FBI, Labor Department Probe SEIU’s Stern

Andrew SternThe abrupt departure by Andrew Stern this spring as president of the Service Employees International Union (SEIU), after 14 years on the job, blindsided a lot of observers. After all, he was a shadow cabinet member of the Obama administration. Reported ongoing federal investigations into two unrelated, and possibly illegal, financial arrangements may shed light on his motives. The Associated Press and the Los Angeles Times each ran stories last Tuesday stating the FBI and the Department of Labor have been interviewing persons potentially knowledgeable about the possibility that Stern: 1) received unauthorized funds from a book he’d authored several years ago; and 2) approved the disbursement of funds to pay for a Southern California SEIU local official’s no-show job who eventually was convicted in an unrelated kickback scheme. Stern denies his involvement in these activities and indeed even the fact of an investigation. 

Andrew Stern, though with two years left in his current term, announced in mid-April at a union executive board meeting that he shortly would be leaving his post. “There’s a time to learn, a time to lead, and then there’s a time to leave. And shortly, it will be my time to retire…and end my SEIU journey,” he subsequently explained in an e-mail to rank and file members. Mary Kay Henry beat out Anna Burger for the top spot, officially winning appointment on May 8. But Stern is hardly in hibernation. He remains a frequent visitor to the White House and a member of the President’s deficit-reduction commission. And he’s become a research fellow at Georgetown University and a paid consultant at the SEIU. Yet his abrasive, centralized management style won him a number of enemies at the union. Some, in fact, might be talking to the feds.

The Service Employees during Andrew Stern’s reign doubled in size from roughly 1 million to 2 million, the latter figure not even the 300,000 workers in an SEIU affiliate called Purple Storm. That increase, at a time when membership in other unions either were holding steady or in decline, was no coincidence. Growth was central to Stern’s philosophy of employer-employee relations. He lived and breathed it. A desire to grow was the main reason for the growing split between him and his former mentor, AFL-CIO President John Sweeney, by the middle of the last decade. At the same time, he alienated a lot of local leaders who wanted autonomy, especially in the health care sector, and who saw him as giving growth a higher priority than sound contracts. Moreover, he ran up large debts. Total SEIU liabilities during 2000-09 rose from around $7.6 million to $120.9 million. Assets rose as well – from $66.6 million to $187.7 million, but much of that took the form of IOUs from troubled locals. Despite his high profile from Washington, D.C. headquarters, then, Stern faced rebellion from within.

The FBI and the U.S. Labor Department’s Office of Inspector General, as reported on September 28 by the Associated Press, are jointly investigating certain Stern business dealings. Specifically, the agencies want to know if the $175,000 advance that Stern pocketed from Free Press (Simon & Schuster) for his book, “A Country That Works: Getting America Back on Track,” violated any federal labor laws. They also want to know if he was aware that the $75,000-a-year consultant’s job he arranged for Alejandro Stephens, formerly president of SEIU Local 660, amounted to a no-show job. Stern is adamant that the probe is baseless, stating: “The stories appearing today in the L.A. Times and on the AP are simply false. I have absolutely no reason to believe, and not the slightest indication, that I am being investigated by federal authorities with respect to Alejandro Stephens, ‘A Country That Works,’ or for that matter, anything else.”

The book, “A Country That Works,” released in October 2006, was boiler-plate progressivism mixed in with Stern’s observations about how organized labor could mobilize an emerging political coalition; one could see why Barack Obama would want Stern on his side. Still, the book fell well short of best-seller status. Indeed, it didn’t even earn back the cost of the cumulative $175,000 advance that Stern received in four installments. The SEIU executive board approved the book contract, which called for the union to buy 500 copies for free distribution; spend $80,000 on promotion; and use union staff for research and fact-checking. A union spokeswoman, Michelle Ringuette, asserted the deal contained nothing improper and that purchases were voluntary.

The second area of inquiry, Stern’s possible approval of SEIU funds for a ghost job, may bear more fruit. As reported in Union Corruption Update last October, Stephens during his tenure as president of Local 660 in Los Angeles allegedly had used his position to set up a phony “consulting” firm to register area voters. Charged in federal court in August 2009, Stephens eventually pleaded guilty to ripping off $52,000 from the voter drive operation and was sentenced in federal court to four months in jail and three months home confinement. Stern was not connected to these charges. Still, federal agents are interested in the possibility that in 2007, when Local 660 and Local 347 merged to form Local 721, Stern offered Stephens a generous severance package and a $75,000-a-year consultant’s job with the SEIU California State Council. As discovered later, that position amounted to a ghost job, in violation of federal law.

It may be that Stern is innocent of wrongdoing. But it’s unlikely that the FBI-DOL probe has occurred in a vacuum. Someone in the union knows something. It’s noteworthy that then-SEIU Local 721 President Annelle Grajeda (she resigned in March 2009), in addition to being a former girlfriend of Alejandro Stephens, is a Stern ally. She headed the international union’s lobbying and voter drives for all of California. The FBI and the Labor Department have not commented. But as the union is spending $44 million to keep Democrats in control of Congress, it knows this isn’t a good time for a scandal.


SEIU’s Stern Leaves Troubled Legacy.

Los Angeles Service Employees Ex-Boss Charged in Scam; Set to Plead Guilty.

Top Officer of Local, California Affiliates Probed; Takes Leave.