UFCW Member in Maryland Sues Labor Department; Seeks Transparency

Labor Secretary Hilda SolisA union normally is about the last place anyone would look to find someone pressuring the U.S. Department of Labor (DOL) to more aggressively scrutinize union financial reporting. Yet a member of a public employee local in Maryland is doing just that. And he’s gone to court, too. Meet Chris Mosquera, a member of Local 1994 of the United Food and Commercial Workers (UFCW), which represents municipal and county government workers in suburban Montgomery County, Md. This May, Mosquera filed suit in District of Columbia federal court against Labor Secretary Hilda Solis (see photo). The action alleges that Solis exceeded her authority in rescinding a rule finalized during the last days of the Bush administration requiring more annual expenditure data from large unions. Mosquera filed suit on his own initiative, and not on the union’s behalf.

The action hasn’t occurred in a vacuum. The U.S. Department of Labor is charged with establishing and enforcing regulations pursuant to the Labor-Management Reporting and Disclosure Act (LMRDA), also known as the Landrum-Griffin Act. Congress passed the law in 1959 following lengthy hearings revealing extensive corruption within many unions, most notably the Teamsters. DOL developed annual financial reporting requirements and set up a new agency, the Office of Labor-Management Standards (OLMS), to enforce them. These rules remained virtually unchanged for some 40 years. During that time, corruption continued to run rampant at many national, district council and local labor organizations.

President George W. Bush’s secretary of labor, Elaine Chao, decided that the time for stronger preventative medicine was at hand. In 2003 she proposed regulations to force union officials to specify in greater detail how they were spending their money. Those rules were based heavily on a May 2002 petition filed by NLPC. The proposed reports, moreover, would have to be available online for viewing by the general public. As the biggest problems had been occurring in biggest unions, the logical result was a revamped LM-2 reporting form, which applies to large unions – i.e., those with annual receipts of at least $250,000. Affected unions, Chao and her staff proposed, would have to itemize all expenditures of $5,000 or more. In this way, union officials and their employees would be less able to employ bookkeeping deception to hide theft.

Union leaders made clear their intense opposition to the rule change. In short order, the AFL-CIO went to court to challenge it. The new form constituted an overstepping of Secretary Chao’s legal authority and infringed on union free speech rights. The challenge proved unsuccessful. A federal circuit court, by a 3-to-0 margin, in May 2005 upheld Chao’s authority to expand the LM-2, though it did give organized labor solace by voting 2-to-1 to indefinitely set aside the department’s proposed (and eventually adopted) Form T-1, which would govern trusts such as pension plans and training funds in unions with at least $250,000 in annual receipts.

Corruption continued. Thus, during the waning months of the Bush administration, the DOL developed a supplementary regulation. On January 16, 2009, four days before President Bush’s last day in office, department officials announced publication of a final rule (RIN: 1215-AB62) in the January 21 Federal Register to update Form LM-2. This fine-tuning would require more information about: compensation received by union officers and their employees; parties buying or selling union assets; and categories of receipts. In addition, the rule would authorize the department to rescind the right of a union to use the simpler Form LM-3 for filing annual financial reporting data if that union has been habitually delinquent or deficient.

President Obama’s labor secretary, Hilda Solis, selected for the job mainly on the strength of her pro-union record as a four-term Democratic congresswoman from California and overall progressive-Left stance, wasted little time in undoing what had been put in place. After a pro forma 60-day review of the regulation, her department cancelled it; it already had suspended enforcement, which had been scheduled to kick in on February 20. While it is true that OLMS and other agencies within the Obama Labor Department often have been vigilant in going after embezzlement and other financial crimes, many of these investigations likely would not have been necessary had the January 2009 rule remained intact.

That’s where Chris Mosquera comes into the picture. A low-income housing inspector for more than a decade at the county-funded (but not county-managed) Montgomery County Housing Opportunities Commission, he is at once a union man and a published critic of union practices. He views the people running his union, the UFCW-affiliated Municipal and County Government Employees Organization, as dishonest or, at the very least, duplicitous and secretive. For him, the rollback of the Bush-era requirements amounted to a political gift to organized labor in return for its enthusiastic support for candidate Barack Obama in 2008. A return to the old ways, he argued, served as a green light to labor officials to treat union funds as though they belonged to them personally.

Mosquera consulted the Springfield, Va.-based National Right to Work Legal Defense Foundation about suing the department. The foundation, which has been instrumental in a host of landmark worker freedom cases over the last few decades, decided his grievance was crucial to maintaining accountability at the nation’s unions. On May 23, the foundation filed suit on his behalf against Secretary Solis in U.S. District Court for the District of Columbia, arguing that her rule rollback had denied dissenting union employees their rights, especially since many dues-paying members and fee-paying nonmembers provide funds involuntary.

Mosquera believes union officials have something to hide. In a guest editorial a month ago for the Washington Examiner, “Why I Sued U.S. Labor Secretary Hilda Solis,” he wrote:

As a member of the United Food and Commercial Workers, I’m more knowledgeable than most about the ins and outs of union finance.

In fact, I’ve learned some interesting things about my own local’s spending habits over the years. Like the $2 million office condo they bought in Gaithersburg (Md.), or the fact that the president of my local makes over $200,000 a year, plus other undocumented benefits…

Disclosure is a simple but effective tool for fighting corruption and encouraging accountability. If union officials know their spending habits are part of the public record, they’ll be less interested in expensive getaways and more interested in effectively managing their members’ hard-earned dues.

That’s why I filed a lawsuit in U.S. District Court to stop Solis from rolling back these vital union transparency requirements. Union officials shouldn’t be allowed to operate behind closed doors when billions of dollars of dollars of employees’ hard-earned money is at stake.

He concluded that anyone who pays union dues, voluntarily or not, should have a right to see how his or money is spent. Existing rules provide too much leeway to avoid accountability.

The lawsuit is focused on Secretary Solis’ rescission of the January 2009 LM-2 Final Rule. Her action allegedly exceeded her legal authority because it: 1) used burden upon unions as a justification; 2) replaced the rescinded LM-2 rule with one that actually increases opportunities to circumvent LMRDA; and 3) eliminated disclosure of the sources of most receipts, in contradiction of Section 201(b)(2) of the law. Don Loos, a key DOL employee under Secretary Chao and currently senior adviser to the president of the National Right to Work Committee, cites Section 208 of LMRDA to justify his case. The law states: “The secretary shall have authority to issue, amend, and rescind rules and regulations prescribing the form and publication of reports required to be filed under this title and such other reasonable rules and regulations (including rules prescribing reports concerning trusts in which a labor organization is interested) as he may find necessary to prevent the circumvention or evasion of such reporting requirements.” This, Loos argues, bars Secretary Solis from arbitrarily eliminating public reporting and disclosure requirements.

Secretary Hilda Solis and her aides have done more than simply rescind the January 16, 2009 rule change. They also have rolled back a rule change instituted in 2007 under Secretary Chao to strengthen Form LM-30, which governs potential conflicts of interest among union officials and fiduciaries. The Obama-era DOL also has all but ended oversight of teacher unions. And it has rescinded the requirement that unions disclose nonunion enterprises under their control. The main Solis approach to union regulation, in other words, appears to be to regulate as little as possible. This makes sense. Unions are a key source of financial support for the Democratic Party. Secretary Solis in effect is doing what her benefactors want her to do. It’s a comfort to know that one union member out there has gone to court to call her out on it.

Related:

Obama Rolls Back Union Disclosure; Gives Green Light to Corruption

Obama Set to Block Labor Department Transparency Rules

Department Publishes Final Rule for LM-2, LM-3

Labor Department Issues Final Rule for Union Trusts

Circuit Court Upholds Union Reporting Rules – Up to a Point