Labor unions rarely skimp on salary and benefits, especially for those at the top. Yet for sheer audacity, few are the equal of the International Brotherhood of Boilermakers. An investigative report published this past Saturday in the Kansas City Star, a follow-up to an expose of several years ago, is an apt reminder. The author of each, Judy Thomas, plumbed publicly-available financial records of the union, concluding that officials and support staff have continued to indulge expensive tastes at members’ expense. National Legal and Policy Center Chairman Ken Boehm, quoted in the new article, had this to say: “This is so over the top. It really tells you that there aren’t the kinds of checks and balances that are supposed to be there.” A number of local affiliates aren’t so happy about this either.
When it comes to compensation for union office jobs, nobody does it quite like the International Brotherhood of Boilermakers (IBB). The Kansas City, Kan.-based union currently represents roughly 53,000 workers in the U.S. and Canada who assemble, install and repair boilers and pipe fittings for commercial enterprises. Five years ago, in May 2012, NLPC heavily referenced a Kansas City Star expose as a prime example of a widespread tendency: Union leaders abuse the trust placed in them by dues-paying members. Reporter Judy Thomas, in reviewing annual union financial reports filed with the Department of Labor, discovered that total compensation for the top nine officers for fiscal year 2011 averaged about $450,000. President Newton Jones received $607,022, of which about half represented various disbursements. In fact, 71 of the other 123 headquarters employees received six-figure disbursements ranging from $109,192 to $352,107. The union also transported its officers and employees in style. As part-owner of two planes, the IBB spent $521,160 on maintenance and fees. An executive, Sammy May, received a car costing nearly $75,000 as a retirement gift. Union bosses also double-dipped, courtesy of the Boilermakers’ own financial institution, Brotherhood Bank & Trust. Three of the bank’s 11 board members also served as union officers and a fourth was a retired union officer. And when an executive retired, he could look forward to a lucrative career as a union “consultant.” One recently retired vice president, George Rogers, received $300,000 for each of fiscal years 2008 and 2009 for this purpose.
What led to the Star investigation was more than simple curiosity. In each of 2008, 2009 and 2010, a federal grand jury had subpoenaed records of union benefit plans for possible trustee violations of the Employee Retirement Income Security Act (ERISA). The allegations, made by union whistleblowers, formed the basis of a joint probe by the U.S. Department of Labor’s Office of Inspector General and Employee Benefits Security Administration initiated prior to publication; the DOL had filed a motion on March 27, 2012. Boilermakers officials proved highly resistant. Not only did the union withhold numerous subpoenaed documents, it also heavily redacted those it did release.
In all, the grand jury subpoenaed at least four individuals to testify in the wake of the Kansas City Star stories of 2012. One person testified, but the others refused, invoking the Fifth Amendment. The only resulting criminal prosecution was that of Angela Heninger, sales and marketing director/office manager for a Boilermakers benefit fund called MOST (Mobilization, Optimization, Stabilization and Training). The feds charged her in April 2013 with one count of embezzlement, six counts of wire fraud and five counts of bank fraud totaling $50,000, but that figure almost certainly was understated. The previous year, a MOST report to the Department of Labor indicated that around $480,000 was missing. The arrows pointed to Heninger, who had received nearly $175,000 in salary and benefits in 2011, apparently insufficient for her needs. That August, Heninger pleaded guilty to a superseding indictment. In March 2014 she received a 30-month prison sentence and a $640,000 restitution order. Another Boilermakers official, Larry McManamon, wasn’t prosecuted but should have been. The DOL, in fact, had told the union that McManamon should not be allowed to sit on its pension boards. Yet he continues to serve on the union’s National Annuity Trust and the Boilermaker-Blacksmith National Pension Trust, the latter of which manages $7.2 billion in assets. He also is board chairman of the Boilermakers Vacation Plan, which the DOL currently is investigating for the years 2007-13. His daughter, Bridget Connors, and a son, Larry Jr., also now serve in key positions with MOST and the National Joint Apprenticeship Program.
There also have been civil suits against the union. The most prominent among them was filed by Curtis Barnhill, executive administrator of the Boilermakers National Funds during July 1, 2005-November 15, 2008. He alleged that he had been fired from his job for cooperating with federal investigators. President Jones, rather than cut benefits for all members, which would have made him unpopular, reportedly took steps that Barnhill described as “outside of the normal and established procedures and policies of the Pension Fund.” These actions “appeared to be financially and legally unsound,” and involved a broker “of questionable background.” Moreover, the aforementioned George Rogers during his tenure as union vice president allegedly used his position as a trustee of all three union benefit plans to steer anywhere from $500 million to $1 billion in contracts to an employee-owned Jersey City, N.J.-based company, HGK Asset Management. At the time, his daughter, B.K. Power, a former internal union auditor, was vice president of sales and marketing at the firm. For its work during 2004-10 with the Boilermakers, HGK collected $8 million in management fees. All this looked like a conflict of interest under ERISA rules from any angle. Barnhill settled with the union a few years ago, though the terms were not disclosed.
Union officials took a strong dislike to the Kansas City Star’s multi-article expose. At their 2013 gathering at the Hilton Marco Island Beach Resort and Spa along the Florida Gulf Coast, union leaders denounced the “attack articles.” Yet the cat was out of the bag. If only reluctantly, they instituted across-the-board pay cuts and eliminated certain jobs, including one held by a son of President Newton Jones. The Kansas City Star, eager to see if this cost-cutting effort had been sustained, revisited the issue this year. Examining financial data, reporter Judy Thomas concluded that the reforms amounted to window dressing. “(T)hings appear to have returned to business as usual,” she wrote. Union officials, unlike in 2012, did not speak to Ms. Thomas, but she got her story anyway.
Excessive generosity – and there was plenty of it – started at the top. President Jones’ base salary, following a slight reduction to $295,628 in fiscal 2013, rose to $435,240 three years later. His total compensation, after being cut to $491,866 in 2013, grew to $756,973 three years later. The combined base salary for the union’s top seven officers for 2016 was around $2.5 million; total income was about $3.5 million. While other employees numbered 107, a drop from 123 five years earlier, it is noteworthy that 46 of those staffers pulled in six-figure salaries. Sixteen of them had total incomes exceeding $200,000.
In the area of fringe benefits, the union has continued to pull out the stops, with a few bows to fiscal prudence. To its credit, the IBB dropped its fractional ownership of one of its airplanes. And it availed itself of a suite at Kansas Speedway (in Kansas City, Kan.) that had been costing tens of thousands of dollars a year. But in other ways, Boilermaker officials have continued to feed from the union trough. Much of the money went for pro football tickets. Over the past five years, Thomas found, the IBB spent about $22,000 on Kansas City Chiefs home games and a whopping $173,000 on Washington Redskins home games. The union also had a fondness for baseball, spending about $90,000 on Kansas City Royals tickets.
Expense account inflation has gone well beyond sporting events. The union continues to reward retiring executives with new cars and consulting contracts. While Boilermakers officials are getting used to the novelty of paying for commercial flights, the getaway functions themselves still cost a bundle. In 2016, the union spent $51,560 on an international executive council meeting and another $320,511 on a construction division conference at Hilton Marco Island; $343,879 on an industrial-sector operations conference at the Mirage Hotel and Casino in Las Vegas; $16,356 on a party at the InterContinental Hotel on the Country Club Plaza in Kansas City, Mo. The IBB also spent $70,000 at the Paul Nelson Farm hunting lodge and corporate retreat in South Dakota and $27,250 on golf balls imprinted with the International Brotherhood of Boilermakers logo. In 2015, the union dropped $270,239 at Hilton Marco Island; $15,962 at a UN-sponsored conference on climate change in Lima, Peru; $5,966 at the Hotel Bristol in Paris for a World Energy Conference; and $37,665 at the Sheraton Maui Resort and Spa in Hawaii for a convention planning meeting.
Boilermakers bosses also rolled up impressive restaurant tabs. During 2012-16 they sprung for meals at the Capital Grille on the Country Club Plaza (Kansas City, Mo.) to the tune of $47,000. In 2016 alone, the union spent $11,931 at Joe’s Stone Crab in Washington, D.C. and $7,672 at Chop 239 on Marco Island. The union wasn’t shy about self-promotion either. It paid the Kansas City, Mo.-based Wide Awake Films nearly $1.2 million to produce a number of documentaries celebrating Boilermakers achievements, $450,000 of that in 2016 alone.
The role of nepotism in this financial profligacy should not be underestimated. President Newton Jones, who inherited his job from his father in 2003, has taken good care of his own. His wife, Kateryna, are on the union payroll. So are a brother, Charles, and a sister, Donna. All make six-figure salaries. A son, Cullen, also works for the union, making nearly $100,000 in salary and about $85,000 in other disbursements in 2016. All told, the family received $950,069 in salaries and about $650,000 in other disbursements. Family members of other Boilermakers officials did their best to keep up with the Joneses. In responding to the Star’s 2012 report, the union had rationalized the situation: “(P)ay for top leaders of the Boilermakers union is voted on, in true democratic fashion, by delegates representing rank-and-file members, every five years…Those who work in our trade often do so because it is what their fathers, grandfathers and great-grandfathers did. It is quite common for working members – and their leaders – to have relatives employed in the industry at various levels.”
Common or not, this sort of spending ought to raise legal and ethical red flags, especially since the Boilermakers, like most other unions, are structured as nonprofit organizations. Marcus Owens, a partner in the Washington, D.C. office of Los Angeles-based litigator Loeb & Loeb and former head of the IRS Exempt Organizations Division, is alarmed. Benefiting from tax-free revenues, he told the Star, carries a special obligation to members and the general public. “So when a tax-exempt organization abuses that tax-exempt status and ignores the boundaries,” Owens said, “it really has something in common with somebody who cheats on their taxes individually. They (corrupt union officials) are eroding the very idea of a voluntary tax system, and that’s ultimately destructive for civil society.” He added: “Labor unions are designed to further the interests of workers in collective bargaining. They’re not a personal money-making business or an individual’s own enterprise.”
A number of union people feel the same way. “It’s all a family affair,” said Craig Sparks, a retired member of Boilermakers Local 83 in the Kansas City area. “They pay ridiculous salaries to these people. But they’re not playing with their money; they’re playing with our money.” Retired Local 83 President Ed Lacey dismisses the idea that such compensation reflects member approval. “They go to the convention, and everybody falls right into line,” said Lacey. “Usually, one person from every local has a delegate to the convention, and usually that person is either the business manager or the president, and so whoever the three or four other delegates are from that local, they’re not going to rock the boat. There’s nothing democratic about anything they do.” Nick Giannone, a trustee of Boilermakers Local 29 in Boston, put it this way: “This is just more proof that they’re completely out of touch with the rank-and-file membership.” He knows first-hand how thin-skinned union leadership can be. Back in 2012, Giannone was sued by President Jones for creating a Facebook page parody, “Lord Newton B. Jones, Monarch,” that criticized union bosses’ salaries and perks. The suit eventually was dismissed.
The International Brotherhood of Boilermakers is hardly the only union with a penchant for loose spending. But even unions with far higher membership and budgets usually aren’t this brazen. To add insult to injury, Boilermakers membership has been falling. Rank and file, 57,203 in fiscal year 2012, declined to 53,287 four years later. And the 2012 figure was way down from the roughly 100,000 figure of 2006. The problem isn’t just at the national level. Spending at Boilermakers Local 154 in Pittsburgh in recent years has been almost out of control, prompting a federal investigation. Dissenters throughout the union know something is wrong. And to their credit, they have publicized these excesses. But they need help from the outside. An encouraging sign of hope is the proliferation of states recently enacting Right to Work legislation. In chronological order since early 2012, these states have been: Indiana, Michigan, Wisconsin, West Virginia, Kentucky and Missouri. By barring unions from forcibly extracting dues payments from workers under contract, these states effectively have reduced a union’s pool of collectible funds, and with it, its pool of spendable funds.
Investigative reporting on the order of the Kansas City Star’s probes of the Boilermakers can make a real difference across organized labor. Union leaders may not be principled, but they are publicity-conscious. The last thing they want is to have a newspapers with wide circulations shine a spotlight. Union members are increasingly irritated over a lack of accountability among their leaders. Exposes such as these will hasten reform.