Ex-Hawaii police chief, wife to admit more crime, avoid jury trial
Instead of going to trial, Louis and Katherine Kealoha have made a deal with prosecutors to plead guilty to bank fraud
Jennifer Sinco Kelleher
HONOLULU — A retired Honolulu police chief and his wife, a former prosecutor, are scheduled to plead guilty Tuesday to bank to fraud and identity theft charges, which is expected to end an ongoing federal prosecution against them.
The expected pleas by Louis and Katherine Kealoha follow their conviction last June in a plot to frame a relative to keep him from revealing fraud that financed their lavish lifestyle. Louis Kealoha retired as chief after becoming target of the federal corruption investigation, and Katherine Kealoha is a former high-ranking deputy Honolulu prosecutor.
Louis Kealoha filed for divorce last week.
A second trial for bank fraud and identity theft had been scheduled for January. They were so desperate to fund their lavish lifestyle, prosecutors say, the couple swindled more than a half-million dollars from banks, relatives and others. Prosecutors say Katherine Kealoha stole money in a reverse mortgage scheme of her now-100-year-old grandmother's house and that she drained two children's trust accounts.
Instead of going to trial, the Kealohas have made a deal with prosecutors to plead guilty to bank fraud, their lawyers said. Katherine Kealoha is also pleading guilty to identity theft.
She spent bilked money on her firefighter lover, a Maserati, Elton John concert tickets and a resort banquet when her husband became police chief, prosecutors said.
She was facing a third trial for separate drug-dealing allegations against her and her pain physician brother. She used her position to cover up their crimes, prosecutors said. She's expected to plead guilty to failing to do anything about her brother's crimes, her lawyers said.
After the Kealohas were convicted of conspiracy, a judge ordered Katherine Kealoha detained because of concerns she would try to obstruct justice if allowed to remain free on bond. Her estranged husband is free on bond.
The jury also found two police officers of conspiracy and a retired major was found acquitted in the June trial. Another retired officer previously pleaded guilty.
Federal authorities started investigating the Kealohas in 2015. 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.
Prosecutors say Katherine Kealoha's uncle and grandmother had threatened to expose them for fraud, so she devised a scheme to silence them. She tried to have her grandmother declared incapacitated. She and her husband used members of a special, hand-picked police unit to frame the uncle, Gerard Puana, for stealing the Kealohas' mailbox, prosecutors say.
Puana was arrested and a trial against him for the mailbox theft ended in a mistrial in 2014 because then-chief Kealoha gave improper testimony about his wife's uncle's criminal history.
Puana's federal defender went to federal authorities with evidence he planned to use at trial about the Kealohas' plot. The Kealohas were indicted in 2017. A judge split the indictment into two trials: the mailbox conspiracy and the bank fraud allegations.
Puana and his mother, Florence Puana, testified 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, an FBI forensic accountant testified at the trial.
Much of the testimony also focused on the alias Alison Lee Wong, which prosecutors say Katherine Kealoha invented to forge documents.
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.
The conspiracy charge carries a sentence of up to 20 years, but the plea deal will reduce the Kealohas' prison time.