Kihano’s trial
begins tomorrow

The former House speaker
faces 24 federal charges
of violating campaign law

By Ian Y. Lind
Star-Bulletin

The trial of former state Rep. Daniel J. "Danny" Kihano, who served as speaker of the House from 1987 until his retirement in 1992, is scheduled to begin tomorrow in federal district court.

Kihano faces 24 counts of mail and wire fraud, money laundering, obstruction of justice, conspiracy and filing a false income tax return, stemming from the alleged diversion of about $27,000 from his campaign fund into personal use.

Kihano's attorney, Ben Cassiday, was out of town until today and could not be reached for comment, according to his office.

Kihano and Cassiday have previously denied any wrongdoing and have characterized the charges as politically motivated.

This is the first time campaign law violations by a state or local candidate in Hawaii have been prosecuted by federal rather than state authorities, but such moves are becoming more common as prosecutors seek to increase the potential consequences of alleged political corruption.

Federal charges are felonies

Campaign violations are considered misdemeanors under state law, while the charges lodged against Kihano are felonies carrying a possible combined sentence of nearly 200 years imprisonment, fines of up to $750,000 and forfeiture of all funds involved in money laundering, according to the U.S. attorney's office.

Paul Hendrie, communications director at the Center for Responsive Politics in Washington, D.C., said the Justice Department is becoming increasingly aggressive in using creative theories to go after campaign violators.

"It's positive, from our point of view, because enforcement of campaign finance laws has generally involved penalties that were nonexistent or so mild that people involved in campaigns had the idea they could pretty safely take a chance and break the law," Hendrie said.

"This is now sending the message that breaking campaign finance laws is serious business and can no longer be done cavalierly."

Kihano apparently 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 drug money loaned or invested by two convicted drug dealers.

Two other stockholders and officers in the venture have admitted knowing about the drug money and pleaded guilty to federal conspiracy and money laundering charges.

Kihano was not charged in that case, but it prompted the review of his campaign records by a team of IRS and FBI agents that led to the current charges.

According to the indictment, handed down in August 1996, Kihano used campaign funds to purchase two $10,000 annuities in 1988, then converted the principal plus $7,360 of interest into personal use when the annuities were cashed out in early 1993.

Loan document fabricated?

The indictment also alleges Kihano used campaign funds to purchase automobile insurance for his personal vehicle, and pocketed about $1,000 in reimbursements for travel originally paid for with campaign funds.

The government also charges that Kihano and two others conspired "to influence, obstruct and impede" the grand jury investigation by fabricating a loan document purporting to show he intended to repay his campaign for the annuity proceeds.

Kihano learned of the federal probe in early 1996 and then directed that a loan document be typed and back-dated to January 1993, the indictment says. Kihano then allegedly persuaded two friends and campaign workers to tell the grand jury the document was drafted in 1993 when in fact it was created three years later.

Assistant U.S. Attorney Michael Seabright said it will take up to two weeks to present the government's case.