NLPC Chairman Kenneth Boehm testified on how to better protect union pensions from corruption before the Subcommittee on Employer-Employee Relations of the Committee on Education and the Workforce on Sept. 10.
Boehm cited a March 2002 report by the U.S. Dept. of Labor’s Inspector General on 357 cases of union racketeering, of which 44% involved pension and welfare plans. He then pointed to a number of particularly outrageous examples reported in UCU:
— In Oregon, officials with Capital Consultants dispensed favors to union pension trustees, who then steered their members’ retirement savings to risky investments, which were then covered with even riskier “Ponzi-like schemes.” More than $100 million was lost.
— In 1997, the Plumbers & Pipefitters Natl. Pension Fund bought the aging Diplomat Hotel in Hollywood, Fla. for $40 million. A plan to spend $100 million on restoration with investment partners eventually mushroomed to $800 million, despite an appraisal that valued the hotel’s worth at only $587 million. Labor Dept. investigators found that Plumbers Union President Marty Maddaloni accepted a $12,000 trip to Italy from a contractor on the project, a clear violation of the Employee Retirement Income Security Act (ERISA).
–Several natl. union officials took advantage of their positions on the board of the union-owned insurance group, Ullico, to buy its stock before its price was set to increase. Then as that stock, highly leveraged to Global Crossing, was scheduled to decrease in value, Ullico directors sold their stock before the decrease took effect, at a personal profit. But because most union pension funds held far more shares of Ullico stock than the individual directors, they could not participate in the buyback and were forced to watch their stock plummet along with Global Crossing’s.
Boehm recommended that the Congress amend ERISA to require union officials to disclose all income outside their positions as trustees. And incredibly, independent public accountants are not required to report violations of ERISA to the Labor Dept. “There is no rational justification for such a loophole if we are serious about protecting pension funds relied upon by American workers.
Boehm’s complete testimony can be read on the NLPC web site at http://nlpc.org/olap/congress/020910.htm.