Hawaii County has declared itself a victim of an employee who pleaded guilty to stealing affordable housing credits, and its attorneys are asking the court to return property currently under forfeiture by the federal government.
In a petition filed Oct. 20 in federal court, county attorneys ask for a hearing to adjudicate its interest in four of the seven properties seized after former community development specialist Alan Scott Rudo, who worked 12 years in the county Department of Housing and Community Development, pleaded guilty to accepting almost $2 million in bribes.
“Rudo defrauded, misled, and ultimately deprived the County of critically necessary affordable housing units,” said Deputy Corporation Counsel E. Britt Bailey in the petition. “Rudo’s admitted criminal conduct deprived the County’s vulnerable low-income residents of the opportunity for homes. The County is highly invested in righting the wrongs of Rudo’s and his co-conspirators behavior.”
The county was the first to petition for the court’s consideration of its losses following the federal notice of forfeiture and asset seizure. A Texas affordable housing developer has also petitioned for consideration of its interest, and it’s possible others might follow.
In particular, the county is seeking 45 affordable housing credits, $938,428.16 from the sale of a lot on Kiwi Street in Kailua-Kona known as Lot 16-A, as well as Lot 16-B and 16-C of the Kealakehe Homesteads.
Rudo has pleaded guilty and is now set for sentencing May 23.
Three alleged co-conspirators, Hilo attorneys Paul Joseph Sulla Jr. and Gary Charles Zamber, and Rajesh P. Budhabhatti, a Puna businessman, were indicted by a grand jury after Rudo on July 18 pleaded guilty.
The government says the three alleged co-conspirators received affordable housing credits and a land conveyance having an aggregate value of at least $10.9 million. Sulla and Zamber are charged with six counts of honest services wire fraud and one count of conspiracy. Budhabhatti is charged with one count of wire fraud. Sulla is also charged with one count of money laundering. All three have pleaded not guilty.
The county isn’t the only third party declaring victimhood in the scheme. Honuaula LLC, a Texas limited liability company, on Oct 22 also filed a petition for determination of its interest in Lots 16-B and 16-C of the Kealakehe Homesteads.
“Petitioner is an innocent bona fide purchaser for value of a long-term leasehold interest in the Property where Petitioner seeks to provide the community with affordable housing,” said Hilo attorney Ronald Kim, representing the company.
The indictment charged that the four collectively created, owned, managed, controlled and used Luna Loa Developments LLC, West View Developments LLC and Plumeria at Waikoloa LLC to make it appear as if those companies would develop affordable housing, when in fact they had no intention to do so. Those companies, as well as at least two other limited liability corporations and two trusts, were used to deceive the Housing Office, the county and its residents, and to obtain and distribute affordable housing credits, land and money, the indictment charged.
Developers who agree to construct new affordable housing units in excess of any requirements imposed under county law may earn affordable housing credits. The credits can be transferred to other developers, who can use them to satisfy existing or future affordable housing requirements. Housing Administrator Susan Kunz told the County Council in August that her office is taking a close look at internal policies and fortifying them as needed.
“I personally learned of Rudo and his co-conspirators fraudulent scheme upon the County of Hawai’i when the news of the fraudulent housing scheme was made public in July, 2022,” Kunz said in an affidavit accompanying the county petition. “At all times, the County of Hawaii, and in particular the Office of Housing and Community Development, assisted and cooperated with the federal investigation.”
Email Nancy Cook Lauer at ncook-lauer@westhawaiitoday.com.
