Under deal approved by judge, Kealohas plead guilty to remaining charges

HONOLULU, Hawaii (HawaiiNewsNow) - After maintaining her innocence for years, Katherine Kealoha pleaded guilty Tuesday morning to bank fraud, identity theft and covering up knowledge of a drug ring involving her brother ― all felonies ― under a plea deal approved by a federal judge.

Hours later, her husband Louis Kealoha pleaded guilty to bank fraud.

Also Tuesday, the former police chief apologized publicly for the first time.

Holding back tears, he told reporters that he was sorry for what he’d done ― but didn’t elaborate on his attorney’s claims that he’d been unwittingly pulled into criminal schemes by his wife, a former high-ranking deputy city prosecutor.

“I’m not even thinking about myself right now. I’m thinking about the negative impact that all of this had on the community, the police department, and family and friends,” Kealoha said.

“All I know is that I’m going to do my best to redeem myself and... I’m sorry,” Kealoha said as he choked back tears.

By pleading guilty, the Kealohas forgo two trials scheduled for 2020.

The convictions are on top of those stemming from the so-called “Mailbox Trial,” in which Katherine Kealoha and her husband, Honolulu’s former police chief, were found guilty in June of obstruction and conspiracy.

Under the deal, federal prosecutors agreed not to seek more prison time than the range set by the court’s sentencing guidelines.

The government will also request that all the sentences be concurrent, except the aggravated identity theft for Katherine Kealoha. That crime requires a mandatory minimum of two years and must be served consecutively.

The guilty pleas are a stunning reversal of fortunes for the former law enforcement power couple, who during a years-long federal investigation always continued to claim they were wrongly accused.

But standing in front of federal Judge J. Michael Seabright on Tuesday morning, Katherine Kealoha ― wearing a Honolulu Federal Detention Center jumpsuit ― outlined under oath how she had committed the crimes she was accused of. In open court, she said:

• In 2010, she inflated her financial status in loan documents by claiming a trust fund for two siblings she had been appointed guardian for was actually her money.
• She also admitted to falsifying a police report to explain her credit issues. She said she asked a police officer ― who she refused to name ― to sign the report and give it to her credit union.
• And she said that as a deputy city prosecutor, she was assigned a drug case involving her brother, Dr. Rudy Puana. She didn’t remove herself from the case or notify federal authorities that he was involved in distributing large quantities of opioids, including fentanyl, she said.

Seabright responded to her admissions with: “I accept your guilty plea and I judge you guilty.”

The Kealohas’ guilty pleas are the culmination of weeks of negotiations with federal prosecutors.

The deail includes a requirement that Katherine Kealoha pay about $280,000 in restitution to her elderly grandmother, Florence Puana, and her uncle.

Gerard Puana emerged from the federal courthouse Tuesday looking slightly shell-shocked. He said he’s been waiting years for his niece to admit what she’d done.

“It was surreal,” he said. “She’s never really taken any responsibility. She has never apologized to my mother or myself.”

Under the deal, Kealoha will not be able to appeal any of her convictions once she’s sentenced with one exception: She can claim ineffective assistance of counsel.

In the so-called “Mailbox Trial,” prosecutors showed how Kealoha stole money from her relatives then framed her uncle with a crime ― the theft of the couple’s mailbox ― in a bid to hide what she’d done.

Sentencing on the crimes the couple has been convicted of may not happen until early next year.

In the financial crimes trial, prosecutors were prepared to show how the Kealohas stole money from relatives and friends to fraudulently secure homes in Kahala and Hawaii Kai.

Some of the money came from two siblings who referred to Katherine Kealoha as “Aunty Kathy.”

The sister and brother were children when their father died and they collected about $170,000 from a malpractice lawsuit. Kealoha was the trustee of the account.

The Kealohas must also pay restitution to the siblings, about $170,000.

After the hearings, special prosecutor Michael Wheat, who has led the investigation since 2015 made a rare appearance outside the courthouse to answer questions from the media.

“Contrition is always the first step on the road to deal with your issues and the Kealohas took that step today and hopefully this will help this community heal after what it’s gone through for the last couple of years,” Wheat made it clear, his work is not done yet, “Today another page has turned in the long saga that has plagued this community for some time.”

When asked how many pages there were in the book, he refused to answer.

Wheat’s team of prosecutors have sent target letters to Honolulu Prosecuting Attorney Keith Kaneshiro and the city’s top civil attorney, corporation counsel leader Donna Leong. Subject letters have also gone out to other individuals.

Part of the deal requires cooperation from the Kealohas, but Wheat would not say what that involves.

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