Protest Decisions

IN RE: KRIS TAYLOR and HOFFA UNITY SLATE,
Protest Decision 2001 EAD 256
Issued: March 23, 2001
OEA Case Nos. PR110302NA, PR110801NA and PR030713NA

See also Election Appeals Master decision 01 EAM 59 (KC)

Kris Taylor, a member of Local 745, and the Hoffa Unity slate (the "Hoffa slate"), filed the above-captioned pre-election protests pursuant to Article XIII, Section 2(b) of the Rules for the 2000-2001 IBT International Union Delegate and Officer Election ("Rules"). The first two of these protests were the subject of our decision in 2000 EAD 75 (December 29, 2000), but in that decision we severed for separate decision protest allegations concerning the reporting of legal and accounting contributions and expenditures by Teamsters for a Democratic Union ("TDU") and Teamsters Rank and File Education and Legal Defense Foundation ("TRF").

We decide that issue here. For the reasons stated below, we conclude that prior Election Officer (but not Election Appeals Master) precedent requires that we hold that only professional services (including the services of non-professionals working under direct professional supervision) may be funded through legal and accounting monies. However, because we believe that the prior Election Officer precedent that is binding on our office is wrong, we urge the Election Appeals Master to reverse in any appeal from this decision. We explain our reasoning in what follows.

Election Administrator representatives Michael Nicholson, Bruce Dubinsky and Lisa Taylor investigated the protests.

The Parties' Positions, the Election Officer Precedent, and the Rules and Statutory Provisions at Issue

The allegations addressed here raise two issues: i) whether legal and accounting fund contributions may fund the work of non-professionals performing what has been characterized by TDU and TRF as legal and accounting services, and ii) the propriety of TDU's and TRF's varying reporting of such matters.

A. Protests PR110302NA and PR110801NA, filed by Taylor and the Hoffa slate, respectively, challenge the reporting of $9,624.45 as legal expenditures and $37,000.45 as accounting expenditures for time spent by TRF staff who are not legal and accounting professionals in their initial CCERs. Hoffa slate protest PR030713NA challenges TDU's and TRF's legal and accounting reporting in CCER #3 on the same basis, and also challenges updated legal and accounting figures included in TRF's Supplemental Form #1 filed for that CCER, which covers the period ending January 31, 2001. In this regard, the most recent Hoffa slate protest alleges:

TDU's CCER #3 cannot be reconciled with CCER #2. In CCER #2, TRF reported aggregate "legal" expenditures to date of $9,624.45, and aggregate "accounting" expenditures to date of $37,000.45. In CCER #3, TRF reports additional "legal" and "accounting" expenditures, but now reports aggregate "legal" expenditures to date of only $6,002.38 and aggregate "accounting" expenditures to date of only [$]3,163.88. It now seems clear that either TRF's CCER's are a fraud, or that it is now using massive amounts of unreported contribution, raised from non-members and/or which it does not treat as subject to individual contribution maximums, in the 2000-2001 International Union Delegate and Officer Election.

The Hoffa slate asks that TRF be barred from further participation in the election until there has been adequate accounting for such discrepancies.[1]

In correspondence to the Election Administrator preceding the filing of the most recent protest and the filing of their CCER #3, TDU and TRF state that "TRF's original computations of its 'accounting' expenditures [in the first two CCER reporting periods] was an inflated figure, including all administrative costs, whether or not election-related." They thus claim:

in completing its original CCER's #s 1 and 2, TRF made no attempt to segregate campaign-related accounting expenses. TRF has now completed its review of the records and refined that computation to exclude all administrative work that is not election-related. TRF's only election-related accounting activity was the staff time expended by organizer Ken Paff and bookkeeper Alan Jacobson in reviewing and computing the allocations of time, according to the Huddleston (sic) formula, and in completing the CCER's. See Gilmartin, P1337-42 (February 14, 1997)(preparation of CCERs was "accounting service). Since no time slips were maintained for the period preceding May, 2000, and no time was expended at that time on preparing CCER's, the percent of total expenditures spent on election-related accounting during the period covered by the CCER#1 was very minor …

 

According to TDU and TRF, this recharacterization of legal and accounting expenditures resulted in CCER #1 accounting expenditures of $382.61 and CCER #2 accounting expenditures of $971.48, rather than the $37,000.45 originally attributed to those periods in CCERs #1 and 2. As to legal expenditures, TDU and TRF state:

TRF has also reviewed its records underlying the legal expenditures reported on the CCERs. These figures were also inflated, since TDU has simply reported as "campaign-related" all of its legal expenditures, including staff time spent on unfair labor practice cases, internal union legal issues having no bearing on the election, and any other time spent on any sort of legal activity. CCER #1 included all of the staff time spent working with Paul Levy of Public Citizen Litigation Group, in the Spring of 2000, largely in connection with the development of the rules. The revised computation includes all expenditures for staff time spent advising members on election protests and helping members to vindicate their rights under the Rules, e.g., by referring protestors to lawyers. These revised figures are … $234.27 [for CCER #1 and] $$3,302.35" for CCER #2.

Thus, TDU and TRF now contend that aggregate TRF accounting expenditures for the Rules reporting periods ending September 30, 2000 equal $1354.09 rather than $37,000.45, as originally stated in their CCERs #1 and 2, and they similarly contend that aggregate TRF legal expenditures for the Rules reporting periods ending September 30, 2000 equal $3,267.05 rather than $9,624.45, as originally stated in those CCERs.

TDU and TRF have agreed to file amended CCER reports for the first and second reporting periods following resolution of the issues raised in this decision. Separately, the Election Administrator has directed TDU and TRF to supply his staff with all of its back-up documentation for the recalculation of TDU/TRF legal and accounting expenditures. Such materials have been received.

We shall return to these CCER matters below, after our discussion of the Rules interpretation issue that is at the heart of this protest.

B. This case turns on the interpretation of Article XI, Section 1(b)(5) of the Rules, which provides:

(5) Except as provided herein, the rules in subparagraphs (2), (3) and (4) above, do not prohibit a candidate's solicitation or use of financial support or services from nonmembers, disinterested employers, foundations or labor organizations to pay fees for legal or accounting services performed in assuring compliance with applicable election laws, rules or other requirements or in securing, defending or clarifying the legal rights of candidates, if and only to the extent such contributions are received in response to solicitations specifically requesting such funds or services or are contributions so earmarked by the contributor at the time the contribution is made. No nonmember, disinterested employer, foundation or labor organization may contribute more than $10,000, in total, to the 2000-2001 International Union Delegate and International Officer Election to pay for such legal and accounting services. A candidate may not accept or use any such contribution where the contributing nonmember, disinterested employer, foundation or labor organization has contributed more than $10,000, in total, to the election to pay for legal and accounting services. A candidate may not accept or use financial support or services from the Union, from any interested employer (or association of employers of which an interested employer is a member), or from any vendor that has performed work for the International Union or any one of its subordinate bodies within the past 12 months to pay fees for legal and accounting services or for any other purpose. Neither the Union, any interested employer (or association of employers of which an interested employer is a member), nor any such Union vendor may contribute financial support or services to the candidacy of any member. Nothing herein shall prevent or limit legal or accounting professionals (whether or not Union vendors) from making, or a candidate from accepting or using, an in-kind contribution of legal or accounting services, so long as such services are performed in assuring compliance with applicable election laws, rules or other requirements or in securing, defending or clarifying the legal rights of candidates. In the event that a candidate demonstrates to the Election Administrator that the $10,000 limit on contributions to pay for legal and accounting services set forth in this subparagraph (5) and in subparagraph (12)(E), below, prevents the candidate from instituting an action in any Court, or in a proceeding before any administrative agency or the Election Administrator or the Election Appeals Master, the Election Administrator has the authority to waive or increase the $10,000 limitation, or to take other appropriate action.

(Emphasis added.)

On October 29, 1997, Interim Election Officer Benetta Mansfield wrote then Hoffa slate counsel Bradley Raymond concerning the Election Rule interpretation issue raised here (the "IEO letter"). The IEO letter concerned the payment for Richard Leebove's services from the Hoffa campaign's legal and accounting fund. Leebove was not at that time a practicing accountant or lawyer, and, noted Mansfield, the services for which he had been compensated included the gathering of "information related to contributions to the Carey Campaign, at least some of which was subsequently provided by Mr. Leebove to the Election Officer." Mansfield concluded that the Hoffa campaign could not pay Leebove out of its legal and accounting fund.

In so concluding, Mansfield discussed Article XII, Section 1(b)(2) of the Rules for the 1995-1996 IBT International Delegate and Officer Election ("1995 Rules"), the analog of the above-quoted Rules provision.[2]  Based upon her analysis of that provision, Mansfield stated:

While Mr. Leebove was interviewed as a witness [concerning the Carey contributions] and may have provided information to Mr. Hoffa or his attorneys, he was not providing legal services. Legal services are provided by a member of the legal profession holding himself/herself out as a lawyer and engaged in the practice of law. It may also include certain activities by nonlawyer subordinates (paralegals, law clerks, private investigators) who work for and are subject to direct supervision and control of a lawyer. Many IBT members, and indeed, nonmembers, act as witnesses for various candidates in protest investigations, and uncover important facts. That does not make their conduct equate with the provision of legal services.

There is no evidence that Mr. Leebove works for or is subject to the supervision and control of a lawyer. Indeed, the evidence shows that he is a publicity spokesperson who has been energetic in attempting to uncover information advantageous to his client and critical of the opponent. Therefore, the payment for Mr. Leebove's services from the legal and accounting fund violates Article XII, Section 1 of the [1995 Rules].

The IEO letter ordered the Hoffa campaign to transfer $2,500.00 from its general fund to its legal and accounting fund based on this reasoning. Judge Conboy affirmed the order contained in the IEO letter in Leebove, 97 EAM 328 (November 24, 1997), which we discuss in more detail below.

C. TRF and TDU argue that they have reported certain work performed by non-legal and accounting professionals as legal and accounting expenditures "because, given the organizations' uncertainty as how best to categorize such staff activities, it was best to err on the side of the more cautious approach, by fully reporting all such activities." Letter from Barbara Harvey, February 15, 2001 ("BH letter"). Harvey also claims that,

with the single exception of the election-related accounting work required to maintain the Huddleston (sic) allocations and to report them on CCER's, all of these staff activities are the same as activities historically performed by staff before there were any elections supervised under the Consent Decree: educating and advising members on their rights in Teamster elections and helping them to enforce their rights. If these activities are not 'legal and accounting,' then they are properly classified as membership education, and not reportable at all.

(Id.)

D. The LMRDA, section 401(g), 29 U.S.C. § 481(g), prohibits the use of union dues and employer funds "to promote the candidacy of any person ...." In United Steelworkers of America v. Sadlowski, 457 U.S. 102 (1982), the Court held that the LMRDA permitted the USWA to ban non-member contributions to candidates in its electoral campaigns. However, the Court also held that such bans cannot bar the use of outsider funds to support activities covered by LMRDA Section 101(a)(4):

Section 101(a)(4) provides that a union may not "limit the right of any member thereof to institute an action in any court, or in a proceeding before any administrative agency." 29 U.S.C. § 411(a)(4). The outsider rule would clearly violate this provision if it prohibited union members from accepting financial or other support from nonmembers for the purpose of conducting campaign-related litigation. In our view, however, the outsider rule simply does not apply where a member uses funds from outsiders to finance litigation.

457 U.S. at 119.

TDU and TRF argue that the Rules follow and expand upon Sadlowski by prohibiting campaign contributions from impermissible sources, including nonmembers, while excepting from this prohibition contributions "to pay fees for legal or accounting services performed in assuring compliance with applicable election laws, rules or other requirements or in securing, defending or clarifying the legal rights of candidates,....' Art[icle] XI, § (b)(5) (emphasis added). TDU and TRF further note that the definition of "campaign contribution" under the Rules expressly excludes legal and accounting services. Definitions, ¶5.

TDU and TRF also point to the Second Circuit's decision in U.S. v. International Bhd. of Teamsters, 931 F.2d 177, 189 (2d Cir. 1991), where the court construed the Consent Decree and the original Election Rules' general prohibition of contributions to "promote the candidacy" of IBT members in supervised elections "as being limited to aiding campaign advocacy and as not including accounting and legal services."

TDU and TRF further argue that legal and accounting provisions of the Rules rests on a broader rationale than that stated by the Sadlowski Court. They assert that "the Court's decision rests squarely, and solely, on the members' right to sue under 29 U.S.C. §411(a)(4)[, whereas t]he 'legal and accounting' exception carved out by the Rules rests, in addition to the Sadlowski rationale, on formal recognition of the value of funding legal and accounting services that assure compliance with the law and the Rules. This rationale applies with equal force to accounting services expended on compliance with the Rules, as well as to legal services." (BH letter)

Taking a different tack, TDU and TRF also argue that many of the expenditures they recorded in their CCERs as legal and/or accounting expenditures are not campaign expenditures at all, and thus would not be CCER-reportable if they were determined not to be legal and accounting expenditures on the ground that the services underlying the expenditures were not performed by either lawyers or accountants. Instead, they argue that much of the activity in question is protest-related activity, which is not properly deemed a campaign contribution under such precedent as Jordan, P269 (January 18, 1996), and cases cited therein. They argue that under this precedent "the expenditure of paid time by local union officers and representatives on the filing and prosecution of election protests is excluded from the definition of 'campaign contribution.'" (BH letter) Thus, they urge the Election Administrator to refrain from finding a violation on their part under the Rules even if we determine that the compensated services in question are not properly attributable as legal and accounting fund expenditures because non-professionals performed them.

E. The IBT and the Hoffa slate have each responded to these arguments, and Taylor's counsel has adopted their position.

Like TDU and TRF, the IBT points to Sadlowski, arguing that:

[the] Rules were adopted in order to animate the Supreme Court's suggestion [there] that to protect the right of members to sue under Section 101(a)(4) of the LMRDA there should be an exception to an otherwise lawful proscription against candidates for union office accepting campaign contributions from persons or entities that are not union members. The exception would permit contributions from nonmembers that are earmarked to pay any legal or accounting services designed to secure, protect or advance the legal rights of the candidate.

Letter from Bradley T. Raymond, February 23, 2001 ("BR letter").

The IBT also points to the IEO letter, and Judge Conboy's affirmance of the order in that case in 97 EAM 328, supra. It argues that:

There was little question that the particular work for which Leebove had been paid using legal and accounting funds [there] had worked to secure, defend or clarify the legal rights of Mr. Hoffa and other candidates on his slate. But Ms. Mansfield concluded that it was not legal work because "[l]egal services are provided by a member of the legal profession holding himself/herself out as a lawyer and engaged in the practice of law." … Ms. Mansfield concluded that the payment for investigative services could not be made using legal and accounting funds, although Leebove could be compensated for his services using campaign funds. Judge Conboy subsequently affirmed Ms. Mansfield's decision and endorsed her reasoning.

(BR letter, p. 3)

The IBT also points to an initial draft of the Rules, in which it says "the IBT included language which would have clearly stated that '[l]egal and accounting services, under these Rules, include services provided by licensed legal and accounting professionals, and services provided under supervision of legal and accounting professionals, for the purpose of enforcing or clarifying candidates' rights and obligations under, and for ensuring compliance with, these Rules, the IBT Constitution and applicable laws…." (Id.) According to the IBT, "[t]he United States Attorney objected to this clarification, which was characterized as a 'loophole' that could have facilitated the misuse of nonmember contributions for campaign purposes through the device of placing a campaign operative under the nominal supervision of a legal and accounting professional." Although the IBT argues that it had not intended in its proposal to create such a 'loophole,' it notes that the proposed clarification was dropped, and that it does not appear in Article XI, Section 1(b)(5) of the current Rules." (Id.)

From these points, the IBT asserts that funds raised from nonmembers may not be used "in assuring compliance with applicable election laws, rules or other requirements or in securing, defending or clarifying the legal rights of candidates" unless those funds are expended on the services of licensed lawyers and accountants, or those employed by them and working under their direct supervision.

Separately, the IBT opposes TDU's/TRF's position that services performed by their staff may be non-reportable for CCER purposes if they are deemed not to be legal and accounting expenditures because of the non-professional status of those providing the services. Thus, the BR letter states:

The drafters of the Rules did not contemplate, and the Rules do no provide for, a third category of unreported contributions (whether from members or nonmembers) that may be used by candidates, slates or independent committees "for the 2000-2001 International Union Delegate and Officer Election" beyond campaign contributions and contributions to legal and accounting funds. To the extent that a candidate, slate or independent committee provides advice to members relating to issues arising under the Election Rules or which otherwise concerns the 2000-2001 International Union Delegate and Officer Election, only legal and accounting funds or campaign funds raised and reported in accordance with the Rules may be used to compensate the person(s) who provide(s) the advice. In this regard, Article XI, Section 1(b)(1) of the Rules clearly states that "[o]nly contributions which are properly solicited, made, accepted and reported under these Rules may be expended or used by candidates, slates or independent committees for the 2000-2001 International Union Delegate and Officer Election.

(BR letter, p. 4, emphasis in original.)

The Hoffa slate likewise addresses this last issue, characterizing TDU/TRF's argument as one that asserts "that the activities performed by TRF staff need not be reported on either TRF's or TDU's CCERs, and that precedent holding that only legal and accounting professionals, or persons working under the immediate supervision of legal and accounting professionals, may be compensated in connection with reportable campaign-related services with legal and accounting funds raised from non-IBT members is inapplicable to TDU and TRF." Letter from J. Douglas Korney, February 22, 2001 (the "DK letter").

The Hoffa slate argues that this asserted position is "wholly untenable," noting that for its first two reporting periods TDU reported an $11,425.00 allocation to TRF, ostensibly for rent, allocation of expenses," along with "unspecified expenditures to itself totaling $9,629.95 for 'legal' and $37,000.45 for 'accounting.'" The Hoffa slate further asserts that although TDU/TRF:

seems to be saying that these payments represent staff salaries, there is no evidence of which [it is] aware suggesting what the staff did, certainly nothing that would show the "connection between the fees claimed, discrete hours worked and specific acts performed." See, generally, Leebove, 97 EAM 328, p. 2 (November 24, 1997). Indeed, [we are] aware of no factual basis for the allocation during the two reporting periods of some $37,000.00 to "accounting" and $9,600.00 to "legal." And this is entirely beside the fact that neither TDU nor TRF has reported to whom these salary, benefits and overhead were allegedly paid.

(DK letter, pp. 1-2.)

The Hoffa slate, aside from joining in the IBT's position that the IEO letter should be followed, asserts that "TDU and TRF have effectively thumbed their noses at the Rules, which require reporting of all campaign related expenditures by simply lumping them all together under obscure and catch-all headings for 'legal' and 'accounting.'" (DK letter, p. 2.)

Analysis

1. Article XI, Section 1(b)(5) of the Rules on its face applies only to "a candidate's solicitation or use of financial support or services from nonmembers, disinterested employers, foundations or labor organization to pay fees for legal and accounting services performed in assuring compliance with applicable election laws, rules or other requirements or in securing, defending or clarifying the legal rights of candidates." It does not mention the solicitation or use of legal and accounting funds by independent committees.

The definition of the term "campaign contribution" stated in Definition No. 5 of the Rules, however, does. It excludes from the definition of "campaign contribution" any "payments or services received by the legal and accounting fund established by a candidate, slate or independent committee to provide legal or accounting services performed in assuring compliance with applicable election laws, these Rules or other requirements, or in securing, defending, or clarifying legal rights of candidates." Similarly, Article XI, Section 2(c) requires independent committees to file Supplemental Form No.1 with their CCERs, and thus requires such committees to report the legal and accounting contributions they receive and expenditures they make on such forms. From this, we conclude that the drafters of the Rules intended that the strictures of Article XI, Section 1(b)(5) apply to independent committees such as TDU. This leaves the question whether the "legal and accounting services" referred to in that provision can ever apply to the services of non-professionals who do not work under the direct supervision of a professional lawyer or accountant, the question passed upon by Interim Election Officer Mansfield in the IEO letter.

2. Article I of the Rules provides that the Election Administrator "has the authority to interpret, to enforce, and when necessary, to amend the Rules [and to] take all necessary actions, consistent with these Rules, to unsure fair, honest, open and informed elections." That article also provides that "[i]n exercising these powers, the Election Administrator shall consider and apply, where applicable, precedents and decisions issued during the 1990-91 and 1995-96 International Elections and the 1997-98 Rerun Election." The IEO letter is one of those precedents, including its holding that Article XII, Section 1(b)(2) of the 1995 Rules permits only the services of professionals and those working under their direct supervision to be funded from legal and accounting funds.

We disagree with the holding in the IEO letter, for reasons we discuss in what follows. Before that discussion, however, we note our view that Judge Conboy's decision in Leebove, supra, leaves open the question presented here, and thus makes this issue one that is open for review by the Election Appeals Master.

Thus, in Leebove, Judge Conboy found "no evidence in the record that Mr. Leebove performed legal services as distinguished from public relations services for the [Hoffa] Campaign," and on that basis affirmed the order of the Interim Election Officer. And, as to the issue presented here, he noted but did not appear to pass on the Interim Election Officer's "reason[ing]" that "Article XII, Section 1(b)(2) [of the 1995 Rules] … covers only practicing lawyers and those who are subject to the direct supervision and control of a lawyer, such as paralegals, law clerks and private investigat[ors]."

We note our disagreement with the IEO letter even though Article I of the Rules requires that we GRANT the protest allegations against TDU's and TRF's admitted treatment of the compensation paid to their non-professional staff members for activity at least in part designed to assure candidate compliance with applicable election laws, rules or other requirements or in securing, defending or clarifying the legal rights of candidates with whom the TDU/TRF staff has interacted. We, however, urge the Election Appeals Master to reverse our holding for the reasons discussed below.

3. We start, as we must, with the text of the relevant Rules provisions. We find nothing in those provisions that requires the result reached in the IEO decision. Rather, Article XI, Section 1(b)(5) of the Rules refers only to the "fees for legal or accounting services" that may be paid from legal and accounting funds, and defines those services by their purpose, but not by the professional or other status of their provider(s). In addition, only later in the text of that subsection is reference made to "legal and accounting professionals," and then only in establishing the limits applicable to a subset of regulated legal and accounting services, viz, the provision of such services through in-kind contributions, which, according to the text of the rule, may be provided only by "legal and accounting professionals." The inference to be drawn from the foregoing is that only legal and accounting professionals may make in-kind contributions of legal services, not that only legal and accounting professionals may be compensated for legal and accounting services. The broader claim of the protestors -- that only legal and accounting professionals may be compensated for providing legal and accounting services to a candidate -- does not naturally follow from the text of the Rule itself. The same is true of the last paragraph of the definition of the term "campaign contribution" found at Definition 5 of the Rules.

The bargaining history pointed to by the IBT is to the same effect. Thus, as discussed above, in an initial draft of the Rules the IBT included language which would have clearly stated that "[l]egal and accounting services, under these Rules, include services provided by licensed legal and accounting professionals, and services provided under supervision of legal and accounting professionals, for the purpose of enforcing or clarifying candidates' rights and obligations under, and for ensuring compliance with, these Rules, the IBT Constitution and applicable laws…." Contrary to the IBT, we believe that the non-adoption of the term "services provided by licensed legal and accounting professionals" as part of a proposed definition of legal and accounting services under Article XI, Section 1(b)(5) illustrates our point that nothing in the text of Article XI, Section 1(b)(5) requires the result reached in the IEO decision.

4. The purpose of the rule stated in Article XI, Section 1(b)(5), in our view, argues against the construction adopted in Interim Election Officer Mansfield. Thus, the purpose of the legal and accounting exception to the Rules' strict limits on the sources of campaign contributions is to ensure that candidates and independent committees have sufficient resources to vindicate their rights and the rights of IBT members under the Rules. For candidates and independent committees with sufficient resources, the limitation urged by the IBT and the Hoffa slate here is of less moment than it is other players in the IBT election process. Conversely, those parties to the election process with more limited resources are potentially prejudiced by the limitation that follows from adoption of the position set out in the IEO letter.

To illustrate, a party may decide that its resources are best utilized by having non-lawyers and non-CPAs function in the role that lawyers and CPAs play for other parties in the election process. Such a decision would conceivably be based on the conclusion that they can best "assur[e] compliance with applicable election laws, rules or other requirements or in securing, defending or clarifying the legal rights of candidates" and members by providing the services necessary to those ends through experienced rank and file activists rather than professionals. Stated plainly, such a party may decide that it can better further these legitimate ends by compensating lower-paid activists to do the work, rather than professionals with their higher hourly rates.

In our view, the interests served by allowing non-professionals to perform such work outweigh any reasons that may be offered to limit the providers of such services to lawyers and professional accountants. Thus, there is a long history in the labor movement of non-professionals providing such services to union members. Many unions pay non-professional yet highly experienced lay staff to appear before government agencies such as the National Labor Relations Board, the U.S. Department of Labor, state agencies and other arms of the federal, state and local government. Many unions also use non-professional staff to arbitrate grievance cases of large as well as small moment, and the experience of the labor movement indicates that such services are well-performed by non-professionals, and at less expense to labor unions. See generally, Fair Representation and Equal Protection, 98 Harvard Law Review 1212, 1275-1282 (1985) and the cases cited below. The courts have thus recognized that unions who use the services of non-professionals for such tasks do so consistent with their fiduciary duty of fair representation to members. Castelli v. Douglas Aircraft Co., 752 F.2d 1480, 1483 (9^th Cir. 1985); Grovner v. Georgia-Pacific Corporation 625 F.2d 1289 (5^th Cir. 1980); Walden v. IBT Local 71, 468 F.2d 196 (4^th Cir. 1972); Dirring v. Lombard Bros. and IBT Local 25, 619 F.Supp. 911, 915-16 (D. Mass. 1984), aff'd, 787 F.2d 578 (1^st Cir. 1986)(table); McFarland v. IBT Local 745, 535 F.Supp. 970, 977 (N.D. Tex. 1982). These holdings affirm that unions may and often do decide that it is in the interest of their members to spend less per hour to hire non-professionals to perform more hours of their work because the greater good can be served by such rationing. Any interpretation of the Rules should not ignore this judicially recognized reality of industrial life.

The realities of accounting practice also caution against adoption of the narrow definition of "accounting services" urged by the IBT. Thus, each of the fifty states regulate the professional practice of accountancy and each state has a professional association of CPAs. Gormley, The Law of Accountants and Auditors (Boston, 1981), ¶ 15.01. Some jurisdictions have "permit[ted] the practice of professional accountancy, including attestation, without licensing, and [have] regulate[d] only the certification of CPAs and the use of that designation." (Id., footnote omitted.) Other jurisdictions "provide for licensing of non-CPA practitioners at secondary levels of professional accounting, typically called public accountants, who may perform services (other than auditing) of the same character as those of CPAs." (Id., emphasis in original, footnote omitted.)

Other types of accounting practice are allowed, and "[t]he practice of accounting-related activities at a subprofessional level is considered by statute or judicial decision, or both, not to be a public interest activity subject to licensing. Examples are bookkeeping, write-up of financial statements without audit or attestation, accounting data processing service, and certain tax return preparation. Those activities may therefore be performed by nonlicensees, although many licensees practice extensively in those areas." (Id., footnotes omitted.)

In other words, many non-licensed non-professionals lawfully perform accounting services. Further, from the experience of the Election Administrator and his staff with unions, many such non-professionals perform such services for labor unions. Just as is the case with lawyers, we believe it is inappropriate to limit candidates and other affected parties in this supervised election process to the selection of licensed professionals to meet their accounting service needs.

5. Notwithstanding the foregoing, it must be acknowledged that allowing payments to non-professionals to be included among the legal and accounting expenses covered by Article XI, Section 1(b)(5) of the Rules poses risks to the election process. The chief risk is that such categorization will serve as a shield for the use of non-member and employer or foundation money for regular campaign purposes, rather than for legal and accounting purposes made legitimate by Article XI, Section 1(b)(5). Yet, this same risk is present even if legal and accounting funds are limited only to payments for the services of licensed attorneys and professional accountants. This is so because such professionals may well provide services to campaigns beyond those sanctioned by Article XI, Section 1(b)(5) under the guise of providing sanctioned services, thus allowing campaign activities to be funded from the non-member, employer and foundation money that is contained in legal and accounting funds.

In this regard, we note that the reporting of legal and accounting fund expenditures required by the Rules, by past Election Officers and by the Election Administrator to date offer little by way of safeguards that would assure that those providing legal and accounting services that are financed from otherwise prohibited funds do not stray beyond expenditures that are legitimately financed thereby. For example, lawyers for candidates, campaigns and independent committees have been required to do little more than ensure that their client's CCERs state the amounts and dates of the lawyer's bill for such services. Such limited disclosure provides insufficient assurance that legal and accounting funds are being used solely for proper legal and accounting services.

Our analysis of the instant case has resulted in our decision to require further assurances of compliance with the Rules provisions concerning legal and accounting expenditures. Accordingly, we will issue under separate cover an advisory concerning these matters. The advisory will be published following the issuance of any appellate decision in this case, if an appeal is taken.[3]  It will announce that beginning with the CCER filing date set in Article XI, Section 2(d)(iv) of the Rules, all persons providing paid or in-kind legal services to candidates, slates or independent committees required to file CCERs under the Rules must file a statement with the Election Administrator on each of the dates and for the reporting periods set out in Article XI, Section 2(iv) through (xii) attesting that the services provided to their clients or employers during that reporting period that are or will be charged to a legal and accounting fund are in fact legal or accounting services within the meaning of the Rules, rather than services of another kind.[4]

We anticipate that at the minimum these attestations and accompanying information will have the prophylactic effect of deterring any abuse of the Rules' legal and accounting fund provisions. If the Election Appeals Master determines that non-professionals may provide legal and accounting services and can be paid for such services from legal and accounting funds, they too will be required to file such materials, to the extent those services are performed for candidates, slates or independent committees required to file CCERs under the Rules.[5]  Disclosure of such materials will be limited to the Election Administrator and his staff, absent good cause shown.

6. With respect to TDU and TRF, we believe that if our holding here were reversed the risk of compensating non-professionals to perform legal and accounting services from otherwise prohibited funds would be mitigated by the Huttleston system required by Article XI, Section 1(b)(9) of the Rules. Under that system and that Rules provision, the Election Administrator has required and continues to require contemporaneous timekeeping by TDU/TRF staff. Such records allow the Election Administrator to assure that TDU/TRF legal and accounting funds are being used only for legitimate legal and accounting services, and that contributions from non-members, employers and foundations are therefore not used as campaign contributions. The level of detail required by the Huttleston system offers far more assurance than will be offered by the newly required attestations that will be the subject of our forthcoming advisory.[6]  The records provided approach and/or exceed the level of detail provided by attorney hourly billings.

The availability of such materials from these independent committees provides an additional assurance that abandonment of the IEO letter will not undermine the Rules strict limitations on the use of non-member and other prohibited funds for campaign purposes.

7. In reviewing the submissions of the parties here, it is apparent that there is a need for guidance so that affected parties can understand what types of service constitute legal and accounting services regulated by Article XI, Section 1(b)(5) of the Rules. Such guidance will be helpful in resolving the protest issue resolved here, since the definition of legal and accounting services has a bearing on the result. But even if it did not, the need for guidance is real, since the professional status of a service provider does not provide a safe harbor with respect to Section 1(b)(5). We therefore address this issue.

The text of Article XI, Section 1(b)(5) is the starting point for such guidance. It makes clear that there are three elements to the provision of legal or accounting services within the meaning of the Rules. All must be present to in order for the limitations and privileges established by Article XI, Section 1(b)(5) to apply.

First, the service must be one that, but for the provisions of Article XI, Section 1(b)(5), would be deemed to be a campaign contribution under the Rules. Thus, the service must have as a "purpose, object or foreseeable effect ... to influence, positively or negatively, the election of a candidate for Convention delegate or alternate delegate or International officer position." Rules, Definitions, No. 5. In this regard, all of the portions of that definition, save its last paragraph, should be consulted and applied.

Second, the service must be of a type that would be commonly considered a legal or accounting service if performed by a lawyer or an accountant. The mere fact that the service was actually performed by a lawyer or accountant is insufficient for this purpose. Thus, for example, if a lawyer provided the kind of "public relations" services found to have been provided in Leebove, supra, the lawyer's professional status would not make those services legal services. The identify of the service provider is relevant. It is not, however, determinative.

Third, the service must be one that otherwise relates to the 2000-2001 IBT International Union Delegate and Officer Election in the manner described in Article XI, Section 1(b)(5): a service performed in assuring compliance with applicable election laws, rules (including the current Rules)or other requirements, or in securing, defending or clarifying legal rights under the rules or election laws.

If a service does not meet each of these three tests, the funding for or contribution of the service does not implicate Article XI, Section 1(b)(5) of the Rules. In such a case, the service is thus not a legal or accounting service under Article XI, Section 1(b)(5) of the Rules. In such cases, Definition ¶5 of the Rules will determine whether the service or the funding of it is a campaign contribution.

The foregoing analysis requires rejection of TDU's/TRF's claim that services historically performed by their staff before the Consent Decree and supervised IBT elections are by virtue of that history unregulated and unreportable expenditures under the Rules. Instead, without regard to history, the three tests set forth above must be applied to such activities by TDU's non-professional staff when those activities are undertaken during the course of a supervised election (at least if the category of legal and accounting expenditures can include the services of non-professionals). If the three tests discussed above are met, the service is properly characterized as a legal and accounting service within the meaning of Article XI, Section 1(b)(5) (at least where performed by a professional). History is simply irrelevant to the determination. If the three tests are not met, then Definition 5 of the Rules must be applied to determine whether there is a reportable campaign contribution.

By way of example, before the Consent Decree TDU/TRF may have advised member-candidates on their right to campaign under the LMRDA. When that advice is given now, however, during the course of a supervised election, it meets the third test for legal and accounting expenditures set out above, since it relates to the defense of legal rights under the Rules. The application of the other two tests, and the ultimate resolution of the linked issue raised in this protest concerning the existence or non-existence of non-professional legal and accounting services under the Rules, will determine whether compensation for the service is a legal and accounting expenditure. That neutral standard applies to all alike. There is no special standard for independent committees under Article XI, Section 1(b)(5).

8. For reasons we now explain, we reject the claim in the most recent protest filed by the Hoffa slate that TDU's and TRF's most recent CCER filings are fraudulent violations of reporting requirements of Article XI of the Rules.

It is true that TDU's/TRF's most recent filings contain aggregate numbers for legal and accounting expenditures that are inconsistent with their earlier CCER filings, and it is true that TDU and TRF have yet to amend their earlier CCERs to conform to its most recent filing. In making its most recent filings, however, TDU and TRF have made clear that their intent in doing so is to advocate the position advanced in their submissions in this case, viz, that most of the expenditures characterized in their earlier filings as legal and accounting expenditures are not that, but are expenses that are unregulated and unreportable because they fund the performance of services historically performed by them before the onset of supervised IBT elections. While we reject this argument from their "history," we acknowledge that TDU and TRF have made clear at least since their most recent CCERs were filed last month, and in fact earlier, that they are ready to file amended CCER #1 and CCER #2 that are consistent with guidance that will hopefully result from the resolution of this protest.

The Election Administrator has informed TDU and TRF that the nature of their reporting obligations will be affected by the outcome of this protest decision, and has already directed them to submit all back-up data reflecting their recharacterization of their legal and accounting expenditures. They have complied willingly and cooperatively, and have asked for direction from the Election Administrator so that their reporting requirements and contribution source obligations can be met in full. There is no evidence of fraudulent behavior. Instead, what is evident is the confusion engendered by the need to resolve the question that is at the heart of this case: the status of non-professional services as legal and accounting services under the Rules. TDU and TRF have agreed at all times to comply with the resolution of that issue and amend their reports accordingly.

Accordingly, we retain jurisdiction over the allegations in the instant protests concerning inadequate or inconsistent CCER reports by TDU and TRF, pending appellate resolution of the status of non-professionals as providers of legal and accounting services within the meaning of the Rules. We will ensure that TDU and TRF expedite amendment of their financial reports upon resolution of this matter.

Remedy

We have granted the protest and have determined that under the IEO letter TDU and TRF have improperly charged to TRF staff time of non-professionals as legal and accounting expenditures. If this holding stands after any appeal to the Election Appeals Master, then sufficient funds to cover such expenditures improperly charged to TRF as legal and accounting expenditures must be transferred from TDU to TRF from resources obtained from permissible sources within the meaning of Article XI, Section 1(b)(9)(A) of the Rules, but only to the extent that the improperly charged expenditures are campaign contributions within the meaning of the Rules. The amount of such transfer, and any interest thereon, shall be determined by the Election Administrator following an examination by Election Administrator forensic accountant Bruce Dubinsky of data already supplied by TDU and TRF, and any other necessary data.

TDU and TRF shall further cease and desist from any further charge for the compensation of non-professionals to TRF as legal and accounting expenditures. Finally, TDU and TRF are ordered to fully cooperate in the Election Administrator's ongoing examination of their charges for legal and accounting expenditures, and to file amended CCER reporting forms in the manner directed by the Election Administrator.

An order of the Election Administrator, unless otherwise stayed, takes immediate effect against a party found to be in violation of the Rules. Lopez, 96 EAM 73 (February 13, 1996).

Any interested party not satisfied with this determination may request a hearing before the Election Appeals Master within two (2) working days of receipt of this decision. The parties are reminded that, absent extraordinary circumstances, no party may rely upon evidence that was

not presented to the Office of the Election Administrator in any such appeal. Requests for a hearing shall be made in writing, shall specify the basis for the appeal, and shall be served upon:

Kenneth Conboy

Election Appeals Master

Latham & Watkins

Suite 1000

885 Third Avenue

New York, New York 10022

Fax: 212-751-4864

Copies of the request for hearing must be served upon all other parties, as well as upon the Election Administrator for the International Brotherhood of Teamsters, 727 15^th Street NW, Tenth Floor, Washington, DC 20005 (facsimile: 202-454-1501), all within the time prescribed above. A copy of the protest must accompany the request for hearing.

William A. Wertheimer, Jr.

William A. Wertheimer, Jr.

Election Administrator

cc: Kenneth Conboy

2001 EAD 256

DISTRIBUTION LIST VIA UPS NEXT DAY AIR:

Patrick Szymanski

IBT General Counsel

25 Louisiana Ave. NW

Washington, DC 20001

Bradley T. Raymond

Finkel, Whitefield, Selik,

Raymond, Ferrara & Feldman

32300 Northwestern Highway

Suite 200

Farmington Hills, MI 48334

J. Douglas Korney

Korney & Heldt

30700 Telegraph Road

Suite 1551

Bingham Farms, MI 48025

Barbara Harvey

Penobscot Building

Suite 1800

645 Griswold

Detroit, MI 48226

Betty Grdina

Yablonski, Both & Edelman

Suite 800

1140 Connecticut Ave. NW

Washington, D.C. 20036

Tom Leedham c/o Stefan Ostrach

110 Mayfair

Eugene, OR 97404

James L. Hicks, Jr.

Suite 1100

2777 N. Stemmons Freeway

Dallas, TX 18207

Teamsters for a Democratic Union

7437 Michigan Avenue

Detroit, MI 48210

Teamsters Rank and File Education and Legal Defense Foundation

7437 Michigan Avenue

Detroit, MI 48210

Bruce Dubinsky

Klausner Dubinsky & Associates

4520 East West Highway

Suite 640

Bethesda, MD 20814