Feds Allege Continued Wrongdoing by Indicted HI Union Bosses

Deposed labor leader Tony Rutledge Sr. and his son Aaron, facing trial on federal fraud and tax evasion charges, must post an additional $500,000 bail, wear electronic devices and have their movements tracked by satellite, a U.S. magistrate ruled yesterday.  The new restrictions were imposed in the wake of additional federal charges filed against the Rutledges this month, including allegations of financial abuse at Unity House Inc., the labor organization where they worked until IRS agents seized it Dec. 14.

 

Federal Magistrate Leslie Kobayashi also ruled that the Rutledges cannot leave the island of Oahu or go anywhere near the airport or Unity House’s offices on Ala Wai Boulevard in Waikiki.  Special U.S. Attorney Ted Groves, lead prosecutor in the case, said in court that a court-appointed receiver now running Unity House has discovered evidence of “other financial abuses at Unity House” and questioned whether the 51-year-old non-profit will be able to survive.  “The assets are in worse shape” than was originally believed and are now worth “less than $42 million,” Groves said.

 

Brook Hart, attorney for EG&G Technical Services, the court-appointed company now running Unity House, said the receiver is poring over the books and analyzing the activities of Unity House in the face of federal government threats to revoke the nonprofit’s tax exempt status.  “There are many areas that may be ripe for investigation,” said Hart, the attorney for the receiver.

 

Unity House resembles a labor union, and is affiliated with the Intl. Bhd. of Teamsters and the Hotel Employees & Restaurant Employees Intl. Union.  But while it holds money and administers programs for the benefit of organized laborers, it is not a union.  Groves, the federal prosecutor, argued for increased bail and electronic monitoring because, he said, the Rutledges committed new criminal offenses while out on bail awaiting trial on earlier charges.  “Clearly they didn’t get it,” Groves said. “Additional measures need to be taken.”

 

Nonprofits such as Unity House are allowed under federal law to engage in a limited amount and type of political activities, including lobbying, but unreported or excessive politicking can expose an organization and its officers to tax penalties and even criminal charges.  State records show that over the past four years, Unity House donated some $85,000 to Isle political campaigns and causes. It employed a full-time lobbyist, Cliff Laboy, at the state Legislature.

 

The largest beneficiary of Unity House political giving over the past two years has been the Hawaii Republican Party, which received a total of $12,000. The Democratic Party received $10,000 from Unity House.  Mufi Hannemann’s successful 2004 mayoral campaign received $2,500 from Unity House, records show.  

 During this year’s mayoral campaign, charges arose that recipients of Unity House scholarship money and other financial aid were being pressured to work as unpaid interns for the Hannemann campaign.  KITV4 News reported that one University of Hawai’i scholarship recipient complained of being directed by Unity House to work for the Hannemann campaign.  Students receiving Unity House scholarships were required to complete a certain number of hours of “volunteer services” and organizations that benefited from those services had to sign paperwork showing that it had been performed, Kubota said.

 

Tony Rutledge’s lawyer, Jeff Rawitz, said in court that increased bail or electronic monitoring of Tony Rutledge are not necessary because he is not a risk to flee the jurisdiction.  The trial is set to begin Jan. 11 but a motion to delay proceedings, given new charges in this month’s re-indictment of the Rutledges, will be heard Monday. Also pending is a government motion to disqualify Rawitz from the case for an unspecified conflict of interest.