Kauai woman gets 17-years for ‘staggering’ tax, fraud schemes

A 51-year-old Kauai woman will spend 17 years in federal prison and pay more than $5 million in fines and restitution for running multiple fraud schemes over eight years that targeted students applying for loans and scholarships, tax refunds, and credit card applications.

In addition to nearly two decades behind bars, U.S. District Judge J. Michael Seabright ordered that Lei­hinahina Sullivan, 51, aka “Lei,” of Lihue, must serve three years of supervised release after she pleaded guilty in July 2021 to three counts of wire fraud and one count of aggravated identity theft related to “multiple long-running fraudulent schemes,” according to the U.S. Department of Justice.

“This 17-year sentence holds Sullivan accountable for the damage she caused by her years-long fraudulent schemes, the money she stole from individuals in her community and public and private institutions, and her repeated and willful rejection of the rule of law,” said U.S. Attorney Clare E. Connors in a statement. “This sentence will stop Sullivan from continuing to prey on vulnerable members of our community who unwittingly trusted her manipulation and lies.”

Assistant U.S. Attorneys Rebecca A. Perlmutter and Mohammad Khatib, who prosecuted the case, had asked Seabright to sentence Sullivan to 312 months in federal prison.

“The seriousness of Sullivan’s conduct and her likelihood of recidivism dwarfs almost any other criminal defendant,” wrote Perlmutter in a March 21 sentencing memorandum. “Sullivan truly stands in a league of her own based on her ongoing post-indictment criminal conduct, efforts to obstruct the case, willful and intentional efforts to mislead and manipulate the court and make a mockery of the court’s admonishments and rules, failure to take accountability for her actions by repeatedly blaming victims, the justice system, the judge, her counsel, and the government, repetitive victimization of family and close friends, and her inability to abide by rules of two release programs and the BOP (Bureau of Prisons).”

Perlmutter wrote that it would take significant time, resources and effort to unravel the complex financial fraud Sullivan perpetrated to accurately tally the damage.

“Although much has been discussed, presented at the evidentiary hearing, and briefed on this topic, the clear bottom line is that Sullivan’s tax loss for her own returns and those of others is greatly underrepresented,” she wrote. “The special agent explained in his testimony and with evidentiary examples all the evidence describing why the loss number is so much lower than the true representation of the loss caused by Sullivan, including the fact that he would have to investigate her conduct for over a decade to account for the full scope of her tax and other schemes.”

Seabright also ordered Sullivan to pay $3,396,035.15 in restitution to various victims and public and private entities including the Internal Revenue Service, Hawaii Department of Taxation, American Express, Bank of Hawaii, Citibank, Gates Millennial Scholars, and the U.S. Department of Education, according to federal court records.

Sullivan also must pay a penalty of $2,012,41.92 in forfeiture for the criminal proceeds of her offenses. In sentencing Sullivan, Seabright described the “staggering scope, length, and complexity” of her criminal conduct, according to a news release.

Between January 2011 and July 2019, Sullivan executed a tax fraud scheme that amounted to $2.8 million in losses. She prepared and filed hundreds of false state and federal returns for her and other people. She was convicted of creating fictitious expenses, claims for credits, and other lies.

Sullivan did not review these tax returns with the individuals before she filed the tax returns in their names and forged their signatures on many of the returns, according to a news release from the U.S. Attorney’s office.

She was also convicted of using “college-bound students” to prepare and submit false student loan, grant, scholarship, and financial aid applications, and other documents that requested money from public and private educational-based financial assistance and aid providers.

She took some money from students’ financial aid applications and transferred it to bank accounts she controlled, then spent the money on her own personal and other expenses, such as for her home construction, retail purchases and bills.

Sullivan’s final fraud scheme involved the theft of Social Security numbers and birth dates that she used to take out at least 40 credit cards in other people’s names and spend more than $1 million.

“Sullivan directed multiple witnesses to avoid law enforcement contacts, told them lies about the status of her case, instructed them to lie to the grand jury when legally compelled to testify truthfully, and told them to destroy incriminating evidence,” according to Perl­mutter. “Even worse, she persisted in this conduct after she was federally indicted on other charges and under pretrial conditions not to contact witnesses.”

Sullivan’s attorney, Rustam A. Barbee, did not immediately reply to a Hono­lulu Star-Advertiser request for comment.

Special Agent in Charge Bret Kressin, IRS Criminal Investigation, Seattle Field Office; the U.S. Department of Education’s Office of Inspector General’s Western Regional Office; the FBI; and the state of Hawaii Department of Taxation investigated the case.