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Thursday, November 7, 2013
New lawsuit alleges former gubernatorial appointee’s involvement in financial shenanigans at union
By Malia Zimmerman @ 7:08 PM :: 9280 Views :: DHHL, Ethics, Labor, Rail

New lawsuit alleges former gubernatorial appointee’s involvement in financial shenanigans at union

Perry Artates Perry Artates

by Malia Zimmerman, Watchdog.org, November 7, 2013 

HONOLULU — Hit men, Yakuza, Hells Angels, the Chinese crime syndicate and Hawaii politicians — these may sound like characters coming together in a bad episode of Hawaii 5-0, but they’re actually mentioned in myriad allegations listed in a new lawsuit against 67 Local 3 labor leaders, including several from Hawaii.

According to the lawsuit, filed Oct. 27 by the law firm Moore & Leviant, LLP, based in Woodland Hills, Calif., one of the defendants is prominent Maui labor leader and former Hawaiian Homeland Commissioner Perry Artates.

In an unrelated criminal case, Artates and his wife, Ronnette Artates, may be sentenced to as many as five years in prison on federal charges when they go to U.S. District Court on Nov. 13, after the couple each pleaded guilty to one count of conspiracy related to a mortgage fraud case, carrying maximum penalties of five years imprisonment and $250,000 fine.

After learning of Perry Artates’ federal fraud conviction through a Watchdog.org media inquiry, on Aug. 23 Gov. Neil Abercrombie asked him to resign as a Hawaiian Homelands Commissioner, a position he held since 2007 to oversee the management of state land set aside for native Hawaiians.

Artates also lost his position as executive director of the Hawaii Operating Engineers Stabilization Fund, an organization under Local 3 that lobbies for union-backed legislation related to construction and development and raises money for Democratic candidates who support their agenda.

The 111-page class-action lawsuit naming as defendants Artates and more than 60 leaders of the International Union of Operating Engineers, and the International Union of Operating Engineers Local 3, claims Perry Artates “embezzled” fund money and “used credit cards associated with the fund for personal reasons” taking a total of $90,000 he wasn’t entitled to.

The lawsuit, which also names several other Hawaii-based labor leaders, said as an Operating Engineer Credit Union Trustee, Artates and other trustees failed to account for millions of dollars allegedly “loaned” to Local 3 operations that are now “missing,” including $4 million from Hawaii.

The Operating Engineers Credit Union is one of the nation’s largest labor union credit unions, with 22 branches across Hawaii, California, Nevada and Utah, and $777.84 million in assets.

“The Defendants named in their capacities as Board members of the Operating Engineer Federal Credit Union or the Operating Engineer Credit Union itself, have participated in unlawful transactions related to Local 3-associated entities, including transactions related to the Hawaii Industry Stabilization Fund,” the lawsuit said.

The Hawaii Operating Engineers Industry Stabilization Fund advocated for the Honolulu rail project and launched a series of advertisements during the 2012 election in support of the city’s 20-mile $5.2 billion project.

The fund also made campaign contributions to several prominent Democrat politicians in the 2012 election period, including Senate President Donna Mercado Kim, Senate Majority Leader Brickwood Galuteria, then-House Speaker Calvin Say and House Majority Leader John Mizuno. The largest contributions went to Hawaii Island Mayor Billie Kenoi and Oahu Mayor Kirk Caldwell.  Maui Mayor Alan Arakawa and state Rep. Richard Fale, both Republicans, also received contributions.

A spokesman for Local 3 maintained leadership has made “accountability and transparency” a priority, and has published and made available quarterly financial statements and semi-annual reports of the union’s health and welfare funds.

“The Local 3 administration has nothing to hide,” Local 3 spokesman Mark Kyle said.

Filed by five plaintiffs – David Slack, John Jarboe, Ken Bettis, Kenny Mendoza and Hawaii resident Clyde Eli – the federal lawsuit makes several wild and even bizarre allegations.

Under a section in the lawsuit entitled “Local 3’s Leadership Has Solicited Murders to Silence Opposition Voices Within Local 3’s Membership,” the plaintiffs claim that in 2007, Business Manager and International Vice President Russ Burns “solicited the murder of a dissident Hawaiian Local 3 union member when he vocalized opposition to the union leadership.”

“Burns approached a fellow Local 3 union leader, Mr. Mahoe, to commit the murder of the dissident union member on the island of Oahu in Hawaii,” the lawsuit alleges. “Mr. Mahoe, an officer at the time, refused to murder his fellow union member and fellow native Hawaiian. Despites his efforts, Burns was unable to find another loyal union leader he trusted to murder the dissident member in order to silence him.”

According to state Campaign Spending Commission records, Burns is a key figure who distributes money to Hawaii’s pro-development politicians to fund their campaigns, including House Speaker Joe Souki, then Lt. Gov. Brian Schatz and Maui state Sen. J. Kalani English.

Burns also is accused of lavishly spending union funds on himself, including trips to Hawaii.

The lawsuit also includes a reference to motorcycle gang, Hells Angels, and said a union member was told by a district representative and fellow union members that members of Hells Angels were going to kill him.

The union also has business dealings with international crime syndicates including the Yakuza and the Triads (Japanese and Chinese crime syndicates, respectively), which includes transactions with companies that Local 3 officers know to be Triad-controlled or Yakuza-controlled, the lawsuit alleges.

“Local 3 allows contractors operated by front organizations for the Yakuza and Triads to operate double-breasted,” the lawsuit said. “The International Union of Operating Engineers has sent representatives to the islands to forge relationships with the Triad leaders.”

Kyle, of the Operating Engineers Local 3 called the accusations “baseless, libelous, ludicrous and fictitious,” and completely without merit, and maintained the claims in the lawsuit will easily be refuted in court.

The lawsuit claimed Local 3 union officials used Gregory Scher, a District 17 union member in Hawaii, to intimidate cooperating witnesses and class representatives into abandoning their efforts to expose union corruption within Local 3 and the IUOE.

Scher recently pleaded guilty and will be sentenced Dec. 2 on a single federal charge for falsifying information on a passport application, on which he said the mother of his toddler abandoned them and could not be reached to give permission to take his daughter out of the country.

Scher, a 44-year member of Local 3 who is now working on the Honolulu rail project, said he has never seen such ridiculous accusations in his life.

“I am a 66-year-old fat guy with serious health issues,” Scher said in an interview, adding, “I never heard of three of the people I am accused of intimidating.”

Scher, who maintained the lawsuit is “totally libelous and slanderous,” said, “If I was not named in the lawsuit, I would say it is the most laughable bunch of shit that I have ever read.”

The plaintiffs are seeking legal fees and compensation, but maintain they filed the lawsuit in part to ensure they have a union “not run by dishonest embezzlers, extortionists and criminals who victimize their members through theft, threats, assaults and misuse of union assets in gross violation of the high fiduciary standards.”

Local 3 spokesman Kyle said the accusers are a group of disgruntled, politically motivated, former staff and members of the union who have no concern for fellow members. He maintained the lawsuit is nothing more than a “smear campaign aimed to propel the accusers into positions of power.”

“We are fully prepared to litigate this case and expose the lawsuit for what it really is – a cowardly and underhanded attempt to seize power,” he added.

Calls to the Moore and Leviant in California and a request to interview the Hawaii plaintiff went unreturned.

Artates and his lawyer refused to comment on either the fraud conviction against him or the allegations contained in the civil lawsuit.



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