Thermal Engineering
is indicted over taxes

A federal grand jury investigating illegal campaign donations has indicted a local engineering firm and its president for allegedly filing false tax returns.

In an eight-count indictment filed yesterday in U.S. District Court, the secret panel alleged that Thermal Engineering Corp. and its president, Ken Mashima, reimbursed its officers for making $59,000 in campaign contributions to local candidates between 1997 and 2000.

The company improperly booked those contributions as officers' income on its federal tax returns, resulting in a lowering of Thermal Engineering's taxable income for those years, the indictment said.

If convicted, Mashima faces up to three years in prison, and he and the company face a fine of up to $250,000 for each count.

Thermal Engineering "funded political contributions through its officers and then deducted the contributions as officer compensation on the income tax return, thereby lowering the amount of taxable income," the indictment said.

Howard Luke, an attorney for Mashima, said he was surprised by the federal charges since the firm recently hired an outside tax lawyer to work with tax authorities to resolve the matter.

The criminal charges are the latest involving the Kalihi-based engineering firm. In 2002, Thermal Engineering pleaded no contest to a misdemeanor charge that it made a political donation under a false name to Mayor Jeremy Harris' campaign.

But the firm, which also was fined $31,000 by the state Campaign Spending Commission in 2002, had its state criminal case dismissed under a deferral granted by a state judge that rewarded the company for staying trouble-free for a year.

The federal indictment was based on an investigation by the Internal Revenue Services' criminal investigation division. The prosecution is being handled by Assistant U.S. Attorney Michael Purpura.

The Thermal Engineering indictment comes less than a year after federal prosecutors obtained a conviction against a local accountant for his handling of his company's political contributions.

Last December, Yiu Wing Wong pleaded guilty for improperly listing $13,000 in political contributions as deductible business expenses on his employer Geolabs Inc.'s federal tax returns.