Louis Kealoha’s legal bills in the federal trial should not be paid for by city taxpayers.

That’s the position the county’s corporation counsel is taking in an appeal filed in court against the Honolulu Police Commission.

Taxpayers are still footing the bill, just from federal money instead of county dollars, because the Kealohas have court-appointed lawyers after showing the court their expenses exceed their income.

Federal prosecutors have raised a red flag about their financial position.

Last year, Louis Kealoha asked the Honolulu Police Commission to fund his legal representation in the mailbox corruption case, saying he’s being prosecuted for actions while on duty as police chief.

Last month, the police commission approved it, causing a backlash at the Honolulu City Council, which passed a resolution asking corporation counsel to fight it.

“I think the city council is absolutely right to demand accountability on whether the attorney fees should be spent for their defense,” said legal analyst Doug Chin, who has served as a former state attorney general, lieutenant governor and city managing director and is now in private practice. “I think people in the community always have to be concerned because it’s their taxpayer dollars, whether it’s their city dollars or their federal dollars that are being used to fund the defense of the Kealohas.”

Corporation counsel has filed an appeal in Circuit Court to nullify the police commission’s decision, saying the allegations that got Louis Kealoha indicted don’t entitle him to city money for his defense just because they happened while he was chief.

This includes allegations that he had CIU officers follow Katherine Kealoha’s uncle prior to allegedly framing him for the mailbox theft, contributing to a false police report about the theft, and instructing officers to arrest the uncle.

The Kealohas long since moved out of the Kahala home where somebody had plucked the mailbox.

They next lived in a Hawaii Kai house.

The mortgage payment stacked up their debts to the point where the federal judge was convinced they couldn’t afford private counsel.

Louis and Katherine each got appointed a federally-funded attorney.

Judge Michael Seabright said at the time: “It’s clear their debt exceeds their assets. It’s also clear there just isn’t this sort of cash available to pay for counsel.”

But Seabright said he could re-evaluate things and even require payments from the Kealohas if their financial situation changed, whether from more income or less debt.

Seabright added: “If you have a long-lost relative you never heard of and all of a sudden you get a million dollar inheritance, you’ve got to let us know that, okay?”

That didn’t happen, but the Kealohas’ expenses did shrink when they failed to pay the mortgage the Hawaii Kai home, and it was foreclosed on and sold earlier this year.

Prosecutors reminded the judge recently that meant it’s time to take a look at their financial situation now that the mortgage expense was gone.

Prosecutors wrote in a court filing in March that “The United States is ‘charged with the responsibility of bringing to the court’s attention any possible misuse or waste of public funds.’

The Kealohas filed supplemental financial affidavits, but according to Louis’ court-appointed attorney Rustam Barbee, “The attorney appointments have not been directly challenged or revisited since the foreclosure action.”

Meanwhile, the Kealohas have been living back in Kahala, having spent $135,000 to buy a leasehold condo here in June 2017, prior to indictment and arrest but months after getting target letters. The purchase was also after Louis was forced to retire with a $250,000 city payout, and after Katherine had already been on voluntary unpaid leave from her job as a deputy county prosecutor.

“No question it’s a bad look,” Chin said. “Now, to be fair to them, it does look like it’s a downsizing from a house to a condo unit.”

It was a leasehold purchase, at a building in which owners also have to pay about $2,500 a month in ground-rent to landowner Kamehameha Schools, plus insurance. The Kealohas property tax bill is about $400 a month, and they’ve paid that twice-a-year installment late with penalties and interest to the city a couple of times.

Chin explains judges don’t usually weigh in on whether a living expense is reasonable or lavish when determining whether to appoint counsel — just whether a defendant spends more than they make.

“When it comes to what a judge can do, a judge really can’t go so far into all the details in trying to second guess and look over every single budget item that they’re spending,” Chin explained. “What a judge can do is simply require that they’re updating the court as far as how their financial lifestyle is going and whether or not the attorney fees are still justified.”

Chin added: “The judge needs to call the Kealohas or whoever is relying upon court-appointed counsel and make sure that they are explaining themselves and justifying why they are needing the court-appointed counsel.”

Louis Kealoha currently gets a pension as an HPD retiree, estimated to be around $150,000 a year, in addition to benefits.

Attorneys tell me that if funds later become available to the defendants who have appointed counsel, the judge could order reimbursement to the federal court. They would likely not be ordered to replace their attorneys with private counsel at this point.

As for the appeal filed this week against the Honolulu Police Commission, the mayor’s spokesperson says corporation counsel “cannot represent both sides of this issue, so the department will need to get approval to hire outside counsel to pursue the appeal. This approval would come from the City Council. To date, no funds have been disbursed toward Kealoha’s representation in this case.”

Separately, representation for various former city staff in cases surrounding the Kealohas’ Ethics Commission matters has cost city taxpayers in excess of $630,000.