A federal judge has ruled that an ailing witness can be deposed by defense attorneys representing three former top city officials accused of conspiring to defraud the government by creating a $250,000 retirement settlement for former Honolulu Police Chief Louis Kealoha.

There was debate among attorneys in the case whether Nelson Koyanagi, who served as director of the city Department of Budget and Fiscal Services and is fighting cancer, is well enough to face questioning by lawyers representing former city Managing Director Roy Amemiya, Corporation Counsel Donna Leong and Police Commission Chairman Max Sword.

But U.S. District Judge Leslie E. Kobayashi ruled Monday there wasn’t adequate cause to show that “the deposition would be dangerous” to the witness, although she said during Monday’s hearing that “it certainly will be frustrating, … it will be burdensome given his medical condition.”

Koyanagi is expected to confirm the 2017 Kealoha settlement was legal and followed a structure similar to separation payout agreements with other former city department heads. In an Oct. 3, 2018, interview with the FBI, he stated that use of funds from the “provision for vacant positions” account was available for the Honolulu Police Department to cover the $250,000 payout, according to court documents.

“Koyanagi replied that if HPD wanted to utilize the (PVP) account, at the time, they could have. Koyanagi further stated that (acting Police Chief Cary Okimoto), at the time, was new to the job and did not understand the process. … If a Department filled a vacant position earlier in the year, that Department could use the Provisional Account and utilize this money for other purposes,” Koyanagi told the FBI.

“Not withstanding the evidence outlined above, the Government continues to contend that defendants conspired to fraudulently convert funds from the PVP account by having Koyanagi transfer PVP funds to reimburse HPD for the Kealoha severance payment and then falsely represent to City Council that the transfer was for new hires,” Leong’s attorney, Lynn E. Panagakos, wrote in a motion filed Monday pushing for Koyanagi’s deposition.

Prior to moving forward with the Kealoha payout, the city administration also considered a legal and policy memo authored by a deputy corporation counsel that deemed it legal and appropriate. A 2019 review of the settlement conducted by a San Francisco law firm, Farella Braun &Martel, contracted by the city also declared its structure legal and in line with separation payment practices at the time.

Assistant U.S. Attorney Janaki G. Chopra filed a memo Monday asking Koba­yashi to deny the defendants’ efforts to depose Koya­nagi because medical evaluations provided by his physicians under seal suggest he is too sick to take questions “and it appears he will be unable to testify at trial in this matter.”

In a motion filed Monday, Lyle S. Hosoda, Amemiya’s counsel, argued the U.S. Department of Justice knew months ago that Koyanagi was terminally ill but never disclosed that fact until January, delaying the indictment and continuing to “strenuously oppose” the witness’s testimony via deposition.

Federal prosecutors had “unfettered access” to Koyanagi and interviewed him twice, in March and October 2018.

“The defendants all have the deepest regard and respect for Mr. Koyanagi and his family, and it hurts them to bring this motion, but the Government has left no alternative,” Hosoda said in his motion. “Mr. Koyanagi has extensive knowledge of the City charter, ordinances, and practices regarding the expenditure of budgeted funds. With conspiracy being the crime alleged, nearly two decades of experience in budget and finance, and being the director to whom critical questions in this case were asked, Mr. Koyanagi’s state of mind, intentions, and communications are critical to the defense. The Government’s delay and willful withholding severely prejudice the entire defense.”

Amemiya, Leong and Sword are scheduled to stand trial June 13 after entering pleas of not guilty to charges of conspiracy and defrauding the government. They are free on $50,000 bonds.

Their prosecution is the latest development in a federal public corruption probe that dates to at least 2016 and started with the convictions of Kealoha and his estranged wife, former Deputy Prosecutor Katherine Kea­loha.

Kelly Thornton, director of media relations for the U.S. Attorney’s Office of the Southern District of California, which is handling the case, declined comment. Hosoda, Panagakos and Randall Hironaka, Sword’s attorney, did not immediately reply to a Honolulu Star- Advertiser request for comment on Kobayashi’s ruling.