The Office of Consumer Protection, the state’s top consumer watchdog agency, has accused three people, including two prominent Hawaiian sovereignty advocates, of committing mortgage rescue fraud through a scheme “targeting homeowners desperate to save their homes from foreclosure.”

In a series of legal filings in both state and federal court since the beginning of 2018, the consumer protection agency alleges the scheme involves David Keanu Sai, an activist scholar who has vigorously promoted his own theory that the illegal overthrow of the Hawaiian Kingdom invalidates subsequent laws and land titles; attorney Dexter Kaiama, who has defended a number of sovereignty activists with arguments based on Sai’s theory; and Rose Dradi, a former Kapolei resident.

In court filings, Sai and Kaiama have strongly denied doing anything illegal. Dradi could not be located and has not responded to the allegations.

The agency alleges homeowners facing imminent or threatened foreclosure were told, both explicitly and implicitly, that a legal defense based on Sai’s sovereignty beliefs would result in the foreclosures actions being dismissed and their homes being saved.

According to OCP:

Sai, who claims to be an expert on sovereignty issues, maintains that the continued existence of the Kingdom of Hawaii means that the State of Hawaii does not exist. According to Sai, there are no state laws, and there are no state courts. Sai claims to know all of this first-hand because Sai claims to be an acting minister/diplomat for the Kingdom, and Kaiama is supposedly the Kingdom’s acting attorney general.

Sai, the agency alleges, has a standard written contract that clients are asked to sign which requires them to pay a fee before services can be provided. Dradi often serves as Sai’s assistant, soliciting clients, obtaining payment, and coordinating with them in advance of court appearances, the agency says. She has often been the “primary point of contact between consumers and Sai.”

Once fees are collected, Sai then allegedly provides a written answer to the foreclosure lawsuit or a “motion to dismiss” that contests the court’s jurisdiction based on his theory that all U.S. or Hawaii law is unenforceable here because Hawaii remains an independent state. The motion is provided in a standard format which the property owners are advised to sign and file in court “pro se,” without the benefit of an attorney.

The agency alleges this scheme “in which Sai’s supposed expertise on Hawaiian sovereignty issues is packaged as part of a motion to dismiss, has been shown to be of no benefit….No judge presiding over a foreclosure case has yet to be convinced that the case must be dismissed for lack of subject matter jurisdiction based upon the continued existence of the Kingdom of Hawaii, and yet Sai keeps offering his services and illegally collecting his fees in advance.”

And when the sovereignty argument fails in court, as it consistently has, the agency says the home owners have incurred additional costs and delays, and as a result “have essentially squandered any meaningful chance they had to save their property….”

The Office of Consumer Protection’s allegations became public beginning in early 2018 when it intervened in an existing foreclosure against an Ewa Beach couple who had stopped making their mortgage payments in 2011, and defaulted on the remaining loan balance of more than $300,000.

The lender initiated foreclosure proceedings in March 2015. OCP alleges the couple paid a total of $7,250 in advance fees in their attempt in order to obtain the services they believed could block the foreclosure and save their home. Most of the fees went for the services of Sai and Dradi, with additional amounts going to Kaiama, who was paid to make a “special appearance” in court to present a defense based on Sai’s written motion.

OCP alleges Kaiama has appeared on behalf of consumers facing foreclosure in no less than 200 cases. In at least 100 of those cases, the agency says Kaiama argued that the court lacked jurisdiction based on Sai’s sovereignty theory.

OCP alleges Sai, Kaiama, and Dradi’s actions violate provisions of Hawaii’s Mortgage Rescue Fraud Prevention Act, Section 480(E) HRS, first passed by the Legislature in 2008 to protect homeowners whose desperation “makes them vulnerable to persons who claim they can stop, prevent, or delay foreclosures, liens, or encumbrances, or claim they can reduce, modify, or eliminate mortgage loan obligations or other filed or threatened liens or encumbrances.”

The law includes a long list of prohibited acts by those advising or assisting owners of financially distressed properties. Attorneys and consultants offering services to owners of distressed properties are barred from accepting advance fees and from misrepresenting, “expressly or by implication, any material aspect of any mortgage assistance relief service.” The law also requires written contracts with full disclosure of fees and other details of services to be provided, and requires detailed record keeping and clear notice that the homeowner can cancel the contract at any time before all promised services have been provided.

Violations of the law are considered unfair and deceptive trade practices, and the specifically prohibited acts are punishable as Class C felonies with up to five years in prison and a $10,000 fine.

The Office of Consumer Protection was seeking civil remedies, including a “cease and desist” order, along with penalties to stop the alleged scam. OCP itself is a civil agency and cannot bring criminal charges, but the agency disclosed in court proceedings that it has referred the matter to prosecutors for criminal investigation.

After a year of legal wrangling, Circuit Court Judge Jeffrey Crabtree ruled that the Office of Consumer Protection should not have been allowed to piggyback its case against Dradi, Sai, and Kaiama on the preexisting foreclosure case. Crabtree acknowledged that the Office of Consumer Protection’s allegations were “detailed and comprehensive,” and “concern important issues of consumer protection which are in the public interest.”

However, Crabtree found the consumer agency had “attempted to take a procedural short-cut while trying to move too far too fast,” and concluded it had been procedurally improper to allow OPC to intervene in the bankruptcy. Judge Crabtree then dismissed the OCP case without prejudice, and said the agency could instead pursue its allegations by filing new complaints containing the allegations that have already been spelled out.

On April 16, 2019, OCP filed such a complaint against Dexter Kaiama for failing to use written contracts, failure to deposit client funds in a client trust account, and failure to keep client funds in the trust account until all of the contracted services had been performed.

It is seeking to bar Kaiama from aiding or representing any owners of distressed property in the future in any manner, as well as seeking restitution, fines, and penalties. Although the new complaint describes the roles allegedly played by Dradi and Sai in the sovereignty scheme, it isn’t clear how they would be affected if the Office of Consumer Protection prevails in this action against Kaiama.

This isn’t the first time Kaiama’s reliance on Keanu Sai’s theories have landed him in some trouble. In 2017, the Hawaii Supreme Court issued an “Order of Public Censure” against Kaiama, affirming findings of the Office of the Disciplinary Counsel that he violated the Hawaii Rules of Professional Conduct in 2012 when he accused Circuit Court Judge Greg K. Nakamura of being a “war criminal.”

It is also a rerun of sorts for Keanu Sai, who was convicted of attempted theft for his role in the so-called Perfect Title case in the late 1990s which also involved his theory about the impact of the overthrow of the Hawaiian Kingdom.

As the Los Angeles Times reported in 1997, Perfect Title was “…a partnership formed by Donald Lewis and David Keanu Sai in December 1995, which has been challenging ownership of parcels of land by tracing titles back to the days of the Hawaiian kingdom. While the details of each case differ, the company invariably concludes that because the U.S.-backed overthrow of Hawaii’s monarchy in 1893 violated international treaties, any government or land title since then is invalid.”

Some home owners, using these “title reports,” stopped paying their mortgages and argued their title insurance should be required to pay because their titles were now “clouded.”

Although Rose Dradi could not be located by the Office of Consumer Protection, she has left a paper trail. In late 2018, federal investigators reportedly issued a subpoena for records of a Google Mail account controlled by Dradi as part of “an alleged criminal investigation.” She disclosed the existence of the subpoena in a rambling pro se filing in Honolulu’s Federal District Court in January 2019. In that document, she also referred to “an unlawful series of raids against two associates….” It is not known whether the investigation is related to the alleged mortgage foreclosure rescue scam or to Dradi’s other business dealings on the U.S. mainland.

Dradi used a mailing address in the state of Washington in recent court filings. Last year, she filed for personal bankruptcy in Atlanta, Georgia, listing two local businesses, Bank of Hawaii and a Honolulu Land Rover dealer, among her creditors. She is listed in Florida business registration records as a principle in and agent for Nuwaii Holdings LLC, a company registered in Florida, while Dradi’s LinkedIn.com listing identifies her as the owner of Dradi Financial Services. That company is not registered to do business in Hawaii, although Dradi was listed as an officer of The Dradi Organization LLC, which was administratively terminated by the state in 2011 after failing to file its annual business reports for several years.

Also see:

“Critical reporting needed on self-proclaimed sovereigns,” ilind.net, Jan 30, 2019.

Ian Lind: Here’s Why Hawaii Judges Are Not ‘War Criminals’, Civil Beat, May 11, 2017.

“Hawaii Monitor: Is Part of the Sovereignty Debate Just a Matter of Faith?” Civil Beat, Mar 5, 2014.

“Reminder: Always check the footnotes,” ilind.net, Sept 13, 2011.

“Pseudo-legalistic sovereignty case makes my head spin,” ilind.net, Dec 4, 2010.