Hawaii Union HQ Seized by IRS

Unity House Inc., the hybrid labor organization created more than 50 years ago by union patriarch Arthur Rutledge, was seized Dec. 14 by federal agents investigating criminal charges against Rutledge’s son and grandson.  IRS agents took control of the Unity House headquarters in Honolulu at 7 a.m., following a restraining order issued by Sr. U.S. Dist. Judge Samuel King (HI, Nixon) that freezes some $42 million in assets.


Lawyers for Unity House President Anthony “Tony” Rutledge Sr. and various Unity House officials claimed that the move was an improper effort to deny Rutledge and his son Aaron their ability to defend themselves against criminal tax charges pending in federal court.  Aaron Rutledge is Unity House executive vice president.  The two were indicted in August 2003 on charges they skimmed hundreds of thousands of dollars from a corporation they headed and filed false tax returns on behalf of a beach equipment rental company.


Eric Seitz, who represents 10 current and former Unity House officers and employees, said Asst. U.S. Attorney Ted Groves sought the restraining order because Unity House is paying some of Tony Rutledge’s legal defense costs in the criminal case.


Groves declined to comment other than to say, “I will let Judge King’s order speak for itself.”  That order cited evidence “of an on-going scheme to defraud the members and beneficiaries” of Unity House as justification for the government’s takeover of the organization.


For decades, government agencies and labor union officials have periodically examined the cash-rich Unity House and tried to assert control over its finances. It resembles a labor union, holding money and administering programs for the benefit of organized laborers, but it is not a union.


In 1990, a state court judge brought in an outside expert to run the nonprofit while results of a disputed leadership election were sorted out.  Additional charges have been filed against them twice since the August indictment, and Judge King’s order yesterday said yet another superseding indictment has now been returned against the pair. That court record is still sealed.  The order names a private company, EG&G Technical Services Inc., as a receiver to temporarily operate Unity House and protect its assets.


The criminal trial of Tony and Aaron Rutledge is now set to begin Jan. 11. 


Founded in 1951, Unity House was funded for decades by dues and other assessments levied against members of the Hawaii Teamsters Union and the Hotel Employees and Restaurant Employees Union here.  Art Rutledge, the father of Tony and grandfather of Aaron, ran both unions’ Hawaii locals and controlled the assets and activities of Unity House with an iron hand, defending it over the years from legal challenges from union rivals as well as more than one investigation by federal authorities. 


Art Rutledge said on some occasions that he created Unity House to be independent of its affiliated unions so that their parent labor organizations on the Mainland could not raid its ever-growing assets, which Rutledge invested in Waikiki real estate.


Investigators for the U.S. Government Accounting Office who looked into Unity House as part of a U.S. Senate investigation in the early 1980s noted that the independent setup of Unity House also protected it from oversight and reporting requirements imposed on unions by the U.S. Department of Labor.  It now administers benefits and programs for some 20,000 union members and retirees.


Officials of the Teamsters and Hotel-Restaurant Employees unions have jockeyed with the Rutledge family for years over control of Unity House assets.  Yesterday Jason Ward, spokesman for H.E.R.E Local 5, said “members and staff of the union have been contacted by the FBI” about Unity House and its finances.  Mel Kahele of Teamsters Union Local 996, who was elected to the board of directors of Unity House earlier this year, said he only attended one board meeting of the organization, then was “subpoenaed to testify before the grand jury about what happened at the meeting.” [Honolulu Advertiser, 12/15/04]