State collecting
more taxes thanks
to ‘human torpedo’

Its first tax investigator
pursues fraud with a zest
that's yielded $3 million

By Suzanne Tswei
Star-Bulletin

It's not safe to drive fancy cars around tax fraud investigator Stephen Hironaka. He will take down the license numbers and run checks to see if you are cheating on your taxes.

"As far as I am concerned, I am an investigator 24 hours a day. If something catches my eye, I'll look into it," Hironaka said.

Let that be a warning as the tax season comes around -- Hironaka never passes up a reason to look into other peoples' business.

As the state Tax Department's first and sole criminal investigator, Hironaka has an impressive record in three years on the job.

The department has won 21 cases, resulting in more than $3 million worth of taxes, penalties and fines. Indictments have been returned in nine other cases, which could lead to $855,000 in taxes and fines.

Another seven cases, possibly worth $733,000 for the state coffers, have been completed and are waiting legal action. Hironaka now is busy investigating 10 more cases.

Little wonder that his boss, state Tax Director Ray Kamikawa, calls Hironaka "the human torpedo."

Hironaka looks nothing like a torpedo, nothing like a stereotypical hard-boiled crime fighter or colorless accountant. He is more like a favorite school principal -- gentle, affable, charming and understanding. But make no mistake about it, the 55-year-old Honolulu native, who has the enthusiasm of a rookie cop and the cunning of a seasoned accountant, is lot scarier than he looks.

For one thing, he can subdue an uncooperative subject with his bare hands, skills perfected during his 22 years as a deputized criminal investigator for the Internal Revenue Service. Hironaka retired from the federal agency as the deputy director for the criminal investigation section of the IRS Western area before joining the state in 1995.

But not everybody is a fan of his tactics.

"I have not heard of him, but if that's the mode the tax administration is taking, that's unfortunate," said Lowell Kalapa, president of the Tax Foundation of Hawaii.

The state may find itself like the IRS found itself last year, criticized by Congress for using arm-twisting means that, in some cases, drove people to suicide.

"Care has to be exercised in collecting taxes," Kalapa said. "Taxpayers may be in a bind, in the middle of a divorce or bankruptcy proceedings. Or they may be ignorant of the law."

Kalapa added: "There are two sides to every situation. An overzealous collector may do more harm than good."

Hironaka is the first to admit that, unlike the IRS, the state has neither the manpower (although a second investigator is expected on board soon) nor the resources to go after all the tax cheats, or even just the big tax cheats. The point is that for the first time, the state is generating criminal charges against tax fraud that can end in not only fines but also prison terms, he said.

"It's no secret that the state did not enforce the tax codes. But when Ray (Kamikawa) came in, he really reinvigorated the department. He's given us some of the tools needed to enforce the laws.

"And, he hired me," Hironaka said.

Hironaka, who has an accounting degree from Chaminade University, said he looks into three specific types of tax fraud: people not paying taxes, people underreporting their taxes, and those who help others file false returns. He has gone after some of the most obvious violations, such as businesses and their officers failing to pay excise taxes and the employee withholding tax.

Hironaka routinely uses published lists of the most successful businesses in the islands as a starting point to find violators. Other times, anonymous tips and fancy cars give him ideas.

"Lifestyle is important. If people are showing an affluent lifestyle and I look into their taxes and find out they are paying taxes on $10,000 income or something that doesn't indicate the kind of income necessary to support the lifestyle, then that's not good," he said.

Once he has indications of fraud, the difficult work begins. A time-consuming and laborious reconstruction of possible income must be completed to show proof of criminal wrongdoing, he said.

For all of his hard work, most of the violators readily offered to pay the taxes they owed, he said.

But cooperation at this point does not eliminate the criminal charges, Hironaka warned. The best thing to do is to pay the taxes before he finds you.

"Most people are honest. There are only about 10 to 12 percent who are not paying their fair share," Hironaka noted.

"And if you haven't been paying your taxes for some reason, no matter for how long, just pay it now and most likely we won't press charges against you."

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Star-Bulletin writer Lori Tighe
contributed to this report.