When Nancy Pelosi became Speaker of the House early in January, she vowed that her tenure in office heralded a new era of transparency. The days of lawmakers being bought by cash-flashing lobbyists offering skybox parties and Scotland golf junkets were over. Quickly, the House tightened internal rules governing gifts, travel and earmarks. Not long after, the Senate overwhelmingly passed a lobbying restriction bill, the Legislative Transparency and Accountability Act; the House is set to take up its own version by the end of the spring. But this display of moral rectitude is colliding with the reality of a political network, of which Pelosi is very much a part, centering on a San Francisco union in hot water with federal regulators. The union, Local 38 of the United Association of Plumbers, Pipefitters and Journeymen, is currently under investigation by the U.S. Department of Labor (DOL) for using member benefit funds to prop up a money-losing resort in rural Northern California.
The facility is the Konocti Harbor Resort and Spa, about 100 miles north of San Francisco near the Lake County community of Kelseyville. The facility’s management wants to build an Indian gambling casino to climb out of the red. The proposal, which involves landless tribes serving as front men for an as-yet-named Las Vegas casino chain, is almost enough to invite nostalgia for the heyday of convicted Washington, D.C. lobbyist Jack Abramoff, whose own publicized Indian casino-related wheeling and dealing inadvertently helped propel Pelosi to her current job. Back in November 2004, the Labor Department filed a civil complaint against Local 38, alleging the union “mismanaged the benefits and placed the benefits of thousands of workers at risk.” The union and its business manager, Lawrence Mazzola, Sr., should be familiar to readers of this publication. The February 27, 2006 issue of Union Corruption Update described the local’s unusual dual role as SRO hotel slumlord and luxury resort owner. The arrangement was costing rank-and-file membership serious money both ways – especially the latter.
The local owns the decaying Civic Center Hotel in downtown San Francisco, cited by city building inspectors as needing extensive repairs. A major reason why the supposedly cash-strapped union seems unable to upgrade the property is that over the years it had shifted about $36 million in member benefits into a union-managed “convalescent trust fund” that owns the Konocti facility. The scenic resort, situated near a dormant volcano and a large natural lake, features a 5,000-seat amphitheater and a 1,000-seat concert hall, which over the years has hosted musical acts such as Peter Frampton, Huey Lewis & the News, Linda Ronstadt and Clint Black – popular, but apparently not popular enough to put operations in the black. But resort management has an ace up its sleeve: Indian gaming. By selling the resort to a federally-recognized tribe, the union could use the proceeds to replenish undercapitalized benefit plans and keep the feds off its back.
The Department of Labor’s civil suit, still in the discovery phase, seeks to restore funds to the union plans, force trustees to enact stricter financial controls, and bar officials involved in the fund diversion from handling benefits in the future. In addition, the department reportedly has launched a criminal probe, something DOL officials neither confirm nor deny. Mazzola, whose family has run the union for decades, wasn’t available for comment either. A number of Northern California political allies are hoping he’ll stay unavailable. Mazzola heads the San Francisco Building & Construction Trades Council and the San Francisco Airport Commission, and served on current San Francisco Mayor Gavin Newsom’s transition team a few years ago. In 2001, Rep. Pelosi officially proclaimed him an “outstanding leader for San Francisco.”
Mazzola’s most noteworthy association, however, may be with developer Darius Anderson, point man in a pending Indian casino deal. Anderson heads the San Francisco-based Kenwood Investments, a successful private-equity real estate development firm which he founded in 1999. He’s also a lobbyist, enjoying access to the highest levels of the California Democratic Party. Sen. Dianne Feinstein, D-Calif., was his original political mentor. Anderson’s top man at Kenwood is Jay Wallace, who managed Nancy Pelosi’s first House campaign two decades ago. Anderson also has done legwork for supermarket billionaire Ron Burkle, a close friend of Bill Clinton. And he works both sides of the aisle, too, reportedly taking vacations with Susan Kennedy, chief of staff to GOP Gov. Arnold Schwarzenegger.
Anderson hasn’t done anything illegal – so far as one can tell. But he seems to engage in the kind of ethically-challenged compromises that developers often make in order to win political support for projects with a major impact. Significantly, early this decade he had lawyer Doug Boxer, son of Sen. Barbara Boxer, D-Calif., on his payroll, a period during which the Senator had drafted legislation restoring federal recognition of California’s Coastal Miwok and Southern Sonoma County Pomo tribes. The Miwok had vowed beforehand they would not seek to build a casino, that they simply wanted health, housing and education benefits available to other federally-recognized tribes. Four months later, tribal leaders suddenly announced they’d been working with the Las Vegas-based Station Casinos, Inc. to build a casino-resort complex in Sonoma County for which Kenwood Investments had bought up land options. A Kenwood employee in the Sonoma deal, Stuart Sunshine, found employment in 2004 under Mayor Newsom. Meanwhile, Newsom’s predecessor, Willie Brown, became a lobbyist for two Indian tribes trying to bring casino gambling to Barstow, down in the Mojave Desert. People wanted their piece of the pie, given the growth of Indian gaming in the state. Preliminary data from the California Department of Employment Development indicate that tribal casinos employed 50,800 workers in March 2005, up nearly 14 percent from just a year earlier.
An Indian casino, then, could be a real money-maker for the Konocti resort, perhaps generating profits to rival the Foxwoods casino in Connecticut that made the previously unknown Mashantucket Pequot tribe very rich. If Konocti were to be reclassified as tribal land, it would be ripe for casino development, creating a land price windfall for the Local 38 resort trust fund and helping to cover shortages in its member benefit funds. All that remains is to find a tribe(s) to front for the deal, while Darius Anderson and his Las Vegas backers run the show.
All this is easier said than done. For one thing, in 2005 Governor Arnold Schwarzenegger stated he would oppose all Indian casino proposals in his state lacking a land trust or designated reservation status – and then only in cases where local residents and elected officials had given support. A Konocti casino would not pass this test. In February, Lake County supervisors unanimously adopted a resolution opposing any and all Indian gaming in their county. Schwarzenegger’s recalled predecessor, Democrat Gray Davis, by contrast, had been an enthusiastic supporter of tribal gaming. Tribal gambling interests had provided about $2 million to Davis’s political campaigns, not to mention over $100 million to those of various legislators. Second, anti-gambling activists are organized. Cheryl Schmit, director of one such group, Stand Up for California, says an Indian casino at Konocti could require special congressional legislation. “You do that,” she said, “when you know there is not going to be local support.” Third and finally, local land use regulations aren’t likely to be changed. Kenwood Investments’ Jay Wallace reportedly has been meeting with Lake County officials about a possible rezoning. Mazzola reportedly wants a reclassification of his family’s walnut orchard near the resort from agricultural to commercial; he and his wife own a combined 228 acres in the area. But that might not fly. “I asked that question (about the orchard rezoning) because I wanted them to know I wouldn’t support it (the project) no matter what,” said Lake County Supervisor Rob Brown. “They were kind of vague about it, but said it was not off the table.”
But a casino deal might go through anyway. According to Schmit, Anderson already has recruited several landless Indian tribes to serve as straw buyers. What’s more, he has backers in Las Vegas set to finance and run the operation. And to cap it all, he’s offered the deal to the Department of Labor to resolve its ongoing civil suit against Mazzola. Schmit asserted that DOL hired HVS International, a prominent Mineola, N.Y.-based hospitality industry consultant, to assess the proposal. HVS concluded Konocti’s land value would increase from $8.5 million to $11 million if an Indian casino were allowed. Suzanne Mellen, who heads the company’s San Francisco office, would not speak on the record. But Schmit insisted she and Mellen had discussed the specifics of a casino proposal that the department had received from Mazzola’s attorneys.
All this was set in motion by three dissident and now-retired members of Plumbers Local 38 beginning some two decades ago. Persistent amateur sleuthing by Philip Livingston, Ed Bermingham and Jim Bunting eventually led to the Labor Department’s suit in 2004. In 1989 the trio filed a lawsuit alleging that Local 38 leadership had been siphoning union funds into the pockets of Larry Mazzola and his friends. The initial results were not promising. Bunting spent a fortune in lawyers’ fees, and ran for a union business-agent post. He won, but the union promptly eliminated the position. Bermingham for a decade fed information to DOL, which by then had been conducting a probe. He managed to win a $100,000 settlement in a separate case. Livingston acted as his own attorney, but did not realize an award. Still, he continued to educate himself on public records laws, union trust fund rules, and the union’s finances. “I had a stack of paper two or three feet high,” he recalled. “I could see they were taking loans out of these trust funds and sending it out there. The money that was going out there was incredible. I helped this later case going.” The wait proved worth the effort when the DOL filed suit.
What will become of the civil and possible criminal action? That depends on how close the revelations come to implicating Democratic Party bigwigs. If they get too close to the fire, a settlement with DOL to head off a criminal trial for Mazzola and other officials of Local 38 seems more than likely. Nancy Pelosi and other San Francisco-area Democratic leaders hope so. As ethical reformers, their reputations are on the line. (SF Weekly, 1/17/07, 2/14/07; PR Newswire US, 3/13/07; other sources).