By Malia Zimmerman
Hit men, Yakuza, the 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 labor leaders and entities from Local 3 on Oahu. According to the lawsuit, which was filed in U.S. District Court’s Northern District of California on Oct. 27 by the law firm Moore & Leviant, LLP, one of the defendants is prominent Maui labor leader and former Hawaiian Homeland Commissioner Perry Artates.
In an unrelated criminal case, Makawao resident Perry Artates and his wife Ronnette Artates may be sentenced to as much as five years in prison on federal charges when they go to U.S. District Court on Nov. 13.
In 2012, federal agents indicted the Artateses on charges of conspiracy, wire fraud and making a false loan application, and in June 2013, the couple each pled guilty to one count of conspiracy, carrying maximum penalties of five years imprisonment and $250,000 fine.
According to a 2012 federal indictment, the case against the Artateses centered around a 2007 mortgage transaction from which they both benefitted. Court records show Perry and Ronnette Artates approached Pedro Oliveros and his wife, who were facing foreclosure on their home in Makawao and offered to buy the property.
At the time, Ronnette Artates was a licensed realtor and Perry Artates was a prominent labor leader, a Hawaiian Homelands Commissioner, the Waiohuli Hawaiian Homesteaders Association chair and a member of the Maui Economic Development Board. They promised to let the Oliveroses live in the home for six months while paying rent, and then buy it back when their financial situation improved.
The indictment said the deal went through, but Perry Artates claimed in two legal documents he would be the “owner and occupant” of the home, a false statement to a financial institution that helped him secure a 100 percent transaction loan, while Ronnette Artates collected sales commission.
About six months later, the Oliveroses fell behind on their rent, and the Artateses evicted them. Pedro Oliveros filed a lawsuit against Perry and Ronnette Artates in 2009, and that case is still pending.
After learning of Perry Artates’ federal fraud conviction through a media inquiry, on Aug. 23 Governor 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 the 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.
In any case, the new 111-page class action lawsuit (which MauiTime has obtained and has also been written about by Courthouse News Service) names as defendants Artates and more than 60 leaders of the trade union, the International Union of Operating Engineers, and the International Union of Operating Engineers, Local 3. It claims Perry Artates “embezzled” fund monies 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 Hawaiian Industry Stabilization Fund,” the lawsuit alleged.
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 Russell E. 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. [William Kahlani] Mahoe, to commit the murder of the dissident union member on the island of Oahu in Hawaii,” the lawsuit alleged. “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 contributes money to Hawaii’s pro-development politicians to fund their campaigns, including House Speaker Joe Souki, then Lt. Gov. Brian Schatz and Maui Senator J. Kalani English.
The lawsuit also accuses Burns of lavishly spending union funds on himself. “Burns never travels without security to either Hawaii or the Pacific Rim Islands, all paid for by Local 3,” stated the lawsuit. “In fact, Burns will not attend a union meeting on any of the Hawaiian Islands without several other union officers accompanying him to the meeting, with the additional cost charged to Local 3, given that Hawaii-based offers could just as easily, and at less expense, attend meetings with Burns. In addition, Burns frequently requires Local 3 to pay for more than one hotel room for him simultaneously during meet trips, just so he doesn’t have to pack up his belongings at one luxury suite while he stays at other suites on other islands.”
Also according to the lawsuit, a union member was told by a district representative and fellow union members that members of a motorcycle gang, the Hells Angels, were going to kill him.
The lawsuit further alleged that the union maintains 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.
Triads include branches of Chinese transnational organized crime organizations or the Chinese mafia, based in Hong Kong, the Philippines, Thailand, Macau, Taiwan, and within the islands which comprise the Pacific Rim, and also in countries with significant Chinese populations, such as the United States, who commit a variety of crimes from extortion, money laundering, trafficking, and gambling and prostitution, the lawsuit said, while the Yakuza, some 103,000 members strong, are a trans-national organized crime syndicate operating in Japan or in areas around the world with significant Japanese populations, such as in the Hawaiian Islands and the Pacific Rim islands.
“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 disproven in a court.
Earlier this year, the Moore & Leviant 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.
The complaint said that “he (Scher) would approach union members cooperating with the class representatives and others associated with this action (including members and spouses of members), in order to intimidate and threaten them with financial demise if they persisted in pursuing justice against the Local 3 officers and the International.”
Scher recently pleaded guilty to a single federal charge of falsifying information on a passport application. According to the federal criminal complaint filed in April on that matter, Scher made a false claim that his child’s mother abandoned them and could not grant permission for him to take the child to Mexico, where he was seeking employment. His sentencing date is scheduled for December.
Scher, a 44-year member of Local 3 who is now working on the Honolulu rail project as a crane operator, 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. “I never heard of three of the people I am accused of intimidating.”
Scher, who maintained the lawsuit is “totally libelous and slanderous,” said the people involved with the lawsuit have an agenda and have been in fraudulent activities themselves.
“If I was not named in the lawsuit, I would say it is the most laughable bunch of shit that I have ever read,” Scher said.
“The lengths Mr. Scher went to in seeking to deter the class representatives and others working with them included using phone calls and electronic means to communicate threats to these targeted individuals,” Moore & Leviant’s lawsuit claimed, noting that Scher was later rewarded with a Local 3 job and an appearance in court by a Local 3 business agent on May 31 of this year to help secure the release of an ankle bracelet restriction imposed on him.
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, and 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 under-handed attempt to seize power,” he added.
Calls to the Moore & Leviant in California and a request to interview the Hawaii plaintiff went unreturned.
Perry Artates and his lawyer refused to comment on either the fraud conviction against him or the allegations contained in the civil lawsuit.
Malia Zimmerman is the editor of HawaiiReporter.com.
Cover illustration: Marc Antosch