Albert S.N. Hee, president of a telecommunications company that serves Hawaiian homesteaders, siphoned $4 million from the company to pay for personal expenses, ranging from massages to a mainland home for two of his children, prosecutors said as Hee’s tax fraud trial began in federal court.
But Hee’s defense attorney said the case amounts to nothing more than a "good-faith dispute" between Hee, his accountants and the government.
Government attorneys say they will outline a case that shows Hee knowingly used company money to provide a lavish lifestyle for himself and his family, including thousands of dollars for meals, flights, vacations, personal massages, a house, college expenses and tuition for his three children attending mainland private colleges.
Hee, president of Waimana Enterprises Inc., the parent company of Sandwich Isles Communications Inc., was indicted by a federal grand jury in December on seven counts of corrupt interference with the administration of Internal Revenue Service laws and six counts of submitting a false tax return for the years 2007 to 2012.
His trial began Tuesday, after selection of a five-man, seven-woman jury, with four alternates, before U.S. District Judge Susan Oki Mollway. Prosecutors are scheduled to begin presenting their case Wednesday.
Hee is also president of Sandwich Isles, a subsidiary of Waimana, which provides broadband Internet and landline and wireless telephone service to customers living on Department of Hawaiian Home Lands property.
The indictment alleges that from 2002 to 2012, Hee tapped Waimana Enterprises Inc. — a company Hee incorporated and owns stock in — to pay $4 million of his personal expenses, including:
» $752,082 for tuition, books and rent for Hee’s three college-age children.
» $1.3 million for a house in Santa Clara, Calif., used exclusively by two of Hee’s children.
» $92,000 for massages.
» $121,878 in credit card charges.
» $722,550 in false wages paid to Hee’s three children, who did no work for Waimana.
» $590,201 in false wages paid to Hee’s wife, who did no work for Waimana.
Defense attorney Steven Toscher said the government’s claims that Hee logged all of those charges as business expenses was correct, but that he recorded all of it openly, with no attempt to conceal them, and all at the advice of his accountants, who will be called to testify in the case.
"This wasn’t about money," Toscher told jurors. "This is about a man that thought what he was doing was right."
Quinn Harrington, a trial attorney with the Tax Division of the U.S. Department of Justice, said the government will present accountants and tax consultants who will show that Hee was the sole voice in all company decisions and signed off on every move the company made.
"What the defendant said, the company did," Harrington said in opening statements.
Harrington said Hee resorted to creative bookkeeping terms for personal expenses, such as referring to the massages as "consulting expenses," or paying for his children’s college tuition as an "educational expense," before reclassifying it as a loan, with no promissory note or paperwork.
If convicted, Hee faces up to three years’ imprisonment and a fine of up to $250,000 on each of the 13 charges.
Hee is the brother of former state Sen. Clayton Hee.
