This painting, “Graffiti does it,” by the Los Angeles artist known as OG Slick, is the only one of 28 assets owned by convicted crime boss, Michael J. Miske, Jr., that will not be forfeited to the government as a result of his conviction last week on federal murder and racketeering charges.

The jury’s decision in Phase II of the trial devoted to the forfeiture issue was entered in Honolulu’s Federal District Court on Wednesday. The first phase of the trial ended last Thursday with the jury’s guilty verdict on 13 of 16 criminal counts.

The assets targeted for possible forfeiture ranged from a luxury home overlooking the water at Portlock, valued at $7.3 million for real property tax purposes but previosly appraised at over $10 million, to a group of paintings including several by OG Slick, as well as cash held in several bank accounts.

“Graffiti does it” was apparently excluded from forfeiture because it was given to Miske as a gift from the artist, and had not been purchased with proceeds from his criminal enterprise.

Check out:

“Miske To Forfeit More Than $20 Million In Assets To Government, Jury Rules,” Madeleine Valera, Civil Beat

“Jury in Miske case: Crime boss convicted of murder must forfeit $4M, other luxury assets,” Hawaii New Now

At 1 p.m. Tuesday, a text from the federal court in Honolulu announced that the parties had rested in Phase II of the trial of Mike Miske, in which the jury has to decide whether the prosecutors have proven that millions of dollars in real estate, cash, and collectible cars owned by Michael Miske were tied to the racketeering enterprise he operated and, as a result, must be forfeited to the government.

It took just a day and a half for both sides to present their respective cases and turn the matter over to the jury.

Here is the jury instruction regarding what is required justify forfeiture of the assets. It appear that the third element is the one mostly at issue in the Miske case.

Under federal law, any defendant convicted of racketeering conspiracy, in violation of 18 U.S.C. Section 1962, shall forfeit to the United States any property that constitutes: (1) any interest the Defendant has acquired or maintained in violation of Section 1962; (2) any interest in, security of, claim against, or property or contractual right of any kind affording a source of influence over any enterprise that the defendant established, operated, controlled, conducted, or participated in the conduct of as part of the offense; or (3) any property constituting or derived from any proceeds the Defendant obtained, directly or indirectly, from racketeering activity.

Unlike the earlier phase of the trial, where government charges had to be proved “beyond a reasonable doubt,” the standard of proof required in this second phase is lower, “by a preponderance of the evidence.”

According to the instructions read to the jury by Judge Derrick Watson:

To “establish by a preponderance of the evidence” means you must be persuaded by the evidence that the claim is more probably true than not true. This means that something is more likely present than not present. To put it differently, if you were to put the government’s evidence and the Defendant’s evidence on opposite sides of a balance scale, the government’s evidence would have to make the scale tip slightly on its side of the balance. If the government’s evidence fails to do this with respect to any item of property, then the government has not met its burden of proof with respect to that item of property.

The list of property at issue in this forfeiture stage of the trial can be found in this post from last month.

The jury will continue deliberating on Wednesday morning.

Several witnesses testifying this week in the racketeering trial of former Honolulu business owner Michael J. Miske Jr. focused on bank transactions that appeared to be “structured” to avoid the banks’ mandatory reporting of cash transactions over a $10,000 threshold.

Banks have been required to report customer’s large cash transactions since the passage of the Bank Secrecy Act in 1970. The law, and the the reporting it requires, are designed to “deter and detect money laundering, terrorist financing and other criminal acts and the misuse of our nation’s financial institutions,” according to a summary of the law by the Comptroller of the Currency.

The Bank Secrecy Act requires financial institutions to file reports of all cash transactions exceeding $10,000, and to also report “suspicious activity,” including deliberate attempts to avoid the reporting requirement by “structuring” transactions into amounts that stay under the $10,000 limit.

Although cash transactions over $10,000 are not illegal, incident reports can raise “red flags” for investigators focused on money laundering and related criminal activities, like drug trafficking.

From the federal government’s Financial Crimes Enforcement Network (FinCen):

Can I break up my currency transactions into multiple, smaller amounts to avoid being reported to the government?

No. This is called “structuring.” Federal law makes it a crime to break up transactions into smaller amounts for the purpose of evading the CTR reporting requirement and this may lead to a required disclosure from the financial institution to the government. Structuring transactions to prevent a CTR from being reported can result in imprisonment for not more than five years and/or a fine of up to $250,000. If structuring involves more than $100,000 in a twelve month period or is performed while violating another law of the United States, the penalty is doubled.

Shortly before Miske and ten initial co-defendants were indicted in July 2020, affidavits filed in support of applications for search warrants indicated Miske was being investigated for the crime of illegal structuring, in violation of 31 U.S.C. § 5324.

Ultimately, he was not charged with structuring, but it is one of a long laundry list of crimes that can be evidence of a racketeering conspiracy, the first and overarching charge against Miske.

None of this background information was provided to the jury when prosecutors began calling a series of witnesses focused on “structuring.”

Several current and former employees of First Hawaiian Bank testified on Tuesday about situations in which Miske, or representatives of his companies, attempted to cash what the said were multiple paychecks for employees of the fishing vessel “Rachel.” These were foreign citizens who were not allowed to leave the boat when it was in port in Honolulu.

In each of the situations described, the bank tellers said they told Miske or his representatives that their checks totaled more than $10,000 and would require the bank to submit a CTR, or Currency Transaction Report. In each case, the person seeking to cash the checks then removed one or more checks so that the immediate transaction would be below the reporting threshold.

The first transaction identified by prosecutors took place in January 2011, soon after one of Miske’s companies, Kamaaina Holdings LLC, had purchased the “Rachel.” Jason Yokoyama, who known to the bank at that time as Miske’s “assistant,” wanted to cash four checks. When told that the total exceeded $10,000 and would require the bank to submit a CTR, Yokoyama removed one the checks, and reportedly said Miske would come later to cash the last one, keeping the total under $10,000.

Yokoyama was one of the co-defendants named in the third superseding Miske indictment. He pleaded guilty in December 2023 of wire fraud, and admitted skimming cash from Miske’s M nightclub, and turning the cash over to Miske each week. The weekly deliveries of cash sometimes exceeded $10,000, according to Yokoyama’s plea agreement.

Another FHB employee described a similar transaction on March 12, 2012, also at the Ward Branch.

She described the situation in an incident report.

Office manager for Kamaaina Holdings (Andrea Kanakua) came in to cash their employees checks totaling $9404.45. Usually the owner Michael Miske comes in to cash the checks. They do this because the checks are payable to employees who are not allowed to leave the fishing boat. The owner claims he cashes their checks and repays them. Checks were payable to (Ratu Dokanivalu $4349.76, Raymon Samola $3879.81, and Shar Tua $1174.88) She mentioned she had more checks but they were not small enough to keep under the 10K threshold for reporting. She took the cash all in large bills.

Kaneakua is considered an unindicted co-conspirator in this racketeering case. She is a longtime employee and as well as one of Miske’s girlfriends who resided with him over different a number of years. The government has filed a notice that it intends to call Kaneakua to testify as a hostile witness, along with several other women Miske had been involved with.

Another transaction by Miske the following year was deemed suspicious, and the incident report note: “Investigation Worthwhile.” The teller reported being concerned that it “felt suspicious” because the total was $9,787.39, just below the CTR threshold. In addition, she reported that after getting approval to cash the checks, she asked Miske if he wanted the money separately for each employee. She said Miske declined, telling her to “just put it all together.”

A third similar report was filed February 3, 2014.

Andrea Kaneakua, office manager came in to cash their employees’ checks. She only cashed 7 of the checks she had. Andrea kept the total below $10,000 to avoid filing a CTR. She said she will be back to later to cash the rest.

During cross examination, Miske’s attorneys displayed bank statements which listed each check cashed on a separate line, and tried to get witnesses to agree that they were therefore separate transactions, even if presented together at the same time. The bank employees, however, were firm that multiple checks presented at the same time were considered by the bank to be part of a single transaction.

The government then called IRS Special Agent Bennett Strickland, an expert in the field of financial investigations. Strickland the incident reports from banks are used as leads that can suggest further avenues of investigation.

In the case of Miske’s companies, the Strickland said he had examined transactions between 2011 and 2014, and had found “a pattern of structuring” involving Kamaaina Holdings LLC. He found there had been 12 pay periods during which payroll checks totaled more than $10,000, but those were presented to the bank in 29 transactions, with only one exceeding $10,000.

A chart Strickland prepared was introduced into evidence as Exhibit 1-1024

This is the second post excerpted from a draft set of jury instructions filed in court on Friday. The 176-page document is what the court proposes to use to orient jurors and explain the laws they are expected to apply to the sprawling case against former Honolulu business owner Michael J. Miske Jr.

I got a little ahead of myself by saying today’s post would look at the jury instructions concerning the charged racketeering conspiracy.

First, though, the draft jury instructions walk through the law regarding conspiracies in general.

It’s not necessarily straight forward.

A group of people can be legally found to be conspiring together even if not all of them know what the others are doing, and they may be involved in separate and distinct activities. And it’s possible to be found guilty of a criminal conspiracy even if the central crime never actually happened. So that if you and others agree to rob a bank, and concrete steps are taken to carry out the crime (procuring weapons, arranging a getaway car, keeping the bank under surveillance, etc.), but then later abandon the idea, the law appears to say that you can be found guilty of conspiring to do it, even though “it” never happends.

Anyway, read on. Here’s a link to the draft instructions that spell out the law of conspiracy. The next post will explain the even more complicated racketeering conspiracy law.

Draft Jury Instructions