I'm sure that the fact that it was the Chief's mailbox certainly was a factor.  And the uncle had a prior criminal record.  Theft of a mailbox is likely a state misdemeanor, but interference with US Mail is a felony, so the more serious charge was going to be the federal charge.  
The conflict arises from the fact that the local fed prosecutors had the Chief, his wife, and the various HPD officers all as witnesses in the case.  They interviewed them and called them as witnesses.  
They can't then turn around and prosecute everyone involved on the same basic facts.  Its the "appearance of a conflict" problem.  And the fix is easy -- just have another office handle the case.  This is not uncommon on the mainland.  For example, threats against a federal judge are usually handled by prosecutors for a district different than the district where the judge sits.  Same for prosecutions of federal judges.
And it does extend to the whole office because everyone works for US Attorney.