Carey’s Permanent Expulsion Upheld

The permanent expulsion of ex-Int’l Bhd. of Teamsters boss Ron Carey from IBT was upheld Apr. 18 by the U.S. Court of Appeals for the Second Circuit. The court affirmed a 1998 district court ruling upholding and enforcing union disciplinary sanctions imposed on Carey and ex-IBT Governmental Affairs Director William W. Hamilton for the central roles they played in the elaborate money laundering scheme that tainted the 1996 IBT election.

“We recognize the irony, indeed the poignancy, of this case, in which a union leader, long pledged to internal reform, should be held accountable for corrupt practices. But the law requires no less,” said U.S. Circuit Judge Robert A. Katzmann in writing for the court. “Union democracy, after all, is premised on fair elections. To that end, union officials, such as Carey and Hamilton, have a duty to ensure the integrity of that process and to fulfill their obligations to the union membership by adhering to the highest standards of governance.”

IBT’s Independ. Rev. Bd. in 1998 found that Carey had breached his fiduciary duty as IBT president by authorizing the diversion of some $735,000 union funds to outside groups in an effort to generate contributions to his reelection campaign. Rejecting Carey’s claim that the money-swap was done by aides without his knowledge, IRB determined that the boss knew and approved of the scheme and it recommended his expulsion. Hamilton as IBT’s chief political liaison, had played a pivotal role in the scheme, the IRB found, and should be similarly sanctioned.

Earlier this year, Carey was indicted for perjury and making false statements during the government’s lengthy investigation of the illegal fund-raising effort. He faces a maximum penalty of five years in prison on each of seven counts. Hamilton was convicted in 1999 of embezzlement of union funds for his part in the campaign funding swap and sentenced to three years in prison.

Rejecting Carey’s arguments, the court concurred with IRB that Carey “committed ‘serious breaches of trust’ that ‘require severe sanctions.'”  “IRB justified the penalty imposed on Carey by finding that ‘[a]s the top elected official of the IBT, Carey was especially obligated to follow the rules, particularly as to financial transactions of the size involved here and in light of his constitutional obligation to review expenditures.'”

Hamilton’s part in the funding swap displayed “…an abuse of trust by a powerful administrative official [which] undermined the faith of the public and the IBT members in the ability of the union to conduct its day-to-day affairs in a trustworthy and honest way,” the court said. “Actions which cause such harm are deserving of serious rebuke, both to censure officers such as Hamilton, and to warn other members that such abuse will not be tolerated.”

“At bottom, Hamilton’s embezzlement and Carey’s breach of his fiduciary duties resulted in the misuse of $735,000 in union funds. As a result of their approval of the contributions to the political advocacy organizations, the 1996 IBT election had to be overturned and the union membership was denied its right to a fair and democratic election. We therefore hold that IRB’s decision regarding the choice of sanctions is neither arbitrary or capricious.” the court said.

Circuit Judges Fred I. Parker and John M. Walker joined in the ruling. Bruce C. Bishop of Steptoe & Johnson in Washington, D.C. represented Carey. G. Robert Gage Jr. of Gage & Pavlis in N.Y., represented Hamilton. Karen B. Konigsberg and Andrew W. Schilling, Asst. U.S. Attys. for the S. Dist. of N.Y. represented the government [BNA 4/23/01]