Alleged fraud unintentional,
defendant testifies

Michael Boulware is accused of
diverting almost $10 million

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By Debra Barayuga
dbarayuga@starbulletin.com

The president of Hawaiian Isles Enterprises said he did not steal from his own company or intend to defraud the federal government by failing to report millions in personal income between 1989 and 1997.

Michael Boulware testified yesterday he believed the money belonged to the company and that he relied on the advice of counsel that he did not have to report the income on his personal income tax returns.

Boulware, 53, took the stand in his defense yesterday in U.S. District Court. He is charged with 19 counts, including tax evasion, conspiracy and bank fraud.

Federal prosecutors allege he diverted nearly $10 million of his company's income to himself to support his wife, a pending divorce and a girlfriend. The company is a major distributor of wholesale coffee, tobacco and vending machines in the islands.

Defense attorneys say Boulware spent the money for the company's benefit and any amounts that went to his girlfriend, Gin Sook Lee, were part of an unconventional arrangement made to satisfy his wife's claims against the company.

When he asked his wife, Mal Sun Boulware, for a divorce in 1987, she demanded $5 million, including a house, Boulware said.

Boulware said upon the advice of counsel, he opened a trust in his son's name and transferred half the company's stocks and a $500 check. Once the trust had accumulated enough to satisfy his wife's claims, the money would be returned to the company. Lee was named the sole trustee.

From 1987 to 1994, Boulware said he transferred checks and cash from coffee sales and other company proceeds to Lee "to hold" for Hawaiian Isles Enterprises.

By 1994, the trust had grown nearly $6 million, so he asked his lawyer about making payments to his wife. Boulware said he relied on his attorney's advice that the payments would not be taxable so he didn't have to report them on his personal tax returns.

He divorced his wife, but Lee claimed the divorce was bogus and that he was only trying to get money from her. She refused to turn over the trust money, forcing him to borrow from associates, Boulware said. He said he did not report the money as income because they were loans.

He later sued Lee to get back the money. She was forced to return nearly $6 million to Hawaiian Isles Enterprises in 1997.