Former Honolulu Police chief Louis Kealoha and his wife, city deputy prosecutor Katherine Kealoha, left federal court Friday after being released on bond after entering pleas of not guilty in relation to their public corruption case.

The couple was arrested earlier in the morning at their home by federal agents.

Prosecutors had asked the court to detain Katherine Kealoha, but the Kealohas' attorney Myles Breiner objected. Prosecutors said Katherine Kealoha has a track record to obstruct justice and intimidate witnesses.

They also said she had gone to great lengths to evade FBI surveillance and there was evidence that Kealoha used encrypted communication to avoid detection, creating false documents and fake evidence as well.

Using an alias as "Alison Lee Wong," prosecutors produced bank statements where she acted as trustee and made false claims to bank. They produced police reports and documents they believe were forged as two examples she was willing to obstruct justice and conceal her activities.

Magistrate Judge Richard Puglisi ruled against detaining Katherine Kealoha. The couple was released on separate $100,000 signature bails. 

Police officer Danny Sellers was also arrested Friday morning as a co-conspirator in the case. He was released on a $50,000 signature bail after pleading not guilty.

The Kealohas and Sellers, as well as retired police officer Gordon Shiraishi, and current officers Derek Hahn and Bobby Nguyen, were indicted in federal court on charges that include conspiracy to commit offenses, obstruction, giving false statements to federal officers, bank fraud, aggravated identity theft, and criminal forfeiture.

The case is based on the 2013 theft of a mailbox from the Kealohas' Kahala home. Investigators had been looking into whether charges brought against Gerard Puana, the uncle of the chief's wife, were trumped up.

A spokesman with the city prosecutor's office sent out a statement after the arrest, saying that "The Department of the Prosecuting Attorney has placed Deputy City Prosecutor Katherine Kealoha on leave without pay pending the outcome of the federal court case."

Honolulu Mayor Kirk Caldwell also a statement Friday, saying in part that "The FBI investigation has reached the highest levels in the Honolulu Police Department and Prosecutor's Office, and this shows that no one is above the law. Oahu residents deserve to know what happened and expect justice to be served." 

"Please keep in mind, most of Honolulu's finest serve our community with honor and respect for the law," said City Council Chair Ron Menor in an afternoon statement. "Less than 1 percent of HPD's more than 1,900 sworn officers were disciplined in 2016. Most of our officers follow the law and do whatever it takes to keep our community safe. These allegations do not reflect the work they do to maintain Honolulu's reputation as one of the safest cities in America."

In the meantime, the search continues for a permanent successor to Louis Kealoha as police chief. Max Sword, chair of the Honolulu Police Commission, said in a statement that the commission respects "the decisions that the grand jury has made and leave the question of whether crimes were committed to the criminal justice system. We ... will focus on the future, on selecting a new Chief, and on supporting the men and women of HPD as best we can."

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