Corruption trial opens for scandal-mired Hawaii power couple

HONOLULU (AP) - The former Honolulu deputy prosecutor accused of framing her uncle to keep him from exposing financial fraud that supported the lavish lifestyle of her and her husband -- a now-retired city police chief -- comes from a big family with complicated relationships, her defense attorney said Wednesday as a corruption trial against the couple and current and former officers got underway.

Defense attorney Cynthia Kagiwada also said in her opening statement that there is a "misunderstanding" about what happened to the money defendant Katherine Kealoha is accused of stealing from her uncle and grandmother.

Louis and Katherine Kealoha are accused of conspiring with officers in a unit hand-picked by the chief to frame the uncle in what's been described as Hawaii's biggest corruption scandal.

The grandmother and uncle sought help from Katherine Kealoha, a former Honolulu deputy prosecutor, to buy a condo for him, Kagiwada said.

The Kealohas were indicted in 2017 on charges including conspiracy and obstruction. Federal authorities began investigating the two in 2015 and both stepped down from their jobs as the inquiry deepened.

The indictment was later separated into two trials. This first one focuses on allegations the defendants conspired to frame the uncle for stealing the Kealohas' home mailbox.

A second trial will focus on bank fraud and identity theft. Katherine Kealoha also faces a third trial for a separate indictment that accuses her and her pain physician brother of dealing opioids.

Katherine Kealoha's uncle Gerard Puana and her grandmother had sued her, alleging she stole money from them in a reverse mortgage scheme. She then conspired to frame Puana for stealing the mailbox so a jury in the civil case would not believe him, prosecutors said.

"This case neither begins, nor ends, with a mailbox," Assistant U.S. Attorney Michael Wheat said in his opening statement.

He said the case was about greed and abuse of power by the Kealohas and "the men closest to them, all members of a secret police force called the Criminal Intelligence unit."

Wheat is a special prosecutor from San Diego because the U.S attorney's office in Hawaii recused itself from the case.

Members of the unit hand-picked by the chief are on trial with the Kealohas: Officer Minh Hung "Bobby" Nguyen, Lt. Derek Hahn and retired Maj. Gordon Shiraishi.

Nguyen was married to Katherine Kealoha's niece and lived in the couple's pool house, Wheat said, while Hahn was Katherine Kealoha's partner in a solar business and Shiraishi was one of her husband's oldest friends.

Defense attorneys for the current and former officers disputed Wheat's characterization of the unit as "secret." There was no conspiracy, they said.

Louis Kealoha's attorney, Rustam Barbee, said prosecutors are relying on circumstantial evidence that will require jurors to "take a leap of faith."

One glaring detail is missing from the prosecution's case, Barbee said: "Five years after the mailbox theft, the government has no evidence of the identity of who they think stole that mailbox."

He disputed prosecutors' theory that the mailbox was prepped in advance and that a man in surveillance footage is seen easily lifting it off its pedestal. The mailbox was attached with just one bolt and was forcibly removed, Barbee said.

The couple had a lot to lose if Katherine Kealoha's fraud came to light, Wheat said: their status in the community, her law license and the lavish lifestyle they were accustomed to. Katherine Kealoha used money from the reverse mortgage for personal needs including exotic cars and attending fancy concerts, Wheat said.