HONOLULU (HawaiiNewsNow) - Former Honolulu Police Chief Louis Kealoha and his deputy prosecutor wife, Katherine, have apparently stopped paying the mortgages on their Hawaii Kai home, and haven't paid the property taxes on their Kahala condo either, Hawaii News Now has learned.
Legal experts say these new developments could threaten their legal team, made up of taxpayer-funded attorneys and could get the Kealohas sent back to jail.
The Kealohas bought the four-bedroom, three-bath Hawaii Kai home in 2013 for $1.25 million, while Louis Kealoha was still HPD's chief and his wife was the third-highest deputy prosecutor in the state. But the FBI says the home was purchased using money stolen from relatives.
Now that the two have been charged with multiple counts, including theft, fraud and perjury, the federal government has put a lien on the home.
If the Kealohas are found guilty, the lien ensures the victims will be paid back.
"Basically it sits in escrow until there's a final determination," says Ricky Cassiday, a real estate expert. "You're innocent until proven guilty."
The bank also owns part of the home and there is another lien, from the Kealohas' former attorney, Kevin Sumida, who claims they owe him about $800,000 for past legal expenses.
But not paying the mortgage means it could fall into foreclosure, which brings the value down. And that could mean, there isn't enough equity to go around.
The home is clearly not what it used to be: The grass is overgrown, dead leaves hang from the trees, and the paint is chipping. Neighbors say the couple haven't been there in months.
"They figure, they're never getting their house so why should they put any more money into it, they're just screwing the people that have the liens, the people they've screwed before," said attorney Michael Green who represents two of the couple' alleged victims. "It's just part and parcel of who they are."
Katherine Kealoha was trustee for an account for Green's clients, siblings who got about $170,000 from a malpractice claim over their father's death. The federal indictment says Kealoha used the siblings' money to pay for personal expenses, including her multiple mortgages and luxury cars.
"They took everything they could from my clients so now it's just a question of trying to recoup what you can," says Green.
The extra money the Kealohas have by not paying the estimated $5,000 a month in mortgages could put their taxpayer-funded legal team in jeopardy because their high monthly debt is what convinced Chief U.S. Judge Michael Seabright that they could not afford their own attorneys. If they stopped making those payments, they are required to report it.
"They were put on notice that they should notify the court of that change in their financial condition and the court may determine that if they don't do that that they may have violated some of their pretrial conditions," said attorney William Harrison, who added the judge could send them back to jail if he finds they are being deceptive about their finances.
The Kealohas bought a leasehold condo in Kahala last summer and that's where they were arrested after the grand jury indictment. Records show they have not paid the property taxes on that condo either.