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I. INTRODUCTION This is my fourth report
as the Monitor of the Hotel Employees and Restaurant Employees International
Union (International Union or HEREIU). My earlier reports, dated A. HEREIU Structure
and Organization The International Union
headquarters is located in On According to the Labor
Organization Annual Report Form, LM-2, filed by the HEREIU for fiscal year
1997 (May 1, 1996 - April 30, 1997), the General Executive Board members
received salaries, allowances, and expenses totaling $3,538,940.
Additionally, disbursements to employees of the International Union for
salaries, allowances, and expenses amounted to $8,666,901. These employees
range from administrative staff to International Organizers, State
Organizers, and International Auditors. Total receipts for the HEREIU for
that same period were $30,852,667. The number of local unions
in the International Union stands at 138. There are also eight State Councils
and two Joint Executive Boards, one in The General President has
the power to appoint a trustee, called an International Trustee, to take
control of the affairs of a local union, a Joint Executive Board, or a State
Council. The allowable bases for such action are set forth and explained in
the International Constitution. When my term as Monitor began, 26 local
unions were under trusteeship. B. HEREIU History The history of the International
Union dates back to 1891 in Criminal infiltration has
been an ongoing problem with the union. During the 1930’s, a Special
Commission on Crime headed by Thomas Dewey of New York revealed massive
racketeering in the restaurant business in New York, including criminal
influence in local labor unions. In 1958, the Select Committee on Improper
Activities in the Labor or Management Field, chaired by United States Senator
John L. McClellan, established that organized crime figures in C. Consent Decree On On the same day, That same day, The Consent Decree also
directed the International Union’s General Executive Board to create a Public
Review Board and to adopt an Ethical Practices Code. The Public Review Board
and Ethical Practices Code were presented to the International Union’s
convention in 1996, and adopted as part of the International Constitution,
effective The purpose of the Ethical
Practices Code is to insure high standards of executive and administrative
practices in the International Union, its subordinate bodies, and local union
officials. Under the Ethical Practices Code, the International Union is
required to maintain adequate safeguards for the prevention of corruption,
discrimination, anti-democratic procedures, and the association of any
official of the International Union or its subordinate bodies with organized
crime figures or anyone that would bring disrepute to the union. The Public Review Board
was established to review complaints and conduct hearings whenever necessary
to insure the high moral and ethical standards in the administrative and
operational practices of the International Union, its subordinate bodies and
local unions, and to review all matters arising under the International
Union’s Ethical Practices Code. Now that my term as Monitor has expired, the
Public Review Board is providing oversight to the International Union under
the terms of the Consent Decree. I have joined two other individuals to make
up the membership of the Public Review Board. The other two members are
Archbishop James P. Keleher of Under the terms of the
Consent Decree, my term as the Monitor was set to expire March 5, 1997, i.e.,
within 18 months of the filing of the Consent Decree on September 5, 1995. In
February 1997, I requested an extension of my term based on a showing of
probable cause to believe that corruption or the influence of organized crime
exists in the International Union or its constituent entities. The Court agreed
and granted the extension for a period of 12 months, ending D. The Monitorship My office staff remained
the same throughout my term as the Monitor. Daniel F. Sullivan served as my
Chief Investigator and LaVerne Waller as my
Administrative Assistant. My Investigations Officer, Howard E. O’Leary, Esq.,
of the law firm Dykema Gossett in Throughout my term as
Monitor, invaluable assistance was provided by the Office of the United
States Attorney for the District of New Jersey, the Organized Crime Section
of the Department of Justice, the Federal Bureau of Investigations, and the
United States Department of Labor. After my appointment as
Monitor in September 1995, I spent the remainder of 1995, in large part,
reviewing the history of the International Union, as well as pertinent
reports of government agencies and the records of the U.S. Senate Permanent
Investigations Subcommittee, which conducted hearings on the International
Union. My office began its actual investigative work in January, 1996. Since
then, I have reviewed the operations and actions of the International Union
in a systematic way. In doing this, I have relied on the Consent Decree’s
mandate that the International Union give me unfettered access to all records
or documents and officials, agents, employees, and members of the International
Union and its constituent entities. Investigators from my office have
conducted reviews of select local unions and the International Union
headquarters. Investigations have also been conducted in response to
unsolicited complaints and allegations. Finally, investigators from my office
have conducted investigations regarding specific programs, issues, topics,
and individuals associated with the International Union. The Consent Decree gives
the Monitor the authority to investigate, audit, and review all aspects of
the International Union and its constituent entities to advance its remedial
objective. The Monitor is also given authority to disapprove International
Union actions that he believes may violate the injunctive prohibitions of the
Consent Decree, may constitute a crime involving labor organizations or the
employee benefit plans, or may further the direct or indirect influence of
any organized crime group or the threat of such influence now or in the
future. In accordance with this authority, I have reviewed the International
Union’s hiring, appointment, and reassignment decisions. I also have reviewed
contracts, leases, and other obligations. I am pleased to report that the
International Union has been very cooperative in submitting matters to me for
review and has given members of my staff unfettered access to records. The Consent Decree, as
required, was published in the November/December 1995 issue of the Catering Industry Employee
magazine. I included a "Message to All Members" asking them to help
me carry out my responsibilities. An 800 number was provided to facilitate
member participation in the process. This has resulted in the receipt of many
unsolicited complaints and allegations that were processed by my office. Many
of the complaints concerned grievances that were not within my jurisdiction,
as defined by the Consent Decree. Other complaints required us to conduct
preliminary investigations in order to obtain sufficient facts to determine
whether the matter was appropriate for handling by the Office of the Monitor
or by the International Union. In those matters that were referred to the
International Union for handling, I am happy to report that these items were
handled in a responsible manner. II. REVIEW OF LOCAL UNIONS / CANDIDATE CLEARANCE A. Findings One of the most productive
procedures followed by my office was the review of local unions. My office
conducted reviews at the International Union’s headquarters and at 16 local
unions. Some were terminated short of a complete review. The local unions
were selected for review because or their location in an area or region
historically known to be susceptible to the influence of organized crime.
Others were reviewed as a result of specific allegations or known problems.
Reviews were conducted of the following local unions:
Many of the reviews
demonstrated that some local unions were not being operated and managed in a
manner consistent with the best interests of the membership, and some reviews
resulted in disciplinary charges. We found that: 1. Many of the local
unions do not obey their bylaws. 2. Notice to membership
meetings is not adequate, resulting in lack of quorums for General Membership
meetings. 3. Expenses are not
presented to the membership for approval as required, or, if presented,are vague or not
presented in the full context of the expenditures. 4. Raises and bonuses are
not presented to the membership for approval as required, in many instances, they were not even presented to the local
union’s Executive Board. 5. Per capita taxes are
delinquent with no effort to make arrangements for payment to the
International Union. 6. Personal expenses are
placed on union credit cards, including personal meal and beverage expenses. 7. Expenses are charged to
the union without adequate documentation to verify that the expense was
necessary for conducting union business.
8. Automobiles are
provided for employees who only use them to commute to and from work. 9. Training of officers,
business agents, and organizers is minimal or nonexistent. 10. Organizing projects
are not coordinated or supervised. 11. Severance and
insurance programs are set up for the officers, which are not in the best
interest of the membership. 12. Members are not
permitted to inspect LM-2 reports as required by the Labor Management
Reporting and Disclosure Act, and, in many cases, members are unaware they
exist. 13. Personnel policies,
salary pay scales, job descriptions, performance standards do not exist. 14. The International 15. Many local unions do
not require Business Agents to file any documentation or weekly report
describing what they did during the preceding week. 16. Executive Board
members have little or no understanding of their fiduciary obligation to
ensure that the local’s funds are spent solely in the best interests of the
membership. 17. Many locals do not
have an annual audit despite the requirement for such an audit in the HEREIU
Constitution. As noted above, most locals
failed to follow the HEREIU Constitution and their own local bylaws with
respect to salary increases and bonuses. The HEREIU Constitution, Article XI,
Section 23(c), and local bylaws require that all wages, salaries and expense
allowances must be determined by a recommendation of the local’s Executive
Board and approval by majority vote at a regular or special meeting of the
General Membership. The actual practice
relating to salary increases and bonuses varies widely among HERE locals. At
a number of locals, salary increases are discussed, approved and recorded in
Executive Board meeting minutes. An oral motion is then made to approve the
Executive Board meeting minutes at the next regular General Membership. The
membership does not know that the Executive Board meeting minutes include
salary increases and/or bonuses for the officers and no motion is made or
vote is taken at the General Membership meeting on the proposed salary
increases. Instead, the increases are implemented unbeknownst to the members,
in violation of the HEREIU Constitution and the bylaws. At certain locals, the
Executive Board meeting minutes are available for inspection on request by
individual members. Such access is no excuse, however, for failing to accord
the members their right to be informed of, and participate in, compensation
decisions with their money. Members who sought to exercise his or her right
to oppose a proposed salary increase would have to scrutinize the Executive
Board meeting minutes prior to the General Membership meeting, oppose the
oral motion to approve the Executive Board meeting minutes and demand a vote
on the proposed salary increase. The International Union
should promulgate uniform policies to be followed in connection with salary
increases and bonuses for local union officers and employees. Local 69 in Practices vary widely
among local unions with respect to the issuance of credit cards. Local 450 in
The International Union
should establish uniform policies for the use of credit cards by local union
officials. At periodic intervals, possibly bi-weekly, the local union
official should fill out and sign a form identifying the individuals present,
briefly explain why the expenditure was necessary for conducting official
union business, and attach both the receipt and charge slip relating to the
expenditure. The local union official’s signature shall constitute a
certification that the expense was, in fact, necessary for conducting
official union business. All local union officials should understand that a
knowing false certification shall constitute grounds for disciplinary
charges, including removal from office and termination of employment with the
local. The bylaws of HERE locals
typically provide for the election of three trustees who are members of the
Executive Board. The trustees generally are not (and should not be) salaried
employees of the local. The trustees are given the responsibility of
verifying the locals’ quarterly financial reports and the annual audit
required by Article XIV, Section 11, of the HEREIU Constitution. As part of
their responsibilities, the trustees should be required to review each month
the forms, certifications and supporting documentation submitted by the
officers relating to their credit card charges. After reviewing these
materials, the trustees should be required to certify that to the best of
their knowledge, information and belief, the expenses in question were
necessary for conducting official union business and that adequate
documentation exists to verify or substantiate the business necessity for
such expenses. With such a system of controls in place, recurring charges at
a particular restaurant or bar should prompt inquiry by the trustees and the
local’s independent auditors. Our investigations of HERE
locals found that not only trustees, but Executive Board members, generally
had little or no understanding of their fiduciary responsibilities under the
Labor Management Reporting and Disclosure Act and the HEREIU Constitution.
The Labor Management Reporting and Disclosure Act, Title 29 U.S.C., Section
501(a), provides that Executive Board members have a duty to hold the money
and property of the local solely for the local’s benefit and that of its
members and to expend same only in accordance with the HEREIU’s
Constitution and local union bylaws. The HEREIU Constitution, Article XI,
Section 23(a), provides that all funds of a local shall be held for the sole
benefit of its membership, and no local may make any expenditure other than
for the best interest of the local. Under the Labor Management Reporting and
Disclosure Act, the Executive Board members are legally liable to the members
for violations of their fiduciary duties to the local and its membership. Unfortunately, Executive
Board members generally had no understanding of their obligations or exposure
under the Labor Management Reporting and Disclosure Act. Few were familiar
with the HEREIU Constitution and their own local’s bylaws, although the Labor
Management Reporting and Disclosure Act requires
that all of the local’s expenditures be in accordance with the HEREIU
Constitution and the bylaws. At Local 122 in The International Union
should develop educational materials and provide training to Executive Board
members of HERE locals about their fiduciary obligations to the local and its
membership, including the obligation to oppose salary increases, bonuses and
the like when such expenditures are not in the membership’s best interest. Similarly, some locals,
like Local 1, require their Business Agents to file weekly reports describing
their activities for each day of the preceding week, while others do not
require any documentation to verify that the Business Agents actually worked
and/or describe what he or she did. The Business Agents
performs a substantial portion of his or her duties on their own outside of
the office, namely, servicing collective bargaining agreements, handling
grievances or attempting to organize new employers. A requirement that
Business Agents fill out and sign a weekly report describing their activities
during each day of the preceding week is necessary to ensure that the
employees are actually working and fulfilling their responsibilities to the
membership. Requiring such documentation makes it more difficult for
"no-show" or "partial show" employees to defraud the
membership. For example, the weekly reports of one Local 1 Business Agent
indicated that this individual reportedly spent portions of approximately 70
days annually attempting to organize a particular riverboat casino. Our investigation
disclosed that, in truth and fact, this Business Agent was gambling at the
casino and unknown to many of the individuals involved in this organizing
campaign. The International Union
should promulgate uniform reporting policies and forms for use by all
Business Agents employed by HERE locals. Such policies should have provisions
for periodic review of such weekly reports by the Business Agent’s superiors. There also appears to be
wide disparity among HERE locals on the necessity for having audited annual
financial statements. The HEREIU Constitution, Article XIV, Section 11,
provides:
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Despite the above requirement, many locals are
not audited at all, including, for example, a local as large as Local 1 with
more than 15,000 members. An annual audit performed by a certified public
accounting firm is an important safeguard against corruption, embezzlement and
non-feasance. All HERE locals -- or at least all HERE
locals above a certain size threshold -- should be required to have an annual
certified audit.
Clearly, not all of the above problems exist
in the majority of local unions; however, the HEREIU should be sensitive to
these problems and take corrective action if they occur.
B. Local 1
This local union is the home local of the
former General President, former General Vice-President, and former Director of
Organization. Their association with this local union has resulted in
considerable International Union assistance. A report prepared by the
International Union in February 1997, revealed that assistance to Local 1 over
the years amounts to $2,608,337.81. This was the largest amount of assistance
granted to any local union, with the exception of Local 226,
Despite all of the extra attention and
assistance granted to Local 1, it has been in a bad financial condition for
many years. Local 1 officials could not produce any
accounting reports when requested. They suggested that Thomas Havey & Company,
It is unclear where the compilations go when
presented by Thomas Havey & Company to officials
of Local 1. Havey’s compilations, including the
attached cover letter, are directed to the Executive Board of Local 1; however,
when shown the compilations during an interview, all of the Executive Board
members advised they had never seen them before. The current
Secretary-Treasurer of Local 1, who has been in this position since
A review of the compilations shows that in
May, 1984, the International Union granted a $304,522 loan to Local 1 to cover
past due per capita taxes and various other expenses incurred prior to
The 1993 compiled report contained comments
from Thomas Havey & Company regarding Local 1’s
capacity to exist as a going concern. The going concern comment is set forth as
follows:
Note 8. Going Concern
As shown in the accompanying financial
statements, the
The
The debt reduction plan referred to above
apparently did not work because the
After reviewing the above identified
compilations, it would seem logical to ask why the International Union’s
officials allowed this local union to continue from 1984 to the end of 1996,
ignoring loan repayments, accumulating large per capita, pension payments, and
administrative debts. The former International Union’s General
Secretary-Treasurer, Herman Leavitt, advised he did not see the compilations
prepared by Thomas Havey & Company for Local 1.
He acknowledged there were conversations and communications between his
department and the General President regarding the financial problems at Local
1. The problems never seemed to go away and no one pressed to resolve them.
During all the years of financial difficulty,
the officers and employees of Local 1 received salary increases on a regular
basis and former General President Hanley collected $31,000
per year as Executive Director of the Local.
The failure of the HEREIU General Officers to
deal with this never-ending Local 1 problem is, of course, due to the fact that
many of the general officers come from
C. Chicago Joint Executive Board
Review of the records of the Chicago Joint
Executive Board reveals that the stated purpose of this Board is to provide
coordinated management of the various local unions in the Chicago Metropolitan
Area and to resolve disputes between local unions. The minutes for this Joint
Executive Board for the period 1989-1997 show that the only local unions
participating are Local 450,
The positions of Executive Director-President,
Secretary-Treasurer, and Office Secretary are all paid positions. The salaries
are $300 per week for the Executive Director-President; $300 per week for the
Office Secretary; and $200 per week for the Secretary-Treasurer. The Office
Secretary also serves as the Office Manager of the International Union’s
Midwestern Regional Office and has the title of Administrative Assistant to the
General President of the International Union. The Chicago Joint Executive Board
usually meets at the Midwestern Regional Office location.
A review of the minutes of the Chicago Joint
Executive Board’s meetings reveals that the Executive Director-President is almost
always present and presides at the meetings. The usual business consists of the
Executive Director-President providing information regarding Local 450’s
activity for the past month and someone from Local 1 also discussing what had
occurred at Local 1 over the past month.
The Secretary-Treasurer has been a very
infrequent participant in the Chicago Joint Executive Board’s activities over
the past several years. In 1994, he attended only one of the twelve meetings
that year. His attendance for several other years was never more than 50
percent of the Joint Executive Board’s meetings, yet he has continued to
receive in excess of $10,000 from the Board each year. The Office Secretary of
the Board receives an annual salary of approximately $15,600 and also is
enrolled in a pension plan which is funded by the Joint Executive Board. This
is all in addition to the pension plan benefits, salary and allowances ($68,705
in fiscal year 1997), and an automobile leased for her by the International
Union. The Chicago Joint Executive Board is funded by a 25 cent per month per
capita fee on all members of the participating local unions (Local 450 and
Local 1). In 1996, the Chicago Joint Executive Board’s cash receipts were
$50,252.
The paid officers and the Office Secretary are
all also highly paid officers/employees of the International Union and/or Local
1 and Local 450. The work performed by this Joint Executive Board appears to be
that of both Local 1 and Local 450 keeping each other informed of their work in
order to coordinate their efforts in overlapping areas. This kind of
inter-local cooperation would appear to be a routine function of both Local 1
and Local 450. That should not require a Joint Executive Board to accomplish.
I am aware of the fact that the Chicago Joint
Executive Board is a signatory to a multi-employer collective bargaining
agreement with the Chicago Hotel Association. The most recent agreement,
executed in early 1997, is for a term of five years and eight months.
Consequently, during the five year period between collective bargaining
agreements, there is little justification for the Joint Executive Board’s
existence, much less for the payment of salaries to its personnel.
Recommendation:
That the salaries for the Chicago Joint
Executive Board personnel be discontinued.
D. Candidate Clearance
Union democracy is a fundamental tenet of
union governance, and the International Constitution deals at length with rules
and procedures for electing high level International Union officials and
conducting elections in local unions. Furthermore, the Consent Decree, under
paragraph 27, specifically sets out procedures for the Monitor to oversee the
election of officers in the International Union and its constituent entities.
The objective is to ensure that elections are free from corruption and the
influence of any barred person. The Consent Decree requires that the Monitor be
advised in advance of all candidates for elections, both at the International
Union headquarters and within the union’s constituent entities.
The Office of the Monitor has reviewed 1,064
candidates for elective office in 64 local unions. In addition, we have
reviewed 64 individuals appointed as Business Agents or
similar positions of trust. If the background materials
included recent run-ins with the law, investigators conducted interviews, at my
request, to provide individuals an opportunity to explain the circumstances of
those situations. We have conducted approximately 25 such interviews. No
candidate for elective or appointive office has been disqualified as a result
of these reviews. It is not known how many potential candidates did not apply,
or withdrew, because the screening process was in place.
III.
REVIEW OF INTERNATIONAL
A. Financial and Administrative
Management
Representatives of the Office of the Monitor
conducted an on-site review of administrative operations and detailed audits of
certain financial records at the International Union headquarters in
There is a program to develop a budget for the
Research Department. General President Wilhelm has implemented a computer
accounting program which will be the basis of a HEREIU budget. He hopes that
all departments of the HEREIU will be operating on a budget within a year or
two. He, in his capacity as Secretary-Treasurer, took the initiative to
implement a budget procedure for the International Union’s overall operations.
Interviews of officials, employees and some
consultants confirmed that the International Union has traditionally operated
without some absolute basics. There is no budget, no organization chart, no job
description for employees, and no policy manual.
One consultant commented that the former
General President had not seen a need for "structure". However, the
consultant added that the time for structure in the management of the
International Union had probably arrived.
While the lack of an organizational chart may
not, on the surface, appear to be critical, it is clearly a deficiency in the
overall management of the International Union. Time and again during the
interview of officers, employees and consultants, the interviewees were unable
to define lines of authority on matters in which they were directly involved.
For example, one might assume that the Director of Organization would have a
degree of responsibility either directly or indirectly over every employee in
the Department of Organization. During an interview, he denied having any
degree of responsibility over certain individuals and/or initiatives, however,
other officials involved in organizing efforts made specific comments
contradicting his remarks.
The staff of the International Union was asked
to provide an organizational chart, position descriptions and job titles for
employees of the International Union, but the only existing internal document
provided was a listing of headquarters personnel arranged alphabetically by
first name. Consequently, my staff conducted interviews of all employees to
determine the duties of each and to develop an understanding of the work flow.
These interviews revealed expressions of confusion, questionable workload
distribution, duplication of effort and, in some cases, animosity attributed to
a lack of clearly defined duties and lines of authority. In some instances, for
example, employees’ duties were taken from them when their superiors vacated
assignments or new bosses brought in their own assistants. In those instances,
the pay of the former incumbents was not impacted, but they were left without
clearly defined duties. Aside from the obvious insensitivity to the affected
employees, there is an apparent disregard for cost-effective management.
While salaries of most employees seem to be
very generous, there were no uniform standards for selection of appointees, no
uniform compensation standards, no performance review process, and no
established criteria for promotion or pay increases.
The lack of documents accounting for authority,
responsibility, and performance of employees was not only an indication of poor
management, but, in some cases, it clearly facilitated intentionally inflated
compensation and the concealment of ghost employees. In several instances, the
Monitor’s inquiries about organizers, special assistants and consultants
precipitated abrupt departures through retirement and resignation.
Recommendation:
1. Prepare a budget for the next fiscal year.
2. Establish written policy establishing a
system for evaluating performance of employees.
3. Prepare an organizational chart defining
lines of authority/responsibility for officers and employees.
4. Define standards for compensation of all
employees.
B. Credit Cards
The International Union maintains a credit
card account with the American Express company which allows each of the General
Officers (General President, General Vice-President, Secretary-Treasurer, and
Director of Organization) to charge expenses. Additionally, retired
General Officers John Gibson, John Kenneally, and
Herman Leavitt have credit cards, as well as the Executive Vice-President. The
American Express cards were utilized by these individuals during the period
1993-1996 to charge approximately $645,000 in expenses to the International
Union. Additionally, the former General President has a VISA credit card (First
Card) assigned to him, and the General Vice-President obtained a VISA card
(Citibank Advantage) in June, 1995. These two cards were utilized to make
additional charges of $237,316 (First Card) and $89,487 (Citibank Advantage)
during the same period, 1993-1996. As a result, the International Union
disbursed approximately $971,803 for routine credit card purchases during this
period.
The justification for obtaining second credit
cards for the General President and General Vice-President was not fully
documented; however, it was noted that both the First Card and the Citibank
Advantage card provide free air miles based upon usage. No evidence of
utilization of free air miles was noted in the union’s records.
Formal policy regarding the use
of above identified credit cards appears to be non-existent. The secretaries to
each of the officers have been given the responsibility of reviewing the credit
card expenses and insuring that receipts are attached to the monthly
statements. During interviews, these employees identified items which could not
be charged, such as cigarettes, movies and laundry/dry cleaning. It was noted
that on several occasions these items were detected on the credit card bills,
and the individual officers reimbursed the International Union for these
expenses. It appeared that staff employees did not have a clear understanding
as to whether alcohol is an allowable expense.
The fragmented credit card utilization policy
for the International Union is set forth in two memoranda; one prepared by the
Department of Organization in January, 1991 and another bearing the name of
Director of Organization dated February, 1994. This second memoranda stated
that Thomas Havey & Company, the International
Union’s auditors, had advised that International Union employees had been in
violation of the U. S. Department of Labor laws and regulations with regard to
meal expenses. It stated that any meal charges by the cardholder and any other
union employee from their home city would not be reimbursed. When questioned
about this memoranda, the Director of Organization did
not recall preparing it. He also suggested that this policy might not apply to
officers of the International Union.
Clearly, the U.S. Department of Labor and the
Internal Revenue Service (IRS) regulations make no distinction between officer
and employee. Department of Labor International Compliance Audit Program
(I-CAP) investigators were concerned that International Union officials were
attempting to circumvent their directive in this matter. The file of the
Department of Labor documents this and indicate that the directives regarding
expenses must apply to "all officials, the highest ranking general
officers, as well as employees".
A review of the documents maintained by the
Department of Labor regarding an I-CAP audit conducted at the International
Union during 1990-1992 presented a much clearer picture of the International
Union’s policy (or lack thereof) regarding business expenditures. The audit
directed that officers and employees incurring reimbursable expenses should
submit timely, adequate, written documentation sufficient to corroborate the
business purpose of the expenditure. The Department of Labor files reflect that
International Union officials were not keeping adequate records regarding officers expenses. They pointed out that, in many cases,
explanations were not given for charges and, in other cases, incomplete or
insufficient explanation was given. They directed that documentation for these
expenses must include who, what, where, when, and why, and that this
documentation must be completed when the expense occurs. They pointed out that,
if recorded in a timely manner, this accurate documentation would minimize the
risk that the expenditures would be considered personal in nature, and it would
greatly assist the Accounting Department in accurately recording these
expenditures. These instructions as given by the Department of Labor were set
forth in a management letter prepared by Thomas Havey
& Company for the General Executive Board of the International Union.
When my review of the International Union’s
records began, it became immediately obvious that the Department of Labor’s
instructions regarding timely recording and sufficient documentation had been
totally ignored. We discovered that the secretaries were still trying to obtain
documentation for credit card charges that had occurred eight to ten months
earlier. The credit card bills were sent to the Accounting Department in a
timely manner, but, in many cases, the supporting documentation would not be
sent to the Accounting Department until after the end of the fiscal year. In
other words, the bills were being paid with no documents attached.
Additionally, when the documentation was finally received, it consisted of
receipts and cryptic comments such as "locals", "skychefs", or "health and welfare". This was
the very type of documentation that the Department of Labor had previously
advised was totally unacceptable.
My review also revealed that the
responsibility for approval of these miscellaneous expenses was not properly
assigned. A secretary was given the responsibility to insure the
appropriateness of charges incurred by the highest officials of the International
Union. This resulted in expenses being reviewed to determine if specific
disallowed expenses have been charged, for example, if video movies are rented
or cigarettes purchased. The bulk of the charges were not, however, being
reviewed by anyone to determine the appropriateness of the expense. A cursory
review of these records immediately spotted numerous problems which could have
been addressed by an appropriate approval process. For example, records for
restaurant and bar purchases made by one senior official disclosed a pattern of
excessive tipping. It was not uncommon for the tips to be greater than the
restaurant/bar purchase amounts, as set forth below:
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Date |
Purchase |
Tip |
Total |
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$ 5.80 |
$ 80.00 |
$ 85.80 |
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$ 97.20 |
$50.00 |
$147.20 |
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$34.38 |
$ 50.00 |
$ 84.38 |
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$150.29 |
$100.00 |
$250.29 |
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|
$ 98.80 |
$100.00 |
$198.80 |
|
|
$ 33.00 |
$ 50.00 |
$ 83.00 |
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$116.45 |
$150.00 |
$266.45 |
An International Union employee assigned to
drive this official to and from area restaurants at union expense confirmed
that this official was known to give very generous tips.
Records for another senior International Union official revealed a pattern of
extensive purchases at restaurants/bars in his home-base area with fellow
employees from that geographical area.
Examples are as follows:
TOTAL $317.78
5/15/96 $ 11.50 Lola’s/Roulette
TOTAL $347.58
The above expenses at Chicago, Illinois area
establishments are all attributed to this senior International Union official
and, in each case, one other individual (different individuals on December 5,
1995, and May 15, 1996) who share office space in Chicago, Illinois.
When questioned regarding these expenses, the
official and the employees contend they were conducting union business (talking
to bartenders, etc.) at all of the business establishments where charges were
incurred. This does not appear to be responsive to the Department of Labor
instructions or the Director of Organization memoranda of
While it is recognized that this International
Union has a special interest in insuring the economic well-being of the
hotel-restaurant industry, it is doubtful that this is accomplished by a select
few officials frequenting bars and restaurants.
Since we examined the credit card abuses, the
HEREIU has initiated a two-level verification process, first, in the user
department and then in the General Secretary-Treasurer’s office, which is
designed to curb the abuses disclosed by our review.
Clearly, a system of stringent controls should
be in place to ensure the credit card charges by International Union officials
are necessary for conducting official union business. At least monthly,
International Union officials should fill out and sign a form identifying the
individuals present when the expense was incurred, briefly explain why the
expense was necessary for conducting official union business, and attach both
the receipt and charge slip relating to such expenditures. If an International
Union official fails to submit such documentation in a timely fashion, the
expense should be deemed personal and deducted from the official’s
compensation. The International Union official’s signature on the form along
with the supporting documentation shall constitute a certification that the
expense was, in fact, necessary for conducting official union business. All
International Union officials should understand that a knowing false
certification shall constitute grounds for disciplinary action, including
removal from office and termination of employment with the International.
Semi-annually, the expense forms and
supporting documentation submitted by International Union officials relating to
credit card charges should be reviewed by a select number of General Executive
Board members who should certify that, to the best of their knowledge,
information, and belief, the expenses in question were necessary for conducting
official union business and that adequate documentation exists to verify or
substantiate the business necessity for such expenditures.
Recommendation:
1. Terminate issuance of union credit cards to
retired officials.
2. Assign responsibility for review and
approval of credit card expenditures to a select number of
General Executive Board members and ensure that these individuals are
familiar with the Department of Labor and Internal Revenue Service regulations
regarding business expenditures.
3. A sufficient sample of expense forms and
supporting documentation should be reviewed by the certified public accounting
firm conducting an audit of the International Union’s financial records to
ensure that the system of control relating to credit card charges is adequate.
C. Per Diem / Allowances
On
The per diem payments do not appear to be
related to actual expenses incurred by the officers because some of them are
additionally reimbursed for miscellaneous cash expenses, such as taxi and
skycap tips. The payment of per diem, and recording it as an allowance on the
LM-2 form also tends to present a distorted picture of the total salaries paid
to the officers. Payment of a per diem allowance for possible expenses to a
retired employee is incomprehensible. Even after receiving this $14,600 per
year in per diem payments, John Gibson still submits bills for miscellaneous
expenses when he attends conventions or other similar functions.
In addition to the above per diem allowances,
the International Union has for many years awarded officers and select
employees for attending International Union conventions and General Executive
Board meetings. International Vice-Presidents, Administrative Aides, and
Administrative Assistants were each given $4,000 for attending the 1996
Convention. The allowance for attending General Executive Board meetings is
usually $2,000-$2,500. This International Union granted $478,150 in allowances
in fiscal year 1997.
The 1996 LM-2 for the Laborers International
Union of North America, an organization with 793,730 members, lists no money
expended for officer/employee allowances.
Recommendation:
Eliminate per diem payments and General
Executive Board/Convention payments to officers and select employees, current
and retired.
D. Leased Vehicles
Historically, the International Union has
maintained a fleet of nearly 60 leased vehicles, ostensibly for the business
use of certain union officials, employees, and consultants. In addition to
this fleet, the International Union owns limousines based in
The International Union spends about $425,000
annually for leased vehicles and another $100,000 on miscellaneous automotive
maintenance expenses. In the interest of expediency, the Monitor's audit did
not address the dollar value of automobile insurance premiums or the cost of
liability judgments/claims. However, the amounts in the latter two categories
are assumed to be substantial because the International Union provides
automobile insurance coverage not only on vehicles leased and owned by the
union but also on several vehicles owned by employees who are reimbursed for
mileage expenses in lieu of being provided with union cars. Anecdotal
information obtained during the course of several interviews suggests that the
International Union has incurred significant costs for legal expenses and
payment of claims emanating from automobile accidents.
Some of the local unions also lease vehicles.
Local 1,
Clearly, the total cost of automobile-related
expenses incurred by this International Union and its constituent entities is
at a level that deserves the close scrutiny of management on a continuing
basis, and program management sufficiently structured to provide managers with
the information necessary to make fiscally sound decisions. Unfortunately, that
has not been the case in the past. It has not been overlooked that about one
year ago, and probably as a reaction to the Monitor's inquiries, then General
Secretary-Treasurer Wilhelm published a document announcing the terms of an
agreement between the International Union and a vendor who is to be the sole
source provider of leased vehicles. It is hoped that the publication of the
General Secretary-Treasurer’s memoranda is intended as an initial step in a
much greater effort toward fiscal responsibility.
A review of International Union practices with
regard to acquisition, assignment, maintenance and disposal of vehicles
revealed that the International Union had no uniform program in place to ensure
fiscal responsibility. Accounting and reporting for this very costly segment of
the International Union's total expenditures were sorely lacking and, in some
cases, suggests the possibility that expenses may have been deliberately
concealed from the general membership of the International Union and government
oversight.
For example, the International Union's submissions of the required Labor Organization Annual Report (U.S.
Department of Labor Form LM-2) for the past several years contains the
statement, "It is not practical to make a precise distribution of
automobile expenses..." While the word "practical" is by
definition a relative term, it is difficult to believe that any competent
manager exercising generally accepted business practices would not see the
absolute need for this information. In fact, other labor organizations,
including the International Brotherhood of Teamsters and the Laborers
International Union of North America, do conduct a precise accounting for
automobile expenses (itemized by individual) and report that information
annually on Form LM-2.
The International Union's LM-2 also asserts
that, "
A review of International Union lease
agreements and interviews of International Union personnel revealed that many,
probably most, vehicles leased by the International Union are assigned to
individuals who use them primarily for commuting and personal use rather than
union business. In some instances, individuals to whom cars are provided have
sedentary work assignments which rarely, if ever, require travel outside the
workplace. Others are rewards for a privileged group of individuals favored by
the General President. Ironically, the leased vehicles for which there appeared
to be a clearly perceivable business justification were the more modest and the
least costly in the fleet. Virtually all vehicle assignments are approved by
the General President who personally signs every lease agreement.
According to officials of the International
Union, the principal document governing policy on leased vehicles known to have
existed prior to the Monitor's term was a memorandum dated
Despite the 1992 memorandum, a master list of
leased vehicles provided by the International Union headquarters staff in
November, 1996, as well as other documentation reviewed by my staff, revealed
that 19 (33 percent) of the 57 vehicles listed were then being leased at
monthly rates significantly exceeding the $600 limitation. Ten of the 19
vehicles exceeding the $600 limitation were being leased at monthly rates
ranging from $861 to $1,483. Further examination of records, as well as
interviews of officers and employees, determined that there was an assumed, but
unwritten, exclusion of General Officers from the restrictions in the policy
memorandum and that other individuals were granted exemptions by virtue of the
purported relationships they claim to have with the General President. No one
interviewed was aware of any limitation ever being placed on leased vehicle and
automobile related expenses incurred by General Officers. In fact, the
International Union also bears the cost of leased vehicles, automotive
maintenance expenses and automobile insurance premiums for retired General
Officers and places no cost restrictions on the retirees. In essence, the leased
vehicle "program" was clearly micro-managed by the former General
President, and the only documented restrictions on the "program" are
selectively, if at all, enforced.
Given the premise that vehicles are provided
primarily to be used in connection with union business, the rationale behind a
policy of not reimbursing gasoline expenses is difficult to understand. Several
employees and officials were asked about the policy, but none could offer an
explanation of the logic. One General Officer said he was unaware of the
policy, admitted that he routinely approves reimbursement of gasoline expenses
for employees under his supervision, and said he had never before been
questioned about it. Former General Secretary-Treasurer Leavitt recalled that
the policy of not reimbursing gasoline expenses was established as a
cost-saving measure at the specific suggestion and insistence of the General
President whose decisions, according to the former General Secretary-Treasurer
and many others, are never challenged. He said he could not explain the logic
of the decision other than to describe it as one of many examples of
"union politics", i.e., a rule is made and then selectively enforced
or ignored.
In the absence of any substantive explanation
to the contrary from those interviewed, it would appear plausible that the
rationale behind suggesting such a policy may be a perception that vehicles are
provided as perquisites and the drivers do not incur gasoline expenses as a
result of conducting the International Union's business.
Despite the fact that the International
Union’s outlay for automobile-related expenses are well over one half million
dollars per year, there is no budget for vehicle leases and related costs, nor
are there any administrative controls to provide management with timely
information pertinent to controlling costs throughout the fiscal year. The
decision to provide an individual with a leased vehicle is made by the General
President and ratified by the General Executive Board. At this time, members of
the General Executive Board are not provided with any information to justify
the business need for providing a vehicle, nor are they informed of any
anticipated costs when they are asked to affirm the decision to provide an
individual with a leased vehicle. Document reviews and interviews revealed no
evidence of any General Executive Board member ever voting "no" on a
proposition recommending that a leased car be provided. With the exception of
certain low level employees, most individuals were permitted to use vendors of
their choice and negotiate their own lease deals. In every case, however, the
lease agreement contract was ratified by the General President.
Officials at the highest level in the
International Union enriched themselves by manipulating the leases of luxury
vehicles. Top officials, including the former General President, former General
Vice-President, and former General Secretary-Treasurer engaged in a practice
referred to as "front-end loading", whereby they committed the International
Union to highly inflated monthly payments on leased vehicles so as to reduce
the lease end values and/or pre-negotiated prices for which they could then buy
the vehicles. This practice enabled them to personally acquire several vehicles
for thousands of dollars below the used car wholesale prices and, in some
cases, to facilitate sales of vehicles to friends and relatives at bargain
prices. Not only did these officials subsidize their purchases at the
International Union’s expense by "front-end loading", but, in two
instances, also converted the International Union’s security deposits of $700
and $1,350 to reduce even further their bargain prices.
In addition, they arranged to each have more
than one vehicle leased for their exclusive use. All had vehicles at their
homes of record, away from
One of the lease deals involved a "guest
car" assigned to the former General President. The lease was for a
customized GMC Suburban, valued at $47,000, leased at $1,483 per month and
having a pre-negotiated purchase option of $5,000 at the end of a three-year
term. The vehicle had approximately 3,000 miles on the odometer, was garaged at
the International Union’s condominium location, and had been under lease for
two years. When the former General President was informed of the Monitor’s
interest, he abruptly ordered that the International Union terminate the lease
and that the International Union purchase the vehicle. He acknowledged that he
had personally been involved in arranging for the lease of the Suburban, but
stated that he did not intend to purchase the vehicle and did not notice when
agreeing to the terms of the lease agreement that the monthly payments were
extraordinarily high or that the lease end value was extremely low. He did,
however, acknowledge having purchased other vehicles which had been previously
leased by the International Union. One of those, for example, was a 1993
Cadillac Allante, a two seat convertible, Illinois
license place KEH8 (Mrs. Hanley’s name is Kathryn E. Hanley) at the time it was
leased, the capitalized cost of which was $63,212 and for which the General President
paid $6,000 less than the wholesale value after the International Union made
monthly payments of $1,685 for three years. Another International Union leased
vehicle purchased by the General President at lease end was one which had 5,000
miles on the odometer and for which he paid $5,000.
The practice of "front-end loading"
International Union lease agreement contracts has been so flagrant in some
cases that the manager of a leasing company took to preparing letters to
International Union officials in which he openly provided a variety of payment
options with corresponding termination values. One of the letters, for example,
was addressed to the former General Secretary-Treasurer and stated in part,
"A $802 lease payment brings the Jeep lease down
to the same termination value as your previous lease. Please advise me the
termination value you want to place on your new lease. The lower the
termination value the higher the monthly payment."
Investigation confirmed that former General
Secretary-Treasurer Leavitt had, in fact, purchased that vehicle and that he
paid $15,000 below wholesale for and $10,000 below wholesale for another. He
acknowledged these transactions in a deposition and, when asked about the
propriety of inflating lease payments to personally profit at lease end, he
said he saw nothing wrong with it. In fact, he insisted that he was deserving because of his many years of service to the
International Union.
The former General President, in a deposition,
insisted that he and other International Union officials were provided with
leased vehicles for the primary purpose of using them to conduct union
business.
However, an audit of auto leases
revealed that the International Union continues to lease luxury vehicles for
the exclusive use of three retired General Officers and for a favorite charity
of the former General President’s in
In summary, the International Union has
suffered a severe financial loss in vehicle lease transactions. I am informed
that the HEREIU is in the process of correcting existing problems, eliminating
unnecessary costs and establishing a basis for accountable, more efficient
management in the future.
Recommendations:
1. Prohibit the lease-end
purchase of any International Union leased car by any union official, employee
or consultant.
2.
Prohibit International
3. Discontinue the
practice of providing leased vehicles for consultants and consider other means
of compensation in lieu of vehicles.
4. Discontinue the
practice of contributing a leased vehicle to any charitable organization. In
situations where it is deemed to be in the best interests of the general
membership to donate, the contribution should be monetary and in an amount
approved by the General Executive Board.
5. Assure the use of
correct accounting and reporting procedures to include a precise accounting for
automobile expenses on Form LM-2 and to correctly report income to IRS. This
should take into account that the Internal Revenue Service business/personal
use formula does not apply to any consultant, any retiree, and any employee who
cannot document more than 50 percent use on International Union business.
6. Conduct a cost benefit
study of the International Union’s $100,000 motor home and consider disposing
of it by the most cost effective means if its projected use does not justify
operational, maintenance, and storage costs.
E. Per Capita
Delinquencies
The International Union has had a long history
of problems in connection with collection of per capita dues from its local
unions. At the International Union’s 41st general convention in July, 1991, the
General President acknowledged this problem and advised the Convention
delegates that if the constitutional provision that excluded participation by
delinquent local unions were enforced, there would be only about 14 people
allowed to be seated at the convention. He announced that the International
Union had made loans totaling $9.5 million to all of the delinquent local
unions so that they could attend the Convention. Prior to the conclusion of the
Convention, the General President announced that he was going to recommend to
the General Executive Board that the $9.5 million in loans be forgiven. He went
on to state, "in the future this per capita tax will be paid on time, not
30 days delinquent, not 60 days delinquent, in some cases not five years
delinquent. It will be paid like you pay your mortgage or your rent, because if
you don’t pay it then you are going to lose the services that you get through
that per capita. Subsidies will be canceled, staff
will be withdrawn and reassigned to areas that will pay the per capita. You
have to pay for the services. You are going to pay for the services."
In March, 1990, the Assistant to the General
Secretary-Treasurer was asked by the Department of Labor to provide a list
reflecting the per capita delinquency of all affiliates. He informed the
Department of Labor that the International Union did not have records
reflecting delinquent amounts of each local union. He stated that these records
are maintained only on the local union level and that he could provide only an
estimate.
My review has revealed that the 1991
"forgiveness" and threat of losing services and subsides did nothing
to correct the delinquency problems. By 1996, as stated earlier, Local 1 had a
per capita delinquency exceeding $1 million and was granted a $1.3 million loan
by the International Union so that its delegates could be seated at the 1996
Convention. A report prepared by HEREIU in February, 1997, revealed that since
By letter dated February 3, 1997, the
International Union’s Co-General Counsel, Robert Rotatori,
forwarded to me a copy of a memorandum dated January 27, 1997, prepared by the
International Union’s General Secretary-Treasurer. This memorandum captioned
"Status Report, General Secretary-Treasurer’s Office", addressed,
among other things, the per capita and loan collection problems. The following
is set forth in this memorandum regarding these problems:
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1. Per capita enforcement |
The International Union has had a chronic
problem with delinquent I.U. per capita payments by a noticeable minority of
local unions. A program is being developed to ensure timely per capita
payments, in accordance with the Constitution:
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- A list of delinquent local
unions is now produced on the 1st and 10th of each month. - Letters are sent each month to all local
unions which are delinquent by two or more months. - Phone calls are made to the delinquent
local unions. |
A policy must be established
in the next several weeks on a course of action for any local union which fails
to meet its obligations in spite of the above process. Any remedy must be
applied even-handedly to all local unions.
That recommendation has now been implemented,
and I am informed by General President Wilhelm that all per capita and loan
repayments are on schedule.
The International Constitution, in Article
XIV, Section 13, clearly authorizes the International Union, through the
General Executive Board, to expend funds of the International Union for
charitable purposes. At the same time, the International Constitution indicates
in Article I, Section 2, that the objective of the International Union is
"to organize all persons within its jurisdiction for the economic, moral
and social advancement of their condition and status in life".
Furthermore, the Ethical Practices Code, as codified in the International
Constitution in Article XXII, Section 2, states that "Union funds are to held in sacred trust for the benefit of the membership.
The membership is entitled to assurance that Union funds are not dissipated and
are spent for proper purposes. The membership is also entitled to be reasonably
informed as to how Union funds are invested or used".
With these principles in mind, my office has
reviewed the large number of substantial donations to various charities, civic
organizations, and causes that were approved by the General Executive Board
during the period
General Executive Board members occasionally
make handwritten comments on their copies of the proposition ballots returned
to the International Union headquarters. In one such instance, the member voted
"yes" in regard to a particular donation, but remarked, "I vote
yes on the assumption that this is a legal use of [International Union] money -
I assume that has been researched". In another case, a member abstained
and commented, "Do not know reason for this donation". In neither of
the cases cited was there an indication that the Board members’ questions were
ever answered.
While many of the donations made by the
International Union suggest a compassionate response to human need, the
objectives of others are far less obvious. A prime example of the latter is a
donation of $2,000 to the Headwaters Classic Sled Dog Race in Land O’Lakes,
Listed below are recipients of International
Union donations of $5,000 or more approved during the period of the study:
$45,500
20,000
14,500 Eithne
Fitzpatrick Memorial fund [and Gold Tournament]
14,000 Labor of Love Tournament
14,000
14,000 Robert Gamez
Charity Golf Classic
11,000 American
10,000 Local 610,
10,000 The Culinary
10,000
10,000 The
9,000 St. Martin De Porres
Catholic School
8,000 American Jewish Committee
7,700 Guide Dogs of the Desert
7,250 The Thorek
Foundation
7,000 All-American Collegiate Golf Foundation
6,500 Jewish National Fund
6,000
5,000
5,000 National Jewish Center
for Immunology & Respiratory Medicine
5,000
5,000 Catholic Charities of
5,000 Catholic Church Extension Society
5,000 St. George Orthodox Church of the Desert
5,000 Saipan Relief
fund
5,000
5,000 Leukemia Society of
5,000
Even a cursory review of these donations will
reveal general themes of similarity among the recipients. For example, six of
the 33 recipients (18 percent) are related to the Catholic Church, which
received $94,500, or 29 percent, of all donations. Other themes are also
apparent. For instance, many recipients are located in
The Irish American Sports Foundation has
received about $450,000 from the HEREIU. This foundation was started in 1983
for the specific purpose of providing recreational facilities for Irish youth.
In 1993, the Edward T. Hanley Basketball Arena was dedicated outside
The contributions by the HEREIU to this
organization are clearly authorized, however, it is
difficult to imagine how this contribution is even remotely related to the concerns
of union members across the
Similarly, contributions to the All-American
Collegiate Golf Foundation have been very generous. In 1992, for example, the
HEREIU paid $25,000 for union officers and guests to play in a tournament at
Rancho Mirage in
The purpose of this examination is not to
suggest which recipients are worthy to receive donations. Rather, it is to
suggest that donations are being made without apparent regard to reasonable
standards of relationship to union objectives. It appears that these recipients
have greater connection to top officials of the International Union than to its
members.
Recommendations:
1. Prepare written guidelines for the
expenditure of International Union funds for charitable purposes.
2. Establish a committee to make
recommendations to the General Executive Board regarding charitable donations.
3. Require all solicitations and
recommendations for donations to pass through the committee before being
forwarded to the General Executive Board for action.
4. Require the committee to work from an
annual budget establishing the maximum amount of money that can be donated to
charity for the year.
5. Provide union members with detailed
information of all donations made through the Catering Industry Employee
magazine.
G. Audit Program
It would seem critical that the audit staff of
nearly any organization would consist of auditors having formal education in
accounting. However, the International Union audit staff consists of five
individuals, only one of whom is a professionally trained accountant. Four of
these five individuals (including the only accountant) are paid $63,250 per
year. The fifth auditor, who happens to be the relative of former General
Secretary-Treasurer Leavitt, is paid $12,500 more than the others and has no
degree in accounting.
The auditors all operate from their private
residences in different cities, none in
The auditors make a special effort to maintain
a favorable relationship with the local unions. Each auditor establishes his
own schedule and rarely visits International Union headquarters in
One example of handling internal audit
findings was the matter of excessive spending and delinquency of per capita
taxes in Local 1,
In my view, many of the problems on the local
union level can be addressed, and indeed, deterred by a competent audit
program. The auditors must review car leases, credit card use, proper
authorization for expenditures by the Executive Board and the General
Membership. Auditors must assure that the local obeys its bylaws. There is no
systematic process for audit coverage of the activities most susceptible to
fraud, waste, and abuse.
On
Recommendation:
The audit staff should be trained on current
auditing techniques to detect fraud and waste in local unions and an auditor
should be assigned full-time to audit the operations of the International
Union.
H. Organized Crime Information
The HEREIU acknowledged in the Consent Decree
in this proceeding that subordinate bodies, such as local unions, have
historically suffered from an externally induced corruption problem. In an
appendix to this report, I list the individuals subject to disciplinary action
by the Office of the Monitor, and the reasons for the discipline imposed. Some
are barred from further participation in the HEREIU for organized crime
association. For that reason, the HEREIU needs to stay informed on organized
crime activity in the labor movement.
In order to emphasize the importance of
avoiding associations with members or associates or organized crime groups to
persons holding positions of trust in the HEREIU, the International Union
should require all International Union officers, HERE local officers and other
persons in a position of trust to certify annually that they have not knowingly
associated with members or associates of any organized crime group.
On April 1992, Judge Frederick B. Lacey,
Independent Administrator of the International Brotherhood of Teamsters (IBT),
issued a Summary Report to the court supervising the IBT Consent Decree. He
made many recommendations, including steps to guard against organized crime
problems in the future. He stated:
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It should be the duty of, at
least, one International employee to stay abreast of all publicly available
information concerning organized crime activity in the labor movement. This
individual would stay abreast of federal and state public hearings on the
matter. He would obtain all legislative reports on organized crime as well as
the annual reports on the matter of applicable state crime commissions. He
would stay abreast of academic and other studies. Regular databank searches
of press accounts of mentions of teamsters and organized crime would be
conducted. Indictments and trials would be followed and recorded. |
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By now, the IBT has barred
about 50 officials for organized crime association. The Laborers International
Union of North America is currently in the process of investigating corruption
in its ranks and officials have, in fact, been barred for organized crime
association. It is essential that the HEREIU stay informed of all developments
in this area, and I suggest this responsibility be placed in the Research
Department at headquarters in
The International Union also needs to adopt a
policy requiring the International Union, HERE local officers and other persons
in a position of trust to disclose whenever they are arrested or indicted on
criminal felony charges. This should assist the International Union in
determining whether disciplinary action should be taken against individuals,
pursuant to the HEREIU Constitution, in the future. For example, a President and
Vice-President of a HERE local were indicted on felony charges. The individuals
were convicted and imprisoned for a period of approximately four months while
remaining in their positions as officers of the local. Former General President
Edward T. Hanley testified during his deposition that he never knew about their
convictions, or continued service as union officials while being incarcerated.
In another instance, a HERE local president was charged with a felony. He ran
for reelections as President of the local while under indictment. Few at the
local, and no one at the International Union, knew about the charges pending
against him.
Recommendation:
1. The Research Department should maintain a
database of all individuals barred from the union movement, as well as public
source information covering organized crime activity as it relates to labor
unions.
2. General Executive Board members,
International Union officers, HERE local officers, and other individuals
holding positions of trust should be required to certify annually that they
have not knowingly associated with members or associates of any organized crime
group.
3. General Executive Board members,
International Union officers, HERE local officers, and other individuals
holding positions of trust should be required to disclose to the International
Union’s president when they are arrested or indicted on criminal felony
charges. It should be understood that a failure to disclose an arrest or
indictment on criminal felony charges is grounds for disciplinary action,
including dismissal.
I. Regional Offices and Condominium
In addition to the headquarters in
An Administrative Assistant to the former
General President assigned to the "Midwestern Regional Office" in
The Administrative Assistant assigned to the
International Union’s office in
The condominium owned by the
International Union has been maintained essentially for the exclusive use of
the former General President and his personally approved guests. This was
confirmed through interviews of personnel at the luxury high-rise building in
the
Mr. Hanley’s personal clothing hangs in a closet
and photos of his grandchildren are displayed in the master bedroom. The
apartment is fashionably decorated and expensively furnished with luxury items
such as an elaborate stereo system, a "home theater" large screen
television set and a fully stocked 24-bottle wine rack. An employee of the
International Union headquarters is assigned the collateral duty of looking
after the apartment.
Mr. Hanley’s personal use of the luxury
apartment has obviously been minimal since he never spent more than 25 days per
year in Washington, D.C. Reviews of logs, calendars and other records, as well
as comments from persons interviewed, established that the condominium
apartment is rarely used by guests. Despite the fact that the apartment is
usually vacant, officials and employees routinely obtain accommodations at
local hotels at the International Union’s expense when they travel to
Given the limited use of the International
Union’s luxury apartment, the cost of acquiring, renovating, and maintaining it
does not appear to be in the best interests of the International Union’s
general membership.
Recommendations:
1.
Consider abolishing the Midwestern Regional Office in
2. Dispose of the
J. Organizers
A fundamental function of every labor union is
to conduct organizing activities. Organizing can have several meanings within
an individual union, but the most basic meaning is to recruit, or organize, new
members. The theme of the most recent International Union convention held in
The HEREIU has over 100 employees which the
International Union pays as "Organizers". These Organizers are of two
kinds by title - International Organizers and State Organizers. Both kinds of
Organizers are virtually indistinguishable with respect to their function.
Consequently, for the purpose of this report, both "International"
and "State" Organizers will be referred to as "Organizers".
In 1995, the International Union paid salaries to a total of 105 Organizers. Of
this number, 65 had the title of "International" and 40 had the title
of "State". Of the 65 International Organizers, nine were also
International Vice-Presidents. The 40 State Organizers should not be confused
with local Organizers who are employees and/or officers of local unions, and
who are paid as such by their local union..
My review began with an examination of the
structure and functions of the International Union’s Department of
Organization. Interviews were conducted of the department’s staff, former
members of the department, and other International Union departments that
interact frequently with the Department of Organization. A total of 41
individual International Organizers were interviewed.
Questions concerning International Organizers
were addressed in the depositions of former General President Edward Hanley,
former Director of Organization Thomas Hanley, and retired General Secretary-Treasurer
Herman Leavitt. Similar questions were addressed in interviews of then General
Executive Vice-President Ronald Richardson, as well as in the interviews of
several International Vice-Presidents who are also International Organizers.
Lastly, numerous individual "Organizer’s Weekly Reports" were
reviewed to reconcile the activities documented thereon with per diem reports
and expense reimbursements.
Organizing activity in the International Union
is generally of two kinds - organizing the unorganized and
"servicing". Servicing, also known as "representational
work", is the activity associated with responding to the workers’ needs
after a collective bargaining agreement has been signed and approved by the
workers. The most important and time-consuming aspect of servicing is the
handling of workers’ grievances.
International Organizers are administered by
the International Union’s Department of Organization. The department currently
has a Director, Assistant Director, and a supporting staff of five people. The
primary function of the support staff is to receive and process the information
necessary to see that the Organizers are paid.
All Organizers are required to fill out an
Organizer’s Weekly Report. This report documents their specific organizing activities
and serves as the basis for their being paid. The report requests specific
information about the Organizer’s activities and requires that the activities
be listed by type, i.e., organizing or servicing. The report also requires the
Organizer to list the percentage of his or her time spent organizing or
servicing, but does not ask for the amount of time the Organizer
expends. Failure to submit a report every week can, and occasionally does,
result in a suspension of pay.
Organizers are reimbursed for expenses
incurred in connection with their organizing activities after they submit
appropriate receipts to the International Union headquarters. Administration of
all Organizers’ travel and expense reimbursements is supervised by one of the
five Department of Organization’s staff members, who is
also an Administrative Aide to the Director of Organization. International
Organizers are required to get permission before they engage in airline travel.
The International Union has two national
contracts with the food service industry. They are the Sky Chef and CA ONE
Master National Agreements. Both Sky Chef and CA ONE are companies whose
primary business is preparing food at airports. The contracts with both
companies have basic provisions that apply to all of their facilities
nationwide. The International Union’s bargaining agent for both contracts is
the International Union itself. Consequently, grievance procedures are
processed through the International Union rather than through local unions as
with other contracts.
Usually, servicing has not been considered to
be a part of organizing. Indeed, in local unions the functions are usually
separate, with local organizing projects being handled by salaried Organizers
and servicing being handled by business agents. Administration of the Sky Chef
and CA ONE contracts is handled by the Department of Organization because
Vincent Sirabella, former Director of Organization,
was the International Union official who negotiated the original Sky Chef
contract in 1969. Administration of the contract stayed in his department
because he was there, and it has remained there since.
The U.S. Senate held hearings concerning the
International Union in 1984. Its findings are contained in a report dated
August, 1984 that was published by the Permanent Subcommittee on Investigations
of the Committee on Governmental Affairs. The number of International
Organizers in the International Union is addressed at page 32, paragraph
"C", entitled "Increase in HEREIU personnel".
The report states: "Another
characteristic of Hanley’s presidency is found in the
The Permanent Subcommittee’s review suggests
that a significant number of the "organizers" were hired on the basis
of criteria other than proven ability. The Subcommittee learned that many of
the new organizers had no experience and a number had criminal records. Several
were identified as associates of known criminal figures. Still others were
friends or relatives of high-ranking HEREIU officers. Some had full-time jobs
in addition to their HEREIU duties, including jobs with other unions.
What the Senate found in 1984 is still true of
the International Union today. The total number of Organizers has remained
consistently at 100 or more, while the membership and revenues have
consistently declined. As of the most recent LM-2, covering the year ending
April 1997, the International Union had 113 Organizers, including 16 who are
International Vice-Presidents. The combined annual salaries
of the International Organizers has grown from $2 million in 1974 to the
present-day total of $3,556,186.
Herman Leavitt, retired International Union
General Secretary-Treasurer, echoed the Senate findings when interviewed by
investigators from my office. He stated that "years ago" when he was
starting out in the International Union it was a "real honor" to be
an International Organizer, and appointments were reserved for "only the
most qualified". In those days there were only seven International
Organizers in the whole International Union.
A modern comparison with the International
Brotherhood of Teamsters is useful to highlight the inflated number of
International Union Organizers. The Teamsters’ International Organizers have
the same function as their counterparts in the International Union. In 1995
(the year of the most recent Teamsters’ LM-2 available to the Monitor), the
Teamsters had a membership of 1,437,000 served by 35 International Organizers.
In a comparable period, 1994-1995, the International Union had a membership of
243,467 served by 105 International Organizers. Thus the International Union,
with a membership of only 17 percent of that of the Teamsters, had three times
as many Organizers. The fact is that most of the International Organizers are
not engaged in organizing activities.
No person interviewed could, with confidence,
articulate a difference between "International" and "State"
Organizers. The most frequent response to the question was that International
Organizers are paid more. That does appear to be true, on average. However, the
absence of written job descriptions and pay scales makes it impossible to draw
a formal distinction between the two. Herman Leavitt spoke with the most
confidence when he said that a International Organizer
is a "higher level position" requiring a proposition to hire or fire,
whereas State Organizers could be hired or fired without a proposition.
However, our audit found that both kinds were hired and fired by proposition in
the identical manner.
An example of how the terms
"International" and "State" can be confusing is the use of
the terms for Organizers who have been involved in the International Union’s
"riverboats" campaign, which has taken place from approximately 1991
to the present in
Thomas Hanley was the Director of Organization
and, by title, he should have been directing or coordinating the International
Union’s major organizing activities. In fact, the most significant increase in
membership for the International Union in decades has come from organizing
drives in
Neither the International Union nor the
Department of Organization have anything written that
pertains to the hiring, firing, evaluation, management, or supervision of
Organizers. An exception is a memorandum dated
There is no description of the Organizer
position and there are no qualifications for the Organizer position. There is
no system of performance evaluation. There are no pay scales. There are no
procedures for the hiring and firing of Organizers other than there must be
approval by the General Executive Board. There is no system for correlating an
Organizer’s background and ability with the needs of a particular assignment.
There is no Department of Organization budget and no administrative system by
which expenses can be tracked and monitored. Department of Organization personnel
were unable to answer the most fundamental questions such as "how many
Organizers are there, how much do they cost in salaries, what are the
department’s operating expenses in a year, and how much has the riverboats
campaign cost"? The sole vehicle for following an Organizer’s activities
is the Organizer’s Weekly Report. But these reports are not computerized and
must be searched by hand and read individually.
When International Organizers have been asked
to identify their supervisor, almost without exception their reply was
"Tom Hanley". However, Thomas Hanley was clearly unable to supervise
the daily activities of more than 100 Organizers. There were no identifiable
intermediate supervisors between Thomas Hanley and the Organizers. Most
Organizers are virtually unsupervised. The culture of senior Organizers is that
they need to be independent, and shouldn’t require direction from the
International Union. While this may be a laudable ideal, Organizers should be
accountable to someone who can reasonably monitor their activities.
Examples were found in the riverboats campaign
where individual Organizers picked their own organizing target and, without
asking for or receiving approval, simply showed up at the riverboat to work. In
one instance an Organizer actually moved to a different city without permission
in order to work on a different target. On-site supervision is in the form of
coordination of Organizers’ activities, rather than accountability for actions.
Those involved in the riverboats campaign
expressed confusion as to individual assignments and the identity of
"lead" Organizer. Two International Organizers thought they were both
lead organizers at one time, and another stated that Tom Hanley hired them, but
he told them only that they were to "work the riverboats". Each
"asked around" Local 1 in order to find out where the riverboats were
and which boats were being organized. Each had the same experience of showing
up at a riverboat with other Organizers who didn’t know who they were and didn’t
know they were coming. Organizers who were interviewed about their work
relating to the Hollywood Casino riverboat provided the names of three
different people they believed was the lead organizer.
Lisa Cosby, Secretary to Tom Hanley at the
International Union’s headquarters in
My investigation found that International
Organizers are scattered throughout the International Union doing a variety of
things, few of which actually involve organizing. Fifteen of the International
Vice-Presidents listed on the most recent LM-2 (1996-1997) are International
Organizers. Several Vice-Presidents stated that the International Organizer
salary is a means to pay the Vice-Presidents, who otherwise don’t get paid for
the extra responsibility. That is a reasonable argument, as is the argument
that Vice-Presidents, by virtue of their position, are always involved in
organizing for the International Union in one way or another. However, these
individuals are not supervised by the Director of Organization, even though
their weekly reports are processed through the Department of Organization.
In some instances, the assignment of an International
Organizer to a local union is viewed as a contribution to the local union from
the International Union. Ron Richardson, current General Vice-President of the
International Union, was interviewed about an International Organizer assigned
to his local union when he was Secretary-Treasurer of Local 25 in
The most significant factor impacting on the
absence of clearly defined responsibility for the International Organizers is
the fact that many were appointed by former General President Hanley, usually
for reasons known only to him. Apparently, he did not consult with anyone
before hiring or firing an Organizer. Many International Organizers reported
only to General President Hanley, and only he knew what they did for the
International Union. That structure makes the Department of Organization
irrelevant, except for the fact that the Department of Organization processes
the weekly reports for payment.
During my term, seven International Organizers
were investigated because of questions about what they did for the
International Union. Of the seven, one was terminated and five were the
subjects of charges by me, resulting in their dismissal.
Recommendations:
1. Establish a written definition of the
International Organizer position based on specific organizing activities. The
definition should include specific duties and responsibilities.Differences
between "International" and "State"
Organizers should be strictly defined.
2. Coordinate and oversee all major
International Union organizing activities should be directed by the Director of
Organization or other General Officers and Senior Officials, as determined by
the General President.
3. Establish the written rules, policies, and
procedures necessary to efficiently supervise and/or monitor the activities of
the International Organizers.
4. Require the Director of Organization to
reside in
5. Review the activities of all International
Organizers and remove or reassign any who are determined not to be fully
employed in meaningful activity on behalf of the International Union.
K. Consultants
The International Union uses personal service
contracts to retain lobbyists, legislative experts, legal counsel, and public
relations specialists as consultants. This allows the International Union to
obtain expertise from outside specialists or retired International Union
officials. This method has also been used to soften the transition for
International Union officials when they move from the active ranks into
retirement. Several consultants have been given leased cars, including one
former movie actor, who was paid $25,000 per year, plus expenses.
Approval for retention of consultants is
obtained by General Executive Board propositions, usually with insufficient
detail to form a basis for decision. Furthermore, there is no method of
tracking the work of the consultants and holding them responsible for their
work. Co-General Counsel Robert Rotatori advised in a
letter dated
The majority of the consultants were hired by
former General President Hanley, with the approval of the General Executive
Board. Most of them were hired in the State of
Jack Lavin, Director
of Public Relations of the HEREIU located in the Midwestern Regional office in
Mr. Lavin does not
file any reports describing his activities. He does, however, give oral reports
at some General Executive Board meetings.
Robert E. Juliano,
Legislative Representative for the HEREIU who came to
Harry Anselmo, a
lobbyist in
Paul Burke, a retired actor and
neighbor of Mr. Hanley’s in
Gateway Associates of Chicago, Illinois
received $267,488 for the period October 1988 through November 1996 for consulting
on state and federal matters. The principal person in that company is Patrick Levar, a
Robert L. Hickman, Sr., was hired as a
Business Agent for Local 1 in
Robert L. Hickman, Jr., a consultant from
Danross Associates, Dan Rostenkowski, President, was retained
on
Cady Gibbons of Chicago, Illinois was hired as
a consultant and received $19,000 during the period
The Leadership Council of Illinois was
retained as a consultant for $25,000, plus expenses, for the years 1994 through
1996. Ted Lechowicz, a former Illinois State Senator,
is the principal person in that group. There are no reports.
Pat Marcy, Jr., of
The International Union also retained
attorneys. Carl Walsh, a private practitioner in
Jayne Carr Thompson, a
Edward J. Calihan,
Jr., another
Samuel V. P. Banks is the attorney for Local 1
in
The HEREIU also retains four consultants at
about $50,000 per year to serve as union trustees on the Welfare and Pension
funds. It is the International’s position that these consultants serve an
important role in improving both the operation and image of these funds. My
oversight responsibility did not include the operations of the funds.
Consequently, I am not in a position to make a judgment about that. One of the
consultants, a practicing attorney in
The above examples, and there are others,
clearly show that the hiring of consultants has to be controlled. There is no
question that consultants are valuable in bringing a special expertise to
special problems. In the HEREIU, the special problems seem to be all in
Recommendations:
A. Contracts with consultants need to be more
precise in describing the duties of the consultant.
B. Consultant contracts should require
periodic reports of the consultants activities.
C. The HEREIU should
cease the practice of leasing automobiles, which includes the upkeep and
insurance, for any consultant.
D. The HEREIU should
cease providing health insurance, or any other benefits, to consultants.
E. The HEREIU
Director of Public Relations should be based at the International Union
headquarters in
F. The HEREIU should
cease hiring attorneys on retainer, other than the General Counsel now serving.
L. General Executive Board
An important objective of the Consent Decree,
as well as the HEREIU Ethical Practices Code adopted at the 42nd General
Convention in July, 1996, is to promote democratic participation of all
International Union members in union affairs. As far as the affairs of the
International Union are concerned, members of the General Executive Board must
assure that objective is realized. In my judgment, the General Executive Board
needs to do more to meet its responsibility to the membership At-Large.
The General Executive Board of the
International Union is composed of the International Union’s General Officers,
i.e., the General President, General Secretary-Treasurer, General
Vice-President, Director of Organization, the District Vice-Presidents, and the
Vice-Presidents At-Large. There are currently 14 District Vice-Presidents and
12 Vice-Presidents At-Large, and one Executive Vice-President.
The General Officers are elected each five
years at the Convention of the International Union and serve until 30 days
after the election of new General Officers at the next Convention. Any delegate
to the Convention can place a name in nomination for a General Officer
position. The successful candidate is then chosen by a majority roll call vote
if more than one candidate is running for the office. The convention delegates
themselves represent the various local unions in the International Union. They
are elected by secret ballot within the three-year period preceding the International
Union’s convention.
The International Union’s Constitution
provides that the General Executive Board "shall act as Trustees for,
shall have all authority of the International Union, and shall exercise general
supervision over the International Union, its property and all its subordinate
bodies and members between Conventions". Article IV, Section 2. The
General Executive Board is called into session at the Conventions, of course,
but their other meetings between Conventions are infrequent. Consequently, the
majority of the General Executive Board’s actions are taken when the Board is
not in session.
The International Union’s Constitution
provides that "In all matters requiring action by the General Executive
Board when such Board is not in session, the Board may, upon request of the
General President, act by telegram, letter, or long distance telephone; such
action to have the same legal effect as when the Board acts in formal
session". In practice, the General Executive Board does most of its business
in this way, and the majority of the actions of the Board are accomplished
through propositions which are mailed to the members for their votes.
I reviewed the General Executive Board votes
on propositions for a defined period to determine whether the Board acts
independently in an informed manner, as required under their fiduciary duty to
their union member constituency. Prior the study, we observed that there seemed
to be little, if any, dissent when the Board votes on the propositions, and
there seemed to be little information provided to the members who voted on the
propositions. Furthermore, it appeared that the Board was approving many
actions subsequent to their implementation.
The study involved a physical review of all
837 propositions approved by the General Executive Board from
Through the study we determined that 833 of
the 837, i.e., 99.5 percent of the propositions voted on during this period of
15 months, were approved by unanimous votes. It is noteworthy that only six
"no" votes were cast in voting for four propositions during this
period. General Executive Board members were more likely to abstain from voting
on a particular proposition than voting "no". Only 23 abstentions
were declared in the voting for 21 propositions. The number of abstentions is
even more telling when it is pointed out that most of the abstentions involved
Board members refraining from voting on propositions involving their own pay
raises or promotions.
The study was also revealing in its
examination of "effective dates" of the actions in that only 177 of
the 837 propositions had "effective dates" associated with the
actions for which approval was sought. The study found that 171 of these 177
propositions had effective dates that were earlier than the dates of final
approval by the General Executive Board members. Most were considerably
earlier. The majority of propositions with earlier effective dates were in
areas related to personnel actions, such as salary increases (69), appointments
(42), resignations (23), and terminations (19). In one case, Proposition #6584,
involving a salary increase, the effective date was 166 days earlier than the
date of approval. Six of the propositions with effective dates related to
property leases. However, in one of these cases, the proposition was approved
prior to the effective date of the lease agreement. In the other five
propositions, Board approval was obtained subsequent to the effective date of
the lease or lease extension.
General Executive Board members are provided with
very little information on which to base their votes on the propositions. The
propositions are commonly only a few paragraphs stating the proposed action.
For example, a proposition recommending a salary increase for an International
Union employee usually contains only the name, job title, and amount of salary
increase. Typically, the Board member is not provided with any written
justification for the increase, the previous salary level, or details as to
where the employee serves. Other important General Executive Board actions are
proposed with a similar lack of information. For example, the imposition and
extension of local union trusteeships are critical actions taken by the General
Executive Board. Propositions relating to this important area also lack
critical information as to the justification for the action proposed and past
related actions.
The lack of supporting information for the
propositions would not be so disturbing if the International Union were a small
organization where General Executive Board members were in close touch with one
another and where information flowed freely between the members and the
International Union headquarters. That is not the case here. The International
Union is a very large organization that is widely spread geographically.
Communication between the International Union headquarters, the General
Officers, and the International Union’s constituent entities are irregular and
often unreliable. Common sense leads to the conclusion that General Executive
Board members have no practical way to keep informed
on the many issues that arise and require action through propositions. For
example, a General Executive Board member in
Another aggravating factor relating to this
issue is the fact that the International Union has few written policies or
guidelines when it comes to spending union funds. The overall authority is
entrusted to the General Executive Board, but there are few guidelines to help
the Board members exercise this authority responsibly. As stated earlier, the
International Union does not have salary schedules for their employees and
officers. Starting salaries are set out in propositions, but they may or may
not fall in line with other starting salaries for others who have held similar
positions. Salary increases do not come from a coherent schedule upon which
employees can depend. Rather, they are proposed when the General President or
some other senior officer determines that it is time to do so.
Interviews with General Executive Board
members confirm the conclusions of the study in this area. During interviews,
Board members admit that they did not know the details of various propositions
when they voted for approval. When hard pressed, some said they discussed some
of the propositions with other General Officers if they did not have enough
information on which to form an opinion. This, however, was the exception. Most
explained that it was impossible for them to know all details of all
propositions, so they relied on the integrity and good intentions of the
General President on whose authority most of the propositions were submitted.
At least one said that the General President would not recommend approval of a
proposition if it were not necessary, proper, and in the best interest of the
International Union. In fact, the General President has almost unfettered
authority to run the International Union as he wishes.
The Consent Decree states, in paragraph 4,
that "All officers … have a heightened fiduciary duty to the membership in
insuring the independence and the integrity of the union free from corruption
and the influence of criminal groups as well as promoting democratic
participation of union members in union affairs as guaranteed by the
Labor-Management Reporting and Disclosure Act". The General Executive
Board members need to do more to live up to this
important responsibility.
The General President’s ability to control the
General Executive Board may also be a structural problem. The remuneration of
the General President, General Vice-President, General Secretary-Treasurer, and
Director of Organization is established by the HEREIU’s
Constitution. The remuneration of all other General Executive Board members --
as General Organizer -- is established by the General President, with the
approval of the General Executive Board. The HEREIU’s
LM-2 indicates that the amount of compensation for the General Organizer
members of the General Executive Board varies widely. The salaries range from
$35,000 to $87,000. It is difficult to conceive of General Organizer members of
the General Executive Board mounting significant political opposition to the
General President when he controls the amount of their compensation.
Under former General President Hanley, the
number of Vice-Presidents At-Large was increased, the last time at the 1996
International Union’s Convention. While the purpose of increasing the size of
the General Executive Board may have been to broaden participation in union
affairs, it also increased General President Hanley’s control over the Board
since he made the appointments to fill these positions and establish their compensation
as General Organizers. Prior to the next General Convention, the HEREIU should
consider ways to restructure the General Executive Board, including the
compensation of Board members, to ensure greater independence from the General
President.
Recommendation:
Require that all propositions contain or be
accompanied by adequate information to allow the General Executive Board
members to make an informed decision.
At the beginning of my term, 26 local unions,
or approximately 19.5 percent, were in trusteeship and under the oversight of
International Trustee’s who reported directly to the General President. This
percentage is high compared to other large international unions.
My investigators reviewed selected trusteeship
files at the International Union to determine the reasons for the trusteeships.
The U.S. Department of Labor also provided information from their files
regarding the reasons for local unions being placed in trusteeship.
The reasons varied; however a high percentage
of the charges cited "financial instability" (5 locals), "the
local union has incurred a significant indebtedness to the International
Union" ( 3 locals), "financial
mismanagement" (1 local), and "failure to pay per-capita taxes"
(1 local) as reasons for the imposition of the trusteeship. However, there is
no consistency in the treatment of local unions in this matter. Local 264 in
At the end of the trusteeship, in some cases,
the trustees or individuals appointed by the trustees to oversee the day-to-day
operations of the local union were elected to the top management position of
the local union in spite of the fact that these individuals were not previously
members of the local union. In one case, the new bylaws shortened eligibility
membership tenure allowing chosen individuals to run. Many of these bylaw
changes stimulated a flurry of "Hotline" complaints to my office.
Inquiries at the International Union received reasonable explanations, however,
strong perceptions continued to persist among the membership that the
International Union had given an unfair advantage to selected candidates.
Although I did not dispute the election results, I strongly believe that the
practice of allowing appointed trustees or trustee-appointed administrators to
run for elected office creates a strong distrust by the local union’s
membership, and should be carefully reviewed.
In the case of the trusteeship imposed on
Local 814,
The International Union Constitution, in
compliance with U.S. Department of Labor regulations, limits the term of a
trusteeship to 18 months. Extensions beyond 18 months must be approved by the
General Executive Board. At the time of review in February, 1996, 24 of the 26
local unions in trusteeship had exceeded the 18-month limit.
Local 611,
Local 77, Rhinelander Wisconsin, was opened as
a newly chartered local union on
Local 77 was abruptly closed by General
President Hanley shortly after the initiation of an investigation by my office.
It is noteworthy that former General President Hanley, former General
Vice-President O’Gara, and former Director of Organization Thomas Hanley, as
well as other International Union employees own vacation homes in the Land O’Lakes, Wisconsin area.
Following my initial inquiry on trusteeships,
several elections were scheduled. By September 1996, six months after my first
inquiry, five elections had been scheduled and Local 77 had been closed. Of the
initial 26 trusteed local unions, only 15 remain in
trusteeship.
Five local unions have been placed in
trusteeship at my request. These trusteeships were imposed in order to restore
democracy to the local unions following charges being filed against the
officers for violations, such as association with organized crime figures,
embezzlement, and filing false reports with the U.S. Department of Labor, etc.
The local unions trusteed are as follows:
Local 122,
Local 69,
Local 4,
AFL-CIO Nursing Home Council,
Local 57,
The trusteeship of the AFL-CIO Nursing Home
Council was imposed by agreement between HEREIU and the Service Employees
International Union.
I am happy to report that Local 122 and Local
69 have held elections and the trusteeships have been removed.
The imposition of trusteeships is necessary
where small local unions have no members willing to run for office or where
they are financially unable to operate without assistance from the
International Union. However, a disparity exists in the treatment of the local
unions by the International Union. There is also a definite lack of continuing
oversight of these local unions, and trusteeships continue far longer than
necessary. This is highlighted by General President Hanley’s testimony that the
propositions recommending renewal of trusteeships are "boilerplate"
and handled by the clerical staff at the International Union.
It is evident, as in other areas of survey,
that decisions with regard to trusteeships are totally at the discretion of the
General President, and these decisions appear to be arbitrary and capricious as
evidenced by the disparity in their imposition noted above.
There also appears to be a significant lack of
communication between the International Union and the local union members
during trusteeship proceedings which creates an aura
of distrust among the members.
Recommendations:
1. Institute a written procedure for the
imposition and monitoring of trusteed local unions.
2. Assign responsibility for the oversight of trusteed local unions and policy to an individual at the
International Union Headquarters, preferably a competent International Union
officer who will ensure fairness and continuity in the application of policy.
3. Ensure that trusteed
local unions are removed from trusteeship at the earliest possible date and
that democracy is restored to the local unions without unnecessary delay.
Provisions should be implemented to ensure that a local union
not remain in trusteeship longer than 18 months, except in extreme
cases.
4. Review the practice of allowing the
International Trustee, or a Trustee-appointed administrator, from subsequently
running for office in the trusteed local union.
Strong consideration should be given to limiting this practice and requiring
General Executive Board approval for exceptions.
N. International Union
Airplane
The International Union has
owned and operated private aircraft for executive travel since prior to the
election of Edward T. Hanley as General President in 1973. In 1987, the International Union sold its prop jet
aircraft and purchased a 1980 Sabreliner, Model 65
jet aircraft, FAA# N500 WD. This aircraft is operated by a crew of three and is
configured for six passengers. It is based at the
A review of the uses of the International
Union aircraft was conducted for the purpose of determining whether there were
any improprieties concerning travel destinations or the type of passengers
being transported. This review also attempted to assess the reasonableness of
aircraft operational costs which amounted to $442,755 during the 1995 and 1996
LM-2 reporting periods. Our inquiry included interviews; reviews of flight and
passenger records; analysis of aircraft expense records; and examination of the
results of the U.S. Department of Labor’s I-CAP audit covering the period of
1989 operations of the International Union and its affiliated local unions.
Our review of records of passengers traveling
on the International Union’s aircraft during 1996 and 1997 did not identify any
travel by organized crime figures or by individuals barred or removed from the
International Union by the Consent Decree. We were unable to identify
passengers prior to 1996 because of absence of such data in the flight records
maintained by the pilot. Flight destinations for the same period seemed to be
consistent with locations where union business or union-sponsored events were
conducted and locations proximate to General President Hanley’s residences,
i.e.,
It was not possible to address the overall
cost effectiveness of the use of a union aircraft versus commercial aviation
because Mr. Hanley -- the primary user -- did not maintain an advance planning
calendar and traveled spontaneously or with minimal advance notice.
General President Hanley maintains his primary
residence in
We also found that the International Union is
not in compliance with instructions and guidance relative to aircraft record
keeping and disclosure of non-business use of the International Union’s
aircraft provided by the Department of Labor in 1991 during the I-CAP audit of
the International Union and its local union operations during 1989. The
Department of Labor considered the International Union’s record keeping to be
inadequate and in violation of Section 206 of the Labor Management Reporting
and Disclosure Act (LMRDA) of 1959, as amended. They instructed that permanent
records be maintained which would explain the specific business purpose of each
flight and identify all passengers. They also advised the International Union that
non-business/personal travel in the International Union’s aircraft must be
disclosed by and recorded by identified travelers on the annual LM-2 Report(s).
The extensive number of flights without passengers between
Recommendations:
1. Establish, in writing, a policy explaining
authorized use of the International Union’s aircraft, including authorized
users. This policy statement should address the propriety of use of the
aircraft by individuals, including International Union personnel traveling on a
business flight for personal benefit unrelated to union business such as
traveling on vacation or to a primary residence away from
2. Conduct a needs and cost analysis of the
union’s continued use of the union aircraft which involves the annual
expenditure of at least $225,000, excluding costs of the pilot and attendant.
The above recommendations have been taken over
by events. I have been informed that the union aircraft was sold and delivered
to the buyer on
IV. DISCIPLINARY
PROCEEDINGS
The Consent Decree gives the Monitor the right
and power to remove, suspend, expel, fine, or forfeit the benefits (except
certain vested employee retirement benefits) of any officer, representative,
agent, employee, or person holding a position of trust in the International
Union and its constituent entities. The Monitor may exercise these disciplinary
powers when it is found that any of the above persons engages or has engaged in
actions or inactions which: (i) violate the
injunctive prohibitions of the Consent Decree, (ii) violate any criminal law
involving the operation of a labor organization or employee benefit plan, or
(iii) further the direct or indirect influence of any organized crime group or
the threat of such influence now or in the future. If a union member is found
to have engaged in any of these actions or inactions, the Monitor has the right
and power to impose discipline up to and including expulsion from union
membership.
In order to discharge his disciplinary duties
under the Consent Decree, the Monitor has the same rights and authority as the
International Union General President, the General Executive Board, and any
other officer, agent, employee, or representative of the International Union,
as well as the full authority derived from any and all provisions of law.
The individual charged with disciplinary
action by the Monitor is provided with written notice of the charge(s) and
afforded an opportunity to be heard. The charged party has 20 days to answer
the charges and may be represented by counsel at any hearing conducted by the
Monitor. The Monitor conducts the hearing, renders a final decision, and
imposes the particular discipline. Hearings are conducted under the rules and
procedures generally applicable in labor arbitration proceedings, and decisions
are made using a "just cause" standard.
Discipline imposed by the Monitor is final and
binding, but subject to review by the Court. Written appeals must be filed by
the person disciplined within 30 days of the Monitor’s decision. The
International Union or the
As I indicated earlier in this report, I
received many allegations of wrongdoing by officers or members from a variety
of sources. I am happy to report that most of the allegations did not result in
adverse action; however, the following disciplinary actions
were taken:
1. Barred permanently from participating in
union affairs:
Local 1,
Robert Babowice,
International Organizer
Kurt Calabrese, Business Agent
Michael Romanelli,
International Organizer
Samuel P. Louis, International Organizer
Local 10,
Dennis Francis, President
Robert Tate, Vice-President
Local 57,
Louis Sanfilippo,
President
Louis Masco, Member
Local 69,
John N. Agathos,
Sr., President
John R. Agathos,
Jr., Administrator
Fred Paone,
Secretary-Treasurer
Michael Santoli,
Vice-President
Local 77, Rhinelander,
Jerry Pitts, International Trustee
Local 122,
Vincent P. Gallo, III, President
Local 450,
Joseph Spano,
President/International Vice-President
Frank Riggio,
Secretary-Treasurer
Joseph Marino, Business Agent
2. Barred for 13 years by operation of law:
Daniel Rostenkowski, Consultant
Robert L. Hickman, Sr., Consultant / Business
Agent, Local 1
In addition, two officials from Local 57,
Nancy Ross, Secretary-Treasurer and International Vice-President, and Vince Fera, Executive Board member, entered agreements barring
them from holding a position of trust for a period of three years beginning
April 23, 1998.
Over the course of my Monitorship,
we also investigated allegations concerning several past and present General
Officers of the HEREIU, including former General President Hanley, Director of
Organization Thomas Hanley, former General Vice-President John O’Gara, and
former General Secretary-Treasurer Herman Leavitt.
As it related to former HEREIU General
President Edward T. Hanley, Sr., my inquiry focused principally on Mr. Hanley’s
role in the charter and operation of Local 77 in Rhinelander, Wisconsin; Mr.
Hanley’s use of the HEREIU airplane, his use of HEREIU-leased automobiles; his
purchases of previously leased HEREIU automobiles; and Mr. Hanley’s receipt of
salary and pension contributions from Local 1 in Chicago, Illinois. My office
also investigated allegations of present associations between Mr. Hanley and
known or alleged members of organized crime.
On
Mr. Hanley which provided that if Mr. Hanley
announced his retirement no later than
Mr. Hanley requested, and I agreed, that the
agreement be sealed by the Court until such time as he announced his
retirement. He requested the temporary sealing to ensure that an orderly
transition of leadership would occur. Mr. Hanley announced his retirement in a
meeting of the HEREIU’s General Executive Board in
Mr. John O’Gara, General Vice-President, was
informed that the Investigations Officer proposed to file charges against him
relating to his use of HEREIU-leased vehicles and purchase of previously leased
HEREIU vehicles, as well as charging expenses to the HEREIU which were not
necessary for the conduct of union affairs. Mr. O’Gara decided to retire on
Mr. Herman Leavitt, General
Secretary-Treasurer, retired in July 1996. His potential charges related to the
purchase of leased automobiles at a below market price at the end of the lease
period. Mr. Leavitt paid the HEREIU $15,000 to settle this matter.
The charges against Thomas W. Hanley allege
that he breached his fiduciary duty to Local 1 and the HEREIU by authorizing
payments of $31,000 per year to Edward T. Hanley as a part-time employee of
Local 1 when Edward T. Hanley performed no meaningful service for Local 1.
Also, Thomas Hanley caused the payment of a salary to John F. Duff, Jr., when,
in fact, John F. Duff, Jr., performed no meaningful service for the HEREIU for
a substantial period of his employment. In addition, the charges allege that
Thomas Hanley converted funds of the HEREIU by charging expenses not necessary
for the conduct of HEREIU business.
Mr. Thomas Hanley signed an agreement to
resolve these charges. Again, the agreement does not constitute an admission of
the charges. He agreed to relinquish his position as Director of Organization
of the HEREIU. This is a General Officer position. He further agreed to
relinquish his position as President of Local 1 and as a member of the Chicago
Joint Executive Board. Also, Thomas Hanley agreed not to be employed by the
HEREIU or any HEREIU entity for one year beginning
Charges against seven other individuals need
to be concluded. A chart reflecting all charges and their status is attached to
this report.
V.
CONCLUSION
Paragraph 3 of the Consent Decree in this
action, U.S. v. HEREIU, Civil Action No.95-4596 (GEB), sets out the
remedial objective:
3. The remedial objective of this Consent
Decree is that the HEREIU and its constituent entities be free from the direct
or indirect influence of any organized crime group or the threat of such
influence now and in the future.
This same objective is repeated in the HEREIU
Ethical Practices Code, which calls for:prevention
of corruption, discrimination, anti-democratic procedures, and the association
of any official of the HEREIU or its subordinate bodies with organized crime
figures or anyone that would bring disrepute to the union.
It is fair to say that the history of the
HEREIU has included numerous allegations of organized crime association,
including during the term of General President Hanley, which began in 1973. As
indicated earlier in this report, the
In Section IV of this report, I listed the
officials disciplined by my office. Seventeen of those individuals have been
barred for life from participating in HEREIU affairs because of alleged
organized crime association or their failure to cooperate with my office. All,
except one who appealed my decision to the Court, signed agreements with me to
leave the union. It should be noted that the agreement is not an admission of
guilt of any kind, however, the end result is the same, namely, barred for
life. Two of the individuals disciplined were members of the General Executive
Board. Another two were local officials who had been members of the General
Executive Board but resigned their membership prior to the signing of the
Consent Decree. None of the four General Officers serving at the beginning of
my monitorship have been charged with organized crime
association. There has never been an allegation of organized crime association
against General President Wilhelm.
In closing, I feel compelled to add that the
thousands of hard working men and women members of this union deserve better
leadership. Even assuming that democracy ever existed in the first place, I
believe our efforts make an important contribution to achieve that goal. The
totality of this report shows that Mr. Edward T. Hanley was a strong and
persuasive leader who was never challenged by anyone, certainly not by the General
Executive Board of the HEREIU. Mr. Hanley served as General President for more
than 25 years. The HEREIU Constitution provides that a member may be required
to stand trial when charged with "Activities which tend to bring the local
or the International into disrepute". Numerous allegations of possible
association with organized crime groups were known over the years, yet no
investigations were ever conducted by the HEREIU to ascertain the facts. Mr.
Hanley rewarded family members and friends, especially from the
Mr. Hanley’s leadership of the HEREIU was not
democratic and not fair to the members throughout the
Hopefully, the new leadership of the HEREIU
will take steps to assure that the HEREIU becomes a truly democratic
organization. Failing that, the Public Review Board will have to take the lead
in this important responsibility. Recent communications from General President
Wilhelm are encouraging. He understands the problem areas and again, hopefully,
so does the General Executive Board. Let me add one more comment. In my
judgment the salaries and emoluments of the General Officers are excessive and
the lifetime contract guaranteeing full salaries and emoluments to Mr. Hanley
and former General Officers Kenneally, Gibson, and
Leavitt are irresponsible. "Union funds are to be held in sacred trust for
the benefit of the membership", so states the HEREIU’s
Ethical Practice Code, and each person holding a position of trust in the
HEREIU must follow that mandate.
The purpose of this report is to inform the
Court and the parties to the Consent Decree of my activities. My responsibility
under that decree was to investigate and review allegations of wrongdoing. My
office, over the last two and a half years, has done just that and the results
are in this report. The HEREIU is a large organization. It is composed of
thousands of men and women who work very hard in the hospitality industry in
this country and
I respectfully submit that the actions taken
by my office have brought the HEREIU closer to the remedial objective of the
Consent Decree. The ongoing supervision by this Honorable Court, coupled with
the disciplinary supervision by the Public Review Board and a diligent and more
informed membership, will continue the process of keeping the HEREIU free from
the influence of organized crime groups and, hopefully, promote greater
democracy.
RESPECTFULLY SUBMITTED,
Kurt W. Muellenberg
Court-Appointed Monitor
DATED: