STAR-BULLETIN / NOVEMBER 2005 Tony Rutledge and his son Aaron leave federal court last year after their first proposed plea agreement is rejected. Their new deal was approved yesterday.

Plea deal keeps Rutledge out of jail

Unity House's former president pleads guilty and must sever ties with the nonprofit

Former Unity House President Tony Rutledge was sentenced to three years' probation yesterday for filing a false tax return for 1997, ending a protracted legal fight with federal prosecutors.

"After seven years and millions of dollars and three indictments, everybody now agrees -- the court, the government and the defense -- that nothing that Mr. Rutledge did required him to even spend one day in jail," said Rutledge's attorney, Jeff Rawitz, after the sentencing.

Under a new plea agreement accepted yesterday by U.S. District Judge David Ezra, Rutledge was sentenced after pleading guilty to a single felony charge of filing a false 1997 tax return for Star-Beachboys Inc., a family-owned Waikiki concession stand. The charge stemmed from $350,000 in earnings that prosecutors alleged he had skimmed from the family business and used as a slush fund.

The deal calls for Rutledge to "permanently disassociate" himself from the nonprofit Unity House, which his late father, Arthur Rutledge, founded in 1951.

"One is left to wonder, after all these resources have been expended, what was really accomplished," Rawitz said. "Was it all about really getting Mr. Rutledge to leave Unity House?"

Rutledge's sentencing was postponed Friday when Ezra told defense attorneys and prosecutors during a conference that he intended to reject a previous plea agreement that would immediately terminate the position of the Unity House court-appointed receiver, Anthony Pounders.

Following the conference, Rutledge had described Ezra's move as a conspiracy.

Ezra said yesterday that there was no conspiracy against Rutledge and that he has no personal animosity against him. Terminating the court-appointed receiver would have jeopardized ongoing proceedings of the nonprofit organization, he said.

In November, Ezra rejected another plea agreement that would have allowed Rutledge and his son to return to Unity House as consultants after their probation terms ended.

The latest plea agreement allows the court-appointed receiver to remain with Unity House for four months to resolve ongoing business matters for the organization, which serves about 20,000 members and retirees of the Teamsters Union and Local 5 of the Hotel Employees and Restaurant Employees union.

Pounders' attorney, Brook Hart, said the four-month period provides "an orderly transition that would not interfere with the receiver's efforts to repatriate substantial assets to the organization."

The organization's board of directors, with the exception of Rutledge and his son Aaron, were also to be reinstated immediately under the new agreement. Two vacant positions on the board will be selected by Ezra.

Rutledge still can be a beneficiary of Unity House and attend social events. He can also receive severance pay and pension and health benefits.

Twelve other charges against Rutledge that included mail and wire fraud were dismissed.

Ezra said Rutledge and his son were not proved guilty of the other charges in the indictment. "They were never convicted for those other charges and should not be accountable," he said.

After the sentencing, Rutledge said he was relieved that it was over after more than 15 years of being investigated by the federal government. Still, he said, he was confused about why he had to sever ties with Unity House after Ezra said he is not guilty of the other charges.

Ezra sentenced Aaron Rutledge to a year of probation yesterday after he pleaded guilty earlier to a misdemeanor charge of witness harassment. He can return to the nonprofit organization after his probation ends.

"I'm happy that it's over, finally," Rutledge said.

Aaron Rutledge was the former sports director and second executive vice president for Unity House. He said he would like to return to the group once his probation ends, but that decision is up to the board.

Attorney Brian De Lima, who represented him, said it was unfortunate that the focus of the court proceedings was on Unity House. "There was no wrongdoing in regards to Unity House," he said.

Star-Beachboys, which pleaded guilty earlier to aiding in the filing of a false tax return, was ordered to pay a $40,000 fine. Ezra said the fine can be paid over a two-year period.

Unity House is being audited by the IRS. Hart said the IRS started the audit in the fall and is looking into the group's tax-exempt status. "It's ongoing. I don't believe they reached a final conclusion on that subject yet," Hart said.

Attorney John Cox of the U.S. Department of Justice said yesterday's sentencing brought closure to a lengthy litigation.

"In all of these cases, it's a difficult calculus to accept a plea bargaining, accepting less of what was charged in the indictment in exchange for the certainty of conviction," Cox said.

"In this case, given all the factors that the United States had to consider in reaching a fair resolution, we extended these plea offers, and we're very comfortable with what we offered and what was accepted."