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Tuesday, May 7, 2002



Tax evasion
nets 4-year term

A judge finds that a local business
owner failed to pay $8 million


By Leila Fujimori

lfujimori@starbulletin.com

A federal judge sentenced multimillionaire Michael H. Boulware to four years and three months in prison yesterday for tax evasion, filing false income tax returns and conspiracy.

Visiting U.S. Judge Edward Rafeedie, from Los Angeles, found that Boulware failed to pay $8.1 million in state and federal taxes over nine years.

He did not include as relevant the fact that Boulware directed the comptroller of his company, Hawaiian Isles Enterprises, to underreport the amount of state tobacco taxes due by $21 million. And Rafeedie credited Boulware for charitable donations.

Boulware faced a maximum sentence of 12 1/2 years in prison.

"The judge was extremely fair on sentencing," Boulware's attorney, Victor Sherman, said. Special Attorney Edward Groves of the Justice Department's Tax Division was surprised.

"Four years for a man who has had unlimited means and who is a multimillionaire may be viewed as being an eternity for him -- for someone who has basically gotten whatever he wanted and had access to Rolls-Royces, Mercedes and a lifestyle that most other people would never dream of," Groves said.

Rafeedie ordered Boulware to pay a fine of $2,500, a forfeiture amount of $495,814.80, and to serve 36 months of supervised release after serving his prison term.

"I'm sorry for all the trouble I've been causing and I don't know," Boulware told the court, his voice trailing off.

Boulware is founder of Hawaiian Isles Enterprises, a tobacco, coffee, water and vending machine business with sales of $85 million a year.

At trial, prosecutors showed Boulware failed to report federal income in excess of $10 million from 1989 through 1997. They also provided evidence he had received annual compensation during those years of more than $1.7 million and diverted money from his company through phony foreign entities and offshore bank accounts.

A jury found Boulware guilty on Nov. 29 of four counts of federal income tax evasion, five counts of filing false income tax returns and one count of conspiracy to make a false statement to influence a financial institution.

Boulware admitted he took the advice of an attorney and tried to hide company assets while going through a divorce and had given the money to his girlfriend, Gin Sook Lee, to hold in trust.

"Obviously, he was under a lot of pressure. He was living with one woman and married to another, basically, so he felt pressure from two sides," said Sherman.

When Lee failed to return the money, Boulware sued in Circuit Court and prevailed.

Boulware is free pending appeal after posting a $100,000 signature bond.

Sherman denies Boulware did anything wrong, and says that there is no tax loss to the government, since the company overpaid $1 million in taxes.

He described Boulware as a man who "raised himself from his bootstraps to have a very successful business."

Former state Rep. Nathan Suzuki, although never charged, was alleged to have been a secret shareholder in a Tongan corporation through which Boulware laundered money. Prosecutors also said his Capitol office fax machine was used to wire a document as part of the scheme.

Suzuki was a former comptroller for Hawaiian Isles, and a certified public accountant for Boulware from 1989 to 1994.

Groves said the government has not determined whether to prosecute anyone who may have assisted Boulware.



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