Former CU Members & Top Law Enforcement Officials Face Years in Prison

Credit union members who were once among the top law enforcement officials in Honolulu face years in federal prison after admitting they defrauded credit unions and banks through elaborate schemes to secure loans that funded their extravagant lifestyle.

Last week, former Honolulu Police Chief Louis Kealoha, 59, pleaded guilty to bank fraud, and his wife, Katherine Kealoha, 49, a former Honolulu deputy prosecutor pleaded guilty to bank fraud, aggravated identity theft and drug charges.

Plea agreement documents show that the couple spent more than $591,000 derived from loans fraudulently obtained from credit unions and banks, stolen funds from a reverse mortgage scam and money that belonged to two children for whom Mrs. Kealoha was the state court appointed trustee and guardian.

The Kealohas used these funds to pay for their personal expenses, including a $26,000 induction brunch when Mr. Kealoha was appointed police chief, car payments for a Maserati and Mercedes Benz, concert tickets, restaurants, hotels and a trip to California’s Disneyland, according federal prosecutors.

On multiple loan applications, the Kealoha inflated their monthly incomes, including falsely stating that they received revenue from a rental property and submitted a fake lease agreement to the financial institutions. To cover their poor credit scores, the Kealohas claimed inaccurate reporting by the credit bureaus and that they were victims of identity theft. To prove it, they submitted a forged police report that purported to document their ID theft claims.

Based on these false claims, for example, the couple secured a second $150,000 mortgage from the $280 million Hawaii Central Federal Credit Union in Honolulu. That second mortgage has been paid in full.

In their separate plea agreements, they agreed to pay restitution of $165,269 to the children and forfeit $63,476 from the sale of the Kealohas’ home, which has an estimated market value of $1.2 million, according to the Multiple Listings Service. The $63,476 represents the funds derived from the second mortgage fraud that subjected the money to criminal forfeiture, court documents show.

The Kealohas also victimized the $1.7 billion Hawaii USA Federal Credit Union in Honolulu and the American Savings Bank.

In June 2019, in a related case, the Kealohas were convicted by a federal jury for abusing their power by conspiring with two police officers to frame Katherine Kealoha’s uncle, Gerard Puana, for a crime he did not commit in a desperate attempt to discredit his claim that the Kealohas stole a substantial amount of money from him and his 100-year-old mother – Katherine’s grandmother – Florence Puana.

In their plea deals, the Kealohas also agreed to pay restitution of $46,261 to Gerard Puana and $243,453 to Florence Puana.

In her plea agreement, Mrs. Kealoha admitted to drug trafficking conspiracy with her brother, anesthesiologist Rudolph B. Puana, who wrote medically unnecessary prescriptions for controlled substances such as oxycodone and fentanyl in order to resell them. When the brother came under police suspicion, Mrs. Kealoha used her law enforcement position to take control of the investigation and ensure that she and her brother were not prosecuted.

Although Mrs. Kealoha could receive a maximum prison term of 60 years, she is likely to face 24 years to 37 years in prison based on federal sentencing guidelines outlined in her plea agreement. Mr. Kealoha’s maximum prison term is 35 years. However he is likely to face 24 years to 32 years in prison, his plea agreement shows.

Their sentencing hearings have not been scheduled.