On Wednesday, January 11, 2017, Honolulu’s recently-appointed Acting Chief of Police made a telephone call to the Honolulu office of the Federal Bureau of Investigation.

Cary Okimoto had been named acting chief less than a month earlier when the former chief, Louis Kealoha, went on leave after receiving formal notice he was the target of a federal grand jury investigation and was likely to soon face criminal charges.

This wasn’t a routine call. Okimoto told the feds that the city’s top attorney, Corporation Counsel Donna Leong, and other city officials, were attempting to illegally tap Honolulu Police Department funds to pay for a confidential settlement in exchange for Kealoha’s agreement to retire and to give up any legal claims against the city.

Leong and Honolulu Police Commission chair Max Sword had apparently taken the lead for the city in confidential settlement talks with the outgoing chief, and the resulting tentative deal, which included a substantial cash payment, had already been agreed to “in principal” by the Honolulu Police Commission.

Sword, who had been nominated to the commission by then-Mayor Mufi Hannemann in 2009, was a longtime Outrigger Hotels executive and influential lobbyist whose advice had been sought out by political insiders for years.

Leong was now attempting to put the finishing touches on the agreement, including identifying the source of funds to finance the deal, so that it could be finalized and signed the following week.

The proposed settlement was a political hot potato, generating awkward questions about Kealoha’s criminal liability, and drawing criticism from several members of the city council, who hinted that the council might refuse to fund the deal. Leong was doing her best to get the settlement in place with minimal public fuss and the least possible political damage to the administration of then-Mayor Kirk Caldwell.

But HPD’s new leadership, well aware that the department was the focus of a criminal investigation and under intense federal scrutiny, broke ranks with the city administration and took their concerns directly to the feds.

Within days, Okimoto’s tip, and additional information that followed, led the FBI to initiate “a criminal investigation into whether Leong and others had committed violations of federal criminal law, including conspiring to obtain by fraud, or to convert, funds of an organization or government agency that receives federal funding in violation of federal law….”

The investigation eventually led to the December 2021 indictment of Leong, Sword, and Roy Amemiya, the city’s managing director. All three were charged with a single count of conspiracy to obtain or “misapply” more than $5,000 without authority from a program receiving federal funds, “by materially false and fraudulent pretenses, representations, promises, and omissions of material facts” in violation of federal law. A violation may occur even if the eventual use of the funds is otherwise legitimate, if they were used without proper authority.

A first superseding indictment added five counts against Leong for allegedly making false statements during a November 13, 2017 FBI interview.

The trial of the three defendants is now scheduled to begin in October after multiple attempts to dismiss the charge failed.

HPD’s role in triggering the federal investigation and indictment is one of the important stories that emerges from hundreds of pages of previously sealed court documents that were made public by a December 23, 2023 court order. The court acted in response to a legal challenge to continued secrecy brought by the Public First Law Center, formerly known as the Civil Beat Law Center for the Public Interest.

Attorneys representing the three defendants say federal agents and prosecutors have misinterpreted what was said during the recorded telephone calls, and continue to maintain their clients are innocent of the charges.

Tuesday, January 10, 2017.

Max Sword, chairman of the Honolulu Police Commission, met privately with Acting Chief Okimoto, along with Deputy Chief Jerry Inouye and Acting Deputy Chief Bill Axt, according to court records.

Sword told them the commission was preparing a “settlement” with the outgoing chief, but said the details were secret, and he was not authorized to disclose them to HPD.

“Axt, who had previously overseen HPD’s Budget Division, told Sword that HPD could not pay for Kealoha’s settlement package out of its budget,” according to later accounts of the meeting.

Axt told investigators Sword appeared “shocked” by HPD’s view that it could not legally use its funds for the settlement.

After the meeting, Sword allegedly “immediately sought Leong’s help to get HPD officials on board,” documents show, and she then sent an email requesting an in-person meeting with HPD leaders to discuss the settlement.

That evening, Sword and Leong began referring to the Kealoha payout as a “retirement agreement” rather than a “settlement,” according to the documents.

Wednesday, January 11, 2017

In addition to Okimoto, Inouye, and Axt, the meeting with Leong included HPD’s senior legal counsel, Lynne Uyema, and Deputy Corporation Counsel Duane Pang, who advised the Police Commission.

Leong opened the meeting by insisting that the issue wouldn’t have to go before the City Council for approval if the funding for the Kealoha deal came from the police department’s salary budget.

According to the government’s account of the meeting, “Axt told Leong that HPD could not fund a settlement payment, and that because Kealoha was not working under a contract, HPD had no ability to pay him severance.” Further, he said the deal amounted to a legal “settlement” with Kealoha, which required council approval.

“Axt also told Leong that “if she was pushing for Kealoha to receive the settlement money so that he drops the lawsuits against the City, she should ‘say it.”

In the face of resistance from Axt, Leong asked him and the others to leave the room so she could speak privately with Okimoto.

“Axt and Inouye went out to the hallway along with Deputy Corporation Counsel Duane Pang, where they continued to discuss the Kealoha payment,” according to a July 2017 court order. “Axt told Pang that the payment would require City Council approval and anything to the contrary ‘went against the Revised Ordinances and is illegal.'”

“Pang replied, ‘I know I told her (Leong) that.'”

Meanwhile, Leong was ratcheting up the pressure on Okimoto.

“Alone with Okimoto, Leong admitted that she refused to go to the City Council for approval of the settlement,” according to description contained in a memo prosecutors filed in court six months later. “To avoid them, she advised Okimoto to lie by claiming HPD had used the money to hire new employees. She suggested that Okimoto should go along with the plan for the sake of his career, reminding him, “[t]he Police Commission is your boss.”

When the meeting was over, several things happened.

First, Okimoto sent an email to Leong reiterating his position that HPD did not have the money to fund the Kealoha payment.

Second, Okimoto made his phone call to the FBI and shared his concerns about what he termed “illegal” demands being made of the department.

Third, and perhaps more importantly, Okimoto and his leadership team began recording their telephone calls concerning the Kealoha deal with Leong and other city officials.

Thursday, January 12, 2017

Okimoto returned a phone call from Leong the next day. The call was recorded.

During the call, which Okimoto surreptitiously recorded, Leong began with a question.

“Is it truly just a funding issue or is there something else going on?”

Okimoto replied that it was “mostly” a funding issue. “We don’t have the money,” he told her.

Leong then said she had gone to the city’s budget director for advice.

“When I’m really stuck…I go to the guy I call dad and that’s Nelson Koyanagi.”

“He calls me mom,” Leong said with a chuckle, noted in the transcript.

“So I went to dad and I said dad, I need, I-I-I told him what the situation was with HPD.”

If the Kealoha payment were made out of the salary account, then when the budgeted amount ran out, Leong said Okimoto could then report it had been spent on recruits “or whatever,” and then Koyanagi would transfer additional funds from a special account.

“When you run out of money you just re- tell him that you’ve run out of money, request the money. [Breathes out] And he will fund it,” Leong said.

Okimoto then pointed to “the other issue,” that “by law anything over a hundred-thousand dollars needs city council approval.”

Leong ignored that question, and went on about how the process could be stretched out over number of months so that a request for additional funds from HPD would not appear to be related to the Kealoha payout, and it would not be necessary to obtain City Council approval, only to provide notice of the transfer.

She suggested fiscal staff in the two departments could talk about “mechanics,” and also suggested Okimoto speak with Koyanagi directly.

“Go talk to him,” Leong said. “Get comfort, and if you’re okay with it just say ok umm you’re ok with it and uh he’s going to have to make sure his people are on board and he knows the confidentiality of it.”

After the call was over, Okimoto was clearly not with the program. In a follow-up phone call, Okimoto told Pang “that the proposed payment arrangement amounted to ‘hanky-panky,’ and that he was ‘flatly against’ the use of HIPD funds for such purposes.”

Later that day, Deputy Chief Inouye phoned the FBI’s supervisory special agent and asked to meet with him in person. At 8:30 that same evening, the two men met at Inouye’s Aina Haina home.

During their meeting, Inouye gave the agent a CD with the recording of Okimoto’s phone call with Leong. It was only the first of several CDs containing additional recorded telephone conversations that were provided to the FBI over the next several months.

Although the investigation eventually stretched out for several years, it was solidly grounded in the first-hand accounts of HPD’s top leadership at the time.