Credit union files suit to foreclose on ex-police chief’s $1M home

Updated: Mar. 1, 2018 at 4:40 PM HST
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(Image: Hawaii News Now)
(Image: Hawaii News Now)
(Image: Hawaii News Now)
(Image: Hawaii News Now)

HAWAII KAI, OAHU (HawaiiNewsNow) - A Hawaii credit union is foreclosing on the Hawaii Kai home owned by the former Honolulu police chief and his wife, a deputy city prosecutor.

In a lawsuit filed this week, Hawaii Central Federal Credit Union Louis and Katherine Kealoha "failed, neglected, and refused to make payments."

Hawaii News Now reported last month that the Kealohas stopped paying the mortgage on the home, putting the court's decision to appoint them representation paid for by taxpayers in jeopardy.

HNN visited the Kealohas' home on Niumalu Loop recently and neighbors said no one had been there in months. The grass and bushes were overgrown.

The Kealohas bought the home in 2013 for $1.2 million and refinanced it more recently.

The suit put the principal balance still owed on the home at more than $1 million.

The couple also owe the credit union more than $15,000 in interest and $963 in late charges.

Louis Kealoha, who was forced to retire as police chief last year, was given a $250,000 payoff by the Honolulu Police Commission despite being a target of an FBI public corruption case.

The two were later indicted by a grand jury for a long list of charges, including bank fraud, theft and forgery.

His wife, Katherine, is still a deputy city prosecutor but is on administrative leave.

At a hearing last year, the two told a judge they couldn't afford defense attorneys in part because of the large mortgage payments. The judge subsequently granted them taxpayer-funded counsel.

The lawsuit shows they weren't actually making those mortgage payments, though they said they were.

And legal experts say that could cost them their defense team or the courts could force them to repay the cost since they have the extra money.

Meanwhile, the credit union is trying to stake its claim on the home.

The federal government has a lien on the home to repay the Kealohas' victims, if they are found guilty of the crimes.

Attorney Michael Green represents two of the alleged victims, "Here is a woman who signs an affidavit in court of indigency, and part of the fact that she can't afford to pay for her own lawyer is because of all the bills mounting up, including 60-thousand dollars a year in a mortgage payment."

Green's clients, siblings, are among the victims who say Mrs. Kealoha stole hundreds of thousands of dollars from them, "They could take the damn house, she could care less that anybody ever gets paid.. She could care less that these kids could ever get paid, but she got herself a free lawyer."

The couple's civil attorney, Kevin Sumida, also has a lien on the home for fees of about $800,000.

The Kealohas have 60 days to respond to the lawsuit. They have been living in a condo in Kahala since last summer.

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