DOJ Agrees to End Auditor’s Oversight of Corruption Plagued Union

Oversight of the Int’l Bhd. of Teamsters’ financial affairs by an outside auditor will end later this month as the result of an order signed Dec. 20 by U.S. Dist. Judge Loretta A. Preska (S.D.N.Y., H.W. Bush), who has ongoing oversight of the consent decree that in 1989 settled the racketeering suit against IBT. On Jan. 10, IBT said an agreement had been reached with the Dep’t of Justice to eliminate the independent financial auditor (IFA) first put in place in 1997 following discovery of the illegal money laundering schemes that help finance the re-election of then-president Ron Carey. Federal officials said at the time that lack of adequate internal union controls enabled Carey operatives to siphon off union funds for his reelection and “were an invitation to improper and illegal conduct.”

Under the agreement to eliminate the outside auditor, IBT has pledged to establish a series of internal controls. Among other steps, it has agreed to create an audit committee, establish an internal business code of conduct and clear guidelines for reporting violations of this code, and establish procedures for explaining departures from existing policies.   In a letter to Preska, outgoing U.S. Atty. Mary Jo “Molasses” White said “the government believes that, given the IBT’s enforceable commitment to implement meaningful reform of its internal controls, the circumstances that necessitated the IFA no longer exist and the limited goals of the interim agreement that established the IFA have been met.” She recommended that “the IFA’s role in monitoring the union’s expenditures should be discontinued.”

The IFA’s review of the Teamsters’ financial practices is set to end Jan. 27, one month after Preska’s order was entered by the court. The order commits the union to implementing the agreed-upon internal controls within 90 days. The government reserved the right to insist on an audit over the next 15 months to ensure that the union was carrying out promised steps to improve its internal financial controls. The agreement provides that the court may reinstate the IFA if the government shows that the union has failed to implement the controls.

IBT General Counsel Patrick J. Szymanski called elimination of the outside auditor “a very constructive step.” He viewed it as a major step toward the union’s broader objective of eliminating or making major changes to the consent decree. IBT’s discussions with the U.S. Atty.’s Office in Manhattan on lifting the consent decree are on hold temporarily until White’s successor, James B. Comey, is confirmed and settles into the job. [BNA 1/14/02, N.Y. Times 1/11/02]