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The Honolulu Advertiser
Posted on: Wednesday, February 8, 2006

VOLCANIC ASH
Rather than save face, they blew the case

By David Shapiro

The resolution of criminal charges against former labor leader Anthony Rutledge and his son Aaron represents an astounding capitulation by the U.S. Justice Department that begs for a public explanation.

A case that started with sizzling indictments, freezing of assets and a dramatic seizure of the Unity House organization run by the Rutledges ended Monday with whipped prosecutors accepting a plea bargain that involved no prison time and returned Unity House to its old directors.

For different reasons, the judge and the Rutledges both expressed doubt that justice was served, and the former prosecutor who won the initial indictments called the plea agreement a "travesty of justice."

If Justice Department lawyers think they saved face by getting something out of this deal, they obviously don't know the difference between saving face and showing 'okole.

In 2004, after a seven-year investigation, prosecutors filed 13 felony charges of fraud, conspiracy and tax evasion that could have brought Anthony Rutledge 93 years in prison and Aaron 53 years.

At the center of the prosecution was Unity House, a $42 million nonprofit service organization for union members and retirees that was founded with union funds by the late Arthur Rutledge, Anthony's father.

The indictments accused Anthony and Aaron Rutledge of mismanaging Unity House and misappropriating its assets for personal use.

At the behest of prosecutors, the court ousted Unity House's directors and turned management over to a private receiver.

In the agreement approved Monday by U.S. District Judge David Ezra, Anthony Rutledge pleaded guilty to a single count of filing a false tax return and will serve three years' probation.

Aaron Rutledge pleaded guilty to one misdemeanor and will serve a year of probation.

Control of Unity House will be returned to the old directors friendly to the Rutledges including another son, Anthony Jr.

The directors will be asked to pick up some $1 million of the Rutledges' legal fees and possibly approve thousands of dollars more for severance pay and lost vacation time and health benefits.

At Ezra's insistence, Anthony Rutledge agreed to permanently sever ties to Unity House, but Aaron could return to work there after his probation.

Far from showing contrition for the felony he pleaded guilty to, Anthony Rutledge stood outside the courthouse three days before his conviction, cursing Ezra and prosecutors.

Ezra clearly had to hold his nose to let this deal go down after rejecting an earlier agreement that would have allowed Anthony Rutledge to return to work at Unity House.

Over Rutledge's objections, Ezra gave receivers four more months to clean up business before returning Unity House to the old board.

But in the end, he had no choice but to conclude, "While there were serious charges laid against him, they have not been proven and he is not guilty."

Instead of explaining themselves, prosecutors have fought to seal records that would illuminate their actions, supposedly to avoid embarrassing witnesses.

But more likely, it's their own bungling that they're worried about exposing a stance that must change if the Justice Department hopes to regain public confidence shaken by the bizarre outcome of the case.

There are fair questions that need to be answered: If prosecutors didn't have the evidence to make their case, why did they file inflated charges and drag the Rutledges through the mud?

If they believed the charges were supported, why didn't they stick it out and stand up for the 20,000 beneficiaries of Unity House?

Some answers may ultimately come from the Internal Revenue Service, which Ezra says is conducting a "serious" audit of Unity House and its tax-exempt status.

David Shapiro, a veteran Hawai'i journalist, can be reached by e-mail at dave@volcanicash.net.