A former police chief and his former prosecutor wife allegedly carried out a $4 million fraudulent mortgage, refinancing and line of credit scheme victimized two credit unions and three banks.

Federal prosecutors indicted former Honolulu Police Chief Louis Kealoha and his wife, Katherine Kealoha, a former supervisor attorney for the Honolulu prosecutor’s office, last week with 20 counts of bank fraud, criminal conspiracy, obstruction of justice, making false statements to a federal officer and aggravated ID theft.

The Kealohas were indicted along with five other Honolulu police officers following a federal grand jury’s two-year investigation into public corruption and abuse of power within the Hawaiian law enforcement agency. The accused couple and one of the police officers pleaded not guilty Friday in U.S. District Court in Honolulu.

The case is being prosecuted by the office of acting U.S. attorney Alana Robinson for the Southern District of California in San Diego. She flew to Honolulu for the court hearing and addressed the media.

“The 20-count indictment describes a complex web of fraud, deception and obstruction by a husband and wife team so desperate to fund their lifestyle and maintain their sell-professed status as Honolulu’s power couple that they swindled hundreds of thousands of dollars from banks, credit unions and some of the most vulnerable members of the community,” Robinson said, the Associated Press reported

Those vulnerable members of the community included children’s’ trust funds that included more than $167,000, investment money of about $70,000 from Katherine Kealoha’s disabled uncle and a $513,000 reverse mortgage scheme that victimized Kealoha’s 98-year-old grandmother. The reverse mortgage fraud victimized the Bank of Hawaii and MetLife Home Loans.

The Kealohas allegedly 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 Disneyland in Anaheim, according to the indictment.

The 41-page indictment charges the Kealohas with nine felony counts of bank fraud.

They allegedly falsified documents to secure first mortgages, refinancing and lines of credit from the $1.6 billion Hawaii USA Federal Credit Union in Honolulu, the $263 million Hawaii Central Federal Credit Union in Honolulu and the American Savings Bank.

Starting in March 2010, the Kealoha applied for a $1.1 million home with HUSAFCU to refinance their mortgage and falsified information on their application. They falsely claimed that they owned two trust accounts and they denied derogatory items on their credit reports. Mrs. Kealoha also altered monthly trust accounts to make it appear that she owned the accounts. However, in 2004, while employed as a private attorney, Mrs. Kealoha was appointed by the Hawaii state court as a trustee and guardian of a 10-year-old and a 12-year-old. The state court also ordered Kealoha to create individual trust accounts of more than $167,000 for the children. Using an alias, Mrs. Kealoha also sent a fabricated email to herself at a different email address and forwarded that email to her mortgage broker to make it appear that the derogatory credit associate with Kealoha was erroneous.

In June 2012, the Kealoha’s applied for a $150,000 second mortgage and then in March 2013, they also applied for a $180,000 HELOC with HCFCU. According to the indictment, the couple certified in a Form 1003 loan application they received more than $2,700 a month in rental income when in fact no such income existed.

In June 2013, the Kealohas returned to HCFCU to apply for a $980,000 mortgage loan to purchase a house. This time they submitted to the credit union a forged Honolulu PD police report that claimed they were victims of ID theft to explain their negative credit history. In May 2014, the couple also applied for a $90,000 HELOC from HCFCU for debt consolidation and again submitted a forget police report claiming their were victim of ID fraud.

Additionally, in June 2016, the Kealohas applied for a $1 million loan with HCFCU to refinance their mortgage and cash out of $32,000 and a $172,500 home equity line on an investment property. Once again, the couple allegedly submitted to the credit union a fake police report that they were victim of identify fraud to explain their poor credit history.

According to the indictment, the Kealohas began their bank fraud scheme in December 2007 when they applied for a $50,000 from ASB and fraudulently used the trust accounts as collateral. And in March 2009, they applied for a $55,000 loan and again fraudulently pledged the trust accounts as collateral. They used the loans to pay for personal expenses and pilfered the funds in the trust accounts to repay the $105,000 loans.

Federal prosecutors also noted that the Kealohas opened an controlled bank accounts at three other credit unions and two other banks. Prosecutors do not say, however, whether these accounts were used by the couple to carry out their alleged crimes.

Instant Insights /

Former Police Chief & Prosecutor Indicted for Bank Fraud

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