Posted on: Thursday, September 23, 2004

Ex-CEO wins appeal of tax case

By Ken Kobayashi
Advertiser Courts Writer

A federal appeals court has issued a decision that throws into legal limbo Honolulu businessman Michael Boulware's 4 1/4-year sentence in his tax evasion and bank fraud case.

Boulware, president and chief executive of Hawaiian Isle Enterprises, was found guilty by a federal jury in 2001 of nine counts of filing false tax returns and tax evasion and one count of conspiracy to commit bank fraud.

In a 2-1 decision last week, the U.S. 9th Circuit Court of Appeals reversed the nine tax convictions and sent the case back for a new trial, upholding the conspiracy conviction.

Neither Boulware nor his lawyer, Dennis O'Connor, could be reached for comment yesterday.

Federal prosecutors had contended Boulware, who turned a vending machine business into a multimillion-dollar company selling Kona coffee, bottled water and cigarettes, came up with ways to avoid paying $8.1 million in federal and state income taxes from 1989 to 1997. He was sentenced by visiting U.S. District Judge Edward Rafeedie to prison terms of three years and 4€ years for each of the tax counts, and 4 1/4 years for conspiracy.

Boulware was permitted to remain free on a $100,000 signature bond while he appealed.

Edward Groves, a special attorney with the Justice Department's Tax Division who prosecuted the case, said he would recommend that the department ask for a reconsideration and, if necessary, a rehearing by a fuller appeals court panel rather than a retrial.

Without the tax convictions, the 4 1/4-year sentence for conspiracy also could be in jeopardy, Groves said, because U.S. Supreme Court and federal appeals court decisions earlier this year now essentially require that juries, not judges, decide factors in a case that would lead to a higher sentence.

The appeals court ruled Sept. 14 that Judge Rafeedie should have allowed the defense to introduce at trial a state court judgment that contradicted the prosecution's case that Boulware had stolen money from his corporation and given it to his girlfriend.

But Groves said yesterday that judgment was unrelated to at least half of the tax counts.

Former state Rep. Nathan Suzuki, who represented House District 31 (Salt Lake, Moanalua) from 1992 to 2002, pleaded guilty in March to his role in creating secret overseas bank accounts for Boulware's assets.

Rafeedie postponed sentencing to Nov. 15 to see whether the U.S. Supreme Court would clarify its decision affecting sentencing.

Advertiser staff writer Curtis Lum contributed to this report. Reach Ken Kobayashi at kkobayashi@honoluluadvertiser.com or 525-8030.