The U.S. Attorney’s Office for the District of Hawaii announced Friday that four defendants were convicted for their parts in a complex tax refund fraud scheme that falsely obtained over $1 million in fraudulent federal tax refunds.

From a news release:

HONOLULU – A federal jury convicted four individuals from Hawaii this week for their roles in a tax refund fraud scheme.

The following is according to court documents and evidence presented at trial: from at least January 2015 through September 2018, Rosemarie Lastimado-Dradi, Marciaminajuanequita Dumlao, Elvah Miranda, and Daniel Miranda conspired to defraud the United States. As part of their scheme, the conspirators filed fraudulent individual tax returns and other tax documents that reported false withholdings from mortgage lenders and then claimed substantial refunds from the IRS. After processing the false returns, the IRS issued refunds totaling over $1 million.

To prevent the IRS from recovering the fraudulently obtained refunds, the conspirators created trusts, opened new bank accounts in the names of business entities and the trusts, and transferred the proceeds between the accounts to conceal them from the government. In addition, Lastimado-Dradi, Dumlao, and Elvah Miranda laundered the fraudulently obtained refunds through a series of bank transactions. Dumlao and Daniel Miranda also each filed for bankruptcy and made false statements under oath in relation to their respective bankruptcy proceedings.

All the defendants were found guilty of conspiracy to defraud the United States. In addition, the jury found Lastimado-Dradi, Dumlao, and Elvah Miranda guilty of money laundering. Daniel Miranda and Dumlao were found guilty of making false statements under oath in a bankruptcy proceeding. Finally, Elvah Miranda was also found guilty of filing a false tax return, and Lastimado-Dradi was found guilty of aiding and assisting in the preparation of false tax returns. Dumlao was acquitted of filing a false tax return and four money laundering counts. Daniel Miranda was acquitted on one count of filing a false return.

I flagged the original indictment because one of the defendants, Rose Dradi, was also part of a fraudulent foreclosure relief scheme involving David Keanu Sai, a prominent proponent of the idea that the Hawaii Kingdom was never extinguished and now exists as an occupied territory, and Dexter Kaiama, a former Hawaiian attorney who tried to use Sai’s argument as a defense in court cases.

“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,” attorneys for the state’s Office of Consumer Protection argued in a 2018 lawsuit. “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.”

I wrote about the scam in a 2019 post after OCP challenged a foreclosure case in which the homeowners used documents prepared by Sai and Kaiama in an attempt to defeat the lender’s foreclosure. According to OCP, Dradi identified and solicited potential “clients,” and then managed their communication with Sai and Kaiama.

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 referred the case for possible criminal prosecution in 2019. Hawaii News Now reported at the time that Sai had taken nearly $8,000 in fees from homeowners facing foreclosure who believed Sai’s assistance would save their homes.

“Sai’s conduct constitutes a felony and Sai’s criminal wrongdoing has been referred to the proper criminal authorities for investigation,” OCP attorney James Evers said in a court filing.

No criminal charges were filed in response to the referral, and neither Sai nor Kaiama was tied to Dradi’s larger tax refund scam.

In June 2020, attorney Kaiama settled a civil lawsuit brought by the Consumer Protector by agreeing to be permanently barred from providing “legal services or any other assistance” to any homeowner whose property is facing actual or threatened foreclosure.

Two years later, in December 2022, Kaiama abruptly surrendered his law license after refusing to cooperate with an investigation by the Office of Disciplinary Counsel, and refused to respond to an order of the Hawaii Supreme Court to show cause why he should not be immediately suspended. Several weeks later, the court made the suspension official, precluding Kaiama from reactivating his law license absent approval from the disciplinary counsel.