Friday, February 4, 2005

Unity House receiver
warns of meltdown

Unity House Inc. could suffer a financial meltdown if Wall Street takes a significant downturn, according to the court-appointed receiver for the nonprofit labor organization.

In court papers filed Wednesday, Anthony Pounders of EG&G Technical Services Inc., said the organization's investments are highly leveraged and face extreme damage should the stock market drop by 10 percent.

Pounders said Unity House borrowed $8 million against its $14 million stock market portfolio.

He is asking for U.S. Magistrate Barry Kurren's permission to use most of the proceeds from Unity House's $6 million sale of the NCR Building in Kakaako last month to pay down its debt and other expenses.

Kurren will hold a hearing on Feb. 11.

Jeff Rawitz, Rutledge's attorney, declined to address Pounder's assessment of Unity House's finances. But he said the receiver, in taking over Unity House's day-to-day affairs, is liable for any business judgments that he makes.

Pounders took over management of Unity House in December when Senior U.S. District Judge Samuel King ordered the seizure of the nonprofit labor group as part of the ongoing criminal investigation into Rutledge and his son Aaron Rutledge.

An indictment by a federal grand jury in December alleged that the Rutledges operated Unity House for their own personal benefit and wasted millions of dollars. The secret panel also alleged the elder Rutledge attempted to divert Unity House's assets into overseas accounts in an effort to evade the criminal investigation.

The Rutledges have pleaded not guilty to the charges.

In Wednesday's filing, Pounders said Unity House's ability to pay its expenses has been hampered by business decisions during Rutledge's tenure.

Pounders said he recently had to set aside $1 million in Unity House funds as the result of a civil judgment awarded to local developer Stanford Carr, who sued Unity House over a failed development near Ewa Villages.

He said the move has limited the amount of cash available for daily operational expenses.

Pounders also cited Unity House's investment in a residential development project with a company known as Lucky Ranch LLC. The deal obligates Unity House to provide $2.3 million by March 1 or face losing that amount plus legal fees to Lucky Ranch's investors.

Pounders said he is determining if he should proceed with the Lucky Ranch investment or pull out.

Unity House Inc.

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