TEAMSTERS (IBT)
Nash Finally Sentenced, Gets Off Easy
Almost 55 months after confessing felonious conduct, Teamster money-laundering
scandal figure, Jere Nash, has finally been sentenced. U.S. Dist. Judge
Thomas P. Griesa (S.D.N.Y., Nixon) sentenced Nash Apr. 9 to a mere two
years probation for his role in a series
of schemes which lead to the embezzlement of some $885,000 from the Int'l
Bhd. of Teamsters' treasury and to $538,100 in illegal campaign contributions
to the failed reelection campaign of expelled IBT president Ron Carey.
The sentencing appears to have been hush hush: the four N.Y.C. major dailies
and the two Washington, D.C., dailies apparently did not cover the sentencing
(as of Apr. 15), which is surprising given the red hot coverage of the
scandal in the past.
Nash was Carey's campaign manager and pled guilty Sept. 18, 1997, to one count of conspiracy and one count of making false statements. Griesa agreed to show leniency to Nash, who served as the main prosecution witness in the failed perjury trial of Carey in Oct. 2001. "I have no intention of imposing a prison sentence," Griesa told Nash. Nash also testified against ex-IBT political director William Hamilton, who was convicted in Nov. 1999 and is serving a three-year prison term. Griesa ordered Nash to pay $25,000 in restitution, which has already been paid.
A bearded, bespectacled Nash apologized to the IBT before sentencing: "I felt so strongly about the need for Ron Carey to get elected that I was willing to substitute my judgment for the collective judgment of the union members that voted, and that was wrong." Nash faced up to three years in prison under sentencing guidelines, although prosecutors asked for less time because of his "substantial assistance." Griesa granted the request, noting that he had given probation to two other campaign aides convicted in the scheme. [Bloomberg News 4/9/02] This apparently was not a reference to Martin Davis and Michael Ansara, both of whom worked with Nash to facilitate the schemes and whom pled guilty on the same day. There has been no report that these two have been sentenced. Two minor scandal figures fund-raiser Charles Blitz and disbarred attorney Nathaniel Charny both received slaps on the wrists in 1998 and 2000, respectively.
Attention opposition researchers: while awaiting sentencing, Nash kept busy. In the Mar. 2002 issue of Campaign & Elections, Nash placed the following classified ad: "DEMOCRATIC CONSULTING GROUP, INC., P.O. Box 1488 Jackson, MS 39215, 601-352-7037 Jere Nash FAX 601-949-8492." Research to date has not uncovered any of the convicted felon's clients; however, if you find the Democratic Consulting Group working for a political candidate or some other political organization this election cycle, please contact the Union Corruption Update.
PLUMBERS (UA) / CARPENTERS (UBC) / COMMUNICATION WORKERS
(CWA) / AFL-CIO / IRON WORKERS (BSORIW) / ASBESTOS WORKERS (HFIA) / OPERATING
ENGINEERS (IUOE) / LABORERS (LIUNA) / RETAIL UNION (RWDSU) / MACHINISTS
(IAM)
ULLICO Scandal Grows: Maddaloni, McCarron, Bahr Sold Shares
As reported in the last issue, a federal grand jury in Washington,
D.C., is probing stock transactions by directors of a union-dominated insurance
firm ULLICO linked to the now bankrupt firm,
Global Crossing. The Wall St. Journal reports that internal documents reveal
that ULLICO officers and board members cashed in on some 71,000 ULLICO
shares between Jan. 2000 and Sept. 2001, possibly at the expense of the
very union pension funds to which they owed a fiduciary duty. The profits
were potentially huge. For example, Martin J. Maddaloni, president of the
United Ass'n of Plumbers & Pipe Fitters, allegedly reaped a $184,000
profit from timely selling of a mere 2,000 shares of his ULLICO stock back
to ULLICO in 2000.
The list of union bosses who did sell and who did not sell is growing. ULLICO board chairman and ex-AFL-CIO Building & Construction Trades Dep't president Robert A. Georgine allegedly sold 4,000 ULLICO shares. William G. Bernard, a ULLICO director and ex-president Int'l Ass'n of Heat & Frost Insulators & Asbestos Workers, allegedly sold 8,664 shares. Indicted Int'l Ass'n of Iron Workers' ex-president, Jacob "Jake" West, a ULLICO board member, allegedly sold 5,250 shares. Douglas J. McCarron, ULLICO board member and president of the United Bhd. of Carpenters, sold 3,000 shares. Finally, Morton Bahr, ULLICO board member and president of the Communications Workers of Am., sold 300 shares for a $27,000 profit in 2001.
Increasing the pressure on other bosses to come forward are four who have claimed that they did not sell any ULLICO stock: AFL-CIO president John J. Sweeney; Int'l Union of Operating Eng'rs president Frank Hanley; Laborers' Int'l Union of N. Am. president Terence M. O'Sullivan, and Retail, Wholesale & Dep't Store Union ex-president Lenore Miller. [WSJ 4/5/02]
The ULLICO scandal is already hurting Big Labor. The AFL-CIO was gearing up to push for corporate-governance reforms and had launched a campaign with the Int'l Ass'n of Machinists to pressure Lockheed Martin not to renominate Enron director Frank Savage to its board. The day the AFL-CIO started getting nasty media calls on ULLICO, AFL-CIO secretary-treasurer Richard L. Trumka (who has pled the Fifth in another union scandal) pulled the plug. "He didn't want us to look like hypocrites," says one union official involved. [Business Week 4/8/02]
LABOR LAW REFORM
Landrum-Griffin, LM-2, Reform Moving Forward
In a joint hearing Apr. 10, two subcommittees of the House Committee
on Education & the Workforce heard testimony about whether the Dep't
of Labor's union financial reporting and disclosure regulations are meeting
the requirements of the Labor Mgmt. Reporting
& Disclosure Act, a.k.a, the Landrum-Griffin Act. "The law was
intended to ensure that rank-and-file union members have a full, equal,
and democratic voice in union affairs," said Rep. Sam Johnson (R-Tex.),
chairman of the Employer-Employee Relations Subcommittee. "With the passage
of time, we have seen some aspects of union democracy thrown to the wayside
and often ignored. Union leaders should respect the law, and [DOL], which
is responsible for putting teeth into the LMRDA, should aggressively enforce
it. Unfortunately, neither is always the case."
"The reporting and disclosure provisions of [LMRDA] are a failure because
among other things the [LM-2] form only requires unions to report their
expenses in broad categories," said Rep.
Charlie Norwood (R-Ga.), chairman of the Workforce Protections Subcommittee.
"The result is that they can hide illegal or questionable disbursements."
Norwood also commented on data showing in that 34% of unions
filed late financial reports with DOL or none at all. "The only thing I
can compare this lack of enforcement to is the prohibition era when speakeasies
operated openly because of paid-off local police and politicians. Labor
leaders know that they can do just about anything, because [DOL] will look
the other way in the hopes of getting union support for the incumbent President."
Saying that "a significant number of unions consistently fail to comply with the statutory requirements that they timely file annual reports," Deputy Sec'y of Labor D. Cameron Findlay noted that "many observers believe that [DOL] does not have sufficient enforcement tools to punish wrongdoers" such as civil money penalties for delinquent filers. He was also critical of the current LM-2 and the other annual financial reports: "The existing forms utilize such broad, general categories that union leaders could easily use them to hide overspending, financial mismanagement, and other irregularities from their members."
Robert Fitch, a freelance labor reporter, lauded Johnson and Norwood for their "efforts to chip away at the wall that separates union members from the information they need to hold their leaders accountable." He added that "Americans can discover a great deal about what's in their food, their corporations, their consumer products, but American unions have still not been brought effectively into the Information Age."
Phillip Wilson of the Labor Relations Inst., said "In the face of the Enron and ULLICO financial scandals, shareholders and union members alike want new assurances that they can rely on those they entrust with their money to use it wisely on their behalf." He concluded: "increased transparency and improved distribution of financial information can only serve to strengthen connections between unions and their members." Johnson and Norwood, have introduced legislation that would amend LMRDA to improve and better safeguard members' democratic rights. [Rep. Johnson 4/10/02; BNA 4/11/02]
SERVICE EMPLOYEES (SEIU)
New York Reform Candidate Fired
Dominick Bentivegna, a union staffer who stood up to corruption in
a powerful N.Y.C. local, was fired Apr. 9 from his $85,000-a-year union
job after declaring he would run for president of Serv.
Employees Int'l Union Local 32B-32J. He helped oust local boss Gus
Bevona in 1999 amid reports of financial irregularities and a $6 million
black marble penthouse.
Under new leadership, Bentivegna took a job supervising shop stewards. But he became fed up with excessive spending and a lack of union democracy, and he marched into local president Michael Fishman's office and declared he was running against the boss in Sept. 2003. Twenty minutes later, he says, he was terminated. "He said, 'You're not going to work for me and run for office,'" Bentivegna said.
"It's not about democracy," Fishman said. "If you disagree with the program, you can't be working here." Attorney Alan Serrins said Bentivegna will contest the firing in federal court. Bentivegna retains his elected position as assistant secretary to local. [Daily News; N.Y. Post 4/11/02]
PLUMBERS & PIPE FITTERS (UA)
DOL Action Reportedly Nearing in $800 Million Florida Hotel Case
The Dep't of Labor is reportedly nearing the end of its investigation
into the United Ass'n of Plumbers & Pipe Fitters' investment in the
Westin Diplomat Resort & Spa near Miami. Martin
J. Maddaloni, president of the union whose pension fund owns the $800
million Diplomat, recently mailed a letter to UA locals to alert them that
DOL may "take action" against the trustees of the pension fund. Reportedly,
DOL asked for five of the fund's six fiduciaries to resign, including Maddaloni.
UA bought the Diplomat in 1997 and sold it to its pension fund. The transaction drew the attention of DOL, which required that the pension fund hire an independent overseer to monitor costs. Still, costs continued to mount. The Wall St. Journal estimated that UA's investment in the Diplomat amounts to 20% of the fund's assets. "I don't think it's quite that high," Maddaloni said. He acknowledged, however, that DOL is "concerned" about the cost overruns of the nearly four-year construction project. [Miami Herald 4/4/02]
RETAIL UNION (RWDSU)
Florida Boss Indicted for $70,000 Theft
Jack D. Hatch, ex-president of Retail, Wholesale & Dep't Store
Union Local 43 in Dade City, Fla., was indicted on one count of embezzling
some $70,000 in union funds by charging excessive and unauthorized lost
time, making personal charges on the local's credit cards, and receiving
unauthorized expense reimbursements between Nov. 1996 and Mar. 2000.
[DOL 3/28/02; USAO M.D. Fla. 3/28/02]
OPERATING ENGINEERS (IUOE)
Alleged $41,200 Theft Forces Resignation
Cecil Argue, president of the Int'l Union of Operating Eng'rs Local
139 in Milwaukee since 1998, resigned Mar. 22 under a cloud of corruption.
Argue's resignation followed allegations that he made unauthorized deductions
of $41,200 from a nonunion fund over the past five years. Reportedly, the
local had already fired Argue from his role as director of organizing and
had demanded his resignation. "Unfortunately, mistakes that I have made
in my personal life have made it impossible for me to continue on in my
role as president of this great union," according to Argue's resignation
letter.
Joe Wineke, the local's public relations director, said Argue was the
steward of a voluntary fund which is used for election activities, parties,
and nonunion expenses. He claimed that Argue, without authorization, removed
$41,200. "To say we're disgusted is to put it mildly," said Wineke. "We
put our trust in this man and he violated that trust."
After the allegations, the local hired an accounting firm
to audit the local and its funds. It found "no evidence of improprieties
involving Mr. Argue and [IUOE] Local 139 unions assets." There was no report
of whether the matter has been referred to law enforcement. [Daily Reporter
(Milwaukee) 4/8/02]
- - - - - -
ADDITIONAL BRIEFS NOT INCLUDED ON THE FAX EDITION OF THIS UNION CORRUPTION UPDATE:
- - - - - -
FOOD & COMMERCIAL WORKERS (UFCW)
Californian Gets 18 Months for $280,000 Theft
U.S. Dist. Judge Oliver W. Wanger (E.D. Cal., H.W. Bush) sentenced
Alan L. Axt, ex-vice president of the
United Food & Commercial Local 1288 Federal Credit Union, Apr. 1 to
18 months in prison for embezzling about $282,300 from the institution
based in Fresno, Cal. Axt pled for a lighter term based on a claim of "extreme
remorse." Axt told Wanger before sentencing, "You can't imagine the hurt
I've caused so many people ... I've apologized to so many people." The
judge denied Axt's motion. Wanger told Axt he does not doubt the sincerity
of his remorse, but he added, "you didn't blow the whistle on yourself"
and didn't begin cooperating until after he was caught.
Axt pled guilty Sept. 4 to charges that he stole the money between Mar. 1, 1999, and Nov. 30, 2000, while he was vice president of member services for the institution. His lawyer, David Gottlieb, said Axt has repaid about $50,000 of the money. Insurance has paid another $50,000, and Wanger ordered Axt to make restitution of a remaining $182,335. So in other words, Axt got away with $47,665.
Asst. U.S. Atty. Jonathan B. Conklin, one of the prosecutors on the case, said more than $100,000 of the missing money is unaccounted for and Axt said he is at a loss to explain it. "I wish I knew where it all went to," Axt said, "... It didn't go to a Swiss bank." Axt blames his crimes on problems with a new manager of the credit union, where he had worked for 15 years, but the details were not reported. Axt is currently working in Bakersfield. Wanger allowed him to remain free on his own recognizance until May 28, when he will begin serving his term. He also will spend five years on supervised release after his time in custody. [Fresno Bee 4/2/02]
CARPENTERS (UBC)
Indiana Boss Gets Year for $47,000 Theft
U.S. Dist. Judge Robert L. Miller, Jr. (N.D. Ind., Reagan) sentenced
Robert D. Meyer Mar. 26 to one year and one
day imprisonment and two years of supervised release for embezzling $47,346.40.
Miller also ordered Meyer, ex-secretary-treasurer of United Bhd. of Carpenters
Local 1481 in Gary and South Bend, Ind., to make full restitution to the
local and the local's corruption insurance company, Fidelity & Deposit
Cos. Meyer embezzled the funds by using the local's ATM card for personal
use over a two-year period. He was charged Nov. 19 and pled guilty Dec.
6. He must report to prison on May 10. His sentencing was adjusted upward
by his prior criminal conviction in Charlotte, Mich., for "attempted uttering
and publishing" in 1987. [DOL 3/26/02; USAO N.D. Ind. 4/3/02]
LABORERS (LIUNA)
Texan Admits Union Embezzlement
Linda Chargois, ex-office secretary of Laborers'
Int'l Union of N. Am. Local 80 in Houston, pled guilty Apr. 1 to count
one (charging her with embezzling $57) of a 29-count indictment that had
charged her with embezzling a total of $35,171 in union funds. She allegedly
stole the funds in 29 transactions from Feb. 1998 to July 2000. The case
is assigned to U.S. Dist. Judge Richard A. Schell (E.D. Tex., Reagan).
[DOL 4/1/02; USAO E.D.Tex. 1/18/02]
South Carolinian Indicted for $27,800 Embezzlement
Gwendolyn M. Meadows, ex-bookkeeper for Nat'l Postal Mail Handlers
Local 334 (a subunit of the Laborers' Int'l Union of N. Am.) in Columbia,
S.C., was indicted Mar. 20 on one count of embezzling $27,882.16 in union
funds. From Mar. 1997 to Sept. 1998, she allegedly stole the funds by failing
to deposit dues check-off checks, receiving cash back on union deposits,
and purchasing postal money orders for personal use with union funds. [DOL
3/20/02; USAO D.S.C. 3/20/02]
COMMUNICATIONS WORKERS (CWA)
Hollywood Boss Sentenced for $22,100 Embezzlement
U.S. Dist. Judge J. Spencer Letts (C.D. Cal., Reagan) sentenced Leonard
M. Duge, ex-vice president of Communications Workers of Am. Local 59053
in Burbank, Cal., Apr. 8 to 24 months of unsupervised probation in connection
with a union embezzlement scheme. Duge admitted Feb. 25 to embezzling $22,137.66
between Jan. 1996 and June 1998 from the local, which is a.k.a., Nat'l
Ass'n of Broadcast Employees & Tech'ns Local 53. He submitted fraudulent
salary loss vouchers to Local 59053, was reimbursed, and spent the money
on personal expenses. In exchange for the guilty plea, the U.S. Atty.'s
Office in Los Angeles charged Duge on Mar. 5 with only a single count of
falsification of union records. The plea agreement stated that Duge has
made full restitution.
The specific charge to which he pled guilty illustrates his scam. Duge prepared and submitted a salary loss voucher on Dec. 17, 1997, to Local 59053 claiming that his employer, the Nat'l Broadcasting Co., failed to compensate him for the time he spent on union leave between Dec. 8-12 and Dec. 15-17, 1997. As a direct result, Local 59053 issued Duge a check for $2,118.05. According to the plea agreement, the boss knew that NBC was contractually bound to, and did, fully compensate him for all the time he spent on union leave during these periods, and that he was not entitled to further compensation from Local 59053. [DOL 4/8/02; City News Serv. 4/8/02; U.S. v. Duge, No. 02-CR-225 (C.D. Cal.)]
MACHINISTS (IAM)
Georgia Boss Sentenced, Pays $16,000 in Restitution
Carey L. McClure, ex-secretary-treasurer
of Int'l Ass'n of Machinists Lodge 2731 in Hampton, Ga., pled guilty Apr.
5 in U.S. Dist. Court in Atlanta to a one-count information charging him
with failure to maintain records. Between Feb. 1999 and June 1999, McClure
willfully made false entries (payee and date) on check stubs, according
to the information. He was sentenced to three months home confinement with
a monitor and 36 months probation, and he was ordered to make restitution
of $16,621.22. McClure was indicted Jan. 22 on one count of embezzling
$16,917.13 in union funds and one count of failure to maintain union financial
records. It was unclear from the information, but the check scheme may
have effected defunct Lodge 2733 and Lodge 615 in Marietta, Ga. [DOL 4/5/02;
USAO 4/5/02]
TEAMSTERS (IBT)
Mississippi Boss Stole $2,700
Jessie A. McGee, ex-business agent of Int'l Bhd. of Teamsters Local
891 in Jackson, Miss., pled guilty Mar. 28 in U.S. Dist. Court for the
S. Dist. of Miss. to making false entries in union records and was sentenced
to two years probation. He had previously made restitution of $2,782 to
the local. He had been indicted earlier on one count of embezzlement and
one count of falsifying union records. [DOL 3/28/02]
PAINTERS (IBPAT)
California Fund Manager Indicted on Nine Fraud Counts
William L. Seay was indicted Apr. 9 on nine counts of mail fraud in
relation to a failed $33 million investment for S. Cal. & Ariz. Glaziers,
Architectural Metal and Glass Workers Pension Plan that he managed. He
pled not guilty to federal charges of defrauding an employee pension plan
connection with its multi-million dollar investment in a Carson landfill
that, at one time, was planned to be used for a professional football stadium.
The indictment alleges that Seay, the ex-administrator and investment advisor to the plan, defrauded the plan in relation to an investment in a 157-acre former landfill located near the junction of the 110 and 405 freeways in Carson, Cal. Between 1989 and 1997, the plan invested more than $33 million in an unsuccessful effort to develop the Carson Property into a retail outlet mall. The property was more recently the subject of a failed bid to attract an NFL franchise to the L.A. area. Between 1994 and 1998, Seay deceived the plan, as well as its trustees, participants and outside auditors, about the value of the property and the prospects for return of the plan's investment in the property.
The indictment also alleges that Seay failed to disclose his prospective personal interests in the property and an adjoining property. By causing the plan to invest tens of millions of dollars in the project, Seay was able to promote his personal interests and to collect hundreds of thousands of dollars in compensation from the plan for his administrative and investment advisory services. To date, the plan has not recovered any of its investment in the property.
At the arraignment, Seay's case was assigned to U.S. Dist. Judge Edward Rafeedie (C.D. Cal., Reagan) who scheduled a June 4 trial. If Seay is convicted of all counts, the maximum penalty is 45 years in prison and $1.75 million in fines. The Glaziers union is now apart of the Int'l Bhd. of Painters & Allied Trades. [USAO C.D. Cal. 4/9/02]
LABOR LAW REFORM / TEACHERS (NEA)
Michigan Legislature Considers Financial Reporting and Disclosure
Provisions for Public Unions
A group of Mich. state lawmakers, led by Rep. Robert Gosselin (R-Troy),
are pushing a bill that could require unions
of public employees to disclose more detailed financial information.
Gosselin and the Mackinac Center for Public Policy, which backs the bill,
hope House Bill 5574 eventually leads to the requirements' being applied
to all unions. If approved, the bill would amend Mich.'s Public Employment
Relations Act to require annual union reporting according to spending categories.
The reports would be filed with the Mich. Dep't of Consumer & Industry
Servs. Also, the reports would be subject to an independent
audit. Currently, public unions aren't required to file an annual financial
report. Unions in the private sector must file an LM-2 with the U.S. Dep't
of Labor.
"This is a bill that's time has come," Gosselin said. "Companies have to disclose where their money goes, politicians have to disclose where they receive money from and where they spend it, so why are unions let off the hook?"
Introduction of HB 5574 came a month after the Midland-based Mackinac Center issued a Dec. 2001 report called "The Michigan Union Accountability Act." The report calls for more financial accountability and disclosure by unions. Under the bill, those that don't comply couldn't force employees of union shops to pay dues.
Karen Schulz, communications consultant for the Lansing-based Mich. Educ. Ass'n, said "This bill is not necessary." Financial data is available on tax returns and campaign-finance reports, she said. [Crain's Detroit Business 3/4/02]
"Unions in Michigan represent over 900,000 workers and take in more than $250 million in membership dues annually. But in spite of their expansive wealth and political power, requirements that unions disclose their financial dealings are minimal." the Mackinac Center said in proposing its broader bill. "Reform of the federal reporting system, which governs private-sector unions, is needed but unlikely in the current political climate. Michigan can take the lead by passing its own Union Accountability Act, requiring annual financial disclosure reports and independent audits of public-sector union affiliates active in the Great Lakes State."
LABORERS (LIUNA) / ELECTRICAL WORKERS (IBEW) / OFFICE
& PROFESSIONAL EMPLOYEES (OPEIU) / PLUMBERS & PIPE FITTERS (UA)
DOL Settles Five Portland Pension Fund Suits
The Dep't of Labor Apr. 4 filed five consent orders with the U.S. Dist.
Court for the Dist. of Oregon settling allegations against more than 40
trustees of union pension and benefit funds
concerning alleged violations of the Employee Retirement Income Security
Act . At the same time the consent orders were filed, DOL filed the complaints
upon which the settlements were based. The settlements are the latest round
of litigation resulting from the demise of Capital
Consultants LLC, a Portland investment management company that has
been charged with pension fraud. DOL already has a case pending against
Capital Consultants. DOL settlement resulted in the dismissal of 27 trustees
from their current positions and a new set of procedures that the funds'
must abide by in the years ahead in their investment management.
Capital Consultants has been under federal receivership since Sept. 2000. DOL estimates that a large number of union funds lost more than $100 million due to risky investments made by Capital Consultants. Funds from dozens of collectively bargained Taft-Hartley multiemployer plans and other union plans accounted for $407 million of high risk investments made by Capital Consultants, many of which may now be worthless.
The resulting litigation in the U.S. Dist. Court has fallen into three broad areas: actions against Capital Consultants, and their legal and financial advisers, by federal regulators and trusts; actions against union fund trustees by union members and DOL; and criminal charges against former Capital Consultant managers and at least one union fund trustee.
Last month a $16 million settlement was reached in the class action cases filed by union members against their fund trustees. However, the funding of the settlement is now in question due to the financial difficulties of the insurance company that provided liability coverage for some of the funds' trustees. All the settlement payments were to be funded by the funds' fiduciary liability policies.
DOL's five settlements are part of the class action settlements and do not require the trustees to pay any more money to the trust funds, said Chrys Martin, a Portland lawyer representing most of the fund trustees. DOL's complaints alleged that trustees for 10 funds involving five different unions violated the prudence standard under ERISA by allowing Capital Consultants to invest $150 million in risky investments. The suits alleged that the trustees ignored warnings by outside advisors, ignored their own guidelines on diversification and permitted Capital Consultants to make a number of risky private investments during the mid- to late 1990s. The suits also charged that three officers in three different unions who served as trustees were improperly influenced by gifts from Capital Consultants, also in violation of ERISA. The suits sought the restoration of the funds' losses. However, the settlement of the suits does not call for any more payment to the trusts than was agreed in Mar. in the class action lawsuits.
Martin said the DOL settlement provided nothing new, only that the government wanted the settlement written in its format. She said it was "disingenuous and unfortunate" that DOL took action against the funds' volunteer trustees. The agency first began investigating Capital Consultants in the early 1990s and yet it failed to catch onto its investment schemes, too, she said.
The five lawsuits detailed how trustees in fund after fund ignored warnings by outside investment "monitors" of the risks of such private investments. Trustees for a number of the funds ignored their funds' guidelines on the amount of their funds that should be invested in such ventures. When the amount of such investments exceed the guidelines, trustees often voted to relax the guidelines, the suits said. For example, in the case involving the Oregon Laborers-Employers Health and Welfare Trust, the plan called for investments only in readily marketable securities and real estate. Yet during the mid-1990s Capital Consultants invested up to 35% of the fund under its management in collateralized notes, the suit said.
Between 1995 and 1999 the trustees of the Oregon Laborers-Employers Pension Plan allowed Capital Consultants to invest 55%, or $ 103 million, of its assets under the firm's management in private placements, the suit said. Trustees of the union's 401(k) plan allowed up to 100% of the funds managed by Capital Consultants to be placed in risky private investments, contrary to the fund's diversification policy, the suit said.
Three funds were administered by the Eighth District of the Int'l Bhd. of Electrical Workers headquartered in Denver. The union's pension fund in the early 1990s had a $ 300,000 limit on the amount Capital Consultants could loan to any one borrower in a private placement, according to the suits. In 1996 the trustees changed this limit to 20% of fund's assets under management by Capital Consultants. And in 1997 the trustees changed the limit to 50%. By 2000, the fund had $46 million under management by Capital Consultants, much of it private placements, the suit said.
The Portland-based United Ass'n of Plumbers & Pipe Fitters Local 290's Pension Plan was "repeatedly warned" in 1995 by its outside investment monitor about Capital Consultants' private placements, the suit said. The trustees were warned of the low returns and high risks of such investments, the suit said. The monitor characterized Capital Consultants' nontraditional asset portfolio as "drastically underperforming," the suit said. Trustees were charged with failure to protect interest, with failure to act with prudence and diligence, failure to heed warnings and for relying on inadequate investment reports.
Three union officials who served as trustees were singled out for accepting gifts from Capital Consultants. John Abbott, a former business manager of the Or., S. Idaho, and Wyo. Dist. Council of Laborers, was named for accepting $194,940 in gratuities from Jeffrey Grayson, the principal owner of Capital Consultants. He has already pled guilty to criminal charges and is to begin a 15-month sentence soon, plus must pay restitution.
The other two union officials charged in the complaint for accepting gratuities as trustees were Gary Kirkland, chief executive of the Portland-based Office & Prof'l Employees Int'l Union Local 11, and Robert Legino, a Denver-area union official who served as a trustee on two funds administered by the Eighth Dist. of the IBEW. A portion of the charges against Kirkland were not included in the settlement and remain in dispute with DOL. [BNA 4/10/02]
AUTO WORKERS (UAW)
DOL Looking at Joint Detroit Funds
The Dep't of Labor said Apr. 10 it will try to open the books of three
multimillion-dollar funds run by the United Auto Workers and Detroit automakers.
The funds are meant to finance training for hourly auto workers, but money
has been spent on political receptions, stock-car racing, Las Vegas conventions
and lavish parties, and private planes for union officials.
Rep. Charlie Norwood (R-Ga.) chairman of a House Subcommittee on Workforce Protections, asked the Deputy Secretary of Labor D. Cameron Findlay to expose the finances of these funds to rank-and-file UAW members. He spoke Apr. 10 at a congressional hearing on financial reporting requirements for unions. Norwood said he asked for the new disclosure requirements on joint funds, which other industries and unions also use, after he read a Detroit Free Press report last year about the way the UAW and General Motors Corp., Ford Motor Co. and DaimlerChrysler AG operate their joint funds. The automakers finance the funds according to a per-worker formula. It is a benefit unions negotiate during contract talks.
The Free Press report showed the three nonprofits the union and each automaker run have hefty administrative costs and unusual expenses. They have sponsored stock-car races and teams, hosted receptions for politicians, among them President Clinton, and rented limousines, private planes and helicopters. The UAW and General Motors have called their joint fund "the largest privately funded educational program in the world" and combined, the three funds spent more than $1.3 billion between 1996 and 1999. Yet the three Detroit funds escaped DOL scrutiny and regulation for years. UAW and the automakers established the first joint funds in 1982 to retrain thousands of laid-off workers. Over the years, the funds have grown to encompass child-care and fitness centers for members. They also help pay workers' college tuition and are involved in improving workplace safety. UAW and the automakers negotiate terms for the funds and require the car companies to contribute 19 cents an hour for every hour worked by every hourly worker. The automakers also pay an overtime penalty of up to $5 an hour for every hour worked, based on a formula. The joint funds are classified as nonprofit and file annual tax returns with the IRS that describe their financial status in general. These forms are public documents.
Findlay told the Detroit Free Press that he is looking at the possibility
of requiring the union or the joint funds to file financial disclosure
statements as part of a review of the way unions describe their finances
to rank-and-file members. "The broad intent is that a union member ought
to be able to see how a union is spending their money," Findlay said.
Norwood said he believes DOL can require the funds to disclose
their finances without requiring congressional action. "The average union
member in Georgia would be appalled to know how some of their hard-earned
money was being spent and the Labor Department's job is to make sure they
know," Norwood said.
Dave Yettaw, an ex-president of UAW Local 599 in Flint, Mich., said he has been pushing for reporting requirements for the joint funds since 1998. "This is what we've been after because this money comes out of the members' economic package," Yettaw said. "This is a huge sum of money that goes unreported." [Detroit Free Press 4/11/02]
Suspended Boss Forced to Repay $1,200
Union boss and political activist Eric Mays is engaged in a running
battle with United Auto Work Local 699 in Saginaw, Mich. Mays is suspended
as recording secretary at the local. He has been involved in numerous political
efforts in Eastern Mich. , including gathering absentee ballots for candidates.
Mays was recently reinstated as a union member after reimbursing the local
for hotel reservations and plane tickets to a union conference in Washington,
D.C., that he did not attend. He was ordered to pay the local nearly $1,200
by the UAW's Public Review Board, which heard his appeal on charges the
local filed against him. No word if law enforcement has been notified of
the apparent union embezzlement.
UAW members can seek the board's independent review of actions by elected officials and UAW official bodies. Members of the board are independent of the UAW, and the board's decisions are binding. The review board ruling was direct in its assessment of May's appeal, calling it "singularly lacking in merit." Mays repaid the local the money under protest, and said that the local still owes him back pay. He now faces an internal union trial in his attempt to win back his recording secretary position.
Because he did not have back pay that the local owed him, Mays said, he couldn't afford to travel to the conference, even though plane tickets, hotel reservations and arrangements had been made for him. Mays thought he could use the plane tickets - for himself and a companion - the next day, but then learned there would a significant additional charge to use the tickets. "I didn't know it worked like that. I thought you could just catch a plane from Detroit to Washington with the same ticket," Mays said.
Mays said the president of UAW Local 699, Al Coven, is trying to undermine the will of the local's members. Mays said he has had a series of run-ins with Coven, including one in which an argument between the two men led to a secretary at the local filing a grievance against Mays. Coven noted that Mays is facing a trial by union members over the secretary's grievance. Given the time frames involved under union rules, a decision on that charge could be at least 90 days away. Mays says he faces two possible outcomes: a reprimand, or removal from office. [Flint Journal 3/26/02]
COMMUNICATIONS WORKERS (CWA)
Ohio Harassment Complaints Filed Against Clinton-Pardoned Ex-Boss
Three Ohio women are taking on their company and their boss, a former
union boss, in sexual harassment complaints. Deborah A. Fannin, Gay Griffith
and Cheryl Ortoski filed charges of discrimination with the Ohio Civil
Rights Comm'n on Feb. 5. The charges, which are made against the United
Tele. Credit Union in Rocky River, Ohio, specifically name Martin J. Hughes.
Hughes is an ex-vice president of the Communications Workers of Am. In
Dec. 2000, President Clinton pardoned him for his 1987 conviction for falsifying
union records. In their complaints, the women identify Hughes as treasurer-manager
of the credit union. Griffith and Ortoski say the harassment started in
Feb. 2001, when Hughes moved into their offices. Presumably, the pardon
enabled him to obtain employment in which he would be entrusted with other
individuals' money.
The complaints of both Griffith and Ortoski allege Hughes has asked if he could go to the bathroom with them. Ortoski's complaint says Hughes threatened to spank her. Griffith's complaint alleges he "attempted to set up an appointment with Planned Parenthood to discuss my personal sexual activities." The women's attorney, Avery Friedman, said they have a tape of Hughes dictating a letter to Planned Parenthood. Fannin's complaint claims that, during her job interview, Hughes remarked about two women in the office, "that they were lesbians." Fannin started working at the credit union in Jan. 2002. Her complaint alleges Hughes has since made the following statement: "If you ever get raped, you need to lay there and enjoy it." Friedman said Fannin will amend her charge of discrimination to include "statutory retaliation" because she was fired Feb. 7.
Drema Brown of OCRC's public affairs office said the women's charges will be investigated. When that process is completed, Brown said, investigators will make a recommendation to the five commissioners. If they decide there is probable cause, the state attorney general's office will get involved, she said. [Plain Dealer (Cleveland) 2/8/02]
PLUMBERS & PIPE FITTERS (UA)
Chicago Local Loses Discrimination Suit, Must Pay $155,000 in Damages
U.S. Dist. Judge David H. Coar (N.D. Ill., Clinton) ordered United
Ass'n of Plumbers & Pipe Fitters Local 597
Mar. 28 to pay eight black union members $155,000 to compensate them for
on-the-job racial harassment, which he described as "vile, disgusting and
insulting." Coar found the Chicago-based local liable for the emotional
suffering and mental anguish endured by the eight. The eight were harassed
in 1995 and 1996 while working on the construction of a waste-to-energy
incinerator in Robbins, Ill. In addition to the damage award, Coar ordered
wide-ranging injunctive relief after finding that the local's actions were
intentional and there was a strong possibility of future discriminatory
behavior.
Gregory Gochanour, the EEOC supervisory trial attorney in the matter, said the ruling is unique because it points to organized labor's responsibilities for securing worksites free of racial harassment and intimidation. He said Local 597's suggestion that it had little authority or power to curb racist behavior clearly was inadequate in the view of the court. EEOC believes that this is one of the very few instances in which a union has been held responsible in a racial harassment case.
"There can be no serious contention that the racial environment at the Robbins construction site was not racially hostile," Coar wrote. "Despite the contentions of Local 597, the graffiti on the walls of the port-a-johns was vile, disgusting and insulting. Only a visitor from another planet would fail to understand the ugliness of what was written and drawn on those walls." Coar also rejected the union's suggestion that a certain amount of racist talk and graffiti occurs at all construction sites and cannot be controlled. He concluded that the union knew about the racist environment, knew it to be egregious, and condoned it through its inaction.
In his final judgment, Coar granted $25,000 in compensatory damages to the lead plaintiff James M. Ferguson. Compensatory awards of $15,000 were granted to two other pipefitters and awards of $10,000 were granted to five others. In addition, a punitive damage award of $ 50,000 was granted, with $20,000 going to Ferguson and the remaining $30,000 being split equally between the remaining seven plaintiffs.
As for the injunctive relief, Coar ordered Local 597 to develop a written policy against racial harassment and a mechanism for gathering and evaluating complaints of such harassment. In addition, he ordered the local to develop a training program covering racial harassment for all union members and to mail notices to union members about the outcome of the litigation. Finally, Coar ordered the local to supply EEOC with six written reports about its compliance with the order over a three-year period.
The local was represented at trial by Charles Regan of the Chicago firm of Mayer, Brown, Rowe & Maw. Another racial harassment suit involving the same local was cleared for trial by U.S. Dist. Judge Blanche M. Manning (N.D. Ill., Clinton) on Mar. 13. [BNA 4/2/02]
POLICE UNIONS / PRODUCTION WORKERS / OPERATING ENGINEERS
(IUOE)
New York Union Fund Managers Convictions Upheld
U.S. Dist. Judge William H. Pauley III (S.D.N.Y., Clinton) denied motions
for acquittal Mar. 26 by a stock promoter and hedge fund manager who were
guilty of participating in a union pension fund fraud and kickback conspiracy
by a Manhattan jury. The indictment alleged that John
M. Black Jr., a stock promoter, and Glenn B.
Laken, a hedge fund manager, along with their co-conspirators, some
of whom were members of organized crime, devised fraudulent investment
products such as a venture fund and preferred stock.
The proposed scheme targeted the pension funds of three unions: Production Workers Local 400, the Annuity Fund of the Detectives' Endowment Ass'n, and Int'l Union of Operating Eng'rs Local 137 of Briarcliff Manor, N.Y. Pauley sentenced ex-treasurer of the Detectives Endowment Ass'n Stephen E. Gardell Mar. 18 to a year and a day on a federal wire fraud charge. He allegedly leaked law enforcement secrets to the mob and in exchange his mob friends built an $8,000 swimming pool at his home, comped him at a casino, and gave him a fur coat for his wife.
Black and Laken were charged with violating the Racketeer Influenced & Corrupt Organizations Act by participating in a conspiracy involving wire fraud and bribery schemes. They also were charged with the illegal acts themselves, such as using interstate wires to defraud the pension funds, and promising to pay illegal kickbacks to union officials. Black and Laken were convicted by a jury of all the charges against them. Black and Laken moved for a judgment of acquittal, asserting that the government's proof of a corrupt agreement with one union does not amount to a pattern of racketeering activity essential to conviction under RICO or support convictions for some of the other offenses. Pauley found that the government's proof, which principally consisted of taped conversations obtained by court-ordered electronic surveillance and consensual recording, was sufficient to sustain all counts of conviction against Black and Laken.
David C. Esseks of the U.S. Attorney's office in New York represented the government. Frederick P. Hafetz of Hafetz & Necheles in New York represented Black. Gerald B. Lefcourt of Gerald P. Lefcourt P.C. in New York represented Laken. [BNA 4/10/02]
MAINTENANCE OF WAY (BMWE)
Fifth Circuit Uphold Strike Injunction Against Union
U.S. Court of Appeals for the Fifth Circuit upheld an injunction barring
the Bhd. of Maintenance of Way Employees from unannounced strikes against
any of six railroad carriers under the Railway Labor Act on Apr. 4 Finding
that BMWE had a "long history of launching [often illegal] strikes without
warning," the district court order that the union give 10 days' notice
before beginning a "strike, work stoppage, picketing or other self help,"
against the carriers was necessary for enforcement of the RLA, and did
not violate the Norris-LaGuardia Act, U.S. Circuit Judge Jerry E. Smith
(5th Cir., Reagan) wrote for a 2-1 majority.
U.S. Dist. Judge John H McBryde (N.D. Tex, H.W. Bush) found that BMWE had a "pattern, practice, and policy of authorizing" or encouraging work stoppages and picketing against the six carriers, without providing advance notice to the affected carrier. Since 1993, the Fifth Circuit said, BMWE struck or threatened to do so 18 times; in nine of these, operations were disrupted before the carrier could get a temporary restraining order. BMWE maintained that these surprise strikes did not violate the RLA, and that, in any case, the Norris-LaGuardia Act prevented a federal court from enjoining such work stoppages.
However, the Fifth Circuit found that the major purpose of the RLA, the court explained, was to prevent disruptions of commerce due to strikes. The union's "deliberate policy of repeatedly calling surprise strikes," the court reasoned, violated the statutory requirement of the RLA to "exert every reasonable effort" to resolve disputes in a way that avoids interrupting commerce. A surprise strike, the court continued, makes such resolution impossible. That many of the work stoppages in which BMWE had engaged concerned "minor disputes," which must first be heard and considered by use of the RLA's compulsory dispute mechanisms "strengthens the conclusion that BMWE was engaged in a pattern of illegal activity," the appellate court said.
The court pointed out that it was not holding that all surprise strikes
violate the RLA, or that an injunction is appropriate whenever a union's
statutory violation threatens to interrupt commerce. Rather, the statute
"forbids an ongoing, repeated practice of surprise strikes that are doomed
later to be held illegal and [themselves, individually] enjoined"
Turning to whether the Norris-LaGuardia Act precludes the injunction
issued by the district court, the Fifth Circuit asserted that the federal
policy against enjoining labor activity under the Norris-LaGuardia Act
does not "deprive the federal courts of jurisdiction to enjoin compliance
with various mandates of the Railway Labor Act," especially when an injunction
would provide the "only practical, effective" remedy.
In this case, BMWE has engaged in a practice of surprise strikes that violated the RLA, the court said. The disruption wrongly suffered by carriers ended in each case only after the strike was called and a restraining order was obtained. However, no damages are available to carriers under the statute. The only remedy, the court said, is "preemptive injunctive relief." Injunctions after the fact, the court said, would not prevent interruptions of commerce, nor would they provide the union with an incentive to cease the kind of practice enjoined here. It is the objective of avoiding the damage wrought by illegal surprise strikes that also prevents a narrowing of the injunction to only illegal surprise strikes, the court added, because the characterization of the underlying dispute as "major" or "minor" cannot be undertaken by the parties until after the surprise strike has begun, and the damage done.
Circuit Judge Harold R. DeMoss, Jr. (5th Cir. H.W. Bush) concurred and Circuit Judge Adrian G. Duplantier (E.D. La., Cater), sitting by designation, dissented. Rick G. Sorenson, Fort Worth, Texas, represented the railroad companies. Richard Steven Edelman of O'Donnell, Schwartz & Anderson, Washington, D.C., represented the union. [BNA 4/9/02]
POLICE UNIONS (FOP)
Maryland Union Considers Criminal for Lobbyist Post
Maryland's largest police union may rehire a disgraced but still powerfully
connected Annapolis lobbyist, even before he finishes serving a 30-month
federal prison sentence for defrauding his clients. The Fraternal Order
of Police was reportedly scheduled to meet Apr. 12 or 13 to consider signing
Gerard E. Evans, once the highest-grossing lobbyist in Annapolis, to a
new contract. And despite a new ethics law passed in the wake of Evans's
conviction, state officials say he would not be barred from working at
the Md. State House.
"We don't think [his conviction] should be held against him," said the
president of the Md. FOP, Calvert County Sheriff John R. Bartlett. "He
was an absolutely incredible lobbyist. He did a good job for us, and we
don't forget our friends."
Evans's 1999 indictment touched off two years of hand-wringing
over the role of lobbyists in the legislative process. Evans himself called
for reforms the day a jury found him guilty, and his case spurred passage
of a law meant to curtail outsider influence. But the lobbyist-ethics provision
took effect in Nov. 2001, after Evans's conviction, so the section that
would otherwise bar his return will not apply to him.
Critics of the system that for years allowed lobbyists to wine and dine lawmakers during the 90-day General Assembly session said they cringed at the notion of an Evans homecoming. "It would be discouraging to have the Ghost of Lobbying Past back in the game," said James Browning, executive director of Common Cause/Maryland. "This is a big step backwards."
But House Speaker Casper R. Taylor Jr. (D-Allegany) said that if Evans has served his sentence, he should be welcomed back warmly. "I've always understood it that once you have paid your penalty, your slate is clean," Taylor said.
Evans has held on to the strong support of his closest allies in the State House, including the powerful Senate president, Thomas V. Mike Miller Jr. (D-Prince George's). Evans began his career as a low-level Democratic operative. He toiled as an intern in the state Senate and grew so close to Miller that the senator became godfather to Evans' twin daughters. Since Evans' conviction for scheming to bilk clients out of more than $400,000 in lobbying fees, Miller has repeatedly declined to engage in speculation about his friend's return.
Although he was sentenced on Sept. 29, 2000, to 30 months in federal prison, Evans spent less than a year of his sentence behind bars. In Nov. 2001, he was moved to a halfway house, and he has been confined to his posh Davidsonville, Md., home since Mar. 22, 2002. His official release is scheduled for May 13, 2002. The conditions of his home detention permit him to work, and he has taken a full-time job with ACS State and Local Solutions, a Washington technology firm, where he is organizing a program to help others who leave prison to find work.
But Bartlett says he believes Evans's true calling is in Annapolis.
He said he will try to persuade the 11-member FOP board of directors to
hire Evans back for a post that in 2000 paid $27,000 for the 90-day session.
The decision will not be easy. Several board members said they expected
strong disagreement -- one predicted "a major bloodletting." Don Helms,
a member from the union's Baltimore lodge, said the key issue, not surprisingly,
will be Evans's criminal record. "Gerry did a lot of good things for the
FOP when he was with us," Helms said. "But we do have an image to worry
about. I mean, we are law enforcement." [Wash. Post 4/12/02]
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