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Federal Court Ruling: Sen. Karl Rhoads participated in Honolulu County Council Kickback scheme
By Andrew Walden @ 11:35 PM :: 18731 Views :: Honolulu County, Ethics, Politicians

by Andrew Walden (originally published October 14, 2010)

When Honolulu County Council member Andy Mirikitani faced trial in 2001 for fraud, theft, extortion, and bribery, key testimony against him came from Cynthia McMillan, the wife of now-State Representative Karl Rhoads (D-Downtown Honolulu).  McMillan had worked closely with Mirikitani, at one time chairing his campaign committee.  Prior to presenting her testimony--in which McMillan implicated her husband--her attorney negotiated an immunity agreement with federal prosecutors. 

While immunity agreements protect criminals from prosecution, they do not prevent the Court from reciting the facts of the case.  On April 30, 2003, a three-judge panel of the US Court of Appeals heard the appeal of Sharon Bynum, who had been convicted along with Mirkitani.  In its ruling denying Bynum’s appeal, the court recited these facts:

In June of 1999, Mirikitani offered to authorize an $11,000 bonus to a part-time staff member, John Serikawa ("Serikawa"), if Serikawa would agree to pay Mirikitani one-half of the after-tax gain resulting from the bonus. Mirikitani also promised to make Serikawa a full-time employee and increase his annual salary from $23,000 to $28,000. Serikawa accepted the proposal and received a bonus of $9,617 paid out of Honolulu's general fund….

In May or June of 1999, Mirikitani made a similar kickback proposal to Cynthia McMillan ("McMillan"), another of his Honolulu employees. Mirikitani instructed McMillan that the kickback was to be paid by check to Mirikitani's campaign fund. McMillan received a bonus of approximately $16,916 on July 15, 1999. On the same date, McMillan transmitted checks to Mirikitani's campaign fund in the amount of $4,000 from her own bank account and $250 from her husband's bank account. At trial, McMillan testified that she understood that a refusal to engage in Mirikitani's kickback scheme might lead to "a bad working relationship or something."

Bynum discussed McMillan's participation in the kickback scheme with her on two occasions during the summer of 1999. In one conversation, Bynum told McMillan that the "kickback couldn't have come at a better time" for Bynum and Mirikitani "because they had a lot of bills." In another conversation, Bynum told McMillan that the kickback scheme permitted Bynum to be paid for the work she performed in Mirikitani's council office. At trial, the Government presented evidence that Bynum covered up McMillan's kickback in a campaign spending report.

The Star-Bulletin June 14, 2001 describes much more than $250 worth of involvement on the part of Rhoads:

John Edmunds, Mirikitani's attorney, said in his opening statement that there was no direct correlation between the bonus and the contribution to the Friends of Andy Mirikitani made by McMillan.

But McMillan's testimony rebutted that argument. "I feel it was a 100 percent tie-in," she said, "that if I didn't give the campaign contribution, I wouldn't get the bonus." While he did not state explicitly that the bonus was tied to the campaign contribution, she said, "he used the word 'deal.'"

McMillan testified that she and her husband (Karl Rhoads), an attorney, looked into the legality of an employee contributing to the campaign of her boss and were told it was OK.

They did not, however, ask anyone about the propriety of contributing to the campaign as a condition of a bonus, she said.

Grilled by Edmunds several times about why they did not ask anyone about the propriety of that contribution, McMillan said: "I can't explain it. I'm just telling you it didn't cross my mind."

Rhoads is an attorney.  McMillan is a long-time political insider.  Some people may actually believe that these two are not criminals.  Released from prison and now married to Mirikitani, Sharon Bynum is not one of them.  In a recent column posted on HawaiiReporter, she explains:

His trusted senior aide, Cindy McMillan…was given immunity for her cooperation and testimony. She quickly appeared to benefit by her cooperation and was given a choice position with one of the mayor’s favorite consultants. Later, she was appointed to Councilmember Duke Bainum’s staff. Shortly thereafter, she became a Director for Pacific Communications. Her husband, an attorney, couldn’t keep a job and is now serving as a State Representative.



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