Rutledge
fee fraud alleged

A court-appointed receiver
says $26,000 monthly
benefited relatives and friends

Unity House Inc.'s court-appointed receiver is questioning more than $26,000 in monthly salaries and consulting fees to relatives and friends of indicted labor leader Tony Rutledge.

Payments under review Unity House Inc.'s court-appointed receiver is questioning more than $26,000 in monthly payments to friends and relatives of labor leader Tony Rutledge. They include: » $3,620 to son Anthony Rutledge Jr., who was a Unity House executive vice president. » $4,000 to his son Aaron Rutledge, who was Unity House's treasurer and second vice president. » $1,430 to daughter Abbey Rutledge, who also was employed by Unity House. » $1,380 to brother-in-law and Unity House employee Arthur Abbey. » $4,850 in consulting fees to a company headed by cousin Dick Ornellas. » $11,375 to friends Rio Martell, Al Burns, Anthony Shield and Dexter Gomes, who worked on a Rutledge-inspired film venture, the Hawaii Pacific Cinema Development Foundation.

Since last month's government seizure of Unity House, receiver Anthony Pounders of EG&G Technical Services Inc. said he has found "many suspicious transactions" that benefited Rutledge and his family, including his son Aaron.

These payments are in addition to Tony Rutledge's $11,000 monthly salary as Unity House's president.

"These transactions evidence the extent to which the Rutledge defendants exercised unfettered control over Unity House," Pounders' attorney, Brook Hart, said in court papers filed on Friday.

"Overwhelming evidence indicates that the Rutledge defendants engaged in an extensive unlawful scheme of fraud that gained them complete control over Unity House as an entity."

Jeff Rawitz, Rutledge's attorney, said he had not seen Pounders' filing and declined comment.

Pounders' allegations are the latest in the federal government's long-running criminal investigation into Tony and Aaron Rutledge, who were indicted in August 2003 on fraud and tax-evasion charges.

Last month, senior U.S. District Judge Samuel King issued a temporary restraining order allowing the federal government to seize Unity House and place it under Pounders' custody.

The Rutledges, who have pleaded not guilty to the criminal charges, are asking U.S. District Judge David Ezra to dissolve the restraining order, saying the government had no basis to seize the $42.2 million tax-exempt labor organization.

A hearing is scheduled today.

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

According to Pounders, Tony Rutledge "effectively maintained complete authority over Unity House and its assets" by engineering the passage of state legislation in 2003 that permitted him to convert Unity House from a membership-based organization to one controlled by his family and friends.

Pounders said the resulting lack of oversight allowed Rutledge to make a number of questionable monthly payments to relatives and friends.

Pounders also questioned a finder's fee that was to go to Aaron Rutledge for Unity House's pending sale of the NCR Building on Kapiolani Boulevard. Payment of the fee was halted after the government seized Unity House.

Pounders said the proposed fee from broker PY Inc. "creates a clear conflict for Unity House" and threatens its tax-exempt status since Aaron Rutledge also is a real estate agent at PY.

Dennis Enomoto of PY did not return calls.