IN RE: LOCAL 20 BUSINESS AGENT FUND.
Decision 2001 EAD 549
Issued: November 8, 2001
(See also Election Appeals Master decision 01 EAM 105)
Office of the Election Administrator forensic accountant Bruce Dubinsky, C.P.A., conducted an investigation of the above-referenced fund. Pursuant to our authority under Article XIII, Section 4 of the Rules for the 2000-2001 IBT International Union Delegate and Officer Election ("Rules"), we issue the following decision and order concerning $14,000 in campaign contributions made to the Hoffa-Singer campaign in June 2000 (the "Contributions").
In Rockstroh, P764 (July 11, 1996), Election Officer Barbara Quindel granted a protest concerning the Local 20 Business Agent Fund (the "Fund"), finding that the Fund, which had made $6,880 in campaign contributions to International officer candidate and Local 20 officer Lester Singer, was improperly supported with local union resources in violation of Article XII, Section 1(b) of the 1996 Election Rules.
In the 1996 decision, the Election Officer found that the Fund was created on or about April 1979, by various employees of Local Union 20, that there were 13 participants in the Fund, and that participation in the Fund was voluntary. Our investigation shows that participation in the Fund at present is similarly voluntary, and exists in numbers similar to 1996.
Thus, as in 1996, any employee/member of the local union wishing to participate in the Local 20 Fund is required to sign a voluntary authorization provided by Local Union 20's credit union. That authorization allows an amount designated by the Local 20 employee/member to be deducted from the employee/member's wages by the local union and deposited in the Fund.
As in 1996, all participants in the Fund were given an opportunity to be involved in all decisions regarding how the money is spent. Thus, Fund participant and Local 20 employee Cheryl Johnson described in her sworn deposition the process that occurred here before the Contributions were made:
Q. Okay. And so the fund decided it was going to authorize distribution of monies for a campaign contribution?
A . Right.
The testimony of other Fund participants was similar: the decision to withdraw money from the Fund was a collective decision by the participants and was taken to facilitate the making of the Contributions to the Singer campaign. As Local 20 president William Lichtenwald testified:
A In one of the campaigns, I believe -- I don't know whether it was in the '98 campaign or the '96 campaign. We had just -- for the campaign, we would like just draw one big check from all of us, and there was some difficulties on it in one of the elections, so our understanding was that that couldn't be done. The money had to be withdrawn individually, and then we had -- individually we had to make the choice whether or not we wanted to contribute it, you know. It didn't make any sense, but that's what the rules were, so we were asked if we wanted to make a withdrawal, and, of course, I guess we all decided we were going to do it, asked whether they wanted to make the individual withdraw, and we did, and no one said you had to contribute, but everybody knew what it was for.
Q Was it your understanding or belief that based on this moral obligation or friendship obligation that you talked about, that once the decision was made to contribute the money to the Singer campaign, that you had to use this money then to make that contribution?
A Well, you understood that you would. I don't think anybody ever had to, but it's -- you just do it. I mean it's -- you don't let the guys down, you don't let your buddies down.
Unlike the case in 1996, however, as Lichtenwald's testimony suggests, the Fund did not issue a check directly from Fund assets to the Hoffa-Singer campaign in order to carry out the decision to make the Contributions. Instead, fourteen $1,000 checks made payable to the fourteen Fund participants were drawn on Fund assets on the same day and paid to them. Each then cashed their check and contributed $1,000 in cash to the Hoffa-Singer campaign. The Fund participants apparently took this step believing it was sufficient to allow the past practice of using local union resources to support the Fund to continue.
Thus, the Fund participants uniformly state that they were not obligated to contribute the $1,000 in Fund assets they received to the campaign, and each stated that the contribution they made was voluntary, and that they understood that they were free to keep the money if they wished. All stated that they did not wish to do so, but rather wanted to contribute the $1,000 they received from Fund assets to the campaign. A number of the Fund participants also indicated their belief that if they kept the money for themselves rather than contributing it to the campaign fellow Fund participants might view them less than favorably.
Counsel for the Fund participants argues that no Rules violation exists here precisely because, unlike the case in 1996, the Fund did not contribute money to a campaign, but rather distributed money to the Fund participants, who then decided on their own to make the Contributions.
We disagree for several reasons, keeping in mind that the issue here is whether there has been an improper use of union resources to support the Hoffa-Singer campaign.
First, the Fund itself, as in 1996, is clearly supported by the resources of Local 20. Thus, as in 1996, payroll deductions are made from the Local 20 payroll checks of the Local 20 participants. Accordingly, what was found in Rockstroh, supra, is also true here:
Although the Local 20 Fund is ostensibly a group of members who are joining together to make voluntary campaign contributions, the campaign contribution is being facilitated by the local union through a wage authorization mechanism. Thus, local union resources, e.g., accounting, bookkeeping, checks, are being indirectly used to make a campaign contribution.
A local union employee made the deduction from the payroll check and cut a check to the Fund in the amount of the deduction. A local union employee or bookkeeper is responsible for the necessary record-keeping to ensure reconciliation of these deductions with Fund balances. In these and possibly other ways, the local union is providing resources to facilitate this type of voluntary fund. …
Second, the taxpayer identification number used by the Fund (as recorded by the credit union in which the Fund's assets are kept) was that of IBT Local 20 at the time the assets used to fund the Contributions were withdrawn. This is not a mere exercise in bookkeeping, since the local union's tax-exempt status is used to shield the Fund's interest and investment earnings from federal taxation.[1] The Fund benefits economically from this treatment.
Third, the added step of issuing individual checks to Fund members does not change the reality that the Fund exists in part to fund the collective decision of Fund participants to make its assets available for campaign contributions approved by the Fund's participants. The change adopted from the 1996 practice elevates form over substance. It does not change the fact that local union resources are used to maintain the Fund and enhance the worth of its assets, assets that are funded and maintained in part to make campaign contributions.
It is precisely because local union resources were used to support and enhance the Fund that Article XI, Section 1(b)(3) of the Rules has been violated here. If they had not been used, if voluntary payments had instead been paid into a group fund through a means not requiring work by the local's payroll staff, and if such a fund had been maintained with a taxpayer identification number other than that of the local union, then campaign contributions from such a fund would be appropriate under Article XI, Section 1(b)(9)(A) of the Rules precisely because they were made in a way that did not involve the use of union resources. Unfortunately, that did not occur here.
Having said this, we note, as did Election Officer Quindel, that certain practices associated with such funds can lead to difficulties even if the use of union resources is avoided. Thus, for example, such funds can be used in an attempt to avoid the contribution limits applicable to each IBT member. This can occur when a member receives and contributes distributions from such a fund greater than the amount the member has contributed to such fund, and when the member is thus in reality contributing money that finds its source in the earnings of other IBT members who also participate in the fund. Further, as noted by Election Officer Quindel in Rockstroh, with such funds "there is a greater chance that [local union] employees will feel compelled to make contributions to the fund in order to retain their positions or to curry favor with their employer." We have not found such evasion or compulsion here, but the IBT, local unions and IBT members must guard against them.
Accordingly, for the reasons stated above, we find a VIOLATION of Article XI, Section 1(b)(3) of the Rules here.
In order to remedy this violation, we provide the same relief as that ordered in Rockstroh. There, the campaign that received contributions from the Fund was ordered to return those contributions to the Fund within seven days. We order the same relief here as to the $14,000 in contributions made to the Hoffa-Singer campaign by Fund participants in June 2000. However, since the Hoffa-Singer campaign has transferred its remaining assets to the Hoffa Unity slate's campaign funds, we order that the Hoffa Unity slate make that refund.
Further, so long as the Fund receives its monies through the wage authorizations described above, and so long as it uses the local's taxpayer identification number as its own, it is ordered to cease and desist from making any direct or indirect contributions to International officer candidates. International officer candidates may not accept such contributions. Employees and members of Local Union 20 who made such contributions to the Singer campaign through the Fund are, of course, permitted to make personal contributions to Mr. Singer's campaign, as well as contributions to the campaign of any other candidate.
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 15th 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 549
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
3060 Penobscot Building
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
Todd Thompson
209 Pennsylvania Ave., SE
Washington, DC 20003
Matt Ginsburg
30 Third Avenue
Brooklyn, NY 11271
James L. Hicks, Jr., P.C.
Suite 1100
2777 N. Stemmons Freeway
Dallas, TX 75207
Lester Singer
Ohio Conference of Teamsters
435 South Hawley Street
Toledo, OH 43609
IBT Local 20
435 S. Hawley
Toledo, OH 43609
John Roca
Gallon Takacs
3516 Granite Circle
Toledo, OH 43617
Bruce G. Dubinsky, CPA
Klausner Dubinsky & Associates
Certified Public Accountants
4520 East West Hwy.
Suite 640
Bethesda, MD 20814
[1] The credit union issued the calendar year 2000 IRS form 1099 for the Fund using Local 20's taxpayer identification number.