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Federal prosecutors want to send a former Honolulu nonprofit leader to prison for five and a half years for embezzling federal funds from Olelo Community Media and trying to fleece the city out of federal COVID-19 relief funds.

Hanalei Aipoalani has pleaded guilty to embezzling more than $500,000 from the nonprofit media company’s AmeriCorps program and agreeing to take a bribe to steer CARES Act money to the CEO of Hawaii island’s public access TV station, according to court records.

Prosecutors asked the court to sentence Aipoalani to 66 months of imprisonment, three years of supervised release, mandatory restitution and a forfeiture money judgment.

“To affect his frauds, the Defendant abused multiple positions of trust and treated public funds ear-marked for the most vulnerable and desperate Americans as his own personal piggy bank,” Assistant U.S. Attorney Channing Phillips filed Friday.

Aipoalani is scheduled to be sentenced on Wednesday in federal court in Washington, D.C.

In a , Aipoalani’s court-appointed attorney H. Heather Shaner said her client is “begging” for a sentence shorter than the 57-month guideline calculated by the U.S. Probation Office. She asked the court to consider a variance that would enable Aipoalani to serve home detention or community confinement.

Shaner wrote that Aipoalani has no criminal history and accepted responsibility for his crimes before he was even indicted. The attorney also asked the court to consider “the role of ‘Face’ in the Asian Pacific Islander culture,” and how losing face is “a very real punishment” in and of itself.

“‘Losing face’ is much more intense than suffering embarrassment or shame,” Shaner wrote, adding that if sentenced to prison, Aipoalani would be sent to an out-of-state facility far from his family.

“His actions were a criminal lapse and very stupid,” Shaner wrote. “They were the worst thing he has done in his life. In balance, he should not be judged by the worst actions he has ever taken. His misdeeds must be balanced by 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 developments in the case closely, it is premature to comment on this process,” he said Monday in an email. “We look forward to its resolution.”

A Pattern of Deception

Aipoalani committed his embezzlement scheme as the human resources director for Olelo.

From December 2014 through June 2019, Olelo received more than $935,000 in AmeriCorps funds. More than half of it was based on Aipoalani’s fraudulent submissions that he “siphoned into bank accounts for his own benefit,” according to the prosecutors’ sentencing memo.

Aipoalani did this in several ways, prosecutors said, including diverting former AmeriCorps members’ living allowances to his own accounts. He even fired an AmeriCorps member in September 2015 and falsely blamed the decision on budget constraints to divert that employee’s continuing living allowances to his own personal use, prosecutors said.

In addition, Aipoalani created fraudulent invoices from a second nonprofit, falsely claiming that the organization was entitled to $97,000 in reimbursements. 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 an AmeriCorps member at Na Leo and sought reimbursements for her for work that she never performed, according to court records.

Angelita Aipoalani to conspiring with her husband in the scheme. She is also scheduled to be sentenced on Wednesday. In a letter to the federal judge overseeing her case, she said she is “truly ashamed” of her involvement.

Hanalei Aipoalani was able to embezzle from Olelo despite the fact that he was debarred from handling federal grant money, the court records said. He had been previously caught trying to divert federal grant funds into his personal bank account, according to prosecutors, although no details were provided.

The debarment was supposed to last from April 2013 through April 2016. But starting in November 2014, Aipoalani was allowed to administer Olelo’s AmeriCorps program.

According to the sentencing memo, Aipoalani never informed his bosses about his debarment. And when the Hawaii Commission for National and Community Service, which administers AmeriCorps funds, was notified about it, Aipoalani wrote a letter on Olelo letterhead – purporting to be signed by the nonprofit’s president – falsely claiming that Aipoalani had been replaced as the AmeriCorps representative.

In reality, Aipoalani continued to run the AmeriCorps program and the nonprofit’s finance director was never apprised of the debarment, the memo said.

After Aipolani left Olelo, he worked for Aloha United Way for less than a year, according to the nonprofit. He left that job in June 2020.

In a statement, Aloha United Way CEO John Fink said that while none of Aipoalani’s charges relate to his AUW work, the alleged activity is “deeply disturbing.” When the organization learned about Aipoalani’s charges in March, it reviewed its financial and program records for the 11 months he had worked there and hired an outside firm to perform additional reviews of books and records.

“The internal and external reviews are in the process of being completed, and to date, the reviews have not identified matters that we would need to report to the authorities,” Fink said. “AUW has and will continue to adhere to the standards set for leading nonprofit organizations.”

Stolen Money Paid For Lavish Lifestyle

The FBI traced approximately $429,000 of fraudulent proceeds that were diverted from Olelo, the sentencing memo states. Of that, $75,000 was withdrawn in cash and authorities don’t know how it was spent.

The remainder was spent on the Aipoalani’s “luxurious 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 states.

Aipoalani flaunted his spending on social media, prosecutors said, including photos of a red Ferrari rented for his birthday in January 2019, his wife in a first-class seat in summer 2018 and the couple vacationing at Universal Studios in 2015.

In August 2020, Aipoalani was hired as a CARES program administrator in Honolulu’s Department of Community Services. The city had just received $387 million from the federal government to help respond to the coronavirus pandemic.

From “nearly the moment he was hired,” Aipoalani started conspiring with a co-conspirator about how he could tailor grant applications to obtain city CARES money. 

Court records refer to “Co-Conspirator 1,” who was the CEO of Hawaii island’s only public access station.

That description matches Stacy Higa, who was put on leave in March. Higa, who was a 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 Co-Conspirator 1 thanked him, the Defendant replied, ‘My pleasure, boss man. Let’s begin to rock and roll and make $,’” the sentencing memo stated.

On Sept. 16, 2020, Aipoalani texted his “partner in crime,” prosecutors said.

“The goal is to fund both applications — a little more than $1M; of which about $600K will be gravy money with the balance being tied to some work/lift,” Aipoalani wrote.

The men discussed opening limited liability companies fronted by their wives, the sentencing memo states.

“I’ll teach you how to launder!! Lol,” the co-conspirator wrote.

“Let’s do this,” Aipolani wrote.

On Sept. 23, 2020, Aipoalani told his co-conspirator that he was “pushing to advance” his grant application, according to the sentencing memo. A few days later, Aipoalani told his partner that his nonprofit’s application was approved at $350,000 and that he had been able to “bump up” that grant to “just under $420K.” Aipoalani then told his co-conspirator to make backdated certifications claiming that nine Oahu residents who had been adversely impacted by the pandemic had been certified through an online training program, according to the sentencing memo.

On Oct. 9, 2020, federal agents executed search warrants of Aipoalani’s home and storage unit as well as and the Hawaii Commission for National and Community Service. After that, the two nonprofit grant applications were withdrawn and no funds were delivered, the sentencing memo said.

Had agents not interrupted the scheme, $845,000 would have been paid out to Higa’s companies for “expenses” that hadn’t been incurred so that the men could “personally enrich themselves,” the sentencing memo said.

Aipoalani started working for the Honolulu City Council in January but was dismissed when his guilty plea went public.

Connie Kiriu, the interim president and CEO of Na Leo, said Higa remains on leave from the station but declined to comment further.

Despite Aipoalani’s pleas, prosecutors are sticking with their call for incarceration.

“The Defendant’s convictions here are a culmination of a long pattern of attempting to enrich himself by fleecing programs designed for the most vulnerable Americans,” the sentencing memo said. 

“His reputation in the community – one of public service and generosity – was a house of cards built on many years of systematically defrauding the very community that he purported to serve.”