The federal criminal trial of three men accused of conspiring with a Hawai\u02bbi County employee to defraud the county by abusing affordable housing agreements has been in the news lately.<\/p>\n\n\n\n
However, that is not the only litigation that has been brought against a company and an individual involved in that scheme.<\/p>\n\n\n\n
Last October, in state court, Honua\u02bbula, LLC, developer of about six acres of Kona land that had been acquired through the use of fraudulently obtained housing credits, sued West View Developments, LLC, and its president, Rajesh Budhabhatti, one of the defendants in the federal criminal case.<\/p>\n\n\n\n
Honua\u02bbula had leased the land from West View with the intention of satisfying a development agreement with the company and the county that calls for construction of at least 112 affordable housing units.<\/p>\n\n\n\n
According to Honua\u02bbula\u2019s complaint, West View, Budhabhatti, and another defendant, PMJ Kona, LLC, devised a \u201cscheme to strip Honua\u02bbula of its right to develop a critical affordable housing project\u201d by placing the two lots where the affordable housing is to be built under a restrictive covenant that effectively prevents Honua\u02bbula from building four-story apartment buildings on the leased land.<\/p>\n\n\n\n
The covenant was intended to protect ocean views from a mauka lot that, in 2015, was part of an affordable housing scheme that West View presented to the county Office of Housing and Community Development, calling for 104 units to be built over three lots covering 13 acres. The county approved that proposal in an Affordable Housing Agreement (AHA) filed with the Bureau of Conveyances on December 17, 2015. Immediately prior to the filing of that document, West View registered the document giving it clear title to all 13 acres. <\/p>\n\n\n\n
One year and ten days later, the county gave West View permission to break off that mauka parcel from the AHA, thus paving the way for the company to sell the largest of the three lots. <\/p>\n\n\n\n
The effect of that action was to double the density of the affordable housing. The 100-plus units now had to be built over less than half the area contained in the agreement the county signed with West View.<\/p>\n\n\n\n
In early 2019, Neil Gyotoku, then director of OHCD, wanted to know what progress had been made on the apparently stalled development. West View attorney Gary Zamber assured him that work was proceeding apace. Site studies were to be completed by June, with \u201cvertical construction\u201d starting no later than May of 2021. By August 2022, 60 units in Phase 1 would be ready for occupancy, Zamber said.<\/p>\n\n\n\n
There are no documents in OHCD files to support Zamber\u2019s reassurances.<\/p>\n\n\n\n
Instead, West View seems to have been looking for development partners to undertake actual construction of housing on the site. By 2020, it had begun working with three men \u2013 one in Texas, one in Washington state, and one in Kealakekua \u2013 who eventually would form Honua\u02bbula and take over the development agreement from West View.<\/p>\n\n\n\n
With the substantially reduced acreage, the only way the required number of units could now be built was to go high. As early as 2020, architectural drawings posted online by a Honua\u02bbula principal showed four-story apartment blocks clustered on the landscaped site, with a low-rise outdoor pavilion in the middle of the development \u201cfor social activities.\u201d<\/p>\n\n\n\n
In mid-June, Honua\u02bbula had organized as an LLC in Texas and had registered to do business in Hawai\u02bbi.<\/p>\n\n\n\n
On July 1 of that year, Honua\u02bbula and West View signed a long-term (55-year) land lease agreement. Terms called for Honua\u02bbula to develop 55 affordable units and 45 market-rate units and to pay $7,000 a month rent to West View over that same period. Oh, and to pay West View an additional $100,000 when financing was obtained.<\/p>\n\n\n\n
Budhabhatti signed the agreement as president of West View, while Bruce Beard signed as president of Honua\u02bbula.<\/p>\n\n\n\n
By October 2020, Honua\u02bbula had decided to apply to have the housing development be permitted under Chapter 201H of Hawai\u02bbi Revised Statutes, which gives developments qualified as affordable certain concessions when it comes to permitting. The market-rate units were dropped from the plans and now the development was to be 100 percent affordable. <\/p>\n\n\n\n
Over the next few months, the OHCD, Honua\u02bbula, and West View worked out details of the plan to have Honua\u02bbula build housing on land that would remain under West View\u2019s ownership. A development agreement was signed by Honua\u02bbula\u2019s Carlo Mireles on January 12, 2021. Then-Mayor Mitch Roth signed on March 31, 2021, which became the date the agreement became effective. More than a year passed, however, until Budhabhatti signed the agreement on behalf of West View on April 14, 2022.<\/p>\n\n\n\n
Under terms of the agreement, Honua\u02bbula was to have completed construction of 112 units within three years of the effective date of the agreement. Should that not happen, West View agreed to \u201cconvey the fee simple interest, free and clear of all liens, claims, and encumbrances\u201d to the county in return for payment of $1,000.<\/p>\n\n\n\n
In the summer of 2021, the lengthy 201H application was delivered to the Hawai\u02bbi County Council. On September 8, the council voted to approve the resolution granting certain exemptions to the project. <\/p>\n\n\n\n
The Restrictive Covenant<\/strong><\/p>\n\n\n\n In the spring of 2021, at the same time Honua\u02bbula was working out terms of the development agreement with West View and the county, West View was itself working out terms of a sale of the seven-acre parcel.<\/p>\n\n\n\n One of the many studies included in the 201H application was a description of the physical characteristics of the site, which reported that the site\u2019s aggregate elevation was 828 feet above mean sea level. A four-story building of the sort that Honua\u02bbula was planning would rise at least 40 feet above that, meaning it would top out at somewhere around 868 feet. At that height, the ocean views of any homes built on the mauka seven-acre parcel would likely be limited, if not altogether obstructed.<\/p>\n\n\n\n According to Honua\u02bbula\u2019s complaint in state court, in mid-March 2021, West View and PMJ entered into an agreement of sale, with PMJ intending to subdivide the seven acres into one-acre home sites. \u201cPMJ believed that to maximize its profits from the mauka parcel, it needed to force Honua\u02bbula to change its plans and ensure that the multi-family buildings on the subject parcel were below the view plane of the mauka parcel,\u201d the complaint states.<\/p>\n\n\n\n Accordingly, West View placed a restrictive covenant on the affordable housing lots, in favor of the mauka parcel, identified by its tax map number. \u201cNo buildings, structures, improvements, trees or vegetation of any type or kind shall be planted, constructed or maintained on the Property that unreasonably obstruct the ocean views from the upper property now designated as Tax Map Key 7-4-004:091, or as later subdivided into separate lots, and the maximum height of any such buildings, structures, improvements, trees or vegetation of any type or kind on the property shall not exceed an elevation of 835 feet above sea level.\u201d<\/p>\n\n\n\n The restrictive covenant, dated April 15, 2021, was signed by Budhabhatti on June 1. On May 28, he signed the deed conveying the mauka property to PMJ Kona. Both documents were registered with the Bureau of Conveyances on June 4. <\/p>\n\n\n\n The purchase price for the land sold to PMJ was $950,000 \u2013 roughly the same amount that West View had paid for all three parcels by using 46 housing credits as cash. (That still left West View with 49 credits. Five were sold to another developer. The remainder have been seized by the U.S. Marshal\u2019s Office. On June 4, 2022, the federal government seized proceeds from the sale of the land to PMJ in the amount of $938,428.16.)<\/p>\n\n\n\n The Indictments<\/strong><\/p>\n\n\n\n As mentioned earlier, Budhabhatti did not sign the development agreement with the county and Honua\u02bbula until April of 2022, more than a year after its effective date. Until he signed, Honua\u02bbula would have been hard pressed to obtain financing or otherwise move forward with plans for the affordable housing site.<\/p>\n\n\n\n Once that did occur, however, Honua\u02bbula finalized a lease of the West View property on June 13 and on July 8, gave a mortgage of $500,000 to Housing Assistance Council.<\/p>\n\n\n\n The lease included three restrictions: Mineral rights, in favor of the state; claims arising from customary and traditional rights of Hawaiians; and the terms of the development agreement.<\/p>\n\n\n\n Funds obtained through the mortgage were to be used \u201cto develop, acquire, rehabilitate, or preserve one hundred five units of rental\/homeownership housing on the land.\u201d<\/p>\n\n\n\n But at the same time as these events were occurring, the federal government was in the final stages of preparing criminal indictments against the four men involved in West View and other schemes that, the government claimed, enriched them to the tune of $10,980,000.<\/p>\n\n\n\n On July 18, Alan Rudo, the county OHCD staffer who approved the West View affordable housing agreement, pleaded guilty to wire fraud. Three other men \u2013 Budhabhatti and Hilo attorneys Paul Sulla Jr. and Zamber \u2013 were charged with wire fraud and other crimes for their roles in using excess housing credits and other means to enrich themselves at the county\u2019s expense.<\/p>\n\n\n\n Following the criminal charges, on October 22, 2022, the U.S. District Court in Honolulu ordered the forfeiture of the West View property along with a number of other properties. Both Hawai\u02bbi County and Honua\u02bbula petitioned the court to award them the property or protect their interests in it. <\/p>\n\n\n\n The county argued that it had a \u201cconstructive trust\u201d \u2013 \u201ca device utilized by equity to compel one who unfairly holds a property interest to convey that interest to another to whom it justly belongs.\u201d<\/p>\n\n\n\n Honua\u02bbula argued that its leasehold interest in the property should be recognized, stating that it had already secured \u201cfunding of over $50,000,000.00 for construction, including $25,900,000.00 federal and state low-income housing tax credits\u201d and planned to begin construction in early 2023. It claimed to have known nothing about the alleged fraud related to the West View\u2019s acquisition of the property until July 13, 2022, when the government filed a lis pendens<\/em> with the Bureau of Conveyances, stating that the government would be seeking forfeiture of the property. And only subsequent to that, Honua\u02bbula said, did it learn of the height restriction. While asking the court to protect its leasehold interest, it also sought removal by the court of that restrictive covenant.<\/p>\n\n\n\n U.S. District Magistrate Judge Rom Trader ordered the U.S. Marshals Service to auction the West View property, subject to the leasehold interest of Honua\u02bbula, on October 31, 2023.<\/p>\n\n\n\n Nearly a year later, a company called Kekoa Real Estate Holdings, LLC, took title to both parcels, paying $122,500 for the smaller one and $227,500 for the larger. The total purchase price of $350,000 is just over half of the assessed value of $680,200, according to county property tax records.<\/p>\n\n\n\n Kekoa REH, a Texas LLC registered to do business in Hawai\u02bbi, had been formed the previous month. Its sole manager is Aaron Hultgren, one of the three members of Honua\u02bbula.<\/p>\n\n\n\n The Complaint<\/strong><\/p>\n\n\n\n On October 8, 2024, Kekoa REH acquired the West View property. On October 25, it brought its complaint against West View, PMJ Kona, and John and Jane Doe individuals, corporations, LLCs, and government entities. Four days later, it amended the complaint to now include Budhabhatti as a defendant.<\/p>\n\n\n\n \u201cThe height restriction \u2026 is wrongfully preventing Honua\u02bbula from completing the construction of an approved affordable housing project\u2026 thereby causing substantial harm to both Honua\u02bbula and the Hawai\u02bbi community,\u201d the complaint states. <\/p>\n\n\n\n \u201cBy recording the restrictive covenant, West View breached its express obligations and\/or implied covenants to Honua\u02bbula under the Lease Agreement and\/or the Development Agreement, by rendering Honua\u02bbula unable to complete construction of the subject affordable housing project,\u201d it continues. \u201cFurther, in recording the restrictive covenant, West View, by and through Budhabhatti, misrepresented the material fact that it had not already entered into both the Lease Agreement and Development Agreement. \u2026 [D]espite being fully aware that certain portions of the subject affordable housing project would exceed the height restrictions contained in the restrictive covenant, West View and Budhabhatti recorded the restrictive covenant so that West View and Budhabhatti could profit from selling the mauka parcel to PMJ.\u201d<\/p>\n\n\n\n Honua\u02bbula alleges that PMJ knew about the lease between West View and Honua\u02bbula and was aware of the scope of the housing project. PMJ, it states, \u201cwrongfully conspired with West View and Budhabhatti and\/or induced West View into recording the restrictive covenant\u2026 As a result of the restrictive covenant, which prioritizes a private investor\u2019s desire for ocean views over necessary affordable housing, PMJ has been unjustly enriched to the detriment of Honua\u02bbula.\u201d<\/p>\n\n\n\n Honua\u02bbula is seeking a declaratory judgment affirming its rights and ability to move forward with the affordable housing project. Also, it is asking the court for \u201cinjunctive and\/or equitable relief,\u201d \u201cgeneral, compensatory, special, treble, and punitive damages against West View, PMJ, and\/or Budhabhatti,\u201d and attorneys\u2019 fees and costs.<\/p>\n\n\n\n PMJ has filed a cross-claim against West View and Budhabhatti. \u201cIf PMJ Kona is found liable to Honua\u02bbula, PMJ Kona is entitled to indemnification and\/or contribution from either \u2026 West View or \u2026 Budhabhatti, or both,\u201d the cross-claim states.<\/p>\n\n\n\n On December 19, default judgments were entered against West View and Budhabhatti. A trial date of December 2, 2025, was set in the courtroom of 3rd<\/sup> Circuit Judge Wendy DeWeese.<\/p>\n\n\n\n In the meantime, Honua\u02bbula is deposing and subpoenaing members of PMJ or their representatives, including Marcus Kelekoma of MK Custom Builders (Melanie Kelekoma is a member of PMJ), Jacqueline Gupton (another PMJ member). Also being served are Alan Rudo, Margaret Reynolds (Rudo\u2019s ex-wife and a real estate agent), and Budhabhatti.<\/p>\n\n\n\n \u2014 Patricia Tummons<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" The federal criminal trial of three men accused of conspiring with a Hawaiʻi County employee to defraud the county by abusing affordable housing agreements has been in the news lately. 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