Jury alleges
Rutledge tried
to move funds

Alleged plans to send
assets overseas came
a year after indictment

A Unity House attorney says
new allegations are without merit

Embattled labor leader Tony Rutledge looked to divert Unity House Inc.'s assets to foreign banks and overseas investments in an apparent attempt to circumvent an ongoing criminal investigation, according to new charges by a federal grand jury.

Tony Rutledge: He is accused of conspiring to shift control of Unity House from members Rutledge faces new allegations A new, 70-page grand jury indictment unsealed yesterday alleged that Tony Rutledge operated Unity House Inc. for his personal benefit at the expense of Unity House's members. According to the grand jury, Rutledge: » Explored ways to divert Unity House assets to offshore banks in an apparent attempt to circumvent an ongoing federal criminal investigation. » Conspired to shift control of Unity House from its members by converting it into a non-membership-based nonprofit organization. The change meant that all major decisions required approval from Unity House's outside board, which is dominated by Rutledges' supporters. » Approved a $40,000, un-collateralized loan to former state lawmaker Romy Mindo, who later introduced legislation favorable to Rutledge. » Secured the hiring of his son Aaron as the listing agent for two residential properties sold by Unity House. The grand jury said the home sales generated commissions of $15,000 for Aaron Rutledge. » Initiated a $50,000 investment in a film project in which he stood to receive a profit. » Ordered a $1 million investment in a failed film venture. Unity House recouped $750,000 of the investment but has filed suit for the remaining $250,000.

In a superseding indictment unsealed yesterday, the grand jury said that Rutledge instructed Unity House's outside consultants in September to "assist in moving financial assets offshore" in light of the panel's investigation into his Unity House activities.

The consultants, who were not named, later provided Rutledge with a memo that outlined several methods of moving assets into foreign entities and advised that such offshore vehicles "would be beyond the review of the IRS," the panel said.

The alleged diversion scheme was conceived more than a year after the grand jury indicted Rutledge and his son Aaron on federal fraud and tax evasion charges.

It is also one of several new charges of self-dealing that prompted Senior U.S. District Judge Sam King to issue a restraining order last Friday seizing Unity House and placing the $42.2 million nonprofit charity in the hands of an outside receiver.

Rutledge and his Los Angeles attorney, Jeff Rawitz, had no comment yesterday, but in an interview with KITV-4 News, Rutledge denied that he tried to move Unity House's assets offshore.

Rutledge, who along with son Aaron pleaded not guilty to the original August 2003 federal grand jury indictment, has asked for an evidentiary hearing next week to challenge King's restraining order.

The Rutledges' criminal trial is scheduled for January.

Eric Seitz, an attorney representing several Unity House employees and officers, said that federal prosecutors are improperly leveraging their criminal investigation by introducing new allegations that are more appropriate for a civil case.

Seitz added that the new allegations are groundless and that federal prosecutors wrongly attribute "sinister motives" to Rutledge's actions.

He said that prosecutors are the ones with sinister motives.

Assistant U.S. Attorney Ted Groves, who is handling the Rutledges' case, declined comment. But in court documents, prosecutors alleged that Unity House operated as a "alter ego" of the Rutledges and that the charity's assets, which once totaled more than $70 million, were being squandered under their control.

The 70-page third superseding indictment adds new wire and mail fraud charges against the Rutledges. It also makes new allegations of self-dealing by the Rutledges at the expense of Unity House's 12,000 members.

According to the grand jury, Rutledge:

» Approved a $40,000, un-collatoralized loan in January for former state Rep. Romy Mindo without Unity House board approval.

During the 2003 legislative session, Mindo introduced a bill to convert Unity House from a nonprofit controlled by members to one controlled by its board of directors. The bill became law.

Seitz, who represents Mindo, denied any connection between Mindo's loan and his legislative actions. He said the loan was "above board" and will be paid back in due course. Mindo, who lost his re-election bid last year, and Rutledge told KITV that the money was a home improvement loan.

» Got his son Aaron hired as the listing agent for two residential properties sold by Unity House. The grand jury said the home sales generated commissions of $15,000 for Aaron Rutledge even though he did "not provide any services" to further the sale.

» Initiated the transfer of $50,000 in Unity House money in August 2002 to a separate foundation that he controlled called the Hawaii Pacific Development Foundation. The money was then turned over to principals involved in a film project entitled "Hawaii Port of Call," in which Rutledge stood to receive financial gain.

» Ordered a $1 million payment to a Los Angeles film company known as Beacon Edge Pictures LLC. The investment was intended as seed money for a movie in which a Rutledge-owned company would receive a production contract for filming in Hawaii. Beacon Edge refunded $750,000 to Unity House after the project fell through, and in August two companies linked to the Rutledges sued the film company for the remaining $250,000.

Unity House, founded in 1951 by Tony Rutledge's late father, Arthur, is a nonprofit organization that serves members and retirees of the Teamsters Union and the Local 5 Hotel Employees and Restaurant Employees union.

The grand jury alleged that Tony Rutledge also conspired to shift control of Unity House from its members by converting it into a non-membership-based nonprofit organization. The change meant that all major decisions required approval from Unity House's outside board, which is dominated by Rutledges' supporters, the grand jury said.

Previously, such decisions required the approval of Unity House's members.

Seitz said the change was made because annual meetings were too expensive and time-consuming and that Unity House had difficulties getting enough people to attend such meetings.