Federal prosecutors want to send the former Honolulu nonprofit leader to prison for five and a half years for embezzling federal funds from Olelo Community Media and trying to defraud the city of federal COVID-19 relief funds.
Hanalei Aipoalani has pleaded guilty to embezzling more than $500,000 from the nonprofit media company AmeriCorps’ program and agreed to accept bribes to direct CARES Act money to the CEO of the Hawaiian island public access TV station, according to court records.
Prosecutors asked the court to sentence Aipoalani to 66 months in prison, three years of release with supervision, mandatory restitution and a money-deprivation decision.
“To influence his fraud, Defendant abused several positions of trust and treated public funds earmarked for America’s most vulnerable and desperate people as his own personal piggy bank,” Assistant US Attorney Channing Phillips wrote in a sentencing memorandum filed Friday.
Aipoalani scheduled to be sentenced Wednesday in federal court in Washington, DC
In a sentencing memo seeking leniency, court-appointed attorney Aipoalani H. Heather Shaner said his client was “appealing” for a sentence shorter than the 57-month guideline calculated by the US Office of Probation. He asked the court to consider differences that allow Aipoalani to serve house arrest or community confinement.
Shaner wrote that Aipoalani had no criminal history and accepted responsibility for his crimes even before he was charged. Lawyers also asked the court to consider “the role of the ‘Face’ in the culture of the Asia Pacific Islands,” and how losing face is a “very real punishment” in and of itself.
“’Losing face’ is much more intense than suffering from embarrassment or embarrassment,” Shaner wrote, adding that if sentenced to prison, Aipoalani will be sent to an overseas facility away from his family.
“His actions were criminal and utterly stupid,” Shaner wrote. “It was the worst thing he did in his life. On balance, he should not be judged by the worst act he has ever done. His bad deeds must be balanced with a lifetime of generosity, hard work, community service and dedication to his family.”
Olelo Community Media President and CEO Roger McKeague declined to discuss the case.
“While we continue to follow the development of this case closely, it is too early to comment on this process,” he said Monday in an email. “We look forward to the resolution.”
A Pattern of Deception
Aipoalani carried out an embezzlement scheme as director of human resources for Olelo.
From December 2014 to June 2019, Olelo received over $935,000 in AmeriCorps funding. More than half of it was based on Aipoalani’s false submission that he “sucked into bank accounts for his own benefit,” according to prosecutors’ sentencing memos.
Aipoalani did this in several ways, prosecutors said, including diverting former AmeriCorps members’ living allowances into his own account. He even fired an AmeriCorps member in September 2015 and mistakenly blamed the decision on budget constraints to divert the employee’s continuing living benefits for his own personal use, prosecutors said.
In addition, Aipoalani created a false invoice from a second non-profit organization, falsely claiming that the organization was entitled to $97,000 in damages. The nonprofit is not named in court records, but the description matches Na Leo TV on the Big Island.
Aipoalani falsely claimed that his wife, Angelita Aipoalani, was a member of the AmeriCorps in Na Leo and sought reimbursement for him for work he never did, court records show.
Angelita Aipoalani pleaded guilty in April to abetting her husband in the scheme. He is also scheduled to be sentenced on Wednesday. In a letter to the federal judge overseeing his case, he said he was “absolutely ashamed” of his involvement.
Hanalei Aipoalani was able to embezzle money from Olelo despite the fact he was barred from handling federal grant money, court records said. He was previously caught trying to divert federal grant funds into his personal bank account, according to prosecutors, although no details were provided.
The ban was supposed to last from April 2013 to April 2016. However, from November 2014, Aipoalani was allowed to administer the AmeriCorps Olelo program.
According to the sentencing memo, Aipoalani never told his superiors about his ban. And when the Hawaii Commission for National and Community Service, which manages the AmeriCorps fund, was notified of it, Aipoalani wrote a letter on Olelo letterhead — which was meant to be signed by the nonprofit’s president — falsely claiming that Aipoalani had been replaced as the AmeriCorps representative.
In fact, Aipoalani continued to run the AmeriCorps program and the nonprofit’s director of finance was never notified of the ban, the memo said.
After Aipolani left Olelo, he worked for the Aloha United Way for less than a year, according to the nonprofit. He left the job in June 2020.
In a statement, Aloha United Way CEO John Fink said that while none of Aipoalani’s allegations relate to his AUW work, the alleged activities are “deeply disturbing.” When the organization learned of Aipoalani’s allegations in March, it reviewed his financial and program records during the 11 months he worked there and hired an outside company to carry out additional reviews of the books and records.
“Internal and external reviews are in the process of being completed, and to date, they have not identified matters that we need to report to the authorities,” said Fink. “AUW has and will continue to adhere to the standards set for leading nonprofits.”
Stolen Money Paid For Luxury Lifestyle
The FBI tracked about $429,000 of fraudulent proceeds diverted from Olelo, the sentencing memo states. Of that amount, $75,000 was withdrawn in cash and authorities have no idea how the money was spent.
The remainder was spent on Aipoalani’s “luxury lifestyle,” including more than $117,000 on dining and entertainment, $56,000 on travel and hotel rooms, and more than $87,000 on retail purchases, the sentencing memo said.
Aipoalani showcased his spending on social media, prosecutors said, including photos of a red Ferrari rented for his January 2019 birthday, his wife in first class in the summer of 2018 and the couple vacationing at Universal Studios in 2015.
In August 2020, Aipoalani was hired as the CARES program administrator in the Honolulu Department of Community Services. The city recently received $387 million from the federal government to help respond to the coronavirus pandemic.
From “nearly the moment he was hired,” Aipoalani began to conspire with co-conspirators about how he could tailor a grant application to obtain the city’s CARES money.
Court records refer to “Co-Conspirator 1,” who is the CEO of the island’s only public access station.
That description fits Stacy Higa, who was on leave in March. Higa, who? was Hilo mayoral candidate last year, has not been charged with a crime, according to a search of federal and state court records. He could not be reached for comment.
The sentencing memo includes text messages exchanged between Aipoalani and Higa.
“When Fellow Conspirator 1 thanked him, the Defendant replied, ‘With pleasure, boss. Let’s start rock and roll and make $,’” the memo reads.
On September 16, 2020, Aipoalani sent an SMS to his “partner in crime,” prosecutors said.
“The goal is to fund both applications — a little over $1 million; where around $600K will be buckwheat with the balance tied to some jobs/lifts,” wrote Aipoalani.
The men discussed opening a limited liability company fronted by their wives, the memo said.
“I’ll teach you how to wash!! Lol,” the co-conspirator wrote.
“Let’s do this,” wrote Aipolani.
On September 23, 2020, Aipoalani told his co-conspirators that he was “pushing to advance” his grant application, according to the sentencing memo. A few days later, Aipoalani told a colleague that his nonprofit application was approved for $350,000 and that he had been able to “build” the grant to “just under $420K.” Aipoalani later told his co-conspirators to back-certify claiming that nine Oahu residents affected by the pandemic had been certified through an online training program, according to the sentencing memo.
On October 9, 2020, federal agents executed search warrants at Aipoalani’s home and storage unit as well as By Leo and the Hawaii Commission for National and Community Service. After that, two nonprofit grant applications were withdrawn and no funds were delivered, the sentencing memo said.
If the agency does not interrupt the scheme, $845,000 will be paid to Higa’s company for undisbursed “expenses” so that the individuals can “personally enrich themselves,” said the sentencing memo.
Aipoalani started working for the Honolulu City Council in January but was fired when his guilty plea was made public.
Connie Kiriu, interim president and CEO of Na Leo, said Higa remained on leave from the station but declined to comment further.
Despite Aipoalani’s pleas, prosecutors stick with their calls for detention.
“Defendant’s sentence here is the culmination of a long pattern of attempts to enrich himself with programs designed for America’s most vulnerable,” the sentencing memo said.
“His reputation in society – one of public service and generosity – is a house of cards built over years of systematically defrauding the communities he serves.”