HPD settlement rejected
By Jim Dooley
Advertiser Staff Writer
The City Council has rejected an offer to settle a bitterly contested lawsuit filed by a police officer against the Honolulu Police Department, viewing the structure of the settlement as "too complicated and precedent-setting," Councilman Romy Cachola said yesterday.
The proposed settlement came to $575,000 — approximately $57,500 per year for 10 years. But that amount is dwarfed by the legal bill of approximately $1.5 million that the city has paid its attorneys to defend the whistleblower lawsuit filed by decorated HPD detective Kenneth Kamakana three years ago.
The case is scheduled to go to trial in December, and the legal bills for both sides will continue to mount.
Attorneys for the city briefed members of the Council's Executive Matters Committee on the proposed settlement behind closed doors Thursday. Cachola said yesterday that members of the committee rejected the proposal because it was "quite complicated and quite unprecedented."
Cachola said the council is still open to settling the case, and the talks are "a work in progress."
He acknowledged that the proposed offer is "for a lot less money" than Kamakana and his attorneys are seeking in damages.
The settlement was to be paid out over several years to ease the tax burden on Kamakana and his attorneys.
Susan Ichinose, a Honolulu attorney not involved in the case but who is familiar with federal tax laws in personal injury lawsuits, said yesterday the tax liability to such a plaintiff "could be enormous."
Congress changed tax laws governing damage payments to plaintiffs in federal discrimination and whistleblowing cases in 1998, Ichinose said.
Jury awards or settlement payments used to be tax-free, but are fully taxable now if a plaintiff cannot show that he or she was physically harmed by an employer's wrongful conduct, Ichinose said.
And plaintiffs are responsible for taxes not just on the money they receive, but on all legal fees and expenses paid, Ichinose said.
"There have been cases where plaintiffs have ended up owing money, even though they prevailed at trial," she said.
Stretching payments out over a period of years, usually through purchase of an insurance annuity, can lessen the annual tax burden paid by a winning litigant in such circumstances, she said.
It is not known precisely how much of the proposed settlement money would go to Kamakana and how much to his attorneys, but it is believed to be about 50 percent each, meaning Kamakana would receive about $26,000 per year before taxes.
Kamakana's attorney, William McCorriston, did not respond to repeated requests for comment.
City Corporation Counsel David Arakawa, who briefed council members at the Thursday meeting, referred questions to private attorney Jerold Matayoshi, who is representing the city.
"I can't comment because it's confidential," Matayoshi said yesterday.
No new legal proceedings were scheduled in the case at federal court, "but I'm sure at some point soon we're going to have to get back there," Matayoshi said.
A source familiar with the negotiations said some council members balked at approving the settlement, not just because of its complexity, but because they believe it's too much to pay for the damages Kamakana claims to have suffered.
"He wasn't fired, he didn't lose any money," sad the source, who did not want to be identified because the negotiations are confidential and ongoing.
Kamakana was placed under internal affairs investigations and transferred out of HPD's elite Criminal Intelligence Unit, which investigates organized crime and terrorism, after he reported evidence of wrongdoing and corruption in the unit to the FBI.
Kamakana, who specialized in organized crime narcotics trafficking, notified the FBI that CIU officers had interviewed a defendant in a Chinatown organized crime gambling case after they had been asked not to do so by both the FBI and the U.S. attorney's office.
One CIU officer had what was perceived to be an improperly close personal relationship with another defendant in the case, according to court papers.
Court records also show the CIU was excluded from participation in the gambling case because of concerns by police officers and FBI agents about close ties between certain CIU officers and organized crime figures.
Many court records filed in the lawsuit were placed under seal because the city and HPD said making them public would endanger ongoing cases and threaten the lives of police officers and confidential informants.
Thousands of pages of court records were made available to the public after The Advertiser intervened and asked that the records be unsealed. The city is still fighting further disclosure.
Reach Jim Dooley at jdooley@honoluluadvertiser.com or 535-2447.
