Michael Nelson, Director of NLPC’s Organized Labor Accountability Project, has written a substantial scholarly work that proposes reforms to combat union corruption. The law review article draws on Nelson’s experience editing NLPC’s Union Corruption Update since June 1998.
Entitled “Slowing Union Corruption: Reforming the Landrum-Griffin Act to Better Combat Union Embezzlement,” it appears in the Spring 2000 issue of the George Mason Law Review. Nelson is an evening student at George Mason University School of Law in Arlington, Virginia. For the article, he won the prestigious Adrian S. Fisher Award for best student article at the school for 1999-2000.
The Landrum-Griffin Act
The cornerstone federal statute in the fight against union corruption is the Labor-Management Reporting and Disclosure Act of 1959, popularly known as the Landrum-Griffin Act. In addition to making it a federal crime to embezzle union member dues, it gives union members certain rights to act as a check on the power of union bosses. These include the right to sue for breaches of fiduciary duty and the right to some financial information.
Nelson makes the point that while Landrum-Griffin was a step in the
right direction, it is not good enough. Nelson uses examples from
more than thirty unions to demonstrate that there is a wave of union corruption
in America that Congress needs to address. He also explains why embezzlement
is so frequent and what types of reform will curb the rampant corruption.
Ingredients for Reform
The article first details the ingredients for successful reform. The enactment of Landrum-Griffin in September 1959 was a legislative miracle. President Dwight Eisenhower was a lame-duck president. Congressional Republicans suffered big losses in the November 1958 elections at the hand of the powerful and well-mobilized unions. Yet despite large Democratic majorities in both Houses, Landrum-Griffin passed.
This miracle occurred because of Sen. John L. McClellan (D-Ark.). He was tenacious and unrelenting during hearings into union corruption. His hearings received widespread and favorable media coverage from 1957 to 1959. Nelson argues that Landrum-Griffin’s enactment is the ideal legislative and political blueprint for modern policy makers to implement his proposed reforms.
Nelson also provides a detailed legal analysis of how Landrum-Griffin combats union embezzlement. It is designed to aid dissident union members who want to understand the rights and protections Landrum-Griffin affords them in the fight against corrupt union bosses.
Eight Reforms
The article then proposes eight reforms to better deter and punish union embezzlement.
First, Landrum-Griffin should be amended to require annual audits and quarterly reports from unions similar to those required by the Securities and Exchange Commission (SEC) of corporations. Currently, union annual reports, called LM-2s, filed with the Department of Labor (DOL) are deficient. Strengthening union reporting with such requirements as an independent public accountant’s certification, generally accepted auditing standards, and generally accepted accounting principles would go a long way toward catching and preventing union embezzlement.
Second, the Act should be expanded to cover all unions. Currently, a loophole in the law allows government employee unions, such as the scandal-ridden American Federation of State, County & Municipal Employees to escape Landrum-Griffin. Further, state and regional AFL-CIO councils are exempt. Recent embezzlement scandals in both types of union organizations warrant an expansion in Landrum-Griffin’s coverage.
Third, Congress should impose term limits on union bosses. Many embezzlement schemes take place because a boss is entrenched for ten or twenty years. With such long reigns, bosses are able to game the system to have a better chance to embezzle without detection. Additionally, many schemes are uncovered when a boss retires. The union’s records change hands, and the new boss brings questionable records public in order to avoid being blamed for wrongdoing he didn’t commit. Limiting terms to three or five years would increase transparency in union records making embezzlement more difficult.
Fourth, the DOL’s oversight of unions needs reform. In pension matters, DOL has the right to sue for breaches of fiduciary duty. The rationale for this power is that the aggrieved parties may not always have the investigative and legal resources to press their claims. The same benefit should be afford to aggrieved union members. Separately, DOL’s current distribution of the unions’ disclosure information is woefully behind the times. Nelson recommends that DOL be required to emulate the Internet and electronic resources that the SEC provides the public for information on corporations.
Fifth, union members’ right to sue should be improved. Different courts have applied different meanings to the terms of Landrum-Griffin and sometimes this cuts against the interests of union members. Nelson argues that Congress should make it less restrictive for members to bring legitimate suits against corrupt union bosses.
Sixth, the maximum prison sentence that a judge can impose on a union embezzler is only five years. It should be increased to ten. Further, Landrum-Griffin allows a judge to ban a convicted boss from union office for three to thirteen years. It should be increased to five to twenty.
Seventh, Congress should give DOL the right to impose civil money penalties on bosses that violate Landrum-Griffin. Many other labor law statutes permit DOL to impose civil penalties. Such penalties would increase the cost for wrongdoers who fall outside of Landrum-Griffin’s criminal provisions and would provide an additional sanction against a criminally convicted boss.
Finally, Landrum-Griffin’s definition of “appropriate relief” should be expanded to include convicted bosses’ pensions. In a 1990 Supreme Court case, union members tried to recover funds lost to a boss’ $377,000 embezzlement. The boss’ pensions were declared off limits because of the current construction of the law. The court bluntly said that if Congress didn’t like the result, Congress should change the law. Nelson argues Congress should do just that.
To obtain a copy of the full 60-page, 400-footnote article, please contact George Mason Law Review, 3401 N. Fairfax Dr., Arlington, VA, 22201; 703-993-8161. Ask to purchase a copy of Volume 8, Issue 3 (Spring 2000). It costs $15. Or, if you have access to an electronic law library (Lexis/Nexis or WestLaw) the article cite is 8 Geo. Mason L. Rev. 527 (2000).
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