By Ian Lind
United Public Workers Director Gary Rodrigues skimmed more than $200,000 from two union health benefit plans by arranging secret payments to companies owned by his daughter, Robin Haunani Rodrigues Sabatini, according to a 43-count indictment handed down by a federal grand jury in Honolulu.
The payments were made at Rodrigues' direction by two insurers, Hawaii Dental Service and Pacific Group Medical Association, the indictment alleges.
Rodrigues and Sabatini face multiple counts of mail fraud, defrauding a health care benefit program, embezzlement, money laundering and conspiracy to commit money laundering.
The indictment could bring an end to Rodrigues' nearly three decades at the helm of the 15,000-member United Public Workers, one of the state's largest unions.
Doron Weinberg, a San Francisco attorney representing Rodrigues in the criminal case, said last night that it is "a little premature" to comment on the possibility he will step down from his union post.
"There have been some discussions about what the appropriate response should be, and that will be seen in the next few days," Weinberg said.
Weinberg, who left the islands yesterday just before the indictments were announced, said he had not had a chance to carefully review the charges.
"However, I know Gary. I know what he has done for the union and for the community. And I have every confidence these charges will not stand up," Weinberg said.
Steven S. Alm
Weinberg said he was retained by Rodrigues in late 1998 after a series of Star-Bulletin stories on alleged misuse of union resources by the UPW leader.
Honolulu attorney Robert F. Miller, who has represented the UPW in this matter, declined comment pending a meeting with the union's executive board.
The indictment alleges that UPW members unknowingly paid inflated fees for health care benefits under contracts negotiated by Rodrigues, who then directed the insurers to use the excess funds for payments to Sabatini's companies.
Although described as consulting fees, Sabatini did little or no work, according to the indictment.
Fees paid to daughter
On March 25, 1996, HDS made a lump sum payment of $25,381.19 to Sabatini's Four Winds RSK Inc. for consultant fees covering the period January 1994 through December 1995, although the company "was not in existence until February 1996 and could not have and did not perform any consulting work for UPW," the indictment said.
During 1996, Sabatini distributed $36,600 from Four Winds accounts to herself and other family members, the indictment alleges.
During 1997, Four Winds paid $54,600 to Sabatini and family members, and made a $35,000 distribution to her own pension plan.
The indictment lists 14 payments totaling more than $150,000 to Sabatini's companies between March 1996 and December 1998 involving funds originating with the UPW-HDS contract.
Sabatini also received more than $147,000 in a series of payments from PGMA and a sister company, Pacific Equity Growth and Management, during 1996.
Sabatini later distributed funds to Rodrigues and other family members, the indictment alleges, including $14,213.64 for purchase of a 1997 Ford Ranger truck registered in Rodrigues' name.
The payments to Sabatini began in early 1996 and continued through December 1998 but were never disclosed to the union's executive board or membership, according to the indictment.
U.S. Attorney Steven S. Alm said union members were defrauded of money paid for health benefits which instead went to benefit Rodrigues and his family.
"UPW members were also defrauded of their right to the honest services of their union director," Alm said.
The indictment seeks to recover $200,200 allegedly paid to Sabatini and Rodrigues, but Alm called that figure "very, very conservative."
Significant events in Gary Rodrigues' career:
Union leadership career began on Kauai in 1965 at age 23
1997: Appointed to Hawaii's Judicial Selection Committee.
1994: Appointed by President Clinton to the Advisory Council on Unemployment Compensation.
1994: Selected by Hawaii Supreme Court to serve on committee to recommend trustee candidates for Bishop Estate.
1986: Appointed judge for the American Federation of State, County and Municipal Employees Judicial Panel.
1985: Elected president of Hawaii State Federation of AFL-CIO.
1983: Suspended from his post as UPW state director for 10 weeks by UPW executive board as he prepared to accuse the union president, James Brown, of misusing union funds. Brown levied the same charges against Rodrigues. Rodrigues was eventually cleared of charges and reinstated. The same day, he changed locks on office doors and fired seven staff members who had opposed him.
1981: Became UPW state director.
1965: Became UPW Kauai business agent at age 23; remained in post 16 years.
The maximum penalty for mail fraud and embezzlement is five years of imprisonment and a $250,000 fine for each count. Defrauding a health benefit program has a maximum of 10 years in prison and a $250,000 fine. The two money-laundering conspiracy charges and related charges each carry maximum penalties of 20 years in prison and a fine of up to $500,000.
A conviction could also result in Rodrigues being barred from holding any union post as an employee, officer or even a consultant.
HDS premiums 'inflated'?
The indictment is the first to result from a continuing three-year investigation conducted by the Office of the Inspector General of the U.S. Department of Labor, the Criminal Investigation Division of the Internal Review Service, the FBI, the U.S. attorney's office and the Honolulu Police Department.
According to the indictment, Rodrigues' theft of union funds began in June 1992 when he negotiated a contract with HDS to provide dental benefits for union members and their families.
Rodrigues also negotiated an addendum to the contract calling for a consulting fee to be paid to a designated consultant, with the cost of the consulting fee added to the premium charged to the UPW and its members.
The HDS contract was disclosed to the UPW executive board, but Rodrigues "did not disclose the fact that the premiums charged by HDS were inflated to include the consulting fee," the indictment alleges.
The consulting fee was paid to an unidentified individual to pay off a personal loan made earlier to Rodrigues, according to the indictment.
The indictment does not identify the consultant, who was described as deceased.
However, former UPW employee Allan J. Loughrin was paid $10,000 by HDS as a consultant during the same time period, according to members of Loughrin's family.
Loughrin's son, Walter Parker, told the Star-Bulletin in 1998 that the consultant contract was arranged by the union as a means to repay a personal loan Loughrin made to Rodrigues.
Loughrin's daughter, Georgietta Carroll, was Rodrigues' secretary and had a personal relationship with the union director. Rodrigues and Carroll jointly purchased property in Bend, Ore., in the mid-1980s and built a home there, real estate records show.
Loughrin died in 1997.
Arraignment due soon
The indictment alleges that after the personal loan was paid off in March 1994, Rodrigues wrote to HDS asking that all consultant fees be held by the company "until further notification."
Two years later, in early 1996, Rodrigues instructed HDS to begin paying the consultant fees to Four Winds, formed by Sabatini in February 1996.
Four Winds also received fees from PGMA, which offered a union-sponsored health insurance plan to UPW members. The payments from PGMA continued through 1996 but ceased when the company became insolvent at the end of the year. PGMA was seized by state insurance regulators in March 1997.
After a January 1998 Star-Bulletin story disclosed the consultant fees by PGMA, Sabatini started a new company, Aulii Corp., which took over the assets of Four Winds and received the continued payments from HDS.
Beginning in February 1998, Rodrigues directed HDS to pay the consulting fees to the Voluntary Employees' Benefit Association of Hawaii, which in turn made payments to Sabatini's new company. The payments to Sabatini were made through an affiliate, Management Applied Programming Inc., the indictment charges.
At the time, Rodrigues was a director of VEBAH, which is linked both to UPW and the Hawaii Government Employees Association, the state's largest public employee union.
VEBAH attorney Paul Schraff could not be reached for comment.
Weinberg said Rodrigues and Sabatini are expected to appear in court for arraignment in the next week or two, although no court date has been set.
Star-Bulletin reporters Leila Fujimori and
Harold Morse contributed to this report.