By Ken Ige, Star-Bulletin
Daniel Kihano declines comment after leaving the
federal court building. A jury found him guilty yesterday
in the first federal case of campaign-law violations tried
in Hawaii. Kihano's attorney, Ben Cassiday,
stands beside him.

'A very clear message'

Former House Speaker Daniel Kihano faces
5 to 10 years for campaign fund abuse

By Jim Witty and Susan Kreifels

The conviction of former House Speaker Daniel Kihano for diverting $27,000 from his campaign fund for personal use lets politicians know they aren't beyond the law, said the state's chief campaign spending watchdog.

"It sends a message to candidates that we are going to enforce the law. I would advise candidates not to take it lightly," said Bob Watada, director of the state Campaign Spending Commission.

A federal jury found Kihano guilty yesterday of 15 of 23 counts, including money laundering, obstruction of justice and filing a false income tax return. Two counts were dismissed. The jury also said Kihano must repay $20,075 to the federal government.

It is the first federal case of campaign-law violations tried in the state.

Matt Matsunaga, co-chairman of the Senate Judiciary Committee, which acts on campaign finance legislation, expressed sympathy for Kihano and his family but lauded the U.S. attorney's office for strict enforcement of the campaign finance laws.

"This verdict sends a very clear message that law enforcement is not going to tolerate illegal misuse of funds," Matsunaga said.

Matsunaga's counterpart in the House, Rep. Terrance Tom, praised the stricter candidate accountability engendered by recent legislation. However, he said the proliferation of campaign spending and ethics laws could discourage candidates from seeking office.

"It could have a chilling effect, that people who would otherwise get into politics would be hesitant," he said.

But Matsunaga said the Kihano verdict won't turn many potential candidates away from the political arena.

"Those people truly wanting to serve the public are willing to play by the rules," he said.

Kihano, 64, faces five to 10 years in a federal prison, defense attorney Benjamin Cassiday said. U.S. District Judge Alan Kay said the sentence would be "near the vicinity" of five years or less.

Cassiday said he is considering asking the judge for a lighter sentence based on Kihano's poor health, but would not say if he would ask for probation only. U.S. prosecutors said a prison sentence was mandatory and that they would oppose a lighter sentence because federal prisons have adequate medical facilities.

Cassiday also said he would probably appeal the case.

Kihano would not comment on the verdict.

"I'll write a book and you can read it later," Kihano said.

Cassiday said Kihano was "obviously very disappointed." The jury deliberated for seven days and "we were hoping there would be more favorable results."

Kihano is scheduled to be sentenced March 9. Until then he will remain free on $100,000 signatory bail under pretrial supervision.

"He is a lifelong resident . . . and has served the community for many years," Kay said.

Kihano testified that he borrowed $20,000 from his campaign funds after he left office in 1992 because he was broke.

But he said he intended to pay back the money.

"Danny Kihano violated (the public) trust," said U.S. Attorney Steven Alm, adding that the public should not feel sorry for Kihano.

"Money in your campaign war chest is not personal money. He stole it; he's paying the consequences. This should serve as a warning to anyone (politicians) contemplating this or doing it."

Alm would not comment when asked if his office was investigating campaign spending of other politicians.

Alm said Kihano first came to the attention of federal prosecutors because of his role as an officer of Hale Nani Partners. The company, which was attempting to build a private surgery center on Maui, was funded in part by money loaned or invested by two convicted drug dealers, Alm said. Then investigators started looking at Kihano's campaign spending.

Cassiday said investigators picked on the "weakest" politician who was already retired. "The wake-up call should be to somebody in office," Cassiday said.

Jury foreman Emmanuel Chen said jurors reached a verdict on the 21 counts within three days. But two counts resulted in a hung jury because of difficulty in interpreting their instructions.

Kihano's actions,
subsequent charges

Former state House Speaker Daniel Kihano was convicted of federal charges based on these things he did:

Action: Used campaign funds to purchase annuities from Grand Pacific Life Insurance and later withdrew the money for personal use. Convicted: 2 counts of wire fraud. Wire fraud resulted from money wired from GPL to a mainland firm.

Action: Used campaign funds to purchase car insurance for personal and campaign vehicles after leaving office. Convicted: mail fraud. Mail fraud resulted from mailed insurance documents.

Action: Canceled a scheduled trip from Tokyo to Seoul in June 1992, paid for with campaign funds, and deposited the $631 refund check into his personal account. Convicted: mail fraud. Mail fraud resulted from mailed reimbursement check.

Action: Flew to a legislative conference in San Francisco using campaign funds, then took the reimbursement from the sponsoring group for personal use. Convicted: mail fraud. Mail fraud resulted from mailed reimbursement check.

Action: Cashed out a $20,000 annuity purchased with campaign funds, then withdrew the money and, in a series of bank transactions, converted it to personal use. Convicted: Six counts of money laundering.

Action: Created a backdated promissory note saying he intended to repay the annuity funds to the campaign, all in an attempt to mislead the federal grand jury into believing it had been executed in 1993. Convicted: 3 counts of obstruction of justice.

Action: Failed to report annuity funds as income on his personal income tax returns. Convicted: filing a false tax return.

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