1. Oregon Investors Used Kickbacks to Fleece $100 Million from Pension Funds

Capital Consultants has been under federal receivership since September 2000. The U.S. Department of Labor, in a suit filed April 4, 2002, estimated that a large number of union funds lost more than $100 million due to risky investments made by Capital Consultants. DOL’s five lawsuits detailed how trustees in fund after fund ignored warnings by outside investment "monitors" of the risks of certain 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.
 
Further, three funds were administered by International Brotherhood of Electrical Workers Eighth District. 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.

Similarly, United Association of Plumbers and Pipefitters 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.

On February 26, 2001, Laborers pension official John D. Abbott pled guilty to accepting gratuities from union fund manager Jeffrey L. Grayson to use his influence as a pension trustee and filing a false tax return. Abbott,  ex-secretary-treasurer and business manager of the Laborers' International Union of North America's District Council of Oregon, South Idaho, and Wyoming, pled guilty to racketeering charges, under 18 U.S.C. § 1954, and to understating his income on his 1997 tax return by $76,560. On November 21, U.S. District Judge Anna J. Brown (D. Or.) sentenced Abbott to two concurrent terms of 15 months in prison and one year probation.

Grayson assisted Abbott in 1998 when he was in trouble with LIUNA for allegedly pocketing office funds and failing to make restitution. Abbott, according to an audit released in March 1998, took at least $172,000 from office funds including $150,184 in personal charges on his union credit card. As Abbott was being pushed to explain what the audit uncovered, Grayson arranged the sale of Abbott's late wife's catering business, netting the union boss $60,000.
 
Abbott repaid the unauthorized credit card charges and promised LIUNA that he would pay back the rest of the money, nearly $32,000. But he failed to make payments, and in September 1998, LIUNA gave him the choice of resigning or being expelled. Abbott chose to quit and promised once more to reimburse the money he owed. Meanwhile, he organized a consulting company, Kaylano Consulting, and signed a contract with Grayson that promised to pay Kaylano at least $805,000 over five years.

Abbott's sentencing came 24 hours after Brown sentenced Grayson's son, Barclay, Capital Consultants' president, to 24 months imprisonment and three years probation for mail fraud. He pled guilty on March 19, 2001, and is cooperating.

Capital Consultants’ chief salesman, Dean Kirkland, was indicted August 22, 2002, on 20 counts of giving various kickbacks to two union pension fund bosses, one of them his father. Kirkland is alleged to have paid for hunting trips for his father, Gary, and Robert Legino to  the western U.S., Canada, Africa, Argentina and Mexico between 1997 and 2000. Kirkland was a trustee of three pension plans operated by the Office & Professional Employees Intl. Union: the Local 11 401(k) plan, the Western States Local Union Trust, and the Western States Pension Trust. By 2000, those funds had about $60 million tied to Capital Consultants. Robert Legino was a trustee of the IBEW 8th District Pension and Annuity Funds. By 2000, those funds had at least $65 million invested in Capital.

On a second front, a $16 million class action settlement was reached in cases filed by union members against their fund trustees for breach of fiduciary duty in the scandal. 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.

Before the insurer problem surfaced the five unions reached the following terms. The class action settlements with the Oregon Laborers Union and Idaho Laborers Union were filed March 7, 2002, with the U.S. District Court in Portland. A similar settlement for members of Office & Professional Employees International Union Local 11 based in Portland was scheduled to be filed in March 2002. These settlements called for a payment of $4 million to the trust funds administered by the Oregon Laborers Union, which lost an estimated $40 million in investments. The Idaho Laborers Union, which had a loss of $10 million, was scheduled to receive $1.9 million, and Local 11, which had a loss of $10 million, was scheduled to receive just under $1 million.

Another class action settlement was reached March 7 in the same federal court with members of plans administered by Portland-based Local 290 of the United Association of Plumbers & Pipe Fitters. It called for a payment of $3.7 million. The fund has $29 million at risk due to the investment losses at Capital Consultants. Finally, members of the Eighth District of the International Brotherhood of Electrical Workers in Denver were scheduled to settle in March a suit against trustees of their trust funds.The Eighth District includes Idaho, Utah, and Colorado. That settlement was expected to be for about $6 million. The trust has $50 million at risk due to investment losses at Capital Consultants.

Dozens of union pension and other benefit funds reached a settlement May 13 with eleven parties to recover $110 million of losses. The proposed settlement, yet to be approved by the district court, calls for payments to the trusts by 11 companies and professional advisers, including legal and accounting firms.

Most of the settlement money is to be paid by various insurers of the defendants. Nevertheless, several of the trusts' claims remain unsettled including claims against Capital Consultants, its owner Jeffrey Grayson, Deloitte Touche, an accounting firm that provided services to Wilshire and Pricewaterhouse Coopers, an accounting firm that provided services to Capital Consultants.

The major union trusts involved in the recovery action include the Oregon Laborers-Employers Pension Plan, the Eighth District of the IBEW which covers Colorado, Idaho, and Utah, the UA Pension Plan in Portland, and OPEIU Local 11 also in Portland. The sttlement prevents the trusts or plan participants from filing future claims against the settling parties. [UCU 5.8, 5.11, 5.18]

2. Two Convicted in Scheme to Bribe Union Bosses to Access Pension Funds
A N.Y. stockbroker and a Chicago futures trader were convicted Feb. 13 of scheming to bribe union bosses to invest millions of dollars of pension fund money with a corrupt money manager. Stockbroker John M. Black, who authorities say was a Luchese organized crime family associate, and futures trader Glenn B. Laken were convicted today of racketeering, bribery and fraud. Among those whom they planned to bribe were bosses with the Annuity Fund of the N.Y.C. Police Detectives Endowment Ass'n, the independent Production Workers Local 400 in N.Y.C., and Int'l Union of Operating Engineers Local 137 in Briarcliff Manor, N.Y.  The verdict was reached at the conclusion of a three-month trial before U.S. Dist. Judge William H. Pauley, III (S.D.N.Y., Clinton).

Federal prosecutors said Black, a principal in Grady & Hatch Co., and Laken, a principal in TradeVentureFund, worked with a mob-controlled investment bank in lower Manhattan, DMN Capital Inc., in planning illegal payoffs to union bosses. The goal was to induce pension fund managers to shift some $300 million in union pension funds to the control of a crooked investment adviser.  Laken agreed to pay secret kickbacks to the principals of DMN Capital to raise money for TradeVentureFund on the understanding that the kickbacks would pay off union bosses for switching pension fund money to the corrupt hedge fund.

The two were indicted in June 2000 along with 118 others as part of the FBI's "Operation Uptick," which targeted mob influence on Wall Street. So far, 92 defendants have been convicted of various fraud schemes and another 17 cases are pending. The federal jury in Manhattan also acquitted three other men who were on trial with Black and Laken: Dallas-based real estate developers Gene Phillips and  A. Cal Rossi as well as San Francisco-based investment strategist William M. Stephens. Of the 120 defendants charged, 11 have had the charges against them dismissed or were acquitted at trial.  Black and Laken face up to 20 years in prison at their sentencing scheduled for May 31.

No bribes were ever paid, and the union money was never diverted to the other investments. Arrests were made before any union pension funds were squandered. Most of the evidence at trial against Stephens arose from 30 to 35 hours of taped conversations between the various defendants and Jeffrey Pokross, a government informant who ran a corrupt investment bank that had been infiltrated by the Gambino and Bonanno crime families, DMN Capital  On the tapes played in court, Pokross made reference to bribing pension fund managers in conversations with Stephens. But Stephens, the only defendant to take the witness stand in his own defense, testified that he did not believe Pokross was serious and was merely going along with him to meet potential new clients.

3. DOL Alleges ULLICO Imprudently Invested $10 Million
 
The Department of Labor sued Washington, D.C.-based Trust Fund Advisors, Inc.,  and its parent, ULLICO, March 22, 2002, for  imprudently investing more than $10 million in assets of two Laborers' International Union of North America pension funds in a risky  real estate project. LIUNA hired TFA as a union fund manager for the Local Union and District Council Pension Fund and National Industrial Pension Fund. TFA hired ULLICO to handle all real estate made on behalf of clients of TFA. ULLICO-TFA contracted with the pension funds in 1993-94 to handle their investment in real estate. Admitted criminal and ex-LIUNA boss Arthur A. Coia was elected to ULLICO's board in 1993 and was on the board as of Sept. 30, 2000, according to a State of New York’s Insurance Department document.

The suit alleges that ULLICO-TFA violated ERISA by imprudently  investing more than $10 million of plan assets in a risky real estate project. In 1995, ULLICO-TFA used plan assets to purchase and develop a 120-acre tract of raw land in North Las Vegas, Nevada, into saleable building lots. ULLICO-TFA then incorporated LF Las Vegas Realty Corp., paid close to $6 million for the property, and spent more than $4 million to develop it. The suit also alleges that ULLICO-TFA failed to properly investigate the merits of the Sommerset Ridge  project (failed to obtain an appraisal) and, ultimately, abandoned the project in 1997 without selling any lots. The funds suffered losses when the property was sold in June 1999 to Capital Pacific Holdings for less than the money invested by the funds.

DOL is seeking a court order that requires ULLICO-TFA to reimburse the funds for all losses, plus interest, resulting from the breaches; and permanently bars them from violating ERISA in the future. The suit was filed in federal court in Washington, D.C.[UCU 5.7]

4. Trustees Settle ERISA Suit Involving DNC Chief McAuliffe for $4.9 Million
 
Trustees of the National Electrical Benefit Fund must pay more than $4.9 million to reimburse the fund under a consent order settling Department of Labor charges that they breached their fiduciary duties under ERISA by investing in a Florida real estate limited partnership. The two trustees, Jack Moore and John Grau, also agreed to pay a civil penalty of $555,000 under the consent order signed October 16, 2001, by the U.S. District Judge Deborah K. Chasanow (D. Md.). The order resulted from a suit filed in May 1999 by DOL, alleging that the trustees imprudently loaned pension plan assets to a corporation for certain real estate purchases linked to tainted Democratic National Committee Chairman Terence McAuliffe.

In 1992, trustees loaned McAuliffe up to $10 million to buy the property, known as Country Run. As collateral, McAuliffe put up his share of a shopping center and apartment complexes he and the Pension Fund jointly owned.  But almost immediately after buying into Country Run, McAuliffe cashed out of the shopping center, eventually collecting $2.45 million from the Fund after paying only $100 a year earlier for his co-ownership. After five years of slow development at Country Run, McAuliffe bought out his $10 million loan, and the Pension Fund was left with far less a return than it would have earned in more conservative investments.

Moore and Grau denied the allegations, but entered into the agreement with DOL after U.S. District Judge Alexander Williams, Jr. (D. Md.) ruled in July that DOL could proceed with its suit. Williams denied the trustees' motion for summary judgment, rejecting their contention that they did not breach their fiduciary duties because the real estate transactions had beneficial results. [UCU 4.22, 5.15]

5. New Jersey Boss Accused of Embezzling $2 Million

Carmelo J. Sita, ex-fund manager for the Hudson County (N.J.) District Council of Laborers (HCDCL) , was arrested the morning of December 12 at his home in Mountainside, N.J., and accused of embezzling more than $2 million from HCDCL and its benefit funds. He used the money for a lavish lifestyle, including a Martha's Vineyard vacation home and luxury cars, according to the 59-count indictment handed up December 10. U.S. Magistrate Judge Susan D. Wigenton set bail at $250,000, which was reportedly secured by a coop apartment that Sita owns on Manhattan's Upper West Side.

From January 1995 to March 1999, Sita allegedly conspired with others who concealed the embezzlement, and he wrote checks from benefit fund and HCDCL accounts to himself or to pay his personal expenses. Allegedly, Sita stole money to pay for "monthly credit card debts, mortgage payments, lease payments on luxury vehicles, personal taxes, Martha's Vineyard vacation home and boat, and unauthorized political and charitable contributions." Further, he allegedly used union money to pay country club dues. Specifically, the indictment charges him with conspiracy, theft from employee benefit and health care plans, health care fraud, and falsifying disbursement documents about HCDCL.

In addition to prison time, prosecutors are seeking criminal forfeiture of Sita's Mountainside home, his condo in Tisbury, Mass. (Martha's Vineyard), a Wellcraft 20-foot motor boat, and $1,062,787 million in cash. They charge that the property and money came from the embezzled funds.

Sita resigned in 1999 after 22 years as executive manager of HCDCL's benefit funds. The Jersey City based council consists of Laborers' International Union of North America Locals 21, 31, 202, and 325. He is now a self-employed consultant on commercial real estate deals. Sita's attorney, David A. Ruhnke, said his client denies any wrongdoing: "this indictment represents a gross misunderstanding of how matters of compensation were handled in this union." Ruhnke admitted that last year, the Department of Labor sued Sita and other bosses, accountants, and attorneys linked the funds over the alleged embezzlement. The parties reached a confidential settlement, he said. [UCU 4.26]

6. New York Boss Sentenced, Benefit Funds Lost $1 Million

On March 1, 2002, a boss and a member of the United Brotherhood of Carpenters were indicted, pled guilty, and sentenced in Manhattan Supreme Court for taking bribes to let a contractor use nonunion workers at two Manhattan job sites. Stephen Goworek was sentenced to six months in jail and 54 months' probation, and Thomas Riccardo got five years' probation. A third, John Mingione, pled not guilty and will return to court. The scheme allegedly caused the union's pension and welfare fund to be deprived of more than $1 million that was supposed to be paid by the contractor.

The New York State Attorney General charged Goworek in an 11-count indictment, which included Grand Larceny in the First and Second Degrees, four counts of Bribe Receiving by a Labor Official, and five counts of Violating a Fiduciary Duty. Before his arrest, Goworek managed UBC's Stamps Enforcement Unit of the Benefit Funds of the District Council of New York and Vicinity. As the Stamps Enforcement manager, he was responsible for ensuring that contractors remitted the payments to the benefit funds required by contract.
 
Mingione was a UBC shop steward, and Riccardo was on the payroll at one site. Both allegedly acted with Goworek in the bribery and grand larceny scheme. All three faced up to 25 years in prison if convicted of the top count of Grand Larceny in the First Degree. The indictments were the result of a nine-month state and federal probe. It targeted remodeling projects at the Warwick Hotel and Carlton Hotel. A contractor working on those projects cooperated in the probe, which included audio and video taping the defendants' demands for bribes, as well as the actual bribe payments. Some bribes were delivered by undercover agents from New York's Statewide Organized Crime Task Force.
 
"My office will continue to work with [the Department of Labor's] Inspector General to ensure that the labor laws are enforced, that workers receive the wages and benefits which they are entitled to, and that the integrity of the collective bargaining process is protected,"  New York State Atty. General Eliot Spitzer said. [UCU 5.6]

7. Genovese Allegedly Stole $1 Million from Union Funds

Federal prosecutors brought a 98-count indictment against 73 members and associates the Genovese crime family in New York. The charges include embezzlement, extortion, labor racketeering, loansharking, illegal gambling operations, selling counterfeit money, gun trafficking, credit card fraud, and attempted bank fraud, some of which led to conspiracy and racketeering counts. The crimes reportedly earned about $14 million this year. At least 60 defendants were arrested December 5; some were already in custody. If convicted, some defendants would face as little as 5 years in prison while others would face hundreds of years; one could face up to 530 years.
 
Among those indicted are 3 alleged "capos" or captains, who are responsible for supervising the criminal activities of the members of their crews. They were identified as Pasquale "Patsy" Parrello, Joseph Dente, Jr., and Rosario "Ross" Gangi, who is already serving a 97-month sentence in federal prison for his role in a penny stock fraud. Parrello is accused of embezzling more than $1 million from the benefit funds of Local 11 and Local 964 of the United Brotherhood of Carpenters. Allegedly, Parrello and others stole the funds through S&F Carpentry, a unionized company based in Tuckahoe, N.Y., by reporting a fraction of the union carpenters they employed, using non-union labor and destroying payroll records. UBC members allegedly were threatened if they complained about the use of non-union workers. [UCU 4.26]

8. Chicago Bosses Sentenced for Abuse of Benefit Funds
 
On March 15, 2002,  U.S. District Judge Blanche M. Manning (N.D. Ill.) sentenced John Serpico, ex-president of the Central States Joint Board and ex-vice president of the Laborers' International Union of North America to six concurrent 30 months prison terms followed by three years of supervised release. CSJB is a labor organization which handles pension and other employee benefit funds for eight locals including locals of LIUNA and the International Union of Allied Novelty & Production Workers. A jury convicted the powerful Chicago boss July 16, 2001, on six counts of mail fraud. Manning also fined him $100,000, ordered him to make restitution of $30,000, and ordered him to pay the cost of imprisonment. Serpico was CSJB president from 1975-94 and, at the time of the conviction, was a $50,000-a-year consultant. He was purged from LIUNA in 1995.

Serpico, 71, and his longtime mistress, Maria Busillo, 56, engaged in a 12-year scheme trading their control over union pension, benefit, and other funds to obtain some $5 million in loans for personal business ventures. Assistant U.S. Attorney David Glockner said Serpico and Busillo frequently flew together in a union jet to "frolic" at Busillo's beachfront condo in Marco Island, Florida, "financed in part with a loan obtained by dumping workers' money into a corrupt bank." Busillo allegedly obtained loans for a the Florida condo as well as for her $900,000 house in Glenview, Illinois. She reportedly obtained the loan on the house even though the monthly mortgage payment exceeded her gross income.

From 1978-90, the two obtained 17 loans from eight banks that received substantial union deposits, in some cases just days after the banks made the loans. The key dealings were with Capitol Bank & Trust. In return for some $5 million in personal loans at favorable rates, the two deposited about $4 million in union funds in Capitol. The bank also managed $16 million in union pension and welfare plans. Capitol pled guilty in 1996 to the scam and was fined $800,000. Its two owners were forced to sell it and were banned from banking. At Serpico's trial, ex-Capitol president Robert Hahn testified for the government. Among Capitol's actions was a $1.8 million loan to Serpico and his partner, ex-U.S. Representative Morgan F. Murphy (D-Ill.), on a film studio project despite cash-flow woes and no clients. The building was later bought by Oprah Winfrey and turned into Harpo Studios.

Manning sentenced Busillo, also an ex-CSJB president and ex-ANPW president, to 15 months imprisonment followed by three years supervised release on each of two mail fraud counts and one count of making a false statement on a loan application of which she had been convicted, with the sentences to run concurrently. Manning also fined her $100,000 and ordered to pay the cost of imprisonment.

Further, Serpico and Gilbert Cataldo, an ex-Chicago housing commissioner and ex-lllinois International Port District executive director, were convicted of sharing in a kickback scheme of more than $330,000 after CSJB secured a $6.5 million loan for a failing hotel project in Champaign, Illinois.  Serpico was IIPD's  longtime chairman until 1999 when he was indicted. Manning sentenced Cataldo to 21 months imprisonment followed by three years supervised release on each of three mail fraud counts of which he had been convicted, with the sentences to run concurrently. Manning also fined Cataldo $5,000 and ordered to perform 250 hours of community service.

"All three of these defendants have held themselves out for years and even throughout this trial as champions of labor and workers and pillars of the community," said Glockner. "The evidence in this case shows that they're simply crooks."

"Insufficient," is the way LIUNA dissident and Laborers for Justice leader Jim McGough described Serpico's sentence. Expressing outrage at the sentence's brevity, McGough told the Union Corruption Update, "Serpico raped and pillaged Laborers Local 8 and facilitated Organized Crime's control of the Laborers Union and Central States Joint Board."

Manning order the aging Serpico to surrender to prison June 28, but his attorney, Matthias Lydon, said he will seek his continued release pending appeal because of upcoming spinal surgery and an expected six-month recuperation period. After sentencing, Serpico, his hand raised to shield his face, ran into traffic outside the Dirksen Federal Building in an attempt to shake free from photographers. [UCU 5.7, 4.15]
 
9. Rhode Island Embezzler Loses $1.3 Million Suit; Trustees to Repay $24,000
 
U.S. District Judge Ronald R. Lagueux (D.R.I.) ordered the trustees of the International Brotherhood of Electrical Workers Local 99 Health & Welfare Fund January 11, 2002, to repay $24,000 to cover improper benefit payments. A suit, filed in May 2001 by the Department of Labor claimed the board of trustees had violated a law protecting employee pension and welfare benefit plans. Allegedly, from January 1994 and December 31, 1995, trustees of for the, R.I., based fund failed to adequately ensure the accuracy of employee eligibility data. As a result, payments were made to seven ineligible people. Lagueux's judgment also bars the defendants from committing similar infractions in the future. [UCU 5.2]

Further, ex-union pension manager and prison inmate Todd LaScola must repay $1,279,656 to Local 99’s retirement plan under terms of a federal default judgment. Lagueux signed the order July 24, 2001, after LaScola and his firm, CPI Financial Services., Inc., failed to respond to an ERISA suit filed in January 2001 by DOL accusing them of misusing plan assets. DOL's suit alleged that LaScola invested approximately $5,970,000, over 20% the plan's total assets, in unregistered, highly risky notes issued by real estate limited partnerships owned by RBG Management Services., Inc., of Chicago. Allegedly, there was no trading market for the RBG notes, making the investment a violation of the plan's guidelines. LaScola received approximately $312,400 in commissions from RBG, as well as $127,652 in management fees from the plan.

In 1998, plan trustees demanded that LaScola immediately liquidate improper investments. He subsequently returned $5,993,800 to the plan, but he obtained that money through other illegal acts, for which he is currently serving a federal prison term. The $1.279 million ordered to be repaid is the total of the opportunity losses, $839,603, plus the commissions and management fees. LaScola must repay his criminal obligations before making these civil payments. He was ordered to repay $8.12 million May after pleading guilty to nine embezzlement and fraud charges. He is serving an eight-year sentence in a medium-security federal prison in Estill, S.C. [UCU 4.16]

10. Ex-Calif. Bay Area Chief Indicted for "Sham Charities"

A former Santa Clara County Sheriffs Lieutenant and ex-union president was indicted August 2 for trading on the union's name to raise funds for sham charities.

According to the indictment by a Santa Clara grand jury, Armand Tiano and 12 alleged co-conspirators engaged in grand theft, tax evasion and money laundering that involved at least $1.4 million. Among the false charities were two created after the 1998 slaying of Millbrae police officer David Chetcuti. Allegedly, Tiano and the others persuaded many people to write checks for the "Officer Chetcuti Fund" and the "Millbrae Officer Family Trust Fund." The widow, Gail Chetcuti, never received any of those funds.

In his heyday, Tiano oversaw the county jails, presided over the Santa Clara Deputy Sheriffs Association and twice campaigned for Sheriff. In 1993, Tiano incorporated his own fund-raising group, the Deputy Sheriiffs' Sports Association, and contracted with two brothers, George and Matthew Kellner, who already owed the union $100,000 in charity fund-raising. The brothers then began paying off Tiano from the ostensible charity to take advantage of "his official position and contacts" acc. to the indictment.

For the next five years, Tiano and the Kellners raised funds by phone for various groups claiming police affiliation, even though Tiano, who retired in 1996, was the only police officer in these groups. California law requires any non-govt. organization with "police" in its name to have current or retired police comprising at least 80 percent of its membership.

In 1998, a local attorney contacted county prosecutors after his client agreed to make a $100 credit card donation to the "Santa Clara County Deputy Sheriff's Office," then later found eight charges totaling $800 to a similarly named group using Tiano's home address. Tiano denied any wrong-doing and offered a list of food banks, shelters, churches and athletic teams that had benefited from his operations. But when the Santa Clara District Attorney’s office contacted 13 of the charities, only one said it had ever received any funds from Tiano's groups -- $1,000.

Tiano agreed to register his group with the state Attorney  General's Office of Charitable Trusts. After he failed to do so, prosecutors ordered him to cease his telemarketing operations in February 2000. But three days later, Tiano formed the "Police and Sherriff's Athletic League and Community Fund" and persisted in raising money, according to the indictment.

In 2001, Tiano was convicted of molesting two teenage girls. After serving his sentence, Tiano failed to register as a sex offender and was sentenced to 16 months in San Quentin Prison, where he awaits trial for his charity scams. [UCU 5.17]
11. DOL Wins $597,700 for Michigan Funds
 
On March 19, 2002, trustees and the ex-administrator of the Millwrights Local 1102 Supplemental Pension Plan and Health Plan, which are linked to United Brotherhood of Carpenters Local 1102 in Warren, Michigan, agreed to restore $597,775 to the plans.  Further, U.S. District Judge Avern L. Cohn (E.D. Mich) ordered the trustees to resign their positions with the plans.

Cohn's judgment resolved a suit filed Aug. 23, 2000, by the Department of Labor against administrator Automated Benefit Services, Inc. and trustees Walter R. Mabry, Jerry D. Moore, Ronald M. Krochmalny, Keith R. Scrutton, Milford E. Woodbeck, Sr., and Roy Shields. Allegedly, the defendants violated pension laws by 1) paying unreasonable compensation and fees to ABS, 2) failing to prudently invest the plan's cash assets, 3) paying excessive fees relating to the collection of employer contributions to the plans, and 4) making mortgage loans to participants which did not comply with the terms of the pension plan document.

Cohn also ordered the pension plan to comply with the requirements of ERISA in any future activity and gave Nat'l City Bank of Cleveland the authority to manage the mortgage loan portfolio of the pension plan. Reportedly, the bank then exercised that authority and sold the pension plan's portfolio for $1,173,813.40. [UCU 5.7]

11. Two Confess to Embezzling some $453,000 from Benefit Funds

On April 11, 2002, Raymond Robertson, ex-general vice president of the International Association of Bridge, Structural, Ornamental & Reinforcing Iron Workers and director of its National Training Fund, pled guilty in U.S. District Court in Washington, D.C., to one count of conspiracy to defraud an employee welfare benefit plan, one count of aiding and abetting embezzlement from an organization receiving federal funds, and six counts of embezzlement from an employee welfare benefit plan. According to the plea agreement, he agreed to pay a fine of $30,000, to make restitution of $103,170, and to assist the government in other investigations.

Further, Kerry J. Tresselt, ex-bookkeeper for BSORIW admitted November 8, 2001, that she embezzled more than $350,000 from a union job-training fund, the National Ironworkers & Employers Apprenticeship & Journeyman Upgrading Fund, and attempted to cover it up. She pled guilty in U.S. District Court in Washington, D.C., to three counts of embezzlement from an employee benefit plan and one count of conspiring to make false statements. She admitted to illegally issuing checks to herself and others while working for the training fund set up by BSORIW with contributions from contractors. She agreed to make restitution and assist prosecutors in a continuing criminal probe of BSORIW.

From about 1985 to April 2001, Tresselt worked as the bookkeeper for the Fund. In that capacity, she was responsible for issuing checks drawn against the Fund's accounts, recording payments in the Fund's general ledger, and performing other bookkeeping responsibilities. Through several different types of schemes, Tresselt stole more than $350,000 from the Fund from approximately April 1998 through April 2001. Tresselt stole more than $30,000 through, in effect, a "ghost" employee scheme and more than $270,000 by simply writing checks to herself on the Fund's checking account. In addition, she stole more than $40,000 of funds obtained by the Fund in connection with a federal grant received from the Department of Labor to train workers in Poland. Tresselt stole that money by submitting false and fraudulent claims for work which she did not perform. Finally, Tresselt created false and fraudulent records to conceal and cover-up some of her thefts. Under federal sentencing guidelines, Tresselt reportedly faces up to to 27 months in federal prison when she is sentenced by Chief U.S. District Judge Thomas F. Hogan (D.D.C.).

Robertson and Tresselt are the sixth and seventh persons from BSORIW to be charged in the probe launched by the FBI and Department of Labor. Four other bosses have pled guilty to embezzlement or related charges. The fifth, ex-BSORIW boss Jacob “Jake” West, is awaiting trial. He is accused of embezzling $50,000. Others charged in the scandal are: Darrel E. Shelton, ex-general organizer, who pled guilty to embezzling as much as $120,000; Fred G. Summers, the former executive director of organizing, who admitted embezzling more than $50,000; James E. Cole, ex-general secretary , who pled guilty to embezzling more than 10,000; and Michael J. Brennan, the ex-head of the Iron Workers Political Action League, who pled guilty to charges involving the theft of $7,000. Brennan received probation. Shelton, Summers, and Cole are awaiting sentencing. [UCU 5.9, 4.23]

11. Northern Illinois Boss Charged with $353,000 Theft
 
Charles C. Isely, III, ex-president and treasurer of the International Employees Welfare Union was indicted December 19, 2001, on one count of embezzlement and three counts of mail fraud. He allegedly embezzled $353,000 from the Waukegan, Ill.-based union, which he founded and ran from 1974 to 1998. He allegedly wrote 30 fraudulent checks totaling $225,000 from IEWU's death trust fund. He also allegedly wrote another 40 checks for $108,000 on IEWU's bank accounts. The checks were allegedly routed to Isely's bank accounts and used for personal expenses. Further, Isely allegedly obtained a $20,000 bank loan under the union's name and reportedly deposited it in his personal bank account. The alleged crimes occurred in 1994-98. His wife, Patricia, IEWU's ex-vice president and secretary, was not charged. Both resigned in March 1998. In November 1998, Isley and his wife filed for bankruptcy and claimed outstanding debts
to IEWU. [UCU 5.1]

12. Illinois Boss Gets Two Years for Taking $350,000
 
Patrick Stiles, ex-boss of Aurora (Illinois) Firefighters Local 99, pled guilty March 21, 2002, to felony theft in connection with the embezzlement of union and firefighters association funds and was sentenced to two years in prison. The plea agreement, entered in Kane County Circuit Court before Judge Donald C. Hudson, requires Stiles to pay $244,000 in further restitution to Aurora Firefighters Local 99 and the Aurora Firefighters Relief Association. Stiles was released on bail and ordered to turn himself in to authorities on April 23.

Aurora police testified at a bail hearing in Oct. that Stiles had stolen about $350,000 from the two organizations, but the restitution was based on a $275,000 settlement in a related civil suit. Stiles, a firefighter, resigned January 15, 2001, after eleven years with the Aurora Fire Department. He was secretary and treasurer of the Relief Association from 1995 to 1999 and held the same post at Local 99 from 1992 until his resignation.

"We won't feel it's complete until he pays the penalty--doing the time--and pays us back the money he owes us," said Local 99 president Gregory Frieders. Stiles agreed in April 2001 to pay $275,000 to the two groups in a civil suit they filed. He agreed to turn over about $64,000 in retirement funds. The groups have received about $31,000 from his pension , but await payment from a deferred compensation fund. Stiles has made no further payments. Though a lien has been place on his home, unions officials said they doubt he has equity in that home.

Stiles allegedly made out union checks to pay for personal expenses, including $16,800 to credit cards, $8,839 for telephone bills, $3,250 for computer equipment and $8,000 for payments to a non-union bank account. The Relief Association alleged that Stiles wrote $15,092 in checks to himself, $12,000 credit cards, $1,941 to his mechanic and $4,420 to firefighters to work on his house.

When the allegations surfaced, only one signature was required to sign Relief Association checks. Union checks required two signatures, but checks that only had Stiles' signature still were cashed, Frieders said. Since then, both organizations have reportedly revamped their accounting procedures. [UCU 5.6, 4.22]

13. Buffalo Boss & Wife Cleaned Out Pension Fund to Support “Accustomed Lifestyle”

On June 21, Anna May Ervolino was sentenced to a $5,000 fine on top of the $144,470 she had already paid back to the Hospital  & Nursing Home Council (HNHC) in Buffalo, NY.  She was also sentenced to one year probation and 150 hours of community service, and she agreed to a 13-year bar on employment by a union or union pension fund.  In exchange for her March 22 guilty plea and restitution, the U.S. Attny agreed to drop all remaining charges.  She specifically pled guilty to embezzling $1,513 from the HNHC to pay her husband's life insurance premium.

The HNHC, now defunct thanks to the Ervolinos, was chartered by Local 4 of the Hotel Employees & Restaurant Employees union (HERE), Local 168-39 of the Laundry & Dry Cleaning Union, and the Service Employees Intl. Union (SEIU).  Using the executive positions they held in HERE, the Laundry Union and the HNHC pension fund, the Ervolinos began embezzling from HNHC in 1990, ordering the issuance of checks into their personal accounts, sometimes labeling these checks as "severance pay," or "loans" to the Laundry Union, and often forging the signature of another HNHC officer on the checks.  By 1996, the Ervolinos had dragged the HNHC's assets from $196,512 in the black to $178,648 in the red.

In 1999, the court-appointed monitor of HERE concluded that Frank, Anna and their daughter embezzled hundreds of thousands of dollars from HERE Local 4 and the HNHC from 1990-95.  The Ervolinos "knew they were receiving full-time pay for less than full-time work and acted with fraudulent intent," the report said. "Ervolino's work habits consisted of arriving at his office at approximately 10 a.m., taking a 45-minute to an hour lunch period and leaving the office at approximately 2 p.m. or 3 p.m." Reportedly, he also took month-long vacations to Fla., in which he worked on union matters an hour a day.

Both Ervolinos were indicted by a fed. grand jury in Buffalo in May 2000.  But Frank died in Nov. 2001 without ever being tried. [UCU 5.15]

QUOTABLE QUOTE
"At some time during the conspiracy, the defendant, Anna May Ervolino, stated to a person known to the Grand Jury that she hoped certain persons ‘did not expect them [the defendants] to give up the lifestyle to which they were accustomed.'"
--Denise E. O'Donnell, U.S. Attny, W.D.N.Y., May 16, 2000
 
Ervolino's statement came as investigators zeroed in on her and her late husband, Frank, for bankrupting the Hospital & Nursing Home Council's pension fund by using their executive positions on the HNHC to embezzle hundreds of thousands of dollars.

14. $289,000 Allegedly Stolen from New York Fund
 
Barbara Monfre, pension fund administrator for the International Brotherhood of  Electrical Workers Local 3 in New York City was arraigned March 22, 2002, in U.S. District Court in Manhattan on charges of embezzling approximately $289,000 from the local's Elevator Division Retirement Plans. [UCU 5.7]

15. Ohio Boss Stole $130,500 to Cover Gambling Debts
 
Robert D. King, Jr., admitted December 11, 2001, that a gambling habit led him to embezzle $130,507 from the United Union of Roofers, Waterproofers & Allied Workers Local 86 in Columbus, Ohio. Specifically, he embezzled $88,757 from the local and $41,750 from local's employee benefit funds. During his arraignment before U.S. District Judge George C. Smith (S.D. Ohio), King pled guilty to two embezzlement-related charges. King stole the money from August 1999 to January 2001 by writing himself checks from Local 86's general and apprentice-training funds. King told the Columbus Dispatch, "I got hooked on gambling and got in over my head. I got deeper and deeper." He bet at casinos on the Ohio River and in Las Vegas and placed sports bets with bookmakers.

King served as the local's business manager and financial secretary for six years until the international removed him in January 2001. Local 86 officers became suspicious of King because his sloppy record-keeping. The international union audited the local's books and confronted King with numerous discrepancies. King admitted stealing the funds, and the case was turned over to the Department of Labor. [UCU 4.26]

16. Georgia Boss Sentenced to Six Months for $90,000 Thefts

On April 11, 2002, in Steven Jones, ex-business manager  and ex-secretary-treasurer of International Association of Bridge, Structural, Ornamental & Reinforcing Iron Workers Local 387 in Atlanta, was sentenced to six months imprisonment and three years probation and was ordered to make restitution of $90,000--$29,724.73 in union funds and $39,949.42 in apprenticeship funds. He pled guilty on October 11, 2001 in U.S. District Court in Atlanta. [UCU 5.9]

17. New Jersey Boss Accused of Stealing $75,000

A Hackensack policeman was charged Mar. 8 with stealing more than $75,000 from police union funds, including money for the widows and orphans of slain officers. Allegedly, Kevin Schneider, who oversaw the several union funds as treasurer for seven years, used the money during the past four years to finance his gambling forays at the Meadowlands Racetrack and casinos in Atlantic City and Las Vegas. Much of the money allegedly came out of the Policemen's
Benevolent Association Local 9's death-benefits fund, which helps families after officers die. Reportedly, Schneider has almost totally depleted the fund. He also allegedly ravaged Local 9's general-operating fund, contract negotiating fund, golf-outing fund, and a fund to build an in-line skating park for city youngsters.

"I'm devastated," said Local 9 president Philip Carroll, who discovered discrepancies in the local's books only a week before the charges were brought. Schneider started stealing from the local in 1998 and took an increasing amount of money every year since to fund his gambling habit, said Police Chief Ken Zisa. "[This was] a total shock to us. He was hiding it very well,"  Zisa said. Investigators said the boss operated alone. Carroll confessed that he wasn't sure why the dwindling accounts weren't discovered sooner.

The alleged crimes began to unravel after Carroll, who took over as president six months ago, started looking at the local's books as his new administration prepared for an internal audit. Carroll talked with Schneider about the accounts and "didn't like the answers he got," Zisa said. Carroll asked Schneider to show him the local's books, but for a couple of days, Schneider avoided him. Carroll told Zisa, and Zisa subsequently told the Bergen County Prosecutor's Office. When Schneider finally brought the local's books to the police station March 5, he was joined by his attorney.
 
Investigators reportedly discovered a mounting list of withdrawals that Schneider either made out to cash or directly to himself. Police photographed, fingerprinted, and released Schneider on his own recognizance. His charge of theft of more than $75,000 is a second-degree crime punishable by up to 10 years in prison and fines of up to $100,000. Zisa suspended him with pay on Mar. 5 and then suspended him without pay after he was charged on Mar. 8. Zisa said an administrative hearing will be scheduled at which Zisa will seek to remove Schneider from the force. Carroll said the local is working to find out exactly what's left of its accounts and then will start to rebuild with fundraisers. [UCU 5.6]

18. Boston Boss Faces Embezzlement and Bribery Charges

George W. Cashman, president of International Brotherhood of Teamsters Local 25 in Charlestown, Massachusetts, along with four other individuals and three firms were indicted January 16, 2002 on 179 counts of embezzlement and bribery. Allegedly, 19 non-employees were ordered or placed on the firms' payrolls in order to allow the non-employees to receive health benefits from Local 25's Health Services & Insurance Plan to which they were not entitled. Assistant U.S. Attorney Fred Wyshak said the defendants robbed the fund of benefits belonging to qualified members: "The loss is to the fund that has to pay benefits it normally would not have to pay."

Disilva Transportation, Inc., Hutchinson Industries, Inc., and Manfi Leasing Corp., run by brothers Thomas A. and James P. Disilva and their brother-in-law William P. Belanger, filed false documents for the bogus employees from 1992-2001 thereby costing Local 25's HSIP $72,000 in wrongful health benefits. Also, two non-employees were allegedly placed on the firms' payrolls in order to be eligible for pension benefits from the New England Teamsters & Trucking Indus. Pension Fund, which covers several IBT locals.

Cashman and Local 25 vice-president William Carnes allegedly participated in the scheme and directed benefits from the firms to the bogus employees in violation of the Taft-Hartley Act. Cashman and Carnes have run Local 26 since 1992. Additionally, both are trustees of Local 25's HSIP, and Cashman is a trustee of NETTIPF as well as the head of IBT Joint Council 10. All five pled not guilty and were released on $25,000 bond. U.S. Magistrate Judge Joyce L. Alexander rejected arguments that the case against Cashman and Carnes was not serious enough to warrant bail but reduced the prosecutors' demand for $50,000 bail. [UCU 5.2]

19. Five Allegedly Stole $71,000 from Atlantic City Local
 
New Jersey Police announced January 2, 2002 that they have charged five people with conspiring to steal from Atlantic City's largest union, in an embezzlement scheme that allegedly drained at least $71,000 from the severance fund of Local 54 of the Hotel Employees & Restaurant Employees International Union. Mariana Candelaria, who works for Garden State Benefit Services, Inc., the company that administers the local's severance and pension funds from desks inside Local 54's office, was arrested on December 21. Candelaria allegedly conspired with an ex-colleague and three outsiders by falsifying claims for severance payouts and then issuing and cashing the checks. Police charged Candelaria with embezzling more than $50,000, along with conspiracy, forgery, and theft by deception after an investigation by Detectives Edward Riegel and Brian Paige.

Local 54 vice president Al Cohen attempted to distance himself and other bosses from the thefts. He claimed that union members were the victims of a crime committed by a third party working inside the union office.
 
Also charged were Rhonda Jones, who reportedly left her job working for GSBS inside Local 54's office last year; and Jaymes Browne, a friend of Candelaria who allegedly cashed more than $6,800 in fraudulent union checks and forged documents. Jaime Cambrelen, an acquaintance of Candelaria, also faces charges of forgery and fraudulent check-cashing. Another suspect, identified as Sinclair Caesar remains at large. He is wanted on charges of theft by deception in excess of $50,000, fraud and forgery. All five suspects have been charged with conspiracy. The probe is continuing in cooperation with the Atlantic County Prosecutor's Office and the U.S. Department of Labor.

The timing of the arrests of Jones, Browne, and Cambrelen was unclear. News of Candelaria's arrest was kept private for several days because of concerns that releasing the information would jeopardize the investigation. The investigation began as a minor fraud case, when authorities began looking into a severance check issued by GSBS to a union member who supposedly had worked for Tropicana Casino and Resort. But when the probe reportedly showed that the union member never had worked at Tropicana, detectives began following a trail of financial documents, allegedly finding many other fraudulent checks that were issued from Local 54's severance fund starting in March 2001. "Two detectives followed through with it and it blossomed into a major conspiracy," Police Sgt. Michael Tullio said.

The arrests come as more bad news for Local 54 bosses, just weeks after an audit was released to union members that showed that Local 54's net assets dropped by $742,000 to $412,256 in 2000, and two weeks before a court-ordered special officer election. In October, a federal judge in threw out the results of a June 1999 election, ruling that the union failed to mail notices of the election to 1,975 members and failed to send ballots to 1,596 members. [UCU 5.3]

20. Philadelphia Boss Accused of $50,000 Theft; $2,500 from Widow

A federal grand jury in Philadelphia returned a 21-count indictment February 13 charging Kendall Williams with theft of union funds, theft from a union health and welfare fund, failure to keep required records, and failure to file required reports with the Department of Labor. The alleged thefts totaled $50,983.84. Williams is the president of the independent PNI Security Union, which represents the security officers at the facilities of the Philadelphia Inquirer and Daily News.

Between 1997-99, Williams allegedly embezzled approximately $29,683.84 from the PNI Security Union Health & Welfare Fund by falsely claiming that another union member, L. Zane, would join him in traveling to benefit plan administration conferences put on by the International Foundation of Employee Benefit Plans. After obtaining funds for the bogus expenses (conference fees, preconference fees, air transportation, lodging, lost wages, and per diem expenses), he deposited the Fund's checks into the union's checking account and then withdrew that money for his own personal use.
 
Also, he sought and received refunds from IFEBP for preconference programs that he did not attend. He did the same for Zane's unused conference and preconference fees. However, he did not return the refund checks to Fund. He deposited them into the union's checking account and withdrew that money for his personal use. Six conferences were involved: Las Vegas, Stateline, Pa. (2), Vancouver (2), and Washington, D.C.
 
Even more outrageous, Williams allegedly obtained a $2,500 check from the Fund in February 2000 that was meant to be paid to the widow of a recently deceased union member. According to the indictment, he never gave that check to the widow. Instead, he deposited the check in the union's checking account on June 8, 2000, and on June 9, he withdrew the money for his personal use.
 
Further, Williams allegedly embezzled union monies by taking an unauthorized salary between 1997-2000, totaling about $18,800. Finally, Williams allegedly failed to keep proper records of union finances between 1997-99 and failed to timely file required financial reports with DOL for the years 1996-99. If convicted on all counts, he faces a maximum possible sentence of 77 years imprisonment, 3 years supervised release, a $4,200,000 fine, a $2,100 special assessment, and restitution. [UCU 5.4]

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