Union Corruption Update

Since 1997, NLPC has become a high-profile and credible source for information about America’s labor unions through our publication Union Corruption Update.

The newsletter has been referenced in many other media outlets including the New York Times, Chicago Tribune and National Journal.

Virginia Bosses Indicted for Stealing From Disaster Fund

Five union bosses of United Steelworkers of Am. Local 9336 in Radford, Va., were indicted Feb. 19 with embezzling more than $10,000 that was paid the Local 9336 Disaster Relief Fund established after a fatal explosion at the Intermet New River Foundry in Mar. 2000. The fund was earmarked for workers affected by the explosion, in which three workers were killed. About $22,500 was raised. Some workers were facing foreclosure, repossession, and eviction as a result of the subsequent plant shutdown.

Ohio Boss Sentenced for $21,600 Theft

U.S. Dist. Judge Paul D. Matia (N.D. Ohio, H.W. Bush) sentenced Stephen T. Hanlon Feb. 13 to five years probation, including six months home confinement with electronic monitoring, for embezzling $21,657.58 from United Steelworkers of Am. Local 01-4564-S in Girard, Ohio. He also ordered Hanlon to make full restitution.

Hanlon pled guilty Nov. 16 to union embezzlement after being charged on Nov. 2. He admitted to embezzling the funds from May 1998 to June 2000, while serving as financial secretary. He embezzled the funds by various checks-for-cash schemes and using the cash for personal purposes. To circumvent the three-signature requirement for union checks, he wrote and cashed 47 counter checks, payable to himself or cash. He also stole funds by getting cash back from bank deposits of union checks, including payroll tax deposits. He also diverted and cashed the local's tax refunds from the IRS, the receipt of which he did not disclose to other bosses.

Knoxville Boss Gets 10 Months for $10,500 Embezzlement

On Feb. 11, ex-secretary-treasurer of United Steelworkers of Am. Local 35-8681 Donald G. Martin was sentence to five months at a half-way house and five months home detention. Martin was indicted on Mar. 21, 2001, on charges of embezzling $10,591 from the Knoxville-based local, making false entries in union records, and false reporting. Martin was found guilty on all counts by a jury on Oct. 10. In addition to the confinement, he was sentenced to three years of supervised release. He was also ordered to make restitution of $10,400 and pay $5,075 in special assessments. [DOL 2/11/02]

Ohio Boss Gets 3 Months at home for $19,100 Theft

U.S. Dist. Judge David A. Katz (N.D. Ohio, Clinton) sentenced the ex-treasurer of the Lima (Ohio) Mem'l Prof'l Nurses Ass'n, Sharon K. Schmenk, Feb. 1 to three years probation, the first six months to be spent in home confinement. She must wear an ankle monitor, which costs  $4.95 a day. She must pay for the monitor (approximately $891). Katz also ordered the boss to to make full restitution. She pled guilty Oct. 5 to embezzling $19,170 in union funds.  [DOL 2/1/02; USAO N.D. Ohio 2/25/02]

Minnesota Boss Gets Probation for False Entries, Paid $18,700 in Restitution
On Feb. 25, in the U.S. Dist. Court for the Dist. of Minn., Judy Domning, ex-executive director of the Minn. Licensed Practical Nurses Ass'n and ex-executive director of the Technical Employees Ass'n of Minn., was convicted of making a false statement by making false entries in union records. She was sentenced to two years probation and barred from employment by unions "for life." She had pled guilty on Aug. 24 and had previously made restitution of $18,772.

Oregon Fund Manager May be Close to Plea Deal

Jeffrey L. Grayson, the indicted former union fund manager, has tentatively agreed to cooperate with federal prosecutors in Oregon in the fraud and money-laundering case stemming from his investment firm's collapse. His cooperation could mean that a plea agreement is imminent, which would allow Grayson to avoid a trial on 22 counts of fraud, conspiracy, money-laundering, witness-tampering and making illegal payoffs to a union trust fund trustee. Harvey Silets, a Chicago criminal defense lawyer representing Grayson, said that "we've been in discussion with the government. No plea agreement has been signed."  Asst. U.S. Atty. Lance Caldwell said essentially the same thing. "The only thing I can confirm is that there have been discussions."

Pro-Worker Reforms force Colorado Union Eliminate Entire Field Staff

Colo. Gov. Bill Owens (R) terminated state payroll deduction of union dues through an executive order issued in May 2001. Now Owens reports that the Colo. Fed'n of Public Employees has seen its dues collection drop of 50% since the order was issued, prompting the union to lay off its entire field staff of 17 people. Reportedly, such positions are routinely used for political operations.  Americans for Tax Reform believes this is further evidence that when unions are forced to collect funds in the same way everyone else has to, many union members choose to not participate.

Houston Judge Slaps Down Member's Fiduciary Duty Suit

U.S. Dist. Judge Lynn N. Hughes (S.D. Tex., Reagan) ruled Feb. 4 that Louis A. Hoffman, a member of the S.W. Airlines Pilots Ass'n aggrieved by the conduct of the union's bosses, including the ex-president's use of union money to ship a pair of moose antlers to his out-of-state home, does not good cause to bring suit under the Labor-Mgmt. Reporting & Disclosure Act of 1959 (a.k.a. Landrum-Griffin Act). "Because corrupt union leadership cannot be trusted to police itself, individual union members may sue officers if the union refuses to take action," but the have to show good cause, Hughes wrote. Hoffman has appealed the ruling to the U.S. Court of Appeals for the Fifth Circuit.

"However stupid and wasteful the former officers' actions may have been," they did not amount to breach of fiduciary duty under the LMRDA, Hughes said. Finding that Hoffman had no cause to sue, the court suggested that he "pursue his frustration ... through other avenues; he should watch the current administration to ensure it does not repeat the errors."

Appellate Victory for New England Member's Election Suit

The U.S. Court of Appeals for the First Circuit ruled Feb. 19 that the Dep't of Labor's explanation for rebuffing a union member's challenge to the United Bhd. of Carpenters' election procedures raised "serious question" regarding DOL's adherence to its "own articulated policies" and demanded that the decision be presented in a "more reasoned fashion" The court's decision stemmed from a challenge to the election of officers of the Carpenters' New England Reg'l Council. Thomas Harrington, a UBC member, maintained that, since CNWRC performed functions and purposes traditionally accorded to local unions, its officers should be elected in accordance with the procedures governing local elections. Harrington argued that the officers should be selected by members in a direct election by secret ballot, rather than by a vote of delegates who are elected by members of local unions.

LMRDA Preempts State Whistleblower Statute, says New Jersey Court

The N.J. Superior Court, Appellate Division, held Feb. 15 that a claim by union employee Regina Dzwonar that she was discharged for exposing what she considered to be union violations of the Labor-Management Reporting & Disclosure Act of 1959 cannot be brought under state law. Dzwonar's claim under N.J.'s Conscientious Employee Protection Act against the Hotel Employees & Restaurant Employees Int'l Union Local 54 in Atlantic City was preempted by the LMRDA, according to Judge Donald S. Coburn.

Michigan Local Mistreatment of Nonunion Worker Precluded Grievance Representation

The U.S. Court of Appeals for the Dist. of Columbia Circuit ruled Feb. 26 that because union stewards wrongfully prevented a nonunion postal employee from filing a grievance, Nat'l Ass'n of Letter Carriers Branch 3126 in Royal Oak, Mich., must allow the employee to proceed with the grievance and pay for him to be represented by his own attorney.

Enforcing an order issued by the Nat'l Labor Relations Bd., U.S. Circuit Judge Douglas H. Ginsburg (D.C. Cir., Reagan) ruled that NLRB was authorized to issue the order for attorneys' fees. The court rejected the union's argument that it could have represented employee Joe Pitlanish fairly and without bias: given the union stewards' prior mistreatment of Pitlanish, it was within the board's discretion to decide that an independent lawyer was the better strategy, the court said.

Beck Victory for Connecticut Worker

On remand from the U.S. Court of Appeals for the Dist. of Columbia Circuit, the Nat'l Labor Relations Bd. provisionally held Dec. 20 that autoworker George Gally is entitled to a make whole order to remedy the violation found by the court. That is the United Auto Workers of Am.  and UAW Local 376 in Hartford, Conn. violated the Nat'l Labor Relations Act causing Gally's employer Colt Industries to discharge Gally for nonpayment of dues without first informing him of the amount by which his union fees would be reduced if he became an objector under CWA v. Beck. NLRB originally dismissed Gally's complaint but was reversed by the court.

Oklahoma Seeking to Stop Union Payroll Deductions for Non-Members

Enforcing for the first time an administrative rule that has been on the books for five years, the Okla. Comm'r of Labor Brenda R. Wynn ordered a Tulsa employer to stop deducting the union dues of employees who resigned from their union. In a Feb. 12 letter to Baldwin Steel Co., Wynn demanded that the firm refrain from withholding union dues from the paychecks of 19 employees who resigned their membership from Int'l Bhd. of Teamsters Local 523 and asked that their dues no longer be deducted.

Wynn said the regulations implementing its wage law lists allowable deductions from employee paychecks, but that union dues are not an allowable deduction. The regulations are intended to protect employees who do not want money deducted from their paychecks without their permission

California State Employees Win Class Action Status

By certifying  a federal suit as a class action, U.S. Dist. Judge Garland E. Burrell, Jr. (E.D. Cal., H.W. Bush) has allowed 3,200 Cal. state employees to  challenge the money confiscated for politics and other  activities by the the State and the Prof'l Engineers in Cal. Gov't.  Nat'l Right to Work Legal Def. Fdn. attorneys filed the  lass-action suit, Wagner v. PECG, in Sept. 1999 on behalf of Richard Wagner, an investigator for the Cal. Air Resources Bd. in the Sacramento area,  and Kristin Schwall, a water quality engineer from San Diego. They filed the complaint on behalf of all non-member government workers under the PECG's statewide memorandum of understanding (MOU) - also known as a collective bargaining agreement - who have been illegally forced to pay for union political  activities.

FEC Appeals Hidden Records Case

The Fed. Election Comm'n filed an appeal Feb. 15 in a case testing the limits of disclosure of documents from FEC investigations of possible campaign finance violations.  The notice of appeal was filed with the U.S. Court of Appeals for the Dist. of Columbia Circuit. It challenged a decision by U.S. Dist. Judge  Gladys Kessler (D.D.C., Clinton), that documents from the FEC probe of links between the Democratic Nat'l Committee and the AFL-CIO must be kept secret. The FEC investigation was launched following reports of a $35 million AFL-CIO effort to aid Democrats in the 1996 congressional election

Bush, DOL Committed to Fighting Union Corruption

Despite a significant decrease in the Dep't of Labor's proposed FY2003 discretionary budget, the agency charged with monitoring union finance and elections would see a sizable increase in funding, under President Bush's proposed budget. DOL's Office of Labor-Mgmt. Standards, currently is funded at $30.6 million, but would get a $3.9 million increase under the proposed budget. The new funding is intended to increase the number of OLMS audits of unions under the Labor-Mgmt. Reporting & Disclosure Act of 1959 (a.k.a., Landrum-Griffin Act ). It includes $3.4 million and 40 additional staffers "for enhanced enforcement" "to ensure compliance" with LMRDA.

"This is a victory for every American who is forced to pay dues or fees to a union," said NLPC Chairman Ken Boehm. "As repeatedly documented in NLPC's Union Corruption Update, there is wave of union corruption plaguing our country. It's reassuring to know the Bush Administration recognizes the problem and is willing to do something to combat it."

Twenty-Six New York Bosses/Members Indicted on Racketeering and Other Charges; $6 Million Taken

On Feb. 7, federal and local law enforcement announced the unsealing of a 137-count indictment against 26 bosses/members and one associate of the Int'l Union of Elevator Constructors Local 1. More than $6 million in wages and benefits were allegedly stolen. Allegedly, Local 1 bosses defrauded the construction industry and abused the hiring rights of Local 1 members by committing racketeering crimes at more than 20 construction sites in the N.Y.C. area between 1989-2001. The indictment outlines a longstanding scam in which corrupt union bosses repeatedly lined their pockets through no-show jobs doled out to corrupt union members willing to assist the enterprise.

"The acts of the individuals from Local 1 are appalling," said N.Y.C. Police Comm'r Raymond W. Kelly. "As all New Yorkers are working toward rebuilding the City, it is despicable that members of Local 1 participated in such corrupt activities. [We] will continue to target those who manipulate union guidelines for their own benefit."

Philly Boss Accused of $50,000 Theft; $2,500 from Widow

A federal grand jury in Philadelphia returned a 21-count indictment Feb. 13 charging Kendall Williams with theft of union funds, theft from a union health and welfare fund, failure to keep required records, and failure to file required reports with the Dep't of Labor. The alleged thefts totaled $50,983.84. Williams is the president of the independent PNI Security Union, which represents the security officers at the facilities of the Philadelphia Inquirer and Daily News.

Between 1997-99, Williams allegedly embezzled approximately $29,683.84 from the PNI Security Union Health & Welfare Fund by falsely claiming that another union member, L. Zane, would join him in traveling to benefit plan administration conferences put on by the Int'l Fdn. of Employee Benefit Plans. After obtaining funds for the bogus expenses (conference fees, preconference fees, air transportation, lodging, lost wages, and per diem expenses), he deposited the Fund's checks into the union's checking account and then withdrew that money for his own personal use.

No Jail Time for California Extortionist

U.S. Dist. Judge Virginia A. Phillips (C.D. Cal., Clinton) sentenced Hank Van Heyningen, ex-president of Christian Labor Union Local 17 (Dairy Employees), to a mere 36 months probation and 300 hours of community service for extorting money from workers for job referrals. He faced up to 20 years in prison. Phillips also ordered Van Heyningen to pay $100 restitution and a $2,500 fine. The boss of the Chino, Cal., union pled guilty to one federal count of extortion on Oct. 23. He admitted to regularly extorting money for 10 years. A member who received a full-time job with regular daylight hours was charged $800 to $1,500. [DOL 1/7/02; USAO C.D. Cal. 10/23/01]

Ohio Boss Admits $142,700 Scheme
On Jan. 28, Richard Adams, ex-treasurer of Int'l Ass'n of Fire Fighters Local 639 in Parma, Ohio, pled guilty to a federal bank fraud charge for a scheme to deprive the union of $142,715.78. Sentencing is scheduled for Apr. 10 before U.S. Dist. Judge Donald C. Nugent (N.D. Ohio, Clinton). [DOL 1/28/02; Plain Dealer (Cleveland) 1/30/02]

Class Action Pension Suit, Alleging $37 Million in Losses, Allowed to Move Forward

U.S. Dist. Judge Ellen S. Huvelle (D.D.C., Clinton) ruled Jan. 20 that officers and employees of an investment adviser may have breached their fiduciary duties to an the United Food & Commercial Workers Pension Plan for Employees, which is governed by Employee Retirement Income Security Act. Pension plan participants filed a class action against the trustees of the UFCW Pension Plan, claiming they breached their fiduciary duties to the plan by following the advice of Investment Performance Servs., the investment advisers and permitting a investment firm to implement a hedge program. UFCW Pension Plan's executive committee approved an options-based hedge strategy, which allegedly resulted in a $37 million loss. Under ERISA, trustees found to have breached their fiduciary duties to the plan are personally liable for damages.

The trustees claimed the investment firm and IPS breached of their respective fiduciary duty. The participants amended their complaint to add three individuals, officers, and employees of IPS, who the participants claimed breached their fiduciary duty under ERISA by investigating, recommending, implementing, and continuing the hedge program.

Indicted Boston Boss Targeted by the Mob

Boston-area gangsters were plotting to use violence to push aside Int'l Bhd. of Teamsters Local 25 president George W. Cashman in the mid-1990s and seize control of lucrative movie contracts, a U.S. Drug Enforcement Admin. agent said in an affidavit filed Feb. 11 in federal court. John "Mick" Murray, a Local 25 member and an alleged associate of fugitive organized crime boss James "Whitey" Bulger, was "not pleased with the management of Local 25 by . . . Cashman," Agent Joseph W. Desmond said in his affidavit. Murray and Phil Myers, another Local 25 member who was arrested in 1998 on drug charges and is now cooperating with authorities, were allegedly "part of a conspiracy to take charge of Local 25's movie crews through the use of force and violence," he said. The two men plotted to "confront Cashman with a weapon and force Cashman to make changes in the management of the movie crews," Desmond said, adding that they went so far as to track the union president's movements before Myers was arrested and the plan was abandoned.

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