Feds Investigate Alleged $1 Million Embezzlement by a Hawaii Bank of America Employee Who Has Vanished

Federal authorities are investigating a loan officer fired from the Bank of America’s Honolulu office last month for allegedly stealing at least $1 million of customer funds to repay personal gambling debts,
Michael Ho Kim was discharged from the bank shortly before Christmas and his whereabouts are now unknown.

The FBI is in the preliminary stages of an investigation of the matter. Special Agent Tom Simon, spokesman for the Honolulu FBI office, said the bureau “does not discuss the existence of any ongoing investigation.”
Bank of America said in a written statement that it discovered “possible embezzlement of customer-paid escrow funds” by one its employees and notified authorities of the problem.
The bank “continues to assist the FBI in the ongoing investigation,” said Rick Simon, Bank of America media relations officer.
The bank is “working with apparent victims, and as missing funds are documented, the bank is restoring the funds to their escrow accounts and moving toward completion of their loans, when appropriate,” Simon said.
Several sources familiar with Kim’s activities said he convinced his bank mortgage loan clients that checks they wrote to be deposited in escrow accounts should be made out to Kim personally. Kim allegedly never deposited the money in escrow but cashed the checks and used the proceeds to pay pressing gambling debts.
In the meantime, Kim has vanished.
“No one knows where he is,” said one person familiar with the matter.
“There’s some serious auditing going on now of his customer accounts,” said another source.
Kim, who speaks Korean, was described by business acquaintance as a “very productive” member of the bank’s mortgage loan office here.
He previously worked here as a loan officer for Countrywide Financial, the mortgage giant that was acquired by Bank of America in early 2008 during the national subprime mortgage financial crisis.
In a strange twist, the Bank of America last year filed a foreclosure suit against Kim in state court for defaulting on a $452,000 mortgage loan he borrowed in 2005 from Fremont Investment and Loan to buy an apartment in the upscale Hawaiki Tower condominium project near Ala Moana Center.
Kim’s loan was packaged with other “asset-backed securities” that were acquired by the Bank of America later in 2005 from Bear Stearns, the huge New York-based investment bank that collapsed in 2008 during the subprime mortgage crisis.
Kim allegedly failed to make monthly mortgage payments beginning in August of 2007, and by August of last year, his arrearages totaled nearly $129,000, the court paperwork said.
A process server who attempted to deliver a copy of the Bank of America foreclosure suit to Kim in October of last year reported that Kim couldn’t be located and hadn’t lived at Hawaiki Tower “for over a year.”
Kim at the time was still working at the Bank of America’s downtown Honolulu mortgage loan office, but was never formally served with the foreclosure papers, according to court files.
David Rosen, the attorney representing Bank of America in the foreclosure case, said he was never told that Kim worked for the Bank of America.
“I am not aware that the Michael Kim in the suit is even the same Michael Kim you’re talking about,” Rosen said.
But sources familiar with Kim said that officials in the bank’s office here were aware of the foreclosure suit filed against him.
Within a matter of months, Kim’s alleged theft of customer money was discovered and he was discharged.



Property records state that Kim was single when he bought the Hawaiki apartment in 2005, but in 2008, the Internal Revenue Service filed a $66,175 tax lien against him and a woman identified as his wife.



The back personal income taxes, owed for the years 2004 to 2006, were repaid in 2009, and the lien was removed.



When Kim worked for Countrywide Financial here, he was licensed by the state to work as a mortgage solicitor. As a Bank of America employee, he was exempted from the licensure requirement and his license expired at the end of 2008.



A tougher new licensing law for mortgage loan originators enacted by the state took effect January 1, but bank employees are still exempt.



Non-bank mortgage loan officers must now be listed on a national registry called the National Mortgage Licensing System, undergo criminal background and credit checks and complete 20 hours of education on subjects including federal laws, ethics, fraud, consumer protection and fair lending practices.



Mortgage loan officers that work for banks must register with the National Mortgage Licensing System, but are exempted from other requirements of the new law.

Bank Employee Sent To Prison In Fraud Case in Honolulu, Hawaii

A Honolulu federal judge Monday sentenced a former American Savings Bank employee to four months in prison in a fraud case involving hundreds of thousands of dollars from a customer's account.

Marilyn DeMotta was convicted of diverting $300,000 from the account of Ada P.S. Lim, 91, in 2007. The money was diverted to new accounts to make it look like the bank was bringing in more customers, officials said.
Judge David Ezra sentenced DeMotta to the prison time, four months of house arrest and three years of probation. A judge ruled DeMotta must serve the prison time in Hawaii, but the rest of the time can be served in Nevada, where she cares for her handicapped husband.
Since the case began, the victim, Lim, has died. Prosecutors said that made prosecuting the case more difficult.
After the incident, a new law was introduced requiring financial institutions to report any suspicion an older person is being ripped off.

Guilty plea ends Isle bank scandal in Hawaii

Former American Savings Bank supervisor Marylin P. Demotta yesterday pleaded guilty to two theft charges, effectively ending an internal bank scandal that spawned two million-dollar civil suit settlements and a long-running criminal case. Demotta, 43, reached a plea agreement in which she admitted to two counts of theft of government property. Prosecutors dismissed eight other charges of bank fraud and embezzlement.
Demotta was an assistant manager at the bank's Hawai'i Kai branch in 2004 when she became involved in the personal business affairs of a 92-year-old bank customer, Ada Lim.
Lim and her family later sued the bank, alleging that Demotta used her position to take hundreds of thousands of dollars from Lim.
The former security director of the bank filed a separate suit against American Savings, alleging that his superiors told him not to report Demotta's activities to federal regulators.
American Savings denied wrongdoing, but settled both civil suits for about $1 million each.
Fighting back tears yesterday, Demotta, who now lives on the Mainland, was asked to describe her crimes to U.S. Magistrate-Judge Barry Kurren.
Demotta began to speak at length about her dealings with Lim, saying that the elderly woman had called her many times and asked Demotta to make a short-term investment for her.
Demotta's lawyer, Richard Kawana, then had a whisperered conference with her and she quickly admitted guilt to the two charges against her.
Demotta will be sentenced Aug. 9 by Chief District Judge Susan Oki Mollway.
Assistant U.S. Attorney William Shipley said the maximum punishment for Demotta's crimes is 10 years in prison and a $250,000 fine.
She is likely to receive a sentence considerably lower than the maximum.
Shipley said Lim was repaid all her money.
Demotta arranged for some $200,000 capital gains tax payments owed by Lim to be deposited in an American Savings account called an I-Plan account, which Demotta opened for Lim, Shipley said.
Demotta's motivation for making those deposits, Shipley said, was to help her bank branch win an internal bank competition for I-Plan deposits.
The branch did win the contest, which resulted in branch employees and supervisors winning cash bonuses of $1,000 to $5,000.