Ex-Hawaii police chief, wife plead not guilty to corruption

HONOLULU (AP) - A former Honolulu police chief, his deputy city prosecutor wife, and current and former officers conspired to frame the couple's relative for stealing a mailbox to discredit him in a family financial dispute, according to an indictment released Friday after a U.S. investigation into department-wide corruption.

Louis Kealoha, who retired earlier this year, and four former and current officers misused resources from a special police unit to intimidate the uncle of Katherine Kealoha, the indictment said. Gerard Puana had sued to allege his niece stole money from him and his now-98-year-old mother - Katherine Kealoha's grandmother.

A federal grand jury has been looking into allegations of civil rights abuses and corruption within the police force since 2015 and returned the charges of conspiracy, obstruction, bank fraud and other crimes.

Authorities arrested the Honolulu power couple outside their home Friday, Assistant U.S. Attorney Michael Wheat told The Associated Press. They pleaded not guilty, and a judge released the couple on $100,000 bond each.

Louis Kealoha said he and his wife looked forward to defending themselves.

"We appreciate the continued community support and we look forward to our day in court," he told reporters as the couple left the federal courthouse holding hands.

Katherine Kealoha, while a private attorney in 2004, was appointed a trustee and guardian for two children and then spent money in their trust accounts for personal expenses, including mortgage payments and private school tuition for her daughter, according to the indictment.

She also used money from a reverse mortgage of her grandmother's house to pay for Elton John concert tickets, Maserati car payments and more than $26,000 for her husband's police chief induction brunch at a Waikiki resort, the indictment said.

The Kealohas "would improperly use their authority as public officials to prevent the discovery and disclosure of their precarious financial condition," the indictment said.

Katherine Kealoha is on leave without pay pending the outcome of the case.

The couple accused her uncle of the mailbox theft in 2013, and Puana went to trial in 2014. The case abruptly ended in a mistrial when Louis Kealoha gave improper testimony about Puana's criminal history. The charges were dismissed.

Puana's federal defender accused the Kealohas of framing his client to discredit him in the family financial dispute. The attorney, Alexander Silvert, believes the chief intentionally gave improper testimony to stop the trial from uncovering illegal actions.

Silvert said he and his investigators uncovered illegal activity, including that police falsified reports and used a special unit to monitor his client illegally. Silvert took the allegations to the U.S. attorney's office and the FBI.

Other officers were implicated in the investigation.

Retired Officer Niall Silva, who had testified at Puana's trial, pleaded guilty last year to falsifying documents and altering evidence in the mailbox case. He is facing sentencing, and his cooperation appeared instrumental in building cases against Officer Minh Hung "Bobby" Nguyen, Lt. Derek Hahn and retired Maj. Gordon Shiraishi.

Nguyen and Hahn allegedly conspired with others to alter evidence and provide false information to federal officials, according to court documents. Shiraishi, who retired in March, lied to a grand jury about the mailbox case, the documents said.

Shiraishi was captain and commanding officer of the Criminal Intelligence Unit, a specialized unit chosen by department executive staff that reported to the chief, according to criminal complaints against Shiraishi and Nguyen. The unit gathered intelligence and data on organized crime, terrorism and other serious threats facing Honolulu. It also investigated the case of the stolen mailbox.

Members of the unit are hand-picked by the chief, according to the complaint against Hahn, which notes that he was appointed as the unit's lieutenant in 2013, when Kealoha was still the chief.

The co-defendants in the Kealoha indictment are Hahn, Nguyen, Shiraishi and Officer Daniel Sellers, who was arrested Friday. An attorney for Sellers didn't immediately return a phone call seeking comment.

Sellers is an ex-boyfriend of Katherine Kealoha, while Hahn was her partner in a solar company business, according to the indictment.

Honolulu Police Commission said it's focusing on the future, selecting a new chief and on supporting officers. The civilian oversight panel aims to select a new chief by month's end.

Silvert, the uncle's attorney, said he assumed when he got the mailbox case that it would be a straightforward guilty plea because it involved a high-ranking prosecutor and police chief.

"I never for a minute imagined it would become this," he said.

It's now more than a case about a mailbox and the chief's family dispute, Silvert said recently: "This is an abuse of power by people in the highest authority. That's what this case is about."

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Associated Press writer Audrey McAvoy contributed to this report.