Appellate court rules for Unity House
A federal judge's order seizing control of Unity House has been overturned by an appellate court, confirming objections from its former leader, Anthony "Tony" Rutledge, his attorneys said.
"Mr. Rutledge has long believed that the government's seizure of Unity House is unlawful and he is very pleased the 9th Circuit confirmed his view and in a published opinion," said Jeffrey Rawitz, attorney for Rutledge.
The 9th U.S. Circuit Court of Appeals last week reversed an order by U.S. District Judge David Ezra seizing the assets of Unity House and placing it under receivership.
The ruling would have allowed for reinstatement of Unity House's board except that Rutledge agreed to sever ties with the organization as part of a plea deal with the government earlier this month to settle criminal charges against him, Rawitz said. Still, the ruling is important for symbolic reasons, he said.
"It's import is the 9th Circuit rejected a clear overreaching by the government in its efforts to gain control of Unity House."
At the government's request, Ezra turned over the corporation, with $42 million in assets, to a receiver after Rutledge and his son Aaron were indicted in August 2003 on multiple charges, including mail and wire fraud relating to his involvement in the organization.
Prosecutors had argued that Rutledge gained control of Unity House by violating its members' rights and engaging in self-dealing activities without the permission or authority of the board.
Ezra had ruled that all the organization's assets -- if Rutledge were convicted -- would be subject to criminal forfeiture and granted an injunction freezing the organization's assets. Rutledge had denied that the assets are "proceeds" from unlawful activity.
A three-judge panel from the 9th Circuit last week disagreed with Ezra. They concluded that while proceeds of mail or wire fraud are forfeitable, the corporation's assets would not be subject to forfeiture because they do not qualify as "proceeds" obtained by Rutledge through illegal activity.
In a plea deal that kept Rutledge out of prison, the former president and chairman of Unity House pleaded guilty to a single count of filing a false 1997 tax return for the family-owned Star-Beachboys Inc. concession stand in Waikiki. All other charges were dropped.
As part of the agreement, he must sever ties with the organization but still remains a beneficiary.
Ezra also ordered that the corporation's board of directors be reinstated immediately and appointed Robert Fishman and Jim Boersema to fill two vacant positions on the board of directors. The court-appointed receiver, Anthony Pounders, will be allowed to remain for the next four months to transition.
Rawitz said they fully support the appointment of the two men whom he described as an "outstanding addition to an otherwise already competent board."
Questions still remain as to the ruling's impact on the receivership that remains in place and they will be addressing them once the District Court receives the order.
Assistant U.S. Attorney John Cox, who negotiated the new plea agreement with the Rutledges, declined comment on the ruling and what they plan to do next.