Rutledges criticized
for Unity House fall

Prosecutors say that the entity
had three years of solvency left

Poor oversight and questionable investment decisions by former Unity House Inc. President Tony Rutledge have placed the nonprofit organization in a "downward financial death spiral," federal prosecutors said.

In court papers filed on Wednesday, U.S. Assistant Attorney Ted Groves cited a credit analysis by the Bank of Hawaii that indicated that Unity House could run out of money in less than three years at the rate of spending during Rutledge's management.

Groves added that Rutledge and his son, Aaron, "have put themselves in a position to profit greatly" at the expense of Unity House's beneficiaries and would continue to do so had the government not seized the nonprofit's assets last month.

"There is a risk of a resumption of wholesale pillaging of that entity to the detriment of its beneficiaries," Groves said.

Groves is asking U.S. District Judge David Ezra to issue a preliminary injunction barring Rutledge, who is under federal indictment for tax and wire fraud, from returning to his $189,000-a-year post at Unity House.

Last month, Senior U.S. District Judge Samuel King issued a temporary restraining order allowing the government to seize Unity House and place its assets under the control of an outside receiver, EG&G Technical Services Inc. King's restraining order expires on Tuesday.

Rutledge could not be reached for comment. He pleaded not guilty to the criminal charges and has defended Unity House's investments, saying the results speak for themselves. He believes that last month's takeover is part of a long-running campaign by prosecutors to shut down Unity House.

Jeff Rawitz, an attorney for Rutledge, declined comment yesterday, saying he only recently received a copy of court papers and has not had the time to read them. Rawitz is contesting the government's takeover and called for an evidentiary hearing.

Founded in 1951 by Tony Rutledge's father, Arthur, Unity House is a tax-exempt organization that benefits more than 20,000 members and retirees of the Teamsters Union and Local 5 Hotel Employees and Restaurant Employees union.

Tony Gill, attorney for Local 5, said that he has no way to independently confirm the government's allegations about Unity House's financial status. But if true, they confirm "the worst fears" about what the Rutledges would do with Unity House once they got sole control of it, he said.

Groves said that an August 2003 Bank of Hawaii credit approval memorandum and other Unity House financial documents provide "snapshot pictures corroborating the downward financial death spiral" of Unity House's assets.

Internal Unity House financial statements indicate that the nonprofit's current and fixed assets have declined from $73.4 million in December 1999 to $48.6 million in January 2004.