Kealohas On Trial: Conspiracy Or Just A ‘Conspiracy Theory’?

Assistant U.S. Attorney Michael Wheat used Katherine Kealoha’s own words against her Wednesday:

“I WILL seek the highest form of legal retribution against ANYONE and EVERYONE who has written or verbally uttered those LIES about me!”

“They will rue the day that they decided to state these TWISTED LIES!”

Those threats were in a letter Kealoha wrote to her grandmother, Florence Puana, in 2012 after she accused Kealoha of stealing money from her by executing a reverse mortgage on her home.

On Wednesday, Wheat read excerpts from the letter during opening statements in the trial of Kealoha and her husband, former Honolulu police chief Louis Kealoha.

“This letter frames Katherine Kealoha’s intentions in her own words, it sets forth her intentions, it reveals her motive and leads to the conspiracy with the secret police,”  said Wheat, who is the special attorney overseeing the case.

Louis and Katherine Kealoha arrive at District Court on Wednesday for the first day of their trial.

Cory Lum/Civil Beat

The Kealohas are accused of a series of felonies for framing Katherine’s uncle, Gerard Puana, for the theft of their mailbox on June 21, 2013, with the help of several police officers.

Three of those officers, Derek Hahn, Minh-Hung “Bobby” Nguyen and Gordon Shiraishi, are also on trial with their former boss and his wife, who is a former city prosecutor.

In their own opening statements, attorneys for the five defendants contended the prosecution’s case amounted to a conspiracy theory that would break down during the trial.

Over the course of nearly four years, the U.S. Justice Department has uncovered what it believes is a wide web of criminal activity within local law enforcement, from the Honolulu Police Department to the Honolulu Prosecuting Attorney’s Office.

The mailbox conspiracy is just the first of at least three criminal trials that are expected to play out over the next year or longer.

The Kealohas face a second trial for alleged financial crimes, including bank fraud and identity theft.

Katherine Kealoha has also been accused in a separate case of running an illegal prescription drug ring with her younger brother, Rudolph Puana, and using her position as a city prosecutor to cover it up.

And the DOJ has notified Kealoha’s former boss, Honolulu Prosecuting Attorney Keith Kaneshiro, that he’s a target of an ongoing criminal investigation. He’s on paid leave.

The agency has also sent a target letter to one of Honolulu Mayor Kirk Caldwell’s top cabinet officials, Corporation Counsel Donna Leong, the city’s top-ranking civil lawyer who is also on leave. The investigation into Leong appears to stem from her negotiation of a $250,000 severance package for Louis Kealoha after he was named a criminal suspect while he was police chief.

While these issues are not being litigated in the current trial, they are part of the backdrop of what has become one of the largest public corruption scandals in Hawaii’s history.

‘Abuse Of Trust, Manipulation And Greed’

During Wednesday’s opening statements, Wheat told the jurors that the motive for the frame job was a lawsuit Florence and Gerard Puana filed against Katherine Kealoha in March 2013, accusing her of fraud and financial elder abuse.

Not only had Kealoha taken money from the reverse mortgage on Florence Puana’s home, they said, she also tricked Gerard into handing over tens of thousands of dollars in cash to her for a sham investment venture.

According to Wheat, the Kealohas framed Gerard Puana for the theft of their mailbox because he threatened to expose them.

Assistant U.S. Attorney Michael Wheat makes his opening statement Wednesday.

Dannah Mari Hidalgo/Courtesy KITV

The lawsuit had the potential to ruin Katherine’s career as a city prosecutor as well as embarrass her husband, then the head of one of the largest police departments in the country.

Wheat said it also could have ended the “lavish lifestyle” the two had gotten used to, one that included exotic cars, frequent travel and fancy concerts.

The Kealohas needed to take Puana out, Wheat said, and they intended to use the full brunt of their resources to do so.

“This story neither begins or ends with a mailbox,” Wheat said. “It’s a long story of abuse of position, abuse of trust, manipulation and greed.”

Locals Versus Mainland Prosecutors

Wheat spent more than an hour laying out his case against the Kealohas and their alleged co-conspirators.

The attorneys for the five defendants each had significantly less time.

They did their best to poke holes in Wheat’s presentation while telling the jurors it’s up to them to make the government prove its case beyond a reasonable doubt.

Defense attorneys and Louis and Katherine Kealoha, left, huddle together.

Dannah Mari Hidalgo/Courtesy KITV

Each of the defense attorneys emphasized their client’s local ties — such as where they grew up and went to high school — and status as upstanding citizens in the community.

The prosecutors, meanwhile, come from the U.S. Attorney’s Office in San Diego. 

Louis Kealoha’s attorney, Rustam Barbee, said the former chief was probably better at hula dancing than sports.

Barbee noted that Kealoha rode the bench when he played football at Damien Memorial High School in Honolulu, but that he once won first place in a Merrie Monarch Festival competition.

Cynthia Kagiwada, Katherine Kealoha’s attorney, told jurors that she planned to refer to her client as “Kathy” throughout the trial. She then described Honolulu as a small community where personal and business relationships are often intertwined. 

Kagiwada said Katherine Kealoha comes from a large family with complicated relationships.

“Sometimes, these relationships can turn into misunderstandings,” the attorney said. “And sometimes, these misunderstandings are about financial matters.”

Attorney Birney Bervar, right, arrives with Officer Derek Hahn for the first day of the trial.

Cory Lum/Civil Beat

Each attorney said their client was not guilty of an alleged conspiracy to frame Gerard Puana.

Several also pointed out that many of the other issues presented by the government, including the Kealohas’ alleged motive to hide financial misdeeds, were not at issue in this trial.

The only question before the jurors, they said, was whether the Kealohas and Hahn, Nguyen and Shiraishi worked in concert to put Puana in prison for a crime he didn’t commit.

“Derek Hahn was not involved in any conspiracy to frame Gerard Puana or obstruct justice; Derek Hahn didn’t even know Gerard Puana,” said Hahn’s attorney, Birney Bervar. “The only agreement Derek had was to protect and serve the people of Oahu and that’s what he did.”

Barbee called the government’s case a “conspiracy theory” that requires “leaps of faith from a certain fact to another fact, connecting the empty space in between.”

‘I Told Him The Case Was A Loser’

Wheat said the Kealohas lost control of the Puana frame job when the federal government became involved.

One of the first witnesses called by the prosecution Wednesday was Brian Shaughnessy, the postal inspector who initially lodged a criminal complaint against Puana for felony theft of the Kealohas’ mailbox.

Shaughnessy testified that he didn’t want to pursue charges against Puana, but the U.S. Attorney’s Office  instructed him to do so.

Officer Minh Hung “Bobby” Nguyen arrives at District Court.

Cory Lum/Civil Beat

He said he called Assistant U.S. Attorney Larry Tong, and recommended the office not pursue the case. During that phone conversation, Shaughnessy said, he and the federal prosecutor agreed that there was insufficient evidence.

“I told him the case was a loser and we should not go anywhere near the case,” Shaughnessy said.

Tong told him he’d get back to him, Shaughnessy said, adding that later Tong called to say his office wanted to pursue charges against Puana. Tong’s boss, Leslie Osbore, instructed Shaughnessy to draft a criminal complaint for stealing the Kealohas’ mailbox, he testified.

Shaughnessy, who’s been a postal inspector since 2007, said he’d never been involved in a mailbox theft investigation before.

Prosecutors also called as a witness Frederick Rosskopf, a Honolulu police officer who responded to the Kealohas’ house on June 22, 2013, the day after the mailbox was reportedly taken.

Rosskopf testified about what he and Katherine Kealoha discussed, including the fact that she estimated the mailbox cost about $380.

The police officer said that dollar amount was significant because the difference at the time between misdemeanor theft and felony theft was whether the item stolen was worth more than $300.

The fact that Kealoha said the mailbox cost more than $300 meant that the case against Puana, if prosecuted in state court, would have been a felony.

Puana was prosecuted for the destruction of the Kealohas’ mailbox, but the case was ultimately dismissed after Louis Kealoha caused a mistrial by inappropriately telling jurors about a past arrest of Puana.

During his opening statement, Wheat told the jurors he and his team planned to prove Katherine Kealoha intentionally lied about the cost of her mailbox as a means to increase the potential penalties against her uncle.

The trial is expected to continue Thursday with Shaughnessy back on the witness stand.

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