Boilermakers Bosses Receive Excessive Salaries, Benefits
Six-figure salaries, questionable consulting fees and lavish getaway vacations aren't exactly unknown in the upper reaches of organized labor. But officials of International Brotherhood of Boilermakers (IBB), have been taking these and other perks to a new level. That's the conclusion of an exhaustive investigative report published in the Kansas City Star on Sunday, May 13. The author, Judy Thomas, spent many months combing through IBB financial reports and tax returns. Family members of Boilermakers President Newton Jones and other officials have been making out especially well. The Kansas City, Kan.-based union defends its spending and hiring practices, arguing that it operates within the bounds of the law and economic necessity. Yet a number of dues-paying members have a different view.
The International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers represents nearly 60,000 workers in the U.S. and Canada. It's also amassed an impressive asset portfolio. "The Boilermaker family of organizations, together valued at over $10 billion, has proudly represented the interests of hundreds of thousands of working men and women for over 130 years," wrote union general counsel Michael Stapp, in a pre-publication response to the Kansas City Star. Apparently, that endowment has given the union a lot of leeway in the area of executive compensation. All told, total disbursements to the top nine officers of the international union for the fiscal year ending June 30, 2011 were $4.1 million, about $450,000 per official. This $4.1 million figure, in fact, was $182,000 higher than the total disbursements to the 29 executives at the far larger Teamsters.
Thomas' article provides a wealth of detail, starting at the very top. Boilermakers President Newton Jones' total compensation for the most recent fiscal year was $607,022, well above that of either AFL-CIO President Richard Trumka or Teamsters President James P. Hoffa. Of that, $307,134 represented base salary and the other nearly $300,000 represented benefits. Total annual compensation to the eight other IBB international officers ranged from $340,387 to $494,298. What's more, 71 of the other 123 headquarters employees had six-figure disbursements ranging from $109,192 to $352,107. For a union whose membership has declined 7.6 percent since 2006, employment is a pretty sweet deal.
It's an especially sweet deal for family members of top officials. Combined compensation to family members of Newton Jones, who himself inherited the top spot from his late father, Charles W. Jones, nearly a decade ago, and two other IBB executives, totaled more than $2 million, according to the most recent financial data filed by the union to the Labor Department. Jones' brother, Charles, received a salary in 2011 of slightly over $150,000, not including more than $37,000 in other disbursements, as director of the Boilermakers union's History Preservation Department. His sister, Donna, made nearly $100,000 as an executive secretary, while a relative, Michael Peterson, pulled in about $130,000 as an international representative. IBB Secretary-Treasurer William Creeden, who in 2011 received $392,117 in total disbursements, also takes care of family. His son, Ryan, received a $155,487 salary as the union's director of information technology, while a nephew, Kyle, took in $142,767. Union Vice President Lawrence McManamon, who received $470,000 in total disbursements, $255,844 of which was salary, also has put family on the payroll. His son, Lawrence Jr., made $270,622 in salary and benefits as coordinator of the Boilermakers National Apprenticeship Program, according to 2010 tax records. And his daughter, Bridget Connors, received $172,797 in total compensation in 2010 as a representative for the Boilermakers' Mobilization, Optimization and Training Trust. Lawrence McManamon Sr. is a trustee for both organizations. The Kansas City Star noted: "That is only a sampling of the family ties involving union officers."
Possibly related to the unusually generous pay for headquarters employees is the relatively small sum allotted for collective bargaining and contract enforcement. In 2011, the Boilermakers spent $9.7 million on negotiations and enforcement, noted the Star. This amounted only to 14 percent of total expenditures. By contrast, the Teamsters, United Auto Workers and Machinists spent, respectively, 29.5 percent, 40.9 percent and 28.9 percent. IBB members might be wondering if their paychecks haven't suffered as a result.
Meanwhile, top Boilermakers officials receive a substantial second income from a bank under their control, Brotherhood Bank & Trust, also based in Kansas City, Kansas. Three of the bank's 11 board members are active union officers; another is a retired officer. Whether or not this reflects full-time work, it often pays like it. The bank's listed CEO and chairman is IBB President Jones, who during calendar year 2008 received $230,000 in total compensation as a banker, a figure rising to nearly $340,000 in 2009. In 2010 he made nearly $53,000 in his role as bank chairman. Boilermakers Secretary-Treasurer Creeden, who now makes more than $250,000 as a union official, made nearly $258,000 as a bank official in 2009, the most recent year for which he filed.
One of the advantages of being a ranking Boilermakers official is hosting union-related business events. Participants travel in style. The union is part-owner of two planes on which it spent a combined $521,160 last year on maintenance and fees. And it spares few expenses in choosing destinations, which in recent years have included: the Hilton Marco Island Beach Resort and Spa just off the coast of Naples, Florida; the Kingston Plantation in Myrtle Beach, South Carolina; and the Fairmont Tremblant ski resort in Quebec. When union officials take commercial flights, they typically go first-class. While neither first-class nor charter plane travel among officers is considered taxable compensation, they amount to that insofar as family members or relatives make it a habit to fly that way.
Another advantage of being a ranking official is moving about on the ground in style following retirement. It is standard practice for a Boilermakers international officer to keep his union-bought motor vehicle. In 2010, the Star noted, retiring Vice President Sammy May was "gifted" a car with a book value of $51,388 (purchase price: $73,998). And when Vice President George Rogers retired in 2008, he was allowed to keep his company car that had cost the union $53,380.
A car isn't the only amenity enjoyed by retiring Boilermakers officials. Indeed, it amounts to small stuff compared to landing an ongoing gig as a union consultant. George Rogers, for instance, pulled in $300,000 in each of fiscal year 2008 and 2009 in consulting fees following his retirement. That's not including the $400,871 salary he made in 2008, his final year as an active official. "I'm not supposed to talk about anything," he told the Star. One only can wonder why. Retired Vice President Joseph Stinger, meanwhile, has made about $50,000 a year as an IBB consultant since his retirement in 2007 at a $263,910 salary. Who needs an annuity?
Critics outside the union find such spending patterns disturbing. "This is one of the more egregious examples of money flowing like crazy that I've ever seen," remarked Nathan Mehrens, general counsel for the Washington, D.C.-based Americans for Limited Government and a former lawyer at the U.S. Labor Department under Bush-era Secretary Elaine Chao. Marcus Owens, currently an attorney with the Washington, D.C. office of Caplin & Drysdale and, during 1990-2000, head of the IRS' nonprofit organizations monitoring division, likewise stated: "Those kinds of benefits seem extraordinarily high. That's just over the top." Excessive, yes, but is it illegal? Owens thinks it's a possibility. "I think there are real tax issues and probably Department of Labor issues as well," he said. "And the IRS would question whether the income is being used for the benefit of the union members or not."
Critics within the union may hold the key to reform. They do exist. The problem is that they may be reluctant to identify themselves. An anonymous April letter, purportedly written by a group of dissenting members and obtained by the Star, put it this way: "While members and their families struggle to make ends meet this recession, our IBB leaders have been living high off the hog at members' expense. We regret that we have to be anonymous at this time because we fear retribution from a leadership that regrettably values its own personal and financial interests above the rank and file's." Union General Counsel Michael Stapp responds that everything is above board. "President Jones was recently unanimously re-elected by approximately 600 delegates in an open democratic election process, clearly demonstrating membership support for him," he said. Stapp added that union leadership has made every effort to contain costs, cutting annual expenses by more than $10 million over the previous nine years. Whether or not this is a case of selective information, the true gauge of the union's commitment to financial responsibility may be the willingness of dissenters to step forward and challenge the Jones slate in future elections.
Whether or not these expenditures represent illegal activity, it's more than likely that the Kansas City Star investigation will spur at least some internal reform. Union leaders have spun the facts, but that doesn't mean they've disputed them. And some of those facts are more than a little embarrassing. Nepotism and excessive compensation, of course, are hardly unknown in the worlds of the business, philanthropy and higher education. But union leaders shouldn't be exempt from scrutiny.
The scrutiny of the Kansas City Star story, it should be mentioned, was made possible by the greater detail of union financial reporting proposed by Labor Secretary Elaine Chao starting in 2003 and eventually put in place over the following several years (and partially rolled back by Obama Labor Secretary Hilda Solis). Chao and others recognized from the outset that despite longstanding regulations pursuant to the Landrum-Griffin Act of 1959 designed to promote accountability, unions, whether at the national, district or local levels, for too long had been able to falsify or disguise expenditures. The new DOL rules, which require unions to post financial data online for viewing by dues-paying members and the general public, in a real sense made the expose possible. One hopes that given this access, other newspapers in the U.S. will probe the finances of other unions with this level of thoroughness.