I. INTRODUCTION

A. HEREIU Structure and Organization
B. HEREIU History
C. Consent Decree

A. Findings
B. Local 1 (Chicago, Illinois)
C. Chicago Joint Executive Board
D. Candidate Clearance

A. Financial and Administrative Management
B. Credit Cards
C. Per Diem/Allowances
D. Leased Vehicles
E. Per Capita Delinquencies

This is my fourth report as the Monitor of the Hotel Employees and Restaurant Employees International Union (International Union or HEREIU). My earlier reports, dated February 15, 1996, January 8, 1997, and August 14, 1997, covered my term of service as Monitor through June 30, 1997. This report summarizes activities of my office for the entire period of September 5, 1995, to August 25, 1998.

Currently, disciplinary charges are pending against five additional individuals. Until those charges are resolved, the final report cannot be submitted. However, in this report, I will give findings as to the current state of the International Union, including recommendations for future improvements. The final report will include complete financial data on my monitorship.
 
A. HEREIU Structure and Organization

The International Union headquarters is located in Washington, D.C. During my term as Monitor, the International Union was led by a General Executive Board headed by General President Edward T. Hanley, General Secretary-Treasurer John W. Wilhelm, General Vice-President John M. O'Gara, and Director of Organization
Thomas Hanley. In addition, 14 District Vice-Presidents and 12 Vice-Presidents At-Large are also members of the General Executive Board. The powers of the General Executive Board are outlined in Article IV of the International
Constitution.

On May 18, 1998, the General Executive Board elected John W. Wilhelm, former General Secretary-Treasurer, to succeed Edward T. Hanley as General President beginning August 1, 1998. Ted T. Hansen, an International Vice-President from Sacramento, California, has succeeded Mr. Wilhelm and Ron Richardson, the Executive Vice-President, has taken the General Vice-President's position, replacing John M. O'Gara, who has retired. Mr. Edward T. Hanley, Jr., Co-General Counsel of the HEREIU, resigned his position effective July 31, 1998. Robert J. Rotatori, Esq., is now the General Counsel. According to the Labor Organization Annual Report Form, LM-2, filed by the HEREIU for fiscal year 1997 (May 1, 1996 - April 30, 1997), the General Executive Board members received
salaries, allowances, and expenses totaling $3,538,940. Additionally, disbursements to employees of the International Union for salaries, allowances, and expenses amounted to $8,666,901. These employees range from administrative
staff to International Organizers, State Organizers, and International Auditors. Total receipts for the HEREIU for that same period were $30,852,667. The number of local unions in the International Union stands at 138. There are also eight State Councils and two Joint Executive Boards, one in Las Vegas, Nevada, and one in Chicago, Illinois. Joint Executive Boards exist to adjudicate differences between local unions located in the same community and State Councils do the same at the state level. The current membership of the union is 244,423. The General President has the power to appoint a trustee, called an International Trustee, to take control of the affairs of a local union, a Joint Executive Board, or a State Council. The allowable bases for such action are set forth and explained in the International Constitution. When my term as Monitor began, 26 local unions were under trusteeship.
 
B. HEREIU History

The history of the International Union dates back to 1891 in Chicago, Illinois, when a national union, the Waiters and Bartenders Union, was founded. By the late 1940's and early 1950's, the total membership of the union was around 400,000. The current name was adopted at the 39th General Convention in 1981. Criminal infiltration has been an ongoing problem with the union. During the 1930's, a Special Commission on Crime headed by Thomas Dewey of New York revealed massive racketeering in the restaurant business in New York, including criminal influence in local labor unions. In 1958, the Select Committee on Improper Activities in the Labor or Management Field, chaired by United States Senator John L. McClellan, established that organized crime figures in Chicago, Illinois and, elsewhere, had assumed control of some local unions. Again in 1983, the Permanent Subcommittee on Investigations of the United States Senate conducted lengthy hearings that, again, indicated the influence of criminal elements in union affairs. The full history of the International Union can be found in Senate Report 98-595, 98th Congress, 2d Session, "Hearings Before the Permanent Subcommittee on Investigations of the Committee on Government Affairs, United States Senate," August 27, 1984.
 
C. Consent Decree

On September 5, 1995, the United States Government filed suit against the International Union and its General Executive Board seeking equitable relief under the Racketeer Influenced and Corrupt Organizations (RICO) statute, Title 18 U.S.C., Section 1961 et seq. The complaint alleged that "[f]or over 25 years, various members and associates of organized crime groups have exercised influence over the HEREIU and [its] various constituent entities." Specifically, the complaint alleged that the defendants, together with members and associates of organized crime, unlawfully, knowingly and willingly conspired to violate Title 18 U.S.C., Section 1962 (c), in conducting the International Union's enterprise through a pattern of racketeering activity. On the same day, September 5, 1995, the parties entered into a Consent Decree which, among other things, permanently enjoined all current and future members of the union from violating RICO, from knowingly associating with organized crime members or associates or any barred persons, and from interfering with the efforts of anyone effectuating the Consent Decree.

The remedial objective of the Consent Decree is that the International Union and its constituent entities be free from the direct or indirect influence of any organized crime group or the threat of such influence now and in the future. As stated in the Consent Decree, all officers and other persons holding positions of trust in the International Union and its constituent entities are required to have a heightened fiduciary duty to the membership and are required to promote democratic participation in union affairs as guaranteed by the Labor-Management Reporting and Disclosure Act.

That same day, September 5, 1995, and pursuant to the Consent Decree, the Court appointed me as Monitor to oversee the affairs of the International Union and its various constituent entities such as Districts, District Councils, local
unions, and other subordinate bodies as defined by the International Constitution. The Consent Decree also directed the International Union's General Executive Board to create a Public Review Board and to adopt an Ethical Practices Code. The Public Review Board and Ethical Practices Code were presented to the International Union's convention in 1996, and adopted as part of the International Constitution, effective September 9, 1996.

The purpose of the Ethical Practices Code is to insure high standards of executive and administrative practices in the International Union, its subordinate bodies, and local union officials. Under the Ethical Practices Code, the International Union is required to maintain adequate safeguards for the prevention of corruption, discrimination, anti-democratic procedures, and the association of any official of the International Union or its subordinate bodies with organized crime figures or anyone that would bring disrepute to the union.

The Public Review Board was established to review complaints and conduct hearings whenever necessary to insure the high moral and ethical standards in the administrative and operational practices of the International Union, its
subordinate bodies and local unions, and to review all matters arising under the International Union's Ethical Practices Code. Now that my term as Monitor has expired, the Public Review Board is providing oversight to the International
Union under the terms of the Consent Decree. I have joined two other individuals to make up the membership of the Public Review Board. The other two members are Archbishop James P. Keleher of Kansas City and James R. Thompson, former governor of Illinois, who is Chairman of the Public Review Board.

Under the terms of the Consent Decree, my term as the Monitor was set to expire March 5, 1997, i.e., within 18 months of the filing of the Consent Decree on September 5, 1995. In February 1997, I requested an extension of my term based on a showing of probable cause to believe that corruption or the influence of organized crime exists in the International Union or its constituent entities. The Court agreed and granted the extension for a period of 12 months,
ending March 5, 1998. However, for purposes of disciplinary proceedings still pending, my office continues until all proceedings are completed. D. The Monitorship My office staff remained the same throughout my term as the Monitor. Daniel F. Sullivan served as my Chief Investigator and LaVerne Waller as my Administrative Assistant. My Investigations Officer, Howard E. O'Leary, Esq., of the law firm Dykema Gossett in Washington, D.C., was responsible for the evaluation and presentation of the evidence in disciplinary proceedings authorized by the Consent Decree. He was assisted by Judy Jenkins of the same firm. The investigative work was performed by retired law enforcement officials available to the Office of the Monitor from all over the country.

Throughout my term as Monitor, invaluable assistance was provided by the Office of the United States Attorney for the District of New Jersey, the Organized Crime Section of the Department of Justice, the Federal Bureau of Investigations, and the United States Department of Labor. After my appointment as Monitor in September 1995, I spent the remainder of 1995, in large part, reviewing the history of the International Union, as well as pertinent reports
of government agencies and the records of the U.S. Senate Permanent Investigations Subcommittee, which conducted hearings on the International Union. My office began its actual investigative work in January, 1996.

Since then, I have reviewed the operations and actions of the International Union in a systematic way. In doing this, I have relied on the Consent Decree's mandate that the International Union give me unfettered access to all records or
documents and officials, agents, employees, and members of the International Union and its constituent entities. Investigators from my office have conducted reviews of select local unions and the International Union headquarters.
Investigations have also been conducted in response to unsolicited complaints and allegations. Finally, investigators from my office have conducted investigations regarding specific programs, issues, topics, and individuals associated with the International Union. The Consent Decree gives the Monitor the authority to investigate, audit, and review all aspects of the International Union and its constituent entities to advance its remedial objective. The Monitor is also given authority to disapprove International Union actions that he believes may violate the injunctive prohibitions of the Consent Decree, may constitute a crime involving labor organizations or the employee benefit plans, or may further the direct or indirect influence of any organized crime group or the threat of such influence now or in the future. In accordance with this authority, I have reviewed the International Union's hiring, appointment, and reassignment decisions. I also have reviewed contracts, leases, and other obligations.

I am pleased to report that the International Union has been very cooperative in submitting matters to me for review and has given members of my staff unfettered access to records. The Consent Decree, as required, was published in the November/December 1995 issue of the Catering Industry Employee magazine. I included a "Message to All Members" asking them to help me carry out my responsibilities. An 800 number was provided to facilitate member participation
in the process. This has resulted in the receipt of many unsolicited complaints and allegations that were processed by my office. Many of the complaints concerned grievances that were not within my jurisdiction, as defined by the
Consent Decree. Other complaints required us to conduct preliminary investigations in order to obtain sufficient facts to determine whether the matter was appropriate for handling by the Office of the Monitor or by the International Union. In those matters that were referred to the International Union for handling, I am happy to report that these items were handled in a responsible manner.
 

II. REVIEW OF LOCAL UNIONS/CANDIDATE CLEARANCE

A. Findings

One of the most productive procedures followed by my office was the review of local unions. My office conducted reviews at the International Union's headquarters and at 16 local unions. Some were terminated short of a complete review. The local unions were selected for review because or their location in an area or region historically known to be susceptible to the influence of organized crime. Others were reviewed as a result of specific allegations or known problems.

Reviews were conducted of the following local unions: Local 1, Chicago, Illinois Local 2, San Francisco, California Local 4, Buffalo, New York Local 5, Honolulu, Hawaii Local 6, New York, New York Local 7, Baltimore, Maryland Local 10, Cleveland, Ohio Local 11, Los Angeles, California Local 25, Washington, D.C. Local 57, Pittsburgh, Pennsylvania Local 69, Secaucus, New Jersey Local 77, Rhinelander, Wisconsin Local 84, Toledo, Ohio Local 122, Milwaukee, Wisconsin Local 274, Philadelphia, Pennsylvania Local 340, San Mateo, California Local 450, Forest Park, Illinois Local 631, Phoenix, Arizona International Union Headquarters, Chicago Joint Executive Board, Washington, D.C. Chicago, Illinois.

Many of the reviews demonstrated that some local unions were not being operated and managed in a manner consistent with the best interests of the membership, and some reviews resulted in disciplinary charges. We found that:
 

1. Many of the local unions do not obey their bylaws.

2. Notice to membership meetings is not adequate, resulting in lack of quorums for General Membership meetings.

3. Expenses are not presented to the membership for approval as required, or, if presented, are vague or not presented in the full context of the expenditures.

4. Raises and bonuses are not presented to the membership for approval as required, in many instances, they were not even presented to the local union's Executive Board.

5. Per capita taxes are delinquent with no effort to make arrangements for payment to the International Union.

6. Personal expenses are placed on union credit cards, including personal meal and beverage expenses.

7. Expenses are charged to the union without adequate documentation to verify that the expense was necessary for conducting union business.

8. Automobiles are provided for employees who only use them to commute to and from work.

9. Training of officers, business agents, and organizers is minimal or nonexistent.

10. Organizing projects are not coordinated or supervised.

11. Severance and insurance programs are set up for the officers, which are not in the best interest of the membership.

12. Members are not permitted to inspect LM-2 reports as required by the Labor-Management Reporting and Disclosure Act, and, in many cases, members are unaware they exist.

13. Personnel policies, salary pay scales, job descriptions, performance standards do not exist.

14. The International Union's audit program is not properly designed to detect fraud or abuse by officers and employees of local unions.

15. Many local unions do not require Business Agents to file any documentation or weekly report describing what they did during the preceding week.

16. Executive Board members have little or no understanding of their fiduciary obligation to ensure that the local's funds are spent solely in the best interests of the membership.

17. Many locals do not have an annual audit despite the requirement for such an audit in the HEREIU Constitution.

The International Union should promulgate uniform policies to be followed in connection with salary increases and bonuses for local union officers and employees. Local 69 in Secaucus, New Jersey, for example, followed a practice of listing the current salaries of officers and employees and the proposed salaries after implementation of the recommended increases. Prior to taking a vote on each proposed salary increase, the Executive Board's recommendation should be disseminated to the members in writing at a General Membership meeting, namely, the employee's current salary, the amount of the proposed increase and the proposed salary after the increase. A motion should then be made for a vote on the proposed increase for each officer and/or employee, and approved by the General Membership prior to being implemented.

Practices vary widely among local unions with respect to the issuance of credit cards. Local 450 in Forest Park, Illinois issued no credit cards, while Local 1 in the same metropolitan area issued credit cards for use by its president, secretary and treasurer. Union issued credit cards present great opportunity for abuse, and stringent controls are necessary to protect the General Membership from such abuse. A number of locals issued credit cards for the use of the top two or three officers. Typically, the local's office manager pays the monthly statement on the assumption that all such charges were necessary for conducting official union business and trusts the officers to reimburse the local for any charges that were personal. It is unrealistic to expect that the local's office manager will confront his or her superiors about charges that appear to be personal. Instead, there must be a system of controls in place to ensure that sufficient documentation exists to establish the business necessity for all such expenditures.

The International Union should establish uniform policies for the use of credit cards by local union officials. At periodic intervals, possibly bi-weekly, the local union official should fill out and sign a form identifying
the individuals present, briefly explain why the expenditure was necessary for
conducting official union business, and attach both the receipt and charge slip
relating to the expenditure. The local union official's signature shall
constitute a certification that the expense was, in fact, necessary for
conducting official union business. All local union officials should understand
that a knowing false certification shall constitute grounds for disciplinary
charges, including removal from office and termination of employment with the
local.

   The bylaws of HERE locals typically provide for the election of three
trustees who are members of the Executive Board. The trustees generally are not
(and should not be) salaried employees of the local. The trustees are given the
responsibility of verifying the locals' quarterly financial reports and the
annual audit required by Article XIV, Section 11, of the HEREIU Constitution. As
part of their responsibilities, the trustees should be required to review each
month the forms, certifications and supporting documentation submitted by the
officers relating to their credit card charges. After reviewing these materials,
the trustees should be required to certify that to the best of their knowledge,
information and belief, the expenses in question were necessary for conducting
official union business and that adequate documentation exists to verify or
substantiate the business necessity for such expenses. With such a system of
controls in place, recurring charges at a particular restaurant or bar should
prompt inquiry by the trustees and the local's independent auditors.

   Our investigations of HERE locals found that not only trustees, but Executive
Board members, generally had little or no understanding of their fiduciary
responsibilities under the Labor Management Reporting and Disclosure Act and the
HEREIU Constitution. The Labor Management Reporting and Disclosure Act, Title 29
U.S.C., Section 501(a), provides that Executive Board members have a duty to
hold the money and property of the local solely for the local's benefit and that
of its members and to expend same only in accordance with the HEREIU's
Constitution and local union bylaws.

   The HEREIU Constitution, Article XI, Section 23(a), provides that all funds
of a local shall be held for the sole benefit of its membership, and no local
may make any expenditure other than for the best interest of the local. Under
the Labor Management Reporting and Disclosure Act, the Executive Board members
are legally liable to the members for violations of their fiduciary duties to
the local and its membership. Unfortunately, Executive Board members generally
had no understanding of their obligations or exposure under the Labor
Management Reporting and Disclosure Act. Few were familiar with the HEREIU
Constitution and their own local's bylaws, although the Labor Management
Reporting and Disclosure Act requires that all of the local's expenditures be in
accordance with the HEREIU Constitution and the bylaws.

   At Local 122 in Milwaukee, Wisconsin, for example, many of the Executive
Board members were retirees, some in their eighties, who were unlikely to
question, much less oppose proposals from the incumbent management. When our
investigation disclosed that Local 122 owed in excess of $ 100,000 in per capita
taxes to the International Union, the Executive Board members who were not part
of the incumbent management were "shocked" to learn of this delinquency.

   What is more shocking, of course, is that these individuals -- each of whom
had a fiduciary obligation to see that the locals funds were expended in the
best interests of the membership -- had absolutely no understanding of their own
local's financial condition. The International Union should develop educational
materials and provide training to Executive Board members of HERE locals about
their fiduciary obligations to the local and its membership, including the
obligation to oppose salary increases, bonuses and the like when such
expenditures are not in the membership's best interest. Similarly, some locals,
like Local 1, require their Business Agents to file weekly reports describing
their activities for each day of the preceding week, while others do not require
any documentation to verify that the Business Agents actually worked and/or
describe what he or she did. The Business Agent performs a substantial portion
of his or her duties on their own outside of the office, namely, servicing
collective bargaining agreements, handling grievances or attempting to organize
new employers. A requirement that Business Agents fill out and sign a weekly
report describing their activities during each day of the preceding week is
necessary to ensure that the employees are actually working and fulfilling their
responsibilities to the membership. Requiring such documentation makes it more
difficult for "no-show" or "partial show" employees to defraud the membership.
For example, the weekly reports of one Local 1 Business Agent indicated that
this individual reportedly spent portions of approximately 70 days annually
attempting to organize a particular riverboat casino. Our investigation
disclosed that, in truth and fact, this Business Agent was gambling at the
casino and unknown to many of the individuals involved in this organizing
campaign.

   The International Union should promulgate uniform reporting policies and
forms for use by all Business Agents employed by HERE locals. Such policies
should have provisions for periodic review of such weekly reports by the
Business Agent's superiors.

   There also appears to be wide disparity among HERE locals on the necessity
for having audited annual financial statements. The HEREIU Constitution, Article
XIV, Section 11, provides: . . . Local unions shall have their books audited
annually and a copy of such audit must be filed with the General
Secretary-Treasurer within sixty (60) days after the expiration of the audit
period. Despite the above requirement, many locals are not audited at all,
including, for example, a local as large as Local 1 with more than 15,000
members. An annual audit performed by a certified public accounting firm is an
important safeguard against corruption, embezzlement and non-feasance.

   All HERE locals -- or at least all HERE locals above a certain size threshold
-- should be required to have an annual certified audit. Clearly, not all of the
 above problems exist in the majority of local unions; however, the HEREIU
should be sensitive to these problems and take corrective action if they occur.

B. Local 1 (Chicago, Illinois)

This local union is the home local of the former General
President, former General Vice-President, and former Director of Organization.
Their association with this local union has resulted in considerable
International Union assistance. A report prepared by the International Union in
February 1997, revealed that assistance to Local 1 over the years amounts to $
2,608,337.81. This was the largest amount of assistance granted to any local
union, with the exception of Local 226, Las Vegas, Nevada, which had been
involved in a protracted strike. The report also showed that 18 International
Union employees were assigned to this local union. The International Union's
W-2's issued for 1995 list 40 employees with Chicago area home addresses. The
records of the International Union also revealed that in 1996 there were 14
automobiles leased by the International Union and garaged in Illinois.

   Despite all of the extra attention and assistance granted to Local 1, it has
been in a bad financial condition for many years. Local 1 officials could not
produce any accounting reports when requested. They suggested that Thomas Havey
& Company, Chicago, Illinois, was the accounting firm which would be in a
position to provide accounting reports. Havey employees provided annual
compilation reports for the period 1990 through 1996. They explained that their
compilations are limited to presenting, in the form of financial statements,
information that is the representation of Local 1 officers. They expressed no
opinion or other form of assurance on these statements. It is unclear where the
compilations go when presented by Thomas Havey & Company to officials of Local
1. Havey's compilations, including the attached cover letter, are directed to
the Executive Board of Local 1; however, when shown the compilations during an
interview, all of the Executive Board members advised they had never seen them
before.

   The current Secretary-Treasurer of Local 1, who has been in this position
since May 1, 1991, advised he had never seen the compilations before and was
unaware of the extent of the financial difficulties of this local union. He
appeared shocked to learn that the compilation, dated December 31, 1993,
reflected (by notes attached to the compilation) that Local 1 had a 22-month
financial delinquency owed to the pension plan. He advised that when he assumed
the position of Secretary-Treasurer, he requested Thomas Havey & Company to
conduct an audit. Upon completion of that audit, Havey officials met with him,
the President, and Secretary-Treasurer of Local 1 and advised them that Local 1
was overstaffed. The Havey officials suggested cutting the number of Business
Agents at Local 1. This did not happen because the President of Local 1, Thomas
Hanley, advised he was not running a bank, and he did not want to cut
employees.

   The Secretary-Treasurer was aware of per capita delinquencies being forgiven
by the International Union in 1991, and it was obvious that the President of
Local 1 did not feel he needed to work from a balanced budget principle. The
Secretary-Treasurer did not know how the per capita delinquencies would be
handled, but he assumed the President would find a way to resolve this problem.

   A review of the compilations shows that in May, 1984, the International Union
granted a $ 304,522 loan to Local 1 to cover past due per capita taxes and
various other expenses incurred prior to April 30, 1984. Terms of the loan
called for Local 1 to make monthly payments in the amount of $ 3,000 between
1985 and 1990, which never occurred. Additionally, as of December 31, 1990,
Local 1 owed another $ 440,000 in per capita payments to the International
Union. The $ 440,000 debt was deleted because of the International Union's
"forgiveness" of per capita loans at the 1991 International Union convention,
but the 1984 loan of $ 301,522 continued as a debt until 1993, when a prior
period adjustment was made indicating it had been determined that this loan had
also been forgiven in 1991. The 1993 compiled report contained comments from
Thomas Havey & Company regarding Local 1's capacity to exist as a going concern.
The going concern comment is set forth as follows: Note 8. Going Concern As
shown in the accompanying financial statements, the Union incurred a deficiency
of receipts over expenditures of $ 33,536 for the year ending December 31, 1993;
as of that date, there was a fund balance deficit of $ 23,905. Those factors, as
well as the Union being approximately $ 200,000 delinquent on various
administrative expenses and pension plan contributions create an uncertainty
about the Union's ability to continue as a going concern. The financial
statements do not include any adjustments that might be necessary if the Union
were unable to continue as a going concern. The Union is currently implementing
a plan to eliminate delinquent expenses as well as reduce the overall cost of
administration. In addition, dues rates were increased January 1, 1994. The debt
reduction plan referred to above apparently did not work because the December
30, 1994, compilation reflected that the Local 1 was still 11 months delinquent
($ 99,000) in payments to the pension plan and $ 88,000 delinquent in various
administrative expenses. The December 30, 1995, compilation continued to show
approximately $ 92,000 in delinquent pension plan payments and $ 29,000
delinquent in various administrative expenses.

   The December 31, 1996, compilation lists a pension delinquency of $ 81,000
and a $ 233,000 per capita delinquency. This $ 233,000 delinquency was in
addition to the $ 1,300,300 interest free loan which was granted to Local 1 by
the International Union during 1996. The loan is to be repaid at the rate of $
7,500 per month. After reviewing the above identified compilations, it would
seem logical to ask why the International Union's officials allowed this local
union to continue from 1984 to the end of 1996, ignoring loan repayments,
accumulating large per capita, pension payments, and administrative debts. The
former International Union's General Secretary-Treasurer, Herman Leavitt,
advised he did not see the compilations prepared by Thomas Havey & Company for
Local 1. He acknowledged there were conversations and communications between his
department and the General President regarding the financial problems at Local
1. The problems never seemed to go away and no one pressed to resolve them.

   During all the years of financial difficulty, the officers and employees of
Local 1 received salary increases on a regular basis and former General
President Hanley collected $ 31,000 per year as Executive Director of the
Local.

   The failure of the HEREIU General Officers to deal with this never-ending
Local 1 problem is, of course, due to the fact that many of the general officers
come from Chicago and this is their home local. The national leadership never
tried to run the International Union from Washington, D.C. Mr. Edward T. Hanley
never spent more than 25 days per year at the International Union's headquarters
and his son, the Director of Organization, averaged a day or two per month in
Washington, D.C. Hopefully, the new national leadership will give the HEREIU the
national and international attention it deserves. Local 1 should have been
placed in trusteeship many years ago. I am informed by General President Wilhelm
that Local 1 is currently timely on both per capita and loan repayments.

C. Chicago Joint Executive Board

Review of the records of the Chicago Joint
Executive Board reveals that the stated purpose of this Board is to provide
coordinated management of the various local unions in the Chicago Metropolitan
Area and to resolve disputes between local unions. The minutes for this Joint
Executive Board for the period 1989-1997 show that the only local unions
participating are Local 450, Forest Park, Illinois, and Local 1, Chicago,
Illinois. During this entire period, Local 450's Secretary-Treasurer, Frank
Riggio, has served as the Executive Director-President of the Chicago Joint
Executive Board. John O'Gara served as the Secretary-Treasurer of the Joint
Executive Board until June 5, 1989. He resigned when he was appointed General
Vice-President of the International Union. At that time, Thomas Hanley was named
Secretary-Treasurer of the Chicago Joint Executive Board. The positions of
Executive Director-President, Secretary-Treasurer, and Office Secretary are all
paid positions. The salaries are $ 300 per week for the Executive
Director-President; $ 300 per week for the Office Secretary; and $ 200 per week
for the Secretary-Treasurer. The Office Secretary also serves as the Office
Manager of the International Union's Midwestern Regional Office and has the
title of Administrative Assistant to the General President of the International
Union. The Chicago Joint Executive Board usually meets at the Midwestern
Regional Office location.

   A review of the minutes of the Chicago Joint Executive Board's meetings
reveals that the Executive Director-President is almost always present and
presides at the meetings. The usual business consists of the Executive
Director-President providing information regarding Local 450's activity for the
past month and someone from Local 1 also discussing what had occurred at Local 1
over the past month. The Secretary-Treasurer has been a very infrequent
participant in the Chicago Joint Executive Board's activities over the past
several years. In 1994, he attended only one of the twelve meetings that year.

   His attendance for several other years was never more than 50 percent of the
Joint Executive Board's meetings, yet he has continued to receive in excess of $
10,000 from the Board each year. The Office Secretary of the Board receives an
annual salary of approximately $ 15,600 and also is enrolled in a pension plan
which is funded by the Joint Executive Board. This is all in addition to the
pension plan benefits, salary and allowances ($ 68,705 in fiscal year 1997), and
an automobile leased for her by the International Union. The Chicago Joint
Executive Board is funded by a 25 cent per month per capita fee on all members
of the participating local unions (Local 450 and Local 1). In 1996, the Chicago
Joint Executive Board's cash receipts were $ 50,252.

   The paid officers and the Office Secretary are all also highly paid
officers/employees of the International Union and/or Local 1 and Local 450. The
work performed by this Joint Executive Board appears to be that of both Local 1
and Local 450 keeping each other informed of their work in order to coordinate
their efforts in overlapping areas. This kind of inter-local cooperation would
appear to be a routine function of both Local 1 and Local 450. That should not
require a Joint Executive Board to accomplish. I am aware of the fact that the
Chicago Joint Executive Board is a signatory to a multi-employer collective
bargaining agreement with the Chicago Hotel Association. The most recent
agreement, executed in early 1997, is for a term of five years and eight months.
Consequently, during the five year period between collective bargaining
agreements, there is little justification for the Joint Executive Board's
existence, much less for the payment of salaries to its personnel.
Recommendation: That the salaries for the Chicago Joint Executive Board
personnel be discontinued.

D. Candidate Clearance

Union democracy is a fundamental tenet of union
governance, and the International Constitution deals at length with rules and
procedures for electing high level International Union officials and conducting
elections in local unions. Furthermore, the Consent Decree, under paragraph 27,
specifically sets out procedures for the Monitor to oversee the election of
officers in the International Union and its constituent entities. The objective
is to ensure that elections are free from corruption and the influence of any
barred person. The Consent Decree requires that the Monitor be advised in
advance of all candidates for elections, both at the International Union
headquarters and within the union's constituent entities. The Office of the
Monitor has reviewed 1,064 candidates for elective office in 64 local unions. In
addition, we have reviewed 64 individuals appointed as Business Agents or
similar positions of trust. If the background materials included recent run-ins
with the law, investigators conducted interviews, at my request, to provide
individuals an opportunity to explain the circumstances of those situations. We
have conducted approximately 25 such interviews. No candidate for elective or
appointive office has been disqualified as a result of these reviews. It is not
known how many potential candidates did not apply, or withdrew, because the
screening process was in place.
 
III. REVIEW OF INTERNATIONAL UNION

A. Financial and Administrative Management

   Representatives of the Office of the Monitor conducted an on-site review of
administrative operations and detailed audits of certain financial records at
the International Union headquarters in Washington, D.C. From the onset, it was
clear that the International Union suffered from a management deficit and did
not subscribe to generally accepted business practices. Despite an apparent
abundance of personnel, the staff of 35 employees was neither prepared nor
expected to carry out certain functions normally deemed basic and essential to
most business entities of any size. There is a program to develop a budget for
the Research Department. General President Wilhelm has implemented a computer
accounting program which will be the basis of a HEREIU budget. He hopes that all
departments of the HEREIU will be operating on a budget within a year or two.
He, in his capacity as Secretary-Treasurer, took the initiative to implement a
budget procedure for the International Union's overall operations.

   Interviews of officials, employees and some consultants confirmed that the
International Union has traditionally operated without some absolute basics.
There is no budget, no organization chart, no job description for employees, and
no policy manual. One consultant commented that the former General President had
not seen a need for "structure". However, the consultant added that the time for
structure in the management of the International Union had probably arrived.

   While the lack of an organizational chart may not, on the surface, appear to
be critical, it is clearly a deficiency in the overall management of the
International Union. Time and again during the interview of officers, employees
and consultants, the interviewees were unable to define lines of authority on
matters in which they were directly involved. For example, one might assume that
the Director of Organization would have a degree of responsibility either
directly or indirectly over every employee in the Department of Organization.
During an interview, he denied having any degree of responsibility over
certain individuals and/or initiatives, however, other officials involved in
organizing efforts made specific comments contradicting his remarks.

   The staff of the International Union was asked to provide an organizational
chart, position descriptions and job titles for employees of the International
Union, but the only existing internal document provided was a listing of
headquarters personnel arranged alphabetically by first name. Consequently, my
staff conducted interviews of all employees to determine the duties of each and
to develop an understanding of the work flow. These interviews revealed
expressions of confusion, questionable workload distribution, duplication of
effort and, in some cases, animosity attributed to a lack of clearly defined
duties and lines of authority. In some instances, for example, employees' duties
were taken from them when their superiors vacated assignments or new bosses
brought in their own assistants. In those instances, the pay of the former
incumbents was not impacted, but they were left without clearly defined duties.
Aside from the obvious insensitivity to the affected employees, there is an
apparent disregard for cost-effective management.

   While salaries of most employees seem to be very generous, there were no
uniform standards for selection of appointees, no uniform compensation
standards, no performance review process, and no established criteria for
promotion or pay increases. The lack of documents accounting for authority,
responsibility, and performance of employees was not only an indication of poor
management, but, in some cases, it clearly facilitated intentionally inflated
compensation and the concealment of ghost employees. In several instances, the
Monitor's inquiries about organizers, special assistants and consultants
precipitated abrupt departures through retirement and resignation.

Recommendation:

1. Prepare a budget for the next fiscal year.

2. Establish written policy establishing a system for evaluating performance of employees.

3. Prepare an organizational chart defining lines of authority/ responsibility for officers and employees.

4. Define standards for compensation of all employees.

   The International Union maintains a credit card account with the American
Express company which allows each of the General Officers (General President,
General Vice-President, Secretary-Treasurer, and Director of Organization) to
charge expenses. Additionally, retired General Officers John Gibson, John
Kenneally, and Herman Leavitt have credit cards, as well as the Executive
Vice-President. The American Express cards were utilized by these individuals
during the period 1993-1996 to charge approximately $ 645,000 in expenses to the
International Union. Additionally, the former General President has a VISA
credit card (First Card) assigned to him, and the General Vice-President
obtained a VISA card (Citibank Advantage) in June, 1995. These two cards were
utilized to make additional charges of $ 237,316 (First Card) and $ 89,487
(Citibank Advantage) during the same period, 1993-1996. As a result, the
International Union disbursed approximately $ 971,803 for routine credit card
purchases during this period.

   The justification for obtaining second credit cards for the General President
and General Vice-President was not fully documented; however, it was noted that
both the First Card and the Citibank Advantage card provide free air miles based
upon usage. No evidence of utilization of free air miles was noted in the
union's records. Formal policy regarding the use of above identified credit
cards appears to be non-existent. The secretaries to each of the officers have
been given the responsibility of reviewing the credit card expenses and insuring
that receipts are attached to the monthly statements. During interviews, these
employees identified items which could not be charged, such as cigarettes,
movies and laundry/dry cleaning. It was noted that on several occasions these
items were detected on the credit card bills, and the individual officers
reimbursed the International Union for these expenses. It appeared that staff
employees did not have a clear understanding as to whether alcohol is an
allowable expense.

   The fragmented credit card utilization policy for the International Union is
set forth in two memoranda; one prepared by the Department of Organization in
January, 1991 and another bearing the name of Director of Organization dated
February, 1994. This second memoranda stated that Thomas Havey & Company, the
International Union's auditors, had advised that International Union employees
had been in violation of the U. S. Department of Labor laws and regulations with
regard to meal expenses. It stated that any meal charges by the cardholder and
any other union employee from their home city would not be reimbursed. When
questioned about this memoranda, the Director of Organization did not recall
preparing it. He also suggested that this policy might not apply to officers of
the International Union. Clearly, the U.S. Department of Labor and the Internal
Revenue Service (IRS) regulations make no distinction between officer and
employee. Department of Labor International Compliance Audit Program (I-CAP)
investigators were concerned that International Union officials were attempting
to circumvent their directive in this matter. The file of the Department of
Labor documents this and indicate that the directives regarding expenses must
apply to "all officials, the highest ranking general officers, as well as
employees".

   A review of the documents maintained by the Department of Labor regarding an
I-CAP audit conducted at the International Union during 1990-1992 presented a
much clearer picture of the International Union's policy (or lack thereof)
regarding business expenditures. The audit directed that officers and employees
incurring reimbursable expenses should submit timely, adequate, written
documentation sufficient to corroborate the business purpose of the expenditure.
The Department of Labor files reflect that International Union officials were
not keeping adequate records regarding officers expenses. They pointed out that,
in many cases, explanations were not given for charges and, in other cases,
incomplete or insufficient explanation was given. They directed that
documentation for these expenses must include who, what, where, when, and why,
and that this documentation must be completed when the expense occurs. They
pointed out that, if recorded in a timely manner, this accurate documentation
would minimize the risk that the expenditures would be considered personal in
nature, and it would greatly assist the Accounting Department in accurately
recording these expenditures. These instructions as given by the Department of
Labor were set forth in a management letter prepared by Thomas Havey & Company
for the General Executive Board of the International Union.

   When my review of the International Union's records began, it became
immediately obvious that the Department of Labor's instructions regarding timely
recording and sufficient documentation had been totally ignored. We discovered
that the secretaries were still trying to obtain documentation for credit card
charges that had occurred eight to ten months earlier. The credit card bills
were sent to the Accounting Department in a timely manner, but, in many cases,
the supporting documentation would not be sent to the Accounting Department
until after the end of the fiscal year. In other words, the bills were being
paid with no documents attached. Additionally, when the documentation was
finally received, it consisted of receipts and cryptic comments such as
"locals", "skychefs", or "health and welfare". This was the very type of
documentation that the Department of Labor had previously advised was totally
unacceptable.

   My review also revealed that the responsibility for approval of these
miscellaneous expenses was not properly assigned. A secretary was given the
responsibility to insure the appropriateness of charges incurred by the highest
officials of the International Union. This resulted in expenses being reviewed
to determine if specific disallowed expenses have been charged, for example, if
video movies are rented or cigarettes purchased. The bulk of the charges were
not, however, being reviewed by anyone to determine the appropriateness of the
expense. A cursory review of these records immediately spotted numerous problems
which could have been addressed by an appropriate approval process. For example,
records for restaurant and bar purchases made by one senior official disclosed a
pattern of excessive tipping. It was not uncommon for the tips to be greater
than the restaurant/bar purchase amounts, as set forth below: Date Purchase Tip
Total 10/6/94 $ 5.80 $ 80.00 $ 85.80 12/7/94 $ 97.20 $ 50.00 $ 147.20 3/9/95 $
34.38 $ 50.00 $ 84.38 6/21/95 $ 150.29 $ 100.00 $ 250.29 6/21/95 $ 98.80 $
100.00 $ 198.80 2/9/96 $ 33.00 $ 50.00 $ 83.00 4/29/96 $ 116.45 $ 150.00 $
266.45.

   An International Union employee assigned to drive this official to and from
area restaurants at union expense confirmed that this official was known to give
very generous tips. Records for another senior International Union official
revealed a pattern of extensive purchases at restaurants/bars in his home-base
area with fellow employees from that geographical area. Examples are as follows:
12/5/95 $ 48.28 Miller's Pub 12/5/95 $ 136.00 O'Callaghan's 12/5/95 $ 105.00
Jilly's 12/5/95 $ 35.50 The Boss Bar TOTAL $ 317.78 5/15/96 $ 54.50 Lino's
5/15/96 $ 38.50 Gibson's Bar & Steakhouse 5/15/96 $ 211.88 Gibson's Bar &
Steakhouse 5/15/96 $ 11.50 Lola's/Roulette 5/15/96 $ 15.50 The Redhead 5/15/96 $
15.70 White Star Cafe TOTAL $ 347.58 The above expenses at Chicago, Illinois
area establishments are all attributed to this senior International Union
official and, in each case, one other individual (different individuals on
December 5, 1995, and May 15, 1996) who share office space in Chicago, Illinois.
When questioned regarding these expenses, the official and the employees contend
they were conducting union business (talking to bartenders, etc.) at all of the
business establishments where charges were incurred. This does not appear to be
responsive to the Department of Labor instructions or the Director of
Organization memoranda of February 28, 1994.

   While it is recognized that this International Union has a special interest
in insuring the economic well-being of the hotel-restaurant industry, it is
doubtful that this is accomplished by a select few officials frequenting bars
and restaurants. Since we examined the credit card abuses, the HEREIU has
initiated a two-level verification process, first, in the user department and
then in the General Secretary-Treasurer's office, which is designed to curb the
abuses disclosed by our review. Clearly, a system of stringent controls should
be in place to ensure the credit card charges by International Union officials
are necessary for conducting official union business. At least monthly,
International Union officials should fill out and sign a form identifying the
individuals present when the expense was incurred, briefly explain why the
expense was necessary for conducting official union business, and attach both
the receipt and charge slip relating to such expenditures. If an International
Union official fails to submit such documentation in a timely fashion, the
expense should be deemed personal and deducted from the official's compensation.
The International Union official's signature on the form along with the
supporting documentation shall constitute a certification that the expense was,
in fact, necessary for conducting official union business. All International
Union officials should understand that a knowing false certification shall
constitute grounds for disciplinary action, including removal from office and
termination of employment with the International. Semi-annually, the expense
forms and supporting documentation submitted by International Union officials
relating to credit card charges should be reviewed by a select number of General
Executive Board members who should certify that, to the best of their knowledge,
information, and belief, the expenses in question were necessary for conducting
official union business and that adequate documentation exists to verify or
substantiate the business necessity for such expenditures.

Recommendation:

1. Terminate issuance of union credit cards to retired officials.

2. Assign responsibility for review and approval of credit card expenditures to a select number of General Executive Board members and ensure that these individuals are familiar with the Department of Labor and Internal Revenue Service regulations regarding business expenditures.

3. A sufficient sample of expense forms and supporting documentation should be reviewed by the certified public accounting firm conducting an audit of the International Union's financial records to ensure that the system of control relating to credit card charges is adequate.

On June 19, 1990, John Reynolds, General Counsel for the International Union,
advised a representative of the U.S. Department of Labor that the International
Union was attempting to influence their employees to switch from per diem
allowances to salary. He pointed out that IRS tax codes changed in 1986 or 1987
making per diem allowances taxable, and effective July 1990, they were required
to begin withholding FICA on per diem payments. He also pointed out that it
would be less work for the International Union to include these monies as salary
because it reduces the bookkeeping within the organization. The International
Union converted all employees from per diem to salary, except for some reasons
not altogether clear, the current and retired general officers. The four current
General Officers continue to receive $ 100 daily per diem, 365 days per year,
even when they are on vacation or sick leave. Certain retired officers (John
Gibson, General Secretary-Treasurer Emeritus; Herman Leavitt, General
Secretary-Treasurer Emeritus; and John C. Kenneally, General Vice-President
Emeritus) also receive daily per diem payments. Mr. Gibson receives $ 40.00 per
day, Mr. Leavitt receives $ 100 per day, and Mr. Kenneally receives $ 50.00
per day. The per diem payments do not appear to be related to actual expenses
incurred by the officers because some of them are additionally reimbursed for
miscellaneous cash expenses, such as taxi and skycap tips.

   The payment of per diem, and recording it as an allowance on the LM-2 form
also tends to present a distorted picture of the total salaries paid to the
officers. Payment of a per diem allowance for possible expenses to a retired
employee is incomprehensible. Even after receiving this $ 14,600 per year in per
diem payments, John Gibson still submits bills for miscellaneous expenses when
he attends conventions or other similar functions. In addition to the above per
diem allowances, the International Union has for many years awarded officers and
select employees for attending International Union conventions and General
Executive Board meetings. International Vice-Presidents, Administrative Aides,
and Administrative Assistants were each given $ 4,000 for attending the 1996
Convention. The allowance for attending General Executive Board meetings is
usually $ 2,000-$ 2,500. This International Union granted $ 478,150 in
allowances in fiscal year 1997. The 1996 LM-2 for the Laborers International
Union of North America, an organization with 793,730 members, lists no money
expended for officer/employee allowances.

Recommendation:

Eliminate per diem payments and General Executive Board/Convention payments to officers and select employees, current and retired.

   Historically, the International Union has maintained a fleet of nearly 60
leased vehicles, ostensibly for the business use of certain union officials,
employees, and consultants. In addition to this fleet, the International Union
owns limousines based in Washington, D.C. and Chicago, Illinois, and a motor
home which is based at an automobile dealership in suburban Chicago, Illinois
near the residence of the General President. The motor home was acquired during
1988 at a cost of $ 100,000 and currently has approximately 17,000 miles on the
odometer. The International Union spends about $ 425,000 annually for leased
vehicles and another $ 100,000 on miscellaneous automotive maintenance expenses.
In the interest of expediency, the Monitor's audit did not address the dollar
value of automobile insurance premiums or the cost of liability
judgments/claims. However, the amounts in the latter two categories are assumed
to be substantial because the International Union provides automobile insurance
coverage not only on vehicles leased and owned by the union but also on several
vehicles owned by employees who are reimbursed for mileage expenses in lieu of
being provided with union cars.

   Anecdotal information obtained during the course of several interviews
suggests that the International Union has incurred significant costs for legal
expenses and payment of claims emanating from automobile accidents. Some of the
local unions also lease vehicles. Local 1, Chicago, Illinois, for example, has
maintained a fleet of approximately 16 vehicles despite its failure to pay per
capita taxes and its chronic inability to meet other financial obligations.

   Clearly, the total cost of automobile-related expenses incurred by this
International Union and its constituent entities is at a level that deserves the
close scrutiny of management on a continuing basis, and program management
sufficiently structured to provide managers with the information necessary to
make fiscally sound decisions. Unfortunately, that has not been the case in
the past. It has not been overlooked that about one year ago, and probably as a
reaction to the Monitor's inquiries, then General Secretary-Treasurer Wilhelm
published a document announcing the terms of an agreement between the
International Union and a vendor who is to be the sole source provider of leased
vehicles. It is hoped that the publication of the General Secretary-Treasurer's
memoranda is intended as an initial step in a much greater effort toward fiscal
responsibility.

   A review of International Union practices with regard to acquisition,
assignment, maintenance and disposal of vehicles revealed that the International
Union had no uniform program in place to ensure fiscal responsibility.
Accounting and reporting for this very costly segment of the International
Union's total expenditures were sorely lacking and, in some cases, suggests the
possibility that expenses may have been deliberately concealed from the general
membership of the International Union and government oversight. For example, the
International Union's submissions of the required Labor Organization Annual
Report (U.S. Department of Labor Form LM-2) for the past several years contains
the statement, "It is not practical to make a precise distribution of automobile
expenses. . ." While the word "practical" is by definition a relative term, it
is difficult to believe that any competent manager exercising generally accepted
business practices would not see the absolute need for this information. In
fact, other labor organizations, including the International Brotherhood of
Teamsters and the Laborers International Union of North America, do conduct a
precise accounting for automobile expenses (itemized by individual) and report
that information annually on Form LM-2. The International Union's LM-2 also
asserts that, "Union owned and leased automobiles were used more than 50 percent
on official business. They were also used the remainder of the time, if any, for
personal use." This very general statement was found to be far from accurate.

   A review of International Union lease agreements and interviews of
International Union personnel revealed that many, probably most, vehicles leased
by the International Union are assigned to individuals who use them primarily
for commuting and personal use rather than union business. In some instances,
individuals to whom cars are provided have sedentary work assignments which
rarely, if ever, require travel outside the workplace. Others are rewards for a
privileged group of individuals favored by the General President. Ironically,
the leased vehicles for which there appeared to be a clearly perceivable
business justification were the more modest and the least costly in the fleet.
Virtually all vehicle assignments are approved by the General President who
personally signs every lease agreement.

   According to officials of the International Union, the principal document
governing policy on leased vehicles known to have existed prior to the Monitor's
term was a memorandum dated April 6, 1992, addressed "Dear Employee" and signed
by both the General President and the General Secretary-Treasurer. This
memorandum restricted monthly lease payments to no more than $ 600 and announced
that, "You will not receive any reimbursement for gasoline charges."

   Despite the 1992 memorandum, a master list of leased vehicles provided by the
International Union headquarters staff in November, 1996, as well as other
documentation reviewed by my staff, revealed that 19 (33 percent) of the 57
vehicles listed were then being leased at monthly rates significantly exceeding
the $ 600 limitation. Ten of the 19 vehicles exceeding the $ 600 limitation were
being leased at monthly rates ranging from $ 861 to $ 1,483. Further examination
of records, as well as interviews of officers and employees, determined that
there was an assumed, but unwritten, exclusion of General Officers from the
restrictions in the policy memorandum and that other individuals were granted
exemptions by virtue of the purported relationships they claim to have with the
General President. No one interviewed was aware of any limitation ever being
placed on leased vehicle and automobile related expenses incurred by General
Officers. In fact, the International Union also bears the cost of leased
vehicles, automotive maintenance expenses and automobile insurance premiums for
retired General Officers and places no cost restrictions on the retirees.

   In essence, the leased vehicle "program" was clearly micro-managed by the
former General President, and the only documented restrictions on the "program"
are selectively, if at all, enforced. Given the premise that vehicles are
provided primarily to be used in connection with union business, the rationale
behind a policy of not reimbursing gasoline expenses is difficult to
understand.

   Several employees and officials were asked about the policy, but none could
offer an explanation of the logic. One General Officer said he was unaware of
the policy, admitted that he routinely approves reimbursement of gasoline
expenses for employees under his supervision, and said he had never before been
questioned about it. Former General Secretary-Treasurer Leavitt recalled that
the policy of not reimbursing gasoline expenses was established as a cost-saving
measure at the specific suggestion and insistence of the General President whose
decisions, according to the former General Secretary-Treasurer and many others,
are never challenged. He said he could not explain the logic of the decision
other than to describe it as one of many examples of "union politics", i.e., a
rule is made and then selectively enforced or ignored.

   In the absence of any substantive explanation to the contrary from those
interviewed, it would appear plausible that the rationale behind suggesting such
a policy may be a perception that vehicles are provided as perquisites and the
drivers do not incur gasoline expenses as a result of conducting the
International Union's business. Despite the fact that the International Union's
outlay for automobile-related expenses are well over one half million dollars
per year, there is no budget for vehicle leases and related costs, nor are there
any administrative controls to provide management with timely information
pertinent to controlling costs throughout the fiscal year.

   The decision to provide an individual with a leased vehicle is made by the
General President and ratified by the General Executive Board. At this time,
members of the General Executive Board are not provided with any information to
justify the business need for providing a vehicle, nor are they informed of any
anticipated costs when they are asked to affirm the decision to provide an
individual with a leased vehicle. Document reviews and interviews revealed no
evidence of any General Executive Board member ever voting "no" on a proposition
recommending that a leased car be provided. With the exception of certain low
level employees, most individuals were permitted to use vendors of their choice
and negotiate their own lease deals. In every case, however, the lease agreement
contract was ratified by the General President. Officials at the highest level
in the International Union enriched themselves by manipulating the leases of
luxury vehicles.

   Top officials, including the former General President, former General
Vice-President, and former General Secretary-Treasurer engaged in a practice
referred to as "front-end loading", whereby they committed the International
Union to highly inflated monthly payments on leased vehicles so as to reduce the
lease end values and/or pre-negotiated prices for which they could then buy the
vehicles. This practice enabled them to personally acquire several vehicles for
thousands of dollars below the used car wholesale prices and, in some cases, to
facilitate sales of vehicles to friends and relatives at bargain prices. Not
only did these officials subsidize their purchases at the International Union's
expense by "front-end loading", but, in two instances, also converted the
International Union's security deposits of $ 700 and $ 1,350 to reduce even
further their bargain prices. In addition, they arranged to each have more than
one vehicle leased for their exclusive use. All had vehicles at their homes of
record, away from Washington, D.C. Presumably, a portion of the cost on those
cars was attributed to personal use of the drivers and reported to the Internal
Revenue Service as required. However, these three officials also had cars
garaged in Washington, D.C., which are referred to in the International Union's
records as "guest cars". The "guest car" designation incorrectly implied that
the cars were for the use of visitors to the International Union headquarters,
which clearly was not the case. Some of the so called "guest cars" were driven
as few as 2,800 and 3,000 miles during the entire terms of three year lease
contracts and then purchased for thousands of dollars below the published
wholesale values.

   One of the lease deals involved a "guest car" assigned to the former General
President. The lease was for a customized GMC Suburban, valued at $ 47,000,
leased at $ 1,483 per month and having a pre-negotiated purchase option of $
5,000 at the end of a three-year term. The vehicle had approximately 3,000 miles
on the odometer, was garaged at the International Union's condominium location,
and had been under lease for two years. When the former General President was
informed of the Monitor's interest, he abruptly ordered that the International
Union terminate the lease and that the International Union purchase the vehicle.
He acknowledged that he had personally been involved in arranging for the lease
of the Suburban, but stated that he did not intend to purchase the vehicle and
did not notice when agreeing to the terms of the lease agreement that the
monthly payments were extraordinarily high or that the lease end value was
extremely low. He did, however, acknowledge having purchased other vehicles
which had been previously leased by the International Union. One of those, for
example, was a 1993 Cadillac Allante, a two seat convertible, Illinois license
place KEH8 (Mrs. Hanley's name is Kathryn E. Hanley) at the time it was leased,
the capitalized cost of which was $ 63,212 and for which the General President
paid $ 6,000 less than the wholesale value after the International Union made
monthly payments of $ 1,685 for three years. Another International Union leased
vehicle purchased by the General President at lease end was one which had 5,000
miles on the odometer and for which he paid $ 5,000.

   The practice of "front-end loading" International Union lease agreement
contracts has been so flagrant in some cases that the manager of a leasing
company took to preparing letters to International Union officials in which he
openly provided a variety of payment options with corresponding termination
values. One of the letters, for example, was addressed to the former General
Secretary-Treasurer and stated in part, "A $ 802 lease payment brings the Jeep
lease down to the same termination value as your previous lease. Please advise
me the termination value you want to place on your new lease. The lower the
termination value the higher the monthly payment." Investigation confirmed that
former General Secretary-Treasurer Leavitt had, in fact, purchased that vehicle
and that he paid $ 15,000 below wholesale for and $ 10,000 below wholesale for
another. He acknowledged these transactions in a deposition and, when asked
about the propriety of inflating lease payments to personally profit at lease
end, he said he saw nothing wrong with it. In fact, he insisted that he was
deserving because of his many years of service to the International Union.

   The former General President, in a deposition, insisted that he and other
International Union officials were provided with leased vehicles for the primary
purpose of using them to conduct union business. However, an audit of auto
leases revealed that the International Union continues to lease luxury vehicles
for the exclusive use of three retired General Officers and for a favorite
charity of the former General President's in Chicago, Illinois -- Maryville
Academy, a school for problem children. Notwithstanding the fact that these
retirees continue to receive full salary and "emoluments of office", they
clearly do not participate in International Union business beyond occasional
appearances at social events.

   By no stretch of the imagination could there be a business justification for
International Union funding of vehicles for these individuals, the cost of which
is more than $ 3,100 per month. Beyond the direct costs involved, it would
appear to be less than prudent to unnecessarily expose the International Union
to the potential liability associated with aging drivers and the environment of
a school for problem children. In summary, the International Union has suffered
a severe financial loss in vehicle lease transactions.

   I am informed that the HEREIU is in the process of correcting existing
problems, eliminating unnecessary costs and establishing a basis for
accountable, more efficient management in the future.

Recommendations:

1. Prohibit the lease-end purchase of any International Union leased car by any union official, employee or consultant.

2. Prohibit International Union funding of leased vehicles on behalf of any retiree and recover the three vehicles currently assigned to retirees for reassignment or disposal by the most cost effective means.

3. Discontinue the practice of providing leased vehicles for consultants and consider other means of compensation in lieu of vehicles.

4. Discontinue the practice of contributing a leased vehicle to any charitable organization. In situations where it is deemed to be in the best interests of the general membership to donate, the contribution should be monetary and in an amount approved by the General Executive Board.

5. Assure the use of correct accounting and reporting procedures to include a precise accounting for automobile expenses on Form LM-2 and to correctly report income to IRS. This should take into account that the Internal Revenue Service business/personal use formula does not apply to any consultant, any retiree, and any employee who cannot document more than 50 percent use on International Union business.

6. Conduct a cost benefit study of the International Union's $100,000 motor home and consider disposing of it by the most cost effective means if its projected use does not justify operational, maintenance, and storage costs.

   The International Union has had a long history of problems in connection with
collection of per capita dues from its local unions. At the International
Union's 41st general convention in July, 1991, the General President
acknowledged this problem and advised the Convention delegates that if the
constitutional provision that excluded participation by delinquent local unions
were enforced, there would be only about 14 people allowed to be seated at the
convention. He announced that the International Union had made loans totaling $
9.5 million to all of the delinquent local unions so that they could attend the
Convention.

   Prior to the conclusion of the Convention, the General President announced
that he was going to recommend to the General Executive Board that the $ 9.5
million in loans be forgiven. He went on to state, "in the future this per
capita tax will be paid on time, not 30 days delinquent, not 60 days delinquent,
in some cases not five years delinquent. It will be paid like you pay your
mortgage or your rent, because if you don't pay it then you are going to lose
the services that you get through that per capita. Subsidies will be canceled,
staff will be withdrawn and reassigned to areas that will pay the per capita.
You have to pay for the services. You are going to pay for the services."

   In March, 1990, the Assistant to the General Secretary-Treasurer was asked by
the Department of Labor to provide a list reflecting the per capita delinquency
of all affiliates. He informed the Department of Labor that the International
Union did not have records reflecting delinquent amounts of each local union. He
stated that these records are maintained only on the local union level and that
he could provide only an estimate. My review has revealed that the 1991
"forgiveness" and threat of losing services and subsides did nothing to correct
the delinquency problems. By 1996, as stated earlier, Local 1 had a per capita
delinquency exceeding $ 1 million and was granted a $ 1.3 million loan by the
International Union so that its delegates could be seated at the 1996
Convention.

   A report prepared by HEREIU in February, 1997, revealed that since March 1,
1992, the International Union had assigned 18 of its employees to Local 1 and
incurred total assistance cost for this local union in the amount of $
2,608,337.81. The only local union that exceeded this amount was the Las Vegas,
Nevada local union which had endured a lengthy strike. By letter dated February
3, 1997, the International Union's Co-General Counsel, Robert Rotatori,
forwarded to me a copy of a memorandum dated January 27, 1997, prepared by the
International Union's General Secretary-Treasurer.

   This memorandum captioned "Status Report, General Secretary-Treasurer's
Office", addressed, among other things, the per capita and loan collection
problems. The following is set forth in this memorandum regarding these
problems:
 

Per capita enforcement

- A list of delinquent local unions is now produced on the 1st and 10th of each month.

   - Letters are sent each month to all local unions which are delinquent by two
or more months.

   - Phone calls are made to the delinquent local unions.

   A policy must be established in the next several weeks on a course of action
for any local union which fails to meet its obligations in spite of the above
process. Any remedy must be applied even-handedly to all local unions. That
recommendation has now been implemented, and I am informed by General President
Wilhelm that all per capita and loan repayments are on schedule.

   F. Donations

   The International Constitution, in Article XIV, Section 13, clearly
authorizes the International Union, through the General Executive Board, to
expend funds of the International Union for charitable purposes. At the same
time, the International Constitution indicates in Article I, Section 2, that the
objective of the International Union is "to organize all persons within its
jurisdiction for the economic, moral and social advancement of their condition
and status in life". Furthermore, the Ethical Practices Code, as codified in the
International Constitution in Article XXII, Section 2, states that "Union funds
are to held in sacred trust for the benefit of the membership. The membership is
entitled to assurance that Union funds are not dissipated and are spent for
proper purposes. The membership is also entitled to be reasonably informed as to
how Union funds are invested or used". With these principles in mind, my office
has reviewed the large number of substantial donations to various charities,
civic organizations, and causes that were approved by the General Executive
Board during the period September 5, 1995, and December 31, 1996.

   The study revealed that donations totaling $ 418,870 were approved by the
General Executive Board during that period. Other donations were made during
that period, but they were based on approvals secured prior to September 5,
1995. Even a cursory look at the list of donations during this period raises
serious questions about whether the donations meet the standards of the
International Constitution, how the donations were solicited, by whom they were
recommended, how the donation would benefit the International Union memberships;
and whether the General Executive Board members were provided enough information
when they were asked to approve the donations. General Executive Board members
occasionally make handwritten comments on their copies of the proposition
ballots returned to the International Union headquarters. In one such instance,
the member voted "yes" in regard to a particular donation, but remarked, "I vote
yes on the assumption that this is a legal use of [International Union] money -
I assume that has been researched". In another case, a member abstained and
commented, "Do not know reason for this donation". In neither of the cases cited
was there an indication that the Board members' questions were ever answered.

   While many of the donations made by the International Union suggest a
compassionate response to human need, the objectives of others are far less
obvious. A prime example of the latter is a donation of $ 2,000 to the
Headwaters Classic Sled Dog Race in Land O'Lakes, Wisconsin, authorized by
General Executive Board Proposition 4605, dated January 27, 1992. Although this
proposition fell outside the time period of our study, since Land O'Lakes,
Wisconsin is where former General President Hanley, former General
Vice-President O'Gara, Director of Organization Thomas Hanley, and several other
union officials maintain vacation homes, this proposition raises serious
questions about whether the International Union's funds are being spent in the
best interest of the membership.

   Listed below are recipients of International Union donations of $ 5,000 or
more approved during the period of the study: $ 45,500 St. Joseph Seminary [at
Loyola University] 20,000 University of St. Mary of the Lake Mundelein Seminary
14,500 Eithne Fitzpatrick Memorial fund [and Gold Tournament] 14,000 Labor of
Love Tournament 14,000 Palm Springs Charities 14,000 Robert Gamez Charity Golf
Classic 11,000 American Ireland Fund 10,000 Local 610, San Juan, Puerto Rico -
hurricane relief fund 10,000 The Culinary Institute of America 10,000 Las Vegas
Anti-Defamation League 10,000 The Meadows School 9,000 St. Martin De Porres
Catholic School 8,000 American Jewish Committee 7,700 Guide Dogs of the Desert
7,250 The Thorek Foundation 7,000 All-American Collegiate Golf Foundation 6,500
Jewish National Fund 6,000 Carnegie Mellon University 5,000 Maryville Academy ($
5,000 cash and a leased vehicle) 5,000 National Jewish Center for Immunology &
Respiratory Medicine 5,000 Chicago Convention and Tourism Bureau 5,000 Catholic
Charities of Chicago 5,000 Catholic Church Extension Society 5,000 St. George
Orthodox Church of the Desert 5,000 Saipan Relief fund 5,000 American Police
Center and Museum 5,000 Leukemia Society of America 5,000 Bishop Gorman High
School Endowment Fund.

   Even a cursory review of these donations will reveal general themes of
similarity among the recipients. For example, six of the 33 recipients (18
percent) are related to the Catholic Church, which received $ 94,500, or 29
percent, of all donations. Other themes are also apparent. For instance, many
recipients are located in Chicago, Illinois or Palm Springs, California where
the former General President resides.

   There are also large numbers of significant donations to Irish causes and to
organizations related to golf. The Irish American Sports Foundation has received
about $ 450,000 from the HEREIU. This foundation was started in 1983 for the
specific purpose of providing recreational facilities for Irish youth. In 1993,
the Edward T. Hanley Basketball Arena was dedicated outside Dublin, Ireland. Mr.
and Mrs. Hanley led a 34 member delegation of union officials and guests to the
dedication. The General Executive Board authorized the payment of all expenses
for that trip. The contributions by the HEREIU to this organization are clearly
authorized, however, it is difficult to imagine how this contribution is even
remotely related to the concerns of union members across the United States and
Canada. The only Irish connection for the HEREIU is that General President
Hanley and other senior officers are of Irish descent.

   Similarly, contributions to the All-American Collegiate Golf Foundation have
been very generous. In 1992, for example, the HEREIU paid $ 25,000 for union
officers and guests to play in a tournament at Rancho Mirage in California and
to pick up the transportation and lodging expenses of all participants. In 1994,
Mr. Hanley was Tournament Chairman for another event by this organization and
the HEREIU paid $ 10,000. This foundation was started by Arnold Palmer and Lee
Iacocca to provide about 400 golf scholarships to needy students to attend
universities.

   We did not compute the cost for lodging and transportation for union
officials and guests to these events, but the credit card charges by Mr. Edward
T. Hanley for the January 1996 tournament include $ 6,385 for a reception at
Riccios, a non-union Palm Springs, California restaurant, and $ 2,436 at the
Cafe Tropez at Palm Desert, California. The all too frequent participation by
HEREIU officials and their favorite guests, all expenses paid, in golf
tournaments needs to be reexamined.

   The purpose of this examination is not to suggest which recipients are worthy
to receive donations. Rather, it is to suggest that donations are being made
without apparent regard to reasonable standards of relationship to union
objectives. It appears that these recipients have greater connection to top
officials of the International Union than to its members.

   Recommendations:

   1. Prepare written guidelines for the expenditure of International Union
funds for charitable purposes.

   2. Establish a committee to make recommendations to the General Executive
Board regarding charitable donations.

   3. Require all solicitations and recommendations for donations to pass
through the committee before being forwarded to the General Executive Board for
action.

   4. Require the committee to work from an annual budget establishing the
maximum amount of money that can be donated to charity for the year.

   5. Provide union members with detailed information of all donations made
through the Catering Industry Employee magazine.

   G. Audit Program

   It would seem critical that the audit staff of nearly any organization would
consist of auditors having formal education in accounting. However, the
International Union audit staff consists of five individuals, only one of whom
is a professionally trained accountant. Four of these five individuals
(including the only accountant) are paid $ 63,250 per year. The fifth auditor,
who happens to be the relative of former General Secretary-Treasurer Leavitt, is
paid $ 12,500 more than the others and has no degree in accounting.

   The auditors all operate from their private residences in different cities,
none in Washington, D.C., where the International Union headquarters is located.
Each is assigned a group of local unions to audit on about a one or two-year
cycle. These audit procedures were described by officials and auditors as being
very basic and badly in need of updating. The auditors see themselves as
providing a service to the administrators of local unions, many of whom have
very limited knowledge or experience in administrative matters. Copies of each
audit report are furnished to the local union audited and to the General
Secretary-Treasurer's office in Washington, D.C., but the reports rarely address
anything of a controversial or critical nature. Problems are usually addressed
only by orally bringing them to the attention of local union officials and/or
local union employees. The auditors make a special effort to maintain a
favorable relationship with the local unions.

   Each auditor establishes his own schedule and rarely visits International
Union headquarters in Washington, D.C. Each auditor has a great deal of autonomy
in deciding whether to bring an issue to the attention of the International
Union headquarters and, when he or she decides to do so, it is normally
discussed only with their point of contact, the Administrative Assistant to the
General Secretary-Treasurer. The resolution of issues then depends upon the
internal politics of the International Union. One example of handling internal
audit findings was the matter of excessive spending and delinquency of per
capita taxes in Local 1, Chicago, Illinois, the former General President's home
local union. Although problems were not addressed in writing, they were orally
called to the attention of the Administrative Assistant to the General
Secretary-Treasurer.

   The General Secretary-Treasurer had discussions with the General President
and was told not to worry about it because the General President would resolve
the matter. In essence, the issue was quashed and Local 1 became ever further in
debt. The seriousness of this issue is illustrated by the fact that Local 1's
net worth deteriorated from $ 87,000 in 1990 to negative $ 951,000 in 1996 (a
decrease of 1,200 percent).

   In my view, many of the problems on the local union level can be addressed,
and indeed, deterred by a competent audit program. The auditors must review car
leases, credit card use, proper authorization for expenditures by the Executive
Board and the General Membership. Auditors must assure that the local obeys its
bylaws. There is no systematic process for audit coverage of the activities most
susceptible to fraud, waste, and abuse. On May 29, 1998, then General
Secretary-Treasurer John Wilhelm, wrote to me following a discussion we had
about the need to establish an effective audit program. Mr. Wilhelm and I are in
general agreement, and I appreciate his invitation to work with him and his
staff on this matter.

   Recommendation: The audit staff should be trained on current auditing
techniques to detect fraud and waste in local unions and an auditor should be
assigned full-time to audit the operations of the International Union.

   H. Organized Crime Information

   The HEREIU acknowledged in the Consent Decree in this proceeding that
subordinate bodies, such as local unions, have historically suffered from an
externally induced corruption problem. In an appendix to this report, I list the
individuals subject to disciplinary action by the Office of the Monitor, and the
reasons for the discipline imposed. Some are barred from further participation
in the HEREIU for organized crime association. For that reason, the HEREIU needs
to stay informed on organized crime activity in the labor movement. In order to
emphasize the importance of avoiding associations with members or associates or
organized crime groups to persons holding positions of trust in the HEREIU, the
International Union should require all International Union officers, HERE local
officers and other persons in a position of trust to certify annually that they
have not knowingly associated with members or associates of any organized crime
group.

   On April 1992, Judge Frederick B. Lacey, Independent Administrator of the
International Brotherhood of Teamsters (IBT), issued a Summary Report to the
court supervising the IBT Consent Decree. He made many recommendations,
including steps to guard against organized crime problems in the future. He
stated: It should be the duty of, at least, one International employee to stay
abreast of all publicly available information concerning organized crime
activity in the labor movement. This individual would stay abreast of federal
and state public hearings on the matter. He would obtain all legislative reports
on organized crime as well as the annual reports on the matter of applicable
state crime commissions. He would stay abreast of academic and other studies.
Regular databank searches of press accounts of mentions of teamsters and
organized crime would be conducted. Indictments and trials would be followed and
recorded.

   By now, the IBT has barred about 50 officials for organized crime
association.

   The Laborers International Union of North America is currently in the process
of investigating corruption in its ranks and officials have, in fact, been
barred for organized crime association. It is essential that the HEREIU stay
informed of all developments in this area, and I suggest this responsibility be
placed in the Research Department at headquarters in Washington, D.C. At a
minimum, a list of all people barred from any union needs to be maintained and
shared with all local unions.

   The International Union also needs to adopt a policy requiring the
International Union, HERE local officers and other persons in a position of
trust to disclose whenever they are arrested or indicted on criminal felony
charges. This should assist the International Union in determining whether
disciplinary action should be taken against individuals, pursuant to the HEREIU
Constitution, in the future.

   For example, a President and Vice-President of a HERE local were indicted on
felony charges. The individuals were convicted and imprisoned for a period of
approximately four months while remaining in their positions as officers of the
local. Former General President Edward T. Hanley testified during his deposition
that he never knew about their convictions, or continued service as union
officials while being incarcerated. In another instance, a HERE local president
was charged with a felony. He ran for reelections as President of the local
while under indictment. Few at the local, and no one at the International Union,
knew about the charges pending against him.

   Recommendation:

   1. The Research Department should maintain a database of all individuals
barred from the union movement, as well as public source information covering
organized crime activity as it relates to labor unions.

   2. General Executive Board members, International Union officers, HERE local
officers, and other individuals holding positions of trust should be required to
certify annually that they have not knowingly associated with members or
associates of any organized crime group.

   3. General Executive Board members, International Union officers, HERE local
officers, and other individuals holding positions of trust should be required to
disclose to the International Union's president when they are arrested or
indicted on criminal felony charges.

   It should be understood that a failure to disclose an arrest or indictment on
criminal felony charges is grounds for disciplinary action, including
dismissal.

   I. Regional Offices and Condominium

   In addition to the headquarters in Washington, D.C., the International Union
has leased office space in Chicago, Illinois and in Palm Springs, California. It
also owns a luxury condominium apartment in Washington, D.C. Full-time
International Union employees have been assigned to the offices in Chicago,
Illinois and Palm Springs, California. All seemed to have personal relationships
with the General President and, when interviewed, none could offer a plausible
justification for either the existence of the offices or for their own full-time
salaries and fringe benefits, including, in some cases, leased vehicles.

   An Administrative Assistant to the former General President assigned to the
"Midwestern Regional Office" in Chicago, Illinois said that the office was
maintained "as an accommodation to the [General President]". However, she and
others interviewed confirmed that the General President rarely visited that
office. In fact, several people interviewed could not recall ever seeing the
General President at the "Midwestern Regional Office", and it was confirmed that
he has rented space in Chicago, Illinois hotels, on occasions, when coming to
the downtown area to conduct business. The Administrative Assistant assigned to
the International Union's office in Palm Springs, California is the former
General President's mother-in-law. When interviewed, she acknowledged that she
was in the office to answer the telephone and greet visitors if there are any.
She also said she would like to be productive, and asked for an expansion of her
duties.

   There really was no logical reason to have a regional office in Palm Springs,
California. If needed at all, such an office should be located in Los Angeles,
California or Las Vegas, Nevada, cities where substantial union activities are
underway. The Palm Springs, California office existed only for the personal
convenience of the former General President.

   I have been informed that that office was closed on June 30, 1998, and will
not reopen. The condominium owned by the International Union has been maintained
essentially for the exclusive use of the former General President and his
personally approved guests. This was confirmed through interviews of personnel
at the luxury high-rise building in the Georgetown area of Washington, D.C.,
where the condominium apartment is located, as well as through inquiries and
document reviews at the International Union headquarters. Mr. Hanley's personal
clothing hangs in a closet and photos of his grandchildren are displayed in the
master bedroom. The apartment is fashionably decorated and expensively furnished
with luxury items such as an elaborate stereo system, a "home theater" large
screen television set and a fully stocked 24-bottle wine rack. An employee of
the International Union headquarters is assigned the collateral duty of looking
after the apartment. Mr. Hanley's personal use of the luxury apartment has
obviously been minimal since he never spent more than 25 days per year in
Washington, D.C. Reviews of logs, calendars and other records, as well as
comments from persons interviewed, established that the condominium apartment is
rarely used by guests.

   Despite the fact that the apartment is usually vacant, officials and
employees routinely obtain accommodations at local hotels at the International
Union's expense when they travel to Washington, D.C., on business. Given the
limited use of the International Union's luxury apartment, the cost of
acquiring, renovating, and maintaining it does not appear to be in the best
interests of the International Union's general membership.

   Recommendations:

   1. Consider abolishing the Midwestern Regional Office in Chicago, Illinois.
Since the Western Regional Office in Palm Springs, California has been closed,
the need for another Western Regional office should be examined. Review the need
for employees at those locations and either reassign or release employees as
deemed to be in the best interest of the general membership.

   2. Dispose of the Washington, D.C. luxury condominium apartment.

   J. Organizers

   A fundamental function of every labor union is to conduct organizing
activities. Organizing can have several meanings within an individual union, but
the most basic meaning is to recruit, or organize, new members. The theme of the
most recent International Union convention held in Chicago, Illinois during
July, 1996, was organizing and its importance to the future of this union, which
has suffered a decades long decline in membership. Attendees were told that, as
a guide, local unions should spend approximately one-third of their annual
income on organizing activities. The HEREIU has over 100 employees which the
International Union pays as "Organizers".

   These Organizers are of two kinds by title - International Organizers and
State Organizers. Both kinds of Organizers are virtually indistinguishable with
respect to their function. Consequently, for the purpose of this report, both
"International" and "State" Organizers will be referred to as "Organizers". In
1995, the International Union paid salaries to a total of 105 Organizers. Of
this number, 65 had the title of "International" and 40 had the title of
"State". Of the 65 International Organizers, nine were also International
Vice-Presidents. The 40 State Organizers should not be confused with local
Organizers who are employees and/or officers of local unions, and who are paid
as such by their local union.

   My review began with an examination of the structure and functions of the
International Union's Department of Organization. Interviews were conducted of
the department's staff, former members of the department, and other
International Union departments that interact frequently with the Department of
Organization. A total of 41 individual International Organizers were
interviewed. Questions concerning International Organizers were addressed in the
depositions of former General President Edward Hanley, former Director of
Organization Thomas Hanley, and retired General Secretary-Treasurer Herman
Leavitt. Similar questions were addressed in interviews of then General
Executive Vice-President Ronald Richardson, as well as in the interviews of
several International Vice-Presidents who are also International Organizers.
Lastly, numerous individual "Organizer's Weekly Reports" were reviewed to
reconcile the activities documented thereon with per diem reports and expense
reimbursements. Organizing activity in the International Union is generally of
two kinds - organizing the unorganized and "servicing". Servicing, also known as
"representational work", is the activity associated with responding to the
workers' needs after a collective bargaining agreement has been signed and
approved by the workers.

   The most important and time-consuming aspect of servicing is the handling of
workers' grievances. International Organizers are administered by the
International Union's Department of Organization. The department currently has a
Director, Assistant Director, and a supporting staff of five people. The primary
function of the support staff is to receive and process the information
necessary to see that the Organizers are paid. All Organizers are required to
fill out an Organizer's Weekly Report. This report documents their specific
organizing activities and serves as the basis for their being paid. The report
requests specific information about the Organizer's activities and requires that
the activities be listed by type, i.e., organizing or servicing. The report also
requires the Organizer to list the percentage of his or her time spent
organizing or servicing, but does not ask for the amount of time the Organizer
expends. Failure to submit a report every week can, and occasionally does,
result in a suspension of pay.

   Organizers are reimbursed for expenses incurred in connection with their
organizing activities after they submit appropriate receipts to the
International Union headquarters. Administration of all Organizers' travel and
expense reimbursements is supervised by one of the five Department of
Organization's staff members, who is also an Administrative Aide to the Director
of Organization. International Organizers are required to get permission before
they engage in airline travel. The International Union has two national
contracts with the food service industry. They are the Sky Chef and CA ONE
Master National Agreements. Both Sky Chef and CA ONE are companies whose primary
business is preparing food at airports. The contracts with both companies have
basic provisions that apply to all of their facilities nationwide. The
International Union's bargaining agent for both contracts is the International
Union itself. Consequently, grievance procedures are processed through the
International Union rather than through local unions as with other contracts.
Usually, servicing has not been considered to be a part of organizing.

   Indeed, in local unions the functions are usually separate, with local
organizing projects being handled by salaried Organizers and servicing being
handled by business agents. Administration of the Sky Chef and CA ONE contracts
is handled by the Department of Organization because Vincent Sirabella, former
Director of Organization, was the International Union official who negotiated
the original Sky Chef contract in 1969. Administration of the contract stayed in
his department because he was there, and it has remained there since. The U.S.
Senate held hearings concerning the International Union in 1984. Its findings
are contained in a report dated August, 1984 that was published by the Permanent
Subcommittee on Investigations of the Committee on Governmental Affairs. The
number of International Organizers in the International Union is addressed at
page 32, paragraph "C", entitled "Increase in HEREIU personnel". The report
states: "Another characteristic of Hanley's presidency is found in the Union's
payroll, particularly in the area of organizers. When Hanley's predecessor, Ed
Miller, retired, HEREIU employed approximately 20 International Organizers.
Within two years this figure (including "state" organizers) exceeded 100.
HEREIU's payroll for organizers went from approximately $ 500,000 in Miller's
last year to over $ 2 million in Hanley's second year, in addition to other
non-salary expenditures for organizing. . ."

   The Permanent Subcommittee's review suggests that a significant number of the
"organizers" were hired on the basis of criteria other than proven ability.
The Subcommittee learned that many of the new organizers had no experience and a
number had criminal records. Several were identified as associates of known
criminal figures. Still others were friends or relatives of high-ranking HEREIU
officers. Some had full-time jobs in addition to their HEREIU duties, including
jobs with other unions. What the Senate found in 1984 is still true of the
International Union today.

   The total number of Organizers has remained consistently at 100 or more,
while the membership and revenues have consistently declined.

   As of the most recent LM-2, covering the year ending April 1997, the
International Union had 113 Organizers, including 16 who are International
Vice-Presidents. The combined annual salaries of the International Organizers
has grown from $ 2 million in 1974 to the present-day total of $ 3,556,186.
Herman Leavitt, retired International Union General Secretary-Treasurer, echoed
the Senate findings when interviewed by investigators from my office. He stated
that "years ago" when he was starting out in the International Union it was a
"real honor" to be an International Organizer, and appointments were reserved
for "only the most qualified". In those days there were only seven International
Organizers in the whole International Union.

   A modern comparison with the International Brotherhood of Teamsters is useful
to highlight the inflated number of International Union Organizers. The
Teamsters' International Organizers have the same function as their counterparts
in the International Union. In 1995 (the year of the most recent Teamsters' LM-2
available to the Monitor), the Teamsters had a membership of 1,437,000 served by
35 International Organizers. In a comparable period, 1994-1995, the
International Union had a membership of 243,467 served by 105 International
Organizers. Thus the International Union, with a membership of only 17 percent
of that of the Teamsters, had three times as many Organizers.

   The fact is that most of the International Organizers are not engaged in
organizing activities. No person interviewed could, with confidence, articulate
a difference between "International" and "State" Organizers. The most frequent
response to the question was that International Organizers are paid more. That
does appear to be true, on average. However, the absence of written job
descriptions and pay scales makes it impossible to draw a formal distinction
between the two. Herman Leavitt spoke with the most confidence when he said that
a International Organizer is a "higher level position" requiring a proposition
to hire or fire, whereas State Organizers could be hired or fired without a
proposition. However, our audit found that both kinds were hired and fired by
proposition in the identical manner. An example of how the terms "International"
and "State" can be confusing is the use of the terms for Organizers who have
been involved in the International Union's "riverboats" campaign, which has
taken place from approximately 1991 to the present in Illinois, Indiana and
Missouri. The number of Organizers involved in this campaign at any one time has
varied from four or five to a high of 11.

   Four of the Organizers were International Organizers and seven were
identified as State Organizers. All worked the same campaigns full-time and had
equal status, and there appears to be no rhyme or reason for the designation of
"International" or "State" for these organizers. Thomas Hanley was the Director
of Organization and, by title, he should have been directing or coordinating the
International Union's major organizing activities. In fact, the most significant
increase in membership for the International Union in decades has come from
organizing drives in Las Vegas, Nevada, directed by John Wilhelm. While Mr.
Wilhelm's activities could be characterized as those of a local union, their
size and scope argue that they be considered in a national context.

   Neither the International Union nor the Department of Organization have
anything written that pertains to the hiring, firing, evaluation, management, or
supervision of Organizers. An exception is a memorandum dated February 28, 1994,
which provides guidance concerning expense reimbursements and apparently was
written in response to an earlier U.S. Department of Labor audit which
questioned Department of Organization reimbursement procedures. There is no
description of the Organizer position and there are no qualifications for the
Organizer position. There is no system of performance evaluation. There are no
pay scales. There are no procedures for the hiring and firing of Organizers
other than there must be approval by the General Executive Board. There is no
system for correlating an Organizer's background and ability with the needs of a
particular assignment. There is no Department of Organization budget and no
administrative system by which expenses can be tracked and monitored.

   Department of Organization personnel were unable to answer the most
fundamental questions such as "how many Organizers are there, how much do they
cost in salaries, what are the department's operating expenses in a year, and
how much has the riverboats campaign cost"? The sole vehicle for following an
Organizer's activities is the Organizer's Weekly Report. But these reports are
not computerized and must be searched by hand and read individually. When
International Organizers have been asked to identify their supervisor, almost
without exception their reply was "Tom Hanley". However, Thomas Hanley was
clearly unable to supervise the daily activities of more than 100 Organizers.
There were no identifiable intermediate supervisors between Thomas Hanley and
the Organizers.

   Most Organizers are virtually unsupervised. The culture of senior Organizers
is that they need to be independent, and shouldn't require direction from the
International Union. While this may be a laudable ideal, Organizers should be
accountable to someone who can reasonably monitor their activities. Examples
were found in the riverboats campaign where individual Organizers picked their
own organizing target and, without asking for or receiving approval, simply
showed up at the riverboat to work. In one instance an Organizer actually moved
to a different city without permission in order to work on a different target.
On-site supervision is in the form of coordination of Organizers' activities,
rather than accountability for actions. Those involved in the riverboats
campaign expressed confusion as to individual assignments and the identity of
"lead" Organizer. Two International Organizers thought they were both lead
organizers at one time, and another stated that Tom Hanley hired them, but he
told them only that they were to "work the riverboats". Each "asked around"
Local 1 in order to find out where the riverboats were and which boats were
being organized. Each had the same experience of showing up at a riverboat with
other Organizers who didn't know who they were and didn't know they were coming.
Organizers who were interviewed about their work relating to the Hollywood
Casino riverboat provided the names of three different people they believed was
the lead organizer. Lisa Cosby, Secretary to Tom Hanley at the International
Union's headquarters in Washington, D.C., stated that Thomas Hanley did not
personally supervise the activities of the International Organizers, with the
possible exception of the riverboat Organizers. While Thomas Hanley arguably
managed the riverboats campaign and provided directional oversight, he clearly
did not supervise the individual Organizers. Yet the riverboat Organizers
identified him as their only supervisor.

   My investigation found that International Organizers are scattered throughout
the International Union doing a variety of things, few of which actually involve
organizing. Fifteen of the International Vice-Presidents listed on the most
recent LM-2 (1996-1997) are International Organizers. Several Vice-Presidents
stated that the International Organizer salary is a means to pay the
Vice-Presidents, who otherwise don't get paid for the extra responsibility. That
is a reasonable argument, as is the argument that Vice-Presidents, by virtue of
their position, are always involved in organizing for the International Union in
one way or another. However, these individuals are not supervised by the
Director of Organization, even though their weekly reports are processed through
the Department of Organization.

   In some instances, the assignment of an International Organizer to a local
union is viewed as a contribution to the local union from the International
Union. Ron Richardson, current General Vice-President of the International
Union, was interviewed about an International Organizer assigned to his local
union when he was Secretary-Treasurer of Local 25 in Washington, D.C. He
explained that the International Organizer was college educated and a valuable
asset to the union. The local union was unable to pay a salary large enough to
reasonably expect to keep this person in the union. Mr. Richardson telephoned
General President Hanley and asked that the employee's salary "be supplemented"
by making him an International Organizer. The most significant factor impacting
on the absence of clearly defined responsibility for the International
Organizers is the fact that many were appointed by former General President
Hanley, usually for reasons known only to him. Apparently, he did not consult
with anyone before hiring or firing an Organizer.

   Many International Organizers reported only to General President Hanley, and
only he knew what they did for the International Union. That structure makes the
Department of Organization irrelevant, except for the fact that the Department
of Organization processes the weekly reports for payment.

   During my term, seven International Organizers were investigated because of
questions about what they did for the International Union. Of the seven, one was
terminated and five were the subjects of charges by me, resulting in their
dismissal.

   Recommendations:

   1. Establish a written definition of the International Organizer position
based on specific organizing activities. The definition should include specific
duties and responsibilities. Differences between "International" and "State"
Organizers should be strictly defined.

   2. Coordinate and oversee all major International Union organizing activities
should be directed by the Director of Organization or other General Officers and
Senior Officials, as determined by the General President.

   3. Establish the written rules, policies, and procedures necessary to
efficiently supervise and/or monitor the activities of the International
Organizers.

   4. Require the Director of Organization to reside in Washington, D.C., in
order to work full time in the Department of Organization.

   Establish a clearly defined, written procedure to delegate the Director of
Organization's authority to a subordinate in the event of the Director's
prolonged absence from the International Union.

   5. Review the activities of all International Organizers and remove or
reassign any who are determined not to be fully employed in meaningful activity
on behalf of the International Union.

   K. Consultants

   The International Union uses personal service contracts to retain lobbyists,
legislative experts, legal counsel, and public relations specialists as
consultants. This allows the International Union to obtain expertise from
outside specialists or retired International Union officials. This method has
also been used to soften the transition for International Union officials when
they move from the active ranks into retirement. Several consultants have been
given leased cars, including one former movie actor, who was paid $ 25,000 per
year, plus expenses.

   Approval for retention of consultants is obtained by General Executive Board
propositions, usually with insufficient detail to form a basis for decision.
Furthermore, there is no method of tracking the work of the consultants and
holding them responsible for their work. Co-General Counsel Robert Rotatori
advised in a letter dated December 27, 1995, that the work of consultants is
generally documented only by oral reports to the General President or to
meetings. Mr. Rotatori's response listed only six consultants, although there
were at least 18 formal agreements with consultants on record with the
International Union's Accounting Department at the time.

   The accounting supervisor had no definition of what a consultant is, saying
if "they" say he's a consultant, then he's a consultant. The majority of the
consultants were hired by former General President Hanley, with the approval of
the General Executive Board. Most of them were hired in the State of Illinois.
It is simply impossible to evaluate if the membership of the HEREIU received the
kind of services they contracted for since there are no activity reports filed
by any consultants.

   Jack Lavin, Director of Public Relations of the HEREIU located in the
Midwestern Regional office in Chicago, Illinois, has been a consultant to the
HEREIU since May, 1983. He is currently paid $ 82,000 a year and is provided
with a leased Cadillac Fleetwood. He is required "to perform such services and
duties as are requested by the General President". Mr. Lavin does not file any
reports describing his activities. He does, however, give oral reports at some
General Executive Board meetings.

   Robert E. Juliano, Legislative Representative for the HEREIU who came to
Washington, D.C. from Chicago, Illinois was an employee from 1973 to January
1981. Since then, Mr. Juliano has been a consultant to the HEREIU. He is paid in
excess of $ 250,000 per year and is provided with a 1996 Cadillac Seville. In
addition, he receives $ 10,000, plus expenses, as Legislative Counsel to the
HEREIU Trust Fund. In June 1996, General President Hanley recommended, and the
General Executive Board approved, a five year extension to his contract.
Included in the approval is a $ 10,000 annual increase. Mr. Juliano does not
file activity reports and he represents other clients. He does give oral
briefings at some General Executive Board meetings. It should be noted that the
HEREIU considers Mr. Juliano one of the most effective labor lobbyists in
Washington, D.C.

   Harry Anselmo, a lobbyist in Illinois, was paid $ 40,000 per year and drove a
HEREIU leased Cadillac Seville. His contract was terminated on January 31, 1997.
During his tenure, Mr. Anselmo earned $ 263,423.

   Paul Burke, a retired actor and neighbor of Mr. Hanley's in Palm Springs,
California, has been a consultant since 1980. He was paid $ 25,000 per year,
received health insurance and a union leased Cadillac Seville. Mr. Burke's job
was to provide a "celebrity presence" to the International Union's General
Executive Board and fund meetings. His contract was terminated in February, 1997
after an inquiry by my office. He now receives a $ 600 monthly pension from the
union. There are no reports of Mr. Burke's activities. Gateway Associates of
Chicago, Illinois received $ 267,488 for the period October 1988 through
November 1996 for consulting on state and federal matters. The principal person
in that company is Patrick Levar, a Chicago, Illinois alderman. There are no
reports.

   Robert L. Hickman, Sr., was hired as a Business Agent for Local 1 in Chicago,
Illinois. Mr. Hickman held high positions in the Illinois state government. In
February 1991, he became Executive Director of the Illinois State Toll Highway
Authority. In June 1991, Thomas Hanley was appointed to the Illinois State Toll
Highway Authority at a salary of $ 21,000 per year. In March 1994, Mr. Hickman
resigned his position following allegations that he steered no-bid highway
engineering contracts to a firm his son, Robert Hickman, Jr., worked for. On
February 15, 1995, he was indicted for theft and official misconduct in the
DuPage County, Illinois, courts. Mr. Hickman served as a consultant for Local 1
from October 1994 until the day he was indicted. Again, there are no reports of
his activities.

   Robert L. Hickman, Jr., a consultant from Springfield, Illinois, was paid $
122,000 during the period March 1991 through September 1995. When asked about
his duties, Mr. Hickman