Probe Recommends Charges against Top Teamsters Official

ken-hall-and-james-hoffaHillary Clinton isn’t the only person these days accused of hiding emails to conceal crimes.  In a 42-page letter dated October 31, court-approved investigator Joseph diGenova appealed to International Brotherhood of Teamsters General President James P. Hoffa (r) to take action against IBT General Secretary-Treasurer Ken Hall (l).  According to diGenova, Hall hid over 17,000 email transmissions and other documents that could shed light on acts of embezzlement, bid-rigging and other acts of corruption.  For over six months, Hall, aided by Hoffa’s legal team, allegedly stonewalled investigators.  The IBT calls the charges “baseless.”  But the accusations may delay the union’s ongoing exit from federal control established by a 1989 racketeering settlement.  To complicate matters, U.S. Attorney Preet Bharara last Thursday filed suit against the union, citing “unprecedented and dangerous” activity.

James Hoffa has headed the Washington, D.C.-based International Brotherhood of Teamsters since 1999.  The union, with a current estimated 1.4 million members, by then for a decade had been under strict federal supervision, an arrangement resulting from a settlement of a RICO lawsuit filed by U.S. Attorney for the Southern District of New York and future New York City mayor Rudolph Giuliani.  As Union Corruption Update has described elsewhere, the suit was long overdue.  A succession of Teamster leaders since the 1950s, including Hoffa’s father, Jimmy Hoffa, had overseen a labor empire permeated with corruption and violence, often in collusion with mobsters.  Indeed, at times it was difficult to tell where the union ended and the Mafia began.  The Final Report of the President’s Commission on Organized Crime, released in 1986, cited four unions as among the worst.  The Teamsters were among them, the others being the Laborers, the Longshoremen, and the Hotel and Restaurant Employees.  Giuliani’s team of prosecutors on June 28, 1988 filed RICO charges against the Teamsters and its principals.  Defendants included 18 members of the Teamster executive board and 26 members of various organized crime syndicates, almost all having a felony record.  The suit charged the union with “a pattern of racketeering that included 20 murders, a number of shootings, bombings, beatings and a campaign of fear.”  The union, seeing an embarrassing trial ahead, decided to settle.  On March 14, 1989, the union entered into a consent decree with the Justice Department that would place it under the supervision of Chief U.S. District Judge Loretta Preska, Southern District of New York.  In 1992, the court approved the formation of a three-member body, the Independent Review Board (IRB), that would investigate all allegations of Teamster corruption and impose appropriate sanctions.

The IRB would be in full operation for more than two decades, much to the chagrin of Teamster leaders, including its two general presidents during this time, Ron Carey and James Hoffa.  And it has made significant progress in cleaning up the union.  During its existence, the board and its short-lived predecessor (“Independent Administrator”) removed more than 600 corrupt Teamster officials and members from the union, many of them with ties to organized crime.  The IRB also approved trusteeships of corrupt locals, mob-connected or not.  A lengthy report issued in October 2002, commissioned by the union and supervised by former federal prosecutor Edwin Stier, lauded the Teamsters for ridding its ranks of bad elements.  Yet the report also noted that the reform process was incomplete.  It especially zeroed in on Hoffa’s running mate at the time, John Coli Sr., a Chicago-area Teamster boss with a long history (along with family and friends) of self-dealing that continues to this day.  Hoffa and his loyalists believed that Stier was overstepping his bounds and that further investigations were not needed.  The mounting tension between the Hoffa and Stier factions would result in non-cooperation from the union and mass resignation in April 2004 by Stier and his staff.  “The problem is Hoffa,” noted Stier.  Hoffa found a more union-friendly replacement in New York litigator and former prosecutor Ed McDonald to carry on the Teamster in-house reform program, known as Project RISE (Respect, Integrity, Strength and Ethics).

The Independent Review Board would continue its work, but with James Hoffa and his allies growing increasingly restless.  More than ever, the union brass were adamant about getting the federal government out of the picture, especially as the union was spending about $3 million a year to cover IRB operating costs.  The possibility of an end to the arrangement became more real when Barack Obama took office as U.S. president. And after several years of wrangling, the Teamsters and the Justice Department on January 14, 2015 announced they had reached an agreement to end IRB oversight.  The deal would phase in over five years a union autonomy plan with anti-corruption safeguards.  The following month Judge Preska approved the plan.  In her four-page ruling, she wrote:  “There is no doubt that the decree is procedurally proper, that its terms are clear, that it reflects a resolution of the claims at issue, and that it is untainted by collusion or corruption.”  Hoffa explained things this way:  “This is an historic agreement that returns our great union to our 1.4 million Teamster members.  Our union is committed to the democratic process, and we can proudly declare that corrupt elements have been driven from the Teamsters and that government oversight can come to an end.”

Federal supervision is set to expire in February 2020, but the IRB has its hands full for the time being.  In October 2015, the IRB issued a 59-page report accusing the Ohio Conference of Teamsters of patronage on an extreme scale and calling upon Hoffa to put the Conference into trusteeship.  Conference President Bill Lichtenwald, who also serves as a trustee of the badly-underfunded Teamsters Central States Pension Fund, allegedly neglected his fiduciary duties.  This February, the board issued a report charging Northern California Teamster leader Rome Aloise with a variety of illegal activities, including racketeering and influence-peddling.  Not long after, Hoffa, after reviewing the report, filed charges against Aloise with the union disciplinary board.  Revelations of Teamster corruption also had surfaced in the years immediately prior to the agreement.  They included the father-son duo who looted hundreds of thousands of dollars from Local 120 in Minnesota for their own personal use and the shakedown crew from Local 82 who exacted tribute from vendors at Boston-area trade shows.

Lately, the Independent Review Board has been focusing on Teamster General Secretary-Treasurer Ken Hall.  There are good reasons for that.  Hall, who heads Teamsters Local 175 in the Charleston, W.Va. area, is the second most powerful individual in the union hierarchy.  He’s also the central figure in a recent probe conducted by the Teamsters’ Independent Investigations Officer (IIO), Joseph diGenova.  A Washington, D.C.-based litigator and former federal prosecutor for the District of Columbia (during the Reagan years), DiGenova back in 1997 was tapped by the U.S. House of Representatives to investigate the possibility of corruption in then-IBT President Ron Carey’s re-election campaign in 1996.  As special counsel to the probe, he helped Hoffa campaign operatives with their testimony.  The IRB found the 1996 campaign to be tainted by a complex money-laundering scheme.  It nullified Carey’s victory and ordered a new election held in 1998.  This time, Hoffa, a mortal enemy of Carey (who wound up being tossed out of the union), won by a 54 to 39 percent margin over challenger Tom Leedham.  And he rewarded diGenova for his efforts.  In August 2001, Hoffa appointed him to the Independent Review Board.  Then, following the January 2015 agreement phasing out IRB responsibilities, Hoffa reassigned him to the role of lead investigator into Teamster corruption.  But diGenova, to Hoffa’s consternation, did something that wasn’t in the script:  He concluded that Ken Hall had obstructed the IRB’s work.  In his aforementioned October 31 letter to Hoffa, diGenova wrote:  “The Independent Investigations Officer recommends to the General President that a charge be filed against Ken Hall, the General Secretary-Treasurer, for bringing reproach upon the IBT and violating its and his legal obligations by engaging in conduct that violated the permanent injunction entered in United States v. International Brotherhood of Teamsters.”

Joseph diGenova’s broadside not only called out Hall, it implicated the whole Teamster leadership, including Hoffa.  The letter requested that Hall provide emails dating back to 2013 from William C. Smith III, Hoffa’s executive assistant, and Nicole Brener-Schmitz, the IBT political director.  diGenova asserted:

Hall’s failure to provide specific reasons for his shielding specific documents from review continued throughout the (investigation) process.  The inescapable conclusion was that the secretary-treasurer engaged in conduct to prevent the [Independent Investigations Officer] from examining, among other things, the relationship among high-ranking Teamsters, including himself and other fund trustees, and a facilitator for a vendor who received large contracts from Teamster funds.  Hall’s violation of his obligations under the Final Agreement and Order and its Rules is analogous to a charge of criminal contempt for failure to comply with a subpoena.

Needless to say, Teamster top brass weren’t pleased.  Under the terms of the 1989 consent decree, the Teamster president has 90 days to respond to an investigator’s letter of notification of corruption and to explain actions being taken to address the problem.  The union’s response, however, was to file court papers last Thursday, November 3, accusing diGenova of launching a “nuclear missile” in a “surprise attack” that “interferes with the ongoing election.”  At a press conference that day, IBT spokesman Bret Caldwell denounced diGenova’s charges as “baseless, without merit and politically motivated,” adding that the underlying intent of the probe was to derail the re-election of the Hoffa-Hall slate.  He stated that the dispute centered upon “roughly 50 emails” that have not been turned over.  “Mr. diGenova was on the record saying that these remaining emails could be handled through discussions by the parties,” said Caldwell.  “With his ‘October Surprise’ action against Mr. Hall, [diGenova] has not only reneged on these promises, but also laid bare a deliberate attempt to undermine the IBT and the integrity of its elections.”  Whatever lingering feelings of warmth that Hoffa and his loyalists had toward diGenova now were gone.  It was Ed Stier redux.

Yet given their level of detail, diGenova’s accusations are hard to dismiss.  That’s where the U.S. Attorney for the Southern District of New York, Preet Bharara, comes in.  Last Thursday, Bharara filed charges in federal court based on the diGenova letter.  Bharara long had been critical of releasing the union outright from its consent decree.  In a June 9, 2014 letter to Judge Preska, Bharara had written:

We write on behalf of the United States in response to the June 4, 2014, letter of the International Brotherhood of Teamsters (the “Teamsters” or “Union”).  As discussed below, the Government opposes the Teamsters’ motion for wholesale termination of the 1989 Consent Decree as unwarranted and irresponsible.  The Government recognizes that the Consent Decree has brought about positive change toward meeting the parties’ objectives in entering into its terms, namely ridding the Teamsters of organized crime and corruption and establishing a culture of democracy for the benefit of Union members.  Despite this progress, however, corrupt and undemocratic practices persist at all levels of the Union, and the objectives of the Decree have not yet been achieved.

Accordingly, in response to any motion to terminate the Decree, the Government seeks permission to cross-move for entry of a modified consent decree based on the record currently before the Court, which, among other things, would facilitate an orderly scaling back of the Government’s oversight of the Teamsters’ disciplinary and electoral functions as warranted over time, while ensuring that critical safeguards remain in place, rather than an abrupt and premature termination.  In the alternative, depending in part on the factual record that the Teamsters present in support of their motion, the Government will seek leave to conduct discovery to provide the Court with a more complete record of the Teamsters’ recent acts to demonstrate that the Consent Decree’s goals have not yet been achieved, and that the Teamsters’ motion is unwarranted.

U.S. Attorney Bharara clearly was indicating that releasing the Teamsters from strict federal oversight, while justifiable, should not be done all at once.  In his mind, too many unanswered questions remained.  His advice bore fruit the following January in the form of the Teamsters-Justice Department agreement phasing out the Independent Review Board.

In the case of Ken Hall, Bharara is asking Judge Preska to order the International Brotherhood of Teamsters to turn over 17,334 emails and other documents that the union allegedly withheld from investigators.  As the Teamsters official in charge of maintaining union records, Hall ostensibly was responsible for any withholding of subpoenaed materials.  Joseph diGenova, accordingly, has accused him of obstruction.  Hoffa and other IBT officials have gone unscathed, but that situation may only be temporary.  Here are selected summaries of the prosecution brief:

The IIO is investigating the conduct of high-ranking Union officials and employees, including Ken Hall, General Secretary-Treasurer of the Union, William C. Smith III, Executive Assistant to the General President, Nicole Brener-Schmitz, formerly the IBT’s Political Director, and John Slatery, the IBT Benefits Department Director.  Generally, these investigations concern broad practices of Union officers and employees receiving payments and gifts from employers, vendors, and others doing business with the Union.  This includes the awarding of contracts for a Union fund in 2013, of which Hall, Smith, and other high-ranking Union officials were Trustees, to a company represented by a facilitator, Charles Bertucio, who had close personal relationships with several high-ranking Union officials; payments and the giving of things of value to high-ranking Union officials, by vendors, their agents, employers and others doing business with the Union or its funds, and allegations of widespread financial wrongdoing by Brener-Schmitz that was known within the Union and tolerated by senior officials…

The IBT’s interference and hindrance of the IIO’s work for the past six months has substantially interfered with his ability to perform his duties.  It has occurred when the administration was on notice that the conduct of its top officers and employees were under investigation.  It has also occurred during an election year…

To allow the Union and its employees under investigation to determine what records the IIO can examine is to guarantee an ineffective, Union-controlled IIO.

It likely will take months, possibly years, before this probe is resolved.  The union right now is in the middle of an election; ballots were mailed out on October 6 and are due back next Monday on November 14.  Hoffa may well win re-election against challenger Fred Zuckerman, head of Teamsters Local 89 in Louisville.  Yet it is difficult to see how Ken Hall will be able to keep his job.  All of this suggests that the Justice Department, in taking U.S. Attorney Bharara’s advice two years ago, was right to insist upon phasing out the IRB instead of eliminating it outright.  The Teamsters certainly are more honest now than during those mobbed-up decades.  But that fact alone doesn’t justify granting a clean bill of health.  The union still has a ways to go for that.