.

Panagakos did not reply to a Honolulu Star-Advertiser request for comment. Koya­nagi’s attorney, Howard Luke, declined to comment.

On Jan. 20, Lyle S. Hosoda, Amemiya’s attorney, filed a lawsuit alleging the city violated the Uniform Information Practices Act by denying Amemiya records relating to settlement agreements and other evidence that would prove his innocence, according to court documents.

Hosoda included a copy of his UIPA request asking for all documents in the possession of the city and the Police Commission relating to Kealoha’s severance or separation agreement.

The request also seeks documents detailing the Honolulu Ethics Commission’s severance agreement with its former executive director, Charles Totto, and documents from the discussions leading to the Honolulu Authority for Rapid Transportation’s separation payment to its former director, Daniel Grabauskas.

Grabauskas resigned from the rail authority on Aug. 18, 2016, and received a severance of $282,250 that the HART board executed as a separation agreement that was not reviewed or approved by the City Council. Totto received a separation agreement from the city June 15, 2016. He got $18,000, or two months’ pay, plus pay for unused sick leave and vacation time.

The deals were not reviewed by the City Council prior to execution.

Amemiya requested the records from the city after he was notified June 11 that he was the target of Wheat’s investigation. The city did not turn the records over to Amemiya.

Amemiya is also trying to obtain copies of documents from HPD, FBI, DOJ, the city’s Department of Budget and Fiscal Services and Department of Human Resources related to Kealoha’s severance agreement and separation from police service.

Hosoda declined to comment.

Wheat did not reply to a Star-Advertiser request for comment. Kelly Thornton, director of media relations for the U.S. Attorney’s Office of the Southern District of California, declined to comment.

Wheat has served as a special attorney for the U.S. attorney general prosecuting interdistrict conflict cases in Hawaii since 2012. He and fellow federal prosecutors are investigating allegations that law enforcement officers, elected officials and their supporters in private business conspired to abuse their positions to sideline opponents.

Wheat’s ongoing investigation resulted in the 2019 conviction of Kealoha and his estranged wife, former Deputy Prosecuting Attorney Katherine Kealoha.

Kealoha was sentenced to seven years in prison, and Katherine Kealoha received 13 years in December 2020 after convictions for conspiracy, fraud and obstruction of justice in a probe that began with a report that the couple’s mailbox was stolen from their Kahala home.

In 2018 former city Prosecutor Keith Kaneshiro and two of his deputies received letters notifying them they were a target of Wheat’s investigation. None have been charged.

On Jan. 20, Wheat questioned as witnesses former Congresswoman Colleen Hanabusa and former City Councilmember Ann Kobayashi about $300,000 in campaign donations made between 2008 and 2020 by Honolulu engineering executive Dennis Mitsunaga, his employees, family members and business associates.