BY MALIA ZIMMERMAN – Federal tax fraud charges, an IRS investigation into a $14 million secret account in Switzerland, a state criminal case for 7 manslaughter counts, a host of civil lawsuits and a record for the worst environmental criminal convictions against an individual in Hawaii’s history.
This isn’t a murder mystery or a suspense novel: these are the real life cases that 84-year-old retired Hawaii automobile mogul James Henry Pflueger is embroiled in.
Reports about Pflueger’s cases have been in the news since 2001, and this week is no different.
The state of Hawaii filed a response Wednesday to a double jeopardy and lack of evidence motion to dismiss manslaughter charges against retired automobile mogul James Henry Pflueger.
See the response: Pflueger Ans Br No. 30419
Pflueger, whose Ka Loko dam breached March 14, 2006, killing North Shore Kauai residents Alan Gareth Dingwall, Daniel Jay Arroyo, Rowan Grey Makana Fehring-Dingwall, Aurora Solveig Fehring, Christina Michelle McNees and her unborn child, Timothy Wendell Noonan, Jr. and Carl Wayne Rotstein, was indicted in November 2009 on 7 counts of manslaughter.
The 84-year-old is accused of altering the dam’s spillway, causing it to breach before dawn Tuesday morning, sending an estimated 400 million gallons of water crashing into the community below.
Pflueger’s attorneys maintain his innocence, and blame the state, the county, the reservoir manager and former dam owner, and others for the breach.
However, the state says Pflueger knowingly covered the spillway in the late 1990s when he illegally graded and grubbed the area and flattened a large nearby hill, to prepare the area for housing construction.
The state’s response came after Pflueger’s attorneys appealed the Kauai 5th Circuit Court rulings by Judge Randal Valenciano allowing the case to go forward. Pflueger’s attorneys argue two points on why the manslaughter charges should be dropped: double jeopardy and sufficiency of evidence.
The double jeopardy claim is referring an earlier prosecution of Pflueger by the state Department of Health, the state Attorney General, and the U.S. EPA, which led to the conviction of Pflueger on 10 felony counts for illegal grading and grubbing and pollution of the pristine Pilaa Bay in what would be the most serious and significant criminal environmental case in Hawaii’s history.
His illegal grading and grubbing on the edge of the remote Kauai beach sent 1,000 tons of mud into the ocean during a rainstorm, destroying the reef and private property owned by the Marvin family.
Pflueger avoided prison time, but the June 2006 settlement included the requirement that he pay $2 million in penalties to the state of Hawaii and the United States and spend approximately $5.3 million on the remaining work required by the settlement “to prevent erosion and restore streams in areas damaged by the construction activity.”
In July 2005, the Hawaii Board of Land and Natural Resources fined Pflueger $4 million for damages to Pilaa from sediment runoff to the beach and coral reef. He appealed the decision. Colleen Hanabusa, the state Senate president who is a candidate for Congress, respresented Pflueger against the state, but Pflueger lost the case. That brought the fines by the state and federal government agencies against Pflueger to $12.5 million.
Pflueger also pursued litigation against the Marvins trying to restrict their access via his property to their beachside home, which is surrounded by Pflueger land, and prevent them from utilizing the only fresh water source on the property. After 5 years, Pflueger settled the Marvin’s case against him for an undisclosed sum, but continues to this day to try to block their access to water and a road to their property.
Just days after a settlement was reached in the Pilaa case, Pflueger’s Ka Loko dam located within a few minutes drive of the Pilaa property, breached. Pflueger’s attorneys say double jeopardy applies since he was prosecuted and paid fines for the illegal grading he did in 2001 at Pilaa, and cannot be prosecuted for charges related to illegally grading at Ka Loko. The state attorney general maintains his illegal grading at Ka Loko came years earlier and was not part of the Pilaa criminal case.
Pflueger’s attorneys also claim there is no evidence to back up Pflueger’s manslaughter charges.
However, state attorney general Mark Bennett writes in its response that a secret grand jury reviewed 207 exhibits, listened to 20 witnesses over four days from November 18 to 21, 2008, resulting in a record of 600 pages, and agreed unanimously to indict him.
Pflueger’s Legal Battles Beginning on a Whole New Front – Federal Tax Fraud
In an unrelated matter, Pflueger, who owns the largest car dealership in Hawaii and is a well-known retired race car driver, was in U.S. District Court pleading “not guilty” to charges of tax fraud, conspiracy, filing false tax returns and allegedly transferring $14 million to a Swiss bank account without reporting to the IRS his foreign bank account.
His accountant, Dennis Lawrence Duban, also is charged in the alleged scheme. The federal indictment says Pflueger sold his California property for $14 million and then he and Duban created a Cook Islands Trust and opened a Swiss bank account to hold the funds.
Not reporting a foreign bank account and the other two counts of conspiracy can result in a 5-year prison term, and for false tax returns claims, the court can institute a 3-year prison term. Fines can be as much as $250,000 for each count.
His son, Charles Alan Pflueger, who now operates the Pflueger Auto business, and two other auto dealership employees, including Executive Assistant Julie Ann Kam and Chief Financial Officer Randall Ken Kurata, are also charged in the filing of inaccurate corporate tax filings. This is allegedly related to the Pfluegers’ use of tens of thousands of dollars of company funds to pay for personal and family expenses, which were written off as company expenses.
Assistant U.S. Attorney Clare Connors explains that there are two conspiracies that are charged. “The first conspiracy involves all 5 defendants. The second conspiracy involves James Henry Pflueger and Dennis Lawrence Duban involving moneys related to a sale of property in California that belonged to Mr. James Pflueger.”
All 5 facing federal charges pled not guilty in recent days. Their trial is set for May 2011.
Alan Pflueger’s attorney disclosed that his client has been working with the IRS for the last 18 months to rectify any irregularities. James Pflueger’s attorney William McCorriston maintains that his client is not guilty and says the accusations can be blamed on accounting errors.
Pflueger Fall Out Continues
While the Pfluegers are battling criminal charges on the state and federal level, there is still fall out from the other cases that Jimmy Pflueger is involved in.
- Families in Kilauea, Kauai, who lost loved ones in the 2006 dam breach want a resolution to the criminal case, however, because of appeals, the case may not go to court for several months. A related civil case was settled earlier this year, but the settlement still has not been fully paid to the victims. In addition, according to public record, former dam owner C. Brewer still has a legal battle with its insurance company over covering its share of settlement in its civil suit.
- Kilauea residents on Kauai’s quiet North Shore continue their struggle with clean up issues related to the dam breach. Still missing are the remains of four victims. In addition 16 cars, homes and their contents, and fuel storage tanks could be buried there. Kauai county next week will launch a $4 million cleanup effort of the river decimated by the breach. The state attorney general’s office delayed the cleanup efforts for more than a year because resident landowners along the river would not agree to what they said were unreasonable liability measures they were being forced to sign off on in order to move the clean up forward. Residents have waited since March 2006 for the effort to get under way.
- Famers in the area who once relied on water from Ka Loko reservoir are struggling in the worst drought to hit Hawaii in decades.
- The state Department of Land and Natural Resources shut off the water to about 20 Kilauea farms after distributor Tom Hitch, who operated the water flow from Ka Loko, could not get insurance to cover distribution to the farmers. Pflueger petitioned the state to have the farmers’ water shut off all together and won.
- Several small farm owners over the last year had to spend thousands of dollars to dig water wells. Kilauea Famer David Whatmore estimates the well he has to dig to accommodate his small Kilauea farm will cost $100,000 and much more to operate. The high costs will likely put some of the farmers in the area out of business, he says.
- The Marvins at Pilaa are still in court with Pflueger over the water rights and property access rights case.
- The Pluegers are part of a well-known local family, which inherited several thousand acres of land throughout the state, primarily in East Oahu. In East Oahu’s Niu Valley, residents along one property owned by Pflueger and his cousin are contending with large boulders, including one they nicknamed “killer,” hovering precariously over their homes. In August 2008, two boulders from their Kulepiamoa Ridge property in Niu Valley fell onto two properties over a 5-day period, and at the time, the state entered into negotiations with the Niu Conservative Group, a company owned by Pflueger and his cousin, over the removal of those boulders.
Attorney Eric Seitz, who helped to negotiate a resolution on the residents’ behalf, reports: “We came very close to a settlement by which the state, city, and landowner were going to bear the lion’s share of the expense to remove the boulder that is hanging there so precariously, and the 12 affected homeowners were all going to contribute specified amounts to the effort. All but one of the homeowners agreed, signed the agreement, and gave me their checks. The state and city appropriated or designated their respective shares, and the landowner was prepared to do the same. When one homeowner balked, and wanted changes to one of the documents, the landowner never followed through, so the deal fell apart. It was a substantial effort and a truly remarkable settlement, but all for naught. … The boulder is still there, and to my knowledge no actions are pending.”
Pflueger Receives National Coverage Over Three Cases
The Pflueger criminal cases have attracted national attention on all three fronts, not only because of the magnitude of the charges, but also because of the personalities involved.
ABC 20/20 covered both the Ka Loko dam breach case, and the Pilaa case in a March 2007 investigative report produced in conjunction with Hawaii Reporter.
Hawaii-born entertainer Bette Midler was the lead plaintiff in the case against Pflueger and spoke out for the first time on ABC 20/20.
Duane Dog Chapman, who is the lead on A&E’s Dog the Bounty Hunter, and his wife Beth Chapman, are close personal friends with James Pflueger and his girlfriend, a multi-millionaire heiress in her own right, Cindy Foster. Dog Chapman posted $71,000 bail for James Plfueger related to the Ka Loko manslaughter case.
Pflueger Maintains He is a Victim
Through the many civil and criminal cases Pflueger is involved in, and the many lives he’s impacted, he maintains he is the victim.
In an exclusive interview with Hawaii Reporter after the Ka Loko breach, he said he believes there is a black cloud following him.
Pflueger maintains that the government is unfairly prosecuting him for a variety of alleged crimes and using him as a scapegoat to cover up government malfeasance. He says the people involved in the Pilaa and Ka Loko cases are out to get him.
Editor’s note: Hawaii Reporter editor Malia Zimmerman was subpoenaed to testify in this case.