Forfeited Proceeds<\/em><\/strong><\/p>\n\n\n\n The plea agreement signed by Rudo calls for the forfeiture of funds and other goods acquired through the fraudulent schemes.<\/p>\n\n\n\n First, there\u2019s a \u201cmoney judgment\u201d against Rudo in the amount of $2,114,170. The felony information filed against Budhabhatti seeks a money judgment of at least $925,724.<\/p>\n\n\n\n Second, there are proceeds from the sales of properties they acquired using the fraudulently obtained funds. These seizures total an additional $2,323,890.<\/p>\n\n\n\n The Kealakehe property.<\/em> West View Developments, a company that Rudo, Budhabhatti, and Zamber put together, with the blessing of then-county housing administrator Susan Akiyama Kunz, acquired around 14 acres of land in 2015 for what was supposed to be an affordable housing development encompassing all three parcels that made up the acreage. Soon thereafter, the OHCD agreed that the development could be built on just two of the three parcels, freeing up the third, a seven-acre parcel, to be used without restriction. In May 2021, that parcel was sold for $950,000. On June 4, the federal government seized proceeds from that sale in the amount of $938,428.16.<\/p>\n\n\n\n The Florida property.<\/em> This is a 5,088-square-foot commercial building in Cape Coral, Florida, near Fort Myers, that a Rudo-owned LLC, Dezign Artz, acquired in July 2020 with funds gained through his illegal housing schemes, for $600,000. He sold it on November 8, 2021, for $800,000. The government seized proceeds of $752,064.46 from that sale on November 9.<\/p>\n\n\n\n The Ninole property.<\/em> The government has claimed proceeds in the amount of $499,626.34 from the sale of this property, a 2.7-acre parcel of vacant land along the Mamalahoa Highway in Ninole, around 20 miles north of Hilo. This property was purchased in 2018 by Plumeria at Waikoloa, which by this time had a new name: Peaceful Ventures. The recorded sale price at that time was $350,000, but it is doubtful that this was a true arms-length transaction, since the seller, Rainha Iemanja Capital Holdings, LLC, was managed by Sulla himself and his wife, Jamie Ann Wallace-Sulla, who had held the land, under one or another LLC or trust, since 2000. In April 2020, Peaceful Ventures conveyed the title to another LLC, SZ Ventures, whose sole member was Sulla. SZ Ventures sold the property on December 17, 2021, for $537,500, well above the assessed value of $215,000. On January 6, the federal government seized proceeds from that sale in the amount of $499,626.34.<\/p>\n\n\n\n The Puna property.<\/em> Kaha Kii Hale, LLC, whose sole member was Rudo, acquired this 12,000-square-foot lot with a small home on it in July 2015 for $85,000. In September 2016, the title was transferred to Rudo as the trustee of Bright Antares Trust, with Sulla preparing the conveyance documents. The recorded sales price was the same — $85,000. In June 2020, Sulla again prepared the documents conveying title from the trust to Rudo himself. On January 26 of this year, Rudo sold the property for $150,000. On January 31, the same day that the transaction was recorded at the Bureau of Conveyances, the government seized the proceeds of that sale, amounting to $133,771.33.<\/p>\n\n\n\n The total value of the cash judgment and seized proceeds from property sales comes to roughly $4.5 million. In addition to that, according to Rudo plea agreement, the government on April 4 seized 45 affordable housing credits; the value of such credits varies but has ranged as high as $60,000 each in the past. At that upper range, the value of the credits would be in excess of $2 million.<\/p>\n\n\n\n But there are other properties that Rudo acquired in recent years that the government has left untouched, so far.<\/p>\n\n\n\n The most expensive one is a 3,000-square foot home on an acre of land in the O`oma Heights subdivision in Kona. This property was purchased for $950,000 by Plumeria at Waikoloa in June 2018. On April 14, 2020, Plumeria at Waikoloa \u2013 a.k.a. Peaceful Ventures \u2013 conveyed title to Rudo\u2019s Dezign Artz, with a recorded purchase price of $900,000. Less than three months later, Dezign Artz sold the property for $725,000, with Rudo\u2019s wife, Margaret Reynolds, signing the conveyance documents as Dezign Artz\u2019s manager.<\/p>\n\n\n\n Reynolds herself also acquired significant property in recent years. In February 2019, she bought a 3,000-square-foot house on half an acre of land in Kona for $1.35 million, taking out a $1 million mortgage to finance the purchase. Three years later, this past February, the mortgage was paid off and she now owns the property free and clear.<\/p>\n\n\n\n Over and above the seizures and forfeitures, the government has placed a lis pendens<\/em> on the two lots at Kealakehe that are still held in the name of West View Developments. As stated in the government\u2019s filing with the federal court, \u201cthe United States shall seek to forfeit certain real property \u2026 titled in the name of West View Developments, LLC \u2026 as property, real or personal, which constitutes or is derived from proceeds traceable to a violation of any offense constituting a \u2018specified unlawful activity.\u2019\u201d<\/p>\n\n\n\n \u2018The Waikoloa Scheme\u2019<\/em><\/strong><\/p>\n\n\n\n The government describes in some detail the three schemes Rudo and his co-conspirators orchestrated. The \u201cWaikoloa Scheme\u201d involved Rudo working with principals of a development company, Waikoloa Mauka, LLC, to engineer a scheme intended to satisfy county requirements that it earn about 80 affordable housing credits. This was eventually accomplished by having the developer subdivide an 11.7-acre parcel from its much larger holdings and transfer title to what Rudo put forward as a non-profit organization called Plumeria at Waikoloa.<\/p>\n\n\n\n The scheme began around December 2016, the government alleges, when Rudo \u201ctook various steps to obtain OHCD\u2019s approval of an AHA,\u201d or Afforable Housing Agreement. Rudo \u201crepresented that Company-C [now identified as Plumeria at Waikoloa] \u2018was a Hawai`i non-profit corporation,\u2019 as required by county regulations. In fact, and as Rudo then knew, [it] was a for-profit corporation that had been formed by Individual-1 [Sulla] for the purpose of selling the Waikoloa property for a profit.\u201d The scheme was finalized in June 2017, when the county, relying on Plumeria at Waikoloa\u2019s representations that it was a non-profit, released the developer from its obligations to provide affordable housing.<\/p>\n\n\n\n The conspiracy gets more complicated in January 2018. According to the indictment, on January 22, \u201cSulla formed two trusts \u2013 Active REI and Ad Astra \u2013 benefitting Rudo. On the same day, Sulla formed SZ Ventures, LLC, which was to be operated by Sulla and Zamber with the understanding that \u201cno profits or cash distributions shall be guaranteed until [the Waikoloa property] is sold.\u201d<\/p>\n\n\n\n The following day, SZ Ventures and Dezign Artz, LLC \u2013 a company set up by Sulla but owned by Rudo \u2013 entered an agreement calling for their joint ownership of Plumeria, again with the understanding that \u201cno profits or cash distributions\u201d were to occur until the Waikoloa property sold.<\/p>\n\n\n\n Then, on January 28, Rudo was removed as the owner of Dezign Artz and replaced with the two trusts, Active REI and Ad Astra, that benefited Rudo.<\/p>\n\n\n\n All this set the stage for the transfer of the Waikoloa land to be conveyed to Plumeria at Waikoloa on January 29. The recorded sale price was $55,000. Less than a month later, Plumeria at Waikoloa had identified a buyer and in May of that year the property was transferred to Pua Melia, LLC, owned by Danny Julkowski, at a cost of $1.5 million.<\/p>\n\n\n\n \u201cThrough a variety of subsequent transactions,\u201d the indictment states, \u201cthe proceeds of the Waikoloa sale were distributed by Sulla and divided among himself, Zamber, and Rudo, with Rudo\u2019s share constituting bribes and kickbacks.\u201d<\/p>\n\n\n\n The information against Rudo then states that later that year, on November 5, Sulla sent an email to Rudo and Zamber, \u201cdirecting the disposition of the proceeds in proportion to our percentages.\u201d Finally, \u201cOn or about February 18, 2019, [Sulla] sent an email to Rudo, [Zamber], and another person explaining the entities created to conceal Rudo\u2019s financial and ownership interest in [Plumeria at Waikoloa.] Through a variety of subsequent transactions, the proceeds of the Waikoloa sale were distributed among Rudo, [Sulla], and [Zamber].\u201d<\/p>\n\n\n\n The Kailua-Kona Scheme<\/em><\/strong><\/p>\n\n\n\n To effect this scheme, Rudo and all three of his co-conspirators formed West View Developments, the government alleges. The felony information adds that in September 2015, using his official county email address, Rudo emailed Ron Brown, who owned around 13 acres of land in Kailua-Kona. Rudo explained to Brown \u201cthe benefits of owning [affordable housing credits]. Rudo made it appear as if he was acting in the county\u2019s best interest to provide affordable housing,\u201d the information states, when in fact he was attempting to persuade Brown to sell the property to West View.<\/p>\n\n\n\n Rudo then proceeded to obtain the OHCD\u2019s approval for an affordable housing agreement (AHA-2) between the county and West View Developments. \u201cAHA-2 granted [West View] 104 AHCs in exchange for a promise to develop approximately 52 affordable housing units on the Kailua-Kona property, which it did not own,\u201d the information says. (A fuller history of how West View Developments acquired the affordable housing credits and the land itself is in the June issue of Environment Hawai`i.<\/em>)<\/p>\n\n\n\n After the county released about seven acres from the requirement that affordable housing be built on the site, West View sold that land for $950,000, and, according to the government, \u201cthe proceeds of that sale were intended to be distributed among Rudo and the co-conspirators.\u201d<\/p>\n\n\n\n As Environment Hawai`i <\/em>reported, West View went on to lease the remaining land for $84,000 a year to a prospective developer. It also sold two of the affordable housing credits for $60,000, the government states, \u201cwhich [Budhabhatti] intended to use to purchase \u2018a Hawai\u02bbi-like home\u2019 \u2026 in the Bay area.\u201d The sale of those two credits, it goes on to say, \u201cwas facilitated by a letter drafted by Rudo for [Zamber\u2019s] signature under which [West View] sought OHCD\u2019s approval of the transfer.<\/p>\n\n\n\n \u201cWhile taking official acts on behalf of the county with regard to [the West View affordable housing agreement], Rudo failed to disclose his ownership interest in [the company]. Following his December 2018 resignation from OHCD, Rudo was prohibited from having any involvement with [the company] for one year. Rudo nonetheless continued to engage in, and benefit from, [the company\u2019s] business without the county\u2019s knowledge.\u201d<\/p>\n\n\n\n The South Kohala Scheme<\/em><\/strong><\/p>\n\n\n\n \u201cIn or about February 2015, Rudo endorsed and ultimately secured OHCD approval of an AHA (\u2018AHA-3\u2019) between the county and Company E,\u201d the federal information states, referring to Luna Loa Developments. That agreement, signed by the then-OHCD administrator Stephen Arnett, granted the company 212 affordable housing credits on its promise to develop 106 affordable units on 4.6 acres of land in Waikoloa, South Kohala. The government\u2019s information says, \u201cWhile participating in OHCD\u2019s approval process, Rudo did not disclose his ownership interest in [Luna Loa], which was also owned by\u201d Budhabhatti and Zamber. <\/p>\n\n\n\n The government provides details of how Luna Loa obtained the land by helping it \u201cnegotiate deals to buy the South Kohala property, resell it at a profit, and retain and sell AHCs, all without developing any affordable housing units.\u201d<\/p>\n\n\n\n Steps taken by Rudo, it continues, included: \u201cusing knowledge and expertise gained from his position at OHCD, Rudo identified various landowners who might be interested in buying AHCs. Rudo thereafter drafted letters for [Zamber] to sign \u2026 soliciting offers from those landowners for the purchase of AHCs that the company had acquired through AHA-3.<\/p>\n\n\n\n \u201cOn or about April 8, 2015, [Luna Loa] sold four AHCs \u2026 for $200,000, and the proceeds were deposited into a bank account belonging to [Luna Loa] and controlled by [Budhabhatti]. This occurred even before Luna Loa had title to the property.\u201d<\/p>\n\n\n\n The government continues: \u201cIn late April 2015, [Luna Loa] entered agreements under which it would (i) purchase the South Kohala property from one real estate development company and (ii) resell the property to another real estate development company. After closing the two transactions on the same day, [it] retained 17 AHCs from AHA-3 and took fees of approximately $45,000.\u201d<\/p>\n\n\n\n In March 2016, Budhabhatti and Zamber sold five of the affordable housing credits for $150,000, with the proceeds from the sale deposited into Luna Loa\u2019s bank account, controlled by Budhabhatti. Two months later, West View transferred four of its credits to Luna Loa. Two weeks later, Luna Loa sold 12 affordable housing credits for $384,000, the government says. Again, proceeds were placed into the Luna Loa bank account.<\/p>\n\n\n\n \u201cThrough a variety of subsequent transactions, the proceeds of the foregoing AHC sales were distributed among Rudo and the co-conspirators,\u201d the government says. \u201cWhile taking official acts on behalf of the county with regard to AHA-3, Rudo failed to disclose his ownership interest in [Luna Loa], or the fact that he was receiving proceeds from the foregoing transactions.\u201d<\/p>\n\n\n\n While both Rudo and Budhabhatti were the subject of felony informations that set forth the charges against them, Zamber and Sulla were indicted by a federal grand jury. While many of the crimes are the same, the difference is that both Rudo and Budhabhatti agreed to plead guilty. Zamber and Sulla apparently did not, resulting in charges being brought by means of a grand jury indictment. Zamber and Sulla face one count of conspiracy to commit honest services wire fraud and six counts of honest services wire fraud. In addition, Sulla was charged with one count of money laundering.<\/p>\n\n\n\n Over and above the forfeitures and seizures set forth in the informations against Rudo and Budhabhatti, the government seeks personal money judgments against Sulla for $551,225 and against Zamber for $171,792, such sums \u201chaving been obtained directly or indirectly\u201d as a result of the criminal actions listed in the indictment.<\/p>\n\n\n\n As to the money laundering charge against Sulla, the government states: \u201cOn or about December 23, 2021, \u2026 the defendant knowingly conducted a financial transaction affecting interstate commerce, which financial transaction involved the proceeds of specified unlawful activity, \u2026 knowing that the transaction was designed in whole and in part to conceal and disguise the nature, location, source, ownership and control of the proceeds\u201d of the unlawful activity. The transaction involved shifting more than $500,000 from a Title Guarantee Escrow account to one managed by Old Republic Exchange.<\/p>\n\n\n\n Both Sulla and Zamber have stated that they will contest the charges against them.<\/p>\n\n\n\n \u2014 Patricia Tummons<\/em><\/strong><\/p>\n\n\n\n For Further Reading<\/em><\/p>\n\n\n\n Many articles in the June 2022 edition of Environment Hawai`i <\/em>discuss what the government calls the Kailua-Kona Scheme and the South Kohala Scheme. These include:<\/p>\n\n\n\n \u201cThe Intriguing History that Underlies a Kona Affordable Housing Development<\/a>;\u201d<\/p>\n\n\n\n \u201cEditorial: Big Island\u2019s Housing Policy: Troubled, Confusing, Ineffective<\/a>;\u201d<\/p>\n\n\n\n \u201cHousing Agency Has Had Difficulty Tracking Low-Cost Housing Credits<\/a>;\u201d<\/p>\n\n\n\n \u201cHe Owned the Land for Just a Day But Received 212 Credits from County<\/a>.\u201d<\/p>\n\n\n\n The following articles provide details on what the government calls the Waikoloa Scheme:<\/p>\n\n\n\n \u201cWaikoloa Mauka Project Now Subject of FBI Investigation, Developer Says<\/a>,\u201d September 2020;<\/p>\n\n\n\n \u201cEditorial: Oversight Required for Hawai`i County Housing Office<\/a>,\u201d January 2019;<\/p>\n\n\n\n \u201cAs Owner Is Held in Moscow Jail, LUC Mulls Reverting Waikoloa Land<\/a>,\u201d July 2018.<\/p>\n\n\n\n In a July 25 news conference announcing the charges against Rajesh Budhabhatti, Gary Zamber, and Paul Sulla, Clare Connors, the U.S. attorney for the district of Hawai`i, gave credit to reporting done by Environment Hawai`i <\/em>in launching the investigation into corruption within the Hawai`i County Office of Housing and Community Development.<\/p>\n\n\n\n Near the end of the conference, Connors was asked whether there had been a whistleblower who tipped off the FBI.<\/p>\n\n\n\n Connors replied that a county employee provided the tip after he had been alerted to the fact that some of the documents he had been involved in approving were suspect. \u201cWhen he became aware of that, he reached out to the FBI,\u201d she stated.<\/p>\n\n\n\n \u201cThe media had been covering certain of these transactions,\u201d Connors went on to say. \u201cThe Plumeria deal had been in the media. That\u2019s when this particular county employee became aware of the involvement of the county.\u201d<\/p>\n\n\n\n \u201cThe media, was it the Environment Hawai`i <\/em>newsletter?<\/em>\u201d Connors was asked.<\/p>\n\n\n\n \u201cYes, I believe it was,\u201d she replied.<\/p>\n\n\n\n Environment Hawai`i <\/em>reported on the Plumeria at Waikoloa deal beginning in July 2018, when questions began to arise about the deal in the context of hearings by the state Land Use Commission.<\/p>\n\n\n\n (This article was amended to delete reference to Neil Gyotoku as the county employee who tipped off the FBI. He told Environment Hawai\u02bbi he was not the source.)<\/em><\/p>\n\n\n\n \u2014 Patricia Tummons<\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" On June 22, Alan Scott Rudo, a former staffer with the Hawai`i County Office of Housing and Community Development, signed a plea agreement with federal prosecutors, admitting his participation in a conspiracy to commit honest services wire fraud. That plea … Continued<\/a><\/p>\n","protected":false},"author":1,"featured_media":14588,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[499,338],"tags":[7],"class_list":["post-14586","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-august-2022","category-land-use","tag-patricia-tummons"],"_links":{"self":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts\/14586","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=14586"}],"version-history":[{"count":0,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts\/14586\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/media\/14588"}],"wp:attachment":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=14586"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=14586"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=14586"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"https:\/\/environment-hawaii.org\/wp-content\/uploads\/2022\/07\/cape-coral-property.jpg\")
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\n\n\n\nThe Indictment<\/strong><\/h2>\n\n\n\n
\n\n\n\nThe Key Role Played<\/strong> By Environment Hawai`i<\/em><\/strong><\/h3>\n\n\n\n