Vending chain's founder sentenced
By David Waite
Advertiser Courts Writer
An O'ahu man who parleyed a vending machine business into a multimillion-dollar company specializing in the sale of Kona coffee, bottled water and cigarettes was sentenced yesterday to four years and three months in prison for evading income taxes during a nine-year period.
But U.S. District Judge Edward Rafeedie allowed Michael H. Boulware to remain free on a $100,000 signature bond while appealing his conviction. Rafeedie found that Boulware, president and chief executive officer of Hawaiian Isle Enterprises, is not a flight risk and is not a threat to the community. Boulware was found guilty by a federal jury in November of 10 criminal counts including tax perjury, tax evasion and conspiracy to commit bank fraud.
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 about $8.1 million in federal and state income taxes from 1989 to 1997.
Groves said an IRS agent contacted Boulware about questionable tax practices in 1993 but that Boulware continued to evade paying personal income taxes on income derived from the company in which he was the sole stockholder. Boulware maintained throughout the trial that he thought he was sheltering much of his income in legitimate programs and relied on advice from tax advisers, including state Rep. Nathan Suzuki, and his lawyer.
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, D.C. had told him in early 2001 they planned to seek an indictment against Suzuki on conspiracy or other charges in connection with the case.
Groves yesterday said that his supervisors have not yet decided whether to try to indict Suzuki.
Suzuki yesterday said prosecutors are "only talking" about an indictment in the media and he intends to show when he runs for re-election this year that there's "no substance" to the suggestion that he did anything illegal. "If there was anything to it — although my attorney said don't say it — they would have indicted me," Suzuki said.
In handing down the sentence, Rafeedie departed from a recommendation from the federal Adult Probation Office which submitted a report that said Boulware should receive 121 to 151 months based on federal guidelines. But Rafeedie said he had done an analysis of his own and did not believe that allegations Boulware cheated the state out of $21 million in taxes on tobacco products should be included as "relevant conduct" for sentencing purposes.
With the tobacco tax issue out of the formula for calculating the sentence, Rafeedie concluded the guidelines called for a term of 51 to 63 months. He said he opted to sentence Boulware to the low end of the range of sentences based largely on 36 letters praising his contributions to charity.
Groves urged Rafeedie not to be swayed by the letters. But Victor Sherman, Boulware's lawyer for the sentencing hearing, asked Rafeedie to be lenient, noting Boulware has never been convicted of any other significant crime, has been a contributing member of society, employs dozens of people and has several children to take care of.
Advertiser staff writer Brandon Masuoka contributed to this report.
