HONOLULU (KHON2) — U.S. Attorney Clare Connors announced a series of public corruption charges on Monday.
An investigation, carried out by the FBI, found four individuals sought to deprive Hawaii County of affordable housing.
The first, a public official, Alan Scott Rudo, worked at the Office of Housing and Community Development as an affordable housing specialist. His role was to help residents find affordable housing.
The FBI investigation said Rudo used his trust as a county employee to shepherd affordable housing projects that would benefit three LLCs connected to him and the three other men.
“First instance, Luna Loa, it was a South Kohala property that they would build affordable housing, 106 units on that property,” Connors said. “At the end of the day they obtained the property they sold the property, and no affordable housing was built.”
FBI Special Agent Steven Merrill said, “We share the public’s frustration when government officials conspire with others to divert funds for their own personal gain, new affordable housing developments were meant to provide decent homes to the county of Hawaii citizens.”
Connors said Rudo pled guilty on July 18 to conspiracy to commit honest services wire fraud.
An alleged conspirator, businessman Rajesh Budhabhatti, was also charged with conspiracy to commit honest services wire fraud.
On Thursday, a federal grand jury returned indictments on the last two individuals, Gary Charles Zamber and Paul Joseph Sulla, Jr., both attorneys practicing on the Big Island. They were charged with six counts of honest services wire fraud and one count of conspiracy. Sulla was also charged with one count of money laundering.
Zamber, who was charged with six counts of honest services wire fraud and one count of conspiracy, sent a statement to KHON 2 News.
“The constitution presumes that someone accused of a crime is innocent until proven guilty. While these allegations are serious, they are just that: allegations. They have been around for some time,” Zamber said. “I have been cooperative with the FBI and the government since the first time they contacted me. I have nothing to hide. I am confident that, as the case plays out in court, the truth will come out and my innocence will be proven in (court) — not the media.”
Connors said Rudo schemed with Budhabhatti, Zamber and Sulla, Jr. to defraud the county by first creating three entities: Luna Loa Developments, LLC; West View Developments, LLC and Plumeria at Waikoloa, LLC.
It was to these companies, Connors said, that Rudo shepherded money from the county for building affordable housing.
Connors said they never developed one property and instead walked away with $1.4 million. They obtained at least $10,980,000 worth of land and affordable housing credits.
Rudo allegedly did not disclose to the County of Hawaii, his employer, that he had an ownership interest in the companies.
Court records said they “deceived the County into entering Affordable Housing Agreements for the development of land in Waikoloa, Kailua-Kona and South Kohala, based on false promises that their companies would develop affordable housing.”
Connors said that most of the transactions were conducted in 2015, 2016 and 2017 but the scheme spanned more than six years.
The FBI began investigating in 2018 and the Department of Justice was able to recover over $2.3 million and 45 affordable housing credits connected to this case.
Rudo is set for sentencing on Oct. 31. He agreed to forfeit real estate connected to the charges and has agreed to a money judgment of $2,114,170.
Budhabhatti is expected to plead on Aug. 1.
The maximum penalty for these crimes is 20 years in prison and a $250,000 fine, according to Connors.
Meanwhile, the Hawaii County Public Information Officer Cyrus Johnasen said in this statement it was due diligence from employees that tipped off investigators:
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“The County of Hawaiʻi is aware of Mr. Rudo’s actions to betray the public trust and forgo the community’s right to honest services. Through the processes in place and the distribution of power related to affordable housing credits, a county employee spotted Mr. Rudo’s misconduct and alerted Federal authorities of the matter, which ultimately led to his recent indictment. Since the initial tip-off, our county officials have worked diligently and transparently with Federal investigators and will continue to do so. Although these incidents happened under previous administrations, we are here to take ownership of the issue and will continue to find ways to better our transparency and ensure honest services to all in our community.”