Professional Documents
Culture Documents
Defendants.
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Dennis M. Walsh
Review Officer
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D. IT Program ................................................................................................ 51
E. Records Retention..................................................................................... 52
F. Operation of the Review Officer Hotline.................................................. 53
G. Active District Council Membership and the Out of Work List............... 53
Conclusion ........................................................................................................................ 56
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We are not here to curse the darkness, but to light the candle that can guide us
through the darkness to a safe and sane future. As Winston Churchill said on taking
office ... if we open a quarrel between the present and the past, we shall be in danger of
losing the future. Today our concern must be with that future. For the world is changing.
The old era is ending. The old ways will not do.
Stipulation and Order entered on June 3, 2010, in United States v. District Council, et al.,
90 Civ. 5722 (SDNY (RMB) (the “Stipulation and Order”). Exhibit 1. It endeavors to
inform the Court and the parties of the scope and substance of my activities for the past
relating to the New York City District Council of Carpenters (the “District Council”) and
its Taft-Hartley fringe benefit funds (the “Benefit Funds” or the “Funds”).
the United States Attorney for the Southern District of New York, the New York City
Police Department, the office of the District Attorney of New York County, the Federal
Bureau of Investigation, and the United States Department of Labor Office of Labor
Racketeering.
I also thank the rank and file members of the District Council who have provided
me with insight and information and shown their deep commitment to the noble goals of
organized labor.
Though proceedings pending in the District Court will likely lead to an election of
District Council officers in December of this year (preceded by local union delegate
elections in the fall), the District Council is still under supervision by the United
Much has changed at the District Council (including its affiliated local unions) in
the last half year. The significant turnover in employees, whether by veto, resignation or
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retirement has continued and as a result the District Council has been strengthened. The
implementation of new policies and procedures, the creation of new functions, the hiring
of new employees, the provision of training and the improvement and broadened use of
technology have made the District Council a more business-like institution. Employees
of the District Council have been given the opportunity to flourish and have their
completely satisfied, I am less concerned now than I was last December about the
A policy of fiscal prudence is generally taking hold at the District Council and the
local unions, but work remains in this regard; though I prefer to appeal to the better
nature of decision makers when it comes to expenditures, I have and will continue to
One must recognize though, that the improved condition of the District Council
has been gained only through the extraordinary but ephemeral opportunities presented by
present circumstances. The District Council will soon hold an election. Before that day,
the best methods of governance and administration of the District Council must be
appropriately determined and codified to institutionalize such practices and safeguard the
gains made by the District Council over the past year. The last, best hope for the happy
future of this Union will be lost forever if democracy hands the keys of this house over to
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Selected Matters of Interest
I received the first draft of proposed District Council bylaws from the UBC on
April 5th. I made a number of comments, which I placed in the document and sent it back
to the UBC in anticipation of meeting with UBC counsel. This first draft with my
comments was made available to interested members for in-person inspection. Some two
dozen members and in some cases their counsel reviewed the document. It is attached
hereto as Exhibit 2.
After meeting with counsel for the UBC and engaging in a mutually beneficial
dialogue, I was sent and reviewed a second draft. Another lengthy meeting was held that
was followed by a third draft, which is now under formal review pursuant to Paragraph
5.b of the Stipulation and Order and which has been promulgated for comment through
In my view, the draft bylaws should pass the following test: do they provide for
and codify the best lawful methods to insure the transparent, ethical, efficient and
holds the reins of power? Even if that test is too strict or subjective for some, considering
the objectives of the Stipulation and Order (i.e., “the eradication of corruption and
racketeering as they affect union carpenters and union employers;” see final “Whereas”
clause), there are plainly provisions of the draft bylaws that are insufficient to achieve
these objectives. See Stipulation and Order, Paragraph 5.b.iii.e. Further, pursuant to
Paragraph 5.b.iii.c, all aspects of the bylaws must comport with federal law. There are
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sections of the draft bylaws that present questions in this regard and must still be
At the close of the comment period, I will again meet with representatives of the
UBC to discuss these propositions, share my views and review the comments I have
received from members. If necessary, I will veto any section of the proposed bylaws that
does not pass muster pursuant to Paragraph 5.b and then make a formal recommendation
I received notice on May 27th of the UBC’s restructuring plan as set forth in a
letter of the same date sent by counsel for the UBC to the Court. Letter of Kenneth
Conboy dated May 26, 2011 and Exhibit D thereto, attached hereto as Exhibit 4. I then
had a message posted on the District Council website inviting members to send me
comments on the restructuring plan (which is available on the District Council website
and private blogs). The comment period runs through June 10th.
The restructuring plan is thus under review pursuant to Paragraph 5.b. After the
close of the comment period, I will meet with counsel to discuss the comments, my views
Preliminarily, I note that the geographic jurisdiction of the work of Locals 1456
(to be dissolved and joined in a new heavy construction local with the members of Local
Union 1536, also to be dissolved) and 2287 will be curtailed and wonder what affect this
will have on precious fringe benefit payments to the Benefit Funds. Further, members of
Local Union 740 (a small specialty local composed of some 300 millwrights) will be
joined with a local based in Syracuse. One assumes that the work of millwrights within
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the geographic scope of the District Council will still be subject to the Consent Decree
and the Stipulation and Order and that fringe benefit payments for work in the New York
My assessment of local unions affiliated with the District Council was set forth in
my first interim report.1/ See First Interim Report at 35-38 (“fiefdoms which breed
corruption”). Since then, I have witnessed first-hand (particularly at Locals 157 and
1456) the further erosion of the role of local unions in adequately serving their members
and the ability of their fiduciaries to grasp and effectively meet their strict obligations.
District Council and the paucity of relevant information presented at local union
meetings, interest by local union members in attending local union meetings has reached
an all-time low. For example, at the meeting of Local 157 held in May at which
nominations for office were to be received and where over 10,400 members had received
postcards notifying them of the meeting, I witnessed only 150 or so members attend this
sad and ineptly conducted event, most of which was unintelligible due to a woefully
interests of members are better served and their rights fully protected by doing so. I
endorse the realization of efficient, cost effective operations achieved through such
members must be served and their rights enforced and respected. The lawful
expectations and needs of all members must be met. As I mentioned in my first report,
1/ I firmly addressed the topic of constituent local unions in my First Interim Report and
supplement that report with additional information and observations herein.
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members must have a meaningful ability to participate through democratic means in the
affairs of the union and on all questions that affect their trade, bargaining unit and job
opportunities. They must be able to speak to and associate with each other, and be fully
informed on all matters relating to the governance and administration of the union. They
must be free to disagree with each other and with their leadership and have the
retribution. State of the art technology, professional grade sound and visual systems in
modern, comfortable and well-lighted venues must be used for meetings where members
must be informed of all information of which they have a right to know -- from the
precise details of proposed expenditures to the state of their pension fund and medical
benefits. The traditional system used in New York City has failed the membership and I
believe that the dwindling numbers of members participating in union meetings reflects
I also note that the chartering of Local Union 395 as an “interior systems” local
would require an adjustment of the so-called “50/50” rule in order to achieve what I
perceive to be its intended purpose. Such a change must only be implemented upon firm
evidence that the District Council -- and employers -- are willing to join together to
implement broad reforms to eliminate all manner of fraud and corruption from the
industry. In order for such a change to be considered, contractors who would seek relief
from the “50/50” rule should, for example, have to sign on to a “Joint Compliance
Program” (“JCP”) with the District Council. Material provisions could include
agreement to (1) use electronic scanners to record work hours (and could include a
requirement that such costs be shared); (2) use site security cameras linked to the internet
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to allow the District Council Office of the Inspector General (“IG”), and a counterpart
selected by the contractor, to view the site at any time; (3) have random and off-hour
inspections of the work site by the District Council; (4) require the filing of weekly
certifications (by sworn affidavit) by the employer attesting to the hours worked on a job,
the payment of required fringe benefits and the manning of the job in compliance with
the Consent Decree and all applicable court orders; a separate, similar certification could
be required from a Union representative; and (5) refer disputes regarding any of the
make findings of fact, award money damages and discipline contractors who violate the
rules. The Review Officer would retain his jurisdiction for at least the period
Results of the JCP after an initial trial period would have to be studied by the
Review Officer, the government and other parties. The District Court would then decide
if such conditional alteration of the “50/50” rule would materially benefit the membership
and aid in achieving the objectives of the Consent Decree and the Stipulation and Order
On February 23rd, I began holding periodic forums in the largest meeting area
available at the District Council for all members to have the opportunity to hear
announcements from me on important matters and to answer any and all questions they
may have relating to the District Council, Benefit Funds and local unions. Members may
also speak their minds at these forums on any and all related matters. I bring my own
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public address system to the event and provide two microphones on opposite sides of the
room for members to use. I also held forums on March 30th and May 23rd. Each event
has run for at least three hours. The first two forums were packed to capacity
(approximately 350 members) and the third was also well attended.
Committee. “ROMAC” was thus formed and had its first meeting in April. The
meetings will allow me to pose specific questions and propositions to a reasonably sized
group to gain their views on a variety of issues. The first ROMAC meeting had almost
perfect attendance and we engaged in a collegial dialogue for over three hours.
member choose to do so. I have been extremely gratified at the response I have received
from members, who have expressed great enthusiasm for the events.
In addition to the forums and the ROMAC, my office has an open door policy.
Any member can go to the District Council during business hours and expect to be able to
see an RO staff investigator. I have also had many meetings with individual rank and file
members and groups of members to discuss whatever concerns or observations they may
have about the Union. My staff receives calls directly at the District Council throughout
the day. I receive calls throughout the day on my office line. Indeed, the frequency of
calls to these lines greatly exceeds the number of calls we receive on the so-called
“hotline.” We strive to address and hopefully resolve all matters within 24 hours.
Since my last report, the District Council human resource function has become
embedded in daily operations. Some 20 new representatives were hired by the District
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Council in the first part of the year. They were all selected after participation in a lengthy
and objective assessment and interview program (which must expressly be part of District
Council operations henceforth). A personnel policy has also been implemented. Exhibit
5.
the last five years and found that it was deeply flawed, and lacked all manner of
procedures and accountability. The employee who headed the department has resigned.
committee with redundant accountability, strict controls and a tracking system. Certain
cases that were improperly handled in years past have been revisited. Performance has
and its efficacy. The department conducts demonstrations, picketing (look for the large
inflated rat) and engages in the “area standards campaign.” It is funded by an assessment
of $.50 per hour taken from the pay of all working members and has a reserve of over
the Forde regime and found insufficient oversight of PAC costs, particularly in the area
of food, drink and travel and entertainment, where excesses were identified. Those
expenditures have been drastically curtailed and the department is now adhering to
District Council policy with regard to, and is notifying the Review Officer of, all
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The Organized Crime Initiative
My staff and I have required dozens of persons employed by or affiliated with the
District Council (and the Benefit Funds) to tell us what they know, if anything, about the
presence within and influence of organized crime figures upon the District Council and
Benefit Funds. See Paragraph 7 of the Stipulation and Order. Unless a deposition is
required, such persons are then required to provide me with a sworn declaration (as
authorized by Paragraph 5.d of the Stipulation and Order) to confirm and memorialize
their knowledge or lack thereof. All persons are free to consult with a lawyer before
I have included the trustees of the Benefit Funds in this undertaking, as well as a
number of candidates for office at local unions. All of the trustees of the Benefit Funds
A number of persons have decided to resign or retire from their positions rather
than provide a declaration or be deposed in this regard. Forms of the various declarations
utilized are attached hereto as Exhibit 6. The organized crime initiative has also utilized
surveillance, data analysis and information from members who have consistently
The initiative also revealed that certain persons in the employ of the Benefit
Funds had personal or familial relationships with members and associates of the
Genovese family. Two of these persons resigned after being interviewed in this regard.
Vetoes
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business representative and Director of Operations of the District Council and his service
as President and Delegate of Local Union 157. On March 23, 2011, I vetoed the
representative of the District Council and his service as vice-president Local 1456. On
608. The notices of veto for the foregoing matters are attached hereto as Exhibits 7, 8, 9
and 10.
On February 25, 2011, I vetoed expenditures of the funds of Local Union 1456 for
two executive board dinners at a local restaurant. The local union filed a petition for
review with the District Court. The vetoes were sustained by the Court. The Court’s
administration of Local Union 1456 (the “Dockbuilders”). The investigation has revealed
various improprieties relating to the expenditure of union funds and deep flaws in its
business practices. After his veto, Michael Koballa settled certain outstanding issues
with this office pursuant to the terms of an agreement executed on February 24, 2011.
The President of the Local, Charles Harkin, resigned his position effective April 27,
2011; resigned as a trustee of the Benefit Funds effective April 29, 2011; and resigned as
a business representative and “withdrew” his membership in the Union effective April
30, 2011. Olaf Olsen, the treasurer of the Local, resigned his position and his
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employment as a business representative of the District Council pursuant to the terms of
The investigation of Local Union 1456 is discussed in detail at 32-39. The Harkin
resignation letters and the settlement agreements with Koballa and Olsen are attached
The Trial Committee provides a serious forum for union justice that has been well
run, diligent and highly effective. It has rendered well-considered and decidedly fair
considered and approved settlements in dozens more cases, many brought by IG Scott
Danielson (who has brought charges against all of the union members who were
defendants in the Forde RICO case). It provides substantive and procedural process that
greatly exceeds the requirements of the LMRDA and the District Council may be
justifiably proud of its existence and achievements. See infra at 39 and Exhibit 15.
From June 3, 2010 through April 2011, the average monthly fee paid to
Fitzmaurice & Walsh, LLP for my and Mark Fitzmaurice’s services as RO and Staff
Counsel, respectively, was approximately $34,000. Billable man hours have ranged from
165 in August to 257 in November. I do not mark up the additional costs I incur for
investigative and legal services. These additional costs have averaged $40,000 per month.
They are passed to and reimbursed by the District Council and I make no money from
these necessary services. I have not billed the Union for any travel time,
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transportation or parking costs, administrative overhead, meals or any phone costs,
Thus, the average monthly cost to the District Council for the foregoing services
has been approximately $74,000, which is less than the median amount contemplated by
Paragraph 8.b.i of the Stipulation and Order (which specifies an expected range of
The average cost of the judicial and administrative services provided by the
Chairman and Vice-Chairman of the Trial Committee has been approximately $40,000
per month.
The relationship between the union and employer trustees of the Benefit Funds
has significantly improved in the past six months. The trustees agreed in mid-December
to the selection of Raymond McGuire of Kauff, McGuire and Margolis LLP to serve as
counsel to the Benefit Funds. He and his colleague Elizabeth O’Leary have quickly and
fully grasped the many issues that must be confronted by the Benefit Funds and have
assisted the trustees and this office in attempting to improve the operations and
The composition of the Board of Trustees has changed since December. Messrs.
Harkin and D’Errico are no longer trustees on the Union side. They have not yet been
replaced; Douglas McCarron, Frank Spencer and John Ballantyne are the sole Union
trustees. John DeLollis, the new Director of the Wall-Ceiling Association, has replaced
Michael Weber in the seat formerly held by Joseph Olivieri. Bryan Winter has succeeded
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John Brunetti as the trustee representing the Cement League. George Greco, the trustee
from the Manufacturing Woodworking Association, resigned on May 27th. The MWA
has designated Catherine Condon of Celtic Cabinet Corp. in Brooklyn as his successor.
The Board is rounded out by employer trustees Kevin O’Callaghan, Paul O’Brien and
David Meberg.
services agreement. After engaging the Segal Company to conduct a diligent nation-wide
search for a suitable replacement, the Board has selected Joseph Epstein of Naperville,
Illinois, to serve as its new Executive Director. Mr. Epstein is a native New Yorker who
in Illinois. He formerly served as the Benefits Director for the State of Maryland.
appropriate professionals, will immediately begin assessing the operations of the Funds
familiar with the findings I related in my first report and will also have the benefit of a
The Segal Company also assisted the Board in the process of selecting new
collections counsel (to replace O’Dwyer & Bernstein). A request for proposal led to the
receipt of submissions from a number of qualified firms, three of which made in-person
presentations to the Board. Virginia & Ambinder was selected by the Board on May 25th.
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The firm brings extensive experience to its new role, including as collections counsel for
Local 1 of the Plumbers Union in New York. There is currently almost $3 million owed
We examined the process employed by the Benefit Funds to consider and grant or
deny payment plans to delinquent contractors (and track the progress of collection) and
identified a number of areas that we felt could be improved. Working with Mr.
McGuire’s office, the trustees and Mr. GraBois’ office, a number of improvements have
been implemented, including the use of database research regarding the assets of
contractors, prior judgments and liens, and interviews of contractors. See infra at 26-28.
On May 16th, the Administrative Committee of the Board of Trustees was given a
presentation by the Segal Company that illustrated the urgent need to cut costs associated
with the Welfare Fund (medical benefits) due to the heavy cost of the plan and the drop
in man hours. Based on current projections, if no more than 15 million hours’ worth of
contributions is received by the Welfare Fund in the average fiscal year, it will exhaust its
reserves in 2013. See infra at 29 and Exhibit 16. As a result, the trustees have been
presented with a range of options to cut costs of up to $5.60 per man hour, and range
from an increase in co-pay amounts, deductibles, loss of dental coverage and increased
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An Observation
I have had expressed to me by some members great antipathy towards the UBC,
which they believe is secretive and dictatorial. Alternatively, I witnessed first-hand the
raucous and discourteous reception given to Frank Spencer by members of Local 157 at
the January meeting of the local (the first to include the former members of Local Union
608, which was dissolved by the General President McCarron on corruption grounds in
regarding the formation of Local 395 and the condition of the Benefit Funds. Those who
are blind with anger will not recognize the heavy responsibility of fiduciaries to shepherd
the interests of so many dependents. Those who do not report the view from the
To the extent that there are “sides,” both (or all) could do better to understand the
positions of others. From the beginning of my tenure, I have urged complacent members
to surmount apathy and participate in the affairs of the Union. I grow increasingly
pessimistic that such improvement in affairs is indeed possible. Whether one supports or
decries the policies and programs of the UBC, failing to seek information and participate
in union affairs and meetings is an abdication of responsibility. Even then, everyone who
participates in the debate about the future of the labor movement and the District Council
must be armed with facts and listen to what others have to say. Those who decline to so
participate and act responsibly will have ceded their right to lament any particular
outcome.
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Liberty lies in the hearts of men and women. When it dies there, no
constitution, no law, no court can save it. No constitution, no law, no court can
even do much to help it…. The spirit of liberty is the spirit which is not too sure
that it is right. The spirit of liberty is the spirit which seeks to understand the
minds of other men and women. The spirit of liberty is the spirit which weighs
their interest alongside its own without bias. The spirit of liberty remembers that
not even a sparrow falls to earth unheeded.
*****
Certain of the above-mentioned and other matters are detailed in the pages that
follow.
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Part One – Benefit Funds
Prior to and during the first six months of the RO’s tenure, dual counsel –
O’Dwyer and Bernstein for the union trustees and Schulte Roth & Zabel for the employer
trustees - represented the Benefit Funds Board of Trustees. The union trustees and the
chronicled in detail in the First Interim Report, interfered with the important business of
the trustees and the reform efforts I was pressing. See First Interim Report at 55-58.
Effective December 15, 2010, Schulte, Roth & Zabel resigned as co-counsel.
(O’Dwyer and Bernstein had resigned at the September 16, 2010 Board of Trustees
meeting but retained certain collections matters). Kauff, McGuire & Margolis was
retained as sole counsel for a one-year period ending December 15, 2011, with Ray
McGuire, Esq., assisted by Elizabeth O’Leary, Esq., being the primary contact. In
conjunction with the change of counsel, three pending deadlock disputes were cancelled
The union and employer trustees are now working together harmoniously and
productively to grapple with the many issues large and small facing the Benefit Funds
and Mr. McGuire and Ms. O’Leary are providing practical, hands-on and effective
The long-time Executive Director of the Benefit Funds, Mr. GraBois, announced
his retirement on April 29, 2011 and is now serving the Funds pursuant to a short-term
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together with the retirement and resignation of other Benefit Funds staff, presents an
opportunity for the Funds’ staff to have a streamlined organizational structure and focus
Trustees retained Segal Company to issue an RFP for a new Executive Director. A
robust process ensued. On March 28, 2011, an advertisement for the position was placed
Monster and the New York Times. Segal received 43 resumes, from which it selected
several candidates for telephone interviews. In early May 2011, Segal representative
recommending the four most highly qualified candidates for a second round of telephone
interviews. In mid-May, 2011, Mr. McGuire conducted the second round of interviews,
with Ms. O’Leary of his firm, Ms. DeVine of Segal and a representative from my office
participating. On May 18, 2011, one of the four remaining participants withdrew from
consideration for the Executive Director position, leaving three candidates for the
Executive Director position. Counsel to the Board of Trustees provided the trustees with
summaries of the interviews of the finalists. Segal conducted reference checks and
On May 24, 2011, the Benefit Funds Board of Trustees conducted in-person
interviews of the three finalists. At the May 25, 2011 meeting, the trustees interviewed
two individuals from that list of three. The trustees determined to offer the Executive
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Director position to Joseph Epstein.2/ He clearly is knowledgeable about administering
restructuring of the Benefit Funds. There is every reason to believe that he will be
installed as Executive Director around July 15, 2011. Mr. GraBois is expected to assist in
I note that for a period of time, the third party administrator option was being
pursued simultaneously with the new Executive Director search. However, with the
hiring of a new Executive Director, that option is not currently being pursued.
by July 2011, in November 2010, the Benefit Funds Board of Trustees also retained Segal
to conduct an organizational review of the Benefit Funds’ office. The objective was for
Segal to review the Funds to identify potential staffing gaps, analyze the impact that staff
turnover would have on overall benefits administration and propose short term changes to
address that impact as well as a longer term plan to achieve maximum organizational
production and efficiencies. While the number of retirements then expected has not come
In February 2011, Segal reported to the Board of Trustees on the more immediate
issues presented. Segal’s core findings included that the Funds appear to have an
functions, too many managers, too many staff members in some departments and that the
2/ This offer is contingent upon completion of a background check. Mr. McGuire will negotiate the
specific terms of the employment agreement.
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Segal recommended a revised organizational structure, which is set forth in
Exhibit 17. Especially when compared with the former organizational structure, see
apparent. If this recommendation were adopted, the Executive Director would have as
Members Services and the various funds (some consolidated under one manager) would
Employer Services Manager would report. This essentially represents the centralization
At the time of its report, Segal noted that the Benefit Funds had approximately
100 employees, with 19 eligible to retire and many of those 19 being managers or
supervisors (secondary supervision supporting the managers). Segal noted that for most
departments, staff had been adequately cross-trained so they could temporarily if not
as being at the greatest risk with three managers eligible to retire, and indicated that the
funds might retain these senior staff on a consultancy basis pending the training of
Since the filing of the First Interim Report, a number of individuals have resigned
from the Benefit Funds. Among senior management, the Manager of the Contractor
Services and Benefits Shortages Departments resigned and his duties and responsibilities
are being handled by another Manager. The Members Services Manager also resigned
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and her duties and responsibilities are likewise being covered by another Manager. The
Special Projects Manager resigned. All told, approximately ten Benefit Funds employees
have recently left the Funds, either through termination or resignation. The trustees have
agreed that Assistant Director and Welfare Fund Manager John Pirrone, who indicated
that he would retire effective July 1, 2011, should be given a consulting agreement
whereby he will work three days a week and be paid on a pro rata basis.
Organizational Review Report as well as its just issued Operational Review Report. The
new Executive Director must also perform his own review of the Funds and remaining
staff to ascertain how he thinks the funds should be best structured, the capability of
current staff to fulfill necessary functions, and the need to train and/or hire staff in order
to ensure the sound and efficient operation of the Funds; he also must implement the new
functions and to run each of their functions effectively and efficiently. Each of the
Executive Director’s direct reports is critical to the running of the Funds and should be
selected with that in mind. Senior management should be groomed such that a seamless
succession would occur if the Executive Director were to leave. Other staff should be
mentored to rise within the organization and take over the responsibilities of their
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E. Human Resources
I specifically note that it is critical that, early in his tenure and through a
Director who will immediately develop and/or refine a state of the art (1) personnel
policy, addressing among other important topics discrimination and sexual harassment;
(2) protocol for hiring, firing and reviewing personnel, with strong restrictions on
nepotism and cronyism; and (3) training presentations and materials to ensure that staff is
well versed in the policies and protocols. See First Interim Report at 52 for a complete
list of the minimum requirements of a Human Resource function. Some strides have
been made, but the HR Director should bring his or her expertise to bear to ensure the
needs of the Benefit Funds in the challenging environment in which it operates. Hiring an
HR Director and focusing that Director’s attention to the above should be a top priority of
the new Executive Director. I have been pressing for the Benefit Funds to hire an HR
Director since the beginning of my tenure because I view this basic, uncontroversial and
important function as a critical hedge against corruption. The new Executive Director
F. Compliance Program
I also view the hiring of a Chief Compliance Officer (“CCO”) and the
Executive Director and another critical hedge against corruption. See First Interim
Report at 52. Indeed, I had pressed for this.3/ Mr. GraBois had agreed to fill this position
3/ Shortly after my appointment as RO, on June 24, 2010, I inquired whether the Benefit Funds had
an effective compliance and ethics program as contemplated by Chapter 8 of the United States Sentencing
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and develop the program. See id. at 53 n.8. With Mr. GraBois’ departure, it is necessary
to focus on hiring a qualified and dedicated replacement for Mr. GraBois as CCO and to
do so with alacrity. The CCO will be responsible for developing a compliance and ethics
program consistent with Chapter 8 of the United States Sentencing Guideline. The hiring
of a CCO and development of a compliance and ethics program should also occur before
Though the Funds’ trustees agreed to create the position and develop the function,
I note that the CCO position was not included on Segal’s organizational chart. At the
May 25, 2011 meeting of the Benefit Funds Board of Directors, Segal mentioned the
possible creation of a CCO position. As the position already existed, it appears Segal
was not aware of the fact. As is the case with the position of Human Resources Director,
I do not view the CCO position as an optional one. Moreover, the CCO should have a
direct reporting line to the Executive Director and/or to the Benefit Funds Board of
G. IT Infrastructure
Since the issuance of the First Interim Report, the District Council has taken steps
to develop its own information technology (“IT”) infrastructure, rather than continue to
utilize the infrastructure of the Benefit Funds. See infra at 50-51. Unfortunately, the
Benefit Funds have made little progress with modernizing their own IT infrastructure.
Segal’s Operational Review Report advises that the Funds are in the process of upgrading
its current system and implementing a web-based system created by a vendor. The
earliest they expect the system to be completed is August 2012. The slow pace of this
Guidelines. On July 8, 2010, I issued a formal recommendation that the trustees conceive and implement
such a program. As noted, I think developing such a program must be one of the highest priorities of
whoever is retained as CCO.
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endeavor is unacceptable and hard to understand. The District Council has made
significant progress in the same period of time and had no system whatsoever upon which
to build. The trustees have asked Segal to assess and report on the vendor’s efforts. Of
course, this project must be completed promptly and should be directly and actively
H. Collections Counsel
With the resignation of O’Dwyer and Bernstein, the Benefit Funds Board of
Trustees sought new counsel to represent the funds in seeking payment from employers
who are delinquent in making their contributions for benefits. Ultimately, Segal issued
an RFP with objective criteria for selection of collections counsel. (In Fall 2010, Segal
presented a list of certain firms to which others were randomly and subjectively added,
but I regarded that effort as a non-starter. That process was set aside in favor of an RFP).
objective standards, beginning February 8, 2011, for three days, the RFP was posted in
the print and on line editions of the New York Law Journal. Expressions of interest were
due February 14, 2011. Thereafter, ten law firms submitted proposals for consideration,
which Segal analyzed and summarized by the end of March 2011. In April 2011, counsel
to the Benefit Funds selected three highly qualified finalists for the Board of Trustees to
consider.
At the May 25, 2011 Board of Trustee meeting, the three finalists made
presentations to the trustees. The Board of Trustees selected Virginia & Ambinder as
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I. Payment Plans
There is little more important to the long-term health of the Benefit Funds than
the collection from employers of the total amount of benefit payments due and owing
from them on behalf of union members. Of course, employers do not always pay the
benefits they owe on a timely basis and too often they do not pay at all. Payment plans
are “formal written agreements between the Funds and employers which set a schedule of
payments in fixed amounts, with interest and include stipulated confessions of judgment
and personal guarantees in event of default.” First Interim Report at 60. Among issues
of concern to this office were the Benefits Funds’ failure to conduct a public records
search regarding employers before entering payment plans with them and the typical
Benefit Funds staff member Kathleen Flannelly, who has handled payment plans on a
daily basis;4/ my staff previously interviewed Ms. Flannelly on August 23, 2010. I,
Committee of the Benefit Funds together with counsel to the Benefits Funds, the trustees
on the Delinquency Committee and Benefit Funds staff, including Ms. Flannelly, on
The meeting of February 22nd addressed, among other things, the delay or failure
to collect on confessions of judgment. It was determined that the payment plan spread
sheet distributed to trustees on the Delinquency Committee will include a new column
regarding the status of collecting on confessions of judgment so they can better track
26
collections. Additionally, we are optimistic that new collections counsel will
regarding how an employer gets to the point of having a high dollar amount payment
plan. The contemplated electronic scanning program to record and transmit hours
worked at job sites (on a real time basis) was viewed as a means of improving on
collection of benefits owed. (The District Council is currently conducting field tests of
electronic scanning systems and procedures, including to assess enabling of the program).
Numerous other ideas for improvement of the payment plan process were advanced by
the participants in the meeting, such as collateral, surety bonds and two party checks.
The March 29th meeting included a broad conversation about the need for
procedures with respect to payment plans, including a means to assess the efficacy of the
plans. Concerns were raised regarding the volume of payment plans and the number of
chronic offenders. Ms. Flannelly noted that the Funds were subscribing to a database
and liens on employer companies and their principals. Other steps were proposed,
prudent under the circumstances. Mr. McGuire proposed drafting procedures and
modifying the form supplied by Benefit Funds staff to the trustees so as to provide them
with more information upon which to base their decision to approve or reject a payment
plan.
documents to better assist the trustees on the Delinquency Committee in deciding upon
the appropriateness and particulars of payment plans. One of the documents is a letter to
27
be sent to employers who request payment plans, which was developed with reference to
the U.S. Probation Department’s financial disclosure form and seeks to obtain current
prospects in order to assess need for a payment plan, the ability to pay and the nature of
any plan to be awarded. Counsel also revised the Payment Plan Approval Template to
require Funds’ staff to provide additional information the trustees would like to have in
making their decisions, including the nature of any audit findings and whether
underpayment was the result of clerical error or failure to report employees. Finally,
counsel created a Monthly Payment Plan Status Chart, to provide the trustees with a one-
page summary providing overall volume, dollar amounts, defaults and collection efforts
and thus address the trustees’ desire to be better able to track progress on payment plans.
It was agreed that the trustees will also need a summary method of tracking the progress
of each matter referred to collections counsel. These various documents can be finalized
with input from new collections counsel, who should address this matter expeditiously.
I also note that the Delinquency Committee meetings and communications among
counsel, trustees and staff between meetings have become increasingly more robust and
fruitful. The involvement of new collections counsel will further enhance this process
and its ultimate objective: collection of the total amount of benefit contributions due and
J. Legal Department
The Executive Director must consider the suitability of individuals who are not
lawyers managing and supervising the Legal Department and whether having an attorney
in residence at the Funds would be a prudent and efficient step that also would benefit
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other aspects of the administration of the Funds. While having a non-lawyer handle
payment plans may work at smaller funds, it might be advantageous for these Benefit
Funds to have in house counsel supervise the payment plan process, liaise with
ensure that collection efforts continue once confessions of judgment are obtained.
In house counsel might also have wider duties and responsibilities, such as
conducting RFPs for and negotiating with vendors, working with the Human Resources
Director on employment issues, advising the CCO in carrying out his or her duties and
otherwise performing the functions in house counsel typically performs. It would in all
efficiencies.
K. Welfare Fund
On May 11, 2011, I and my counsel, the Benefit Funds Board of Trustees (with
the exception of one trustee), the trustees’ counsel and the Executive Director attended a
meeting discussing the condition of the Welfare Fund. Segal advised of a potential
problem with the Fund’s long-term viability and alternative plan designs. Through
March 2011, the number of man hours worked in the fiscal year ending June 30 totaled
11.5 million, which will likely annualize to approximately 15 million hours. At that
level, the Welfare Fund will have yearly deficits and ultimately be depleted in 2013.
(The calculation did not take into account investment income and losses). The trustees
29
On May 16, 2011, the Board of Trustees, their counsel and I had that working
meeting. Among the coverage changes discussed were the requirement of a deductible,
instituting or increasing co-payments for doctor’s visits, eliminating dental coverage and
Later on May 16th, at a previously scheduled status conference, counsel for the
Benefit Fund trustees reported to the Court regarding the status of the Welfare Fund. The
Court inquired whether participants in the fund directly receive monthly or quarterly
reports.
On May 18th, counsel for the Benefit Fund trustees submitted a letter to the Court
advising that consistent with the practice of other benefit funds, the participants do not
receive such monthly or quarterly reports; they receive a Summary Annual Report.
However, counsel appreciated the point and had inquired preliminarily of Segal regarding
providing information to participants “regarding the status of the Welfare Fund, including
cost of benefits, the required contribution rate to remain solv[a]nt, and reserve levels” and
indicated the topic would be raised with the trustees at their May 25, 2011 board meeting.
30
Part Two – District Council
A. Investigations
undertaken to determine what knowledge, if any, District Council employees, local union
officers and Benefit Funds trustees and employees have regarding organized crime
influence and control over the union. Separate declarations have been developed, which
personnel. If an interviewee has no knowledge other than that learned through the media
or court records, he or she signs a declaration to that effect and no other action is taken.5/
If an interviewee has knowledge from sources other than the media and court records, a
local union officers. Eight others who were interviewed refused to sign a declaration.
Each has either retired or resigned his position at the District Council, Labor
interviewing many of the candidates in the local union elections to be held in June.
5/ It is important to note that each person is told that the declaration is a serious legal document and
that he or she has the right to discuss the declaration with an attorney. Each person is also given a week,
and more if requested, to consult with an attorney before signing the declaration.
6/ All declarations and riders are kept by the RO and are not publicly available.
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2. Local 1456 Investigation
Union 1456 (often referred to as the “Dockbuilders”). The investigation has led to the
a. Leadership
Charles Harkin was the President and Business Manager of Local 1456. He was
also a District Council business representative. Harkin was interviewed on January 13,
Harkin said that the Executive Board and guests he invited would eat at Marinella
restaurant once a month between the board and general membership meetings of the local
union. There was no log kept of Marinella dinner attendees. The cost of these dinners
ranged from $1,500 to $3,000. There was no limit to the amount of food and drink an
attendee could order. The bill for the dinners was paid for by the local union. Harkin
admitted that the amount, location, and list of dinner attendees, was never divulged to or
Based on Harkin’s interview, a deposition was scheduled for April 15, 2011. The
afternoon before the deposition, we received a facsimile indicating that Harkin would be
unable to attend. On April 20, 2011, I issued a Notice of Possible Action. See Exhibit
20. Effective April 27, 2011, Harkin resigned as President of Local Union 1456;
effective April 29, he resigned as a trustee of the Benefit Funds; and effective April 30,
7/ The expenses for two Marinella dinners in particular were the subject of a veto and was fully
briefed in the District Court. The veto was upheld. See Exhibit 7.
32
he resigned as a business representative and “withdrew” his membership in the union.
The investigation revealed a trail of unapproved (that is, not presented to the
membership for consideration) credit card expenditures by Harkin and other board
members. Based on a review of American Express credit card bills and meeting minutes,
it appears approval by and notice to the membership was neither sought nor given for any
of these credit card expenses between 2006 and 2009. Unauthorized expenditures
between 2006 and 2009 paid for, among other things, Marinella dinners, stipends, airfare
and accommodations for certain officers and others; fine dining at New York restaurants;
services purchased at a spa; and a 2009 Cadillac DTS (which cost $1,300 per month).
The practice of awarding Christmas “bonuses” to select board members was also
uncovered. Between 2006 and 2009, Charles Harkin, John Harkin, Michael Koballa and
Gary Shelton were given checks in the discretion of Charles Harkin. The amount given
to John Harkin, Koballa and Shelton each year was $5,080.46. Charles Harkin received
$5,615.20. Local union meeting minutes contained only vague references to “usual and
Former business agent John Harkin also used an American Express card. Meeting
minutes from 2006 through 2009 contained no record of approval by or notice to the
members of John Harkin’s credit card expenditures for fine dining, beverages, limousine
services, and golf green fees totaling over $20,000. John Harkin retired last year.
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Gary Shelton, the former Financial Secretary of 1456, District Council business
representative and member of the local union executive board, incurred expenses from
2006 through 2009 for fine dining and limousine and rental car services. There is no
record in the meeting minutes that these expenditures were considered and approved by
representative and board member, also used an American Express card to pay for fine
dining, cigars, wine, spa services and Home Shopping Network merchandise, for which
Olaf Olsen, former Treasurer of Local 1456 since 1999, was deposed on May 2,
2011. He admitted that he did not provide detailed itemized reports on any of the
unapproved expenditures for 2008. The investigation revealed that he did not prepare
any itemized reports from 2006 through 2009. After the first day of testimony, the
deposition was adjourned. On May 10, 2011, before the deposition was to resume, Olsen
b. Stipends
Stipends for meetings of the Executive Board, Finance Committee and Audit
Committee and for travel were given to favored members without the membership’s
knowledge or approval.
the meeting usually lasted for approximately one hour. Immediately following the
34
meeting, board members, members of the Advisory Board and select guests of Charles
The Local 1456 Finance Committee also comprised the President and Business
Monthly stipend payment totals for this purpose ranged from slightly less than $7,000 to
almost $9,000 for 2009. According to Article 5 Section 3 of the Constitution and By-
Laws of Local 1456, the duties of the Finance Committee include, “…the reviewing of all
bills and financial matters referred to them by the Executive Committee or the Local
Union and reporting their findings thereon.” According to Olaf Olsen, no one from the
Finance Committee ever gave the general membership an itemized report of the
unapproved expenditures.
The Local 1456 Audit Committee consists of the Finance Committee and
the local union trustees. From 2006 through 2009, members of the Audit Committee
were paid a stipend of $356.88 for each meeting. According to Article 5 Section 4 of the
Constitution and By-Laws of Local 1456, the duties of the Audit Committee include
quarterly meetings wherein they would “audit the books and report the results of the audit
to the membership at a regular meeting.” The Audit Committee never made an itemized
report of the unapproved credit card expenditures to the membership. Further, it appears
that the Finance Committee, Audit Committee and trustees, at least in theory, performed
the same functions. It is difficult to understand how - with three levels of financial
oversight for which fiduciaries were compensated - there was not one report of the
35
The Advisory Board consists of members and retired members of Local 1456.
appointments to the Advisory Board were made by Charles Harkin. Shortly before his
resignation, Harkin appointed six new members to the Advisory Board. With the
exception of the husband of the Local 1456 Office Manager, all new appointees were
related to former Local 1456 board members. The RO staff interviewed four of the five
new appointees. Those interviewed stated they did not know they were being considered
for the Advisory Board until announcement of their appointments. All accepted their
appointments but were unclear of the duties of the position. Advisory Board members
A $200-a-day stipend was typically given to certain board members for travel.
According to Olaf Olsen, such stipends were granted in the sole discretion of Charles
Harkin. In February 2008, Charles Harkin, John Harkin, Michael Koballa and Gary
Shelton traveled to Florida for 18 continuous days. The Harkins each were given $3,800
and Koballa and Shelton each was given $3,600. The Finance Committee, the Audit
Committee and the trustees never reported this fact to the membership.
reflected the aggregate amount of stipends received by the officers of Local 1456 during
the year. According to the LM-2 forms, the officers of Local 1456 received total stipends
c. Conferences
During the period between 2006 and 2009, few of the conferences attended by
certain board members and others were approved in the general membership’s meeting
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minutes. Certain associated expenses in the form of stipends, airfare, hotel
accommodations, and lavish dinners paid for by union credit cards were never reported to
the members.
For instance, members of the board attended the Public Employee Conference (“PEC”) in
San Juan, Puerto Rico, each year between 2006 and 2009. It is difficult to see the benefit
to members of Local 1456 from the board’s attendance at this conference. Fewer than 30
of the over 1,400 members of the Dockbuilders are civil service employees. William
Lacey, Civil Service Employee Representative for the District Council, could not identify
any reason why Local 1456 officers would attend the PEC. Nonetheless, in 2007 and
2008, board members arrived in Puerto Rico two days before the start of the conference.
They enjoyed two vacation days paid for by the members, plus their salary, stipends and
Each year between 2006 and 2009, one of the winter conferences attended by
Local 1456 board members was the Wall-Ceiling Association Conference, held to discuss
matters pertinent to the dry wall industry. Local 1456 does not perform work in this
industry. Nonetheless, credit card expenses, airfare, hotel accommodations, and stipends
were incurred by fiduciaries at the expense of the membership of the local union.
In 2008, there was a gap of four days between two winter conferences. Instead of
returning home, some board members with their wives chose to remain in Florida and, in
essence, enjoy a four-day vacation paid for by the membership. Salary, stipends, first
class accommodations, rental cars and lavish dinners were subsidized by the membership.
According to Olaf Olsen, the wives’ expenses were paid for by Local 1456. None of the
37
2008 winter conferences were mentioned in any of the Executive Board or general
membership meeting minutes. Olsen also stated that none of these expenditures were
while under supervision, reviewed certain LM-2 reports filed by Local 1456. He
discovered that certain board members had purchased whole life insurance policies with
local union funds. The policies were purchased from Metropolitan Life Insurance
Company (“Met Life”) for Charles Harkin, John Harkin, Michael Koballa and Gary
Shelton, who were also the beneficiaries of the policies. When Mooney discovered the
policies, he told the board members to cash out the policies and return the money to the
general fund.
from Met Life, it appears that each policy that was cashed in was assessed an early cash
out penalty of nearly 80 percent of the value of the policy. For instance, Charles Harkin’s
policy had a cash surrender value of $9,251.83 as of November 30, 2009. The policy was
cashed out on November 30, 2009. However, due to an early cash surrender penalty,
only $1,596.86 was returned to Harkin.8/ The result was a net loss to the membership in
the amount of $7,654.97. It appears that there is a comparable loss on each of the other
e. Trustees
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Section 40 (c) of the Constitution of the United Brotherhood of Carpenters states,
“The Trustees shall audit all books and accounts of the Financial Secretary and the
Treasurer, audit all receipts and accounts of any other person authorized to collect funds,
examine the bank books(s) monthly, and shall report to the Local Union monthly in
writing….” Based on our review of Local 1456’s general meeting minutes, the testimony
of Olaf Olsen and interviews of the trustees, it does not appear that from 2006 to 2009,
In 2009, the trustee stipends were $356.88 for each meeting. Despite receiving
substantial stipends, the trustees failed to perform their required duties and in fact
f. Diver Safety
My office received calls from Local 1456 divers alleging that certain companies
that are signatory contractors with Local 1456 are not following rules and regulations
related to diver safety. The callers alleged that certain signatory contractors are not
employing a full dive crew with a proper tender to monitor the safety of a diver when he
is underwater.
Three accidents have occurred on union sites in the last two years, one of which
resulted in the death of a union diver. Based upon the callers’ allegations, my office and
the IG’s office made visits to four locations at which divers were employed. We have
also performed interviews of union members and made inquiries with government
agencies that have jurisdiction over diver safety. This matter remains under
investigation.
39
3. Trial Committee
Since its inception, the Trial Committee has adjudicated 298 cases. The vast
majority of these cases have been resolved through guilty pleas, trials and plea
matters addressed in the last six months have resulted in charges, trials or vetoes.
Lawrence D’Errico
Lawrence D’Errico was the Director of Operations of the District Council and had
been a business representative since the mid 1990s. On April 21, 2011, I vetoed his
employment with the District Council and his position as President and Delegate of Local
Union 157 for giving materially false answers to questions posed to him in a deposition.
Frank Marino
Frank Marino was the President and Business Manager of Local 2870 and was
District Council. On March 23, 2011, I vetoed Marino’s employment with the District
his duties as a fiduciary for the membership. The Notice of Veto is attached as Exhibit 8.
Michael Dolphin
40
Michael Dolphin was arrested on January 20, 2011 for participating in a
Gambino Crime family. After sending a Notice of Possible Action and receiving a
Sam Bailey
with seven counts of improper conduct. After a trial before the Trial Committee, Bailey
John Thomassen
My office charged former District Council and Benefit Funds’ employee John
Thomassen with six counts of improper conduct. Thomassen, who had resigned from the
Union, asserted that the Trial Committee lacked jurisdiction.9/ After a trial before the
Trial Committee, which Thomassen did not attend, he was found guilty. The judgment is
attached as Exhibit 23. Thomassen has appealed the judgment against him to the UBC.
Michael Koballa
He withdrew a Petition for Review filed with the Court upon entering into a settlement
agreement with my office. The Notice of Veto and Settlement are attached as Exhibit 9.
Michael Murphy
February 7, 2011, I vetoed Murphy’s employment with the District Council for violating
9/ The District Council and this Office have asserted to the Chairman of the Trial Committee that
charges may be pursued against ex-members for conduct that occurred while they were members and cited
precedential authority.
41
the Job Referral Rules, improperly receiving property and benefits from an employer and
by the then existing District Council Anti-Corruption Committee. The Notice of Veto is
As indicated in the First Interim Report, Paul Willoughby, John Holt and John
Daly filed Petitions for Review with the District Court regarding veto decisions that I had
made; the matters were fully briefed and oral argument was heard. First Interim Report
at 14. By Decision and Order dated December 21, 2010, reported as United States v.
District Counsel, 2010 WL 5297747 (S.D.N.Y. 2010), the District Court upheld my
they together with the government and I stipulated to withdrawal of the appeals, which
During my second six months, two additional Petitions for Review were filed. On
February 3, 2011, Local 1456 member Michael Koballa filed a Petition for Review of my
settlement with Mr. Koballa on February 24, 2011, which included his withdrawal of the
On March 28, 2011, Local 1456 filed a Petition for Review of my veto of
expenditures for certain meals at Marinella’s restaurant. On April 20, 2011, I filed a
memorandum in opposition. By Order dated May 16, 2011, the District Court upheld my
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5. Review of Organizing Department
McWilliams, and eight Council representatives. Ray Brugeuras was the Deputy Director
until his resignation in March 2011. His position has not been filled. The number of
Council representatives ranged from a high of 12 in 2010 to the current eight. Of these
eight representatives, six are recent hires. The department has one full time secretary.
The Organizing Department is funded by a $.50 per hour assessment on the wages
of the District Council members. My office has analyzed the financial statements of the
Organizing Department for the fiscal years ending June 30, 2007 through June 30, 2010.
The assessments for the fiscal years 2007, 2008, 2009 and 2010 were $8,963,474;
and benefits of McWilliams, the Council Representatives, and the group’s secretary.
Over the period reviewed, the wages and benefits ranged from $2.4 to $3 million. The
(“ASI”). The expenses of this entity consist of wages paid to its staff. The Organizing
Department has other expenses such as office supplies, leases of office equipment, jobsite
research, vehicles, and shirts that are distributed to members when they assist in
Organizing Department activities. Revenue and expense statements for the period
For each year reviewed, the Organizing Department has not expended the full
amount of the assessment. Revenue has exceeded expenses each fiscal year by $3
43
million to $6 million. The department currently has $21.5 million in bank accounts and
certificates of deposit.
procedures established by the UBC called the Area Standards Program. This program,
initiated by the Council in 2009, seeks to protect the wages and benefits of members of
the District Council by conducting public information campaigns directed to all parties
non-union jobsites to gather relevant information. Each visit is documented and entered
into a database. Written notification is sent by certified letter to all parties with the
results of the initial investigation and the intent of the Council to take action to protect
and uphold the Area Standard wages and benefits. Public demonstrations by Council
members are conducted against the primary employers at the selected jobsites, while
handbills, banners held by ASI employees, and other informational activities are reserved
for secondary entities such as building owners and end users of a company’s products.
office requested a statistical analysis from McWilliams that would quantify the number of
man-hours his department created for Council members each month. For March and
April of 2011, McWilliams submitted an analysis that listed the various activities
demonstrations, and the frequency of each activity. McWilliams also prepared a list of
the jobsites in which the carpentry contractor decided to pay the Area Standard wages
and benefits.
44
McWilliams attempted to report successful results but did not include the number
of man-hours the Organizing Department created for District Council members. After
repeated requests, McWilliams finally advised that he was unable to provide this
activities is not quantifiable in man-hours created for union members. In his view (a
view shared by others who worked at the District Council), the presence of the
Organizing Department in New York City serves as a deterrent to many owners and
staff to provide their thoughts on the status and possible direction of the Organizing
Department. They advised that the Organizing Department faces several obstacles in
achieving its goals and mission. The primary obstacle is the significant disparity in union
and non-union rates of pay and amounts of benefits. McWilliams explained that the
typical rate of pay for non-union workers is $15 per hour, with no overtime and no
benefits. McWilliams also explained that there are very few non-union contractors who
are willing to become union signatories. Very rarely are he and his staff able to “turn” a
contractor based on a financial meeting. McWilliams and his staff continue to emphasize
to the owners or contractors the greater productivity and professionalism of the District
Council members compared to the non-union workers. McWilliams and his staff advised
that they have spent countless hours over the years in reporting abuses by contractors,
particularly prevailing wage violations, to the appropriate law enforcement agencies and
that there has been only a minimal response by these agencies. The Market Recovery
Program, which offers lower rates to contractors in certain areas and is still in effect, has
45
had only marginal success because the union signatory contractors have not gone after
this market.
McWilliams advised that he could increase his success rate and hours generated if
he concentrated his activities solely toward large office building jobsites in Manhattan
Organizing Department has pledged to identify jobsites to these other departments and
Former District Council Executive Secretary Treasurer Mike Forde created the
Political Department in 2000 after he was elected. The current staff of the Political
Department consists solely of Director Stephen McInnis. Marina Vranich was the
Deputy Political Director from 2004 until her resignation in March 2011.
State and New York City levels. This involves periodic meetings at the New York State
Legislature and Governor’s Office in Albany, New York, as well as the Mayor’s Office
in New York City. The Political Department conducts field operations such as “get out to
vote” drives. The Political Department also assists campaigns, particularly if there is a
District Council members. My office has analyzed the financial statements of the
Political Department for the fiscal years ending June 30, 2007 through June 30, 2010.
46
The assessments for the fiscal years 2007, 2008, 2009 and 2010 were $1,057,187;
The expenses of the Political Department consisted primarily of the wages and
benefits of the Director and Deputy Director, political donations and lobbying expenses.
Total salaries averaged approximately $300,000 per year and political donations ranged
from $237,000 to $369,000 per year, depending on the political cycle. Lobbying
expenses ranged from $96,000 to $174,000 per year. Other expenses include rent,
meetings with government officials, and officials from the political departments of other
unions. It should be noted that the expenditures decreased significantly in the fiscal year
ending June 30, 2010. The revenue and expenditures of the Political Department for the
A Political Action Committee (“PAC”) was also created after Forde’s election in
2000. The PAC is staffed by the Executive Delegates from the local unions affiliated
with the District Council. The purpose of the PAC is to consider and review the
expenditures of the Political Department. My office reviewed the minutes of the PAC
from its inception to the present. All donations to candidates were listed and approved
and we found no donations that were seemingly unrelated to the mission of the District
lobbyists, and officials from the political departments of other unions were not listed in
2007 to December 31, 2009. A substantial number of expenditures were for restaurants
and hotels. According to notations on the credit card receipts, the expenditures fell into
47
the following categories: those related to UBC events or programs, those related to
District Council events or programs, and those related to lunch and dinner meetings with
members of government officials’ staffs, lobbyists, and officials from other unions. The
Political Department provided documentation from the UBC to support the expenditures
related to the UBC events. The UBC Supervisor, Frank Spencer, reviewed the District
be unnecessary and not helpful to the creation of jobs for District Council members.
RO staff also found some of the restaurant and hotel expenditures to be excessive
and their justification questionable. The likelihood that certain expenditures would assist
in developing jobs for members was insufficient. Some of the charges were incurred at
the Building Trades conference in Washington, D.C. on April 5, 2008. The amount was
$10,000 for 42 people, included several District Council members who have since
resigned or been incarcerated. See Exhibit 28. A staffer had negotiated and secured a
reasonably priced food and beverage menu but, according to information we obtained, it
McInnis advised that, at the time of these expenditures, there were no specific
guidelines in place. There is now an approval process with respect to expenses and
expenses have significantly decreased. To the extent the District Council personnel
dollar amounts for hotels and restaurants should be put into effect.
RO staff also has attempted to learn more about the results of the Political
48
numbers are available. Positive results are measured in terms of legislation passed.
Examples of legislation passed are the Prompt Pay Act, Worker Misclassification Act,
New York City School Construction Authority Project Labor Agreement, New York City
Mayoral 13 Agency Project Labor Agreement, Croton Filtration Plant, Javits Center
Expansion Project, Barclay’s Arena Project and the banning of the chemical creosote on
dockbuilder jobsites. The Political Department is currently assisting the New York State
the Organizing and Labor/Management Departments. The Political Department will assist
in the effort within its scope to seek that developers and building owners pay Area
B. Inspector General
We are encouraged by the development of the IG’s Office and continue to refer
matters to that office. The work of the IG includes visiting jobsites, checking on
compliance with District Council procedures, filing grievances on behalf of members and
filing charges against members. A general and statistical summary of the IG’s work is
As mentioned in the First Interim Report, the District Council Bylaws need to
elucidate the scope of the Office of the Inspector General and offer protections to the
Inspector General. The draft bylaws attempt to address this need. I am awaiting a
document from the District Council that specifies the IG’s purview and the appropriate
49
Since early in my tenure, I have advocated the implementation of an electronic
scanning program in order to record hours worked at job sites accurately and transmit
them in real time to the District Council and Benefit Funds. This would be another hedge
against corruption. Importantly, such a system would identify whether an employer had
Under the direction of the IG’s Office, an electronic scanning pilot program is
now being conducted. It encompasses 12 job sites and 250 members. The program is
transmitted back to the main frame; it is also achieving the core substantive goal of
creating a record of hours worked by carpenters on each job site in real time.
The additional challenges that need to be met generally involve buy-in to and
training on the program. Contractors need to accept that benefit payments must be made
timely; put another way, it is not sufficient to pay wages on time and benefits when it
suits the contractor. Contractors must be educated about the program and shop stewards
must receive training. Additionally, shop stewards must be supported in their efforts.
Unannounced visits to the job sites by business representatives and the IG’s office must
occur to insure the program is not abused. I have been told of one incident where a shop
steward photocopied membership cards of members on his job site and then scanned the
C. Grievance Procedures
My office has received many calls regarding the District Council grievance
50
performed a thorough review of the process and found many of the members’ complaints
to be well founded. I have shared our findings and my concerns with the UBC and
District Council and they have made significant changes to the system.
Daniel Walcott has been appointed the Director of Grievances to replace Richard
Tuccillo. A Grievance Hearing Panel consisting of the Director of Grievances, the new
Director of Operations, Matthew Walker, and the Director of Jurisdiction, John Sheehy,
has been formed. On April 18, 2011, the District Council promulgated new grievance
D. IT Program
As noted in the First Interim Report, the Benefit Funds had been solely
responsible for providing IT services to the District Council for as long as employees can
recall. See First Interim Report at 49-50. The District Counsel, with guidance from its
IG and counsel, has developed a plan for eliminating reliance upon the Benefit Funds and
being responsible for its own IT services. Additionally, the District Council has made
meaningful progress with respect to this plan. The District Council has retained a vendor
Specifically, the District Council has a two-phase plan and has essentially
implemented the first phase. The first phase was creation of an email system. The
District Council now has a dedicated email server, running Microsoft Exchange Server.
The vendor has configured a system facilitating adherence to the Records Retention
Policy enacted approximately six months ago. The system has been in use since
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administering the Records Retention Policy, is now addressing practical adjustments that
The vendor has also created a backup and recovery system, separate and apart
from the email system. This is primarily intended for disaster recovery, but is an
The District Council still shares the Benefit Funds’ network. Its email system is
routed through the Benefit Funds internet connection. The second phase of the District
Council’s plan is a network split. The split is expected to be effectuated by October 2011
at the latest.
The District Council has determined not to create an in-house IT Department but
rather to outsource to the vendor. The vendor, not the Benefit Funds, now handles the
E. Records Retention
The District Council is also employing a two-phase plan with respect to records
retention (an area addressed by the Stipulation and Order). Preliminarily, the District
Council’s Records Retention Policy became effective November 19, 2010. The
personnel handbook includes the Records Retention Policy. The Human Resources
Director administers the policy. Phase One of the ongoing records retention program has
been scanning the Out of Work List(s) (“OWL”) from 1998 forward so that voluminous
hard copy records may be shredded but a permanent copy of the documents kept
electronically. To date, OWL records for 1998 through approximately 2008 have been
scanned.
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Phase Two of the plan involves scanning the records of District Council
Departments and local unions. A vendor is developing a system for searching all the
scanned documents.
Human Resources Director will assure that staff in each department is thoroughly
familiar with the Records Retention Policy and properly handling documents under its
purview, including retaining records for any statutorily required time period. Training
that the Human Resource Director will have direct interaction with the various
Though the number of calls to the Review Officer Hotline has decreased since last
year, members do use it from time to time. It has become simply another phone number
one can call to speak to this office. The collected summary hotline reports sent to the
I make two observations regarding membership numbers and the out of work list.
leaving the union. The number of members found in arrears has held steady at nearly
1,700 members.
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However, fewer union members have registered with the various out of work lists
(OWL). As of May 31st, the total number of members on the OWL are as follows: 10/
In comparison, the number of people on the OWL as of the filing of the First
Interim Report was 5,500. Thus, 658 fewer members are currently on the OWL.
The April 2011 dispatch figures includes approximately 200 extra tradeshow
dispatches, above normal totals, due to the auto show at the Jacob Javits Convention
Center. The total activity for the previous four months was as follows:
10/ To determine the total number of people on the OWL, we used the number of people on Local
Union 157’s and the specialty local’s OWL. Since members can sign numerous lists and almost all
members in the general construction trade sign the Local Union 157 list we used the number of members
on that list to represent all members in the general construction trade who signed the OWL. Since virtually
all members of the specialty locals sign only one list we are able to accurately determine their numbers by
simply counting them on each list.
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Dec. 2010: 1798
The numbers may indicate a better employment picture starting to appear; but this
is by no means definitive.
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To:
AUSA Benjamin Torrance
AUSA Tara LaMorte
Office of the United States Attorney
Southern District of New York
86 Chambers Street, 3rd Floor
New York, NY 10007
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