FILE - In this March 12, 2019 file photo, retired Honolulu police chief Louis Kealoha and his wife, former deputy city prosecutor Katherine Kealoha, hold hands while walking to U.S. district court in Honolulu. Opening statements are expected Wednesday, May 22, 2019, after 12 jurors and five alternates are selected for the trial of retired Honolulu police chief Louis Kealoha, his wife and current and former officers. Prosecutors say Kealoha and his former city deputy prosecutor wife, Katherine Kealoha, abused their power to frame a relative for stealing their home mailbox because he threatened to expose financial fraud that funded the couple's lavish lifestyle. (AP Photo/Jennifer Sinco Kelleher, File)

Prosecutor: Greed fueled Hawaii power couple's schemes

May 23, 2019 - 3:53 pm

HONOLULU (AP) — A special federal prosecutor spent an hour taking jurors through what has been called the biggest corruption case to rock Hawaii, showing how a high-ranking law enforcement power couple schemed to silence relatives who threatened to expose the financial fraud that funded their lavish lifestyle.

Michael Wheat, a U.S. attorney from San Diego, said they tapped into a secret police force to carry out their plan to frame an uncle for a peculiar crime: stealing their home mailbox.

A trial against retired Honolulu Police Chief Louis Kealoha and former deputy city prosecutor Katherine Kealoha began Wednesday and continues Thursday, five years after they reported the mailbox missing outside their home in an exclusive neighborhood. The couple were indicted in 2017 after a two-year federal investigation that also ensnared current and former police officers, who are now on trial with the Kealohas.

"This case neither begins, nor ends, with a mailbox," said Wheat, who was brought in because federal prosecutors in Hawaii recused themselves.

The case centers on the couple's greed and abuse of their positions, he said, including allegations Katherine Kealoha stole money from banks, relatives and children whose trusts she controlled and police officers carried out their bidding and lied to investigators about it. The charges were so sweeping that a judge broke them into two trials — the first focusing on the mailbox conspiracy.

Defense attorney Cynthia Kagiwada told jurors what happened to the money from Katherine Kealoha's disabled uncle and now-99-year-old grandmother is simply a family misunderstanding. She provided no specifics.

Louis Kealoha's defense attorney, Rustam Barbee, said prosecutors are relying on circumstantial evidence. One glaring detail is missing from the prosecution's case, Barbee said: "Five years after the mailbox theft, the government has no evidence of the identity of who they think stole that mailbox."

Attorneys for the officers on trial said there was nothing secret about their police unit and there was never any conspiracy.

But the prosecutor said the "members of a secret police force called the Criminal Intelligence Unit" were hand-picked by the chief because they were closest to the couple.

Officer Minh Hung "Bobby" Nguyen was married to Katherine Kealoha's niece and lived in the couple's pool house, Wheat said. Lt. Derek Hahn was Katherine Kealoha's partner in a solar business, and retired Maj. Gordon Shiraishi was one of her husband's oldest friends.

The plot to frame the uncle, Gerard Puana, emerged after he and his mother, Florence Puana, sued Katherine Kealoha for money she stole in a reverse mortgage scheme, Wheat said.

Instead of paying off the mortgage loan on her grandmother's home, Kealoha used about $150,000 on Maserati and Mercedes Benz payments and tickets for an Elton John concert, according to court documents.

"Over time, the Puanas began to suspect that something was amiss" after the loan ballooned, Wheat said.

Florence Puana wrote her granddaughter a letter asking what happened to the money. Katherine Kealoha wrote an angry response that revealed her intentions to silence her family, Wheat said.

"I WILL seek the highest form of legal retribution against ANYONE and EVERYONE who has written or verbally uttered those LIES about me!" said an excerpt Wheat showed the jury. "They will rue the day that they decided to state these TWISTED LIES!"

The legal retribution was numerous attempts to lock up her uncle and try to have her grandmother declared mentally incompetent, Wheat said.

Katherine Kealoha also used an alias to facilitate her schemes, Wheat said. Evidence will show Alison Lee Wong is the name that notarized fraudulent documents and that Kealoha purchased notary equipment for that fake name, Wheat said.

The trial is expected to last through the summer, with the uncle testifying. Jurors will watch the grandmother's previously recorded deposition because she is too frail to take the stand in person.

A second trial for the Kealohas will focus on bank fraud and identity theft. Katherine Kealoha also faces a third trial for a separate indictment that accuses her and her pain physician brother of dealing opioids.

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