A jury has found a former Honolulu prosecutor and her now-retired police chief husband guilty in a plot to frame a relative to silence him from revealing fraud that financed their lavish lifestyle, a case that shook the top levels of law enforcement.
The verdict came Thursday in what has been described as Hawaii’s biggest corruption case.
Neither Katherine nor Louis Kealoha testified during the closely watched trial. Their defense attorneys argued the case was built on weak and circumstantial evidence.
Katherine Kealoha left the courthouse without commenting. Her husband said, “It’s still a lot to take in.” He thanked the community for “continued love and support.”
The judge scheduled a bail hearing for Katherine Kealoha on Friday after a federal prosecutor asked that she be jailed.
“The Kealohas’ extraordinary greed inspired astonishing corruption,” said Robert Brewer, U.S. attorney for the southern district of California. Assistant U.S. attorneys from California prosecuted the case because federal prosecutors in Hawaii recused themselves. “These two were supposed to be the good guys. They were supposed to enforce the law — not break it.”
In addition to conspiracy, the jury found both Kealohas guilty of three counts of attempting to obstruct an official proceeding and not guilty on one count of attempting to obstruct an official proceeding and one count of making false statement.
They were on trial over allegations they conspired with officers to frame her uncle for stealing their home mailbox.
Prosecutors say the Kealohas used officers from a secret police unit hand-picked by the chief to frame Gerard Puana for stealing their home mailbox to try to discredit him in a lawsuit he and his mother filed saying Katherine Kealoha stole money from them in a mortgage scheme.
Alexander Silvert, the federal public defender who represented Puana, said the verdict sends a strong message to law enforcement.
“If you use your power to frame an innocent man you will be held accountable,” Silvert said.
The peculiar case of a mailbox reported stolen in 2013 from the Kealohas’ home in an upscale Honolulu neighborhood led to a two-year federal investigation and corruption-related charges against a couple at the top levels of law enforcement.
Prosecutors said Katherine Kealoha bilked relatives, banks and children whose trusts she controlled and spent the stolen money on Maserati car payments, a firefighter lover and a hotel breakfast banquet when her husband became police chief.
A judge split a 2017 federal indictment into two trial trials. The mailbox conspiracy is the first trial, which began in May. A second trial will focus on bank fraud and identity theft charges. Katherine Kealoha also faces a third trial for a separate indictment alleging she and her pain physician brother dealt opioids.
The jury also found Lt. Derek Hahn and Officer Bobby Nguyen guilty of conspiracy.
Retired major Gordon Shiraishi was found not guilty.
Nguyen was married to Katherine Kealoha’s niece and lived in the couple’s pool house, while Hahn was Katherine Kealoha’s partner in a solar business and Shiraishi was in the same recruit class as Louis Kealoha.
Puana testified that he and his niece were once close and that he trusted her enough to invest money with her.
Jurors watched a deposition from Puana’s mother, Florence Puana, now 99. Because of her failing health, she was unable to testify in person.
The Puanas say Katherine Kealoha came to them with an idea about taking out a reverse mortgage on her grandmother’s home to help buy a condo her uncle wanted. Kealoha said she would consolidate her debts — which prosecutors described as massive — and promised her uncle and grandmother that she would pay off the loan.
She used the money to buy her uncle’s condo, but instead of paying off the loan, she drained about $150,000 that was left over in about six months, FBI forensic accountant Laurice Otsuka testified. Kealoha used it on personal expenses, including a nail salon visit, a Maui resort bill and Elton John concert tickets, Otsuka said.
A statement from the Puana family said they find no joy or comfort in the verdict. “The years of humiliation, heartache, tears and sorrow inflicted on Florence, Gerard and our family won’t be assuaged or erased,” the statement said. “Some family relationships have been completely, perhaps forever severed, while others still remain tenuous.”
Much of the testimony also focused on the alias Alison Lee Wong, which prosecutors say Kealoha invented to forge documents.
Kealoha stepped down from the prosecutor’s office as the investigation intensified and her husband agreed to retire, receiving a $250,000 settlement package that he agreed to pay back if convicted of a felony.
Honolulu Police Commission Chairwoman Loretta Sheehan said he doesn’t have to pay back the money until he’s exhausted his appeals.
“The criminal justice system in our town worked today,” Sheehan said, adding that she understands that the police department wants to move on from this scandal. “But I don’t think we should ever put this behind us.”
Honolulu Police Chief Susan Ballard said in a statement the department is working hard to restore its reputation and the public’s trust.
Honolulu Mayor Kirk Caldwell said after the verdict that “it’s time to move on.”
The wide-ranging investigation also has targeted Honolulu’s elected prosecutor, who was Katherine Kealoha’s boss, and the city’s top civil attorney. Prosecuting Attorney Keith Kaneshiro and Corporation Counsel Donna Leong went on paid leaves of absence after the FBI informed them they are targets of the investigation.