Paul Sau-Ki Cheng says he was exonerated of his financial crimes in the 1980s. The public record does not show that.
As Maui County officials struggle to find housing for thousands of displaced people who survived the deadly Aug. 8 wildfire, a Texas real estate developer is offering to build hundreds of affordable homes just north of Lahaina.
In exchange for developing the Pulelehua subdivision near the Kapalua Airport, Paul Sau-Ki Cheng wants $50 million from Maui County, on top of $18 million he’s already received.
Cheng and his project have many supporters in Maui and the developer cites a decades-long record of accomplishment, including high-rise residential towers in Dallas, master-planned subdivisions in North Texas, and luxury condominiums in Newport Beach, California.
But there’s a lesser-known chapter in Cheng’s resume, unfamiliar to many on Maui, including officials who have worked with him in the past, board members of a nonprofit he leads and others who may be asked to approve major financing for the new development.
In the 1990s, Cheng spent years behind bars after a conviction on multiple counts of bank and wire fraud, false entries and transporting illegally obtained money across state lines. He became a figure in the savings and loan crisis that shook the country’s economy in the 1980s, appearing in national news articles. The Federal Deposit Insurance Corp. sued him and several Wall Street investment banks for alleged securities fraud.
Cheng’s troubles happened decades ago, and he appears to have gone on to have a successful career in real estate and stayed out of legal trouble.
Yet Cheng repeatedly claims he was exonerated of his crimes — an assertion not supported by what’s available of the public record. Nor is it reflected in national news coverage of what was, at the time, a major story that affected millions of Americans.
Cheng told the Maui News in 2016: “I have vindicated myself.” As recently as last month, he professed his innocence.
“You will not find any government fines, levies, liens, restitution orders outstanding on me as they do not exist for what has been decades now because the Government has rescinded them,” Cheng wrote in an email to Civil Beat.
But a review of court records turns up nothing to indicate that Cheng was exonerated or had his sentence reversed. What it does show is a man who went to great lengths to clear his name, hiring legendary attorneys F. Lee Bailey and Abbe Lowell– whose clients ranged from O.J. Simpson to the Boston Strangler to Hunter Biden — to defend him.
Despite his high-wattage legal team, Cheng lost his criminal case at trial. An appeals court later overturned one of the charges and Cheng’s sentence was reduced.
Long after Cheng had left prison, a federal judge in Texas in 2001 turned down his petition for his sentence to be vacated because it wasn’t filed within the statutory period of limitations. The U.S. Supreme Court declined to review his case. And President George W. Bush rejected Cheng’s request for a pardon.
When Civil Beat started reporting on him, Cheng said he would have his attorney gather records proving he was exonerated. Neither Cheng nor the lawyer ultimately produced anything.
He declined a request for an interview, saying he was “flattered” by Civil Beat’s interest but “weary” of doing interviews because words “can be taken out of context.”
Cheng points to the reduction in restitution he was required to pay as proof of his innocence. Once government prosecutors saw that his actions had not resulted in any financial losses to a federally insured financial institution, Cheng says the court cut his penalty from millions to court costs.
“In a financial case, this is the best exoneration,” Cheng said by email.
Civil Beat reached out to the U.S. Attorney’s Office in Dallas for comment.
“Due to the age of the case and all the individuals involved no longer being with the office/court we just can’t confirm with 100% certainty if Mr. Cheng’s claims are accurate or not,” wrote spokeswoman Lisa Slimak. “The clerk’s office should have the final disposition of his case.”
In a subsequent email on Wednesday, after she was asked to take another look, Slimak said “there is nothing in the limited information I have that shows he was ‘exonerated.'”
Court and prison records show Cheng was incarcerated in 1991, filed for bankruptcy the year prior and was released from custody in 1997 when he completed his sentence. The court dropped $7.7 million in restitution to $250,000, citing federal code that allows the government to lift or modify restitution when efforts to collect fail.
Despite the restitution reduction that Cheng equates with being absolved, the developer continued to try and get his criminal conviction reversed. Cheng did not explain why he continued to seek exoneration even after, in his telling, he had been found innocent.
Cheng questioned what would motivate a story about him and suggested it was likely planted by rival developers as a “hit piece” again him.
Within weeks of the August wildfire, Cheng popped up on video during an emotional meeting of the Maui County Council where fire survivors were pleading for help to get their lives back on track. During the Aug. 22 meeting, Cheng outlined his plans for Pulelehua, expressing his willingness to alter, enlarge and accelerate construction of the development to make units available for fire survivors in the short term.
“I would like nothing more than to build it right now,” Cheng said.
Construction had already started on the first 240 units and he was willing to convert his market-rate houses into affordable rentals because of the tragedy, Cheng said. He didn’t mention the $50 million subsidy he was seeking.
“Now is not the time to talk about money,” he said. “Now is the time to talk about housing.”
Two council members thanked Cheng for his “generosity.” Two months later, the Maui County Council adopted a resolution urging the administration of Mayor Richard Bissen to give Cheng the money.
Although he lives in Texas, Cheng has been building support for his development for several years.
In 2019, when he went before the Hawaii Land Use Commission, Cheng had won the backing of several community groups, including Sierra Club of Hawaii, Maui Tomorrow Foundation, West Maui Taxpayers Association, Kaanapali Operators Association, Maui Nui Resiliency Hui and West Maui Preservation Association.
Many of these groups still want Cheng to be awarded the multi-million dollar subsidy to offset costs of constructing about 1,000 affordable units. Maui Nui Resiliency Hui, directed by Kai Nishiki and Sarah Freistat Pajimola, serves as Cheng’s on-island project consultants, helping him to navigate legislative and administrative hurdles.
Autumn Ness, the group’s treasurer who is also executive assistant to Maui County Council Member Gabe Johnson, said Cheng has gone above and beyond what community groups have asked of him.
He has agreed to prioritize longtime Maui residents, kupuna and fire survivors for units, open his books to anyone who wants to see them, cap his profit margin at 10%, reconfigure the project to make it 100% affordable and throw in other perks.
Cheng’s attitude was always, “if that’s what the community wants, let’s figure it out,” Ness said.
“That’s when I became a big fan of the project.”
A review of newspaper clippings about Cheng, corporate filings, press releases and other sources paint a portrait of a successful businessman who has built high-end real estate, including high-rise condominiums, shopping centers and subdivisions in various cities on the mainland.
Cheng told the land commission that he heads U.S.A. Infrastructure Investments, a family-owned development company based in Dallas that has “ongoing consolidated real estate assets of over $100 million and active development of over $50 million.”
As for his earlier legal troubles, Cheng told the Maui News in 2016 that he was exonerated, the same claim he has repeated to Civil Beat.
Cheng told the Maui paper that he served “a little time” and “it took about five years to win an appeal.” He said all charges, fines and restitution amounts were dropped.
“I have nothing to hide,” he said.
Cheng also told the paper he tries “even harder to do the best job that I can and I want to make sure everybody knows I do everything the right way because of that …”
“It’s kind of like a chip on my shoulder.”
Timothy Green, Cheng’s Houston-based lawyer, wrote a letter to Civil Beat saying the U.S. Justice Department acknowledged Cheng’s “innocence.” But a review of federal court records shows no indication of vindication or findings of innocence.
Rather, they show a developer who took considerable steps to clear his name, appealing all the way to the U.S. Supreme Court and even making the long-shot request for a presidential pardon.
Cheng’s attempts failed, according to the public record. Following his conviction, Cheng served time in federal prisons in California and Texas.
The Federal Bureau of Prisons took custody of him on Feb. 26, 1991 at the Federal Correctional Institution in Lompoc, Calif. Cheng completed his sentence in a Dallas halfway house on Oct. 24, 1997, according to prison spokesman Donald Murphy.
Prior to the halfway house and besides Lompoc, Cheng served time at Federal Prison Camp Boron, and federal correctional institutions in Big Spring and Fort Worth, Texas. Between December 1993 and December 1994, it appears from court records he was out on probation pending resentencing. A notation says the court ordered the U.S. Marshal Service to return Cheng by aircraft to prison to finish out his sentence on Dec. 23, 1994.
Cheng filed for Chapter 7 bankruptcy on Aug. 8, 1990, one week before a jury convicted him, according to bankruptcy court records.
Council Chair Alice Lee was among several officials and individuals who said they knew nothing about Cheng’s prison background.
“No, I wasn’t aware,” Lee said in a telephone interview in early November.
After a reporter pointed it out, Lee said she looked online and saw the Maui News article where Cheng said he was exonerated.
Lee said she’s not worried about Cheng’s record, noting that previous County Councils and other administrations have vetted him.
“If this matter didn’t come up before I don’t know why it would be an issue now.”
Vice Chair Yukilei Sugimura, who said she’d only heard rumors about legal trouble, took a different view. While Cheng completed his sentence and deserves to move on, she’s troubled by what appears to be his lack of transparency.
“When you’re asking for a large amount of people’s hard-won money,” the public needs to be able to trust your character, the Upcountry representative said
Cheng’s failure to disclose his criminal background erodes trust, Sugimura said.
“It speaks to a person’s character,” she said.
Others in Cheng’s orbit on Maui also were not aware of his past conviction.
Tapani Vuori is vice president of the Maalaea Triangle Association, a nonprofit that lists Cheng as president. In a phone interview, Vuori said he was not aware that Cheng had served time.
“Oh wow. No, I didn’t know,” Vuori said.
Nor did Peter Cannon, a director with the Maalaea Village Association.
In his emails to Civil Beat, Cheng questioned the need for media scrutiny of him and defended his track record of real estate ventures.
“This is not a story of falsehood or a story of someone pretending to know how to build and really doesn’t. This is a story of someone who is highly qualified offering to provide much needed housing that competing interests are trying to deter by using you to unfairly attack us in hopes it will stop us from obtaining ‘their’ grant funds.” Cheng wrote.
Cheng had Green, his lawyer, send a letter.
“I expect you to write with precision in any upcoming article with Honolulu Civil Beat the restitution reduction and vindication of Mr. Cheng,” wrote Green, an attorney with Coats Rose, a firm that specializes in real estate and affordable housing law, representing businesses, government and “high-net worth clients.”
“In the event you should have any other questions regarding this matter, please feel free to contact me, so that you don’t publish any inaccurate or misleading information. I am sure you
understand that Mr. Cheng works on many large public/private partnerships and it is important
that his past business accomplishments are accurately reported,” Green said.
Cheng was raised in Hong Kong, according to a 1986 New York Times article. He comes from a family of real estate developers who have built high-rise office buildings, apartments and shopping centers over the course of decades.
He graduated from Southern Methodist University in Dallas and later earned an M.B.A. from Harvard, according to the paper.
In 1977, he and business partner Simon Edward Heath launched a Dallas real estate company, Pacific Realty Corp. which built shopping centers and apartments. Less than decade later it became the 13th largest residential construction company in the U.S. with operations in 20 states and 50 cities.
Pacific Realty acquired Guaranty Federal Savings & Loan in 1984. With $2 billion in assets and a negative net worth of $785 million, according to the New York Times, the troubled savings and loan association was in receivership at the time.
Soon after acquiring Guaranty, Pacific Realty bought a 30-acre tract near Jacksonville, Florida, for development. Problems emerged when local officials imposed a sewer moratorium, according to court papers. Cheng and Heath tried to sell the land but couldn’t.
They came up with a plan that would ultimately land them in prison.
They directed an employee, Ben Romero, to secure an artificially-inflated appraisal that valued the land at $11.2 million, according to the 5th Circuit Court of Appeals.
The appraisal was based on the false assertion that twin, 70-story high rise apartments would be built on the land, which was worth less than $4 million.
“At the time, Cheng and Heath had no intention of actually building the high rises,” the appeals court judges determined.
In fact, due to zoning restrictions, the sewer moratorium and other complications, “the construction of such buildings on the property was not feasible.”
But with the $11.2 million appraisal letter, Don Farris, a borrower of Guaranty Federal Savings & Loan, bought the property for $10 million, a loan made by Guaranty.
Because the loan required a loan-to-property value ratio of 90%, the Florida property had to be appraised at $11 million for the scheme to work.
With the false appraisal in hand, the deal closed on January 17, 1986.
Things unraveled soon afterwards.
Federal Home Loan Bank discovered two months later that the loan was made improperly.
A grand jury handed down a 17-count federal indictment of Cheng and his partner on Aug. 23, 1989.
The FBI arrested Cheng the following day, according to the docket sheet.
Cheng became a face of the savings-and-loan scandal of the 1980s. His 30-year sentence was the longest prison term that any former savings-and-loan executive had been ordered to serve at the time, according to the New York Times.
Savings and loans once played a big role in the residential mortgage industry by providing mostly long-term, fixed mortgages. Originally created in the 1800s, the thrifts helped people pool their money and obtain financing to buy homes in an era when banks didn’t offer residential mortgages. By 1980, the number of S&Ls had proliferated, totaling nearly 4,000 with $600 billion in assets in operation, according to an historical overview by the Federal Reserve.
High interest rates, rising inflation, a cooling economy, lax regulations and other factors led to a huge meltdown in the S&L industry, an implosion often described as the nation’s worst financial disaster since the Great Depression at the time.
About one-third of all S&Ls failed between 1986 and 1995. Texas was the epicenter of the scandal.
When federal regulators took over Cheng’s Guaranty Federal Savings & Loan in 1988, the bailout cost to taxpayers amounted to some $2 billion, “one of the largest thrift bailouts up to that time,” the Dallas Morning News reported.
Besides the Florida land deal, Cheng and a group of investment banks, including Drexel, Burnham, Lambert, Shearson Lehman, and E.F. Hutton were sued by the Federal Deposit Insurance Corp. in 1990 for alleged securities fraud.
The civil complaint alleged that the central purpose of the fraud scheme was to divert federally-insured deposits “to shore up a takeover attempt by Cheng and Heath of U.S. Home Corporation, a large publicly traded home building company.”
The FDIC sought $516 million in punitive damages.
The New York Times described the lawsuit as “the most significant charges yet by the Federal Government as it investigates abuses in the savings industry tied to Wall Street takeovers.”
High-profile attorney F. Lee Bailey served as Cheng’s defense counsel. Bailey’s client list had included Patty Hearst, O.J. Simpson, Albert DeSalvo – better known as the Boston Strangler – and Dr. Sam Sheppard, who inspired the movie and television series “The Fugitive.”
One of Cheng’s other attorneys was Abbe Lowell, a famous white-collar defense lawyer who is currently representing Hunter Biden, son of President Joe Biden, and embattled U.S. Sen. Bob Menendez of New Jersey.
Lowell has defended other high-profile clients including Ivanka Trump and Jared Kushner, Jack Abramoff, Steven Seagal, Charles Keating and former U.S. Senator and Democratic presidential nominee John Edwards.
Despite Bailey and Lowell’s efforts, Cheng lost his criminal case, and then appealed. The 5th Circuit Court of Appeals agreed that two of the counts were based on the same action. The judges reversed one but affirmed the rest in 1992, remanding the case back to the trial court for resentencing, according to the ruling.
Cheng petitioned for a rehearing and his motion was denied.
The developer turned to the U.S. Supreme Court for relief. Again, he was turned down. The nation’s highest court declined to hear the case in 1993, according to a docket entry.
Cheng also tried to get his sentence vacated. On Jan. 18, 2001, a federal judge in Texas denied his motion with prejudice, meaning he couldn’t refile his case, because the motion was filed outside the statute of limitations.
His next stop was the White House. Cheng asked President George W. Bush to issue him a pardon.
Bush rejected his request, two days before Christmas 2008.
Cheng stands by his claim of innocence.
“The reduction of the restitution to just court costs is an extraordinary acknowledgement by the U.S. Department of Justice and the Court of Mr. Cheng’s innocence,” according to his attorney’s letter.
On April 17, 2017, the U.S. Attorney filed a satisfaction of judgment, noting that the time to enforce the restitution order expired.
In response to an inquiry from Civil Beat, the clerk’s office at the U.S. District Court for Northern Texas was not able to say definitively why the government released the lien.
“It was filed by the U.S. Attorney’s Office and states that the judgment against Mr. Cheng has expired, and the Government is releasing a lien previously recorded in Dallas County that pertained to the defendant. There are no outstanding matters pending before the Court regarding this case,” said Colt Fisher, chief deputy of operations, by email.
The U.S. Attorney who signed the order, John R. Parker, has since become a magistrate judge and declined an interview request.
Despite his legal setbacks, Cheng is characterized in corporate press releases and Texas news articles as an accomplished developer who knows how to get things done.
In Lavon, Texas, for example, Cheng and his billionaire business partner Herbert Hunt offered an array of financial incentives to get a 570-acre project built.
According to the Dallas Morning News in 2004, city officials in Lavon welcomed an offer from the developers to pay about a half million dollars to shore up the town’s police and fire department, pay for a new city hall and city entrance sign and generate more money to fix city streets.
Cheng and Hunt also paid city staff, including an attorney, engineer and planner, for their time reviewing and making decisions about the project, according to the paper.
In return, Lavon leaders were expected to approve a special taxing district for a 1,700-home development called Bear Creek, later renamed Heritage. Home owners in such districts pay taxes to reimburse developers for the cost of sewage and water pipes and other infrastructure.
Cheng and Hunt hired Ray Hutchinson, a prominent Dallas public finance attorney, former legislator and husband of former U.S. Senator and Ambassador Kay Bailey Hutchinson, to handle legal aspects of the deal.
The county ultimately stepped in and changed some of the terms, but the subdivision did end up getting built, according to the paper.
The Dallas Morning News reported that some residents were skeptical of Cheng because of his criminal conviction. Cheng told the paper that his past shouldn’t be a problem.
“I’m just trying to make a living as a real estate development consultant … I haven’t been a controversial person. I haven’t been difficult. I have been respectful,” he said.
As of 2021, Cheng was working on deals in Southern California, Hawaii and other cities in Texas, according to the Dallas Morning News.
As recently as late November, Cheng and his One Turtle Creek company held a private groundbreaking on a 17-story luxury condo building in Dallas, a project being done with Hong Kong-based Rosewood Hotel Group, headed by billionaire Sonia Cheng.
Paul Cheng said by email that he has built over 15,000 housing units in dozens of cities across the U.S., including award-winning master-planned communities.
Cheng described himself as an honored graduate of his alma mater. (He didn’t say which). He said he has served on various boards, received community awards, and has supported civic-minded projects throughout his four-decade career. These include sponsoring sports tournaments, donating funds to build a new fire station, and in Maui, donating eight acres of land in Pulelehua for the construction of a temporary school.
As far as why he’s requesting $50 million from Maui County, Cheng said an average affordable residential unit on Maui today costs “easily over $750,000 per unit to build. Because of this extraordinary cost that is so unique to Maui and Hawaii, no affordable housing project makes normal economic sense without a strong public partnership.”
He also said the $50 million would be paid “on a reimbursement basis.”
“In other words, no work, no pay,” he wrote.
Cheng said a grant recipient “doesn’t just get a check from the government and do with the proceeds as it pleases.”
“We are also the only developer to date that has agreed to provide complete transparency of any County grant expenditures and welcomes any audit they choose to perform on the use of any grant funds. I am not aware any other developer on the island has agreed to do so as a condition of grant,” Cheng said.
Cheng appears to have made his first foray into Hawaii real estate in 2015 when he purchased Maalaea Harbor Shops.
The following year, Cheng and one of his many companies, Maui Oceanview, bought the Pulelehua property for $15 million from Maui Land and Pineapple Co.
Cheng now appears with some regularity, on screen, at Maui County Council meetings, receiving a warm reception.
In October, the council adopted a resolution in an 8-1 vote urging the Bissen administration to fast-track permitting approvals, zoning changes to increase density at Pulelehua and to give Cheng the $50 million.
Sugimura cast the lone vote against it.
Bissen’s predecessor, Michael Victorino, supported subsidizing Pulelehua. In a press release from October 2022, Victorino called the project “good news for West Maui working families” and urged the council to approve the $18 million that Cheng had requested for infrastructure.
Approved by the council in November 2022, the money was to assist Cheng in laying the groundwork for 40 housing units for purchase by people with incomes at or below 100% of area mean income and another 20 at or below 120% of AMI.
Since the fire, Cheng has reconfigured the project to make it larger, more affordable and a shorter timeline.
If the money is approved, Cheng would get $30 million in fiscal year 2024 and $20 million the following year.
In exchange, Cheng has agreed to convert his market-rate homes to affordable units and to prioritize fire survivors, senior citizens and people who’ve lived on Maui for a long time.
He has pledged to speed things up and have the whole thing finished in under five years, with the first units becoming available in approximately 20 months.
Bissen’s communications director Mahina Martin did not respond to email or voicemail requests for comment. Nor did the director of Housing and Human Concerns Lori Tsuhako or deputy director Saumalu Mataafa.
Last Friday, Civil Beat reached out one more time to Cheng, asking if he or his attorney had located any documentation proving his claims of exoneration.
Cheng responded promptly.
“We don’t owe you anything,” he wrote.
“We will not be communicating with you anymore.”
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