Unions exist with an understanding that they are bound to uphold the trust of their members. That principle, by definition, holds especially true for union trusts, which are designed to provide benefits for members and their families. Examples of trusts include retirement plans, health and dental plans, apprenticeship funds, strike funds and credit unions. Union officials don’t directly run these funds. That job falls upon the shoulders of union-designated outsiders known as fiduciaries; i.e., trustees and managers. As such, many financial transactions may operate outside the realm of documentation required by existing union disclosure forms – and miss a lot of corruption. Over the years Union Corruption Update has uncovered numerous examples of fiduciary agents for the Carpenters, Teamsters, Laborers and other unions stealing from or otherwise mismanaging benefit funds, often with the full knowledge and cooperation of union officers. For a half-decade, the U.S. Department of Labor (DOL), led by Secretary Elaine Chao, has sought to promote accountability in trust fund management. It’s now attempting, for a third time, to get an initiative off the ground.
On March 4, the Labor Department published a notice in the Federal Register concerning a proposed rule on union reporting on trusts. The focus is a new form called “T-1.” The term should look familiar. In October 2003, the department published a final rule establishing Form T-1, along with an expanded version of Form LM-2, which for decades has been used by larger unions in filing annual reports on general finances. The revamped LM-2 survived an AFL-CIO legal challenge; the T-1 didn’t. The U.S. Court of Appeals for the District of Columbia Circuit ruled on May 31, 2005 (AFL-CIO v. Chao) that the T-1, in present form, unfairly burdened unions. It was back to the drawing board for the Labor Department. On September 29, 2006, the DOL issued a revised T-1 final rule whose explanatory notes incorporated comments from the appeals court decision. Again, the AFL-CIO filed suit to block it from taking effect, again winning. Last July 16, the U.S. District Court for the District of Columbia vacated the regulation. Now the Labor Department is back for yet another try.
The new T-1 form, like the earlier versions, uses the same format as the LM-2. And like the LM-2, the regulation derives its authority from the Labor-Management Reporting and Disclosure Act of 1959 (i.e., the Landrum-Griffin Act or LMRDA), a law whose intent from the start has been to give union members more opportunity to monitor their respective organizations’ decisions. Labor Department officials justify the T-1 this way:
This rule builds on the administration’s commitment to transparency and accountability for corporations, pension funds and labor unions. Union members, no less than investors and consumers, expect access to relevant and useful information in order to make fundamental investment, career, and retirement decisions, evaluate options, and exercise legally guaranteed rights.
The T-1 form would not prohibit any particular union expenditure. It simply would give members more say over how their bosses allocate and spend trust funds. All unions subject either to LMRDA, the Civil Service Reform Act or the Foreign Service Act with total annual receipts of at least $250,000 must file a T-1 for each trust in which it has an interest, as long as the union’s contribution to it was $10,000 or more during the most recent fiscal year. The new regulation also would apply to each fund for which the union selects a majority of the members of the trust’s governing board or to which it contributes an amount greater than 50 percent of the revenue during the previous fiscal year. The rule would not apply to political action committees if publicly available reports on the committee are filled with appropriate federal or state agencies.
It’s understandable why the AFL-CIO, and organized labor as a whole, have been determined to derail the T-1. Pension, health, job training and other funds have been ripe for the picking by trustees, serving as conduits for hiding or falsifying expenses. And even if the wrongdoing is prosecuted and punished, often years pass before funds are fully or even partly replenished. Nobody likes having to fill out government forms. And unions, like any organization, ought to be given the benefit of the doubt if certain numbers don’t add up. But the new rule, by every reasonable measure, is a modest step to give union members more opportunity to see how their assets are being managed. (U.S. Department of Labor, various documents).