Daniel Kihano
Daniel Kihano
When Kihano learned earlier this year that a federal grand jury was probing his campaign finances, he allegedly attempted to cover up the largest transaction by creating a phony loan agreement and backdating it to 1993.
Kihano was charged yesterday with 24 counts of obstruction of justice, fraud, filing a false tax return and other offenses stemming from the federal probe.
U.S. Attorney Steven S. Alm said Kihano defrauded campaign contributors and the citizens of Hawaii by "diverting funds out of his campaign war chest and into his own pocket."
He said: "Taking from your campaign fund and putting it in your pocket in cash, that is wrong."
Kihano's attorney, Ben Cassiday, said the charges are politically motivated. "Danny is kind of on the outs politically since he switched parties and worked for (former Honolulu Mayor Frank) Fasi, which put him in political limbo land," Cassiday said.
Fasi yesterday said he felt sorrow over Kihano's indictment.
"I was surprised," he said. "I like to say he's innocent until proven guilty."
State House Speaker Joe Souki also was saddened. "I've always had a great aloha for Danny," he said. "He was the speaker while I was finance chairman, and he always treated me fairly," he said.
Kihano used campaign funds to purchase $20,000 of insurance annuities in 1988. The original funds and more than $7,000 in interest were then withdrawn in March 1993 and transferred to Kihano's personal bank accounts or paid to him in cash. The indictment also alleges that Kihano attempted to conceal the payments by transferring the money through a series of financial transactions.
Then, in an attempt to mislead the federal grand jury, Kihano allegedly met with two former campaign aides earlier this year and directed them to prepare, sign and backdate a loan agreement and promissory note, but to tell the grand jury it was prepared in January 1993.
Alm said no charges are currently pending against the two.
In December 1988 and May 1993, Kihano allegedly transferred a total of $3,500 from his campaign fund to an intermediary, who in turn wrote personal checks in the same amount to the Danny Kihano Insurance Agency. Campaign Spending Commission records show the campaign checks went to a campaign official.
Kihano's campaign paid $631 for round-trip airfare from Tokyo to Seoul in 1992. The trip was later canceled, but the reimbursement went to Kihano, who took $231 in cash and deposited $400 into a personal account at Bank of Hawaii.
In May 1992, Kihano flew to San Francisco to attend a conference sponsored by the American Legislative Exchange Council. Although the tickets were purchased with campaign funds, Kihano requested and received partial reimbursement of $300 from the sponsor, and received the remaining $90 from the state. Both reimbursements were again paid to Kihano, with nothing going back to the campaign fund.
Kihano's campaign committee allegedly paid for automobile insurance for personal vehicles registered to Kihano and his wife. A $519 refund check was deposited into Kihano's personal account on March 11, 1994, although the original payments were made by the campaign.
Kihano is charged with failing to report about $20,000 in income related to the campaign transactions on his personal income tax for 1993.
Robert Watada, executive director of the state Campaign Spending Commission, said the agency cooperated with the federal probe. Watada said personal use of campaign funds has been and continues to be a problem."This will put a lot of people on notice to think twice about how they use their campaign money," Watada said.
Cassiday also objected to the conversion of alleged violations of state law into federal offenses. For example, the use of campaign funds for automobile insurance, if improper, could violate state law, which prohibits the use of campaign funds for personal use or for any purpose that is not directly related to the campaign. The indictment, however, treats the mailing of each individual insurance bill or check as a separate instance of federal mail fraud.
Cassiday said Kihano is getting especially harsh treatment because federal prosecutors were frustrated by their failure to find sufficient evidence to tie Kihano to a drug and money-laundering scheme allegedly involving Hale Nani Partners, in which he was a stockholder. Two of Kihano's partners are awaiting trial on charges in that case.
Alm declined to comment on how the campaign funds taken by Kihano were used, but said there is no apparent connection to the Hale Nani deal.
Kihano is scheduled to appear in federal court Sept. 11.