Union officials have made little secret of their desire to use member benefit plans as leverage to achieve a higher social good.Such a goal, however, may conflict with another, overriding goal inscribed in federal law: prudent and sound asset management.The Employee Retirement Income Security Act of 1974, or ERISA, requires fiduciaries of most private-sector benefit plans to base investment decisions solely on the welfare of their participants and beneficiaries.Advancement of broader social objectives, however desirable they might be, is not a criterion.The U.S. Chamber of Commerce, in recent years a target of union shareholder activists, recently wrote a letter to the U.S. Department of Labor asking for a clarification of the permissibility of a planned AFL-CIO shareholder campaign.In its response, dated June 27, 2008, the DOL wrote back that it was not.Employers thus won – that is, until the next round.
Theft within a labor organization, like theft within a corporation, can go undetected for years.Union officials have become increasingly sophisticated in how they conduct financial transactions.And like corporate theft, a good portion of union-related criminal activity could have been avoided if potential conflicts of interest were disclosed beforehand.That’s why the U.S. Department of Labor (DOL), led by Secretary Elaine Chao, during this decade has been trying to inject more detail into union annual financial reports. The added time and cost of compliance might seem an exercise in needless aggravation, but consider the alternative:ever higher amounts of funds illegally diverted from union accounts into the pockets of their chieftains, families and associates.Labor officials – the honest ones included – understandably don’t like the new rules.Several years ago, the AFL-CIO, incensed over the department’s introduction of a longer Form LM-2 (the one required of larger unions), went to federal court to block its implementation.It lost on appeal in May 2005.But the Washington, D.C.-based federation hasn’t lost its taste for battle with the Labor Department.
Rep. Howard “Buck” McKeon of California is the ranking Republican on the House Committee on Education and Labor.As much as any member of Congress, he is attuned to what organized labor is seeking for 2008 and beyond – and the lengths to which unions are prepared to achieve them.He recently shared his thoughts in an exclusive interview for Labor Watch, a monthly publication of a Washington, D.C. nonprofit monitoring group, the CapitalResearchCenter.The unions are pulling out the stops, he noted, and they mean to persuade what remains of the 110th Congress to make good on its legislative pledges, especially the Employee Free Choice Act, which would mandate employers to recognize the results of a simple-majority union card check, thus overriding any possibility of holding a secret-ballot election afterward.
Experience has shown that America’s labor unions, in absence of mechanisms to enforce accountability, have a penchant for disguising how they derive and spend their money. The Bush administration, led by Labor Secretary Elaine Chao, from the start has been engaged in an ongoing effort to combat union corruption before it happens.The centerpiece of that effort for several years has been an expanded, more detailed version of the “LM-2” annual financial reporting form for decades required of larger unions.The AFL-CIO went to U.S. District Court late in 2003 to block implementation of the new rule, but lost in federal appeals court a year and a half later.But many have wondered since:What effect is the new regime having on the way unions operate?A new report by Hudson Institute scholar Diana Furchtgott-Roth gives more than a few answers.Using extensive charts as well as narratives, she argues that unions have made some progress in improving their public transparency, but that this is primarily the result of government pressure.
Immigration reform continues to be a hot potato, and perhaps no more so than in Northern California.For the second time in a little over a month, a federal judge in San Francisco has decided to delay an effort by the Department of Homeland Security (DHS) to enforce the integrity of the Social Security program.Union Corruption Update reported two issues ago that U.S. District Judge Maxine Chesney on August 31 had issued a temporary restraining order barring DHS from mailing notices to some 140,000 employers across the nation, warning them about discrepancies between employer and employee Social Security information.These “no-match” letters would be amplified by a separate notice indicating the potential penalties for failing to resolve differences.DHS, under great pressure from the American people, seeks to discourage employers from hiring illegal immigrants.It now will have to wait a little longer.
That labor unions have become champions of the right of illegal (“undocumented”) immigrants to remain in this country is hardly news.In 2000, the AFL-CIO, pushed by President John Sweeney, issued a formal statement supporting unconditional amnesty for illegal workers and their families.But Sweeney and other federation officials want to do more than issue press statements and pass resolutions.Last month, they went to federal court in San Francisco to block implementation of a Bush administration plan to enforce the law.On August 31, they scored an initial victory.U.S. District Judge Maxine M. Chesney, a Clinton appointee, issued a temporary restraining order barring the Department of Homeland Security (DHS) from mailing notices to 140,000 employers, covering about 8.7 million workers, warning them about suspicious Social Security numbers.These “no-match” letters, as they are known, would point out the penalties for failing to resolve paperwork discrepancies.
Michael Pingatore was clever enough to evade detection – but only for a time.On July 23, the former secretary-treasurer of the Delaware Rural Letter Carriers Association pleaded guilty in federal court to stealing $58,908.38 from his union over a four-year period.Pingatore, 47, during 2002-06 had diverted association funds to a personal checking account by writing unauthorized checks to himself and by starting a credit card on a union bank account without approval.In all, said Assistant U.S. Attorney Robert Kravetz, Pingatore conducted dozens of transactions ranging anywhere from $12 to $6,727.At his hearing, he pleaded guilty to all six charges of embezzlement in exchange for a promise by prosecutors not to bring additional charges related to the thefts.The union represents about 400 letter carriers in the state.(Delaware Online, 7/23/07).
Maryland Local Treasurer Sentenced for Embezzlement
Albuquerque isn’t about to replace Hollywood anytime soon as the nation’s movie and television capital.But a new studio nearing completion at least should make the fast-growing New Mexico city and surrounding area a major industry presence.The $74 million, 50-acre facility, by all accounts, is state of the art.The financing, however, has involved some old-fashioned expense-account fraud – or so certain Los Angeles businessmen allege.On April 9, Pacific Coast Capital Partners (PCCP), the majority owner of Hollywood’s famed Culver Studios, filed suit in Los Angeles County Superior Court.The partnership charges that the project’s main financial backer, the Santa Monica, Calif.-based Pacifica Ventures, and its two principal officers, Hal Katersky and Dana Arnold, fraudulently billed Culver Studios more than $1 million for various services.What makes this action particularly intriguing is that Pacifica received extensive funding from union pensions to get the project off the ground.
If growth in numbers were all that mattered, the Service Employees International Union’s Andrew Stern would be America’s most successful labor leader, hands down.As a top lieutenant in that union to president and future AFL-CIO head John Sweeney, and then, starting in early 1996, as SEIU president himself, Stern has built his union into a powerhouse – “1.8 million members and growing,” to quote the union’s website.Supporters of mass immigration among organized labor officials point to the fact that a huge portion of that growth is attributable to foreign-born persons, especially from Mexico and other Spanish-speaking countries.This, they argue, is evidence that Third World mass immigration is good for the SEIU and for unions as a whole.But growth may have come at a steep price:sweetheart deals that all but in name deliver substandard contracts for members. One large health-care workers’ local in California thinks Stern has sold out his people, a rift suggesting a major power struggle ahead within the Service Employees and its parent federation, Change to Win.
When the new 110th Congress convenes this week, it can count on intensive and sustained pressure from organized labor to enact pressing agenda items.Unions spent an estimated $100 million on the 2006 midterm elections, with the AFL-CIO paying for about $40 million of the tab.The candidates benefiting from this largesse, directly or indirectly, were overwhelmingly Democratic.Now that the Democrats have regained a majority in the House of Representatives and (to a lesser extent) in the Senate, ending a dozen years of frustration, labor bosses want Congress to deliver the goods.That means hiking the federal minimum wage from $5.15 to $7.25 an hour; restricting free-trade agreements; and expanding employee health and safety coverage.Most of all, it means passing card-check legislation, introduced in the last Congress by Sen. Ted Kennedy, D-Mass., and Rep. George Miller, D-Calif., that would enable unions to obtain exclusive representation of workers without necessarily having to win a majority in a secret-ballot election.In effect, labor officials want Congress to seriously compromise a principle of more than 70 years of established labor law.