CRAIG T. KOJIMA / CKOJIMA@STARBULLETIN.COM During yesterday's federal raid, Unity House's front office, shown with photos of its officers, was closed.

Federal officials seize the assets
of the $42-million Unity House

An attorney for labor leader Tony
Rutledge will fight the action

Labor leader Tony Rutledge enjoyed "unchallenged control" over a $42.2-million nonprofit labor organization and "profited greatly" at its expense, said federal prosecutors after seizing control of Unity House Inc. yesterday.

But an attorney for Rutledge blasted the takeover of Unity House, saying prosecutors had "no legitimate basis" for the action.

Agents from the Internal Revenue Service and the U.S. Marshal's Office raided Unity House's Waikiki headquarters and placed all of the labor organization's assets and records under the control of an outside manager, Anthony Pounders of Sacramento, Calif.-based EG&G Technical Services Inc.

Federal prosecutors also froze Rutledge's personal assets, including his bank account at First Hawaiian Bank, which contained $1,164.81 in cash.

"It's really difficult to defend yourself when they don't provide the charges." Jeff Rawitz Attorney speaking on behalf of his client Tony Rutledge

The seizure is part of the federal government's long-running criminal investigation into Rutledge, Unity House president and a former Local 5 hotel workers union official.

Jeff Rawitz, Rutledge's Los Angeles-based attorney, said he plans to file a motion opposing the seizure order, which was issued without a hearing in federal court. Rawitz questioned the timing of the seizure, which comes about a month before Rutledge and his son, Aaron Rutledge, are set to go to trial on federal fraud and tax evasion charges.

The Rutledges have pleaded not guilty to the August 2003 charges.

Assistant U.S. Attorney Ted Groves declined to discuss the specific allegations contained in the restraining order but said Senior U.S. District Judge Sam King would not have signed it if he didn't think the action was appropriate.

In the order, King stated that there is an immediate need to preserve Unity House's assets from being sold or removed from the jurisdiction of the court.

King also noted that any hardship suffered by Rutledge or people affiliated with Unity House is outweighed by the potential harm to Unity House, which provides benefits for members and retirees of the local Teamsters union and the Local 5 Hotel Employees and Restaurant Employees union.

King did not provide details about the potential removal of Unity House's assets. In a 12-page application for the restraining order, prosecutors alluded to a new, sealed grand jury indictment against the Rutledges.

The superseding indictment, which will likely be unsealed in the next few weeks, adds mail fraud and wire fraud charges to the fraud and tax evasion counts already faced by the Rutledges, prosecutors said.

According to prosecutors, the federal grand jury also found that Unity House's assets would be subject to forfeiture if the Rutledges were convicted and those assets faced a risk of being squandered if left in the hands of the Rutledges.

Rawitz said it's unfair for prosecutors to rely on a sealed indictment as the basis for the seizure of Unity House.

"It's really difficult to defend yourself when they don't provide the charges," Rawitz said.

King's order provided a detailed listing of Unity House's holdings, which totaled about $42.2 million.

More than $18 million of those holdings are in the form of cash, stock and other liquid investments. Another $12.1 million is in real estate, including Unity House's 2003 purchase of the Marks Estate in Nuuanu for $2.5 million, and a $5.4 million investment in the NCR Building on Kapiolani Boulevard.

Unity House also holds $1 million in the form of money owed, including a $537,300 loan to the Heavenly Road television project, a $40,000 loan to former isle legislator Romy Mindo and a $222,500 loan to an orthodox Jewish organization known as Chabad Lubavitch.