A major reason why union leaders go crooked is because they see opportunities to steal. And few things provide those opportunities quite like a government sympathetic to union expansion. Australia would seem no exception. At the start of August, Michael Williamson, national president of that country’s Health Services Union (HSU), resigned via text message less than two weeks after the leaking of findings of an eight-month investigation to the media had alleged a clear pattern of “stark favoritism” in union spending and contracting. The probe, which had begun a year ago, led to a May 2 raid by New South Wales (NSW) police on the union’s East Branch headquarters in Sydney, now in government receivership. Acting HSU chief Chris Brown praised the report as a guide to preventing future scandals. Yet given the nature of Australia’s health care system, prevention will be easier said than done. Americans should take heed as well.
The Health Services Union came into existence in 1991 through a merger of two predecessor unions. Based in Melbourne, HSU represents well over 60,000 hospital, disability, ambulance and other health industry employees throughout Australia. It’s also no stranger to scandal. Craig Thomson, HSU national secretary and also a Labor Party MP, faces allegations in a 1,100-page report released in May by Fair Work Australia (roughly the equivalent of our own National Labor Relations Board) that he diverted about AUD$450,000 (1.00 AUD = 1.04 USD) in union funds toward personal expenses during the previous half-decade. Unauthorized expenses included nearly $270,000 for his election campaign, more than $100,000 in cash withdrawals, and nearly $75,000 in entertainment expenses of which nearly $6,000 consisted of payments to female escorts. (The part about the escorts, of course, got most of the attention.) Thomson, who this April was suspended from his party by Prime Minister Julia Gillard, has maintained from the beginning that the accusations were false and that he was being set up by opponents within the union. Eventually, he stepped down and was replaced by Kathy Jackson, the very person, as it turned out, who played whistleblower – and apparently with the full encouragement of her boss, Michael Williamson.
It didn’t take long for Jackson and Williamson themselves to be enmeshed in scandal. President Williamson, under formal suspension for nearly a year, exited the union on or about this August 1, just before a scheduled HSU national executive meeting. Acting President Brown has called upon Jackson to do likewise. The aforementioned internal union probe, authored by barrister Ian Temby and accountant Dennis Robertson, shows why Williamson’s resignation, and the NSW police seizure of union computers and documents three months earlier, was almost inevitable.
Leaked to the Sydney Morning Herald, the Temby-Robertson report concluded that cronyism had a free reign in the union. Under Williamson’s tenure as national president and boss of HSU-East, more than $20 million in questionable and possibly illegal payments allegedly were made by the union to its vendors without any tendering or contract, most of it since 2007. About $4.7 million of this total went to United Edge, an information technology firm which operated rent-free from HSU-East headquarters in Sydney and of which Williamson is part-owner. And some $4.5 million had been paid to another company, Access Focus, a provider of memorabilia; its proprietor, Alf Downing, was described in the report as the union’s “Mr. Fix It.” Apparently, Williamson took especially good care of his family. More than $5 million in union money went directly to companies operated by Williamson and his wife, Julieanne. The union also paid $1.57 million to acquire and renovate a warehouse for use as a rehearsal studio by his son. And it paid Mrs. Williamson $384,625 for performing archiving services. Five of the union’s best-paid employees, in fact, were immediate or extended family members.
Kathy Jackson hasn’t emerged from the probe with a sterling reputation either. The report accuses her of concealing more than $100,000 in union payments to companies listing her and her former husband, Jeff Jackson, as directors. In addition, she allegedly used HSU funds to pay unexplained wages to the children of her current partner, Michael Lawler, Vice President of Fair Work Australia. Some might call that a conflict of interest. As of this writing, she nominally remains national secretary of the union, but reportedly is all but gone. It wasn’t as if either she or her boss, Michael Williamson, were in a position to plead poverty. Their respective salaries were about $287,000 and $400,000.
The Health Services Union, a large and powerful union, owes much of its good fortune to the fact that Australian health care delivery is socialized in a manner not unlike the British system. The government-run system, established in 1984, is known as Medicare, and exists parallel with private health care. Much of the funding comes from a 1.5 percent general income tax (with exceptions for low-income persons), and a 1 percent tax surcharge on high-income earners who don’t have private health insurance. From the start, HSU leaders have strongly supported the program. Equally to the point, the government has accommodated the union, especially under current Labor Prime Minister Julia Gillard, now facing criticism for possibly ignoring and even covering up the scandal. She might have her reasons. Michael Williamson is more than simply a member of the Labor Party. He was its national president for 2009-10. And that was on top of his regular role as senior vice president of the party’s New South Wales branch.
There is a lesson in all this for Americans: The merging of union and political interests breeds corruption. And as government often serves the interests of unions, the unions may return the favor. Unions were crucial to the Obama White House shaping of the final health care bill passed by Congress in 2010. Indeed, without the help of organized labor, particularly that of AFL-CIO President Richard Trumka, the key compromises necessary to passage might never have happened. Beyond partisan politics, there is the logic of corruption. What greatly raises the likelihood of scandal is the size of the pot of funds. The incentives to misappropriate funds for personal gain rises in accordance with the funds’ availability. When government makes it easier for unions to aggressively organize, expand membership and collect dues, it effectively enables corruption. Our new health care system doesn’t take full effect until 2014, but one suspects many union officials hardly can wait.