- Associated Press - Wednesday, February 4, 2015

PAGO PAGO, American Samoa (AP) - An American Samoa couple has been accused of stealing nearly $400,000 from a low-income housing project to pay off their credit cards, fund their businesses and pay for their condo in Hawaii.

John Emil Kruse and his wife, Elaine Gurr Kruse, are scheduled to enter their pleas and be sentenced Thursday for taking government property for personal and business use, court documents show. The hearing is scheduled in Washington, D.C., since there is no federal court in American Samoa.

John Kruse is the director of the American Samoa Procurement Office and is from a well-known family in the U.S. territory. His brother, Michael Kruse, is American Samoa’s chief justice.

The couple had applied for $1.2 million in U.S. Treasury Department funds to build an eight-plex for low-income renters, but only received $864,000 from the local program administrator, the government-owned Development Bank of American Samoa.

Prosecutors will ask that each serve one year in federal prison for using the funds for a host of purposes not related to the housing project, including paying off their credit cards, and buying products for their beverage importing and retail company.

Defense attorneys are asking for probation or home confinement, in the least, and say the couple has agreed to pay restitution.

“There is no suggestion- nor could there be - that the Kruses intended from the outset to obtain government funds they would misuse,” said Gregory S. Smith, defense attorney for John Kruse in his sentencing memo. “The facts instead show a laudable plan gone awry.”

He said the Kruses faithfully worked on completing the project and John Kruse even obtained a contractor and business license to get the construction moving forward, due to the lack of experienced local contractors, who were already taken by other project owners.

But the couple also faced “growing financial pressures” for another business they owned while working on the housing project, he said. They didn’t live lavishly, but he acknowledged they knowingly took the funds for unrelated personal and business expenses.

“The nature and circumstances of this offense, however, do not reveal an evil plan, so much as a good plan gone bad, due to unexpected circumstances and outside financial pressures,” Smith said.

He said his client admitted to FBI agents that he began to treat the funds as a short-term loan.

“He had hoped to use these funds to buy retail products that the family business could then resell, and use future profits from the business to go back toward” the housing project.

Elaine Kruse’s attorney, George Allen Dale, said in a sentencing memo that his client was overworked and overwrought because the couple couldn’t complete the housing project, which was draining their financial reserves.

“The answer Mrs. Kruse chose was wrong, but she is not a heartless thief nor is she even a remote threat to the community that she has served faithfully for so many years,” Dale noted.

The Kruses “shamelessly stole hundreds of thousands of federal dollars, converting them to their own personal and business use (and) diverted hundreds of thousands of dollars, intended for materials and labor, and used them to support their personal lifestyle as well as their beverage importing business,” federal prosecutor Justin Weitz said in his sentencing memo.

He said the defendants “are part of the elite of American Samoa’s society” and noted that the territory is the “poorest place where the American flag flies.” Based on 1999 data by the U.S. Government Accountability Office, it was estimated that 61% of the territory’s residents live in poverty.

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