In the weeks leading up to the trial of three men accused of defrauding the County of Hawaiʻi by scheming to acquire and then resell affordable housing credits, the U.S. District Court for the District of Hawaiʻi has seen a flurry of pre-trial filings by both the federal prosecutor’s office and the attorneys for defendants Paul Joseph Sulla Jr., Gary Charles Zamber, and Rajesh P. Budhabhatti. According to statements from the U.S. Attorney’s office, their schemes netted them close to $11 million.
Jury selection in the trial is set to begin May 12. Following that, all parties have agreed that the trial will probably last 14 days. The prosecutor anticipates it will take eight days for the government to make its case. Attorneys for the defendants estimate they will need about two days each.
Most of the pretrial filings have to do with efforts to limit the evidence or arguments that will be argued at trial, or motions in limine.
Here’s a rundown of several disputed issues.
Sulla’s Reprimand
Can the government mention at trial the fact that the Office of Disciplinary Counsel reprimanded Sulla for lying in state court?
In early April, Sulla filed a motion in limine seeking to prevent the government from mentioning the reprimand he received from the Hawaiʻi Supreme Court’s Office of Disciplinary Counsel (ODC) in March 2023.
Environment Hawaiʻi asked the ODC for a copy of the reprimand. The response: “Our office issues public and private reprimands. Only public reprimands are made available to the public. Our office is unable to even confirm the existence or non-existence of private discipline as it is confidential.”
The government’s filings, however, broadly describe the reprimand.
According to the government’s motion asking the court to allow use of the sanction as evidence, “the ODC determined that there was clear and convincing evidence that on February 13, 2019, Sulla made misrepresentations to the court during a hearing in the land dispute case of John D. Prebula v. Toby James Mazzie. … The ODC found that Sulla falsely stated to the court … ‘I didn’t record any deed. There is no deed recorded by me. All this was done before our office got involved.’ In fact, as Sulla admitted to the ODC, he had drafted and caused the referenced warranty deed to be filed in 2014. Although Sulla claimed his misrepresentations to the court were ‘mistaken and unintentional,’ the ODC determined that he had violated Hawaiʻi Rule of Professional Conduct 8.4(c), which provides: ‘It is professional misconduct for a lawyer to engage in conduct involving dishonesty, fraud, deceit, or misrepresentation.’”
In arguing for the admissibility of Sulla’s reprimand, the government describes the evidence as material. “It helps establish that Sulla knowingly agreed to join a conspiracy and knowingly participated in a scheme with the intent to defraud the county of its right to Rudo’s honest services. Similarly, the ODC reprimand further tends to establish that Sulla’s involvement in the conspiracy and scheme was not just some mistake or accident, but rather that he chose to engage in a conspiracy and scheme to defraud with Rudo and his codefendants. … Second, the evidence is contemporaneous in time to the charged conduct. Sulla’s false statements to the court occurred within the conspiracy period. Third, the evidence is based on disciplinary records provided by the ODC following their investigation, which exceeds the evidentiary standard necessary for admission [under federal rules of evidence]. Fourth, Sulla’s lies to an officer of the judicial branch of county government in a land dispute is closely related to his misstatements and omissions to an executive agency of the same county relating to the South Kohala, Kailua-Kona, and Waikoloa properties in this case. In fact, Sulla’s misstatement regarding who recorded the deed in the Prebula matter mirrors a false warranty deed presented to the [county Office of Housing and Community Development] that enabled Plumeria to acquire the Waikoloa property by misrepresenting the company as a non-profit.” (Plumeria is the name of a company that was involved in one of the three schemes that led to the federal indictments.)
The ODC has also been looking into Sulla’s activities with respect to this case. “The United States intends to offer certain portions of Sulla’s written statement to the [ODC] in relation to this case,” the trial brief states. “Specifically, on October 27, 2022, Sulla submitted a letter and a ‘Factual Statement of Paul J. Sulla’ to the ODC in response to its inquiry into Sulla’s indictment in this case. Portions of that letter and factual statement will be offered into evidence through the FBI agent who subpoenaed the business records from the ODC.”
The government’s proposed list of witnesses includes the ODC’s chief disciplinary counsel, Bradley R. Tamm.
In an April 21 hearing on various pre-trial motions, U.S. District Judge Jill A. Otake held off ruling on whether the ODC reprimand may be used as evidence. She ordered the government to provide Sulla with a list of statements to the ODC investigators that it intends to offer at trial.
The ODC has also been investigating Zamber, according to reporting in the Hawaiʻi Tribune-Herald. In an article published October 2, 2023, reporter John Burnett writes that the ODC had filed motions with the state Supreme Court in September, “seeking instruction … about how to respond to a federal subpoena seeking testimony or documentary evidence in the cases against Sulla and Zamber. The motions noted that disclosure of a portion of what is being requested requires high court authorization because the records ‘are in whole or in part confidential pursuant to the Rules of the Supreme Court of Hawaiʻi.’”
No Kickbacks or Bribes?
Gary Zamber asked the court to disallow the government from using the terms “bribe” and “kickback” except when they refer to payments made as part of a quid pro quo agreement before an official act is taken. As the basis for the request, Zamber’s attorney refers to a Supreme Court decision, Snyder v. United States, which holds that bribes are payments “made or agreed to before an official act,” whereas “gratuities are typically payments made to an official after an official act as a token of appreciation.”
Zamber goes on to point out that “none of the wires” – wire fraud is one of the charges – “alleged in the [second superseding indictment] occurred before Rudo’s alleged corrupt acts began. This means that the government must demonstrate that all of the payments necessarily were post-act payments for a pre-act agreement.”
The government’s reply took note of the fact that Snyder addressed “a statute uncharged in this case concerning misconduct inapplicable to this case. … This is a bribery case. …
“The defendant here attempts to unfairly constrain the prosecution, before any evidence has been presented at trial, by seeking to categorically exclude evidence and references, and doing so by pointing out that gratuities — which are not charged or at issue in this case — cannot be prosecuted under 18 U.S.C. § 666 – which is not charged or at issue in this case.”
Judge Otake denied Zamber’s motion on April 21.
No Victim-Blaming
In one of its several pre-trial motions, the government asked the court to “preclude victim-blaming, that is, leveling allegations, making argument, or presenting evidence that the Hawaiʻi County Office of Housing and Community Development (OHCD) was negligent or otherwise acted improperly in administering the county’s affordable housing policy.”
But the motion hardly flatters the county. “It is well-established that the negligence of a victim in failing to protect against or discover a fraudulent scheme is not a defense to a defendant’s criminal conduct,” the government continues. “Therefore, the defendants cannot point at any failure or inability of the OHCD to prevent or discover the crime as an excuse for their own misconduct and should be precluded from doing so through argument or cross-examination — or any other means — at trial.”
In response, Zamber’s attorneys urged the court to deny the motion. A “central premise of the charges … is that, but for the bribe to Rudo, the county would not have awarded the defendants any [affordable housing credits] and would not have transferred land to them because they never intended to build affordable housing, they never built any affordable housing, and Chapter 11 of the Hawaiʻi County Code does not permit the award of AHCs until the affordable housing is built.”
In support of this argument, they point out that the report of the county auditor in 2023 “explains how and why many of the premises of the government’s case are not, in fact, true,” including the claim that a developer cannot earn credits before construction is completed. “It would be unfair to prohibit the defense from challenging such a prejudicial premise or argument,” they write.
Judge Otake denied the government’s motion as moot.
Argument on the ‘Merits’
The government also asked the court to prevent the defendants from arguing at trial that the projects they were involved in may have been selected by the county on their merits.
After citing several precedential cases, the government states: “[I]t is not a defense to honest services fraud and bribery that the development proposals were or would have been a benefit to the county. … The illegal conduct … is the agreement to pay a bribe in return for some official action, and the government is not required to demonstrate that the official action would be harmful to the public. It is also no defense that the action was beneficial to the public.”
Zamber’s counsel filed a memo in opposition. “The constitutional right to present a defense includes challenging the government’s case,” they wrote. “In Mr. Zamber’s case, it means, inter alia, challenging the government’s assumption that the defendants bribed Mr. Rudo. This includes presenting evidence and argument that the county awarded the affordable agreements to the defendants not because of bribery, but rather on their merit or for reasons unrelated to bribery.”
Judge Otake denied the government’s motion, meaning the defendants can argue the merits of their proposals.
An Abandoned Plea Agreement
When the government announced the charges against Rudo, in June 2022, it was also working on a plea agreement with Budhabhatti. Now the government wants to use statements Budhabhatti made as evidence in trial.
In a signed memorandum of plea agreement, the government states, Budhabhatti admitted that “he is guilty of conspiring to commit honest services wire fraud.”
Budhabhatti and his attorney met with prosecutors in May 2022, the government says in its motion to the court, and agreed to plead guilty. His appearance to enter a guilty plea was set for August 1. But before that hearing, Budhabhatti changed his mind and decided instead to go to trial on the charges.
In the memorandum of plea agreement, the government says, Budhabhatti agreed that if he were to withdraw the guilty plea, statements in the plea could be used against him at trial: “any admission of guilt that he makes by signing this agreement … may be used against him. … The only exception to this paragraph is where the defendant fully complies with this agreement but the court nonetheless rejects it.” This, the government argues, constituted a waiver of protection that would apply under federal rules against self-incrimination.
In its trial brief, the government also describes Budhabhatti’s proffer agreement. “That agreement,” the government states, “provides that after proffering with the government, should Budhabhatti proceed to trial and testify materially contrary to, or otherwise present a position materially inconsistent with the proffer, ‘the prosecution may use the statements and other information provided by Rajesh Budhabhatti during any proffer session, and all evidence obtained directly or indirectly from those statements and information, to examine or impeach [him] if [he] testifies and to rebut any evidence or argument offered by or on behalf of [him] in any proceeding.’”
Statements made in the proffer, quoted in the government’s trial brief, include: “Budhabhatti noted that Rudo’s job for the Luna Loa deal was to get [affordable housing credits] from the county which they planned to sell to raise the $1,000,000 needed to acquire the [DRH] property.” (DRH refers to D.R. Horton Homes, which owned land in Waikoloa Village.)
Also, “Budhabhatti stated he knew it was wrong to give Rudo any money from the Luna Loa deal. [He] would disguise emails to Rudo’s county email address by claiming to need technical assistance from Rudo on affordable housing deals.”
The government acknowledges that some of Budhabhatti’s statements tend to implicate his codefendants. “The government will assure that the statements are sanitized,” it says in the trial brief, adding that the government’s witnesses will be advised to make no reference to Budhabhatti’s statements about his codefendants.
Budhabhatti’s attorney, Salina Kanai, objected to the use of the abandoned plea agreement. The government refused to accept her client’s digital signature, preferring to have a “wet” signature, she noted in response to the government’s motion. “[T]he digital signature was not accepted by the government as ‘signing’ the plea agreement and thus does not trigger the waiver provision” that the government mentions in its motion. The plea agreement, she continues, “should be construed narrowly to simply allow, at most, … the use of the agreement’s factual admissions only to rebut any contrary testimony adduced from Budhabhatti in the event he testifies.”
Zamber’s attorneys asked the court to deny the use of Budhabhatti’s plea agreement at trial, stating, “It is difficult to imagine a more prejudicial piece of proposed evidence than the [memorandum of plea agreement].” Were it to be introduced at trial, they continue, “it would squarely implicate Mr. Zamber in a conspiracy under Mr. Budhabhatti’s alleged versions of events.”
Judge Otake denied the government’s motion. Budhabhatti’s plea agreement cannot be used as evidence.
No Sham, No Shell
Budhabatti’s attorney, Kanai, asked the court to bar the use of the words “sham” and “shell” to describe the several companies the defendants used to carry out their plans. She also objected to the government’s use of a witness, Monica Gould, to explain what shell companies are and what constitutes money laundering – a charge that Sulla faces.
Although by press time, the defendants had not presented their trial brief, Kanai did suggest in another motion that at trial, they may give evidence to “demonstrate that the companies (all or some of them) were legitimate and legal entities, which were fully intended to play a role in the development of various properties.”
The government argued that whether the companies were fraudulent or legitimate was “not an element of honest services wire fraud.
“However, the government’s evidence that the defendants intended to deceive the county and use sham corporations to both give the appearance of legitimacy and hide the involvement of Alan Rudo is relevant to their motive to bribe Rudo. If the scheme was not consistent with, at the very least, the spirit of the Affordable Housing Agreements … it stands to reason that they would want to bribe one of the public officials who plays a central role in drafting and approving the relevant Affordable Housing Agreements. Therefore, any evidence the government is able to present that the entities used by the defendants were not legitimate, even partially, is certainly relevant and should be admitted.”
Judge Otake granted in part and denied in part Budhabhatti’s motion. No information was available at press time to further describe her ruling.
Reliance on Counsel
In a meeting on March 28 to discuss jury instructions, “counsels for Zamber and Sulla each indicated that their clients intended to assert an advice-of-counsel defense,” the government states in its trial brief.
“It appears that Zamber intends to argue that he relied on Sulla’s legal advice as a defense to the alleged honest-services fraud conspiracy and scheme. For his part, Sulla intends to argue that he relied on the advice of his former attorney, Michael Green, as a defense to the money-laundering charge.”
Quoting from a 5th Circuit case, United States v. Carr, the government states: “[w]hen the lawyer is a partner in a venture, takes a share of the profits, or is not a lawyer who had no interest save to give sound advice for a reasonable fee, the advice of counsel defense is unavailable.”
The government continues: “That describes this case with respect to Zamber’s supposed reliance on Sulla’s advice. Sulla is anything but a disinterested lawyer from whom Zamber could have sought advice. He was deeply involved in the conspiracy and scheme. … With respect to Plumeria and the Waikoloa property, Sulla formed the company, served as its sole manager and was the sole signatory on the company’s bank account. Sulla also formed the shell company and the two trusts that were designed to secretly funnel bribery and kickback payments to Rudo. And he signed the agreement to sell the Waikoloa property for $1,500,000 and distributed the proceeds to himself, Zamber and Rudo. Thus, Sulla was neck-deep in the fraud and a necessary tool to ensure its success. For this reason alone … Zamber lacks a good-faith basis to rely upon advice of counsel, given the ‘counsel’ is a co-conspirator. … Did Sulla tell Zamber that paying money to Rudo to get approval of [affordable housing agreements] and the transfer of [affordable housing credits] was legal conduct? Did Sulla tell Zamber that making false representations to the county and omitting material facts in their bids to obtain AHAs and transfer of AHCs was legal conduct? Did Zamber, himself an attorney, rely on such supposed advice in good faith? Did Attorney Green tell Sulla that selling a property he acquired through a company that Sulla knew was the subject of a criminal investigation was legal?”
The government also intends to introduce at trial statements made by Zamber to the FBI as early as June 24, 2021, the trial brief states. “Specifically, Zamber acknowledged his familiarity with Luna Loa, West View, Plumeria at Waikoloa and related entities. He then indicated that he wanted ‘immunity’ if he were to assist the FBI with its investigations. Zamber’s statements were not audio recorded but will be admitted through the testimony of one or more of the FBI agents to whom Zamber made the statements or who was present at the time the statements were made.”
— Patricia Tummons
For a comprehensive account of the schemes that led up to the charging of Rudo, Budhabhatti, Zamber, and Sulla, see “Four Charged in Schemes to Defraud Hawaiʻi County Housing Program” in the August 2022 edition of Environment Hawaiʻi.)
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