Benefit scams, especially involving health plans, grabbed the lion’s share of union corruption stories in 2016. Scammers came from outside as well as from inside the unions, a fact highlighting the need for trustees to exercise greater due diligence in choosing outside parties. There were also the usual cases of six-figure (or more) embezzlement and fraud against union general funds. Labor officials, meanwhile, expanded their misguided campaign to enact a $15 an hour minimum wage. They also tried to undo Right to Work laws in three states, temporarily achieving success in two by way of court action. And a deadlocked Supreme Court enabled state and local public-sector union bosses to retain their authority to coerce dues payments from unwilling workers. In other words, there was plenty to write about. Here were the ten stories that mattered most:
10) Hawaii contractor pleads guilty; sentenced for scamming Painters union, benefit fund, IRS and state. Raymond Fujii was the executive director of an association of union building contractors and the administrator of an International Union of Painters and Allied Trades-sponsored benefit fund. For more than a decade and a half, he defrauded investors out of nearly $1.5 million. Board members of each entity, having grown suspicious, notified the Department of Labor, whose resulting investigation led to his undoing. Fujii pleaded guilty last January, and was sentenced in May for thefts and for evasion of more than $450,000 in federal and state personal income taxes.
9) California dentist sentenced for $1 million ripoff of Teamster benefit plan. David Lewis, a Sacramento-based dentist, saw gold fillings in a Teamster health care plan that covered many of his patients. During 2008-09 he initiated various schemes to loot the plan, including filing claims for procedures not performed, conducting unneeded procedures on healthy teeth, and telling assistants to conduct fake X-rays showing “tooth decay.” Lewis and a former claims manager for his office diverted at least $1 million in plan assets to themselves. A subsequent Justice Department probe led to his indictment in February 2014, guilty plea last January and sentencing in May.
8) Chicago-area contractor executives plead guilty to stiffing LIUNA-contracted workers. Joseph Lampignano and John Traversa, respectively, co-owner and superintendent of Shaumburg, Ill.-based A Lamp Concrete Contractors, were charged in May, and pleaded guilty in June, to mail fraud. The pair during 2008-13, in violation of a collective bargaining agreement with an affiliate of the Laborers International Union of North America, deprived workers of $2.6 million in wages and benefits. Lampignano on his own also extracted around $140,000 in kickback “contributions” from about two dozen employees.
7) Unions try to undo Right to Work legislation. Organized labor can be counted on to provide virulent opposition to state Right to Work laws that protect dissenting union shop employees from being forced to pay dues to keep their jobs. In three states, unions last year launched campaigns to reverse such legislation. In South Dakota, which enacted its law 70 years ago, they failed by a wide margin to secure passage of a deceptively-worded voter referendum. In Wisconsin, which passed its law two years ago, unions had more success, convincing a county circuit judge to strike down the law – for now. And in West Virginia, where the legislature passed its Right to Work law in February over a governor’s veto, unions won a temporary court injunction in August. The actions have taken on extra significance in the wake of the September death of Reed Larson, longtime leader of the Right to Work movement. Defenders of worker liberty should honor Larson’s memory by redoubling their efforts.
6) Organized labor leads campaign to institute a $15 an hour minimum wage. Until a few years ago, the idea of a $15 per hour minimum wage, more than double the current federal minimum of $7.25 an hour, seemed a flight of fancy. Thanks to union activists and their political supporters, it is now entirely possible. Sen. Bernie Sanders, I-Vt., introduced national legislation toward that goal. Los Angeles, Pittsburgh, San Francisco, Seattle, and Washington, D.C., plus any number of smaller cities, in the last couple years have passed such ordinances. The Democratic Party formally endorsed a $15 minimum at last year’s nominating convention. Unfortunately, beyond the morally-charged rhetoric is reality. In economics, everything comes at a cost. And in this case, the costs will be borne by entry-level workers and the businesses that hire (or plan to hire) them.
5) Department of Labor issues rule discouraging employers from resisting unionization. Last March, the Labor Department finalized a rule forcing employers to divulge the identities of outside legal help who give advice on how to avoid unionization. This “persuader rule,” which took full effect in June, also requires such consultants to reveal their client rosters. Unions, led by the AFL-CIO, pushed for the regulation, claiming it will combat employer “union-busting.” In fact, the rule, which is likely unconstitutional as well as costly, is about busting opportunities for nonunion workers to hear an employer’s side of the story during an organizing drive. The rule, however, might be short-lived, as employer groups soon filed challenges in federal court.
4) Southern California ILWU union member, business associate convicted of stealing $3 million in benefits. David Gomez belonged to International Longshore and Warehouse Union Local 13, which represents dockworkers in Los Angeles and Long Beach. He and a friend, Sergio Amador, figured out that the union health care plan was the place to make some real money. The pair opened a chiropractic clinic in Long Beach and another one later in nearby San Pedro. Over several years, they generated invoices of about $3 million in fictitious or unnecessary services, instructing therapists on how to disguise the fraud. Each was arrested and charged in December 2015. Convictions followed in 2016, with Amador pleading guilty and Gomez found guilty by a jury.
3) Teamsters corruption continues. Back in January 2015, the U.S. Department of Justice and the International Brotherhood of Teamsters reached a settlement that would phase out more than 25 years of strict federal anti-corruption oversight. The phase-out plan now might have to go a bit slower than anticipated. Last October 31, a court-approved former federal prosecutor for the District of Columbia, Joseph DiGenova, sent a 42-page letter to IBT President James P. Hoffa requesting action against his wingman, Secretary-Treasurer Ken Hall. According to DiGenova, Hall hid over 17,000 email transmissions and other documents that could shed light on union embezzlement, bid-rigging and other acts of corruption. Only days later, in November, U.S. Attorney for the Southern District of New York Preet Bharara filed charges based on the letter. Meanwhile, Hoffa, having campaigned for re-election, defeated challenger Fred Zuckerman, but by a very close margin, suggesting his popularity among rank and file may be waning.
2) Texas chiropractor, associates convicted for massive taxpayer-funded benefit plan scam. Austin-area chiropractor Garry Craighead knew a good deal when he saw one. Owner of several clinics throughout Texas, Craighead engineered a seven-year pay-for-play arrangement by which he steered patients toward participating pharmacies, who in turn overbilled patients enrolled in health insurance plans, many of them union-sponsored. In return, the pharmacy provided him with generous kickbacks. The scam triggered nearly $18 million in overpayments from the Labor Department worker’s compensation program. Having pled guilty in December 2015, Craighead received a 14-year prison sentence last June and was ordered to pay full restitution. Two other principals, Nermin Awad El-Hadik and Brian Haney, pleaded guilty late last year.
1) Supreme Court deadlock in Friedrichs case maintains monopoly public-sector union funding. This past March, the U.S. Supreme Court announced it was deadlocked 4-4 over whether public-sector labor unions have the authority to force nonmembers to pay partial dues (“agency fees”) to keep their jobs. The tie, made possible by the February death of Justice Antonin Scalia, removed the possibility of a deciding vote cast in favor of the plaintiffs, led by Rebecca Friedrichs, a California public school teacher who had objected to imposition by the California Teachers Association of agency fees. In refusing to reschedule the case, the High Court left intact the appeals court dismissal. Mandatory dues remain a fact of life for a great many state and local employees. And union-driven wage and benefit contracts may prove less sustainable than ever.
(Dis)honorable Mention: Treasury Department rejects Teamster Central States Pension Fund compromise plan, increasing the possibility of insolvency; federal court temporarily suspends Obama Labor Department rule reclassifying private-sector salaried employees as hourly wage status; Nader Karimi, former chief information officer for Screen Actors Guild pension and health plans, pleads guilty to $700,000 tax evasion; Washington, D.C. security union boss Assane Faye convicted and sentenced for stealing at least $350,000; Ronald Mulcahey, Boston-area environmental services contractor, pleads guilty to double-breasting scheme; new monograph reveals how National Labor Relations Board allows unions to suppress employee handbooks; Maryland LIUNA business manager, two contractors plead or are found guilty in $1.7 million scheme to defraud union and benefit plan; Robert Smith III, business agent for International Longshoremen Association local in southeast Virginia, pleads guilty to stealing over $1 million; NLRB clears way for unions to organize graduate students; Massachusetts contractors Christopher and Kimberly Thompson indicted for running double-breasting scheme to divert more than $2 million in benefits from LIUNA workers; Rikers Island jail employee boss Norman Seabrook, New York City hedge fund manager charged in pension fund investment scheme; Minnesota unions force private home care workers to pay dues despite Supreme Court’s earlier Harris v. Quinn decision; upstate New York teachers union official Frank Gluberman pleads guilty to embezzling nearly $800,000 over seven years; David Fleury steals $300,000 from Bricklayers local; Chicago-area contractor Yashvant Patel pleads guilty to mail fraud and concealment in scheme to cheat LIUNA employees out of $1.3 million in wages and $600,000 in benefits; Louis Smith and Johnnie Miranti plead guilty to skimming nearly $300,000 from union benefit funds; Raul Mascote pleads guilty, sentenced for thefts of more than $500,000; Cleveland-area Steelworkers president David Sager charged with embezzling $185,000 from strike fund and accepting $200,000 in bribes from employers.