Boulware convicted in largest tax-evasion case
By David Waite
Advertiser Staff Writer
Honolulu businessman Michael Boulware faces approximately 10 years in prison after a federal court jury found him guilty yesterday of 10 criminal counts, including tax perjury, tax evasion and conspiracy to commit bank fraud.
The jury acquitted Boulware, 53, a self-made millionaire and major figure in Hawai'i's vending machine and Kona coffee industries, of four counts of actual bank fraud.
Boulware's lawyers maintained during the three-week trial that as he built his vending machine and coffee service empire, he knew virtually nothing about taxes and relied on consultants for advice on how to minimize his liability.
Some of the tax shelters Boulware's tax consultants suggested were unorthodox but legal, his lawyers argued.
But Edward Groves, a special attorney with the U.S. Justice Department's Tax Division, said evidence presented at trial showed Boulware deliberately devised a way to keep from paying an estimated $21 million in state tobacco taxes and concocted "one scheme after another" to avoid paying federal income taxes on approximately $10 million.
Groves said Boulware's case, which covered the nine-year period from 1989 to 1997, involved the longest episode his agency had investigated, and that the amounts involved were the largest in history.
State Rep. Nathan Suzuki, D-1st (Salt Lake, Moanalua), who prepared Boulware's tax returns for the years in question, was excused from having to testify on the grounds that forcing him to do so would violate his constitutional protection against self-incrimination.
At a hearing near the start of the trial, Suzuki's lawyer, former Hawai'i Supreme Court Justice Robert Klein, said Department of Justice officials in Washington had told him earlier this year they planned to seek an indictment against Suzuki on conspiracy or other charges in connection with the case.
Groves would not say after the verdict was reached yesterday if an indictment would be sought against Suzuki. He said that decision is up to his supervisors in Washington.
Suzuki could not be reached yesterday, and Klein did not respond to a request to comment on the matter.
Groves estimated that Boulware avoided paying about $3.5 million in federal income taxes on $10 million in income he failed to report to the Internal Revenue Service during the nine-year period.
Groves said IRS Special Agent Jerry Yamachika first paid a visit to Boulware in 1993 to question him about his tax returns, and that Boulware failed to heed the warning. He credited yesterday's guilty verdicts to Yamachika's work on the case during the past eight years.
A sullen-faced Boulware declined to comment as he left the courthouse yesterday.
But his lead attorney, Vincent Marella of Los Angeles, noted that the jury had not convicted Boulware on any of the multiple bank fraud charges, which could have resulted in much more lengthy prison sentences.
"We intend to file a notice of appeal. We believe there are a number of substantial appeal issues," Marella said.
He said the jury's verdicts had to do only with Boulware's personal income tax returns, and were not related to his company, Hawaiian Isle Enterprises, which will remain in operation.
U.S. District Judge Edward Rafeedie, who presided over the trial, set Boulware's sentencing for March 25 and allowed him to remain free on bail until then.
Reach David Waite at dwaite@honoluluadvertiser.com or 525-8030.
