Rutledge duo faces
tax fraud charges

An indictment alleges that
the family hid money from
a beach stand in a slush fund

Union leader Tony Rutledge and his son Aaron were charged with fraud and tax evasion yesterday in a federal indictment that also named Tony's father, the late labor leader Art Rutledge, as an un-indicted co-conspirator.

The three Rutledges allegedly skimmed more than $350,000 of the earnings from the family's Waikiki beach concession stand business, used it as a slush fund and hid the cash in at least four safe deposit boxes in Hawaii banks, according to the indictment.

A federal grand jury indicted Unity House President Tony Rutledge, 57, and his son Aaron, 33, and Star-Beachboys Inc., of which Tony is sole shareholder, on charges that they conspired to defraud the U.S. government by filing false tax returns that allegedly underreported gross receipts from 1992 to the present.

They failed to report the cash on federal and state income tax and excise tax returns for at least the fiscal years ending in June 1993 to June 1997, according to federal prosecutors.

The Rutledges' attorney Jeff Rawitz withheld comment until he reviewed the indictment. He advised his clients to refrain from commenting.

The three men had unrestricted access to the safe deposit boxes and were able to deposit and withdraw cash without a paper trail, the indictment said.

Tony and Aaron Rutledge have placed the blame for the scheme on Art Rutledge, who died at age 90 on Sept. 22, 1997, the indictment said.

The indictment also implicates Unity House, the umbrella organization for Local 5 of the Hotel Employees and Restaurant Employees Union and the Hawaii Teamsters Union. Unity House was begun in 1951 by Art Rutledge, who headed Local 5 for 40 years and the Hawaii Teamsters Union.

The indictment alleges that Tony Rutledge conducted the concession business out of his Local 5 office and used union employees to do administrative work that benefited him, his son and his father.

Tony Rutledge served as head of Local 5 from about 1986 to 2000.

Although the Kuhio Beach concession stand, which rented out surfboards and other beach equipment, lost its license in 1999, the corporation maintains considerable holdings.

Art Rutledge controlled the business from its incorporation in 1972 until his health declined.

After his death, federal agents searched his Kahala home and offices of Unity House and Local 5 on Oct. 30, 1997, seizing records and examining computer files.

The indictment also alleges that the two men deposited $589,214 in cash at First Hawaiian Bank on Nov. 5, 1997, and falsely told a bank employee the cash was found at Art Rutledge's home.

Aaron Rutledge, who began running the business after his grandfather died, was indicted in October for witness tampering in 1997 and for filing false income tax returns.

Tony Rutledge faces up to eight years in prison and $500,000 in fines for aiding and assisting in filing a false federal income tax return and for the conspiracy, according to the indictment. Aaron Rutledge could receive up to 13 years' imprisonment and $750,000 in fines if found guilty of conspiracy, witness tampering and filing a false corporate income tax return.

Star-Beachboys faces a maximum $1 million in fines and 10 years' probation for conspiracy to defraud the government and aiding and assisting in filing a false federal income tax return, the indictment says.

The Rutledges are scheduled to be arraigned on Sept. 4.

Special Attorney Edward Groves, of the U.S. Department of Justice's Tax Division, would not comment on the case.


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