Fed. Judge Throws out Union Trustees of NJ Benefit Fund

A federal judge has removed the administrator and two trustees of a New Jersey union’s benefit funds that are now the focus of an ongoing federal corruption probe.  Citing serious questions about possible financial misconduct within Local 734 of the Laborers’ Intl. Union of N. America (LIUNA), U.S. District Judge Dennis Cavanaugh in Newark said he would appoint substitute trustees to oversee the local’s pension and welfare funds, pending a new election.


Attorney David Grossman, who represents funds administrator Peter Rizzo, said on April 7 that they are considering an appeal.  He also urged the appointment of Edwin H. Stier as the court-appointed administrator.  Stier, a former federal prosecutor, spent a decade as trustee cleaning up the pervasive mob influence within Teamsters Local 560 in northern New Jersey.  More recently, he served as the internal ethics watchdog on the Intl. Brotherhood Of Teamsters, before resigning in April 2004, charging that the IBT was interfering with his investigations of Teamster corruption.


Local 734 has been under voluntary supervision by LIUNA since October 2002.  But its benefit funds had remained under local control.  In January, however, trustees for LIUNA went to federal court seeking the removal of Louis Calastro and Salvatore Salerno — the employer-selected trustees who controlled the funds — and Rizzo, the administrator. The action came after an independent hearing officer, Peter F. Vaira — the former U.S. attorney for the Eastern District of Pennsylvania — concluded that some of those involved with the union local and its benefits funds had ties to organized crime.


Vaira also found that many jobs were being filled by relatives and business associates of former executive board member August “Auggie” Vergalito, who left the local after he pleaded guilty in 1997 to concealing payments he made from the benefit funds.  Vergalito’s wife, a daughter, three sons-in-law, a former son-in-law and two business associates were all on the payroll of the union local or its funds.  Trustees for the parent union cited more than $1 million in salaries for what they said were essentially no-show jobs.


Earlier this year, the U.S. Attorney’s office in Newark subpoenaed records from the New Jersey local, court documents show. Grossman said at least 84 boxes of documents have been delivered to prosecutors. [Newark Star-Ledger, 4/8/05]