Posted on: Saturday, December 18, 2004
Unity House dispute widens
By Jim Dooley
Advertiser Staff Writer
The federal government's Tuesday takeover of the $42 million nonprofit agency Unity House Inc. was illegal and should be dissolved, according to a motion filed in federal court late yesterday by criminal defense attorneys for Anthony "Tony" Rutledge Sr. and his son Aaron, executives of Unity House.
In a related development, the federal government is moving to disqualify the attorney for Tony Rutledge, Jeff Rawitz, from the case due to an unspecified conflict of interest. It also has moved to block further use of Unity House money to pay the legal costs of the two Rutledges, according to court papers and to Brian DeLima, attorney for Aaron Rutledge.
Unity House, a labor benefits organization that administers programs and money for active and retired members of the Teamsters and hotel and restaurant employees unions here, already has paid an estimated $1 million in legal fees to defense lawyers representing Tony and Aaron Rutledge, the government has alleged in the case.
The court-appointed receiver who has taken temporary charge of Unity House, Anthony Pounders of EG&G Technical Services Inc., notified Rawitz and his Mainland law firm by letter this week not to spend any more Unity House money and to return any unexpended funds to the nonprofit, according to records attached to the defense motion filed yesterday.
Internal Revenue Service agents, armed with a restraining order issued by senior U.S. District Judge Samuel King, raided Unity House's Ala Wai Boulevard headquarters Tuesday morning and froze the 53-year-old nonprofit's assets.
King cited evidence from a new criminal indictment of the Rutledges, unsealed Thursday, which charges the men with diverting money from the organization for their personal benefit. Tony Rutledge is accused of plotting to move some of the cash-rich Unity House's assets to offshore financial havens out of the reach of the IRS, according to the indictment.
The two defendants are scheduled to be arraigned on the latest criminal charges at 11:30 a.m. Monday before U.S. District Judge David Ezra. Ezra also has scheduled a 10:30 a.m. hearing on the defense motion to dissolve the government's physical and financial takeover of Unity House.
Big Island attorney DeLima, who represents Aaron Rutledge, said yesterday that discussion of government efforts to disqualify Jeff Rawitz from further representation of Tony Rutledge occurred in a Thursday telephone conference call, the participants of which included himself, Ezra, Rawitz and the lead federal prosecutor in the case, U.S. Justice Department Special Attorney Edward "Ted" Groves.
Groves declined comment on the matter when reached for comment yesterday.
Attempts to reach Rawitz yesterday were unsuccessful. He is an attorney with the Mainland law firm Jones Day, working from its Los Angeles office and specializing in white-collar criminal defense work and complex civil litigation.
Eric Seitz, a Hawai'i lawyer who represents several former Unity House officials and employees, said yesterday that the government's takeover of Unity House "is a travesty."
Seitz called Judge King's restraining order "one of the worst orders I've ever seen. They should have sought a civil remedy. It's not a criminal matter."
Seitz represents Unity House employee Romeo Mindo, a former state legislator. Mindo sponsored legislation that the federal indictment states was designed to bolster Tony Rutledge's control of Unity House. The legislation, and a $40,000 loan from Unity House to Mindo, were discussed in detail in the latest criminal indictment of Tony and Aaron Rutledge.
Mindo is not charged with a criminal offense, and Seitz said his client has done nothing wrong.
Mindo introduced the bill at the Legislature last year, when he still held office and was also working as government and community affairs coordinator for Unity House. The measure allowed Unity House to convert from a "member-based" nonprofit to a "non-memberibased" organization more directly controlled by the Unity House board of directors, according to the indictment.
Passage of the measure was part of ongoing efforts by Rutledge to closely control the activities and finances of Unity House, the indictment said.
In January of this year, Rutledge caused Unity House to lend Mindo $40,000 and didn't tell the nonprofit's board of directors about the loan until the federal grand jury began asking questions about it during the summer, the indictment charged.
Seitz said yesterday that the loan was for home repairs and was not connected in any way to Mindo's introduction last year of the bill cited by the grand jury indictment.
"He owes the money and is going to repay it," Seitz said of Mindo.
Reach Jim Dooley at 535-2447or jdooley@honoluluadvertiser.com.
