DE HAVILLAND DHC-6, N707PV (ALOHA ISLANDAIR FLT 1712), COLLIDED WITH MOUNTAINOUS/HILLY TERRAIN NEAR HALAWA BAY, HI, WHILE EN ROUTE ON A SCHEDULED PASSENGER FLT AT NIGHT FROM MAUI TO MOLOKAI, HI. IMPACT OCCURRED AT AN ELEVATION OF ABOUT 500 FT, SHORTLY AFTER THE ACFT HAD DESCENDED OVER WATER, THEN CROSSED THE SHORELINE. THERE WAS EVIDENCE THAT THE CAPTAIN HAD MADE A NAVIGATIONAL ERROR & MISTAKENLY BELIEVED THAT HE WAS CIRCUMNAVIGATING THE NORTHERN PORTION OF MOKOKAI ISLAND. THE ACFT CRASHED WHILE ON A HEADING THAT WAS PARALLEL WITH THE ISLAND'S NORTHERN SHORELINE. LOW CLOUDS OBSCURED THE MTN TOPS IN THE AREA OF THE ACDNT. THERE WAS ALSO EVIDENCE OF INADEQUATE SUPERVISION OF PSNL, TRAINING & OPNS BY ALOHA ISLANDAIR MANAGEMENT & INSUFFICIENT OVERSIGHT OF ALOHA ISLANDAIR BY THE FAA DURING A PERIOD OF ALOHA ISLANDAIR'S RAPID OPNL EXPANSION.