Hawaii’s Rutledges Plead Guilty to Fraud, Sentenced

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For well over 50 years the Rutledge name was synonymous with organized labor in Hawaii.  Employees of Waikiki Beach hotels, and drivers making deliveries to the hotels, answered to a fiefdom that Arthur Rutledge had begun in the late 1930s and ran with an iron fist.  In 1951 Rutledge founded a nonprofit entity, Unity House, to provide benefits to Local 5 of the Hotel Employees and Restaurant Employees and Local 996 of the International Brotherhood of Teamsters.  Currently, some 20,000 workers and retirees belong to Unity House.  Art Rutledge died in 1997, but his son, Anthony Rutledge, and grandson Aaron Rutledge, carried on the patriarch’s torch – and with a similar blind spot for the law.  Their reign is now over, though the price they’ve paid is considerably less than what prosecutors had sought.    

 

On February 6, Tony Rutledge pled guilty in U.S. District Court for the District of Hawaii to one count of falsifying a tax return.  The barrel-chested Rutledge, who succeeded his father as president of Unity House, and who during 1986-2000 served as financial secretary of HERE Local 5, was sentenced to three years probation.  He also was ordered to permanently disassociate himself from Unity House.  His son, Aaron, Unity House’s former executive vice president, pleaded guilty to one count of witness harassment and was sentenced to a year of probation. He agreed to disassociate himself from the group during the probationary period.  It was the end of a nine-year ordeal of investigation and legal wrangling.

 

Back in August 2003 the pair had been indicted for skimming more than $350,000 from Star-Beachboys, Inc., a rental company for surfboards and other beach equipment.  Tony and Aaron Rutledge, apparently with the old man’s help, allegedly had deposited cash receipts from the enterprise into at least four bank safe deposit boxes.  In filing tax returns for Star-Beachboys during 1993-97, the Rutledges failed to report $415,205 in gross rents.  Four months later, in December 2003, a superseding indictment charged Anthony Rutledge with diverting a portion of Unity House’s $42.2 million in assets toward overseas investments.  A year later federal agents took control of Unity House’s headquarters and assets, following a restraining order issued by U.S. District Judge Samuel King.  Tony Rutledge originally had pleaded guilty last August, but much to his displeasure, U.S. District Judge David Ezra rejected the plea because it would have eventually allowed him to return to Unity House.

 

Unity House had built its hefty war chest thanks to decades of dues and other assessments on union members, and Art Rutledge’s take-no-prisoners management style.  By the early 80s its operations had raised concern among certain members of the U.S. Senate, who requested that the General Accounting Office launch a full-scale probe.  The resulting GAO report concluded Unity House was “a conduit for moving funds among union locals and several affiliated organizations.”  The battles over the group’s assets between the Rutledge family and local HERE-Teamsters officials, if anything, became more fierce. 

 

The recent guilty pleas came after an investigation by the IRS and three agencies within the Labor Department, including its Office of Labor-Management Standards.  The defendants cut a pretty decent bargain, with prosecutors agreeing to drop about a dozen other fraud charges.  The deal also allows the Rutledges to collect back pay, severance pay and compensation for lost vacation and health benefits.  Their hefty legal bills also will be defrayed.  (OLMS, 2/28; Honolulu Advertiser, 2/4/06; KHON-TV, 2/6/06).