If one form of union corruption dominated 2020, it was benefit fraud. And there were quite a few huge hauls. In California, the International Longshore and Warehouse Union-Pacific Maritime Association health plan was fleeced twice over. In one case, four persons made off with $3 million. In the other, a Los Angeles-area chiropractor, Mahyar David Yadidi aided by two associates, collected reimbursements worth $4.8 million for nonexistent or unnecessary services. That’s not even including a separate $3 million ILWU scam resulting in sentences for three persons back in 2019. In New York City, executives of the Navillus construction firm were indicted for their roles in a scheme allegedly depriving members of over $1 million in retirement benefits. And in a shocker, an external audit and a long internal memo accused longtime International Association of Fire Fighters President Harold Schaitberger and another IAFF official of misusing $6 million in union funds, mainly employee pension assets.
Accusations of fraud and embezzlement from union general funds also abounded. Scott Wilson, a Texas businessman, was charged in Oakland, Calif. federal court for diverting more than $4.5 million from International Union of Operating Engineers to at least three front companies. Embezzlement is also the likely explanation for the disappearance of more than $500,000 from the National Border Patrol Council. Manuel Torres, president of a California probation officers union, was charged with embezzling more than $600,000 from his union. The leader of a Pentagon affiliate of the Fraternal Order of Police, Arthur Penn, was charged with stealing nearly $400,000. And two leaders of a United Food & Commercial Workers local in North Carolina, Keith Ludlum and Terry Slaughter, were sentenced for embezzling $275,000 in funds.
There was welcome news on the reform front, however. The U.S. Justice Department and the United Auto Workers reached a settlement settling all civil and criminal claims against the union. For some three and a half years, the Detroit-based UAW had been the focus of attention in light of revelations that their Chrysler and General Motors Departments had been dens of self-dealing. Its two most recent past presidents, Gary Jones and Dennis Williams, each had pleaded guilty to criminal charges earlier in the year. The U.S. Department of Labor published a long-delayed final rule requiring large unions to file a “T-1” annual report showing how trust funds were spent. The DOL also expanded its Form LM-2 for larger unions in an effort to identify corruption. And in a memo, the department cited the United Steelworkers and the American Federation of Government Employees as “disproportionately subject to embezzlement,” a sure sign that the department plans to make combating embezzlement a high priority for unions generally.
Unfortunately, the Democratic majority in both houses of the new Congress, with full support from President-Elect Joe Biden, is primed to pass the Protecting the Right to Organize (PRO) Act, arguably the ultimate example of what labor reform should not look like. This misnamed and misguided legislation has nothing to do with “protecting” rights. It is a blueprint for placing private-sector employers and non-joining employees at the mercy of union monopoly power. The House passed the measure last February, but the Senate had the good sense not to act. In 2021, this monstrosity may become the law, thus ensuring, among other things, an abundance of corruption in the future. Stay tuned.
Here are the 10 stories in 2020 that mattered most, ranked in reverse order of importance. The rankings are subjective, taking into account such factors as the sum of money misappropriated, the “bombshell” news factor, the possible involvement of organized crime, and the importance of the story relative to organized labor as a whole.
10) Department of Labor issues final rule to curb union trust fund abuse. It took a decade and a half, but the Department of Labor now has a better way to detect fraud and embezzlement in health, pension job training and other union benefit plans. Last March, the DOL’s Office of Labor-Management Standards published a final rule requiring labor organizations with total annual receipts of at least $250,000 to file a new financial report, Form T-1, detailing how trust funds are spent. Originally developed during the first George W. Bush administration under Labor Secretary Elaine Chao, the rule was blocked by the courts and then shelved by the Obama administration. The new rule makes it harder for crooks, whether inside or outside of a union, to rip off benefits to which dues-paying members are entitled.
9) House passes PRO Act that would give unions veto power over employers and dissenting employees. The Protecting the Right to Organize (PRO) Act was the most egregious piece of proposed labor legislation in U.S. history. The only good thing about it is that it didn’t become law. Introduced in May 2019 and passed by the Democratic-controlled House of Representatives in February 2020 by 224-194, the bill among other things would have vacated all state Right to Work laws, mandated employer recognition of a union if over half of affected worksite employees sign membership pledge cards, and authorized union secondary boycotts of employers who do business with a primary target employer. Contrary to its title, the bill had nothing to do with “protecting” rights. Workers have had the right to form and join union since 1935. This measure was all about denying rights to anyone, whether employer, employee of third party, who might resist union monopoly power. The Senate wisely demurred, pushing the issue into the background for the time being. But Joe Biden about to become president, and the Democrats now controlling both houses of Congress, the PRO Act is certain to be reintroduced and very likely to become law.
8) Four people indicted in Southern California pain clinic scam costing ILWU health fund $3 million. Health care fraud, like health care itself, is a growth industry. A Southern California bust last February underscores this reality. Federal prosecutors charged four persons with ripping off $22 million via a pair of schemes, $3 million of which came out of a health plan co-sponsored by the International Longshore and Warehouse Union. The defendants had been indicted on a combined 48 counts of fraud, kickbacks and money laundering by an Orange County federal grand jury. The offenses were part of a scheme to inflate the volume and prices of compound cream prescriptions, many of which were unnecessary. Central to the scam was the preparation of fake studies on why creams supposedly work better than opioids.
7) FBI probes disappearance of $500,000 in Border Patrol union funds. Most of the roughly 14,000 U.S. Border Patrol agents are represented by the National Border Patrol Council, an American Federation of Government Employees-affiliated union less than diligent in protecting its own funds. The FBI has been investigating the disappearance of more than $500,000 in council funds either stolen or not properly forwarded to tax authorities. “Somebody pocketed it, just up and walked away,” said current President Brandon Judd. “We expect there will be indictments.” The focus is on former El Paso Sector President Robert Russell and his sister, Dawn Munoz, a former tax accountant for the local. Hopefully, the case will be resolved soon; few issues are more crucial to our nation’s future than protecting the southern border.
6) New York City construction firm officials charged in benefit scam. All too often, unionized contractors attempt to cut costs by withholding scheduled contributions to benefit plans. Last July, Donal O’Sullivan, president and owner of the New York City-based Navillus Contracting, Inc., aided by executives of the company, were indicted in Brooklyn federal court on a combined 11 counts related to an elaborate payroll scheme through which the defendants allegedly cheated several union-sponsored pension plans out of a combined more than $1 million over a six-year period. The defendants have denied all wrongdoing. Yet given their prior history of this sort of thing, they may have a tough time convincing a jury of their innocence.
5) Teamster-connected Hawaii organized crime boss, 10 others, charged with running violent racket. Hawaii has a long history as a haven for organized criminals. And Michael Miske Jr. may be the most extreme example yet. In July, Miske was arrested and charged in Honolulu federal court, along with 10 other men, with murder, racketeering, kidnapping, arson, robbery and money-laundering. Prosecutors termed Miske “the unquestioned leader of a racketeering enterprise” and “a grave danger to the community.” His infiltration of Teamsters Local 996, which provides drivers for movie and TV scenes, alone might end his career.
4) Southern California chiropractor sentenced for ripping off $4.8 million from ILWU health plan. Scammers have had their eyes on the International Longshore and Warehouse Union in recent years. Last August, a Los Angeles-area chiropractor, Mahyar David Yadidi, was sentenced in federal court to 46 months in prison for submitting $4.8 million in fake reimbursements to a health plan sponsored by the union and the Pacific Maritime Association. Aided by two other individuals, Yadidi billed the ILWU-PMA plan for nonexistent or unnecessary services. To conceal the fraud, he ordered employees to falsify medical records. He and two business partners eventually pleaded guilty.
3) Texas Businessman Charged with Defrauding California Operating Engineers local of $4.5 million. Scott Wilson, a Texas businessman, is a former director of the information technology department for International Union of Operating Engineers Local 3 in Alameda County, California. The union no doubt regrets its association with him. Wilson was charged last June in Oakland federal court with defrauding the union of more than $4.5 million over a six-year period and diverting the funds to at least three front companies that he owned. Of that sum, he allegedly received about $2.5 million in kickbacks through various schemes, including sending fake invoices to the union for information technology products and services never delivered.
2) DOL, U.S. Attorney’s Office investigating Fire Fighters boss, former secretary-treasurer for skimming or misusing $6 million. Harold Schaitberger, longtime president of the International Association of Fire Fighters, has a well-earned reputation for autocratic control. He may have earned a reputation as a thief as well. Last March, current IAFF Secretary-Treasurer Edward Kelly circulated a 105-page internal memorandum accusing Schaitberger and Kelly’s predecessor, Thomas Miller, of misusing or stealing about $6 million from the union mainly in the form of pension assets. The memo, which followed an outside audit, also accuses Schaitberger of concealing the losses from the union executive board. The charges were sufficient to warrant ongoing probes by the Labor Department and the Justice Department. Scahitberger has called the charges “reckless and destructive.” Time will show the wiser.
1) Justice Department, UAW reach settlement after former presidents and other union officials plead guilty. Corruption at the 400,000-member United Auto Workers topped the end-of-the-year list a year ago, and justifiably does so again. It’s not every union in which two recent presidents plead guilty in the same year to federal embezzlement, conspiracy and tax fraud charges. A probe by the FBI, the IRS and the Labor Department initially uncovered millions of stolen funds from the UAW’s Chrysler Department and later over $1 million in missing funds from its General Motors Department. Fifteen persons, mainly union officials, were convicted. This December, the U.S. Attorney’s Office for the Eastern District of Michigan announced the settlement of a civil suit that creates an independent monitor to oversee union affairs, the possibility of direct elections, and the resolution of outstanding civil and criminal charges.
Dishonorable mention: independent probe of San Francisco Bay Area Teamster boss Rome Aloise cites violations of two-year suspension; ex-Carpenters members sue benefit fund of New Jersey affiliate for supporting ex-official fired for alerting DOL to $1.5 million theft; Sarah Holmes steals nearly $300,000 from Machinists local at Andrews Air Force Base; Iron Workers boss, member in Northwest Indiana plead guilty in worksite mob attack; benefits consultant Michael Buchanan sentenced for scamming Pennsylvania higher education system employees union out of $1.5 million; federal prosecutors settles with medical lab for $600,000 in fraudulent billings of United Mine Workers health plan in West Virginia; Fraternal Order of Police Pentagon affiliate leader Arthur Penn charged with stealing nearly $400,000; California probation officers President Manuel Torres charged with $600,000 theft; Romero family members sentenced for stealing $800,000 from their Southern California union; dissenters Daniel Dalison and Roger White sue SEIU local in Seattle for Beck violations; union-sponsored lobster cooperative in Maine sues former head and related company for nearly $3 million in losses; Rhode Island drywall contractors Jesus Mendez and Jamie Zambrano indicted for double-breasting scam; New Jersey insurance broker Lawrence Ackerman sentenced for role in $6.6 million theft from insurers and UAW health plan; AFSCME headquarters puts corrupt Hawaii local in trusteeship; Hawaii ILWU boss Nathan Lum sentenced for tax fraud and identity theft totaling more than $300,000; Genovese crime family mobsters Frank Giovinco and Steven Arena sentenced for shakedowns of UFCW locals in Brooklyn; Amalgamated Transit Union supports Black Lives Matter-led nationwide strike of July 20; James Moylan, associate of indicted IBEW Local 98 Philadelphia boss John Dougherty, sentenced for wire fraud and tax evasion; IBEW Local 98 contractor Donald Dougherty and accountant Michael McKale indicted for fraud; Department of Labor cites Steelworkers, American Federation of Government Employees as “disproportionately subject to embezzlement”; United Farm Workers consultants Marcus Asay and Antonio Gastelum charged with fraud in the sale of financial products; federal judge narrows scope of DOL joint employer rule to unions’ advantage; AFSCME local in Southern California blocks dissenting home care provider Maria Quezambra from receiving dues refund; Labor Department revises Form LM-2 to better identify corruption; Kenneth Wynder and Steven Whittick, president and treasurer of New York City police union, charged in $500,000 benefit scam; UFCW officials in North Carolina Keith Ludlum and Terry Slaughter sentenced for combined $275,000 embezzlement; Columbus, Ohio Transit Workers union under investigation over missing $300,000.