New York IATSE Boss Indicted; DOL Sues Benefits Trustees

iatse-logo_0For more than seven years, John McNamee, Jr. avoided getting caught. Then reality caught up. On February 15, McNamee, formerly president and secretary-treasurer of Stage and Picture Operators Local 829, an affiliate of the International Alliance of Theatrical Stage Employees (IATSE), was indicted in Manhattan federal court on charges of embezzling nearly a quarter-million dollars from the New York City union and filing false financial reports. The following day, on February 16, he was arrested and arraigned. The union is also on the hot seat in a much more expensive way. On March 14, the U.S. Department of Labor (DOL) filed suit against the trustees of the local pension plan, alleging they had conducted more than $3 million worth of illegal transactions since 2006 and had failed to perform due diligence in managing another $11 million in assets.

Stage and Picture Operators Local 829 represents exhibition employees for New York City-area sporting and entertainment events. Prosecutors say John McNamee, 52, a resident of New York City, had his own version of entertainment on his mind. During January 2004-February 2011 he allegedly made about $240,000 in unauthorized charges on local credit cards to cover domestic expenses and then made withdrawals from two union bank accounts to pay off the charges. Moreover, with the help of an unnamed union official, he signed checks from the accounts. He did not disclose these transactions on the local’s annual reports to DOL’s Office of Labor-Management Standards. The stolen funds, among other things, allegedly paid for medical, education, vacation, party and other expenses for him and family members. The embezzlement and record-keeping charges, respectively, carry prison sentences of up to five years and one year.

In a separate action, the Department of Labor this March initiated a civil suit against union trustees for mishandling millions of dollars in member benefits. The suit, the result of a probe by the New York Regional Office of DOL’s Employee Benefits Security Administration (EBSA), charges that trustees of the IATSE Local 829 pension, annuity and vacation funds, which includes McNamee, violated their fiduciary duties by engaging in a series of prohibited or otherwise unethical transactions starting in 2006. This one probably will take a while to untangle.

For starters, the suit charges that the defendants improperly transferred more than $2.9 million from the pension plan to the union and its annuity, vacation and hiring hall funds. Moreover, the DOL alleges, local trustees improperly transferred at least $240,000 from the pension plan and annuity fund to various service providers. Additionally, the defendants allegedly allowed the annuity fund to retain at least $5.9 million in undocumented and inadequately secured loans to fund participants, one of whom was McNamee. Were that not enough, the trustees failed to exercise due diligence in investigating or evaluating the annuity fund’s investment of more than $5 million in a now-collapsed real estate investment trust. “These trustees have violated their basic responsibility to administer the plans prudently and solely in the interests of the plans’ participants, and no one else,” said EBSA New York Director Jonathan Kay. “We seek to impose upon these defendants the additional responsibilities of accounting for and correcting their violations, and providing the necessary information and assistance to ensure that the plans are properly managed in the future.”

The current scandals at Local 829 might jar a few memories for New Yorkers. For a long time, McNamee’s father, John McNamee Sr., headed the union. The elder McNamee and top aides were among parties to rampant corruption at the Jacob K. Javits Convention Center on Manhattan’s West Side. For nearly a decade since its grand opening in 1986, the Javits Center was notorious as a haven for organized criminals and union bosses who ran the hiring halls. IATSE, Teamsters, Carpenters and other locals worked in tandem with mobsters in wide variety of criminal activities, including loan-sharking, gambling, no-show union hiring, benefit fraud, Social Security fraud, and staged “accidents” to obtain workmen’s compensation and monetary awards. “An atmosphere of lawlessness on the floor,” is how Dan Castleman, chief of investigations for longtime District Attorney Robert Morgenthau, described the situation at the time. Castleman was respected enough as a real-life prosecutor to eventually play one on HBO’s “The Sopranos.”

The situation prompted New York Republican Governor George Pataki in the summer of 1995 to lead a reorganization of center management and order New York State Police to forcibly remove members of Local 829 and other exhibition hall unions from the premises. From now on, management rather than unions would do the hiring. In June 1996, McNamee Sr. along with Vice President Paul Coscia and seven other union members were charged by Morgenthau’s office with participating in a scheme to illegally obtain nearly $50,000 in health benefits on behalf of a Genovese crime family associate. Apparently, John McNamee Jr. inherited not just his father’s job, but a few of his bad habits as well.