Card Check, Amnesty, Benefit Fraud Led News in 2007

The year 2007 witnessed plenty of union corruption – and aggression. Embezzlement and fraud abounded, at times on a grand scale, especially in relation to benefit plans. But as with 2006, what gave the year added significance was organized labor’s drive to rewrite public policy and law for the purpose of expanding membership. While not formally a misuse of public office for private gain, such efforts constitute a highly questionable stretching of labor law. By changing the ground rules in ways making it harder for workers to avoid joining, unions thus could expand dues collections, and with it, the opportunities to steal. The words underneath the masthead of this publication, “Information on America’s most corrupt and aggressive unions,” are there for a reason. 


More than anything else, labor sought to get Congress to pass a bill that would force private-sector employers to recognize a union as the sole collective-bargaining agent wherever a card check is successful. In other words, if a given union’s organizing drive leads to more than half of all potentially affected employees to sign cards indicating a desire to join, the employer would have to abide by the results. And a National Labor Relations Board-supervised secret-ballot election would be irrelevant. What’s more, the measure would have imposed a “neutrality agreement” upon an employer during the card-check process, even if the employer suspected the union was engaging in undue pressure. Experience has shown more than once that card checks are Labor’s equivalent of high-pressure salesmanship. The effort failed this time around, despite the AFL-CIO, Change to Win, and their respective union affiliates engaging in intensive lobbying. Supporters have vowed to bring the measure back. 


Unions also continued their efforts to persuade Congress to grant amnesty (which also goes by such creative euphemisms as “regularization” and “comprehensive reform”) to illegal immigrants. As in the case of card check legislation, the effort failed. And again, it was a determined 11th-hour Republican filibuster that stood in the way. But this issue has a long shelf life. Organized labor is a full partner with big business and ethnic activists (especially Hispanic) to legalize the resident status of millions of illegal workers and immediate family members. Ironically, the result, if successful, most likely would be depressed wages and benefits, the opposite of what unions want for rank-and-file members. 


The criteria for rating the importance of a story remain the same; check the previous two “Top Ten Stories” articles for a discussion. Here, in capsule and in reverse order, are the Top Ten this time around, with some dishonorable mentions thrown in:


10) New York City contractors pilfer union benefits to reduce labor costs. Patrick McCaul and John McGonnell, co-owners of a Bronx, N.Y. construction firm, Tri-Built Construction, cut their labor costs the wrong way. A year ago the two were indicted in Manhattan federal court for defrauding the New York City District Council of Carpenters. During 1993-2004, they allegedly conspired to defraud the union benefit plan of at least $6.5 million. They siphoned off funds to hire nonunion labor in violation of an existing contract, pay union workers off the books, and bribe shop stewards and a union office employee. The pair pleaded guilty in November, agreeing to forfeit $1.5 million. They also face prison time.   


9) Los Angeles utility workers pad overtime, collect extra wages. Working for the Los Angeles Department of Water and Power (DWP) can be lucrative, especially if one is inclined to claim overtime. A DWP internal audit revealed that department employees had received more than $100 million in overtime pay during March 2005-February 2006. A sizable portion of that figure, investigators concluded, was likely the result of false or highly questionable claims by employees, about 90 percent of whom are represented by International Brotherhood of Electrical Workers Local 18. Nearly 3,500 employees charged overtime that exceeded 15 percent of their regular pay. Though nobody was arrested or indicted (yet), this has all the appearances of a major racket.    


8) New Jersey Operating Engineers local bosses are caught in ghost-worker scheme. The intertwining of organized labor and organized crime is anything but over. Case in point: International Union of Operating Engineers Local 825 and Laborers International Union of North America Local 1153, both based in northern New Jersey. The FBI and various state and local authorities this past spring arrested 25 suspects allegedly involved in a wide variety of scams, one of which was using the unions to create no-show jobs for friends on the ongoing Goethals Bridge reconstruction project. A key figure in the ring is Andrew Merola, a reputed Gambino family mobster with close ties to the Lucchese family. 


7) San Francisco Bay Area Plumbers union and Labor Department reach an agreement. San Francisco’s United Association of Plumbers and Pipefitters Local 38 had diverted an estimated $36 million over the years from benefit funds toward covering operating losses of its Konocti Harbor Resort and Spa in Kelseyville, Calif., about a 90-minute drive north of the Bay Area. The U.S. Department of Labor, after reviewing evidence, filed a civil complaint in November 2004, alleging business manager Lawrence Mazzola, Sr. and several pension fund trustees had been negligent in their handling of member benefits. This August the union and DOL settled, and overall it was a sweet deal for the union. The union, nominally, will relinquish control of the resort and benefit funds to a court-appointed receiver, and individual parties named in the suit either will be barred from further participation in union benefit management or forced to undergo training sessions on ERISA responsibilities. On the plus side for the union, it will have to replenish its pension fund by a mere $3.5 million, with its insurer paying the tab.     


6) Retired pro football players sue their union and the NFL to get their money back. Atlanta-based hedge fund manager Kirk Wright had the Midas touch, but until his 2006 arrest few knew how much of his empire had been built on false promises. Sports stars paid much of the price. In 2006, several former National Football League players, out a combined $20 million they’d sunk into Wright’s funds, filed a civil suit against both the NFL and the NFL Players Union, accusing them of failing to exercise due diligence. This past March a federal judge denied a motion by the defendants to dismiss all charges. The union is supposed to be looking out for the interests of active and retired players, but in this case seemed asleep at the switch. As for Wright, he was arrested on criminal charges in 2006 following an investigation by the Securities and Exchange Commission.


5) Judge throws out Justice Department’s RICO suit against Longshoremen. The U.S. Department of Justice in the summer of 2005 filed a civil RICO suit against the International Longshoremen’s Association in Brooklyn, N.Y. federal court. On the surface, it seemed like a slam dunk for the feds, especially given the string of criminal convictions they’d secured against ranking Gambino and Genovese crime family members for involvement in New York and New Jersey ILA locals. But the bar for racketeering convictions under RICO always has been high, and U.S. District Judge I. Leo Glasser determined this past November 1 that prosecutors hadn’t met it. If successful, the suit would have forced top ILA bosses, including now-retired President John Bowers, out of office. There remain several unanswered questions, however, the least of which may be how a Genovese mobster who had testified in a separate criminal case in 2005 managed to turn up dead in a car trunk a couple months later, after a jury found him and two other ILA leaders not guilty.


4) Unions continue push for amnesty for illegal immigrants. Fresh from defeat in late 2006 in their quest to persuade Congress to pass an amnesty bill, the unions, led by the AFL-CIO, were at it again in 2007, seeking full, unconditional legal resident status for illegal-immigrant workers. They wanted legislation to enable these workers to “come out of the shadows” – as if they could be out any more. Massive rallies and marches in city streets didn’t materialize this time around, but the political activism to promote amnesty is every bit as determined. A revamped but still massive amnesty proposal, backed by virtually all Congressional Democrats and the Bush administration, once again fell short, thanks to a mid-year Senate Republican filibuster. Labor, however, did score a partial victory a few months later in San Francisco federal court, joining with the ACLU and several other plaintiffs to successfully block the Department of Homeland Security from mailing out Social Security “no-match” letters to employers to discourage them from hiring illegal workers. 


3) United Auto Workers, General Motors reach settlement on health plan liabilities. The future of the automobile manufacturing, like other heavy industry sectors, is in peril largely because employers have to make good on expensive, union-negotiated pension and health benefits. The leading Big Three automaker, GM, negotiated a landmark settlement with the United Auto Workers to transfer more than $50 billion in outstanding retiree health care liabilities to a union-managed trust fund for nearly 70 cents on the dollar. The new fund would be what is known as a Voluntary Employee Beneficiary Association (VEBA), which has suddenly become popular. Ford and Chrysler each negotiated a VEBA arrangement with the UAW not long after. Welcome to the new era.


2) Labor Department, ULLICO reach a $20 million settlement. No labor scandal generated more headlines or soul-searching during this decade than that surrounding the Washington, D.C.-based ULLICO, or Union Labor Life Insurance Company. During the years 2002-04 many current and former board members were accused, though not formally charged, of masterminding an insider-trading scheme. The firm had bought a large block of stock in a fiber-optic startup company, Global Crossing, in 1997 at a rock-bottom pre-IPO price. A few years later, just before the technology-stock collapse, ULLICO board members and executives cashed in, enjoying a windfall of tens of millions of dollars, and possibly in excess of $300 million. The House and Senate each investigated the case, releasing damning final reports; the Department of Labor filed a civil complaint. The November 2007 settlement, which involves no admission of wrongdoing, requires ULLICO to pay $16.7 million into a benefit fund, plus another $3.3 million in taxes and penalties. 


1) Union card check gambit fails – for now. Nothing ranked higher on the unions’ political wish list in 2007 than getting Congress to pass card-check legislation, especially with Democrats forming a majority in the House for the first time in a dozen years. The House did pass a card check bill by a 241-185 margin in March, only to see it go down in flames in the face of a Senate GOP filibuster a few months later, despite misleading statistics mustered on its behalf. Supporters are promising to reintroduce the measure for as long as it takes. If and when it does succeed, it would be the end of union democracy as this country has known it, effectively supplanting secret-ballot elections on representation. Much to the unions’ outrage, the National Labor Relations Board in Dana Corp. ruled 3-2 in September that non-joining workers, within certain bounds, can undo a successful card check.

(Dis)honorable mention. Maritime Officers’ McKay brothers convicted, sentenced; Puerto Rican water and sewer union reformer murdered; Puerto Rican Longshoremen leader sentenced for multi-million dollar benefit fraud; Service Employees, California local butts heads over weak contract with nursing home operators; New Jersey’s Vergallito family indicted for embezzlement; U.S. Supreme Court allows dissenting public school teachers in Washington State the right to withhold dues related to union political spending; union-backed ACORN activists in Missouri plead guilty to vote fraud; Wackenhut sues City of Los Angeles, SEIU; report by Hudson Institute researcher sheds light on union salaries, political spending; independent counsel issues report accusing Queens, N.Y. bus drivers’ union of corruption; House Committee passes RESPECT bill; feds bust Chicago health care fraud ring that fleeced union benefit plans; Philadelphia firm under contract with International Brotherhood of Electrical Workers local indicted; Smithfield Foods files RICO suit against United Food and Commercial Workers in response to corporate campaign.