DC37 Fund Sued for Racketeering

Two ex-staffers of AFSCME DC37 have accused its benefits fund of illegally diverting money toward the union’s political activities and fraudulently obtaining overpayments in contributions from the city. Harold Hofmann, the fund’s ex-director of computer systems, and a staffer, Anthony Lawson, have filed a civil racketeering suit charging DC37, its benefits fund and several union bosses with using fund money for politics, no-show jobs, a girlfriend and other improper expenses.

The federal suit raises serious questions about DC37’s benefits fund, which had not been previously connected, publicly, to the widespread criminal corruption investigation of DC37 over the past year. The fund takes in over $100 million in annual contributions from the city. But, union sources said that the Manhattan Dist. Atty., Robert M. Morgenthau, had subpoenaed many documents from the union and from the benefits fund.

The suit seeks over $26 million in damages and accused fund managers of cheating the city by submitting inflated counts of the number of unionized workers for whom the city had agreed to pay the fund $925 annually each. The suit made no estimate of the size of the overpayments, although it said Hofmann told senior fund managers about the overpayments and was ordered not to do anything about them. The suit claimed that schemes ran approximately from 1988 to 1998.

Regarding no-show employees, the plaintiffs asserted that there were at least two dozen people on the payroll of the fund’s computer dep’t who, as far as they could tell, did no work for the fund. The suit also said the fund paid for the mistress of indicted ex-boss Charles Hughes, to work on a project not related to the fund. It also accused Hughes, a defendant, of having the benefits fund pay for him to take friends to Honolulu, Las Vegas and elsewhere.

The suit further alleges that the fund’s employees and equipment were often used for political activities at the request of Stanley Hill, DC37’s ex-executive director. Allegedly, Hofmann was told by bosses that his dep’t had to do whatever was required of it for a union political action committee that was run by Hill. Federal law bars benefit funds from using their money for political campaigns. [N.Y. Times & N.Y. Post 11/6/99]