Hawaii Painters Business Agent Pleads Guilty in $1.5M Theft
by Carl Horowitz, National Legal and Policy Center, 03/11/2016
When it comes to embezzling union funds, third-party administrators can be as adept as union officials themselves. And thefts can go undetected for years. Just ask Painters union members in Hawaii. On January 27, Raymond Fujii, former executive director for a trade group, the Painting & Decorating Contractors Association of Hawaii (PDCA), pleaded guilty in U.S. District Court for the District of Hawaii to one count of mail fraud in the amount of nearly $1.5 million against the PDCA and a related union-supported entity, the Hawaii Painters Trade Promotion & Charity Fund (TP&C). Fujii also pleaded guilty to one count of filing a false tax return. He had been charged on January 20. The actions follow an investigation by the IRS and the U.S. Labor Department’s Office of Labor-Management Standards.
Raymond Fujii is, or was, a Honolulu businessman. His business was representing the Painting & Decorating Contractors Association of Hawaii, a trade group whose members had a collective bargaining agreement in force with International Union of Painters and Allied Trades (IUPAT) Local 1791. Fujii headed two companies, Account Executives, Inc. and RHF, Inc. Sometime around 1996, Account Executives entered into a consulting contract with PDCA and TP&C, the latter funded by local affiliates of Painters District Council 50. Fujii would provide administrative services such as contract negotiation, conflict resolution, check disbursement and financial records maintenance. As part of the arrangement, he also would serve as signatory for PDCA and TP&C bank accounts.
Unbeknownst to his clients, Fujii had laid the groundwork for massive theft. According to court records (Case 1:16-cr-00079-JMS), he diverted client money to his own personal use over a 17-year period. The mail fraud information count put it this way: “From on or about February 19, 1997 to on or about May 8, 2014, in the District of Hawaii, Raymond Hiroshi Fujii, Defendant herein, did knowingly devise, and intended to devise, a scheme and artifice to defraud and to obtain money from the PDCA of Hawaii and the TP&C by means of materially false and fraudulent pretenses, representations and promises, as well as omissions of material fact, well knowing at the time that such pretenses, representations, promises and omissions would be and were falsely made…”
Specifically, Fujii wrote out checks payable to RHF, drawn on the accounts of PDCA and TP&C, making it appear as though RHF was entitled to these payments, when it was not. In some cases, Fujii obtained the signatures of board members on blank checks, falsely claiming that the checks would be used for authorized purposes. In other cases, he forged the signatures of board members to give the appearance that the payments were authorized. To cover his tracks, Fujii provided false financial statements to board members, making sure to omit any entries reflecting checks or payments to RHF. The grand total of theft from PDCA and TP&C bank accounts: $1,483,800. The mail fraud charge related to Fujii’s delivery on or about November 14, 2013 of an information packet via the U.S. Postal Service to a PDCA/TP&C joint board of directors meeting. The packet failed to mention a $20,000 disbursement from TP&C’s Hawaii National Bank checking account to RHF. The second information count charged Fujii with knowingly entering and submitting false information on his personal federal income tax form for calendar year 2009. On or about March 4, 2010, said prosecutors, Fujii reported on IRS Schedule E (Supplemental Income and Loss) combined partnership and S Corporation income of $1,917; the true figure was $122,517.
That these schemes had gone unnoticed for more than 17 years is a testament to Fujii’s guile and his clients’ trust in him. Eventually, PDCA and TP&C discovered something was amiss and reported the problem to the Labor Department. Charged this January 20, he pleaded guilty a week later. As part of the plea deal, Fujii agreed to make restitution of $1,483,800 to PDCA and $315,829 (plus interest) to the IRS. He faces prison terms of up to 20 years and three years, respectively, for his mail fraud and tax evasion convictions. Union members probably aren't complaining.
Former Executive Director of Contractors Association Sentenced To 42 Months In Jail For Mail Fraud and Tax Offenses
News Release from US Department of Justice Honolulu May 13, 2016
HONOLULU -- Raymond Fujii, 68, a resident of Kailua, Hawaii, was sentenced today by Chief U.S. District Judge J. Michael Seabright to 42 months in federal prison for engaging in a mail fraud scheme involving the embezzlement of $1,483,800, and failing to report that income on his federal tax returns. In addition to the 42 month term of imprisonment, Fujii was ordered to pay $1,234,713 in restitution to the victim organization and the Internal Revenue Service. Fujii pled guilty to mail fraud and filing a false federal income tax return on January 27, 2016.
Florence T. Nakakuni, United States Attorney for the District of Hawaii, said that according to information produced to the court, from 1997 through 2014, Fujii used his position to embezzle money from the Painting and Decorating Contractors Association of Hawaii ("PDCA"), and the Painting Industry of Hawaii Trade Promotion and Charity Fund ("TP&C"), a trust fund that promotes the local painting industry. Fujii, who was executive director of the former and administrator of the latter, organized and directed board meetings, and prepared minutes of meetings and financial statements for both organizations. Fujii also was an authorized signatory on the bank accounts for both entities.
During court proceedings, Fujii admitted writing checks to a company that he owned, either forging or fraudulently obtaining the signatures of directors on the checks, and then depositing the money in his personal account. Fujii obtained a total of $1,483,800, but failed to report the money on his federal or State of Hawaii income tax returns. The failure to report the income resulted in tax losses to the federal and state governments of $315,829 and $135,565, respectively. Following the discovery of the offense, Fujii sold his personal residence and used the funds to repay $564,915 to the PDCA.
During today’s sentencing proceedings, Chief Judge Seabright noted that Fujii’s conduct was a "naked betrayal" of the painting association’s trust, and that Fujii had obtained the money tax-free by not reporting it on his income tax returns.
The case was investigated by the Internal Revenue Service, Criminal Investigation, and the Department of Labor Office of Management Labor Standards, and was prosecuted by Assistant U.S. Attorney Larry Tong.