EXCLUSIVE: Federal investigation into police chief broadens

HONOLULU (HawaiiNewsNow) - The federal criminal probe of Honolulu's police chief and his deputy prosecutor wife has grown significantly in recent months, so much so that a second federal prosecutor has been brought in from California to assist with the case, multiple law enforcement sources say.

A central development: The police chief's wife, the head of the city prosecutor's Career Criminal Division, is now being characterized as a central focus of the FBI investigation.

Sources also say that a number of Honolulu police officers and other witnesses have testified before a federal grand jury, whose members will decide whether one of Hawaii's power couples should be indicted on charges of public corruption and civil rights violations.

At the center of the FBI investigation into Honolulu Police Department Chief Louis Kealoha and wife Katherine, sources say and court documents show, is a rancorous family dispute over money.

And perhaps most explosively, the FBI is investigating whether the chief, his wife, and the police department violated civil rights, deceived investigators and abused taxpayer resources for their personal needs.

"What's laid on the table against the chief is huge," said University of Hawaii criminology instructor Aaron Hunger, after being briefed on what Hawaii News Now has learned.

The back story on the case begins in 2009, when Louis Kealoha was sworn in as chief of the 20th-largest police force in the nation.

A few weeks after his swearing-in ceremony, Katherine threw her husband a lavish inauguration party with a $24,000 price tag. That money came from a bank account she shared with her grandmother, 93-year-old Florence Puana. Puana lived with her son, Gerard, who is Katherine's uncle.

The funds in that account are important to understanding the ugly family dispute that would later spill into the civil courts and be presented to the grand jury.

Just months after the lavish inauguration party, $148,000 from the account Katherine Kealoha shared with her grandmother was gone. And that's when the relationship between the Kealohas and Puanas began to sour.

Multiple sources say the FBI investigation is looking into whether Katherine Kealoha used her position as a top prosecutor -- and her police connections -- to gain an advantage in the family dispute.

Family dispute worsens

By 2012, the relationship between Katherine Kealoha and her grandmother and uncle was growing more contentious.

Court documents show that even more money was missing from the joint bank account, which was eventually closed.

That year, Florence Puana sent a one-page letter to Katherine Kealoha characterizing the missing money as "borrowed" and asking her to repay $300,000. The letter was mailed to the chief's office at the police department, where several people would have screened it before giving it to Louis Kealoha.

"As you know, I've tried again and again to talk to you by phone, offered to meet with you at any time or place," Puana writes in the letter, in which she also says that Katherine Kealoha is no longer her attorney "effective immediately."

"You have not been truthful and have turned your back on me," Puana wrote.

Five days later, Katherine Kealoha sent a strongly-worded six-page response to Puana, in which she frequently types whole paragraphs in all caps.  She denies avoiding contact with her grandmother and says she has always been available to talk about the situation.

Kealoha writes, "I HAVE NEVER, WILL NEVER OR WOULD NEVER BORROW, TAKE OR EVEN REQUEST to BORROW ANY MONEY FROM FLORENCE PUANA!"

She continues, "I WILL seek the highest form of legal retribution against ANYONE and EVERYONE who has written or verbally uttered those LIES about me! They will rue the day that they decided to state these TWISTED LIES!"

The Puanas eventually filed a civil lawsuit against the Kealohas over the missing money, and on June 19, 2013, Katherine Kealoha is questioned under oath in the case.

A stolen mailbox, a growing mystery

Two days later, the now infamous overnight theft of the Kealohas' mailbox is caught on surveillance video. The video shows the mailbox being lifted from its pedestal and the thief getting away in a car.

Gerard Puana, Katherine Kealoha's uncle, is quickly identified as a lead suspect. He's later brought up on federal charges.

But what actually happened that night is as fuzzy as the video.

And perhaps most explosively, the FBI is investigating whether the chief, his wife, and the police department violated Puana's civil rights, deceived investigators and abused taxpayer resources for their personal needs in the course of investigating the theft.

Hunger, the criminology expert, says among the most disturbing aspects of the episode is that the police department investigated the theft of the chief's mailbox itself, which he called a conflict of interest.

"We should, as taxpayers, never have had the Honolulu Police Department, any of its services, investigating it," he said. "This should have all been handled by the postal inspector."

Elite police unit involved

Though the theft happened overnight, the first official report wasn't made until 1:30 p.m. the next day, when Katherine Kealoha called 911.

But what she doesn't say to the arriving officer -- or doesn't know -- was that a detective from HPD's elite Criminal Intelligence Unit had already been at the Kealohas' Kahala home since 9 a.m and had already taken their surveillance video hard drive.

The CIU is a specialized group of officers, federally-funded and charged with counter-terrorism efforts and tackling criminal organizations, Hunger said. They also analyze and determine how to address "widespread crime in the community," he said.

In other words, Hunger said, they're not supposed to respond to petty crimes -- just because the victim is the police chief or a powerful prosecutor.

The chief actually addressed those concerns after the theft, telling Hawaii News Now that he "knows what it looks like" but that he wasn't getting any preferential treatment.

'Not about a mailbox'

In the same interview, the chief defended the use of another specialized police squad, the Crime Reduction Unit, to arrest Katherine Kealoha's uncle Gerard Puana as he walked to church on June 29, 2013.

The arrest came eight days after the mailbox theft and just 10 minutes after Katherine Kealoha identified Puana as the thief on the grainy surveillance video.

Hunger said while the public's focus has been on a mailbox caper, onlookers need to move beyond that.

"This is not about a mailbox that has been lost, stolen or somehow tampered with," he said. "This is about a federal crime that wasn't turned over to federal authorities, and was instead, investigated by the victims in the case who over stepped their power."

A misdemeanor or a felony?

In 2014, as the mailbox case headed to criminal court, Puana's attorney claimed his client was being framed by HPD and that the mailbox theft was staged because of the Kealohas' looming civil case over the missing money.

A key to his defense theory was the mailbox itself.

The one that the police said was stolen was a deluxe model with a rounded roof, worth well over $400.

But the mailbox that Google Earth shows was at the home at the time -- and the one visible on the video -- appears to be a Gibraltar brand aluminum mailbox. Those mailboxes rarely sell for more than $200.

The type of mailbox that was stolen may not seem like a significant detail, but here's why it is: Puana's attorney was going to say in court that the mis-identification of the mailbox was intentional. Overstating the value, the defense planned to argue, meant the charge would be a felony rather than a misdemeanor.

In Hawaii, the seriousness of theft charges depend on the value of the stolen property. If the mailbox was valued below $300, the crime in state court would only have been a misdemeanor.

Hunger said if that was the strategy, it was a bizarre one, because the whole case should have been handled by federal investigators in the first place, given that it involved mail.

"It was a federal crime to begin with, so lying about the price to make it a worse crime, if anything, was a silly lie," he said.

A mistrial spurs big questions

The criminal case involving the mailbox didn't get very far, though.

Before any of this evidence was presented in court, a mistrial was called when the police chief, the second person to take the stand, suddenly said Puana, his wife's uncle, had had a prior arrest. The mailbox case was subsequently thrown out.

Since that time, the FBI has tracked down the Kealohas' hard drive containing the mailbox security video, police sources say.

The CIU detectives had only turned over selected parts of the recording and some still shots from other camera angles. Federal agents wanted to view hours of video from that night, to see if a clear, full-screen picture of the car was saved. They also hoped to see a license plate, or details of the thief.

But in a strange development, the video has apparently been deleted. All that was saved was one hour, sources say.

The hard drive has been sent to an FBI lab to try to recover some of the images.

Probe continues

The federal grand jury in the Kealoha case has been hearing evidence for several months, but it's far from over.

More witnesses are still being called, and more subpoenas could be issued soon.  The grand jury must determine if all the various incidents add up to a serious crime. Even if someone is charged, the case must still be proved beyond a reasonable doubt.

It's important to note: The Kealohas won the civil court case brought against them by the Puanas. It is now being appealed. And the chief, who declined comment for this story along with his wife, has always maintained that he's done nothing wrong and has received no official confirmation that he is a target of any federal investigation.

Mobile users: See a timeline of the police chief's tenure here.

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