Kealohas Will Face Two Trials in Federal Corruption Case

Retired HPD Chief Louis Kealoha and his wife, Katherine Kealoha, a deputy prosecutor, will be allowed to have their case divided into separate trials for bank fraud and conspiracy charges.

Cory Lum/Civil Beat

“The 9th Circuit in a flash would reverse what you’re asking me to do,” Seabright told the assistant U.S. attorneys.

The trial on conspiracy charges would also include as defendants four members of a Honolulu Police Department special detail who have been charged with taking part in an elaborate scheme to cover up misdeeds.

In addition to the Kealohas, the indictment names Derek Wayne Hahn, Minh-Hung “Bobby” Nguyen, Gordon Shiraishi and Daniel Sellers, who were members of a special Honolulu Police Department entity called the Criminal Intelligence Unit, which reported directly to the police chief.

The government’s allegations against the Kealohas fall into two general categories. The first involves a series of financial crimes, including allegations that the couple committed bank fraud by lying on loan applications. Prosecutors also have accused Katherine Kealoha of stealing money from trust accounts belonging Ransen and Ariana Taito, whom she was supposed to be serving as a guardian.

The second category involves a scheme in which the Kealohas allegedly used officers from a special secret police unit to retaliate against Katherine Kealoha’s uncle, Gerard Puana, who had accused Katherine Kealoha of stealing money from him and Katherine Kealoha’s grandmother. Specifically, the government argues the Kealohas and the officers framed Puana for stealing a mailbox from the Kealohas’ home and fabricated evidence against him.

Compared to the mailbox conspiracy, the bank fraud and trust account allegations are generally viewed as relatively easy to prove counts which will rest largely on documentary evidence like bank statements and loan applications. Adding to the evidence, Ransen Taito has pled guilty to lying to the federal grand jury to cover up Katherine Kealoha’s theft of his trust money.

Rules of criminal procedure generally allow defendants to be tried together if the defendants all acted as part of the same act or series of related acts. Even if there’s risk that a jury might find a particular defendant guilty merely because of association with others, the idea is that judges can mitigate the risk with clear instructions to the jury on how to apply the facts of the case to the law.

Still, judges must balance the general desire for efficiency, which the law favors, with the Constitutional right to a fair trial.

While the defendants wanted separate trials – generally to separate the mailbox count from the financial counts – prosecutors sought to keep all of the counts together. To that end, the federal indictment framed all of the alleged offenses as part of an overarching scheme by the Kealohas to improperly use their authority to cover up their precarious finances and purported malfeasance involving Katherine Kealoha’s relatives and the Taitos’ trust accounts.

But Seabright didn’t buy the government’s argument. He said that, according to the government’s overarching argument, the theory was merely that “the Kealohas were greedy.” And that wasn’t enough to justify joining all of the counts. He said the court will hold a separate trial on the bank fraud charges and a separate trial on the conspiracy counts centered on the mailbox matter.

Which trial the trust fund theft allegations will end up in was not clear. The government’s amended indictment specifically links Hahn, Nguyen and Shiraishi to the counts involving Ransen Taito’s alleged misstatements to the grand jury, suggesting the officers were involved in a conspiracy causing Taito to lie. Seabright technically ordered the trust counts included in the conspiracy trial.

However, Seabright also expressed skepticism about the government’s decision to include Hahn, Nguyen and Shiraishi in the counts involving the trust fund cover up. He told the assistant U.S. Attorneys, Michael Wheat and Eric Best to “take a hard look” at those counts.

Despite the order for two trials, it wasn’t a complete victory for the defendants. Sellers, for example, has been charged with only two counts — of lying to a grand jury and the F.B.I. — and he had asked for a completely separate trial. Seabright said whether to have a separate trial for Sellers was a close call but denied the request.

Seabright also denied Katherine Kealoha’s request to remove from the indictment references to Alison Lee Wong, an alias Katherine Kealoha allegedly used. According to the government, Wong was a fictional assistant Kealoha created to send emails used to cover up Kealoha’s misdeeds.

Seabright said the indictment wouldn’t be given to the jury, so references to Wong in the indictment would not damage Kealoha. Whether the jury would be able to hear about Kealoha’s alleged use of the fictional assistant, as part of the government’s case, is a separate issue that could be decided later, he said.

This is a developing story. Watch Civil Beat for updates.

Thoughts on this or any other story? Write a Letter to the Editor. Send to news@civilbeat.org and put Letter in the subject line. 200 words max. You need to use your name and city and include a contact phone for verification purposes. And you can still comment on stories on our Facebook page.