Federal Judge Susan Oki Mollway postponed sentencing of Honolulu telecommunications executive Al Hee on multiple charges of tax fraud Monday, after his lawyer raised questions about whether prosecutors had correctly calculated the government’s tax loss and whether discussing Hee’s medical conditions during sentencing violates patient privacy laws.
The anticlimactic hearing stretched on for two hours as Mollway and attorneys debated the technicalities in various statutes amid a packed courtroom in downtown Honolulu that included Hee’s family and friends.
Both parties are scheduled to reconvene Dec. 15 for a sentencing hearing that’s expected to include testimony from a prison physician about whether the prison system can adequately treat Hee’s medical conditions, which were not fully disclosed, as well as a determination on how much Hee owes the Internal Revenue Service in restitution.
Hee was convicted in July on six counts of filing false income tax returns and one count of corruptly impeding the Internal Revenue Service from correctly calculating and collecting his taxes.
Prosecutors say Hee used his company, Waimana Enterprises, to pay for about $4 million in personal expenses, including family vacations, expensive jewelry and regular massages. Hee also used hundreds of thousands of dollars of company money to cover his children’s tuition at private mainland colleges and to pay family members’ “false salaries.”
Hee directed accountants and company employees to classify many of the personal expenses as business deductions or part of a shareholder loan that was never intended to be repaid, according to prosecutors, who estimate the total tax loss at $431,793.
While Mollway deferred a final decision on Hee’s sentencing, she concurred with prosecutors that Hee used “sophisticated means” to defraud the government and obstructed justice, which is expected to enhance Hee’s sentencing.
Prosecutors are recommending a sentence of between 41 and 51 months in prison.
A final determination of the tax loss, which is expected to be made at the next hearing, is not expected to influence Hee’s sentence, but could affect how much Hee has to repay the government.
Hee’s defense is also asking the court to consider Hee’s health. While it became clear during the Monday hearing that Hee says he suffers from food allergies, the extent of his medical problems was not discussed, as Mollway debated whether privacy issues should be taken into consideration.