Legal battle brewing over portion of proceeds from sale of Kealohas’ home

HONOLULU, Hawaii (HawaiiNewsNow) - A portion of the proceeds from the sale of Louis and Katherine Kealohas’ foreclosed home could pit a financial institution against two of their victims.

The Hawaii Central Federal Credit Union filed a court document late last month asking for money leftover from the sale to pay for legal fees. But some are calling for the money to be directed to Ransen and Ariana Taito, siblings who lost their father when they were children.

They were awarded money after a medical malpractice suit and Katherine Kealoha, who was trustee of the account, stole more than $160,000.

The money was used to pay for homes for the former Honolulu power couple.

In October 2018, the couple’s Hawaii Kai home was seized by the federal government and it sold for $1.3 million in March 2019. The credit union got $1.1 million, the cost of the mortgage and fees.

Other fees including Realtor commissions and utilities, which amounted to $142,000.

After everyone was paid, there was about $63,000 left.

The federal government could turn that money over to the Taitos as restitution but the credit union wants all of it.

The attorney for the financial institution, Jonathan Lai, said his legal fees total more than $94,000. That includes conversations with reporters and the Kealohas’ criminal and civil attorneys.

But attorney Michael Green, who represents the Taito family, said the funds should go to the victims. “You know what, you better get ready for it because we’re coming,” he said.

Retired federal public defender Alexander Silvert once represented another victim of the Kealohas’ fraud, Gerard Puana,

“In this instance, be magnanimous,” said Silvert, about the credit union.

“It’s kind of a Robin Hood situation where it would be really nice for the bank to give up its legal claim, it’s legitimate claim to flow to the Taitos,” said Silvert.

Attorney Jonathon Loo, who also represents the Puana family, points out the credit union was made whole. “The better thing to do would be to walk away from it, you got your principal and interest paid back to you which you were entitled to, just kind of let it go,” Loo said.

In a statement, Jonathan Lai, the attorney for the Hawaii Central Federal Credit Union, said it is a not-for-profit organization:

“Had this been a standard foreclosure action, the lender would have recovered its principal balance, interest, late charges, attorneys’ fees and costs from the sale proceeds immediately following the sale. The result should be the same in this case.”

Lai also pointed out that the institution was a fraud victim of the Kealohas, too.

A court proceeding has been scheduled on February 25.

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