Harold Schaitberger (in photo), longtime head of the International Association of Fire Fighters (IAFF), has a reputation for wielding unchallenged power. But that power soon may dissipate in the wake of a memo prepared by the union’s number-two man. On March 20, IAFF Secretary-Treasurer Edward Kelly circulated a 105-page internal memorandum accusing Schaitberger and Kelly predecessor Thomas Miller of misusing or outright stealing about $6 million in union funds, especially pension assets. The memo, which followed an outside audit, also accuses Schaitberger of concealing these losses from the union executive board. Schaitberger disputes the charges, calling them “reckless and destructive.” But the IRS, the Department of Labor and the U.S. Attorney’s Office are conducting a probe that may conclude otherwise.
The International Association of Fire Fighters, which represents more than 300,000 firefighters in the U.S. and Canada, is a very influential public-sector union. And Harold Schaitberger is a big reason for that. First elected general president of the Washington, D.C.-based union in 2000, Schaitberger, now 73, has exhibited a take-no-prisoners style of management. In one instance, he allegedly spent $350,000 in member dues on an outside private investigator to spy on IAFF members. What has helped keep him in office is his demonstrated ability to secure benefits for members. That includes developing IAFF Financial Corporation (IAFF-FC), which provides low-cost insurance and retirement plans, among other member financial services. Currently, IAFF-FC has over $6.7 billion in assets.
Schaitberger is also a political kingmaker. Long immersed in Democratic Party fundraising and issues advocacy, he ran the union’s political and legislative operations for nearly 25 years prior to becoming general president. As IAFF president, he created the union’s political action committee, FIREPAC, which in dollar terms now ranks in the top 0.5 percent of all federal PACs. An avowed progressive, he is notwithstanding critical of his party’s tendency to downplay labor issues in favor of racial, sexual and other “identity” issues. Referring to surveys showing that about half of IAFF rank and file voted for Donald Trump for president in 2016, Schaitberger noted, “There was such a focus on identity issues, the party lost sight of the central core to all workers, and that is their economic security, their family security, their retirement security, their ability to negotiate a contract, their health care, their employee rights.”
This sensibility explains his early and unwavering support of Joe Biden, the presumptive Democratic nominee for president. By the start of 2020, the International Association of Fire Fighters already had donated $5,000 to his campaign and raised another nearly $75,000 from outside sources. Speaking before an IAFF audience in Iowa this January, Schaitberger referred to Biden this way: “His policy issues are consistent with us, and his track record is stellar. He also has a deep affection for the work you do.” If Biden is elected, he almost certainly will revive proposed federal legislation of a decade ago, the Public Safety Employer-Employee Cooperation Act, that would have mandated monopoly bargaining for state and local public safety employees. As Union Corruption Update explained at the time, such a law would have severely strained state and local budgets, and encouraged strikes. Schaitberger was a prime mover behind that legislation, which passed the House in 2010 but stalled in the Senate. That was a bitter pill for him to swallow, but he’s up for another fight.
Right now, however, he is engaged in a more immediate fight: convincing rank and file that he’s not a crook. Critics within the union, led by General Secretary-Treasurer Edward Kelly, have concluded that he is. Kelly, convinced that Schaitberger and possibly other union officials had been dipping into the till, several months ago contracted the Chicago-based accounting and business consulting firm BDO USA to conduct a full audit. The ensuing report, a copy of which was obtained and summarized by the Washington Free Beacon, concluded that Schaitberger and Thomas Miller – Kelly’s immediate predecessor – over the previous two decades had misused or lost track of about $6 million in union funds. Of special concern were Nationwide Insurance-underwritten IAFF pension plan assets.
According to Kelly, who assumed the role of secretary-treasurer in September 2016, Schaitberger and cronies have abused their positions in a variety of ways. His memorandum of March 20 cited several offenses: systematic misrepresentations in financial reporting to the IAFF executive board; improper accessing of employee email; usurpation of the union constitution and its bylaws; diversion of nondiscretionary funds toward purposes unrelated to union business; failure to incorporate pension plan amendments adopted in 2006; and failure to notify the secretary-treasurer of discrepancies in financial reporting. The report cited “two principal officers” (i.e., Schaitberger and Miller) who have accrued millions of dollars in unearned benefits under a non-tax qualified retirement plan subject to IRS Code Section 457(f). Kelly’s lengthy follow-up memo stated that the excess deferrals have triggered an ongoing IRS audit.
Adding to the veracity of these charges is the fact that Kelly had presented copies of the BDO USA audit to three separate legal counsels, each of whom concluding that Schaitberger, given his monthly rates, improperly collected $878,060 in retirement benefits until 2016. Yet the total losses may be far higher than that. “Kelly’s audit also found that the union misreported millions of dollars for a purpose unrelated to their original designation,” noted the Free Beacon article. “As a result of this rampant financial malpractice, roughly $6 million in union funds remain unaccounted for.” The audit also accused Thomas Miller, secretary-treasurer during 2010-16, of collecting unauthorized pension benefits. “The [pension plan] record-keeping prior to my assuming office in September 2016 was so poor, one could argue it was designed that way,” Kelly wrote in his memo.
President Schaitberger, not unexpectedly, is hitting back. In a message to union members, he wrote: “In recent weeks, our union, your Executive Board and I as your General President, have been hit with new, reckless and destructive attacks designed to rip at the fabric of what we have built. These attacks are based on the inappropriate and unauthorized distribution of selective internal, privileged documents.” Yet one specific aspect of the audit could prove damning. Auditors found a secret pension enhancement created in 2006 known as Amendment 6. This clause allowed for the collection of benefits at age 53 without incurring an early retirement penalty. Unnamed sources said the amendment was buried in a committee report as a no-cost technical amendment at Schaitberger’s behest and without executive board approval. This enhancement, moreover, was made retroactive to 2002, just two years after he became general president. Cui bono? The answer would seem obvious. Thanks to this revision, Schaitberger was eligible to collect a generous pension on top of his salary, the latter of which is now about $330,000 a year plus expenses.
The fearless leader’s double-dipping has contributed to pension underfunding. During 2018-19, IAFF retirement plan assets relative to long-term liabilities fell from 84.25 percent to 66 percent. This is courting disaster. Pension Benefit Guaranty Corporation’s threshold for a severely distressed (“critical”) plan is 65 percent; anything below that is a signal that the plan may never achieve solvency and is in danger of going bankrupt. A few months ago the IAFF executive board received the grim news at a meeting a few months ago that the union’s pension system needs an immediate $2 million PBGC bailout. And that may be just for starters.
A number of union members aren’t enamored of these developments. More than 18,000 rank and file, in fact, recently signed a petition objecting to the union’s early endorsement of Joe Biden for president, urging the union to withdraw the endorsement. At least one urban fire department official is also up in arms. “If these allegations are proven true through the appropriate due process, Harold E. Schaitberger, General President, should be removed from office,” said Frank Ricci, battalion chief of the New Haven, Conn. fire department. “Kelly talks about ‘turning over the couches’ to find money. I think it’s time to turn over the couches and chase the rats out.” Whatever evidence the joint federal investigation turns up, Schaitberger and his allies probably aren’t going to come out of it looking good.