3 In the Matter of
4 The Trusteeship Proceeding
Of Local Union 1001
5 Chicago, Illinois.
6 Docket Number 03-21T
Hilton Palmer House
9 17 East Monroe Street
Chicago, Illinois 60603
11 November 11, 2003
16 PETER F. VAIRA, ESQ.
Messrs. Vaira & Riley, P.C.
17 1600 Market Street - 2650
Philadelphia, Pennsylvania 19103
19 INDEPENDENT HEARING OFFICER.
2 Messrs. THOMAS & ASSOCIATES
Office of the GEB Attorney
Federal Reserve Building
4 600 Atlantic Avenue
5 Boston, Massachusetts 02210-2211
6 By: ROBERT M. THOMAS, JR., Esq., of Counsel
Messrs. WINSTON & STRAWN
8 Attorney for Local Union 1001
35 West Wacker Drive
9 Chicago, Illinois 60601-9703
10 BY: MATTHIAS A. LYDON, Esq., of Counsel
SAMUEL MENDENHALL, Esq., of Counsel
12 Messrs. FARACI & FARACI
Attorney for Local Union 1001
13 203 North LaSalle Street
14 Chicago, Illinois 60601
15 BY: PETER S. FARACI, Esq., of Counsel
18 KATHLEEN M. NAGLE, Esq., Messrs. Vaira & Riley
1 THE INDEPENDENT HEARING OFFICER: Ladies and
2 gentlemen, let's go on the record, finally.
3 Good morning, ladies and gentlemen. I'm
4 Peter Vaira, and I'm the
Independent Hearing Officer
5 for the Laborers' International Union of North America.
6 This particular proceeding is in regards to a
7 Trusteeship complaint filed against Local 1001,
8 Chicago, Illinois. And the Docket Number is 03-21T, as
9 in Tom.
10 And sitting beside me is my associate,
11 attorney Miss Kathy Nagle.
12 Representing the General Executive Board is
13 Mr. --
14 MR. THOMAS: Robert Thomas.
15 THE INDEPENDENT HEARING OFFICER: I remember
16 your name. I just wanted to hear you say it.
17 MR. THOMAS: Robert M. Thomas, Jr.
18 THE INDEPENDENT HEARING OFFICER: And
19 representing Local 1001? I have an array here.
20 MR. FARACI: Peter Faraci of Faraci & Faraci.
21 MR. MENDENHALL: Samuel Mendenhall of Winston
22 & Strawn.
23 MR. LYDON: And Matt Lydon from Winston &
25 THE INDEPENDENT HEARING OFFICER: Ladies and
1 gentlemen, I have before me a number of motions, and --
2 given to me by Mr. Mendenhall and Mr. Faraci this
3 morning. And copies have been given to me and Mr.
4 Thomas, and we studied them for about twenty minutes or
5 so, and we'll deal with them -- and I believe Mr. Lydon
6 has something he wants to put on the record.
7 MR. LYDON: Just as an initial matter, Mr.
8 Vaira. As you know, I appeared -- I'm appearing here
9 today on behalf of Local 1001. And I had been
10 scheduled to be elsewhere through Thursday, but I'm
11 here and hopeful that my participation and assistance
12 to Mr. Mendenhall and Mr. Faraci will have some
13 possible consequences.
14 I wanted to acknowledge on the record with
15 respect to the motions that have preceded my appearance
16 here today, that I did speak last week with Robert
17 Luskin and then with Mr. Thomas about
18 schedule and the request for a continuance. And Mr.
19 Thomas and I did agree to dates, including a Saturday
20 or two, in order to be done in mid December with
22 While I was in agreement with the proposal to
23 dismiss the lawsuit for the agreed schedule, my client
24 and co-counsel were more immersed in the issues and
25 nuances of this situation than I am, but did not agree,
1 and hence we're here today.
2 At the same time, I agree with co-counsel
3 that the possibility of simultaneous litigation, which
4 Mr. Luskin abhorred in his letter objecting to a short
5 continuance, could as easily be addressed by an
6 expedited briefing schedule in the Federal Court. And
7 refusing to continue this proceeding yields the result
8 of the situation, seems to me, to which he objected.
9 In that being, I wanted to make this preliminary
10 statement that Local 1001 does not agree that this
11 matter is substantively hearable. Nor do we consent
12 that you have jurisdiction to resolve any questions to
13 substantive hearability. We expressly reserve the
14 right to an independent de novo determination of
15 whether you have jurisdiction to hear the matter in a
16 court competent jurisdiction. And without waiver of
17 this right, we're here and ready to proceed.
18 MR. THOMAS: Excuse me, Mr. Lydon. The
19 return phone call came. May I ask that we take a break
20 in your statement so I can --
21 MR. LYDON: Sure.
22 MR. THOMAS: Thank you.
23 (Whereupon a break was taken in
24 the proceedings after which the
25 following proceedings were had:)
1 THE INDEPENDENT HEARING OFFICER: Mr. Lydon
2 was saying that you had some discussion about some
3 scheduling. Go ahead.
4 MR. LYDON: What I was going to say is that
5 while -- I think where I left off with is we're ready
6 to proceed without waiving our jurisdictional claims.
7 I would like some accommodation. I flew back here
8 late Sunday to prepare in this case. I had to
9 yesterday also handle rescheduling of other matters
10 that were to involve me. And I find at least one
11 aspect of this case a rather daunting task, one to
12 which I'm not immediately prepared. And that would be
13 cross examining Mr. O'Rourke, or whoever it is, who is
14 going to speak to the association of organized crime.
15 There is quite a volume of material to review. So what
16 I'm asking for is an opportunity to defer cross
17 examination until I've had an opportunity to do that.
18 THE INDEPENDENT HEARING OFFICER: I'll do
20 MR. LYDON: And other than that, at this time
21 I would waive opening. I really may make an opening
22 statement when we get to a point preparing -- excuse me
23 -- presenting our testimony or evidence.
24 THE INDEPENDENT HEARING OFFICER: In fact I
25 was -- I think I might have mentioned that in my
1 motion. If there was some person you needed to cross
2 examine and call him back, that's fine. That's fine.
3 Let's address these issues I have here.
4 Let's take the most troublesome first because I'm not
5 too sure we have enough in front of me, and this is --
6 Mr. Mendenhall, this one concerning the Consent --
7 we'll talk about the Consent Decree. You say that this
8 proceeding -- present proceeding that I'm hearing now
9 doesn't comply with a Consent Decree that was signed in
10 front of Judge Gettleman in '92. Am I correct?
11 MR. MENDENHALL: I believe that's 1999, Mr.
13 THE INDEPENDENT HEARING OFFICER: '99. And
14 that was a Consent Decree between the GEB Attorney and
15 the Chicago District Council?
16 MR. MENDENHALL: As well as the United States
17 Government, Mr. Vaira, yes.
18 THE INDEPENDENT HEARING OFFICER: Okay. Let
19 me hear you on that.
20 MR. MENDENHALL: Yes. Specifically we
21 appeared in court in front of Judge Moran last
22 Thursday, and at that time the issue was raised by
23 LIUNA that the proceeding that we're involved in today
24 was governed under the Consent Decree. The following
25 day -- actually I take it back. That same day they
1 filed a Motion to Dismiss, and I quote from page five
2 of that motion, "Second, as reflected in LIUNA's motion
3 for relatedness under the Consent Decree entered in the
4 case pending before Judge Gettleman, this Court has
5 exclusive jurisdiction of all matters relating to the
6 organized crime influence on the Chicago Laborers'
7 District Council and its affiliated Local Unions,
8 including Local 1001."
9 Moreover, as was reflected throughout the
10 hearing, they have now moved this matter -- they are
11 attempting to move this matter from Judge Moran to
12 Judge Gettleman, and that is up at 9:15 tomorrow. And
13 Mr. Hearing Officer, I respectfully say that that
14 matter should be resolved before we undertake a process
15 here of hearing evidence when under the Consent Decree
16 there's a separate Adjudications Officer, Judge Seymour
17 Simon, as you mentioned, and there's a separate
18 Monitor, Mr. Miller. So I would hate for this Court or
19 this -- for you to spend time hearing an issue that,
20 according to LIUNA, you have no jurisdiction over.
21 THE INDEPENDENT HEARING OFFICER: You know
22 that when they say LIUNA, you'll hear that a thousand
23 times here.
24 Is the issue -- the issue before the federal
25 judges and -- is that an issue of simply jurisdiction
1 whether or not -- as you know, in any Trusteeship if
2 the Hearing Officer, no matter this Union or other
3 Unions, rules against the Local Union and puts them in
4 a Trusteeship, as a matter of course, I believe it's
5 Chapter 3 or Section 3 of the Illinois -- the losing
6 party goes into Federal Court. And your Local has
7 contended that they are a public rather than private
8 Union and therefore the LMRDA doesn't apply.
9 Gentlemen, is that the issue that's before
10 the Federal Court rather than whether or not leaving us
11 to comply with the Consent Decree. Is that it? That
12 jumps out at me here.
13 MR. MENDENHALL: Mr. Hearing Officer, if Mr.
14 Thomas has some comments, I'm more than willing to
15 defer and then I can answer your question.
16 THE INDEPENDENT HEARING OFFICER: See where
17 I'm going here, I'm --
18 MR. MENDENHALL: Mr. Thomas, how would you
19 like to do it? Would you like to address it or I can
20 address it.
21 MR. THOMAS: I would love to be heard. I'm
22 waiting for you --
23 THE INDEPENDENT HEARING OFFICER: Okay.
24 Okay. Gentlemen, you're all going to be heard, and I'm
25 fairly familiar with this. But these proceedings that
1 may be sort of a hybrid. Is that the issue that I just
3 MR. THOMAS: Mr. Vaira, let me try to give
4 you a little background on the collateral litigation
6 When these Trusteeship papers were filed,
7 some period after that Local 1001 filed a court action
8 in State Court.
9 THE INDEPENDENT HEARING OFFICER: State
10 Court, yes.
11 MR. THOMAS: And the relief sought -- and I
12 want to emphasize this. The relief sought was a
13 continuance of these proceedings so that Mr. Webb could
14 handle the matter in January. And the representation
15 made there was that A, there was a right to counsel,
16 and B, that they were being denied their right to
17 counsel and so forth.
18 For the record, today, on November 11th, we
19 have three separate attorneys representing Local 1001.
20 THE INDEPENDENT HEARING OFFICER: Aside from
22 MR. THOMAS: The issue then was -- as it
23 evolved, the International then removed the case to
24 Federal Court where it is now. And their emergency
25 motions for requests for preliminary injunctions and so
1 forth have all been denied. The matter is still
2 pending and has not been dismissed, and I'm not as
3 familiar with the procedural facts and so forth. I
4 guess there is some question about whether it stays
5 with the judge it has now or whether it goes to Judge
6 Gettleman. And there is, I believe -- maybe it's not
7 been filed yet, but I believe there's some talk that
8 the Local thinks it ought to be remanded back to State
9 Court. But that's the jurisdictional issue that you
10 pointed out and that I think is in play here.
11 The references that Mr. Mendenhall makes to
12 Mr. Luskin's pleadings in the federal case are
13 jurisdictional in nature. In other words, it's part of
14 the removal papers where the Local is saying it
15 shouldn't be in Federal Court, it should be in State
16 Court. And Mr. Luskin is saying, "No, no, no, no. The
17 LMRDA covers this, and these are exclusively federal
18 matters. In fact, this is under the umbrella of the
19 Consent Decree that was filed in 1999." It is not
20 saying -- and this is my basic point here. It is not
21 saying that this Trusteeship action is brought pursuant
22 to the Consent Decree. That is wrong. He is simply
23 saying that the Federal Court has jurisdiction over the
24 dispute that the Local filed.
25 THE INDEPENDENT HEARING OFFICER: That's what
1 I'm honing in on. I think Mr. Mendenhall is saying
2 that plus something else. I think Mr. Mendenhall was
3 saying, "Yes, there is a dispute, but it ought to be
4 heard in State Court or Federal Court. But if it's
5 heard in Federal Court, this Consent Decree that was
6 entered between the Government and the GEB and in front
7 of Judge Gettleman, has been violated because the GEB
8 should have gone to Judge Gettleman." Am I right?
9 MR. MENDENHALL: Yes. And you hit the nail
10 exactly on the head, Mr. Vaira. I would add a couple
11 of very important points.
12 Mr. Thomas, I believe, without any intent
13 inaccurately stated -- our Motion for Preliminary
14 Injunction has never been denied. They just denied our
15 Motion to Stay the Remand Hearing. And the
16 significance of that, your Honor, is once the case if
17 it is indeed remanded and this hearing is not over, we
18 will be going into court to enjoin this proceeding. So
19 when he states that this injunction has been denied, I
20 respectfully disagree with my esteemed colleague.
21 And secondly and equally important, if Judge
22 Gettleman holds that he does have jurisdiction and this
23 case is covered by the Consent Decree, we will be
24 asking Judge Gettleman to dismiss or stay this
25 proceeding one, pending Mr. Luskin going through the
1 Monitor as required under the Consent Decree; two,
2 appointing the Adjudications Officer as required under
3 the Consent Decree; three, allowing us to use the
4 subpoena power as required under the Consent Decree;
5 and four, our right -- all of our other rights under
6 the Consent Decree; and five, and more importantly, the
7 opportunity, we think, to get Mr. Webb -- it's not
8 about a 60 day continuance. It's about a right to
9 counsel of choice. Whether or not we have that, that
10 goes to the merits. The merits have never been
11 reached. Mr. Vaira, I am sure you want Local 1001 to
12 have the best possible representation as I assume Mr.
13 Thomas does. So we're all in agreement on that issue.
14 So it's those two issues that I respectfully
15 think are before you -- before the Federal Court as to
16 the Consent Decree and before the State Court. So
17 again, I believe counsel misspoke when he said they
18 denied our preliminary injunction.
19 THE INDEPENDENT HEARING OFFICER: I know. I
20 personally think that it belongs in -- that this is a
21 case that belongs in Federal Court, but someone could
22 disagree with me. But, here is my more important
23 question. What in the world does the Consent Decree
24 signed by Judge Gettleman say? What is it? I mean I'm
25 looking at it and it's one of those -- hasn't that
2 MR. THOMAS: I don't believe it has expired
3 yet. I didn't specifically ask Mr. Luskin that, but
4 let me -- whether or not it has expired. I can answer
5 your question on the merits.
6 THE INDEPENDENT HEARING OFFICER: I have the
7 impression from somebody that it has expired, it's
8 finalized, and Justice Seymour Simon doesn't -- isn't
9 going to be given anymore cases, and any disciplinary
10 cases would come to me. There's something about that.
11 Now somebody will have to put that on the record to
12 figure it out, all right?
13 MR. THOMAS: Yes, I'm happy to do that.
14 Whether or not it has expired or is about to
15 expire, I don't know the answer to that question. But
16 let me -- but my response -- the answer to that
17 question will not matter as I'll explain.
18 The Consent Decree -- and I've confirmed -- I
19 read this closely and I've confirmed it now with Mr.
20 Luskin. The Consent Decree was designed in part to
21 expand the jurisdictional powers here of the reform
22 process. It did not limit Mr. Luskin's power under the
23 Constitution or the EDP or the Ethical Practices Code.
24 Rather it gave supplemental jurisdiction to Mr. Miller
25 and the Government and -- for matters arising
1 exclusively under the Consent Decree. And the language
2 that is quoted by Mr. Mendenhall in his motion says,
3 that "The Monitor shall have the power under the
4 Consent Decree." So in other words, if the Monitor
5 says, "I'm bringing an action against the Local or an
6 individual under this Consent Decree because you're
7 violating the terms of the Consent Decree," he has the
8 power to do that.
9 He also has the power to ask Mr. Luskin to
10 handle the case if he would like to. That is
11 independent and supplemental to Mr. Luskin's long
12 standing authority under the EDP and the Constitution
13 to bring whatever actions he in his discretion feels is
15 So what is completely in error about this
16 motion is the notion that somehow the Consent Decree
17 removed Mr. Luskin's authority to bring whatever
18 actions he feels is appropriate. That is not what the
19 Consent Decree says. That's not what was intended.
20 Mr. Luskin was emphatic about this when I talked to him
21 on the phone.
22 The logical assumption of that would be that
23 when the Consent Decree expires there's no reform
24 process. No. The reality is that Mr. Miller was going
25 to take on certain matters in his discretion, and if he
1 wanted help from Mr. Luskin, he could get help from Mr.
2 Luskin through a referral. But that was independent of
3 Mr. Luskin's long-standing authority to bring whatever
4 actions he deems appropriate under the Constitution and
5 under the EDP, which is not the same thing as the
6 Consent Decree. The Consent Decree point that is being
7 raised in this motion is only the point about the LMRDA
8 and the federal jurisdiction.
9 THE INDEPENDENT HEARING OFFICER: Gentlemen,
10 what's the proceeding before Judge Gettleman tomorrow?
11 MR. MENDENHALL: It's their motion to
12 transfer it from Judge Moran to Judge Gettleman because
13 it falls under this Consent Decree.
14 And Mr. Vaira, here is something that I think
15 is absolutely critical. On page nine of the Consent
16 Decree -- Mr. Thomas had just made a representation to
17 you, I believe, that isn't -- again I believe it was an
18 honest mistake. But if you go to the bottom of page
19 nine, the last sentence states: "Notwithstanding any
20 Delegation --
21 THE INDEPENDENT HEARING OFFICER: Let me get
23 MR. MENDENHALL: I sure will. Take your
24 time, Mr. Vaira.
25 THE INDEPENDENT HEARING OFFICER:
1 "Notwithstanding any -- it's underlined here. This is
2 probably your -- you gave it to me so I could see it.
3 Go ahead. "Notwithstanding --
4 MR. MENDENHALL: "Nothwithstanding any
5 Delegation to investigate or prosecute, no charge may
6 be brought under this decree without the consent and
7 approval of the Monitor. The Monitor must also approve
8 the disposition or settlement of any charge brought
9 pursuant to his authority."
10 Mr. Vaira, to say that this decree does not
11 limit Mr. Luskin's authority, again, my esteemed
12 colleague, I believe, misspoke in error.
13 MR. THOMAS: Mr. Vaira --
14 MR. MENDENHALL: Can I finish, Mr. Thomas?
15 THE INDEPENDENT HEARING OFFICER: Go ahead.
16 Go ahead.
17 MR. MENDENHALL: Equally important, right
18 above that sentence in this paragraph, "LIUNA -- it's
19 under the paragraph "LIUNA Internal Reform Officials".
20 So this is clearly intended to be encompassed within
21 the reform process on page nine, the heading of that,
22 Mr. Vaira.
23 Two sentences down starting with "Recognizing
24 the success of the efforts of the Inspector General and
25 the GEB Attorney in attacking organized crime influence
1 in the CLDC and its affiliated entities and the
2 substantial commitment of time and resources they have
3 made, the Monitor may designate the GEB Attorney and/or
4 the Inspector General to act on his behalf to
5 investigate and prosecute charges under this decree
6 whenever it is reasonable or efficient to do so."
7 Period, end quote.
8 Again, Mr. Vaira, I respectfully suggest my
9 esteemed colleague misspoke in error.
10 MR. THOMAS: May I respond to that?
11 THE INDEPENDENT HEARING OFFICER: All right.
12 Go ahead.
13 MR. THOMAS: The words that Mr. Mendenhall
14 just read to you on their face apply to matters arising
15 under the Consent Decree.
16 On page nine the language that Mr. Mendenhall
17 just read to you in the middle of the page, those
18 underlined lines it says: "Act on his behalf to
19 investigate and prosecute charges under this decree."
20 It does not say under the EDP. It does not say under
21 the language of the Constitution. It says "under this
22 decree." It is a supplemental grant of jurisdiction.
23 At the bottom of the page, where Mr.
24 Mendenhall says I'm mistaken, it says "Nothwithstanding
25 any Delegation to investigate or prosecute, no charge
1 may be brought under this decree without the consent
2 and approval of the Monitor." That means what it says.
3 It means the Monitor can charge pursuant to the grant
4 of authority in the Consent Decree. It says nothing --
5 there is nothing in this document and there's nothing
6 in the intent of the parties that ever said that Mr.
7 Luskin would cease to
have his authority to bring
8 Trusteeship cases and disciplinary cases under the
9 Constitution and the EDP.
10 THE INDEPENDENT HEARING OFFICER: Gentlemen,
11 I have -- I understand what's going on. Here is -- it
12 will be interesting to see what Judge Gettleman rules
13 tomorrow. But in the meantime I'm going to deny this
14 motion for this reason: Based -- I'll just take it
15 piece by piece. I'm not ruling whether or not this
16 should be in Federal Court or State Court, whoever has
17 that jurisdiction. I have jurisdiction beyond that.
18 That as to who, I'll have to answer to. So I will
19 proceed not being concerned with whether it will be in
20 State Court or Federal Court.
21 The issue concerning whether or not the
22 Consent Decree governs this proceeding, I'm ruling I
23 don't have to reach that -- or I do reach it. Because
24 as I read the Consent Decree, that has to do with the
25 powers given to the GEB Attorney and the Monitor to
1 pursue disciplinary charges that were heretofore before
2 the EDP never existed. The power that I have sitting
3 here today doesn't come from that. It comes from the
4 Constitution and the history of this Union being able
5 to put its own Local Unions into receivership. And
6 this existed long before the EDP. That's the power I
7 have. I sit in that position very similar to the power
8 I had when I was the Election Officer. My power is
9 derived from the Constitution and not from the EDP. So
10 I rule that in a Trusteeship my power comes from the
11 Constitution and has nothing to do with a Consent
12 Decree in front of a judge.
13 I do not have to reach the issue of whether
14 somebody brought a criminal -- not criminal, but
15 disciplinary charge here that it might not fall under
16 Judge Gettleman. But the Trusteeship, no.
17 MR. MENDENHALL: Mr. Vaira, just to be heard.
18 And we respect the ruling that you just made, but on
19 page 16 of the Consent Decree, paragraph (g)
20 specifically states, and I read into the record again,
21 "Any failure to comply with any such request may be
22 used by the Adjudications Officer to determine whether
23 such entity or person should be subject to the
24 imposition of Trusteeship, supervision, or discipline,
25 as appropriate."
1 So again, Mr. Vaira, I respectfully say this
2 Consent Decree was designed to cover Trusteeship
3 matters as well, and we would simply like to preserve
4 our record on that point.
5 THE INDEPENDENT HEARING OFFICER: I
7 MR. MENDENHALL: We respect again your ruling
8 and thank you for your time in this matter.
9 THE INDEPENDENT HEARING OFFICER: I
10 understand. I understand. As I said, it's a matter of
11 history. I do not believe that the Monitor ever
12 brought the Trusteeship.
13 MR. THOMAS: If I may, Mr. Vaira. More to
14 the point is, if Mr. Mendenhall is right that the
15 Monitor or the Adjudication Officers have authority to
16 handle Trusteeship matters, again, that's besides the
17 point. It's supplemental. Both had authority. The
18 point I'm raising is the Monitor may have had the
19 authority to file a Trusteeship action against the
20 Local pursuant to his authority under the Consent
21 Decree. Mr. Luskin, without question, has authority to
22 do the same thing pursuant to his authority under the
23 Constitution and the EDP.
24 THE INDEPENDENT HEARING OFFICER: Gentlemen,
25 if you're briefing this tomorrow or whatever you're
1 doing, I also direct your attention to the -- a similar
2 Consent Decree in front of the Teamsters, and you ought
3 to explore whether Judge Lacy, the Independent Monitor,
4 or whatever he was called, actually had power of
6 All right. Now having ruled upon that, let's
7 move to the next part.
8 Mr. Mendenhall, what are you -- take your
10 MR. MENDENHALL: Okay. The next one I would
11 like to raise is, we'll probably do it in a series of
12 motions, Mr. Vaira, and that's the Motion in Limine
13 Regarding Evidence relating to Mr. Spignola, (sic) Mr.
14 Kumerow, Mr. Caruso, and Mr.
Palermo. And we're
15 specifically asking in this regard, Mr. Vaira, is the
16 allegations that a Trusteeship is warranted because the
17 current Executive Board is comprised of -- four of the
18 seven members are alleged associates of organized
20 Your Honor, Mr. Spignola is dead and hasn't
21 been involved with the Local since 1982, 21 years ago.
22 How that is relevant to 2800 members in a Trusteeship?
23 We respectfully say it has no relevance in this
24 proceeding, and we would ask that any relevance
25 relating to Mr. Spignola be eliminated and not allowed
1 in this proceeding, Mr. Vaira.
2 THE INDEPENDENT HEARING OFFICER: Let me
3 address these three as you go. I've said this, I
4 hinted at this in one of my motions. We do not need to
5 take this back to the time of Samuel Gompers,
6 (phonetic) all right? There was -- I ruled that in the
7 Trusteeship of the District Council, which was right
8 before us, there was a lot of history of organized time
9 and the labor movement, and we brought it all the way
10 up to the 30's with Sam Giancana and up to the present.
11 Having done that I say it's time now to move on and not
12 -- now keep this in mind that there is a principle, and
13 I've ruled on this several times, once in a Trusteeship
14 in Pittsburgh, that organized crime doesn't -- doesn't
15 undergo a change and walk away one warm afternoon.
16 Time has to pass and there has to be some demonstration
17 that it's occurred.
18 Having said that, there is a history in
19 Chicago of organized crime with the labor movement, and
20 I found that a number of times and I've been pretty
21 definite about it. How far back we're going to go and
22 how far this is going to go -- I warn you. I don't
23 want to come here and hear stories about Spingola and
24 the funeral parlor, being called in and Sam Giancana
25 sending him messages and so forth. I need to go
2 Now, here's what I'm saying. I'm not going
3 -- granting but I'm not denying this motion. I'm just
4 going to say I'm going to deal with questions of
5 relevance, and I do not want to hear long, long
6 histories. I've ruled that some of these individuals,
7 not some of the more recent ones, have been tied to
8 organized crime. You're going to have to demonstrate
9 to me that -- forget about Spingola. That's so far
11 MR. THOMAS: May I be heard on this?
12 THE INDEPENDENT HEARING OFFICER: Okay. What
13 I'm looking for is -- I'm going to deny this motion to
14 this extent. I don't want to hear this chapter and
15 verse about things that occurred in the 80's, and '85
16 and so forth. But, if you have some reference back
17 that there is some logical reference that I or a
18 reviewing Court could say, "Yes, I understand what that
19 connection is," that's fine. But I can't go into a
20 great extent of that.
21 MR. THOMAS: Right. I think I can answer --
22 THE INDEPENDENT HEARING OFFICER: I'm going
23 to let you answer. I'm saying I'm looking for
24 relevance. You have to tie it in as you go.
25 MR. THOMAS: Understood.
1 The intent here is to focus to the extent
2 possible on recent events and recent debriefings of
3 informants concerning, you know, the current
4 leadership. Now in the context of making that factual
5 representation, obviously there are connections that
6 need to be made. I mean if Mr. O'Rourke talks about
7 Mr. Gironda, it's clearly of some relevance what his
8 connection is to the Carusos, what he may have done
9 with the Carusos at different points in his life and so
10 forth. So it would be literally impossible, I would
11 suggest, or seriously misleading to put on a case that
12 had no relevance to the past. And that's not -- what I
13 have been intending to do from the very beginning here
14 is to simply ask you to take judicial notice of your
15 previous findings as contained in the exhibits -- and
16 the Appellate Officer's confirmance of those findings,
17 which are confined in Exhibits 2 through 5 in the
18 proceedings. And I don't plan on having Mr. O'Rourke
19 really talk that much about that prior evidence at all.
20 Those are all matters that have been found.
21 Now as he talks about the current members of
22 Local 1001, including the current officers, if there is
23 a reference to someone in the past, I expect him to
24 raise that, but I don't expect him to dwell on it. And
25 I think it would be -- with respect to all of these
1 motions in limine that Mr. Mendenhall has filed, my
2 response would be the same is that those go to the
3 weight, not to the admissibility. It is of some weight
4 that these people may have had a connection that can be
5 demonstrated down through time. It may be less and
6 less probative the further generations down you go, but
7 it is of some weight. So the issue is really to allow
8 the record in and let him draw those connections, and
9 you can draw whatever inferences or conclusions you
11 THE INDEPENDENT HEARING OFFICER: What I'm
12 going to ask is what -- we may take judicial notice but
13 I want a connection. I want some articulable
14 connection that as we go -- I'm now in 2003 and
15 something that occurred in '85, you know, there's -- is
16 beginning to diminish.
17 MR. MENDENHALL: May I be heard briefly?
18 THE INDEPENDENT HEARING OFFICER: Okay.
19 MR. MENDENHALL: And that's -- and I agree
20 with you. One of the things we're asking, in Mr.
21 Caruso's statement they reference a dice game he
22 attended in 1969. We're in 2003. They say he attended
23 a dice game in 1969, put the Local 1001 in Trusteeship.
24 Your Honor, our request would be exactly what
25 you're saying. We would say grant our motion because
1 there's no relevance to the fact that Caruso attended a
2 dice game in 1969 to support putting the Local 1001 in
3 Trusteeship today.
4 It would be our argument that there's no
5 relevance that Spignola had a meeting with Anthony
6 Accardo in 1974, so put Local 1001 in Trusteeship
8 It would be our argument that Ernest Kumerow,
9 who resigned over a decade ago, is not relevant. Any
10 interaction with him with his father-in-law is not
11 relevant to putting Local 1001 into Trusteeship in
13 Please do not visit the sins of the third and
14 fourth generation on this generation of leadership.
15 Let them rise and fall on their own merits. If he has
16 evidence against this current Executive Board, let him
17 bring it, your Honor. But this is far too important to
18 their lives, to their reputations, and to their honor
19 to allow him to reference a dice game from 1969 and
20 meetings in the 60's, 70's, and 80's before they came
21 into power. Let them rise or fall on their merits,
22 your Honor. And that's all we ask.
23 THE INDEPENDENT HEARING OFFICER: What I'm
24 saying is, and Mr. Thomas has seen me do this a number
25 of times. Sometimes -- quite often I will hear some
1 evidence and then decide at the end that I'm going to
2 exclude it. And I don't employ a method of
3 automatically excluding something if I have some
4 problems with it, but I will weigh it as I go. But I'm
5 giving you some warnings that I'm looking for some
6 qualifications here.
7 MR. THOMAS: Completely understood. And my
8 presentation of the evidence is going to be very much
9 focused on the more recent time frame as has always
10 been my expectation.
11 I would draw one distinction though in
12 response to Mr. Mendenhall's comments. I have
13 virtually no intention here of talking about conduct of
14 people thirty years ago. But, their status in
15 organized crime as opposed to their conduct is a
16 different matter. In other words, if it's the
17 testimony of Mr. O'Rourke that not only is the Local
18 currently controlled by organized crime but always has
19 been, that is clearly relevant to your determination as
20 to whether a Trusteeship is imposed. I don't need to
21 put on evidence and you certainly don't need to find
22 facts about what Mr. Kumerow or Mr. Accardo or Mr.
23 Caruso were doing 20, 30 years ago. But the ultimate
24 testimony that Mr. O'Rourke, based on information that
25 he's gotten from law enforcement and from his
1 informants that this Local has, not only in the recent
2 time frame but in its entire time frame, been
3 controlled by organized crime is clearly relevant. The
4 continuity of that and the lack of contested elections
5 during that entire period, for example, is all part of
6 the larger story.
7 THE INDEPENDENT HEARING OFFICER: You heard
8 my message. We're looking at what's this Local doing
9 today. And if you have to give me some history of how
10 we got here, it has to be pretty relevant, all right?
11 The law and history of organized crime and the labor
12 movement in Chicago, we're past that now. We've moved
13 on and we're beginning to go narrow it down and zero in
14 on the focus, okay?
15 MR. THOMAS: Very good.
16 THE INDEPENDENT HEARING OFFICER: I think you
17 have a couple of more here, Mr. Mendenhall.
18 MR. MENDENHALL: I sure do. And your Honor,
19 in an effort to move it along, we will go to the next
20 Motion in Limine which ties in, and that's Local 1001's
21 "Motion In Limine to Strike All Pre-1995 Allegations
22 Regarding Organized Crime and to Preclude the Use of
23 Any Related Evidence."
24 Now we're getting past just the individuals,
25 former Board members, Kumerow, Caruso, Spignola, but
1 there's references again to Tony Accardo with no tie-in
2 and information to the present. And the reason that's
3 significant, your Honor, I spent a considerable amount
4 of time getting prepared for this case, reading the
5 Coia decision where you specifically addressed this
6 issue and you said, "Pre-1995 there wasn't an EDP in
7 place, and it did not -- I want to make sure I quote it
8 directly accurate, your Honor.
9 THE INDEPENDENT HEARING OFFICER: I've read
10 your -- go ahead.
11 MR. MENDENHALL: "As for historical problems
12 with organized crime, Hearing Officer Vaira has stated,
13 "Prior to the adoption of the EDP, disciplinary charges
14 were limited to violations of the Constitution.
15 Associating with organized crime had never been the
16 subject of disciplinary charges." Period. "The IHO's
17 independent research has found no charges brought in
18 any Union for associating with unsavory or underworld
19 figures prior to the Consent Decree arising out of the
20 litigation between the DOJ and the Teamsters."
21 Then you go on to state, "Until the adoption
22 of the EDP in 1995, the charge of associating with a
23 member of organized crime was not grounds for dismissal
24 from LIUNA."
25 And you cite that in the Coia opinion. And
1 we would simply say, your Honor, we be afforded the
2 same respect with regard to pre-1995 evidence. I don't
3 want to belabor this point too much because a lot of it
4 ties into our previous motions where you said you're
5 looking for what this current Board has done wrong.
6 And that's basically where we're going with this one as
7 well, your Honor.
8 THE INDEPENDENT HEARING OFFICER: I think
9 there's some distinction here.
10 Prior to 1995 there was no EDP yet here in
11 this Union, also in the Teamsters. There was really
12 know (sic no ) offense of associating with organized crime
13 figures. This particular statute or provision and also
14 the one that governs the Teamsters made almost
15 retroactive that if you -- any activity that an
16 individual had in the past, if it's relevant to its
17 present activity, is relevant. You may look at it.
18 And we've used that a number of times saying, "This
19 person has been associated with organized crime since
20 1985. He's still associated with it. It affects his
21 presentability in the Union."
22 Mr. Coia's very different. There was a
23 number of what I call wild card charges against Mr.
24 Coia. They were accusing Mr. Coia of not doing
25 anything about Mr. Serpico and appointing Mr. Serpico
1 as a head of a Hearings Panel, a panel similar to this.
2 And the GEB Attorney said that that was an indication
3 that he was giving him a pass and he was really not
4 doing anything with him.
5 Those comments that I made were in this
6 context: Mr. Coia was trying to get rid of Mr.
7 Serpico. He had a grudge fight with him, a real
8 battle, and it was his way of bouncing him out of the
9 Union by isolating him. And there was evidence that
10 Mr. Coia said, "Now we got to move in here. That's the
11 end of Mr. Serpico. He's out." The GEB Attorney said
12 he could have done more and I said he could not have
13 done more. Now that -- it was in that context. So I'm
14 not going to deny anything prior to 1995 with this
15 caveat it better be relevant.
16 MR. THOMAS: Of course. I mean that would
17 would stand to reason.
18 I have a couple of points. Number one, the
19 language that was quoted is in the context of a
20 disciplinary case. And obviously charging conduct
21 pursuant to the EDP -- that occurred prior to the EDP
22 is problematic. That's what that language refers to.
23 If you're going to say, "You violated the EDP," and
24 then you refer to something that happened before there
25 was an EDP, well there's clearly a notice problem
1 there. That's not what we're dealing with here. Here
2 we're dealing with a historical pattern of organized
3 crime control, and it is relevant to your consideration
4 how far back this problem goes.
5 I recognize completely that you're expecting,
6 and I will provide to you, evidence that the Union
7 still is connected to the "Outfit". But it is clearly
8 relevant to put on evidence saying that these patterns
9 go back far in time.
10 THE INDEPENDENT HEARING OFFICER: Keep in
11 mind, gentlemen, this is a Trusteeship complaint. So
12 we're talking about really an issue of management
13 question. The International Union says, "As a matter
14 of management we want to remove the control from these
15 individuals because they shouldn't be managers. And
16 the reason for that is their association with organized
17 crime." They're not charging them with it, but they're
18 certainly saying that they are. And so we're talking
19 about a management question. And when you look at it
20 you come at it from a -- not an entirely different
21 perspective, but the purpose of the information coming
22 in is different.
23 MR. THOMAS: This will be entirely different
24 if we were talking about a disciplinary case against,
25 say, Mr. Gironda. And if I came into court here and I
1 had only evidence against Mr. Gironda that was 1985 and
2 prior, I would be the first one to say that's a problem
3 and that I shouldn't do that. But for Trusteeship
4 purposes, the organized crime control of this Local in
5 the 1960's is relevant. It's not as relevant as
6 control in the 90's and the current decade, but it has
7 a historical evidentiary value.
8 THE INDEPENDENT HEARING OFFICER: Okay. One
9 more remark and then we'll take a break.
10 MR. MENDENHALL: One very brief remark, Mr.
11 Vaira. And again I think you touched on it as
12 succinctly as anybody has in this room, and that's if
13 this Local is placed in Trusteeship, let it be on the
14 sins of the current administration. Do not visit the
15 sins of the father, the grandfather, and the great
16 grandfather, four generations of prior business
17 managers before these people were in the Union. These
18 are hard working men and women. To say that this is
19 only a Trusteeship proceeding, when my client calls me
20 and says his wife's in tears, they're accusing him of
21 being a bookmaker for X, Y, Z, or that he's a drug
22 dealer, your Honor, that goes beyond a Trusteeship. So
23 I disagree with that claim, your Honor, and that's why
24 I say give us the chance. If they can show this
25 current administration is going improperly, and if
1 there are some problems, they were honest mistakes.
2 Give us the chance to go forward. Don't put us in
3 Trusteeship over a 1960 dice game or a 1950, '60
4 meeting with Anthony Accardo before any of these fine
5 gentlemen became involved in the labor movement. Thank
6 you, your Honor.
7 THE INDEPENDENT HEARING OFFICER: All right.
8 Madam Reporter, you probably want a break. We'll give
9 you a break. Take yourself fifteen minutes.
10 (Whereupon a break was taken in
11 the proceedings after which the
12 following proceedings were had:)
13 MR. MENDENHALL: Your Honor, if I could just
14 very briefly, and -- there's only three promises I will
15 make today. One, I promise you this will be the
16 easiest motion. Two, I promised my daughter I would
17 come home tonight. I worked through the night last
18 night. So she called and said she missed me. And
19 three, I promise my clients I'm going to give them my
21 The clients would like to have the -- we
22 represent 2800 members, and a lot of them work for the
23 City of Chicago in very important job functions to the
24 City, trash removal, things of that nature, and they
25 cannot attend the hearing during the day, but would
1 love to have the opportunity to attend it on a Saturday
2 or if part of it is held in the evening. I promised
3 them I would present it to you, and I do that
4 respectfully, sir.
5 THE INDEPENDENT HEARING OFFICER: I've had
6 these before. The Union has generally objected to
7 this, although there have been some accommodations. The
8 last time we have done it when we had the general --
9 the Chicago one we did it all during the day. I
10 understand that there is some difficulty in doing that.
11 I just have to deal with the lawyers and the efficiency
12 of this order. What you're requesting is that we do
13 part of this on a Saturday?
14 MR. MENDENHALL: Or even in an evening. A
15 lot of them get off, it's my understanding, between
16 3:30 and 5:00. Again, whatever works best for you.
17 MR. LYDON: I think I had a conversation with
18 Mr. Thomas and we talked about this.
19 MR. THOMAS: He talked about if we -- I'm
20 glad Mr. Lydon raised that because I did not agree with
21 what was described to you that -- maybe we had those
22 discussions a while back about whether his schedule
23 could be accommodated. We talked about whether
24 alternative dates could be squeezed in, and we talked
25 about well, if we did it the 20th and 21st, and maybe
1 we could go part of Saturday and so forth, we never
2 finished that conversation because the client didn't
3 agree to that. I never agreed to hold anything on
4 Saturday. I'm always open to talk about what is
5 possible and what needs to be done. As a practical
6 matter it creates huge difficulties both for the
7 lawyers and for the witnesses to do things in the
8 evenings and on Saturday.
9 But I would like to point out today is a
10 Federal holiday. If this concern were genuinely coming
11 from these people, they would be here today. They're
12 not working today. It's a federal holiday. So if this
13 were really a burning desire, one would think at least
14 a few of these people would be here today.
15 MR. MENDENHALL: Your Honor, if I may briefly
16 respond to that. I promise you as an officer of the
17 court at a Union membership meeting I attended the
18 members stood up and asked if they could attend some of
19 the hearing. They work during the day. These are
20 County and Municipal employees. They are not off on a
21 federal holiday. And Mr. Vaira, ironically you know
22 that relates to our whole issue if we're in State Court
23 or Federal Court, we're all Municipal employees. So
24 what the federal government is doing -- our clients are
25 working today, your Honor, and truly would like to
1 attend. I didn't say all of the hearings. I'm just
2 asking for even at best, your Honor, maybe a small
3 portion where the members can come and show that this
4 means a lot to them. And again, that if you take this
5 Union from them, it be done based on the current
6 administration's alleged misconduct. And that's all
7 they ask for. And again, your Honor, as an officer of
8 the court, they asked that of me and I'm relaying it to
9 you. And I thank you for your consideration.
10 THE INDEPENDENT HEARING OFFICER: Any
11 situation where at the end of these -- toward the end
12 of a proceeding, the members are permitted to say what
13 they want to say, and that may be the occasion for us
14 to hold an after hours session to permit them to come.
15 I've never been overwhelmed with the amount of
16 participation, but we'll -- that may be a situation
17 where they can come and voice their concern, and
18 they're entitled to it. This is theirs, and they're
19 allowed to speak out, and we might be able to arrange
21 MR. MENDENHALL: Thank you.
22 THE INDEPENDENT HEARING OFFICER: Okay. Now,
23 where are we, gentlemen?
24 MR. FARACI: Mr. Hearing Officer, we have
25 also presented you with four separate subpoenas which
1 we're hoping we can address rather quickly. If I could
2 start with the first one. Two of them deal with
3 subpoenas for individuals.
4 THE INDEPENDENT HEARING OFFICER: Let's --
5 just the -- let's get the show on the road, and we'll
6 deal with that -- it will take us just five minutes and
7 the lawyers can just come up and we'll chat about it
8 rather than making some formal presentation. I know
9 you put them on the record and we'll chat about what
10 we're going to do with them. All right?
11 MR. THOMAS: Very good. I'm ready to
13 THE INDEPENDENT HEARING OFFICER: Ready to
15 MR. THOMAS: At this time GEB Attorney would
16 call John O'Rourke to the stand.
17 THE INDEPENDENT HEARING OFFICER: Mr.
18 O'Rourke, up here and you can sit over there.
19 Mr. Thomas, we're talking about the -- just
20 for my own sake, we are talking about the current
21 officers, am I right? And the current officers and
22 somebody who just left recently. Who are we talking
23 about? Just give me names. Mr. Nick Gironda --
24 MR. THOMAS: Well, if your question is who
25 are the current officers?
1 THE INDEPENDENT HEARING OFFICER: Yes.
2 MR. THOMAS: On Exhibit Number 1, your Honor,
3 I have what I believe is our most up to date list
4 which would indicate that Nick Gironda is the Business
5 Manager, Nathaniel Gibson is the President, Floyd
6 Grogan is the Vice President, Robert Chianelli is the
7 Recording Secretary, Sam DeChristopher is the
8 Secretary-Treasurer, Paul Reed is the Sergeant-at-Arms,
9 and then there are various auditors and so forth.
10 THE INDEPENDENT HEARING OFFICER: And the DC
11 means the persons who are Delegates of the District
13 MR. THOMAS: Right.
14 THE INDEPENDENT HEARING OFFICER: You'll see
15 there have been some recent changes in the last couple
16 of years, but that, I believe, is the current slate of
18 THE INDEPENDENT HEARING OFFICER: All right.
19 Mr. O'Rourke, the young lady will swear you
21 (Witness duly sworn.)
22 MR. THOMAS: Mr. Vaira, I'm got going to go
23 into the kind of depth and detail of Mr. O'Rourke's
24 qualifications because you've already heard that
25 several times before and you have indeed made findings
1 on that. But I will put enough of it on the record so
2 that people have a sense of his background.
3 MR. LYDON: When you say "heard before,"
4 could I at least know which specific proceedings you're
5 referring to?
6 MR. THOMAS: Certainly. In the Chicago
7 District Council matter he
testified at length. That's
8 Exhibit Number 2 in your exhibit books. He testified
9 at length in the Caruso and DiForti matters, which is
10 Exhibits 2, 3, and 4. And there are explicit
11 references to his testimony and to his expertise in all
12 of those matters.
13 JOHN J. O'ROURKE,
14 called as a witness on behalf of the Respondent, having
15 been first duly sworn, was examined and testified as
17 DIRECT EXAMINATION
19 MR. THOMAS:
20 Q. Good morning, Mr. O'Rourke.
21 A. Good morning, sir.
22 Q. How are you currently employed?
23 A. I'm employed for Quest Consultants and as an
24 inspector for the Inspector General for LIUNA.
25 Q. So the Inspector General capacity is part of
1 your current employment as a private investigator.
2 A. Yes, sir.
3 Q. Again, Mr. Vaira is well familiar with your
4 background, but others in the room may not be. Could
5 you summarize for us your prior career in law
7 A. Yes, sir. I had a total of 32 years in law
8 enforcement, six years with the Office of Navel
9 Intelligence as a Special Agent and Supervisory Special
10 Agent, and 26 years as a Special Agent with the Federal
11 Bureau of Investigation, and a year and three to four
12 months with the FBI as a Cook County Inspector assigned
13 to the Task Force in the Organized Crime and Property
14 Crime Task Force.
15 Q. How many years were you actually employed by
16 the FBI?
17 A. As a Special Agent, 26 years, and then
18 assigned to the FBI for another year and three months.
19 Q. How much of your time in the FBI was involved
20 with organized crime investigations?
21 A. Approximately 23 years.
22 Q. Did you receive any awards or commendations
23 for your service to the FBI?
24 A. Yes, sir. I received commendations from the
25 Director of the FBI and from various police officials
1 and a commendation from the Chamber of Commerce for law
2 enforcement excellence.
3 Q. Was this on one occasion or more than one
5 A. More than one occasion. Approximately a
6 hundred commendations. That's an estimate.
7 Q. How many Chicago Organized Crime
8 investigations do you think you've been involved in?
9 A. Investigations, several hundred.
10 Q. And again limiting the question to your time
11 in the Bureau, how many cases have you been involved in
12 that have actually lead to convictions of organized
13 crime figures here?
14 A. Approximately 75 either as a case agent or as
15 a team of agents working on a case.
16 Q. Have you been qualified as an expert witness
18 A. Yes, sir, by Mr. Vaira in previous hearings.
19 Q. And specifically the Chicago District Council
20 matter and the Caruso and DiForti matters?
21 A. Yes, sir, and the John Galioto matter and
22 John Matassa, Local 2 matter.
23 MR. THOMAS: Mr. Vaira, referring in part to
24 the prior records, I would offer Mr. O'Rourke's
25 testimony as that of an expert in the field of
1 organized crime influence in Chicago, particularly with
2 respect to Labor Unions.
3 THE INDEPENDENT HEARING OFFICER: I found
4 that before. I still find it.
5 MR. THOMAS: Thank you.
6 BY MR. THOMAS:
7 Q. Mr. O'Rourke, how long have you been working
8 LIUNA investigations here in Chicago?
9 A. Since May of 1996 to the present time.
10 Q. So shortly after the agreement between LIUNA
11 and the government?
12 A. Yes, sir.
13 Q. And when did you actually retire from the
15 A. Retired officially in I believe it was March
16 of 1995.
17 Q. So your retirement roughly coincided with the
18 imposition of this reform process.
19 A. Yes, sir.
20 Q. In the context of your doing work for LIUNA
21 in this field, have you used any of your prior
22 informants that you had when you were with the Bureau?
23 A. Yes, sir.
24 Q. Have you developed any new informants since
25 leaving the government?
1 A. Yes, I have.
2 Q. Just briefly, Mr. O'Rourke. When we refer --
3 I want to make sure our terminology is agreed upon
4 here. Does the term "crew" mean anything to you in
5 context of organized crime?
6 A. Yes.
7 Q. What is a crew?
8 A. In Chicago, unlike New York -- New York is
9 five families. In Chicago there's one family. There's
10 a "boss", and then there are subunits called "crews"
11 historically. And a crew sometimes is geographic,
12 generally speaking. And there's a Cicero Crew which
13 covers the west side and Melrose Park. There's the
14 26th Chinatown Crew. There's the Grand Avenue Crew,
15 and there's the North Side Crew or the Elmwood Park
16 Crew. It varies from time to time. Sometimes it's
17 in flux. But the crews historically have been headed
18 from the boss of the crew and then he has lieutenants
19 and individuals who work under him.
20 Q. And what businesses, legal or illegal, does
21 organized crime get involved in?
22 A. The primary thrust of organized crime in
23 Chicago and other places is illegal gambling,
24 bookmaking and to some extent, in the old days, running
25 wire rooms and card games. Out of that comes what they
1 call "juice" in Chicago, loan sharking, lending money
2 to individuals at high per cent of interest enforced by
3 the threat of violence or violence. The usual rate is
4 five per cent a week, which is 260 per cent interest a
5 year on a loan, and the principal generally doesn't go
6 down. And the third aspect of it is extortion.
7 Extorting legitimate and illegal businesses are in the
8 old days running chop shops, and then Union corruption
9 and bribery of public officials.
10 Q. What form does corruption of Labor Unions
11 take in terms of the activities of the LCN?
12 A. The LCN is "La Cosa Nostra" or "The Outfit",
13 as they call it in Chicago, historically has attempted
14 to influence and infiltrate and dominate Labor Unions
15 in order to have a place for their members and their
16 relatives, friends of members, and so on. It gives
17 them a legitimate income and it also allows them to
18 have leased cars and all of the benefits and to control
19 and have a legitimate front.
20 Q. And over the years have you seen any activity
21 with respect to Pension and Welfare Funds in the labor
22 racketeering field?
23 A. Yes, sir. Informants have advised me that
24 one of the reasons for the Mob's interest in gaining
25 influence and control over Labor Unions is so that
1 members' family, friends and associates can have access
2 to pensions and also to Health and Welfare from the
3 Union Funds.
4 Q. What does the term "made member" mean?
5 A. A "made member" is an individual who goes
6 through some sort of ceremony and then is allowed to
7 operate gambling, loan sharking, all the historical Mob
8 activities, and shares in the profits of the Mob. He's
9 generally a boss or a long-time Mob member who's
10 trusted and has been involved in violence.
11 Q. Can a person be part of organized crime
12 without being a quote, "made member"?
13 A. Yes, sir.
14 Q. How does that work?
15 A. The FBI refer to them as "associates", and
16 they come in basically two varieties. An LCN associate
17 is someone who is on the street actually doing work,
18 you know, collecting money, threatening people,
19 performing regular jobs on the street. Examples would
20 be Jerry Scarpelli who was not a "made member" who was
21 a killer, Harry Aleman who was a killer. There is a
22 whole variety of these individuals. Jimmy LaValley who
23 was an enforcer who was not a "made member".
24 The other variety of "made member" of
25 associates would be individuals who facilitate
1 organized crime activities. And these can be people
2 who are not actively involved day to day doing work --
3 organized crime work, but such as people in Labor
4 Unions who do the bidding and follow the orders of
5 organized crime and pursue their interests.
6 Q. Just so we're clear, is the term "associate"
7 a law enforcement term?
8 A. It's -- I would say yes. It's a term that
9 the Bureau decided to utilize.
10 Q. So in terms of working your informants, do
11 they use the term "associate"?
12 A. No, they do not.
13 Q. How do they distinguish between a "made
14 member" and someone who is involved but who is not a
15 "made member"?
16 A. Well they would indicate that -- they would
17 generally know who a "made member" is or a "made guy"
18 as they would say. And the reason for that is once a
19 person is a "made guy", he has all kinds of additional
20 power. And if anybody insults him or strikes him or
21 belittles him, it can cost them physically. So it
22 becomes to their interest to know pretty quickly who a
23 "made guy" is so they can show him the proper respect.
24 Sometimes they're not physical specimens, maybe older
25 men, but they know who the "made guys" are, and there
1 are not that many. They don't refer to "associates".
2 That's an FBI term. They generally talk about a
3 "connected guy" or "with the Outfit" or "he's with the
4 people," and those kinds of terms.
5 Q. When you debriefed your informants, those are
6 the distinctions that you've -- it's been "made guy"
7 versus these other phraseologies; is that right?
8 A. That's correct.
9 THE INDEPENDENT HEARING OFFICER: The
10 associates, am I correct, can be first class, the
11 person who is involved in completely illegal
12 activities, loan sharking, gambling, outside the law,
13 or number two, the associate who may be in a legitimate
14 line of work, doctor, lawyer, businessman, person in a
15 Union, who ostensibly is on -- inside the law but may
16 have connections to these persons in the system from
17 time to time.
18 THE WITNESS: That's correct, yes, sir.
19 THE INDEPENDENT HEARING OFFICER: FBI makes
20 that distinction?
21 THE WITNESS: Yes, they do.
22 THE INDEPENDENT HEARING OFFICER: We're going
23 to get some balance on line. Your informants don't
24 make that. They use the word "connected" or he's --
25 something like that?
1 THE WITNESS: Right. They would normally not
2 use the law enforcement term of "LCN associate".
3 THE INDEPENDENT HEARING OFFICER: So some
4 definitions Mr. Thomas will ask you, questions about
5 "is somebody associated with", you anticipate that you
6 will make that distinction, am I right?
7 THE WITNESS: Yes, sir.
8 MR. THOMAS: Just to be clear, to preview his
9 testimony in this regard, we are not going to make any
10 allegations that the current officers are "made
11 members" of organized crime. The allegation is that
12 they are associated with organized crime. And that's
13 why I'm laying this predicate so that we have that
15 THE INDEPENDENT HEARING OFFICER: I
16 understand that.
17 BY MR. THOMAS:
18 Q. All right. Mr. O'Rourke, in your years in
19 law enforcement and then in your post law enforcement
20 career, what tests do you employ to test the
21 reliability of the information you're getting from
22 informants? How do you measure that?
23 A. Well the informants that were informants when
24 I was in the FBI, the Bureau used a test of results.
25 In other words, arrests made, information resulting in
1 arrests, convictions, Title III's, searches,
2 statistics. And as far as -- and then checking out
3 what they say with other informants. Testing the
4 information, checking it out as best you can.
5 Q. So just -- I want to make sure I understand
6 that correctly. When you say like a search warrant or
7 a Title III application, you're not saying that it was
8 limited to the fact that someone was able to get a
9 search warrant. It's that you could actually look at
10 what was seized and see whether the information was
11 correct after the fact?
12 A. Yes, sir. If the informant told you that Mr.
13 X driving a green car is running narcotics and you were
14 able to get a search warrant based on that and then
15 arrested Mr. X and recovered the car and recovered
16 narcotics and it resulted in a conviction, then that
17 would be a statistic and would show that the informant
18 is truthful.
19 Q. Um-hum. And the informants that you've
20 developed concerning labor racketeering here in
21 Chicago, can you speak to their reliability please.
22 A. Yes, sir. They've been reliable as far as I
23 can tell. They have a background in organized crime,
24 and they have provided information which has been found
25 through investigation to be reliable and truthful.
1 Q. Have you corroborated much or all of what
2 they said?
3 A. Yes, sir.
4 Q. I'm going to -- in just a few minutes we're
5 going to go through them individually so you can speak
6 to their individual circumstances.
7 For how long, Mr. O'Rourke, have you been
8 receiving informant information concerning Local 1001?
9 A. Probably -- I would say probably for 20
10 years, although I did not work labor racketeering in
11 the FBI. But individuals who were involved would
12 mention it and it would be -- I generally would write
13 it up and pass it on to the agents who were
15 Q. Again I'll get into specifics in just a
16 moment. But what generally speaking or how generally
17 speaking would you characterize the nature of the
18 information you've been receiving during that 20 years?
19 A. Generally that organized crime influenced
20 Local 1001 in connection with the 1st Ward, Pat Marcy,
21 John D'Arco, and it was one of the power bases of the
22 Mob in the City of Chicago through being able to
23 influence and control Streets and Sanitation and the
24 other city departments.
25 Q. Has the substance or the nature of that
1 informant information changed in more recent years or
3 A. No, sir.
4 Q. So again, speaking generally here before we
5 get into the specifics. What's the quality and nature
6 of the information you've received about 1001 in recent
8 A. That it was controlled -- that it was
9 influenced by organized crime to their benefit as a
10 place to employ friends, relatives, LCN associates, and
11 to -- as a power base within the City of Chicago for
12 jobs in Streets and Sanitation and working in
13 conjunction with the 1st Ward which was run by Pat
14 Marcy and John D'Arco, and it was the Mob's Union.
15 Q. And as you've prepared for your testimony
16 here today and reviewed some of the names of current
17 and recent officers as well as the persons for whom
18 allegedly improper pension and welfare payments were
19 made, have you determined that organized crime
20 influence is still at issue at Local 1001?
21 A. That's what the informants indicate, yes,
23 Q. Now briefly, Mr. O'Rourke, if you could look
24 at Volume One of the exhibits in front of you. And
25 we've already identified it. But Exhibit Number 1 is
1 an officer history chart which sets forth the persons
2 in relevant positions going back to 1970. Do you see
4 A. Yes, sir.
5 Q. And you've had a chance to look that over
6 before your testimony?
7 A. Yes.
8 Q. And the following four exhibits, 2 through 5,
9 are specific opinions from either the IHO or the
10 Appellate Officer. And I just want to identify those
11 for the record and ask what your involvement was in
12 these matters.
13 First is Exhibit Number 2, which is the
14 Chicago District Council opinion -- rather
15 Memorandum in 97-30T. You do recall the Chicago
16 District Council matter, right?
17 A. Yes, I do.
18 Q. And did you testify at length in those
20 A. Yes, sir.
21 Q. And what generally speaking was the subject
22 matter of your testimony?
23 A. Organized crime influence and control of the
24 Chicago District Council over a period of years.
25 Q. And did that include information concerning
1 some of the officers of the District Council as well as
2 some of the constituent Locals of the District Council?
3 A. Yes, sir.
4 MR. THOMAS: Mr. Vaira, I certainly don't
5 intend to go into all the findings you made there. I
6 would -- but again, as we go through this I would ask
7 that we simply be allowed to take judicial notice of
8 your previous findings here which really can't be
9 disputed --
10 THE INDEPENDENT HEARING OFFICER: You may,
11 but you're going to connect it up. As we go, you can
12 point out and then tell us how that may come into play.
13 All right?
14 MR. THOMAS: Thank you.
15 BY MR. THOMAS:
16 Q. And Mr. O'Rourke, Exhibits 3, 4, and 5
17 pertain to the Bruno Caruso, et al matter which was
18 Docket 99-12D. And did you also testify at length
19 concerning those proceedings.
20 A. Yes, sir.
21 Q. Specifically about individuals' connections
22 to organized crime; correct?
23 A. Yes, sir, I did.
24 Q. And again, Mr. Caruso at the time, in
25 addition to being a former member of -- a former
1 Business Manager of the District Council, was the
2 incumbent Business Manager of Local 1001, this Union,
4 MR. LYDON: Could we clarify which Caruso?
5 MR. THOMAS: Bruno Caruso.
6 THE WITNESS: Yes, sir, that's correct.
7 MR. THOMAS: And again, Mr. Vaira, I would
8 like to be able to refer to portions of these
9 throughout the proceedings without having to establish
10 the whole record of your prior findings.
11 THE INDEPENDENT HEARING OFFICER: Okay.
12 BY MR. THOMAS:
13 Q. All right. Mr. O'Rourke, I want to ask you
14 about your informants that you've developed that may
15 have information concerning present or prior members
16 and officers of Local 1001.
17 First a preliminary question. Are some of
18 these people identifiable by name and others not?
19 A. Yes, sir. There are confidential informants
20 who are individuals who provide information or are in a
21 position to provide information and do not wish to be
22 identified or testify openly for fear of their personal
24 The second class of individuals is
25 cooperating individuals or cooperating subjects. These
1 are individuals who provide information but will agree
2 to testify in open court and have their name --
3 THE INDEPENDENT HEARING OFFICER: And you
4 have in the past broken them into separate categories
5 and identified them by name; am I correct?
6 THE WITNESS: Yes.
7 THE INDEPENDENT HEARING OFFICER: We'll deal
8 with each of those separately and there may be some
9 different tests applied. All right? There are
10 different tests employed.
11 BY MR. THOMAS:
12 Q. Mr. O'Rourke, let's start with the people
13 that can be named. Is there a Mr. Granata that you
15 A. Yes, sir.
16 Q. For THE INDEPENDENT HEARING OFFICER reporter,
17 spell that.
18 A. Joseph, J-o-s-e-p-h, Granata, spelled
20 Q. Is he one of your informants?
21 A. Yes, sir. Cooperating subject.
22 Q. Tell us what you can about his background and
23 the nature of your debriefings with Mr. Granata.
24 A. Mr. Granata was a confidential informant and
25 then kind of transitioned into a cooperating subject.
1 He wore recording devices and then agreed to testify in
2 open court.
3 Q. This is back when you were in the Bureau?
4 A. Yes, sir. He was part of the Cicero Crew
5 under Joseph Ferriola, now deceased, and later with
6 Rocky Infelise. And he associated with Cicero Crew
7 members such as Harry Aleman, Butchie Petrocelli, James
8 Inendino (Phonetic) and others. He was part and parcel
9 of that crew. He was also a close associate and driver
10 for Chuckie Nicoletti, now deceased. And his father,
11 Frank Granata, who operated the Galewood or Granata
12 Funeral home, was a "made member" of organized crime.
13 His brother, Frank, Jr., Frank Granata, Jr., nickname
14 "Gigi" Granata, was also an LCN associate in the North
15 Side or Elmwood Park Crew.
16 Joe Granata was, as I said, an LCN associate
17 in the Cicero Crew, and he dealt with on a regular
18 basis -- on a daily basis organized crime figures over
19 the years. While he was an informant for the FBI or
20 cooperating subject, he wore a body recorder and made
21 narcotics arrests.
22 MR. LYDON: This is not as much a problem,
23 Mr. Hearing Officer, with where we were at the moment,
24 but I would like some clarification. He's identified
25 this man and then he's told who he's associated with.
1 But it's not at all clear how these people are members
2 of organized crime. Where we are right now I'm not
3 going to quarrel with the names that have been raised,
4 but I have concerns about as the way we proceed and how
5 it is that you can say, "Oh, this guy's a member of
6 organized crime, that guy is." It isn't something
7 Granata told -- you have to explain whether it's
8 independent or widely recognized or --
9 THE INDEPENDENT HEARING OFFICER: I believe
10 this is background. And when you refer to Granata, you
11 will -- I believe you will -- you debriefed him, and we
12 expect -- if you're talking he's been with Rocco
13 Infelise, we would like to know around that time how it
14 was if he's associated with Rocco Infelise. We're
15 looking for his reliability when he talks about what
16 else is going on. So -- I think you've done this
17 before and this is preliminary, but you may have to
18 particularize this as you go.
19 MR. LYDON: As I said, at the moment the
20 names aren't anything that I'm disturbed about, but I
21 can see this as a problem as we go forward.
22 THE INDEPENDENT HEARING OFFICER: Okay. Go
24 BY MR. THOMAS:
25 Q. Do you remember where you left off, Mr.
2 A. Yes, sir. Mr. Granata is now in the Witness
3 Security Program, and I debrief him periodically
5 Q. When is the most recent time you debriefed
7 A. October.
8 Q. Of this year?
9 A. Of this year, yes.
10 Q. And what if anything can you say about Mr.
11 Granata's reliability as a witness?
12 A. Mr. Granata actually purchased narcotics,
13 both cocaine and heroin, from an organized crime figure
14 who was then indicted and became a fugitive, was
15 arrested and was convicted in Federal Court of that.
16 He also provided information --
17 MR. LYDON: Who?
18 THE INDEPENDENT HEARING OFFICER: What was
19 his name?
20 THE WITNESS: Roy Salerno, S-a-l-e-r-n-o.
21 BY MR. THOMAS:
22 Q. Over the years have you found this Mr.
23 Granata to be reliable?
24 A. Yes, sir. He also provided information about
25 an individual named Chris Messino, who was a major drug
1 dealer in the south suburbs. And he made some
2 telephone recordings, and as a result Mr. Messino was
3 convicted and sent to federal prison.
4 Q. Have you or your colleagues, either the FBI
5 or the Inspector General's Office, when necessary been
6 able to corroborate what -- the information Mr. Granata
7 has given you.
8 A. Yes. We corroborated through other
9 informants or through investigation.
10 Q. Anything else you want to say before I move
11 on -- about Mr. Granata before I move on to the next
13 A. No, sir.
14 Q. Do you trust the information you get from Mr.
16 A. Yes, sir.
17 Q. Is there a person whose last name is Cooley
18 who you've debriefed over the years?
19 A. Yes, sir.
20 Q. Who is Cooley?
21 A. Robert Cooley was a Chicago criminal attorney
22 and a former Chicago police officer. He became a
23 cooperating subject working with the FBI and the U.S.
24 Attorney's Office and he wore a body recorder. He was
25 law partners with John D'Arco and Pat Marcy's old
1 group. He was used by the Outfit to fix cases,
2 particularly of bookmakers in local court and was
3 immersed in corruption. He walked into the U.S.
4 Attorney's Office and agreed to cooperate, and then he
5 proceeded to wear a wire.
6 Q. Is that Operation Greylord?
7 A. That wasn't Operation Greylord itself, but it
8 was along those lines. He was responsible for the
9 conviction, for instance, of the judge that freed Harry
10 Aleman. The judge -- not a conviction, but the judge
11 that committed suicide later on when he was interviewed
12 by FBI agents.
13 MR. LYDON: Excuse me.
14 THE INDEPENDENT HEARING OFFICER: Go ahead.
15 MR. LYDON: Conviction of a judge that
16 committed suicide?
17 THE WITNESS: I misspoke. I'm sorry. He
18 identified Judge Wilson, who had accepted a bribe from
19 Cooley, to fix a case of an LCN killer named Harry
20 Aleman who was then found not guilty by Judge Wilson.
21 As a result of his information -- Cooley's information
22 Harry Aleman was retried on the murder charges even
23 though he had been previously found not guilty.
24 THE INDEPENDENT HEARING OFFICER: This
25 sequence -- I think the sequence is that Harry Aleman
1 was tried in state court and acquitted. And I believe
2 Judge Wilson heard that and acquitted him.
3 THE WITNESS: Yes.
4 THE INDEPENDENT HEARING OFFICER: Later on
5 Cooley flips, becomes a cooperating individual, and
6 then testifies that he had bribed Judge Wilson to
7 acquit Aleman. And then when this became apparent,
8 Judge Wilson committed suicide. And then Aleman was
9 tried a second time and --
10 THE WITNESS: In Cook County Circuit Court.
11 THE INDEPENDENT HEARING OFFICER: Even though
12 he had been acquitted the first time.
13 THE WITNESS: Yes, sir.
14 THE INDEPENDENT HEARING OFFICER: And then he
15 was then convicted.
16 I think -- the reason I know that is that was
17 testified before me one other time. I'm familiar with
18 that. Not as a prosecutor. I was around when Harry
19 Aleman was acquitted. I remember that.
20 BY MR. THOMAS:
21 Q. Did Mr. Cooley testify in either the District
22 Council case or the Bruno Caruso case?
23 A. I believe he testified in the District
24 Council case as I recall. I don't believe he testified
25 in the Bruno Caruso case.
1 THE INDEPENDENT HEARING OFFICER: Yes, he
2 did. He testified -- I think he testified by
3 telephone, am I correct?
4 MR. THOMAS: That's my recollection.
5 THE INDEPENDENT HEARING OFFICER: He
6 testified by telephone. He testified in person in
8 THE WITNESS: District Council.
9 MR. THOMAS: They may have both been by
11 THE INDEPENDENT HEARING OFFICER: No. I
12 think they were both in person. They were both in
14 BY MR. THOMAS:
15 Q. Mr. O'Rourke, could you speak to Mr. Cooley's
16 -- your experience concerning Mr. Cooley's reliability
17 as a witness? Has he been corroborated?
18 A. Yes, sir, he has.
19 Q. Have you ever had any doubts about the
20 information you were getting from Mr. Cooley?
21 A. No, sir.
22 THE INDEPENDENT HEARING OFFICER: Well I take
23 it what you're telling us today that you're going to
24 relate some additional information from Mr. Cooley
25 aside from what he testified to in these proceedings?
1 THE WITNESS: Yes, sir.
2 MR. THOMAS: Yes.
3 Mr. Vaira, so there is no mystery here.
4 After I establish what this witness has to say about
5 these informants' reliability, I'm then going to go
6 down a list of names of current and former 1001 people
7 and have him testify about what information he's
8 received from these informants at any point about those
10 MR. LYDON: Well --
11 THE INDEPENDENT HEARING OFFICER: And you
12 have been in recent contact with Mr. Cooley?
13 THE WITNESS: Yes, sir.
14 THE INDEPENDENT HEARING OFFICER: How
16 THE WITNESS: October.
17 BY MR. THOMAS:
18 Q. Did you say that he recently died?
19 A. Mr. Cooley?
20 Q. Yes.
21 A. No, sir, not that I know of.
22 Q. Is it Mr. Bills who died?
23 A. Mr. Bills.
24 Q. We haven't come to him yet. Thank you.
25 All right. The next name I want to ask you
1 about is Guy Bills.
2 A. Yes, sir.
3 Q. Recently deceased?
4 A. Yes, about two years ago, maybe three.
5 Q. Did Mr. Bills testify in the District Council
6 or Bruno Caruso matters?
7 A. He testified in the District Council case. I
8 don't recall -- I don't believe -- I think he was dead.
9 THE INDEPENDENT HEARING OFFICER: He was dead
10 when the Bruno Caruso proceeding was going on.
11 BY MR. THOMAS:
12 Q. What can you tell us about Mr. Bills'
13 background and his reliability?
14 A. Mr. Bills was part of the 26th Street
15 Chinatown Crew and was an associate of the Carusos,
16 Frank Caruso and Bruno Caruso and the Roti's, and he
17 was involved in organized crime activities, chop shops.
18 He was an enforcer and collector. He was originally
19 convinced to cooperate by myself and another Special
20 Agent, Bob Peccoraro, was debriefed at great length,
21 and then he testified in federal cases and eventually
22 went into the Witness Security Program -- went to
23 prison in the Witness Security Program. When he had --
24 when he got out I re-contacted him and began to debrief
25 him again on personalities within organized crime.
1 Q. And with respect to all of these people that
2 we're reviewing, did you also debrief them concerning
3 labor racketeering matters?
4 A. Yes.
5 Q. And what were your conclusions, if any,
6 concerning Mr. Bills' -- the reliability of Mr. Bills'
8 A. Mr. Bills was a reliable source. He had
9 developed information while working with the FBI
10 resulting in the convictions of a number of
11 individuals. And the information that he provided was
12 corroborated by other informants.
13 Q. All right. Now I'm going to turn to the
14 people that you've indicated have been unwilling to
15 have their name used publicly. Have you given these
16 informants numbers for identification purposes?
17 A. Yes, sir.
18 Q. And have you done that in the previous
19 proceedings both in the District Council and the Caruso
21 A. Yes.
22 MR. THOMAS: There are four numbers, Mr.
23 Lydon, that we're going to talk about here. Shorthand
24 version is 2, 5, 12 and 17.
25 BY MR. THOMAS:
1 Q. And just so we don't get confused, Mr.
2 O'Rourke, I understand that 2 is actually short for
3 1002; is that right?
4 A. Yes, sir.
5 Q. And 5 is short for 1005?
6 A. Correct.
7 Q. 12 is 1012, and 17 is 1017?
8 A. Yes, sir.
9 Q. So for purposes of our questioning we'll
10 refer to 2, 5, 12 and 17.
11 What can you tell us, Mr. O'Rourke, about
12 Informant Number 2?
13 A. Informant Number 2 was a FBI informant
14 originally developed by Special Agent Ray Stratton back
15 in the 1960's, '68. He was an informant on and off for
16 the FBI all of those years. I began debriefing him in
17 about 1991 to the present time. He over those years
18 has provided information which was found to be accurate
19 through investigation and has resulted in arrests,
20 convictions, search warrants, and so on.
21 THE INDEPENDENT HEARING OFFICER: You might
22 have to particularize that. When you say he was
23 qualified by the FBI, he was actually accepted and
25 THE WITNESS: Yes, sir, he was.
1 MR. LYDON: I'm sorry?
2 THE INDEPENDENT HEARING OFFICER: I said he
3 was actually accepted by the FBI and qualified, put in
4 there -- this wasn't a hip pocket informant.
5 THE WITNESS: That's correct, sir.
6 THE INDEPENDENT HEARING OFFICER: Tell me
7 about his reliability. What did he do for a living?
8 THE WITNESS: In his earlier days he was a
9 criminal and a member of organized crime. He was
10 associated with the Grand Avenue Crew. He was involved
11 in burglaries, jewelry robberies, and was personally
12 associated with and dealt with well known Chicago
13 organized crime figures such as Joe Lombardo, Jr. --
14 Joe Lombardo, Joseph Andriacchi, the current boss of the
15 Mob, Joseph Ferriola, the boss of the Cicero Crew, now
16 also deceased, Rocky Infelise, more recently Michael
17 Spano, who was the lieutenant in charge of the Cicero
18 crew convicted along with Betty Maltese and the recent
19 case in Federal Court, and other organized crime
20 members. And that's confirmed through investigation
21 and through surveillance. We've actually put him with
22 these individuals.
23 THE INDEPENDENT HEARING OFFICER: What did he
24 do with them?
25 THE WITNESS: He, primarily in his later
1 years, is trusted by them and they converse and they
2 talk business and what's going on and so on. He's not
3 -- no longer involved directly in organized crime
4 related criminal matters.
5 THE INDEPENDENT HEARING OFFICER: Does he
6 have legitimate employment?
7 THE WITNESS: Yes, he does.
8 THE INDEPENDENT HEARING OFFICER: Just give
9 me a field.
10 THE WITNESS: He's in construction and
12 THE INDEPENDENT HEARING OFFICER: Contractor?
13 THE WITNESS: Yes.
14 THE INDEPENDENT HEARING OFFICER: Okay. All
15 right. Now you say he gave you -- give me some
16 examples of why you say he's reliable. What has he
17 demonstrated, has he done? Give me some time periods.
18 THE WITNESS: He's provided information, for
19 instance, on who the current bosses of the Organized
20 Crime Syndicate are in Chicago, confirmed through later
21 arrests, convictions or other informant information.
22 Intelligence information. He provided information on
23 the scheme to defraud the city of Cicero which involved
24 the President,
Betty Maltese, and Michael Spano and
25 James Inendino (Phonetic) and others in detail which
1 proved then to be true and resulted in the indictments
2 and convictions by the FBI and --
3 THE INDEPENDENT HEARING OFFICER: How does
4 that occur, resulted in -- what --
5 THE WITNESS: They were indicted.
6 THE INDEPENDENT HEARING OFFICER: But he's
7 giving somebody information that later on something
8 occurs and someone's indicted. How did it get from one
9 place to the other? What did they do with this
11 THE WITNESS: He provided it to the FBI at
12 that time and it was confirmed through investigation by
13 the FBI.
14 THE INDEPENDENT HEARING OFFICER: Did the FBI
15 get any warrants, any --
16 THE WITNESS: Yes, sir. There were several
17 people indicted and then convicted in Federal Court.
18 THE INDEPENDENT HEARING OFFICER: Did this
19 individual provide any information for a search
21 THE WITNESS: No. In that case he provided
22 the information about the scheme, the ongoing scheme.
23 THE INDEPENDENT HEARING OFFICER: General
25 THE WITNESS: Yes, sir.
1 THE INDEPENDENT HEARING OFFICER: Okay. Go
3 MR. THOMAS: And Mr. Vaira, I certainly don't
4 want to cut off any questioning you want to do with Mr.
5 O'Rourke on this.
6 THE INDEPENDENT HEARING OFFICER: No, no.
7 You're about reliability, and there's certain tests for
8 reliability. Okay.
9 MR. THOMAS: Just so we're clear though. I
10 believe all but one of these informants, maybe all, but
11 I believe all but one have been previously described in
12 testimony and then written up in your opinions. Happy
13 to repeat it here if that helps.
14 THE INDEPENDENT HEARING OFFICER: We'll hear
15 them again.
16 MR. THOMAS: All right.
17 BY MR. THOMAS:
18 Q. All right. Anything else concerning Number 2
19 in his reliability, Mr. O'Rourke?
20 A. On one occasion, recalling back fairly
21 recently, he provided information about a tractor
22 trailer load of stolen goods which I relayed to the
23 FBI, and they conducted a surveillance and arrested --
24 recovered the stolen load and arrested several subjects
25 based entirely on his information.
1 Q. So you felt that information was
3 A. Yes, I did.
4 Q. Do you have any doubts about the information
5 you got from Informant Number 2?
6 A. No, I don't. And it's usually -- but it's
7 been corroborated by other independent informants
8 through independent investigation.
9 Q. And again just to be clear, what is the
10 nature of Mr. -- Number 2's life that makes him
11 unwilling to represent to you that you can use his name
12 in public?
13 A. He deals with -- as a former member or an
14 associate member of organized crime himself, he deals
15 on a daily business with members of organized crime and
16 with individuals in the labor movement, and they talk
17 openly in front of him. He then reports it.
18 By nature I should point out that by nature a
19 lot of the information from organized crime informants
20 is necessarily intelligence information because it's
21 by nature a secret criminal society, and it's a
22 conspiracy. And so it's unlike a normal criminal case
23 like a theft from interstate shipment case or
24 something. The Bureau, and to come extent we rely on
25 intelligence type information necessarily.
1 Q. Background data --
2 A. Yes, sir.
3 Q. -- that's used as leads for other matters.
4 A. That's correct.
5 Q. When is the last time you debriefed Informant
6 Number 2?
7 A. Just this past week.
8 Q. Let's move on to Informant Number 5. What
9 can you tell us about his background and reliability?
10 A. He's -- Number 5 has been a member of
11 organized crime for approximately thirty years. He
12 served time in prison and he was part of the Cicero
13 Crew, reporting to former Cicero Crew Boss Joe
14 Ferriola, now deceased, later Rocky Infelise. He was
15 known to associate with the enforcement group
16 consisting of a number of individuals, one of whom was
17 James "Duke," "Dukey" Basile. He was a cooperating
18 subject and wore a wire, and he was identified on the
19 wire as talking to Basile discussing activities. And
20 they engaged in shakedowns and collection of money and
21 threats to individuals and so on. He continues to be a
22 trusted individual and meets with organized crime
23 figures on a regular basis. His father was a Chicago
24 LCN associate and worked for the Department of Streets
25 and Sanitation, as did he periodically. And so he has
1 direct information over a period of thirty years with
2 individuals who, like him, are members of organized
3 crime or associates.
4 THE INDEPENDENT HEARING OFFICER: Is he a
5 "made member"?
6 THE WITNESS: No, he's not.
7 BY MR. THOMAS:
8 Q. Could you describe how either law enforcement
9 or inspectors of LIUNA have determined him to be a
10 reliable source?
11 A. Yes, sir. I began debriefing Number 5 in
12 approximately 1987. And during that time frame he
13 provided information which was used in Title III
14 Affidavits, information that was utilized in search
15 warrants, successful search warrants, resulting in the
16 arrest of individuals or recovery of stolen property
17 and drugs, and in intelligence information regarding
18 organized crime figures, who was meeting who and where
19 they hung out and so on and so forth.
20 Q. Thank you.
21 THE INDEPENDENT HEARING OFFICER: What's --
22 the search warrants or arrest warrants that resulted,
23 what were the names of the individuals?
24 THE WITNESS: He provided information which
25 assisted in the arrest of the Rocky Infelise Crew. And
1 I think there was 14 or 15 individuals arrested and
2 then later convicted in Federal Court in that case
3 alone. Provided information in recovery of stolen
4 property, theft from interstate shipment cases,
5 burglaries committed by organized crime figures.
6 THE INDEPENDENT HEARING OFFICER: All right.
7 BY MR. THOMAS:
8 Q. Have you -- has there been any doubt in your
9 mind over the years that the information you've been
10 getting from Informant Number 5 has been accurate and
12 A. No, sir.
13 Q. Moving on to Number 12, what can you tell us
14 about his background?
15 A. Number 12 was a member of organized crime.
16 He was in the Elmwood Park crew.
17 Q. "Made member" or an associate?
18 A. He was an associate. And he participated in
19 illegal activities with organized crime, collecting
20 involving vending machines and collecting from gamblers
21 who were delinquent. He provides intelligence
22 information on organized crime on a regular basis and
23 meets with individuals, talks with individuals who are
24 members of organized crime and who believe that they
25 can talk openly in front of this person.
1 Q. Can you address his reliability as an
3 A. The information he provides is corroborated
4 by either investigation or through other informants,
5 but I began talking with him after I left the FBI, and
6 so there are necessarily no search warrants or other
7 actual documentation that he's provided.
8 Q. So this is a post FBI informant, perhaps
9 better put a LIUNA only informant, right?
10 A. Yes, sir.
11 Q. And you indicated that you've tested his
12 reliability through corroboration of other -- through
13 debriefings of other informants.
14 A. Yes, sir.
15 Q. Obviously without getting information out
16 that would identify this person, can you give us some
17 -- a sense of how you do that? What types of
18 information do you cross check to see that it's
20 A. If he says that he's met with Mr. X, who we
21 know to be a member of organized crime and has done
22 certain things, and then I asked other informants, "Do
23 you know Mr. X or have you ever heard of this person,"
24 and they all indicate that person's a member of
25 organized crime. He meets with X, Y and Z. He does
1 this and it all corroborates each other.
2 MR. LYDON: I object. This is getting me
3 totally confused because I think we've got X, Y and Z,
4 and I don't know who we're talking about. When you
5 said X the first time around, you referred to X as a
6 member of organized crime. Now I get the impression
7 that X is somebody else. It's a confusing answer.
8 MR. THOMAS: I think he's simply making the
9 point that -- the question specifically was: "How do
10 you cross check those." He's simply saying,
11 "When I debrief another witness and I run the
12 information by another witness, and I get the same
13 information from another witness."
14 THE INDEPENDENT HEARING OFFICER: Let's hear
15 it from him. Without using X and Y --
16 THE WITNESS: Yes, sir.
17 THE INDEPENDENT HEARING OFFICER: You get Mr.
18 Lydon's question? How do you debrief -- this is a new
19 informant, didn't come from the FBI. You developed him
21 THE WITNESS: No, sir. He did come from the
22 FBI actually, and I was allowed to speak with him and
23 continued speaking with him. He originally had been
24 cooperating with the FBI, and so still periodically
25 does, and was considered reliable by the FBI. He
1 provides information based on his experience as a
2 member of organized crime. And he knows individuals
3 who are members or who are associate members and what
4 they do and how they do it, and the information that
5 he's provided is corroborated on debriefing these other
6 informants or these other cooperating individuals.
7 THE INDEPENDENT HEARING OFFICER: This
8 individual -- informants have many, many reasons for
9 giving information. Sometimes it's called fire
10 insurance too. They get in trouble and then they go
11 back to the FBI and they think they can get out of it,
12 and there's times the sentence may be moderated or
13 something. What's in this for him now that he's no
14 longer cooperating with the FBI? What's in it now for
15 him to cooperate?
16 THE WITNESS: Actually, Mr. Vaira, nothing is
17 in it for him. It's pretty much based on the personal
18 relationship and trust with the debriefer, namely
19 myself, and he provides the information for that
21 THE INDEPENDENT HEARING OFFICER: What's he
22 doing for a living?
23 THE WITNESS: He has a regular job. I don't
24 want to --
25 THE INDEPENDENT HEARING OFFICER: I
1 understand. A legitimate job?
2 THE WITNESS: Yes, sir, he has a legitimate
4 THE INDEPENDENT HEARING OFFICER: He's self
6 THE WITNESS: Self employed, regular
7 position, you know, and he is able then to -- is able
8 to meet with and talk with other individuals who are
9 members of organized crime.
10 BY MR. THOMAS:
11 Q. If I could just interject one question here,
12 Mr. O'Rourke. When you say that this is not -- you
13 initially said this is a LIUNA only informant. I take
14 it that's from your own experience, correct?
15 A. Yes, sir.
16 Q. In other words, but the informant came to you
17 from -- via the FBI?
18 A. Correct. Right.
19 Q. In other words, he first was a Bureau
20 informant after you had left the Bureau.
21 A. That's correct.
22 Q. And then they put you in touch with him or
23 vice versa?
24 A. I debriefed him while I was in the Bureau,
25 actually, on one occasion. So I knew him and he knew
1 me from that one occasion, but I was not the case agent
2 on him and I did not debrief on a regular basis until
3 after I started with LIUNA.
4 Q. Thank you. Have you ever doubted the quality
5 or accuracy of the information you've been getting from
6 informant Number 12?
7 A. No, sir.
8 Q. Moving on to Number 17. What can you tell us
9 about Number 17?
10 A. Number 17 is an individual who is
11 knowledgeable about organized crime. He was an LCN
12 associate. He's personally related to some organized
13 crime figures. He has personally been associated with
14 such figures as Joseph Lombardo, Michael Switek --
15 Q. Lombardo Senior or Junior?
16 A. Senior and Junior both. And members of the
17 North Side Crew primarily. He worked for the City of
18 Chicago. And he served time in prison with organized
19 crime figures and is extremely knowledgeable and meets
20 and talks with them on a regular basis.
21 Q. Have you been able to assess his reliability
22 as an informant?
23 A. Yes, sir.
24 Q. And what conclusions, if any, have you drawn
25 about that?
1 A. The information he's provided has been
2 accurate and reliable.
3 Q. So in connection with the names I'm about to
4 review with you, there are three informants named and
5 then four additional unnamed informants, all of whom
6 you feel have provided you with reliable information.
7 A. Yes, sir.
8 Q. And can you describe for the Hearing Officer
9 and for the others in the room, any efforts on your
10 part to make sure that the information you were getting
11 from these people was current for purposes of this
13 A. I debriefed them probably within the last --
14 mostly in October, some in November, updated the
15 information. A lot of the information has been
16 provided all along as I debriefed them on a regular
17 basis. But I went back and ran the names by them, some
18 of the other names by them, and of course the list of
19 the individuals that were on this document supplied to
21 Q. Just to be clear what you're referring to
22 there. At my request did you also have the list of 33
23 recipients, 1001 members who received Pension and
24 Welfare contributions, and run those names by these
25 informants as well?
1 A. Yes, sir, I did.
2 Q. So in prior conversations you may not have
3 listed all 33 of those.
4 A. That's correct.
5 Q. Okay. Thank you.
6 Let's start first with the current officer
7 at Local 1001. The business manager is Nicholas
8 Gironda; is that correct?
9 A. Yes, sir.
10 Q. Have you had occasion in the past and
11 recently as well to ask these informants about Nick
13 A. Yes, sir.
14 MR. LYDON: By way of background, are you
15 going to say which of them you spoke to?
16 MR. THOMAS: Yes, he will.
17 BY MR. THOMAS:
18 Q. Which of the seven informants, Mr. O'Rourke,
19 had anything of significance to say about Mr. Gironda?
20 Let's just list them and then we'll go through them.
21 A. 2, 5, 12, and Guy Bills and Joe Granata and
22 Bob Cooley.
23 Q. So all but 17?
24 A. That's correct.
25 THE INDEPENDENT HEARING OFFICER: Exclude Guy
2 MR. THOMAS: I'm sorry, Mr. Vaira?
3 THE INDEPENDENT HEARING OFFICER: Exclude Guy
5 MR. THOMAS: For all of the testimony?
6 THE INDEPENDENT HEARING OFFICER: On this
7 one. If you can give me something, just leave Guy
8 Bills out separately.
9 BY MR. THOMAS:
10 Q. So what if anything, Mr. O'Rourke, have you
11 learned through your debriefings of these, let's call
12 them five, excluding Mr. Bills, 2, 5, 12, Granata and
13 Cooley, what have you learned about Mr. Gironda?
14 A. In summary, the informants and the
15 cooperating witnesses indicated Gironda was related to
16 Bruno Caruso and to the Rotis from the 26th Street
17 Chinatown. And after he got into trouble with the City
18 of Chicago he was brought into the Union and began to
19 be paid by the Union. That he was Bruno Caruso's
20 relative, cousin I believe, and is -- was known to them
21 as a Chicago LCN associate affiliated with the 26th
22 Street Chinatown Crew.
23 Q. All of them said words to that effect?
24 A. Yes, sir.
25 THE INDEPENDENT HEARING OFFICER: What's the
1 trouble with the City you're referring to? You're
2 referring to something with the City, Nick Gironda had
3 some trouble with the City.
4 THE WITNESS: I can't recall the details, but
5 he was in some kind of an investigation by the
6 Inspector General, and he was in an unpaid position
7 with the Union, and then he was -- on orders of Bruno
8 Caruso he began to be paid a salary.
9 MR. LYDON: And I object and move to strike
10 all that's said -- all he said he was associated with
11 the 26th Street Crew. That kind of information is just
12 too indefinite to mean anything. I don't know what it
14 MR. THOMAS: That's an objection that goes to
15 the weight, not to the relevance or the admissibility.
16 If what Mr. Lydon is saying is that the only thing is
17 relevant is if Mr. O'Rourke has personally witnessed
18 Mr. Gironda taking a bag of cash, we're not going to
19 present that evidence. We don't have that evidence.
20 THE INDEPENDENT HEARING OFFICER: I don't
21 think he's saying that. His objection is I guess in
22 the weight of substance, some particularity as to what
23 that means. Associated can mean associated. It also
24 can mean very associated, it could mean in passing.
25 And I think his objection -- I'll accept it, but, you
1 know, giving it the weight, as I have to do in all
2 these, I really have to go through these with a fine
3 tooth comb. And I understand he's associated with the
4 26th Street Crew --
5 MR. LYDON: It's just too vague --
6 THE INDEPENDENT HEARING OFFICER: I think you
7 -- he has to explain a little more.
8 BY MR. THOMAS:
9 Q. Mr. O'Rourke, is there -- I suppose if you
10 have to break these down conversation by conversation
11 to the extent that you can, maybe that's the way to go.
12 But are you able to, to the extent possible, put in
13 their words the information that you gleaned concerning
14 Mr. Gironda.
15 By way of background let me say with respect
16 to all these informants you went through a list of some
17 30 plus names, right?
18 A. Yes, sir.
19 Q. And you've got a paragraph or two on each one
20 if they knew something about that person.
21 A. Yes, sir.
22 Q. So in that context, you know, what did these
23 people say about Nick Gironda?
24 THE INDEPENDENT HEARING OFFICER: What did he
25 do? They're all probably saying -- you're saying he's
1 connected in some fashion.
2 THE WITNESS: That's correct.
3 THE INDEPENDENT HEARING OFFICER: Tell us
4 what that means. What does he do to be connected?
5 THE WITNESS: All of the informants said that
6 they knew from personal experience and from
7 conversations with other members of organized crime
8 that Nick Gironda was an organized crime associate and
9 was beholden or involved with the 26th Street Crew,
10 which was run by Frank Caruso, and previously to him
11 "Skids" Caruso, and he was a relative of the Carusos.
12 And further they all indicated that he replaced Bruno
13 Caruso because he was a member of the 26th Street Crew,
14 and as a way of continuing the influence of that group.
15 THE INDEPENDENT HEARING OFFICER: When you
16 say "replaced Bruno Caruso," what do you mean by that?
17 THE WITNESS: As Business Manager.
18 THE INDEPENDENT HEARING OFFICER: Mr.
20 THE WITNESS: Bruno Caruso was part of the --
21 involved in the Union.
22 THE INDEPENDENT HEARING OFFICER: Two years
24 MR. THOMAS: I think -- well your opinion
25 came down --
1 THE INDEPENDENT HEARING OFFICER: It was
2 about two years ago. What was Nick Gironda before he
3 became the Business Manager?
4 MR. THOMAS: I believe Secretary-Treasurer,
5 but I'll check.
6 THE INDEPENDENT HEARING OFFICER: Okay. He
7 was an officer. Okay.
8 THE WITNESS: He was an officer.
9 MR. THOMAS: He was Secretary-Treasurer.
10 And then when Mr. Caruso was expelled from the Union,
11 which, by the way, was by your opinion of January 10,
12 2001, which is then affirmed September 13th, 2001. And
13 in 2001 Mr. Gironda became Business Manager.
14 BY MR. THOMAS:
15 Q. So Mr. O'Rourke, what did your informants say
16 with respect to Mr. Gironda's accession to the Business
17 Manager position.
18 A. Their information was based on talk among
19 organized crime members, and they indicated that that
20 was to be expected and the word -- the word on the
21 street was because he was a relative of the Carusos and
22 a member of the 26th Street Chinatown Crew, then he
23 ascended to that job to continue the influence of the
24 26th Street and organized crime in the Union.
25 Q. One second.
1 Now Mr. O'Rourke, in the -- this has
2 previously been covered in some of the other cases, but
3 if you turn to Exhibit Number 2 in your book, on page
4 245 of the District Council opinion --
5 MR. LYDON: Could we have a moment?
6 THE INDEPENDENT HEARING OFFICER: What are we
7 looking at, gentlemen?
8 MR. THOMAS: Page 245 of Exhibit 2.
9 BY MR. THOMAS:
10 Q. Specifically the background is paragraph 61,
11 but specifically paragraph number 62. Do you recall,
12 Mr. O'Rourke, that there was a time when you and your
13 colleagues served the District Council Trusteeship
14 papers on Mr. Bruno Caruso.
15 A. Yes, sir.
16 Q. And in connection with that service of
17 papers, had existing law enforcement officials been
18 notified that this was going to happen for purposes of
20 A. Yes, sir.
21 Q. And as set forth in paragraph number 62, what
22 did Mr. Caruso and anyone else do once he was given
23 those papers?
24 A. Bruno Caruso was accompanied by Nicholas
1 Q. Who at the time was the Secretary-Treasurer
2 of 1001?
3 A. Yes, sir.
4 Q. And a Delegate to the District Council?
5 A. They had been attending a golf outing at the
6 Old Oak Country Club in Orland Park. We approached and
7 served him with the papers and then left, and
8 surveillance had been instituted. Gironda and Caruso
9 together then proceeded first to a trucking company run
10 by a Caruso relative named Bruno Barbara,
11 Trucking Company, and then from there proceeded to the
12 residence of his uncle, Alderman Roti.
13 Q. So there are two that's there, Mr. Caruso and
14 Mr. Gironda, that you described them being involved in,
15 first starting at Barbara Trucking?
16 A. Yes, sir.
17 Q. And second with Alderman Roti?
18 A. Yes.
19 Q. And the Roti visit is described in paragraph
21 A. Yes, sir, that's correct.
22 Q. In your expert opinion, Mr. O'Rourke, what
23 are the organized crime implications of Mr. Caruso and
24 Mr. Gironda visiting first Barbara Trucking and then
25 second Alderman Roti after being served these papers.
1 MR. LYDON: Object to the speculation.
2 THE INDEPENDENT HEARING OFFICER: Any other
4 MR. THOMAS: The question was: "What in your
5 expert opinion is the organized crime significance of
6 the -- both District Council and 1001 officers --
7 excuse me. Bruno Caruso was the Business Manager of
8 the District Council. Nick Gironda was a Delegate to
9 the District Council. Caruso was the Business Manager
10 at the time of 1001 and Gironda was Secretary-Treasurer
11 of 1001. The question to the witness was: "What's
12 the, in your opinion, is the organized crime
13 significance, if any, to their visiting first, Barbara
14 Trucking, and second, Alderman Roti in connection with
15 receiving these papers." And the relevance of this has
16 already been established in your prior --
17 THE INDEPENDENT HEARING OFFICER: I'll
18 overrule the objection. Just let me hear it. I'm not
19 so sure where we're going with this. Go ahead.
20 THE WITNESS: The primary significance of
21 both -- the visit to Barbara Trucking is -- I don't
22 know the significance of that. But Barbara was
23 arrested with Frank Caruso and "Shorty"
24 1980 and is also a relative of Carusos, and he's a
25 member -- he's a Chicago LCN associate.
1 BY MR. THOMAS:
2 Q. Who are you talking about?
3 A. Bruno Barbara, B-a-r-b-a-r-a.
4 The visit to Alderman Roti, which is Bruno
5 Caruso's uncle, as I recall, Fred Roti, who is now
6 deceased, was the Alderman for the 1st Ward and was
7 involved, according to the investigation by the FBI,
8 with the corruption and influencing of the City in
9 Streets and Sanitation through the 1st Ward
10 Organization which was proved by or at least indicated
11 by cooperating witness Cooley and through investigation
12 and wire taps.
13 THE INDEPENDENT HEARING OFFICER: I believe
14 that the -- the facts will speak for themselves. We
15 don't need his speculation as to what they mean if the
16 -- Alderman Roti is -- what Alderman Roti was. I can
17 glean something or not glean something from that. So
18 I'll take that --
19 MR. THOMAS: And if I could just --
20 THE WITNESS: I'll overrule the objection.
21 MR. THOMAS: If I can refer you, Mr. Vaira,
22 to specific of those paragraphs and the underlying
23 testimony of course in the District Council case --
24 this also comes up in the Bruno Caruso disciplinary
25 case. I just want to give you the cites for that.
1 THE INDEPENDENT HEARING OFFICER: I'm
2 familiar with both those opinions that Bruno Caruso
3 went to see Alderman Roti after being served with the
4 subpoena -- the complaint.
5 BY MR. THOMAS:
6 Q. Mr. O'Rourke, could you just help us identify
7 the passage in Exhibit 4, where this is also discussed,
8 and let me direct your attention to
page 53, paragraph
9 93 of Exhibit 4. Do you see that, Mr. O'Rourke?
10 A. Yes, sir, right.
11 Q. So did this matter come up also in the Bruno
12 Caruso hearing specifically?
13 A. Yes, it did.
14 MR. THOMAS: And the findings that flow from
15 that, Mr. Vaira, were that you rejected Mr. Caruso's
16 proffer that this had been a visit to his mother and
17 not to Mr. Roti.
18 BY MR. THOMAS:
19 Q. All right. The visit to Roti's residence,
20 was that a short visit or an extended visit?
21 A. Thirty minutes.
22 Q. And from your perspective -- and I apologize
23 if you've already answered this question. Knowing what
24 you do about organized crime in Chicago, what
25 inferences, if any, would you have drawn from the fact
1 that Mr. Caruso and Mr. Gironda went immediately to Mr.
2 Roti's house after being served these papers?
3 MR. LYDON: Objection.
4 THE INDEPENDENT HEARING OFFICER: Let me make
5 a statement here. I'm trying to draw a fine line here.
6 Mr. O'Rourke is testifying as an expert and he's also
7 testifying as somewhat of an occurrence witness. And
8 his testimony as an expert generally is an area based
9 upon what you know is Mr. Gironda quote, "connected" or
10 -- the fact that certain incidents occur such as
11 visiting Alderman Roti's place and giving the
12 significance of it, I mean it borders on expertise. I
13 don't think we need to hear an expert opinion on that
14 because I know what it means. You can use that as
15 argument. If we're using him as an expert, let's use
16 him as an expert rather than this. And the fact that
17 he goes down and he spends thirty minutes in there, we
18 don't need -- a layman can give you an expert opinion
19 on that what you -- okay? So let's keep Mr. O'Rourke
20 in his area of being an expert rather than an area that
21 he talked about unless it's something very peculiar.
22 All right.
23 MR. MENDENHALL: Can we take a five minute
25 THE INDEPENDENT HEARING OFFICER: Sure.
1 (Whereupon a lunch break was taken
2 in the proceedings after which
3 the following proceedings were
5 THE INDEPENDENT HEARING OFFICER: Okay,
6 ladies and gentlemen, we're going to go back on the
7 record here. Madam Reporter, you ready to go?
8 THE COURT REPORTER: Yes, sir.
9 THE INDEPENDENT HEARING OFFICER: Gentlemen,
10 you should be ready to go. Back on the record.
11 MR. THOMAS: Mr. Vaira, a couple of
12 procedural things.
13 First I've talked to Mr. Lydon about this and
14 he is agreeable. Mr. Jorgensen is available, and I
15 think we could -- if we took a break on Mr. O'Rourke's
16 testimony, we could probably finish his direct and
17 cross today. Just as a courtesy to him I would like to
18 do that since he's come all the way in town for his
20 THE INDEPENDENT HEARING OFFICER: On
21 Jorgensen you will finish his direct and cross.
22 MR. THOMAS: Yes.
23 THE INDEPENDENT HEARING OFFICER: That's
24 fine. It's your gig, gentlemen. And we will --
25 MR. THOMAS: And then we will resume Mr.
1 O'Rourke's whenever he's available.
2 MR. FARACI: Mr. Thomas has indicated he
3 believes the testimony of Mr. Jorgensen is going to be
4 about an hour and a half to two hours, so I can't
5 guarantee that we will be able to finish our cross
6 today. However, I think Mr. Jorgensen is available
7 also on some other dates, or if we can bring him back
8 tomorrow to finish the cross, we can do it then.
9 MR. THOMAS: I certainly didn't intend to
10 preclude anything there.
11 THE INDEPENDENT HEARING OFFICER: No. Just
12 as to where we're going. Gentlemen, coming in I ran
13 into Mr. Jorgensen -- the attorney for the Funds and
14 he's holding a subpoena, a copy of which you gave to
15 me. And is there -- what do you need me to do with
16 these subpoenas?
17 MR. FARACI: What we would like to do is Mr.
18 Jorgensen indicated there's quite a few volumes. What
19 I would like them to do is for you to order them to
20 produce these documents for our inspection. In
21 particular --
22 THE INDEPENDENT HEARING OFFICER: Let me do
23 this: First, the law is unclear. I mean our own law,
24 our own laws are somewhat unclear as to these
25 subpoenas, but if I sign them they'll go. That's what
1 I understand.
2 MR. THOMAS: I would assume so. I guess the
3 -- I view these two requests quite distinctly to the
4 extent that the subpoena for testimony talks about
5 bringing LIUNA members before you. It seems to me that
6 he has the right to ask for that and, you know,
7 assuming there is some relevance to it, that that
8 should happen.
9 With respect to the subpoena to the entity
10 for documents, number one, they're clearly overbroad on
11 their face. We're talking about probably hundreds of
12 thousands of documents here. And -- but secondly, this
13 is a subpoena to a third party. It's the equivalent of
14 subpoenaing a bank. And so I think from that
15 perspective it's unenforceable. If Mr. Faraci can get
16 this voluntarily from the Funds, that's another matter.
17 But it seems to me that actually issuing a subpoena for
18 production of documents from the Funds, not from the
19 Union, but from the Funds -- I would have no problem if
20 this were a subpoena to a Local or a District Council.
21 But the Funds are a different beast all together. I
22 think there is a legal problem and a practical,
23 burdensome problem.
24 THE INDEPENDENT HEARING OFFICER: There is
25 some division of authority as to how much authority I
1 have over or the Union itself has over a Pension Fund
2 or Welfare Fund. We certainly have authority over its
3 Union Trustees. That's for sure. Now, the issue is if
4 we issue -- I issue a subpoena on the request of a
5 participant here, it's a Union, one, to see records of
6 -- wanting to see records of a Fund that he
7 participates in, am I correct?
8 MR. FARACI: Yes, your Honor, these are
9 documents that the GEB Attorney has had access to for
10 many years now, and most of these documents are
11 documents that they relied upon in bits and pieces as
12 they put together their case. It's only fair that we
13 have access to look at the complete record of all of
14 these documents beginning from 1963 all the way to the
16 THE INDEPENDENT HEARING OFFICER: Now before
17 we get to that -- the burdensome part, I think that I
18 would say at first blush I believe -- without me I
19 think even if I believe you to participate in the
20 Union, probably has the right to go to the Fund that
21 you contribute to and see documents. I think just as a
22 broad, general statement because you contribute to it,
23 it's your members'. I won't have any problem issuing
24 the subpoena. If they want to contest it as far as the
25 validity, we'll deal with that.
1 The next question becomes burdensome. And
2 '63 back to now may be burdensome.
3 MR. THOMAS: Mr. Vaira, if I could briefly.
4 I'm concerned about the precedent here of subpoenas to
5 third parties and the enforceability of that. For
6 example, in your papers you've got a lawsuit that Local
7 1001 filed against the Funds. It's a declaratory
8 judgment action concerning the very same pension issues
9 that we're dealing with here. That was filed in, I
10 believe, in October of 2002. If Local 1001 wanted this
11 history, they had a pending court action where they
12 could have issued these discovery requests, and I can
13 give you the exact reference in our papers.
14 MR. FARACI: If I could address that, your
15 Honor. To begin with --
16 MR. THOMAS: If I could just finish.
17 THE INDEPENDENT HEARING OFFICER: Go ahead.
18 MR. THOMAS: It's Tab 14 in your materials,
19 which is Volume Three of the exhibits. They filed a
20 lawsuit seeking declaratory relief concerning the
21 Pension Fund issues right here. So that's the kind of
22 vehicle that's been available to the Local since
23 October of 2002 for this kind of document request. I'm
24 concerned of the precedential nature of IHO subpoenas
25 to third parties that are clearly going to raise legal
1 issues. It may well be that Mr. Faraci can get this
2 voluntarily, and I don't stand in the way of that. I
3 don't want to stand in the way of that. But I think,
4 you know, he clearly could have had Judge Shadur
5 supervise the discovery process on this very
6 substantive issue.
7 MR. FARACI: If I could address that.
8 THE INDEPENDENT HEARING OFFICER: Before you
9 get to that. You were the prosecutor in Anthony
11 MR. THOMAS: Correct.
12 THE INDEPENDENT HEARING OFFICER: What was
13 the issue there concerning you and Paul Luskin
14 attempting to get records from the Funds?
15 MR. THOMAS: The issue had to do with a Union
16 member's misconduct during the course of his employment
17 at the Funds.
18 THE INDEPENDENT HEARING OFFICER: What did
19 you want?
20 MR. THOMAS: We never subpoenaed anything
21 from the Funds. The investigators got access to
22 documents, certainly not through any IHO subpoena,
23 through contacting witnesses and the like. And there
24 was a lot of back and forth about whether those
25 documents could be used or not. But that's -- but I
1 never sought your subpoena authority for a subpoena to
2 the Funds, which is what we're dealing with here. So
3 my point is, if they can get it through a lawsuit or if
4 they can get it voluntarily, that makes a whole lot
5 more sense than actually having the IHO issue a
7 THE INDEPENDENT HEARING OFFICER: That's
8 another -- if it pertains to --
9 MR. FARACI: The purpose of the lawsuit, your
10 Honor, was an attempt to get at various different
11 issues. And part of what the GEB Attorney is raising
12 in their complaint is conduct that goes back to 1963
13 and throughout -- I'm going to rephrase that. They're
14 alleging that there's conduct that goes back to 1963.
15 And the documents that we would like to seek are
16 documents that are going to show that the Fund had
17 knowledge of certain contributions being made by Local
18 1001 and had knowledge who these contributions were
19 being recorded for. And also, that they had agreed
20 from 1963 up until the present to accept these
21 contributions with knowledge of whether or not these
22 people were being paid by Local 1001 as employees or
23 whether or not they were just contributions being made
24 on their behalf.
25 THE INDEPENDENT HEARING OFFICER: Does the
1 Fund really have that discretion? You pay money and
2 they take it? All right? I mean the Union says,
3 "Here's the contributions from X, Y and Z," and you
4 send it in, the Fund takes it.
5 MR. FARACI: It's clear in their documents
6 what fiduciary responsibilities they have in terms of
7 auditing. And we deserve to have access to these
8 audits that they performed over the years to see
9 whether or not these contributions were referenced,
10 whether or not a flag was raised at a certain point,
11 and that they should have then at that point exercised
12 their responsibility and their fiduciary duties to
13 figure out what was going on with Local 1001 in these
15 THE INDEPENDENT HEARING OFFICER: Now that
16 you've told me, I understand where you're going with
17 it. You have to convince me of that, because I've
18 known of situations where ghost employees and money's
19 been paid for them in New York. Now that doesn't mean
20 you fellows do it here, but you've got to convince me
21 that there's some significance or relevance and
22 fiduciary responsibility of that Union to do that. Go
24 MR. LYDON: What he's alluding to is the fact
25 that the Fund was well aware of the employment status
1 of these individuals. This is not a ghost payroller
2 situation. In other words, they know -- it's disclosed
3 and understood that these are persons who aren't
4 receiving wages but for whom contributions -- Pension
5 and Welfare contributions are being made.
6 MR. THOMAS: That assumes a lot, Mr. Vaira.
7 We do not agree with that.
8 MR. LYDON: That's what he's looking to.
9 THE INDEPENDENT HEARING OFFICER: Thank you.
10 I know what you're saying. Let's deal with this
11 because we could spend a little time talking about
12 this. Why don't we get on and get this and at the end
13 I'll deal with the counsel and you fellows and what the
14 story is and where we're going with this. I take it
15 you just want to look at them?
16 MR. FARACI: We would like to review the
17 documents, that's all.
18 MR. LYDON: Just one more thing. With
19 respect to the lawsuit, as you're well aware, this case
20 went out on a Motion to Dismiss as I understand it.
21 THE INDEPENDENT HEARING OFFICER: I'm not
22 doomed by the fact that there's a lawsuit.
23 Okay. All right. Let's hear from your
25 MR. THOMAS: There is one housekeeping
2 THE INDEPENDENT HEARING OFFICER: Go ahead.
3 MR. THOMAS: I just want to put on the record
4 without -- obviously without arguing it again.
5 Concerning the Motion to Dismiss, there is additional
6 language in the Consent Decree which I did not alert
7 you to which I think is dispositive of it.
8 THE INDEPENDENT HEARING OFFICER: Are you
9 telling me that you're trying to convince me that I was
11 MR. THOMAS: I just want to put it on the
13 MR. MENDENHALL: Let me say I have additional
14 language as well that I looked at over lunch. So if
15 we're going to play this game, it could go on all
17 THE INDEPENDENT HEARING OFFICER: Time out.
18 I don't need to hear anymore, okay? That's okay. You
19 can put it on at the end or you can send me something.
20 I don't need to open it up and reopen the argument.
21 All right.
22 MR. THOMAS: At this point we call Mr. James
23 Jorgensen to the stand.
24 THE INDEPENDENT HEARING OFFICER: The young
25 lady will swear you in, sir.
1 (Witness duly sworn.)
2 Sir, for the record please state your name
3 and spell your last name.
4 THE WITNESS: James S. Jorgensen,
6 JAMES S. JORGENSEN,
7 called as a witness on behalf of the Petitioner, having
8 been first duly sworn, was examined and testified as
10 DIRECT EXAMINATION
12 MR. THOMAS:
13 Q. Good afternoon, Mr. Jorgensen.
14 A. Good afternoon.
15 THE INDEPENDENT HEARING OFFICER: Mr.
16 Jorgensen, normally when a witness comes in I explain
17 what the procedure is and who is calling him and so
18 forth, but you're a professional and I think you might
19 have been through this drill once before and understand
20 what's occurring.
21 THE WITNESS: I do.
22 THE INDEPENDENT HEARING OFFICER: Okay.
23 BY MR. THOMAS:
24 Q. Mr. Jorgensen, you understand that this is a
25 proceeding that is not a court proceeding, but it is
1 rather an internal Union proceeding in which Mr.
2 Vaira's going to determine whether or not a Trusteeship
3 over Local 1001 is warranted.
4 A. Yes.
5 Q. Could you tell us where you're currently
7 A. I'm the Administrator of the Laborers'
8 Pension and Welfare Funds in Westchester, Illinois.
9 Q. And if you would, could you give us a brief
10 resume` of your professional background?
11 A. Beginning with the most recent job?
12 Q. Well why don't you take it from the finish of
13 school forward.
14 A. I graduated from college in 1971. After that
15 I began with my employment in the Employee Benefits
16 area with the Central States Pension Fund. From that
17 point on I moved into the consulting area as an actuary
18 consultant for the Siegel Company. I moved into Vice
19 President of Zenith Administrators, which is a
20 third-party administrator administering employment
21 benefits like we do now, and then I moved out to the
23 Q. When did you go to the Laborers'?
24 A. When?
25 Q. When.
1 A. I started July 10th, 1975.
2 Q. What have your positions been at the
3 Laborers' Funds since 1975?
4 A. Until January 1 of 1996, when my predecessor
5 retired because of health reasons, I was the Deputy
6 Administrator -- in January 1 of 19 -- did I say '76?
7 I meant '96. '96 I became the Administrator.
8 Q. So -- just so we're clear. End of '95,
9 beginning of '96 is when you started with the
11 A. As an Administrator, right.
12 Q. And you first came to the Laborers' Funds --
13 A. As a Deputy Administrator in 1995.
14 Q. Thank you. So you've been Administrator from
15 1996 to the present.
16 A. Correct.
17 Q. What's the actual title of these Funds?
18 A. The Pension Fund is the Laborers' Pension
19 Fund. The Welfare Fund is the Welfare Fund -- it's a
20 long, drawn out name. Welfare Fund of the Laborers'
21 District Council of Chicago and Vicinity.
22 Q. Right. Okay. And could you describe
23 basically what these two Funds are and what they do?
24 A. Yes. The Pension Fund collects the money
25 from contributing employers. They process this. They
1 in turn pay the benefits for participants who are
2 retired, and they do the pension applications, they
3 determine all the documentation that's needed for
4 pension applications, and they also entrust the money
5 to be invested to professional money managers.
6 Q. That's on the pension side, correct?
7 A. That's right. On the welfare side is
8 basically an insurance company. We're self insured.
9 Our health insurance is for the sole purpose of
10 laborers working in the A County area, jurisdictional
11 area of the District Council, and we also pay in --
12 process the claims.
13 Q. Which of these Funds, if any, are governed by
14 ERISA? Are both, or --
15 A. They're both Taft-Hartley Funds, right,
16 they're both ERISA.
17 Q. How are the Funds governed?
18 A. By a Board of Trustees.
19 Q. And is there a particular makeup to the Board
20 of Trustees?
21 A. Yes. Half are chosen Union representatives
22 chosen by the District Council, the other half are
23 management personnel chosen by their respective
25 Q. What -- what are the governing documents of
1 the Funds?
2 A. The Trust Agreement and the client benefits.
3 Q. Could you describe what the Trust Agreement
4 is? What does that do?
5 A. The Trust Agreement sets out all the
6 guidelines for the trust, the collection of money, the
7 contributions, the selection of Trustees. It's
8 basically the agreement which -- by which it's the
9 policy is -- of the Fund is made.
10 Q. Could you distinguish for us, I may have a
11 series of questions on this, the difference between
12 your Funds, and the -- for lack of the precise term,
13 the City of Chicago Municipal Workers' Pension Fund
14 headed up by Mr. Capasso. There's a separate Pension
15 Fund that Mr. Capasso heads, correct?
16 A. That's correct. I think he handles -- that
17 Fund is the City Laborers', City of Chicago, where our
18 Fund is basically construction laborers, road builders,
19 masons, concrete contractors, and things like that.
20 Q. Just so I'm clear on this and so everyone
21 else is clear on this, if you have a laborer who works
22 for the City of Chicago but not road construction, just
23 let's say Streets and Sans, or something like that,
24 their pension benefits would go to not your Fund but
25 the one that's headed by Mr. Capasso?
1 A. Correct. The Collective Bargaining Agreement
2 determines where the contributions go. The City
3 Laborers' are not like ours, which would be, like I
4 said, basic construction.
5 Q. So the employers under the Collective
6 Bargaining Agreement are -- let me rephrase that. How
7 is it specified in the Collective Bargaining Agreement
8 that certain laborers will have their funds go one
9 place and certain laborers will go to another?
10 A. Well the agreement covers a number of
11 associations. And if the employer is signatory to that
12 association, then in turn that agreement will specify
13 contributions to, say, the Laborers' Pension Fund for
15 Q. How many constituent employers are there that
16 contribute to your Funds?
17 A. Currently active employers are about 1,700.
18 Q. Okay. And that must mean that your Funds
19 have a fairly voluminous amount of data coming in at
20 them, right?
21 A. Quite a bit, yes.
22 Q. Could you describe for the Hearing Officer
23 what types of data comes to the Funds to be processed
24 on an ongoing basis.
25 A. Well the majority of the data consists of
1 what we call remittance reports. These are
2 contribution reports which are sent out about the 15th
3 of each month for the following month's payment of
4 contributions which are due for that employer. Each
5 employer fills that out based on the number of hours
6 worked by each employee, and in turns pays that amount
7 times the contribution rate for each Fund.
8 Q. So the remittance report comes with money as
10 A. That's correct -- well actually it goes to a
11 lock box. The lock box immediately processes it and
12 puts it in the cash account, and it's swept each night.
13 We get a copy of what came in as well as the
14 reconciliation of the dollar amount for each employer.
15 Q. Let me back up for a moment. Is Local 1001
16 one of your constituent employers for your Funds?
17 A. There are a minimal amount of participation
18 with 1001 in our Fund, right. Offhand I can't say
19 exactly how many employers we have. I do know the
20 Union staff participates.
21 Q. The Union staff. So when we talk about Local
22 1001, we're talking about the employees of the Union,
24 A. Right.
25 Q. As distinguished from laborers out in the
2 A. Correct. The Unions are allowed to
3 participate in the Fund as long as they have employees.
4 Q. So is it your understanding that Local 1001
5 has been one of the employers contributing to your
6 Funds since approximately 1963?
7 A. The exact date they started contributing I'm
8 not sure of, but the inception of the Fund was around
9 that time, and I suspect that that's when they also
11 Q. So you were starting to describe the
12 remittance report process. What is a remittance
13 report? First of all, who is filling it out?
14 A. Well it's generally based on the last report
15 that came in. Generally on a new contractor they'll
16 fill it in by hand. After that it's computer generated
17 based on the last amount of employees that they
18 submitted contributions on. That report gets mailed
19 out to each employer. It has a listing of their -- of
20 the employees, their Social Security Number, generally
21 the Local Union affiliation that they're with, and then
22 in turn the employer fills out each individual's hours
23 worked, multiplies that times the appropriate rate of
24 contribution for the Welfare Fund, the Pension Fund,
25 and some of the -- the Training Funds and some of the
1 Ancillary Funds, and then in turn totals it up and
2 sends a check in.
3 Q. And just to make sure we're absolutely clear
4 on this. What's the point of that? Why do they have
5 to do that?
6 A. Well the contract says for each hour worked
7 an employee receives contributions submitted on his
8 behalf. Not only will it give him eligibility for
9 insurance benefits and his family, it also generates
10 credit towards his retirement for his pension.
11 Q. To your knowledge -- understanding you're not
12 a lawyer, but to your knowledge does the law require
13 that the employer fill these remittance reports out
15 A. Yes.
16 Q. Do you rely upon these remittance reports?
17 A. Well, we -- the remittance reports are -- we
18 take them as factual when they send them in, and then
19 the way we -- a checks and balances is we periodically
20 audit each employer to verify in fact that not only did
21 they submit contributions on behalf of individual's
22 work, but also correctly.
23 Q. Before we get into any discussion of auditing
24 though, what does your staff do with the remittance
25 report when it comes in?
1 A. We have a data entry group that will take
2 each remittance report and go down the line on each
3 individual for that company, and post the actual hours
4 worked for that individual onto the computer system.
5 Q. Is it your instructions to the data entry
6 people or is it written down anywhere that they are
7 supposed to look behind the written remittance report
8 and actually investigate whether the representations
9 are true or not?
10 A. No.
11 Q. Would that be feasible anyway?
12 A. No.
13 Q. So the remittance report data then gets put
14 into electronic form at your Funds, correct?
15 A. Correct.
16 Q. And that's how you keep track on a rolling
17 basis of how many hours a particular participant has
19 A. Correct.
20 Q. Okay. Now you mentioned the audit process,
21 that there are periodic audits?
22 A. Yes.
23 Q. What's the -- the auditors that are employed
24 to undertake this work, their client is whom? Who
25 hires them?
1 A. We hire them, the Trustees.
2 Q. And the Trustees hire the auditors to check
3 what information?
4 A. They check the -- each employer, when they go
5 out for an audit, they will check to make sure that --
6 they'll check the payroll, they will check the
7 contribution report forms, and they will match up the
8 actual hours paid versus the actual hours contributed.
9 If there's a shortage of hours, obviously then we'll
10 send a bill out to the employer saying that, "You
11 shorted" such and such individual such and such amount
12 of hours. And then once -- sometimes there are
13 challenges. Sometimes the employer can verify why the
14 hours maybe were withheld, and if they can't, we will
15 then collect the money from the employer and then post
16 the proper hours to the individuals.
17 Q. What steps, if any, do you take to ensure the
18 objectivity of your auditors in this process?
19 A. Well the auditors, we randomly rotate them.
20 We have auditors that -- we have three auditors right
21 now. We generally keep three on call and we rotate
22 each audit each year. So in other words, the auditor
23 will not do the same audit twice usually.
24 Q. Under what circumstances would you hire an
25 auditor to do an audit on your behalf when they already
1 represent in an auditing capacity one of the employers
2 that is to be audited?
3 A. Well if we knew that they represented, for
4 example, an auditing firm that we're using as -- for a
5 compliance audit, that they also were the auditor for
6 the company, we wouldn't assign them. If we didn't
7 know, we would expect them to recuse themselves.
8 Q. Would you expect an auditing firm to inform
9 you of that fact?
10 A. Yes.
11 Q. In other words --
12 A. They've done it before.
13 Q. So this has come up before where you've asked
14 a firm to do an audit of some employer and they said,
15 "We can't do that because we do their auditing."
16 A. Correct.
17 Q. In which case you go to one of the other
19 A. That's right.
20 Q. Whose burden is it to raise that issue, the
21 conflict issue?
22 A. Well if we know, for example, that they've
23 told us -- we generally ask when we hire a new auditor,
24 "A list of your clients, we have a conflict of interest
25 perhaps with you being the auditor for one of the
1 companies," something like that. And if we then know
2 that there is a conflict there, we won't assign that
4 Q. If you don't know though, only the auditing
5 firm is aware of the conflict, right?
6 A. Right. We rely on their good faith.
7 Q. You said you rely on their good faith?
8 A. Right.
9 Q. And if they elect not to tell you, you may
10 not be aware of the conflict; is that right?
11 A. That's correct.
12 Q. Could you describe for us -- first let me
13 turn to the Welfare Fund. You described a self
14 insurance system, correct?
15 A. Yes, we're self insured. We don't have any
16 insurance underwritten by any company.
17 Q. So the employer will make contributions on
18 behalf of a participant with respect to the Health and
19 Welfare Fund. And that will -- that fact alone, am I
20 right, will give them health insurance, the right to
21 make a claim on the Funds?
22 A. Well there's a certain amount of hours you
23 need for eligibility, five hundred hours.
24 Q. Per year?
25 A. Right. You need to become eligible. Once
1 you establish eligibility, you need five hundred hours
2 in six months or eight hundred hours in a year. We
3 have what's called a look-back rule. We'll look to see
4 if in the last year you have eight hundred hours. If
5 you have, we'll look to see if in the last six months
6 you have eight hundred hours and thereby --
7 MR. LYDON: Excuse me. I think you misspoke.
8 THE WITNESS: You need five hundred hours in
9 six months for eligibility or eight hundred hours in
10 twelve months.
11 THE INDEPENDENT HEARING OFFICER: Okay.
12 MR. THOMAS: That's what I thought you said.
13 THE WITNESS: It's called the look-back rule.
14 We look and see if you can qualify in either parameter.
15 BY MR. THOMAS:
16 Q. Okay. Assuming the person qualifies, explain
17 to us the process of how they are able to take
18 advantage of that benefit on an ongoing basis.
19 A. It's a very generous plan. We cover not only
20 the individual laborer but also all of his eligible
21 family members providing that they haven't reached age
22 18, or if they're in college or in school, with 12
23 credits or more, age 23. So that contribution will not
24 only cover the individual but also all of his -- his
25 spouse and all of his eligible children.
1 Q. And do they get a card associated with their
3 A. The parent -- the parents -- I should say the
4 member and the spouse. If they have any children that
5 are away at college, for example, they will also get a
7 Q. They get a card that says to the effect
8 Laborers' Welfare Fund?
9 A. That's right.
10 Q. So when they go to a medical provider and
11 they have to get their broken leg fixed, this is the
12 card they might present?
13 A. That's correct. If you don't have a card
14 there's a toll free number they can call in to certify
15 eligibility 24 hours a day.
16 Q. Who does the call, the provider?
17 A. The provider usually.
18 Q. And then you will -- your staff will clear
19 the claim and ultimately pay the claim when it comes
21 A. That's correct, yes.
22 Q. So is it fair to say that with respect to the
23 Welfare Fund, the monies come in and the claims get
24 paid out on a fairly revolving basis? Is that a fair
25 way of describing it?
1 A. Yes. Some members use the benefits more than
2 others, but the benefits cover anything from medical,
3 vision, dental and prescription drugs, and there is
4 really -- there's an annual -- there's no annual
5 limits. It's a lifetime limit of $850,000 per covered
6 dependent or covered individual.
7 Q. Then moving over to the Pension Fund side.
8 These remittance reports and funds come to the Pension
9 Fund on a monthly basis, correct?
10 A. Correct. They come in with the Welfare.
11 Q. And those funds, there's more of a lag,
12 presumably, before people can make a claim on them,
13 right? They have to get to retirement age.
14 A. You have to have five years and age 65 or you
15 have to have ten years and age 50.
16 Q. So in that case the Fund has the money to
18 A. That's right.
19 Q. And pay existing claimants who do qualify.
20 A. Right.
21 Q. If you would, describe in general terms how a
22 retiring laborer or employee goes about the process of
23 telling the Funds, "I'm retiring now. I would like my
25 A. Well you can either phone in and then ask for
1 an application to be sent in the mail, but the majority
2 of the people because of the volume of information and
3 -- that's needed and also the election process, it's
4 difficult to pick out the number of different options
5 you have, a husband and wife option, the straight life,
6 the level income option, the partial lump sum, et
7 cetera. We have so many different options to choose
8 from, the majority of the participants come into the
9 Fund and usually bring their spouse and all the
10 paperwork that they -- they call in ahead of time and
11 ask, "What do I need to bring in?" And they'll bring
12 it all in and sit down with one of our employees and go
13 through the process in electing which options that they
15 Q. And once they fill out the paperwork -- well
16 presumably in the process of working with one of your
17 staff and filling out the paperwork, there's some cross
18 checking of the existing data to see if this person is
19 actually in your database, right?
20 A. That's correct. It's all relying on Social
21 Security Numbers. We'll punch in the Social Security
22 Number out of the system and that will generate a
23 report of all the work history that individual has.
24 Certain times there's a discrepancy where the
25 individual might say, "Well, you know, I worked way
1 back then for so and so," and we'll process what we
2 have on hand, and then we'll do further research to
3 determine if there might be some more evidence of work
4 out there.
5 Q. Um-hum. Once that paperwork is done, then
6 what happens?
7 A. Once the paperwork is done it's compiled by
8 our Pension Department. That department then looks
9 over everything to make sure that everything is in the
10 file, everything is signed off on, and everything is --
11 all the required documents is in the folder. At that
12 point -- and the elections that the individual picked.
13 At that point they will then be submitted to the
14 Pension Committee for review, and they will then
15 approve it.
16 Q. What types of considerations does the Pension
17 Committee take up in evaluating these claims?
18 A. We have a number of claims that are very
19 standard, very routine. Those are just a general
20 listing of what the individual's retirement money is,
21 the options that they chose. For the record, they
22 don't sit and look at each file because there's nothing
23 unusual about it.
24 Other files that may need a determination
25 they will look at. For example, disability, determine
1 whether the right documentation is there and whether
2 everything is in order. What we call front shelters,
3 those are individuals that are -- that have all the
4 records, they have all the criteria. They are very
6 Q. And when they're not routine, what types of
7 issues come up that cause people to pause?
8 A. Prohibited employment.
9 Q. What is that?
10 A. That's somebody who may want to retire but
11 say, "I'm going to continue working as a landscaper" or
12 something like that.
13 Q. And that's defined in the Trust Agreement?
14 A. That's defined in the plan document what
15 prohibited employment is. Some of is -- some of it is
16 borderline so that the Trustees will review it. Breaks
17 in service. Somebody says, "Well, I didn't have a
18 break. I had some excuse," or something. Other issues
19 that are -- that fall out of the normal routine
21 Q. And then once the claim is approved by the
22 Pension Committee, then that approval goes to some part
23 of your staff that would actually implement the order
24 to start making payments?
25 A. That's correct. Once the committee approves
1 this, we generally generate a manual check for that
2 period and get the check out right away, because now
3 the committee usually meets about the first Tuesday of
4 the month. By the time we get everything processed
5 it's a couple weeks afterward. Then depending on how
6 they elect. Most people elect direct deposit. If they
7 have that filled out, we will set it up with the bank
8 and then we will generate their check routinely every
9 month after that.
10 Q. Hypothetically speaking, if an employer
11 falsely -- provided false information on the remittance
12 reports that then went into your data bank, let's say
13 for an employee who was never an employee, never worked
14 there, but it's a name that goes on a remittance report
15 and then corresponding monies come to your Fund, would
16 you have any particular reason or your staff have any
17 particular reason to know that that was a false report?
18 A. No.
19 MR. FARACI: Excuse me. Sorry to interrupt.
20 Could we just take a brief recess and talk to you for a
21 couple of seconds with regards to Mr. Maria also being
22 present. I believe he's going to be testifying with
23 regards to some of these same issues that Mr. Jorgensen
24 is testifying to.
25 MR. THOMAS: Mr. Maria is my case agent and
1 is also going to be testifying as an expert based in
2 part upon testimony that he has heard in this process.
3 I mean -- so for example, when witnesses come in and
4 explain how they prepared forms and what they did and
5 what they didn't do, that's all part of his testimony.
6 THE INDEPENDENT HEARING OFFICER: How would
7 Mr. Maria be affected by hearing this that's going to
8 cause him to be less than truthful?
9 MR. FARACI: It's my understanding that he's
10 going to be giving opinions with regards to the work
11 that was performed by Mr. Jorgensen and the other
12 Trustees, and I think he should be outside of their
13 testimony -- he should not be present during their
14 testimony so that when he gives us his opinions,
15 they're opinions from what he reviewed over at the
16 Funds, not from what he's heard Mr. Jorgensen testify
18 THE INDEPENDENT HEARING OFFICER: He may give
19 his opinions. He may sit down -- he is an expert,
20 comes in -- he's looked at a bunch of books, comes in
21 and hears testimony that may be diametrically opposed
22 to what he saw, and he may conclude that he doesn't
23 believe them, the records are bad, or he's got his own
24 opinions. I don't see how it's going to affect Mr.
25 Maria here. He's not a fact witness and he's not going
1 to be swayed by it. Denied.
2 MR. FARACI: I apologize for interrupting.
3 THE INDEPENDENT HEARING OFFICER: That's
4 okay. That's fine. I mean I don't see that because
5 whatever he's doing to make his opinion, he's going to
6 base it on something. And if he says, "I don't believe
7 Mr. Jorgensen," or, "Mr. Jorgensen is correct," or
8 "There's a hole in their procedure," or whatever, so.
9 He's not like a fact witness who saw something and then
10 -- an eyewitness who saw something and then gets to sit
11 in and listen to three others who describe the same
12 thing and then changes his opinion to fit that. I
13 don't view that as that. I don't see any danger here.
14 BY MR. THOMAS:
15 Q. Mr. Jorgensen, we were talking about a
16 hypothetical where the employer falsely reports that a
17 particular individual was an employee and was -- put in
18 a certain number of hours. Then that false information
19 gets put into your database. And the question that you
20 were starting to answer was: Would you necessarily
21 know when that person applies for pension benefits that
22 they're not eligible.
23 A. The Pension Department pulls the information
24 off the system. Once it's loaded onto the system, if
25 there's nothing previously that indicates that these --
1 first of all, if the contributions were erroneous, they
2 would be removed. If audits do not determine that
3 there was any problem or nothing is caught, then what's
4 on the system is what the Pension Department relies on.
5 Q. And again, hypothetically, before we get into
6 any details, if there were a problem where a particular
7 employer had systemically reported false information to
8 the funds, would there be any kind of check that you
9 would hope to rely upon that might catch this other
10 than the employers self certifying?
11 A. Well periodic audits should bring up if there
12 was an issue there.
13 Q. Okay. We'll come to those points in just a
15 For purposes of educating us all on what the
16 paperwork looks like, if you could turn to Volume Three
17 of the exhibit books, Tab 8.
18 These are documents that begin in 1963 and go
19 all the way forward to 2003. In the interest of not
20 over papering the record, I've done one month out of
21 every twelve. It's the same month, July, just to give
22 us a representative sample. I have not included all
23 twelve months for obvious reasons.
24 Mr. Jorgensen, if you can look at the back of
25 the documents so that we get the most recent ones.
1 This is on a form that says "Laborers' Pension and
2 Welfare Funds for Chicago & Vicinity," correct?
3 A. Right.
4 Q. Is this the remittance report?
5 A. That's correct.
6 Q. Does the employer have these typically on the
7 premises and then fill them out?
8 A. Right. They're mailed out each month, yes.
9 Q. So you mail the blank one out?
10 A. Well they're actually filled in with the --
11 from the previous month. If there's any additions or
12 deletions they can take them off.
13 Q. I see. So if someone has ceased employment
14 there or been fired, they can take the name off.
15 A. Right. They can just cross it off and zero
17 Q. If gone from full-time to part-time they can
18 indicate that.
19 A. They can add the person on, right.
20 THE INDEPENDENT HEARING OFFICER: So the
21 employer sends this in to the Fund, and the employer
22 puts Social Security Number, the identity, and how many
23 hours they worked for that particular month.
24 THE WITNESS: That's correct. You can see in
25 the far right-hand column, you can see the hours
2 THE INDEPENDENT HEARING OFFICER: And the --
3 I guess the originator of this would be the relevant
4 persons at the employer.
5 THE WITNESS: Right. Whoever does the
6 bookkeeping. A lot of the bigger employers we have
7 maybe two hundred laborers. They'll just send in a
8 computer report. We will accept that. We'll just
9 attach the sheet onto it, send a computer report in
10 with the person.
11 THE INDEPENDENT HEARING OFFICER: So what I'm
12 looking at here, the one that is before you now, the
13 employer itself is Local 1001.
14 THE WITNESS: Correct.
15 THE INDEPENDENT HEARING OFFICER: And these
16 persons are indicated that they worked for the employer
17 in some capacity, Field Rep, secretary or something
18 like that. Am I right?
19 THE WITNESS: Right. The capacity that they
20 work in is not included on that report.
21 THE INDEPENDENT HEARING OFFICER: But they
22 are employed by that Union, not by some other employer.
23 THE WITNESS: Right.
24 BY MR. THOMAS:
25 Q. So I'm looking at the last page of Exhibit 8,
1 July, 2003. Do you have that?
2 A. Yes.
3 Q. So for example, you got a list of employees,
4 you got their Social Security Number, the Local number
5 that they're affiliated with, their names, and over at
6 the far right column you've got their actual hours
7 worked, right?
8 A. Yes.
9 Q. Then down at the bottom there's a signature
10 of an authorized officer of the employee, correct?
11 A. That's correct.
12 Q. In this case Mr. Gironda.
13 A. Yes.
14 Q. And then in the -- in that -- just slightly
15 to the left of that and above it, there's a warranty
16 phrase in there, correct?
17 A. Right.
18 Q. What is it that the employer is warranting to
19 the funds?
20 A. That is accurate and states all hours worked
21 by all laborers and its employees. "Undersigned
22 employer hereby warrants that this report accurately
23 states all hours worked by all laborers in its employ."
24 Q. And as the Administrator of the Pension and
25 Welfare Fund, what do you understand the term "hours
1 worked" to mean?
2 A. Well hours in which they received
3 compensation or remuneration.
4 Q. And was actual work performed?
5 A. Right.
6 Q. All right. And then if we flip backwards
7 through the various years, we see that at least in
8 format these are the same, are they not? They are --
9 it varies slightly as you go decade to decade.
10 A. Right.
11 Q. Basically there's a list of employees, a list
12 of hours worked.
13 A. Right.
14 Q. Signed off by someone in a responsible
15 position at the employer.
16 A. Correct.
17 Q. And a warranty.
18 A. Right.
19 Q. So, for example, if you go back to just a
20 couple of pages to July, 2001 --
21 THE INDEPENDENT HEARING OFFICER: Gentlemen,
22 where are you?
23 MR. THOMAS: About three or four pages back.
24 At the top it says July, 2001.
25 THE INDEPENDENT HEARING OFFICER: Go ahead.
1 I've got it.
2 MR. LYDON: Okay.
3 BY MR. THOMAS:
4 Q. So, for example, back then there were more
5 names listed than there were in July of 2003. Up at
6 the top there's a James Capasso. Do you see that?
7 A. Yes.
8 Q. And what does the remittance report represent
9 to the Funds in terms of total hours that he worked
11 A. I show for that month that he had 120 hours
13 Q. And again you're not the person reading this,
14 but in terms of when it comes in, what would that
15 ultimately mean in terms of your database?
16 A. That would mean that for that month 120 hours
17 would be posted on his behalf toward his pension.
18 Q. And he ultimately would get credit for that.
19 A. Correct.
20 Q. For his future calculation of benefits.
21 A. That's correct.
22 Q. All right. So this is how the remittance
23 report system works, right?
24 A. Yes.
25 Q. And you keep these on file, right?
1 A. Yes, we do.
2 Q. And when you have auditors look at your books
3 and records, this is one of the things that they check,
5 A. The internal auditors, yes.
6 Q. Yes, your auditors --
7 A. Right.
8 Q. -- will compare this data with other data to
9 see if it matches, right?
10 A. If they're auditing a company, what they will
11 do is they will -- not only for the period of the
12 audit, which is generally three years, they will ask
13 for three years worth of contribution reports. We'll
14 download that off the system and they'll add that on to
15 their computers. Then they'll go onto the site and
16 actually compare this.
17 MR. LYDON: If I can pose an objection. He
18 said internal auditors going outside to do the
20 MR. THOMAS: He said --
21 THE WITNESS: Internal auditors strictly look
22 at the internal functions. The compliance auditors,
23 they go out and look at whether or not contributions
24 have been paid. There are two different sets of
1 BY MR. THOMAS:
2 Q. Let's use your term compliance auditors.
3 A. Okay.
4 Q. The person upon -- the entity upon whom you
5 rely for determining that the data you're getting is
6 good data, is that a compliance auditor?
7 A. That's a compliance auditor.
8 Q. So they'll compare this type of data, the
9 remittance information that comes in, to something back
10 at the employer's shop?
11 A. Correct.
12 Q. What types of data is that that they'll look
13 at the employer's shop?
14 A. They will look at all of his W-2's, they'll
15 look at his payroll records, they'll look at his cash
16 disbursements, things like that, and to make sure
18 THE INDEPENDENT HEARING OFFICER: And that
19 auditor is employed by the Fund?
20 THE WITNESS: That's correct.
21 THE INDEPENDENT HEARING OFFICER: How often
22 is that -- you do these compliance audits?
23 THE WITNESS: Every three years.
24 THE INDEPENDENT HEARING OFFICER: Spot check
25 or what?
1 THE WITNESS: We started sampling what they
2 call honor roll employers. That's just something that
3 they tried within the last year. But prior to that it
4 was not just spot checking, it was every single record.
5 THE INDEPENDENT HEARING OFFICER: And to see
6 if the names coming in were legit?
7 THE WITNESS: Right.
8 THE INDEPENDENT HEARING OFFICER: If they had
9 done the work or there were actual persons or what?
10 What are they looking for?
11 THE WITNESS: What they do is they take each
12 individual employee that has been reported on, they
13 check the hours and make sure that those hours are in
14 fact correct. And they will also check other employees
15 to make sure that there aren't any hidden in the cash
16 disbursements or classified as something other than --
17 I'm not saying they're all trying to circumvent the
18 rules. But to make sure that each qualified employee
19 -- labor employee has a contribution submitted on their
21 THE INDEPENDENT HEARING OFFICER: So looking
22 at July, 2001 and taking the name Willie Bates, your
23 compliance auditor goes to Local 1001 to see if Willie
24 Bates actually exists and looks to see his what? His
25 W-2's to reflect that he worked umpteen hours?
1 THE WITNESS: Right. They will look at
2 Willie Bates. They will then take a look at the
3 payroll records. They will compare whether or not the
4 money that came in on Willie Bates was the correct
5 amount. In this case right here it's 120 hours per
6 month. They will look at each month to see if in fact
7 contributions were submitted and match that up with
8 payroll records.
9 THE INDEPENDENT HEARING OFFICER: Okay.
10 BY MR. THOMAS:
11 Q. The payroll records -- just to follow up on
12 that. The payroll records that they would look to
13 match it up with, you would expect to show what? In
14 other words, 120 times some hourly rate, or what? Or
15 some salary?
16 A. Sometimes it's difficult with Local Union
17 personnel because there isn't an hourly rate. What
18 they'll do is they'll take a look at what the annual
19 salary is. And obviously if -- nobody is going to be
20 paid say $60,000 a year if they work two months. And
21 so they have to make a comparison there of the amount
22 of hours that they in fact probably worked. Most
23 people as a full-time employee of the Local Union will
24 work probably 2,000 hours, and then they'll take a look
25 and see then have they in fact paid the right amount of
1 contributions in proportion to that.
2 Q. So as far as you know, they might look at
3 payroll records, LM-2's that are filed or W-2's that
4 are filed?
5 A. Right.
6 Q. Again, hypothetically, if the payroll records
7 and the LM-2's show compensation of zero, that this is
8 an unpaid position, you would expect your auditors to
9 catch that.
10 MR. LYDON: Object to the leading nature of
11 the question. Asked --
12 THE INDEPENDENT HEARING OFFICER: Well I'll
13 overrule that. You're looking -- or if you look down
14 and saw there was five instead of fifty, that's
15 something you would be looking for, discrepancies.
16 THE WITNESS: Right.
17 THE INDEPENDENT HEARING OFFICER: I'll
18 overrule it. It's not a conjecture.
19 THE WITNESS: They should bring it to our
20 attention, yeah.
21 BY MR. THOMAS:
22 Q. Now if you'll turn to Tab 9. These are
23 selected members of Local 1001's employee hours
24 history, correct?
25 A. That's correct, yes.
1 Q. Is this a document that is generated inside
2 the funds, internal to the funds?
3 A. Yes. This is basically a printout of an
4 employee work history, his hours for each month or by
5 each year.
6 Q. What is the source of this information?
7 A. This is generated from the remittance
8 reports. You can actually see, you know, each month
9 what the total hours contributed, the contract, the
10 number, the Local.
11 Q. So this was the data entry?
12 A. That's correct. What you see on the
13 remittance report is then brought over to here. So
14 this is done year by year and month by month.
15 Q. So just for Mr. Vaira's benefit. So if one
16 were to compare the employee hours history with the
17 remittance reports, that should match up?
18 A. It should, yes, and it will.
19 Q. Okay. So just on this top example, Mr.
20 Capasso, it indicates that he started working 120 hours
21 a week in 1984, going forward all the way through to
22 2002, correct?
23 A. That's correct.
24 Q. Until March of 2002?
25 A. March of 2000.
1 THE INDEPENDENT HEARING OFFICER: Month.
2 MR. THOMAS: 120 hours per month.
3 BY MR. THOMAS:
4 Q. Through to March of 2002, Mr. Jorgensen?
5 THE WITNESS: Mine says through 2000 -- wait
6 a minute. I have Bernard Spano. I'm sorry. You have
7 a number of these.
8 MR. LYDON: Looking at the first page I
10 THE WITNESS: Yes. Through March 2002,
12 BY MR. THOMAS:
13 Q. And on that page, which I think is the fourth
14 page -- the fourth and last of Mr. Capasso's, dated 29,
15 April, 2002, up in the upper right-hand corner. It
16 then has total number of hours as of 4-29-02. Do you
17 see that?
18 A. Right.
19 Q. And how many hours, according to your records
20 which is based on the remittance records, had he worked
21 total since 1984?
22 A. 25,991 hours.
23 Q. All right. Now if we go forward into Tab 10.
24 Without talking about Mr. Capasso specifically yet at
25 this point, can you describe what these documents are?
1 A. Well this is a retirement declaration. This
2 informs us that he will in fact actually retire, that
3 he will not continue working in the capacity he was in
4 prior to that. And the second page is his application
5 for benefits. It's a standard application that he
6 fills out.
7 Q. So this is the paperwork you were describing
8 that someone would come to the Fund or mail it in and
9 say, "I'm ready to retire. I want to start the
11 A. That's correct.
12 Q. All right. I want to turn to the time frame
13 to the end of 1998. At this point you were head of the
14 Funds, correct?
15 A. That's correct, yes.
16 Q. And in the ordinary course of business did
17 you ask that a routine audit be performed with respect
18 to Local 1001's contributions.
19 A. Did I specifically ask this?
20 Q. Or did the Funds.
21 A. Well the Funds' Field Department are the ones
22 that generate and assign the audits. If it was time
23 for a routine audit, then the Field Department Director
24 would assign it. There may have been -- I think there
25 may have been an audit around that time.
1 Q. So if I can direct everyone's attention to
2 Volume Four, Exhibit 26.
3 This is a document generated by an auditing
4 firm that used to be known as Thomas Havey, LLP. Have
5 you seen this before, Mr. Jorgensen?
6 A. Yes. This is an audit that was performed.
7 Q. Okay. So with reference to this, can you
8 tell the Hearing Officer what the background was of
9 this? In other words, what prompted this report to be
11 A. This appears to be just a routine audit.
12 This audit would be assigned, like I said, through our
13 Field Department. It's relatively brief. There is
14 what we call a pip sheet in the back, which is a sheet
15 that tells you if there was any issues, who the
16 managing partners were. In this case right here it's
17 the Local Union, who the principal officer is, and was
18 there anything out of the ordinary. And it says, "No
19 discrepencies were noted."
20 MR. LYDON: Which page?
21 THE WITNESS: It's --
22 MR. LYDON: I see.
23 THE INDEPENDENT HEARING OFFICER: First four
24 pages. "No discrepencies."
25 BY MR. THOMAS:
1 Q. Let's take this one at a time. So the cover
2 page is just that, a cover page that indicates the time
3 periods covered, right?
4 A. That's correct.
5 Q. So what they're representing to you is "We
6 are auditing Local 1001's data from January 1, 1994 to
7 January -- June 30th, 1998," right?
8 A. Correct.
9 Q. Then they have -- on the second page is their
10 letter telling you and summarizing their findings,
12 A. Right. This is -- this certifies that what
13 they've done is performed their audit in compliance
14 with generally accepted auditing practices.
15 Q. And in the middle of the first paragraph it
16 indicates, "The purpose of our review was to assist
17 you," meaning the Funds, right?
18 A. Right.
19 Q. "In determining whether contributions to the
20 Trust Funds are being made in accordance with the
21 Collective Bargaining Agreements in effect and with the
22 Trust Agreements of the Funds," and so forth, right?
23 A. That's correct.
24 Q. Now, they talk about their procedures in the
25 next paragraph. See that?
1 A. Yes.
2 Q. What do they represent to you that they had
3 actually checked?
4 A. Well it said they "included a review of the
5 pertinent provisions of the Collective Bargaining
6 Agreements and compared underlying employer payroll
7 records to the Fund payroll contribution records."
8 Q. That sentence right there, that tells you,
9 the Fund Administrators, that they compared A and B,
10 right? What's the A and B that they're telling you
11 they checked?
12 A. The Collective Bargaining Agreement, making
13 sure that they were in fact contributing on laborers
14 and employees, and they are comparing the payroll
15 records matching up with the Fund contribution records.
16 Q. Okay. So there's a payroll record that
17 indicates internally at the Union what people were paid
18 during the course of their employment, right?
19 A. That's correct.
20 Q. And they're telling you that, "We've checked
21 that and we've compared that to what they've
22 contributed to your Funds through these remittance
24 A. Yes.
25 Q. And then it goes on with some specificity to
1 say what type of employer records they reviewed,
2 payroll journals, individual earnings records, payroll
3 tax returns, contribution reports, job classifications,
4 and general disbursement records. See that?
5 A. Yes.
6 Q. Where does it -- it's the last paragraph and
7 last sentence where they indicate "no exceptions,"
8 right? The bottom of the page.
9 A. "There were no exceptions found in
10 contribution reported to the Funds during our payroll
11 audit period."
12 Q. In plain English what does that mean?
13 A. That means it's a clean audit.
14 Q. Nothing to report to you.
15 A. Right.
16 Q. And you're the client, right?
17 A. That's correct.
18 Q. And then the back-up pages, can you identify
19 what these are? This comes with Havey's report, right?
20 A. What you see here is the years audited, and
21 then you see hours not reported and hours of men not
22 reported. They would have for each month the hours
23 which were not reported, if in fact there was hours
24 missing, and they would have the men who may not have
25 been reported listed, Social Security Number, and then
1 the dollar amounts at the bottom as far as what's due.
2 But this one had zero.
3 Q. Um-hum. And then a couple pages forward
4 there's an item number K or letter K. "Briefly
5 describe the nature of the delinquency." Indicates,
6 "No discrepencies"?
7 A. Right.
8 Q. So when you got this audit report, is it fair
9 to say you assumed everything was fine?
10 A. Yes. I took it and so did our Field
11 Department take it at face value.
12 THE INDEPENDENT HEARING OFFICER: When you do
13 one of these audits to, instead of a Union, but to one
14 of your contractors who have signed the Collective
15 Bargaining Agreement, you go in and see the six months
16 they just have fallen behind, and that's one of the
17 ways that you -- the Fund picks up and determines if
18 the -- they're falling behind or something?
19 THE WITNESS: If they're falling behind we
20 know right away because the reports don't come in. So
21 this is generally if they missed individuals who should
22 have been classified as laborers or they haven't
23 reported enough hours on other laborers.
24 THE INDEPENDENT HEARING OFFICER: I
25 understand. Okay.
1 BY MR. THOMAS:
2 Q. Mr. Jorgensen, at the time you received this,
3 which I guess would have been around late November,
4 1998, did you have any understanding that Thomas Havey
5 had any conflicts in this matter?
6 A. No, I did not.
7 Q. Did you later come to understand that?
8 A. Yes. I -- later on we did find out that they
9 were also auditor for the Local Union.
10 Q. For Local 1001?
11 A. Right.
12 Q. So they were also the auditor for the entity
13 that you were asking them to look at.
14 A. Yes.
15 Q. Had you known that, had they disclosed that
16 to you, what would you have done?
17 A. We would have assigned it to another auditor.
18 Q. In the routine course of business.
19 A. Yes.
20 Q. Do you have any understanding why Thomas
21 Havey didn't disclose that to you?
22 A. No.
23 Q. How much time transpired before you
24 eventually learned that? Approximately.
25 A. I don't remember the exact date really. I
1 think when all this came up, when the Collections
2 Committee was looking at various Local Unions and how
3 they were contributing and trying to get everybody to
4 contribute uniformly, I think at that time it was
6 Q. Now I want to go back in sequence in the
7 exhibits but forward in time.
8 Exhibit Number 10 in Volume Three. Now we're
9 in the 2002 time frame?
10 Mr. Capasso -- there came a time in the
11 spring of 2002 when Mr. Capasso came to apply for
12 pension benefits, right?
13 A. That's correct.
14 Q. That's what's reflected there in Exhibit
15 Number 10?
16 A. Yes. That's his application.
17 Q. Just as an aside, did you know -- did you
18 recognize the name -- did you -- at the time this was
19 filled out, did you know anyone by the name of Capasso?
20 A. I recognized the name. I had never met him.
21 I recognized his name, and I didn't know he had applied
22 for pension until the Pension Director told me that he
23 submitted an application.
24 Q. How did know Mr. Capasso's name?
25 A. He was the Administrator of the Chicago
1 Laborers' Pension Fund -- or the Chicago City Laborers'
2 Pension Fund.
3 Q. So your professional equivalent.
4 A. That's correct.
5 Q. That was the other Fund that we described in
6 the beginning of your testimony?
7 A. Yes.
8 Q. So how many millions or billions of dollars
9 are at issue in those Funds, City of Chicago?
10 MR. LYDON: I object. There is no
11 qualification basis.
12 BY MR. THOMAS:
13 Q. Do you have any sense of the size?
14 THE INDEPENDENT HEARING OFFICER: Let me deal
15 with this. The size, any particular relevance?
16 MR. THOMAS: Just simply trying to establish
17 that this was a very significant Fund with a
18 significant position.
19 MR. LYDON: We'll agree to that.
20 THE INDEPENDENT HEARING OFFICER: I assume
21 it's a big Fund. It's the City Workers' Fund.
22 BY MR. THOMAS:
23 Q. Do you have any sense of the size of that
25 A. I think they're pretty close to what ours is.
1 Q. And that would be what?
2 A. About a billion four.
3 Q. So potentially over a billion dollars.
4 A. Yes, under management.
5 Q. So you had seen his name come up in
6 professional context?
7 A. Correct.
8 Q. But you didn't actually know him.
9 A. No.
10 Q. So when your pension staff alerted you to the
11 fact that he had submitted a retirement application,
12 what was the initial reaction to receiving this
14 MR. LYDON: Are you asking for his reaction?
15 BY MR. THOMAS:
16 Q. Let's start with your reaction.
17 A. Well my Pension Director told me he was
18 retiring, and I kind of jokingly said to her, "Well,
19 you know, there's a job opening. Maybe if you're
20 interested in it." And --
21 Q. Is this Miss McCarthy?
22 A. Right.
23 Q. So one of your deputies.
24 A. Right, exactly. And she says, "Well he's not
25 retiring from the Pension Fund." I said, "What do you
1 mean?" She said, "He's retiring from here." And I
2 said, "Jesus." I said --
3 Q. What did you understand that to mean, "He's
4 retiring from here."
5 A. I said, "When was he working -- where was he
6 working?" And she said it was, "He's still working."
7 I said, "That's kind of unusual." I thought maybe he
8 was getting two paychecks from -- not only from -- but
9 as the Administrator of --
10 Q. Just by way of clarification. The
11 application was coming in saying, "I'm retiring from
13 A. Right.
14 Q. Had you known prior to seeing his application
15 that he had employment with 1001?
16 A. No, not at all.
17 Q. So you knew him as Administrator of another
18 large Pension Fund.
19 A. Yes.
20 Q. So is it fair to say then that questions
21 started being asked?
22 A. Well the paycheck issue wasn't raised right
23 away. I thought well, he's going to continue -- I
24 thought maybe they were paying him from both. I said,
25 "That's a lot of hours worked." And then I said, "Have
1 the attorneys check to see if it's a prohibited
2 employment." And then at that point she came back
3 later and said, "Well, there are no hours." I'm not
4 sure how they found that out. I think through a second
5 audit somehow.
6 Q. Okay. We'll come to the second audit in a
7 moment. That's the Levinson audit?
8 A. Right.
9 Q. So ultimately did this pension request go
10 through or not?
11 A. No. No, it did not. It was turned over to
12 the attorneys. We reviewed this at the Pension
13 Committee and they decided that they were going to
14 suspend this and take a look at whether the actual
15 hours had come in.
16 THE INDEPENDENT HEARING OFFICER: Let me
17 clarify. Mr. Capasso is working as, we assume, the
18 paid Administrator of the other Pension Fund; is that
20 THE WITNESS: Yes.
21 THE INDEPENDENT HEARING OFFICER: Okay. And
22 his employer would be that Pension Fund.
23 THE WITNESS: That's correct.
24 THE INDEPENDENT HEARING OFFICER: And then
25 what it looks like here is that he is being employed by
2 THE WITNESS: Correct.
3 THE INDEPENDENT HEARING OFFICER: And could
4 be a member of 1001.
5 THE WITNESS: That's correct.
6 THE INDEPENDENT HEARING OFFICER: And it's
7 not unusual for persons to be card carrying members of
8 some Local and still be --
9 THE WITNESS: No, that's not unusual.
10 THE INDEPENDENT HEARING OFFICER: So that
11 part didn't ring any bells, but the fact that he was
12 actually employed doing work for 1001 -- or purporting
13 to is what raised the flags.
14 THE WITNESS: Right. I just said, "It's a
15 lot of hours put in."
16 BY MR. THOMAS:
17 Q. When you said "A lot of hours --
18 THE INDEPENDENT HEARING OFFICER: Working
19 full-time both places or close to full-time in both
21 THE WITNESS: Right.
22 BY MR. THOMAS:
23 Q. And specifically we just looked at, a few
24 moments ago, I think it was Exhibit Number 9, the tally
25 for Mr. Capasso was over 25,000 hours.
1 A. Right.
2 Q. Knowing what you know about running large
3 Pension Funds, did that make sense to you that he could
4 have accrued 25,000 hours in another job?
5 A. I couldn't do it.
6 Q. All right. So ultimately this got pushed to
7 a group in your Funds for evaluation; is that correct?
8 A. Correct. The committee of Trustees, the
9 Pension Committee.
10 Q. The committee of Trustees and the Pension
12 A. No. They're called the Pension Committee.
13 Q. And walk us through, if you would, what the
14 process was for getting to the underlying merits of
15 this application.
16 A. Well we had both Fund counsel review this. I
17 can't off the top of my head remember when we
18 determined that the hours weren't really there. We
19 were looking more as prohibited employment. In other
20 words, he wanted to continue what he was doing and also
21 collect a pension from us.
22 Q. And let me just stop you there if I could.
23 So your first inclination was just to check to see
24 whether his interest in being -- continuing employment
25 as an Administrator would somehow disqualify him.
1 A. Correct.
2 Q. And it is later that you stumbled upon
3 another issue?
4 A. Right. That was when we determined -- we
5 discovered that there was no payroll.
6 Q. All right. Let's take a look at that if we
8 Q. I'm just going to walk us through a couple of
9 these documents to get us to where we are.
10 If you look at Tab 11, this is an internal
11 memo from your Funds, right? It's basically raising
12 the issue of whether --
13 MR. LYDON: Objection to leading.
14 THE INDEPENDENT HEARING OFFICER: Is this --
15 what is this?
16 MR. THOMAS: I'll rephrase it.
17 BY MR. THOMAS:
18 Q. Could you simply identify what this document
20 A. The very first -- Tab 11, the first three
22 Q. Yes.
23 A. This is the actual write-up presented to the
24 Pension Committee. This is written up by the Pension
25 Department, and this is an analysis -- Fund sheet
1 analysis as well as the attachment of all the records
2 on file for the Trustees to review.
3 Q. All right. And then moving forward to Tab
4 12. There's a letter from Mr. Capasso to your Deputy
5 Miss McCarthy, correct?
6 A. Right.
7 Q. And again, this is in response to that first
8 issue raised, whether there would be disqualifying
9 employment, right?
10 A. That's correct.
11 Q. And down there near the bottom he indicates,
12 "If I was asked, "do I work in the laboring industry,"
13 he says, "I would have to answer absolutely not." So
14 again, without putting words in your mouth, is he
15 representing here that he thinks he's eligible because
16 it's not a conflict under the terms of the Agreements.
17 A. That's his opinion, yes.
18 Q. Okay. He does not address, does he, anywhere
19 in here the issue of whether he actually did the 25,000
21 A. That's correct.
22 Q. Then if we move forward to Tab 13, now we're
23 into April of 2002. You write him a letter, correct?
24 A. Right.
25 Q. And the letter will speak for itself. What
1 were you trying to communicate to Mr. Capasso?
2 A. Well the Pension Committee had reviewed this,
3 and "It appears from the contribution records of the
4 Pension Fund that all contributions made on your behalf
5 have come from Laborers' Local 1001. Since July of
6 1984 Local 1001 has been submitting contributions on
7 your behalf. These contributions appear to have been
8 made during a time that you were employed full-time by
9 the Retirement Board."
10 MR. LYDON: Excuse me. Are you reading from
11 a certain portion?
12 THE INDEPENDENT HEARING OFFICER: I think
13 he's reading from someplace.
14 THE WITNESS: This is a letter I dated April
15 5th, 2002. It's behind Tab 13.
16 THE INDEPENDENT HEARING OFFICER: And would
17 you repeat that again. I think both Mr. Lydon and I
18 both missed that.
19 MR. LYDON: What paragraph?
20 THE WITNESS: The first paragraph really
21 states that I'm writing on behalf the Pension
22 Committee of the Laborers' Pension Fund which reviewed
23 his recent application.
24 "The Committee was unable to make a
25 determination concerning your eligibility to receive
1 pension benefits," and it goes on -- the third
2 paragraph says, "It appears from the contribution
3 records of the Pension Fund that all contributions made
4 on your behalf have come from Laborers' Local 1001.
5 Since July, 1984 Local 1001 has been submitting
6 contributions for the Pension Fund based on 120 hours
7 per week -- per month, 40 hours of work per week
8 appeared to have been made during the time that you
9 were employed full-time by the Retirement Board."
10 BY MR. THOMAS:
11 Q. Okay. So putting this into conversational
12 language, what were you telling Mr. Capasso?
13 A. Well it reads in the next paragraph what
14 we're basically saying is, "You're in two places at
15 once." And the next paragraph on page two says,
16 "Contribution reports submitted to the Pension Fund by
17 Local 1001 do not indicate that you were receiving a
18 salary from the Local for either full or part-time
19 employment." And, "The records of the Pension Fund do
20 not contain any participation agreement providing for
21 payment of contributions on your behalf by Local 1001
22 for any employment by an entity other than the Local."
23 Q. So then dropping down to the bottom of the
24 page, items one and two, you went on to ask him, "If
25 you're going to get this benefit," what do you need to
2 A. Well two things: "Evidence of the nature and
3 extent of your employment by Local 1001 since July,
4 1984, including positions of employment held, hours
5 worked and compensation received for such employment."
6 Q. Why is compensation received -- let me stop
7 you there. Why is compensation received important to
8 your evaluation of this?
9 A. It shows that he was actually working,
10 employed by the Local.
11 Q. Thank you. And then it goes on to ask for
12 additional indicia of employment, right?
13 A. Right.
14 Q. Okay. We'll come back later to the lawsuit.
15 I want to move ahead to the Levinson audit if we could.
16 So as you -- we're now back into Volume Four
17 if you can follow.
18 THE INDEPENDENT HEARING OFFICER: Where are
19 we going?
20 MR. THOMAS: Into Volume Four of the
22 THE INDEPENDENT HEARING OFFICER: Yeah. What
24 MR. THOMAS: I'll tell you in just a second.
25 If you can turn to 28 please.
1 BY MR. THOMAS:
2 Q. That's a letter to you to Mr. James Lamont of
3 Thomas Havey, right?
4 A. Yes.
5 Q. And it's dated June 14th, 2002.
6 A. Yes.
7 Q. Between the time of the letter we just read
8 to Mr. Capasso, which was April, and then this June
9 letter, had your Funds done any internal investigation
10 to try to get to the bottom of these things?
11 A. Yes. We had reviewed the audits that were
12 performed on the Local, and I believe that the last
13 audits were done by Havey.
14 Q. When you say "the last audits were done by
15 Havey," meaning -- in other words, you were looking at
16 the last audit performed by Havey?
17 A. Right.
18 Q. What caused you to write the letter of June
19 14 where you say, "Hey, we asked you to look at this.
20 We've got information, and what's going on?"
21 A. This letter's basically saying, "How did you
22 miss that this individual was not a full-time salaried
23 employee." The key word "salaried".
24 Q. Now Mr. Lamont was someone who had been
25 involved in the earlier --
1 A. He is their lead compliance auditor. Havey
2 does more than just compliance. They also do other
3 audits. But he's the lead individual in the compliance
5 Q. So when you referred to the previous audit
6 done for the period '95 through '98 --
7 A. Right.
8 Q. -- you're referring to what we've previously
9 looked at as Exhibit 26, that audit that said "No
10 discrepencies," right?
11 A. Yes.
12 Q. And so you're now asking him in a sense --
13 A. "How did you miss it?"
14 Q. "How did you miss it." Okay.
15 At the time -- in June of 2002, did you know
16 whether or not this problem of a missed discrepancy was
17 limited to one person, or did you know that it was more
18 than one?
19 A. We assumed this was a glitch and it was just
20 one individual that they overlooked.
21 Q. Okay. Now if there were 25,000 hours that
22 had been reported into the Funds but zero hours -- or
23 zero salary on the payroll records, is that the kind of
24 thing you would have expected Havey to catch?
25 A. Yes. I would think so, yes.
1 Q. And is it possible that that could be, you
2 know, just an inadvertent mistake where they miss
3 something on one month's salary and so forth?
4 MR. LYDON: Object to the speculation.
5 MR. THOMAS: I will rephrase it.
6 THE INDEPENDENT HEARING OFFICER: I don't
7 think you have to rephrase it. This is somebody who
8 hired an agency to do something for them -- I'm sorry.
9 Havey wasn't working for you, were they?
10 THE WITNESS: Havey was working for us. They
11 were working for us, yes.
12 THE INDEPENDENT HEARING OFFICER: You expect
13 them to do something. I think you can ask the
14 employer, "Did you expect your employee, your agent to
15 do this or not? Would you be surprised if he," you
16 know, "didn't?" That's a reasonable question. Go
18 BY MR. THOMAS:
19 Q. If you hired Thomas Havey to verify that the
20 25,000 hours that Mr. Capasso had been paid in for were
21 actually corresponding to payroll records, you would
22 expect them to look at relevant data on the payroll
23 records to see that that matched up, right?
24 A. Correct.
25 Q. And what you learned in the spring and the
1 summer of 2002 is that somehow that hadn't happened,
3 A. It's sort of a -- in my opinion it's sort of
4 accounting 101.
5 THE INDEPENDENT HEARING OFFICER: Is Mr.
6 Capasso at this time a member of a Union?
7 MR. THOMAS: Member of 1001. Still is.
8 THE INDEPENDENT HEARING OFFICER: I'm getting
9 the impression what you're saying is that the employer,
10 even though it was a Union, was paying money to an
11 employee of a Union for no work?
12 MR. THOMAS: Making pension contributions,
13 welfare contributions -- yes. He's an unpaid Auditor,
14 but in the context of a Local Union that has an outside
15 CPA firm do its auditing. And he has full-time
16 employment of a huge Pension Fund, and meanwhile the
17 Local has been certifying on a monthly basis that he's
18 been working there at least 120, sometimes 160 hours.
19 And as a result of those certifications, the Local is
20 paying the member's money into the Funds.
21 THE INDEPENDENT HEARING OFFICER: You're
22 missing my point.
23 MR. THOMAS: Okay.
24 THE INDEPENDENT HEARING OFFICER: I use the
25 term employee and employer, money being paid or
1 benefits being paid for no work.
2 MR. THOMAS: The Local in this instance is
3 the employer.
4 THE INDEPENDENT HEARING OFFICER: Yep.
5 MR. THOMAS: Mr. Capasso is the employee of
6 the employer.
7 THE INDEPENDENT HEARING OFFICER: Um-hum.
8 MR. THOMAS: I'm sure that there was some
9 minimal work done as an auditor, but I'm also equally
10 sure, based on all the evidence that we have here, that
11 it was nothing, even approximating, 120 hours a month
12 for 14, 16 years. And that's what this is really
13 about, is because what we're showing --
14 THE INDEPENDENT HEARING OFFICER: I
15 understand what you're about. I'm someplace else. And
16 it has to do with the employer/employee. It has to do
17 with -- go ahead.
18 MR. THOMAS: No question of benefit was
19 conferred if that's your question. I can't speak to
20 whether we're talking about no work versus minimal
22 THE INDEPENDENT HEARING OFFICER: Never mind.
23 I'm just trying to define the terms.
24 BY MR. THOMAS:
25 Q. So Mr. Jorgensen, when you wrote this letter
1 to Mr. Lamont, what was your thinking? What were you
2 hoping to get from Mr. Lamont?
3 A. Well I was hoping to get an explanation of
4 how he missed this, or -- I don't know. Or perhaps
5 maybe that there was compensation. But there wasn't.
6 There was no way of explaining it.
7 Q. You did in fact get a response, did you not?
8 A. Yes.
9 Q. Take a look at Tab 29 if you could. This is
10 approximately two weeks later. Mr. Lamont on behalf of
11 Thomas Havey wrote you back, right?
12 A. Yes.
13 Q. Were you surprised by this response?
14 A. Quite a bit, yes.
15 Q. Tell us why.
16 A. Well, it included an attachment of a letter
17 which he claimed was sent on April 26th, which was
18 supposed to have been in prior to the Collections
19 Committee meeting. We were trying to get, like I said
20 earlier, all the Local Unions that contribute on a
21 uniform basis. Some were contributing some hours more
22 than others. So we decided that we were going to --
23 the Committee decided that they wanted 40 hours a week
24 or actual hours worked.
25 MR. LYDON: Just for clarification purposes,
1 the attachment -- the first page of 29 refers to a
2 letter sent on April 26th, and the attachment appears
3 to be a letter dated April 30.
4 MR. THOMAS: That's his attachment. I can
5 clear this up very easily.
6 MR. LYDON: Fine. It would be helpful.
7 MR. THOMAS: I will be happy to do it. It's
8 all here.
9 THE INDEPENDENT HEARING OFFICER: Okay. All
11 BY MR. THOMAS:
12 Q. Just so we're clear on that question. If you
13 go back to Tab 27, there's an April 26th letter from
14 you to Lamont asking for certain information, right?
15 A. Right. This was information -- we wanted to
16 see how the hours were paid -- the number of hours paid
17 by each to Local Union so we could -- so the
18 Collections Committee --
19 THE INDEPENDENT HEARING OFFICER: This was
20 way before the fact. This is on another issue.
21 BY MR. THOMAS:
22 Q. So Tab 27 is your request of Mr. Lamont that
23 certain payroll hours be documented, right?
24 A. It doesn't specifically ask for payroll. It
25 asked for hours worked. This was -- the audit that
1 they didn't show any hours or the average amount of
2 hours worked by each individual. What the Trustees
3 wanted was a uniform way of billing the Local Unions.
4 So what they asked for were these Local Unions to find
5 out if they had the work records and that would show
6 exactly how many hours were contributed on each
7 individual. If they were less than 40 hours a week,
8 say, for example, they were 30 hours. The idea then
9 was that the Trustees would send a directive out to all
10 the Locals and they were going to make all the Locals
11 pay 40 hours a week pay or actual hours worked.
12 And this was asked for prior to the
13 Collections Committee meeting, which would be Monday,
14 May 3rd, 1999. As you can see, as follow-up we threw
15 this in afterwards. It didn't make it to the
16 Collection Committee. So the Collection Committee,
17 even though they didn't have this data, it wasn't
18 singling out just 1001, it was just asking for these
19 Locals in question. Even though they didn't have it,
20 they said, "What we're going to do is we're going to
21 submit 40 hours a week -- Unions are to submit 40 hours
22 a week for each individual worked or actual hours
23 worked." They made the decision without getting this
25 Then I asked him a question on, "How did you
1 miss that?" And he claims that he sent this
2 information in with a cover letter.
3 Q. Back in the '99 time frame did you get a
4 response to this?
5 A. No.
6 Q. So then a couple years forward, in June,
7 you're raising a separate issue, albeit related, which
8 is, "How did you miss this Capasso discrepancy," right?
9 A. Correct.
10 Q. And his response, as reflected in Number 29,
11 is in effect, "Here's what we said to you."
12 A. Exactly, yes.
13 Q. And had you ever seen those attachments?
14 A. No.
15 Q. Had you undertaken a review of records?
16 A. Yes, I did. It would have gone -- obviously
17 it's addressed to me. I'm not saying -- I'm not
18 calling them outright liars. I'm not saying they
19 didn't mail it, but it certainly didn't get through.
20 There is three different departments that were handling
21 this issue at that time. That was my Operations
22 Director, the Field Department, and myself. Had it
23 come in, it certainly would have been compiled as part
24 of their records. We take everything that comes in the
25 door and we image it. It's automatically run through a
1 scanner, it's electronically imaged, and it's stored
2 permanently. There is no record anywhere in the Funds
3 of this ever having come in.
4 Q. You say you're not calling him a liar, but
5 you're not necessarily saying this is the Funds
6 dropping the ball, are you?
7 A. No.
8 Q. So the first time you saw this letter that
9 purports to be sent on April 30th, 1999 was in July of
11 A. Right.
12 Q. Now on the attachments from the -- the
13 attachments to the attachments, if you will --
14 A. Correct.
15 Q. That last -- not the last page. There is the
16 second computer print-out page.
17 A. Correct.
18 Q. Down at the bottom -- let me make sure that
19 everybody has -- down at the bottom there's a specific
20 representation made there, right?
21 A. Yes.
22 Q. Could you read that please?
23 A. It says that, "The following individuals did
24 not receive wages from the Union. In lieu of wages,
25 contributions were made on their behalf to the Funds.
1 Q. And then it lists --
2 A. It lists seven individuals.
3 Q. Now let me ask you this: If the Funds had
4 seen this information in 1998 or 1999, in the context
5 of the Havey audit comparing payroll records to pension
6 contributions, would the Funds have done anything with
7 this information?
8 A. Absolutely, yes. It would have been brought
9 to the Collections Committee or at least the Fund
10 counsel and have -- let them review this and make their
12 Q. Why? What red flags or what any type of
13 flags does this raise?
14 A. Those contributions coming in for individuals
15 that have not in fact received wages.
16 Q. All right. So the first time you see this
17 computer generated document was attached to a July,
18 2002 letter responding to your letter saying, "How did
19 you miss this."
20 A. Yes.
21 Q. So when you got this information from Havey
22 with these additional names, not limited to Mr.
23 Capasso, was this the first time that you had any sense
24 that this might have been a problem more than just one
1 A. Yes.
2 Q. So what was your reaction when you saw seven
3 names listed there?
4 A. We reviewed this with the Trustees and
5 counsel, and we made a determination that we would send
6 out another auditor to perform another audit.
7 Q. By the way, in your letter of June 14th, Tab
8 28 -- maybe -- no. Going the other way, Tab 30.
9 Tab 30 you write back to Mr. Lamont, right?
10 A. Um-hum. Yes.
11 Q. And Thomas Havey has now gone under and been
12 renamed Legacy, right?
13 A. Yes, that's correct. They had an issue with
14 a few of their senior partners and they decided that
15 they would rename the company.
16 Q. Is it your understanding, based on press
17 reports and the like, that that was a criminal problem
18 with his partners?
19 A. Yes.
20 MR. LYDON: Objection to relevance.
21 THE INDEPENDENT HEARING OFFICER: Let's move
22 on with this. We don't need to know about that. Go
24 BY MR. THOMAS:
25 Q. Your letter to -- it's the same person,
1 albeit with a different company name, right?
2 A. Yes.
3 Q. And in this you write back to him to tell him
5 A. Well I'm writing back to him to tell him that
6 the Trustees have reviewed the records and specifically
7 concerning the audit which Thomas Havey conducted in
8 1998, we've been informed that at the time the audit
9 was conducted on behalf of the Funds, that the firm was
10 also an auditor for Local 1001. And I'm informing him
11 that, "This would be appear to have been a conflict of
12 interest without the requisite disclosure to the Funds
13 and consent of the Funds prior to the commencement of
14 such services on behalf of the Funds."
15 Q. Why did you include that in there?
16 A. Well, what I'm saying here is that the
17 attorneys, the Trustees, and myself thought that this
18 is something they should have disclosed and to let us
19 know that at the time that they were going to conduct
20 this audit that they should have told us that there was
21 a potential conflict there. And we should have made
22 the decision on whether or not they should have gone
23 ahead with the audit.
24 Q. And if you knew -- had you known that they
25 had this conflict, would you have thought back in time
1 it might have impacted their objectivity?
2 A. Well you would think -- you would like to
3 think that an auditing firm is above board, but we
4 should have had the decision on whether or not they
5 should have gone ahead with the audit, and our decision
6 would have been a definite they should not have. We
7 should have assigned it to somebody else.
8 THE INDEPENDENT HEARING OFFICER: And you may
9 have written that you could have gotten your money back
11 THE WITNESS: Well it was also decided to put
12 them on notice that they may not be done with us.
13 BY MR. THOMAS:
14 Q. That's the end of your letter, right?
15 A. Yes.
16 Q. That if the Funds have incurred losses you
17 may turn to Havey or Legacy for that.
18 A. Yes.
19 Q. Now, also in the middle of the letter you
20 indicate to him that -- the last sentence of that first
21 page, you represent to him that you -- that the Funds
22 nowhere had a copy of that letter, right?
23 A. Right, yes.
24 Q. Did Mr. Lamont or Legacy or Havey ever come
25 back and say, "You're wrong. We sent it. Here's who
1 we talked to."?
2 A. There was no response to this letter.
3 Q. No response.
4 A. No.
5 Q. Now moving forward to Exhibits 31 and 32.
6 Other witnesses will talk about the pertinent details
7 of these documents. But could you identify these for
8 us please?
9 A. Yes. This is a Howard Levinson -- Levinson,
10 Simon & Sprung which is one of our auditors. This is
11 an audit that they conducted for the period -- the
12 first part for the period of June, '92 through May of
14 Q. And at this point you have at least the
15 preliminary information of the seven names.
16 A. Right.
17 Q. Not just the one name, right?
18 A. Right. But we went back and had him do
19 another audit for this period, and that audit then, as
20 you can see, noted several other discrepencies.
21 Q. Okay. Just so we're clear on your frame of
22 mind, at the time you ordered this audit, did you have
23 a full understanding of what the extent of the problem
24 would ultimately turn out to be?
25 A. Not at all, no.
1 THE INDEPENDENT HEARING OFFICER: Can I ask
2 you a question just for my clarification. If -- Local
3 1001 is an employer.
4 MR. THOMAS: Yes.
5 THE INDEPENDENT HEARING OFFICER: And it
6 makes it -- it is to contribute certain amounts to a
7 Fund. Is that -- that is a separate Trust Fund between
8 that Local and the Fund? What documents could guide
10 MR. THOMAS: There's a Trust Agreement and
11 the Collective Bargaining Agreement as you've
12 described, and the Local as employer is part of those
13 arrangements which obligates it to make contributions
14 to both of his Funds which are then maintained in trust
15 for the benefit of the participants.
16 THE INDEPENDENT HEARING OFFICER: An ordinary
17 employer out there has an agreement with that Fund, and
18 that's the guided by a Trust Fund. The employer who is
19 1001 has a separate or are you part of that --
20 MR. LYDON: There is collective bargaining.
21 THE WITNESS: No. There's a provision in the
22 Trust Agreement which allows Local Unions to
23 participate in the Fund.
24 THE INDEPENDENT HEARING OFFICER: Okay. I'm
25 looking for the documents again, sorry.
1 MR. THOMAS: We'll come to that, Mr. Vaira.
2 It is an attachment to his affidavit which is Tab 16.
3 All that's in the record.
4 THE INDEPENDENT HEARING OFFICER: Okay.
5 BY MR. THOMAS:
6 Q. All right. So, Mr. Jorgensen, you had just
7 described it. This was your initial request, not
8 realizing the full extent of what would later come to
9 light, right?
10 A. Correct. We went back ten years
12 Q. Okay. So what were your instructions in the
13 first get go with Levinson?
14 A. We instructed Levinson to go back ten years
15 and look at the records and perform an audit. Any --
16 as though it was a routine audit, looking for any
17 discrepencies that may exist.
18 Q. Um-hum. And again, without necessarily
19 belaboring the point by getting into all of the
20 paperwork, what did they come back and report to you?
21 A. They came back with a number of individuals
22 that were not only shorted on hours, they have a total
23 of about $80,000 at that time I think, but also a
24 listing of individuals that had not received salary
25 compensation but did in fact receive contributions paid
1 on their behalf.
2 Q. Let me make sure we get both of those points
3 down. The first point was that they were employees who
4 had been shorted?
5 A. Yes. Yes. They had not been paid all the
6 hours in which they in fact worked.
7 Q. And that was based on a comparison of payroll
8 records and remittance reports?
9 A. Correct.
10 Q. So who were the employees that got shorted by
11 the Union?
12 A. I think he's got them listed in here. I
13 don't know off the top of my head. There is a page two
14 of his audit. For example, Kelly Canchola, Debra
15 Chianelli -- page two of his audit. Kelly with a K,
16 C-a-n-c-h-o-l-a, Debra Chianelli, C-h-i-a-n-e-l-l-i,
17 Angela Coglianese, C-o-g-l-i-a-n-e-s-e.
18 Q. These appear to be all women, right?
19 A. On that page, yes. Yeah.
20 Q. Did you later come to understand this was the
21 clerical staff at Local 1001?
22 A. I'm not sure what capacity that they were in.
23 It doesn't identify them as being a business agent or
24 anything else. My assumption is that it really didn't
25 matter what they were. The bottom line is that the
1 auditor determined that they didn't receive the right
2 amount of contributions.
3 Q. So what was -- if you recall, what were the
4 auditor's findings with respect to how that had
5 occurred? Underreported hours or what?
6 A. Yes. There's hours in which they -- they
7 should have had -- should have had contributions
8 reported on their behalf because they did in fact work
9 the hours.
10 Q. Some contributions were reported, they're
11 just not the full amount?
12 A. Exactly. Some hours were reported but not
13 all the ones that should have been reported.
14 Q. So you used the figure $80,000. What did
15 that represent?
16 A. It's in the front of the audit.
17 Q. Page one of Exhibit 32 -- or page two rather?
18 A. Right. The auditor states that, "Our
19 examination indicated that the employer owes the
20 following amounts for the period audited, exclusive of
21 interest." There's dues, LECET, the Pension Fund, the
22 Training Fund, and the Welfare Fund for a total of
24 THE INDEPENDENT HEARING OFFICER: Madam
25 Reporter, how you doing? Are you looking for a break?
1 THE INDEPENDENT HEARING OFFICER REPORTER: Do
2 you mind? THE INDEPENDENT
3 HEARING OFFICER: Mr. Thomas, the reporter is looking
4 for a break here, and --
5 MR. THOMAS: I'll be happy to take a break.
6 THE INDEPENDENT HEARING OFFICER: Give us at
7 least ten minutes. All right.
8 (Whereupon a break was taken in
9 the proceedings after which the
10 following proceedings were had:)
11 MR. THOMAS: All set?
12 MR. LYDON: I just wanted to make a brief
13 remark before we go any further.
14 THE INDEPENDENT HEARING OFFICER: Yes, sir.
15 MR. LYDON: With respect to the subject of
16 employee shortages, which has been addressed in this
17 last Exhibit 32, I don't see any anything in the
18 charges that relates to this. I assume that -- I'm not
19 sure what the relevancy is of what's being said. But I
20 also am just inquiring about this. I have no reason to
21 expect that $80,000 was ever collected by anybody. I
22 don't know where we're headed with it. It's not
23 charged anywhere.
24 THE INDEPENDENT HEARING OFFICER: We're
25 talking about the -- there's some indication that the
1 shortage was -- there was a shortage to the employees--
2 MR. THOMAS: I can answer this.
3 THE INDEPENDENT HEARING OFFICER: It's not in
4 the charges and it's there just to -- because it
5 happens to be in the records.
6 MR. THOMAS: Wait a minute. The specific
7 charge that this relates to is financial malpractice.
8 So coming under that umbrella it absolutely is relevant
9 to what we're doing here. In the surplusage, the
10 preamble of the charges, there is a specific
11 description of what was known at the time by Mr.
12 Luskin's office of the Pension Fund, the contributions
13 on behalf of people that were not believed to have
14 worked. It was in my getting this case ready, in
15 talking to witnesses and digging into the documents
16 further, that I came across this other issue which was
17 there, which is not -- is in the document, but it's
18 clearly relevant to financial malpractice. It's
19 $80,000 of money that the Funds shorted their own
20 employees, and it took the Funds' internal
21 investigation to alert that to them and have them pay
22 the money back and here's the check.
23 MR. LYDON: I think that that's somewhat of
24 an inaccurate description of what occurred, or at least
25 the way I'm trying to piece it together now hearing
1 about it at this late date.
2 Nonetheless, there is nothing in any of the
3 charges that would put us on notice to the fact that
4 there's an allegation that there was also financial
5 malpractice or shorting employees. And I just point
6 that out that there is no charge along those lines.
7 THE INDEPENDENT HEARING OFFICER: Along that
8 line you may argue that to me. If you think that's
9 becoming relevant, you may tell Mr. Lydon that's what
10 you think is relevant and we'll deal with that at the
11 end. Right now he's not on any notice of that.
12 MR. LYDON: And I do say that we need to be
13 able to inquire a little further, investigate a little
14 further. I suspect that it's not exactly -- or at
15 least what I'm hearing right now, it's not exactly as
16 it appears in this letter. So --
17 THE INDEPENDENT HEARING OFFICER: Okay. I
18 understand what you're saying, and if you think that it
19 appeared here and if that's malpractice -- financial
20 malpractice you may say so, but tell him. They may
21 want to respond to say maybe the secretaries have been
22 paid or whatever.
23 MR. THOMAS: Of course they'll have an
24 opportunity to respond. I don't want to be unclear
25 here at all. This absolutely is a part of our --
1 MR. LYDON: And you're saying there is an
2 $80,000 shortage.
3 MR. THOMAS: Once you factor in I think it's
4 interest -- the Union has already paid in $43,000 of
5 that $80,000. And I think the difference between
6 $43,000 and $80,000 I believe is interest.
7 MR. LYDON: It doesn't look like it.
8 MR. THOMAS: Wait a minute. I'll have the
9 exact figures for you here.
10 MR. LYDON: Not if you look at that first
11 page that you've got.
12 MR. THOMAS: The amount the Union has paid,
13 after this came to light, is $43,750.05, and I have the
14 check here.
15 THE INDEPENDENT HEARING OFFICER: To?
16 MR. THOMAS: To the Funds. That's for the
17 employees whose accounts were under funded during this
18 period of time. And that's what is -- what I am
19 representing to everyone here is part of our case on
20 financial malpractice. No, that is not described with
21 specificity in the charges because the person drafting
22 the charges didn't know about that yet.
23 MR. MENDENHALL: Mr. Vaira, if I may be heard
24 on this point. And that's our point exactly, Mr.
25 Vaira. The charges to the financial malpractices that
1 we somehow funneled money to organized crime, these
2 thirteen people listed in the charges. So now there's
3 a claim that we underpaid the secretaries. Nowhere in
4 this complaint is that listed, Mr. Vaira, and that's my
5 sole point, and that we think to spring it on us at
6 3:30 on the first day of the hearing is unfair and that
7 we just want to make a record on that.
8 THE INDEPENDENT HEARING OFFICER: Let me
9 point out that this is -- this hearing is not like
10 sudden death overtime that it is in, let's say, in
11 Federal Court. It may be the ramifications of -- if
12 you show somebody embezzled something from a bank and
13 then it turns out to be that the embezzlement put the
14 bank into bankruptcy or something, it wasn't part of
15 it, but the ramifications.
16 I think it's fair if they want to let you
17 know that they're going to show that the overall effect
18 of it was more than that. We're talking about -- let
19 me step back a second. We're talking about -- these
20 are management issues. This is not a criminal issue.
21 You're talking about financial malpractice. What is
22 this Union under the microscope for? Is it for goofing
23 up their payroll and mishandling their accounts? So if
24 some ramifications flow from that, it's not totally
25 unfair for them to discuss it as long as you folks know
1 where we're going.
2 MR. LYDON: Let me just -- I started down a
3 certain path and I would like to finish my remarks.
4 With respect to this suggestion that there
5 was somehow an $80,000 shortage, I think that the check
6 that he just alluded to, which is something I didn't
7 know what the amount was, but I understood that this
8 issue was resolved for something less than $80,000. I
9 don't think it has anything to do with interest. I
10 think there's just a difference in what is seen here to
11 prove there's shortage and what the actual
12 circumstances were. That's number one.
13 Number two, I think that the people who did
14 the reporting are the very Local who apparently shorted
15 themselves, which was the old logic that suggests maybe
16 a mistake after all of this?
17 What I'm highlighting is that when you bring
18 charges at a late date, such as what we're hearing now,
19 "We're suggesting that this is also financial
20 malpractice," it's not quite fair to do it in the
21 manner that we're seeing here because we don't have an
22 adequate opportunity to get to the bottom of it, as to
23 what actually occurred.
24 We know, number one, there was a claim of
25 $80,000. We know number two, what he just told me,
1 that there's a check written for 40 something that
2 dissolved this. Number three, when we look at the
3 people, on the face of it they're the clerical people
4 who do the reporting. They underreported for
5 themselves? What's the evidence on all of this?
6 THE INDEPENDENT HEARING OFFICER: Gentlemen,
7 the issue is here there is some benefits paid to
8 persons who it appears to be were not working, and then
9 as a compounded part of that or a part of the financial
10 malpractice sum, secretaries were not paid the full
11 amount. Whatever that is, if that's an issue, you may
12 address it to me at the end in saying, "We're going to
13 amend our pleadings here to improve on it." It's not
14 that far afield.
15 What Mr. Lydon is saying he may have some
16 answer to that.
17 MR. THOMAS: That's fine.
18 MR. LYDON: But wait. You have to tell me
19 you're charging something specific. You just don't
20 throw this up here and suggest through the evidence
21 that there's an $80,000 shortage when it's something
23 THE INDEPENDENT HEARING OFFICER: It's not
24 that far afield here. But at the end of the day we'll
25 decide as to what we're talking about as far as the
1 actual shortage or ramifications from this act.
2 Mr. Thomas put in information that came from
3 an audit that a number of individuals were underfunded,
4 am I correct?
5 MR. THOMAS: Which they have had for --
6 certainly at least since the documents were produced.
7 THE INDEPENDENT HEARING OFFICER: If you are
8 saying that that is a ramification and further evidence
9 of financial malpractice, then say so. And then Mr.
10 Lydon might say --
11 MR. THOMAS: I have said so and I repeat it.
12 It is.
13 MR. LYDON: And in its specificity you're
14 saying that there was an $80,000 shortage. That's the
15 specific charge.
16 MR. THOMAS: I'm not making a specific dollar
17 amount charge. I'm saying --
18 MR. LYDON: What is it?
19 THE INDEPENDENT HEARING OFFICER: Well --
20 MR. THOMAS: Mr. Vaira, may I please? I've
21 tried to -- we have three different lawyers making
22 repeated objections. I try to listen -- to let them
23 finish their sentences. I would like to be extended
24 the same courtesy here.
25 Paragraphs 49 and 50 of the charges make
1 generalized allegations of financial misconduct.
2 Paragraph 50 specifically says, "By placing the Local
3 under Trusteeship, LIUNA will be able to monitor the
4 financial condition of the Local and prevent improper
5 contributions and any other financial misconduct."
6 THE INDEPENDENT HEARING OFFICER: The
7 information concerning this is not that far afield or
8 it's not something -- it's not hitting below the belt
9 to say that the ramifications of this also indicate
10 some financial malpractice of the underpayment of the
11 secretaries. And if that -- if you want to argue that,
12 that's fine and I'll put you --
13 MR. LYDON: I'm asking to know specifically
14 what is it that he says about the secretaries? What is
15 the exact charge? Are they saying that they were
16 shorted $80,000? What is the claim? That's what I
17 want to know. Because he refers to paragraphs 49 and
18 50, and 49 and 50 don't refer to any underreporting.
19 They refer to payments to individuals who they claim
20 are ineligible in the first part.
21 THE INDEPENDENT HEARING OFFICER: That's
22 fine. Okay. Now, is a ramification of that, the
23 underpayment of the secretaries, was that a cause and
24 effect? Mr. Thomas has alluded to that. If that's the
25 case --
1 MR. THOMAS: What I'm saying is this is
2 probative of a number of the charges. It is probative
3 of financial malpractice. It is probative of false
4 reports to an ERISA Fund under 18 U.S.C. 1027. It is
5 -- which is specifically Charge 6. Because they're
6 false in two respects. They're false in the respects
7 of reporting contributions for people that haven't
8 worked, and they're false in respect of having
9 underreported hours for people that did work. So I
10 mean this is a classic case of when the proof comes in
11 and it's stronger than what is alleged, or in other
12 words, if you allege four things and you prove six,
13 that doesn't take away from the probative value of five
14 and six.
15 THE INDEPENDENT HEARING OFFICER: Here. What
16 Mr. Lydon is saying is does he have to convince me or
17 -- not convince me. But if you've stated that, does he
18 have to address that in case I'm going to look at it?
19 And what you're saying, yes, the underpayment of the
20 secretaries is -- reflects the malpractice.
21 MR. THOMAS: I think -- my position --
22 THE INDEPENDENT HEARING OFFICER: And his
23 question is how much.
24 MR. LYDON: Yeah. I want a specification.
25 I'd like the end of the charge. That's what I'm
1 looking for.
2 MR. THOMAS: Well I will have by tomorrow --
3 I have a lot of the documents that are -- the related
4 documents that are not in the exhibit books that
5 correspond to the audit reports. The correspondence
6 that goes with the $43,000 check and so fourth, I will
7 be happy to produce that. But absolutely our position
8 is that even without all the 33 names that are listed
9 on Exhibit 7, if this were limited to the Union's
10 underfunding of its employees, that would be financial
11 malpractice right there because there the Funds are
12 being owed money that they're not receiving.
13 THE INDEPENDENT HEARING OFFICER: By the end
14 of tomorrow. One page or even stand before me and say
15 that, "We believe that the secretarial staff or those
16 other persons were underfunded to the tune of X and
17 denied." Mr. Thomas, you're going to argue that, "Mr.
18 Vaira, as an indication of the malpractice --
19 financial malpractice," or, "I'm not going to make
20 anything of it," and go on. One of the two.
21 MR. THOMAS: It will be the former and I
22 would be happy to do that.
23 MR. LYDON: And whatever documents that
24 underlie this.
25 THE INDEPENDENT HEARING OFFICER: Okay. Keep
1 in mind, gentlemen, this is -- a Trusteeship is not the
2 salted amount of pleading, the precise element of
3 pleading that one finds in Federal or State Court, but
4 there is some element of due process, and I think that
5 will be satisfied by Mr. Thomas saying, "We just found
6 something here and I believe I'm going to argue it.
7 You want to know what I'm going to rely upon." And
8 some other times things have come up here, and
9 obviously, gentlemen I'm not interested, I don't care
10 if you want to argue it or not. And that may occur.
11 Okay? But I think this is fair.
12 MR. THOMAS: That is all totally fine. And
13 also the record should reflect if I'm finished in my
14 case in chief Thursday, I assume that, you know, we're
15 going to have other dates down the line when they can
16 put on their case.
17 MR. MENDENHALL: I'll be very brief, Mr.
18 Vaira. And I just think this all goes to underlie how
19 important it is for us to have an opportunity to get
20 these documents that they've had. They received all
21 these document from LIUNA. You said you were going to
22 take it under advisement our request for the documents,
23 your Honor, and we --
24 THE INDEPENDENT HEARING OFFICER: You're
25 talking about the subpoenas.
1 MR. MENDENHALL: We just ask that you factor
2 this in.
3 THE INDEPENDENT HEARING OFFICER: We will
4 talk about those.
5 MR. MENDENHALL: Thank you.
6 THE INDEPENDENT HEARING OFFICER: Let's get
7 to some salted evidence and we'll talk about the
9 Go ahead, sir.
10 MR. THOMAS: Welcome back, Mr. Jorgensen.
11 THE WITNESS: Thank you.
12 BY MR. THOMAS:
13 Q. When we left off, we were talking about that
14 $80,000 figure that you just heard discussed among the
15 lawyers, right?
16 A. Yes.
17 Q. What is your understanding of what that
18 $80,000 figure represents?
19 A. Would you like me to comment on what just
20 went back and forth here?
21 Q. Not comment. If you have a factual
23 A. There was actually three audits. The first
24 one was for the same period of time that the Havey
25 audit was performed, and that's the one that really
1 discovered the $43,000, which we billed out to the
2 Local and they paid it. Then there was another audit.
3 THE INDEPENDENT HEARING OFFICER: What was
4 that $43,000 for, sir?
5 THE WITNESS: That was for the period of time
6 between -- let's see. That was a period of time
7 between -- it was an audit that was done in June of
8 '02, June 27th of '02, and that audit was for the same
9 period of time to review the audit that Havey did.
10 THE INDEPENDENT HEARING OFFICER: But what
11 did that $43,000 -- $40,000 reflect?
12 THE WITNESS: That represented shorted hours.
13 THE INDEPENDENT HEARING OFFICER: Of the --
15 THE WITNESS: Well you keep referring to
16 clerical staff. We don't look at what the position is
17 within the Local. We just look and see that the audit
18 determined --
19 THE INDEPENDENT HEARING OFFICER: That
20 reflects shorted hours?
21 THE WITNESS: Right. The audit determined
22 that there were in fact those hours shorted. And we
23 sent the bill out to the Local.
24 THE INDEPENDENT HEARING OFFICER: $40,000
1 THE WITNESS: $43,000 I think it was.
2 The Local does have a chance to respond by
3 challenging this and saying, "This isn't right." They
4 didn't. They sent a check in for $43,000.
5 MR. LYDON: I have a question. That has
6 nothing to do with the $80,000. In other words, same
7 thing but for a lesser amount. What is that?
8 THE WITNESS: We'll we're going to get into
9 that now.
10 The next audit was for the period of '92 --
11 June 1 of '92 through June 30th of '98. It covered up
12 until the period where the last audit ended, and that's
13 what determined the $80,684.02. That audit then
14 precipitated another audit which went back to --
15 MR. THOMAS: 1963?
16 THE WITNESS: 1963. So we have January 1 of
17 '63 through May 31 of '02. That didn't determine a lot
18 more sitting out there. It brought the audit up to
20 We've noted internally that this is the
21 amount still sitting there. We have netted out the
22 $43,000 paid. The Trustees have not made a
23 determination pending what's going to transpire, first
24 of all. We were sued, and so they just let it sit
25 there. We have not added on interest, because there's
1 a hefty amount of interest when you go back that far,
2 and we have not assessed the liquidated damages either
3 which is ten per cent of the amount owed. The Local
4 hasn't challenged it yet, so it's somewhat held in
5 limbo right now.
6 THE INDEPENDENT HEARING OFFICER: So what are
7 we saying here? I'm looking for a bottom line.
8 THE WITNESS: Well the bottom line is that
9 the final audit costs were $80,872.82 minus the -- and
10 I think you have a copy of the check there.
11 MR. THOMAS: $43,750.05.
12 THE INDEPENDENT HEARING OFFICER: Total.
13 Total bottom line is 80 but they paid 40 and there's
14 some dispute about interest and --
15 THE WITNESS: Right. The interest
16 calculations have not been made yet, and the liquidated
17 damages have not been assessed.
18 THE INDEPENDENT HEARING OFFICER: Liquidated
19 damages is part of the Trust Agreement?
20 THE WITNESS: Yes, it is, ten per cent of
21 what's owed. So technically if they owed the full
22 $80,000, that would be another $8,800 dollars in
23 liquidated damages. So that is where it's at right now
24 with these audits.
25 MR. THOMAS: Okay. Thank you.
1 And Mr. Vaira, I will make that
2 representation and also supplement the record with
3 these additional documents that I've marked.
4 THE INDEPENDENT HEARING OFFICER: Now where
5 were you, Mr. Thomas, when you closed?
6 MR. THOMAS: Well we were right on that
7 point, obviously. And I want to cover a couple of
8 points that have not been raised yet, specifically the
9 lawsuit that was filed and the internal appeals which
10 Mr. Jorgensen hasn't discussed yet.
11 THE INDEPENDENT HEARING OFFICER: This is a
12 lawsuit. We haven't covered the subject matter yet.
13 MR. THOMAS: Correct. We have not.
14 BY MR. THOMAS:
15 Q. Mr. Jorgensen, if you could turn -- this is
16 Volume Three, Tab 15 please -- Tab 14. Do you have
17 that in front of you?
18 A. Yes.
19 Q. Is this a copy of a lawsuit that your Fund
20 was served back in October of 2002?
21 A. Yes, it is.
22 Q. Who was the plaintiff?
23 A. The plaintiff is Local 1001.
24 Q. And obviously the document speaks for itself.
25 If you can put it in your own words what the lawsuit
1 was asking for.
2 A. They were basically asking -- asking the
3 Funds to accept the contributions which were submitted
4 on behalf of the individuals in question.
5 Q. Did that lawsuit go anywhere?
6 A. No. Our attorneys filed a Motion to Dismiss
7 and I think it was dismissed without prejudice, right?
8 MR. THOMAS: Dismissed with prejudice.
9 MR. LYDON: With prejudice.
10 THE WITNESS: Yes.
11 THE INDEPENDENT HEARING OFFICER: What was
12 the nature of the lawsuit?
13 MR. THOMAS: It was a declaratory judgment
14 actually in Federal Court seeking a declaration from
15 THE INDEPENDENT HEARING OFFICER that these
16 contributions -- and here we're not referring to the
17 underreporting issue. We're referring to the
18 contributions for employees who were not receiving
19 compensation were lawful.
20 And again, just to walk us through the
21 documents if we could, Mr. Jorgensen, there was a
22 Motion to Dismiss filed? That's Tab 15, right?
23 A. Yes.
24 Q. And you submitted a lengthy affidavit with
25 attachments --
1 A. Yes.
2 Q. -- which is Tab 16, correct?
3 A. Correct.
4 Q. And included in that is the Trust Agreement?
5 A. That's right.
6 Q. And other pertinent documents, right?
7 A. That's right.
8 Q. And then there was in Tab 17 a Motion for a
9 Rule 11 Sanctions? Tab 18 --
10 A. I don't have those tabs. Is that in Volume
12 Q. Yes. Motion for Sanctions. And then 18 is
13 the Court's opinion dismissing the lawsuit, right?
14 A. Right.
15 Q. In January of 2003?
16 A. That's correct.
17 Q. And then the remaining -- the following two
18 exhibits are the final judgment -- well the final
19 judgment and then a denial of a Motion for
21 A. Right.
22 Q. Okay. While the lawsuit was pending, Mr.
23 Jorgensen, did any of these individuals file appeals --
24 let me back up.
25 When the audit reports came in indicating
1 that there had been problems, was there any action
2 taken against any of the individuals who might have
3 been receiving pension benefits.
4 A. Yes. There was a number of actions. The
5 first one was Mr. Capasso's pension application was
6 rejected. And a number of individuals that we
7 determined were in the same classification who were in
8 fact on pension, their pensions were suspended.
9 Q. Let me just stop you there briefly if I
10 could. Will you look at Volume 3, Tab 7 please?
11 THE INDEPENDENT HEARING OFFICER: I've got it
12 right here.
13 Mr. Jorgensen, when you say they appealed,
14 who did they appeal to?
15 THE WITNESS: The Board of Trustees. You
16 have an automatic appeal and it goes out and somebody's
17 suspended or rejected.
18 THE INDEPENDENT HEARING OFFICER: Okay.
19 BY MR. THOMAS:
20 Q. So specifically with respect to Mr. Capasso,
21 who is about a third of the way down there, he's color
22 coded in black, indicating that he never actually
23 received the pension benefits, correct?
24 A. Correct.
25 Q. The ones that are color coded in red, there
1 of course is a code on page two, but what's represented
2 by the people who are coded in red?
3 A. They are the ones that were actually
4 receiving a pension and that were suspended.
5 Q. So where the pension benefits were actually
6 going out and you determined that they should be cut
8 A. Yes.
9 Q. So some group of the people listed here on
10 Tab 7 sued saying, "We should be reinstated."
11 A. Mr. Capasso sued, yes. He submitted a
12 lawsuit to both the Pension Fund and the Welfare Fund.
13 I think the other individuals came in for their -- they
14 were represented in group by an attorney. They did not
15 specifically show up at the Appeals Committee. Mr.
16 Capasso did. The Appeals Committee reviewed all their
17 cases and they rejected all of them.
18 Q. Okay. I misspoke. When I said "sued," what
19 I meant to say was filed appeals.
20 A. Right, filed appeals.
21 Q. With the Funds. Okay.
22 So -- and then that takes us back to where we
23 were looking at Exhibit -- I think the next one was 21.
24 This is a cover letter to Mr. Capasso's attorney
25 attaching an opinion, correct?
1 A. Correct.
2 Q. Could you tell the Hearing Officer what the
3 opinion is?
4 A. This is the cover letter. It's a copy of the
5 minutes of the Appeals Committee decision attached to
6 that, and the decision of the Trustees was that they
7 were going to deny his appeal for pension.
8 Q. And again the document speaks for itself and
9 it's fairly lengthy. Putting this into your own words,
10 what was the basis for denying these appeals?
11 A. The basis was that there was no salary
12 compensation paid to him while he was -- what
13 contributions were submitted.
14 Q. But if you go back to Tab 7, and this is --
15 comes back to the distinction you were drawing earlier
16 in your testimony. The process for making claims on
17 the Welfare Fund is different from the process for
18 making claims on the Pension Fund.
19 A. Yes, it is.
20 Q. So for example, in Mr. Capasso's case his
21 pension application was denied, but during the course
22 of the years when the Union was reporting him on the
23 remittance reports, did he make any welfare claims,
24 health insurance claims?
25 A. He had -- yes. The chart reveals that he had
1 claims paid out of $6,808.
2 Q. And in terms of money paid to the Funds,
3 which ultimately in your view, at least, should not
4 have been paid to the Funds, combining those two
5 columns, how much money on Capasso's part was spent by
6 the Union?
7 A. Totaling Welfare and Pension, $104,700 plus.
8 Q. Okay.
9 MR. LYDON: Where are you?
10 MR. THOMAS: Tab 7.
11 MR. LYDON: Okay. Thanks.
12 BY MR. THOMAS:
13 Q. Now you heard Mr. Faraci say moments ago, and
14 indeed I think it's alleged in the lawsuit that they
15 filed, you heard Mr. Faraci, and also I think it's
16 indicated in his lawsuit or the Local's lawsuit, that
17 there was some sort of an agreement between the Local
18 and the Funds concerning acceptance of these
19 contributions. Do you know of any such agreement?
20 A. No, not while I was there. I've been asked
21 by the Trustees and also the attorneys to review all
22 the minutes going back literally to day one, and I did
23 not see anything in there.
24 Q. And if you were to find such an agreement,
25 would that surprise you?
1 A. Well normally when there's an agreement
2 entered into which is a, should we say, it deviates
3 from normal policy, something like that should be put
4 in writing.
5 Q. As you look at Tab 7 with the amounts
6 indicated, and again this is separate from the
7 underfunding issue. This is just the funds of the
8 Union that went to the Pension Fund and Welfare Fund
9 for people who did not receive compensation. Do you
10 view these issues as trivial?
11 A. You mean what has been -- what has been paid
13 Q. Yeah. If you look at -- let me direct your
14 attention to the totals on page two. Pension
15 contributions of $396,000 plus. Welfare contributions
16 $434,000 plus coming into the Fund from the Local,
17 which in your view -- on your Fund's view should not
18 have been paid in. And then a corresponding amount of
19 $578,000 and $125,000 plus being paid out. What I'm
20 trying to get at is how seriously do you view these
22 THE INDEPENDENT HEARING OFFICER: I think
23 that's probably some issue for me.
24 MR. THOMAS: I would like his -- I would like
25 you to hear his opinion. You may draw a different
1 opinion. You may --
2 THE INDEPENDENT HEARING OFFICER: You're
3 saying as the Fund Administrator how does that -- like
4 if someone has an audit, how would that affect the
5 significance of the audit.
6 MR. THOMAS: That's not specifically what I'm
7 getting at.
8 THE INDEPENDENT HEARING OFFICER: If you're
9 asking if it's significant or not, I can pretty much
10 figure it out. You want his -- lay -- lay opinion as
11 to being the Fund Administrator. If this is a
12 significant event in the administration of the Fund,
13 you may ask him that.
14 BY MR. THOMAS:
15 Q. Is this a significant event in the
16 administration of your Fund?
17 A. Significant in is this going to make a huge
18 impact on the overall cost of the Funds?
19 Q. Not the financial stability, but in terms of
20 the integrity of the Fund.
21 A. Well, when we discover something like this,
22 the Trustees and the administrative staff, as well as
23 on the advice of the attorneys, take action to make
24 sure that we have everything documented on record, and
25 that we go about correcting whatever discrepencies or
1 issues there are. This isn't something that happens
2 everyday if that's what you're trying to say.
3 Q. And with respect to the Fund's tax status or
4 ERISA status, do these type of issues raise any
6 A. I don't think it's going to disqualify us --
7 our tax exempt status. I don't know if -- the
8 attorneys and the auditors will also -- have recommend
9 that we make a footnote onto our 5500 filing at the
10 next filing. I think it depends on the outcome -- the
11 final outcome is that the attorneys have already
12 recommended that this not be accepted. And as such,
13 it's up to the auditor who performs the annual year end
14 audit whether or not this is material enough to warrant
15 a footnote on the 5500. I don't think that the IRS or
16 the DOL is going to come in and shut the place down.
17 This is something that we were not aware of what was
18 happening. When we found out what was going on, we put
19 a stop to it.
20 Q. So if people are representing that you have
21 agreed or your predecessors have agreed to these
22 arrangements, do you agree or disagree with that
24 A. Well if there was some kind of an agreement,
25 my predecessor is long gone, he's deceased, and whether
1 or not something like this did take place between him
2 or somebody else is immaterial. It's something that --
3 it's being stopped now.
4 Q. Was there any agreement on your watch to this
6 A. No.
7 Q. And have you seen any paperwork of any such
8 agreement on anyone else's watch.
9 A. No. We've researched it very thoroughly and
10 there is nothing on file.
11 THE INDEPENDENT HEARING OFFICER: Mr. Thomas,
12 we have put in as exhibits the history of the
13 litigation of the Union's attempt to get a declaratory
14 judgment, the answer -- what am I to take from that?
15 What is the proof that you want me to take from that?
16 MR. THOMAS: Most of that is background to
17 the story and the chronology of how these issues were
18 dealt with.
19 THE INDEPENDENT HEARING OFFICER: Okay.
20 MR. THOMAS: So, you know, it is probative to
21 the extent that it shows what the conversation was
22 between the two entities.
23 THE INDEPENDENT HEARING OFFICER: I assume
24 that's what it was. It's in there and there's a fair
25 amount of give and take -- not give and take but
1 adverse and -- meaning the issue --
2 MR. THOMAS: And I would also say that some
3 of those documents do in fact shed light on legal
4 issues that are at play here.
5 THE INDEPENDENT HEARING OFFICER: I
6 understand that. Okay.
7 MR. THOMAS: Nothing further at this time,
8 Mr. Vaira.
9 THE INDEPENDENT HEARING OFFICER: Now, where
10 we are here is we have this gentleman here to be cross
11 examined. Do you need a minute or two before you
13 MR. FARACI: If we can have a couple seconds.
14 THE INDEPENDENT HEARING OFFICER: Let's take
15 five minutes.
16 (Whereupon a break was taken in
17 the proceedings after which the
18 following proceedings were had:)
19 MR. FARACI: Gentleman, if we can address a
20 couple of things before we get started.
21 THE INDEPENDENT HEARING OFFICER: Yes, sir.
22 MR. FARACI: First what we wanted to do, I
23 wanted to reserve initially our ability to call Mr.
24 Jorgensen again in our case or a later time. More
25 specifically, hopefully we will have access and you
1 will allow us access to the particular documents that
2 we've requested. And then secondly, I wanted to make
3 sure that he's going to be available so we can finish
4 up with him tomorrow.
5 MR. THOMAS: Why don't we see --
6 THE INDEPENDENT HEARING OFFICER: We're not
7 done yet.
8 THE INDEPENDENT HEARING OFFICER: We'll go
9 until we see where he is.
10 We'll address those documents. You've got to
11 explain to me what you're looking for and what you want
12 to do with these documents, what you want to find there
13 or what you think is there. Let's take care of him
15 MR. FARACI: Maybe we can address initially
16 some of the documents that he's gone over already.
17 MR. THOMAS: All that does is delay the
18 witness' testimony, and I'm anxious that he not be
19 inconvenienced unnecessarily.
20 THE INDEPENDENT HEARING OFFICER: Cross
21 examine him. Here he is.
22 MR. FARACI: That's what I was talking about.
23 THE INDEPENDENT HEARING OFFICER: Go ahead.
24 CROSS EXAMINATION
1 MR. FARACI:
2 Q. We can get started with some of those
4 First, Mr. Jorgensen, if you can take a look
5 at again, and I believe it was GEB's Exhibit Number 16
6 which was your Declaration?
7 A. Yes.
8 Q. Now Mr. Jorgensen, this Declaration was
9 signed by you on what particular date? Would that be
10 December --
11 A. December 4th, 2002.
12 Q. I believe prior to your signing of this
13 Declaration you took the time to review each and every
14 one of these documents, correct?
15 A. Yes.
16 Q. First I would like to begin with what is
17 marked as Exhibit -- it actually says Exhibit 1 here,
18 Restated Agreement and Declaration of Trust
19 of this entire Group Exhibit 16. As you look through
20 it -- apparently Exhibit 1 is the actual Restated
21 Agreement and Declaration, am I correct?
22 A. That's correct, yes.
23 Q. Can you please tell us what date that
24 amendment -- that document was amended to.
25 A. Amendment through May 31, 2002.
1 Q. If you can tell us what documents came before
2 this Restated Agreement.
3 A. The prior Trust Agreement?
4 Q. Correct.
5 A. That was -- off the top of my head I don't
6 remember when it was restated. I think it was -- I
7 think it was 1987. I'm not sure. It's the yellow
8 book. We restated the Trust Agreement when we had to
9 restate the plan. We included this in it. I can't
10 tell you off the top of my head exactly when it was
11 last restated.
12 Q. Why don't we go back to the beginning from
13 1963 then with the original Declaration of Trust, and
14 then you can bring us forward as to how many Restated
15 Agreements there were.
16 A. It was 1990, by the way, was the last
17 restated prior to this one.
18 Q. Let's go back prior to 1990. Were there any
19 other Restatements, or was that just the original Trust
20 -- Declaration of Trust.
21 A. I think the original Trust Agreement was
22 amended from time to time with amendments which we keep
23 and file. Now these go back quite a ways, back to
24 1963. I think that finally what they did was they took
25 and they printed it in 1990 incorporating all the
1 amendments, then we restated it with amendments in
3 Q. Do you know specifically -- do you know
4 specifically where these copies of these documents are
6 A. Yes. I have them on file.
7 Q. That would be at your office in Westchester?
8 A. Yes.
9 Q. Now if you can turn to page five of the
10 Restated Agreement and Declaration of Trust please. In
11 particular take a look at Subsection -- Employee
12 Subsection 3.
13 MR. THOMAS: What page?
14 MR. FARACI: That's page five of this
15 agreement. I'm just working my way through these pages
16 on here.
17 BY MR. FARACI:
18 Q. Page five, Section 3 where it states
20 A. Correct.
21 Q. You see that?
22 A. Yes.
23 Q. Now earlier you had testified with regards to
24 Mr. Capasso and the other individuals of Local 1001,
25 that they were not qualified as employees, correct?
1 A. They were not true employees receiving
2 salaried compensation, yes.
3 Q. What are you basing the word "true employee"
5 A. I think ERISA defines it as actually
6 performing hours of work through compensation.
7 Q. Would that be specified also in this
8 particular document?
9 A. I don't think the Trust Agreement spelled it
10 out specifically. I think it's assumed under the terms
11 of the law that you would assume that somebody is in
12 fact receiving salaried compensation being an employee.
13 Q. When you say "assumed," assumed by whom?
14 A. By anybody who knows the business.
15 Q. Would you be making reference to possibly
16 attorneys or ERISA attorneys?
17 A. Yes.
18 Q. How about the layman. Would a layman or an
19 employee for let's say a Labor Union understand the
20 ERISA law?
21 A. Well the letter we send out to each --
22 Q. If you can please address my question.
23 MR. THOMAS: He was.
24 THE INDEPENDENT HEARING OFFICER: Let him
1 THE WITNESS: The letter sent out to each new
2 employer does specify that the -- he had to be an
3 employee as a laborer receiving salaried compensation.
4 So this goes way back, so --
5 BY MR. FARACI:
6 Q. When was such letter sent to Local 1001?
7 A. I think when they probably first -- I'm not
8 sure what the letter looked like back in 1963. I can't
9 say that any letter was sent out. That's way before my
11 Q. So to your knowledge, testifying here today,
12 you have no knowledge of any letter sent to Local 1001
13 which defines under the ERISA law an employee, correct?
14 A. I'm not saying it doesn't exist. I would
15 have to check the files. We have a file on each
16 employer. That would be something I could look up and
17 see exactly what that letter said.
18 Q. And again that file would be a file kept in
19 your office in Westchester?
20 A. It would be kept in our Records Department
21 back in the Contract Department, yes. I would hope
22 they'd have something. I don't know how they did
23 business back then. It may have been with a hand
25 Q. Would that file have all of the
1 correspondences then between Local 1001 and the Fund?
2 A. If there was any correspondence going back
3 and forth there should be, yes.
4 Q. If you can take a particular look at
5 Subparagraph (c). Take a moment to read over that.
6 A. All right.
7 MR. FARACI: If I could just read that into
8 the record really quick. It says -- this is Section
9 (c) under "Employee. Any person on whose behalf an
10 Employer has made contributions to the Pension Fund and
11 has reported same on a standard report form which
12 contains a provision binding said Employer to the
13 provisions of this Agreement or otherwise evidencing
14 said Employer's intent to be so bound." Isn't that a
15 definition of "Employee" under this section?
16 A. That's one of the definitions, yes.
17 Q. Now if you take a look on page six, under
18 Subparagraph (f) where it starts, "The term "Employee"
19 shall also mean all eligible persons employed by the
20 Union, on whose behalf the Union shall make payments to
21 the Pension Fund at the times and at the rate of
22 payment equal to that made by any other Employer who is
23 a party to this Agreement."
24 A. Yes.
25 Q. You agree that also further defines
2 A. Yes.
3 Q. Now if you could also take a look on page
4 eight, Section 11. It defines "Covered Employment."
5 It reads, "Covered Employment means employment for
6 which an Employer is obligated to contribute to the
7 Pension Plan or employment with Employers prior to the
8 establishment of the Pension Plan which, in the
9 reasonable judgment of the Trustees, would have
10 required contributions to the Pension Plan had the
11 Pension Plan been in existence at the time of such
13 A. That's past service.
14 Q. You would agree that that also goes back to
15 service prior to 1963.
16 A. Right. That's considered past service. We
17 do grant credit for that, somebody who comes into the
18 industry with past service prior to the existence of
19 the plan.
20 Q. If Local 1001 had been making contributions
21 prior, having had that type of work prior to 1963, it
22 would also qualify as employment?
23 A. Yes.
24 Q. Now if you'd please turn over to page 13 of
25 this same agreement where it talks about "General
1 Powers Relating to the Trustees." And if you go down
2 to Subparagraph (b).
3 MR. THOMAS: What page?
4 MR. FARACI: I'm sorry. Page 13,
5 Subparagraph (b), one, two, third full sentence at the
6 end that begins: "The Trustees have full discretionary
7 authority to modify and interpret the Pension Plan, all
8 Plan documents, procedures, and the terms of the Trust
9 Agreement." See that portion?
10 THE WITNESS: Yes.
11 BY MR. FARACI:
12 Q. And that again would be the Trustees of your
13 particular Fund?
14 A. Correct.
15 Q. Which means that the Trustees of your Fund
16 could amend these documents at any time they want,
18 A. They have the power to amend and modify Plan
19 documents, procedures, with the caveat that it's
20 approved by a Fund counsel.
21 Q. Who presently is Fund counsel?
22 A. We have co-counsel. One is Peter Dowd with
23 Dowd, Black & Bennett, and the other one is Charles
24 Murphy with Ogletree Deakins.
25 Q. And with regards to Mr. Dowd, how long has he
1 been representing the Fund for?
2 A. He started in 1987 I think it was -- '97.
3 I'm sorry. April.
4 Q. And how about Mr. Murphy and his firm?
5 A. At the same time.
6 Q. And earlier in your testimony you had made
7 reference to opinions from attorneys with regards to
8 Mr. Capasso's denial. Would that be the same
9 attorneys, Mr. Dowd and Mr. Murphy?
10 A. Yes, they would.
11 Q. Now with regards to those opinions regarding
12 Mr. Capasso, and I -- and strike that.
13 With regards to the opinions regarding Mr.
14 Capasso, were those opinions shared with the Trustees?
15 A. Yes.
16 Q. And where are those opinions kept?
17 A. In the minutes of the Fund records of the
18 Board meetings.
19 Q. Now with regards to the minutes of the Board
20 meetings, just tell us, if you could, how often are
21 minutes kept and approximately how long are they?
22 A. Our Boards meet every other month, six times
23 a year. The Pension Committee meets monthly. And
24 those minutes are -- the Board minutes are
25 approximately 20 pages long. The minutes of the
1 Pension Committee -- well without attachments, just a
2 cover letter, it's probably -- I would say probably
3 also 18 pages.
4 Q. Now within those minutes are -- I believe you
5 mentioned -- strike that.
6 Within the minutes that you're talking about,
7 earlier you had testified -- if you give me a moment to
8 find it. To James Capasso's determination regarding
9 legitimacy of contributions, disqualifying employment,
10 IRS, 415 limitations. Do you recall that document?
11 A. Yes.
12 Q. Would that document be kept in the same
13 minutes you're talking about?
14 A. Yes.
15 Q. Would any other discrepencies regarding any
16 other folks, such as the members from Local 1001, also
17 be kept in those same minutes?
18 A. Yes.
19 Q. I assume those minutes and those
20 discrepencies would go back to 1963 when they began?
21 A. Well any appeal, any decision made by the
22 full Board or a committee of the Board, which would be
23 in this case the Pension Committee, are kept as
24 permanent records.
25 Q. And with regards to Local 1001, when you
1 reviewed all of these other documents, did you see
2 anywhere in those minutes any regards to any other
3 discrepencies regarding any of the individuals who had
4 applied for pensions in the past from Local 1001 and
5 were qualified.
6 A. No. Any other 1001 employee who had
7 previously applied for pension and it was approved, did
8 I see anything in there? No.
9 MR. THOMAS: I would like to make an
10 objection. The question assumes a fact not in
12 THE INDEPENDENT HEARING OFFICER: Gentlemen,
13 I don't understand the question. I mean what did you
14 ask him? Break it down for me.
15 MR. FARACI: What I want to know is whether
16 or not there was any other individuals from Local 1001
17 who had applied for a pension and they were denied.
18 THE WITNESS: Well we have denials all the
19 time. You're talking under the same circumstances?
20 BY MR. FARACI:
21 Q. Exactly. Under the same circumstances as
22 what we're here talking about today.
23 A. They may not have been -- no. No. We did
24 not discover this until this came up, and then at that
25 point we went back and looked at everybody and then
1 they were denied.
2 MR. THOMAS: That was the basis of my
3 objection is that it's already been established that
4 they didn't know anything until 2002. So there
5 wouldn't have been any --
6 MR. FARACI: If I can just clarify it.
7 BY MR. FARACI:
8 Q. It's your contention that they didn't know
9 anything until prior to 2002.
10 THE INDEPENDENT HEARING OFFICER: He just
12 MR. THOMAS: That was what his testimony was.
13 MR. FARACI: His testimony was he didn't know
14 if there was anything back from 1963 to the present,
15 and he didn't know if there were any oral agreements,
16 not that there was nothing existing before 2002.
17 THE INDEPENDENT HEARING OFFICER: I missed
18 that part about the oral agreements. The question was
19 did you run across any and then did you -- and he said
21 MR. FARACI: Correct. I was just clarifying
22 what Mr. Thomas had said.
23 BY MR. FARACI:
24 Q. Mr. Jorgensen, if you could turn a little bit
25 further to page 27 of that same document and take
1 particular note to Section 3 which is "Report on
2 Contributions and Production of Records".
3 THE INDEPENDENT HEARING OFFICER: Where are
5 MR. FARACI: I'm sorry. Page 27, Section 3,
6 same Exhibit 16.
7 THE INDEPENDENT HEARING OFFICER: "Report on
9 MR. FARACI: Correct.
10 BY MR. FARACI:
11 Q. If you can take a moment and read over that.
12 A. All right.
13 Q. Have you read over the entire thing?
14 A. Yes.
15 Q. Would you agree that that particular
16 paragraph puts a duty to investigate on the Trustees of
17 the Funds?
18 A. It really refers -- it really points out to
19 an employer that you are to have records made available
20 upon request by the Trustees or their Audit Department
21 employees, all records requiring -- "records required
22 to maintain in compliance with the procedures developed
23 and communicated by the Administrator from the
24 beginning of such Employer participation in the Pension
25 Fund forward." What it means is that whom we ask for
1 records to perform an audit and review, whether or not
2 contributions have been made, you have to comply.
3 Q. So you do not agree that it imposed a duty.
4 Is that your position?
5 A. Well it is the Fund's duty under ERISA to
6 make sure the contributions are collected, and we do
7 that through performing periodic audits.
8 Q. That duty also would go directly to the
9 Trustees, correct?
10 A. Yes. They have the ultimate responsibility
11 for everything.
12 Q. If you take a look a little further at the
13 next document in there, it's entitled "Trust Agreement
14 Addendum A." And it actually comes at the end of the
15 agreement. If you go to page 38 and look on the next
17 MR. FARACI: Does everyone have that
19 BY MR. FARACI:
20 Q. Again it appears on the face of this that
21 this was adopted by the Board of Trustees effective as
22 of March 1st, 2002?
23 A. Correct.
24 Q. I'm sorry. I had one other question.
25 If you go back to page 37, a couple pages
1 before that. Where you have your signature it's dated
3 A. Yes.
4 Q. That was the day that you actually signed
5 this document?
6 A. Yes.
7 Q. And let me ask you this: Have the other
8 Trustees --
9 A. Yes, they have signed it.
10 Q. Now earlier you were testifying with regards
11 to different types of audits in this honor roll type of
13 A. Yes.
14 Q. If you look under subsection -- where it says
15 "Audit Period," is this the document that you were
16 making reference to?
17 A. Yes.
18 Q. And if you could, taking a look at this "New
19 Employers" versus "Honor Roll Employers" and "Other
20 Contributing Employers". What classification would
21 Local 1001 fall under with regards to the Fund's view
22 of it and audits?
23 A. After March 1 of '02, based on the audits we
24 had on file are honor roll.
25 Q. How about prior to that?
1 A. Well before that we had no honor roll
3 Q. So explain to us when audits would be
5 A. Every three years.
6 Q. Every three years, no matter what, an audit
7 would be performed on each individual employer.
8 A. Right. Unfortunately, the Locals did not
9 always fall under that policy in the past. They didn't
10 always have regular scheduling. And that was --
11 Q. But again, the policy you're talking about is
12 the policy of the Fund, correct?
13 A. Right.
14 Q. So it would be the Fund's responsibility --
15 A. We scheduled, yes.
16 Q. It would be the Fund's responsibility to make
17 sure the audit was conducted, correct?
18 A. Correct.
19 Q. It wouldn't be the employer's responsibility
20 to --
21 A. No.
22 Q. And back -- if we go back in time from --
23 let's start in 2002. Was an audit conducted on Local
24 1001 every three years?
25 A. Prior to that? No.
1 Q. When were audits conducted?
2 A. Well when I started there I asked -- I
3 noticed that the Local Unions hadn't always been
4 audited, and I asked why. And it was -- they just
5 thought that they should -- that everyone in the Local
6 Unions were honest and didn't -- they didn't need an
7 audit. I said, "Well, you know, we'll have to perform
8 regular audits with the Unions too."
9 Q. So prior to your coming on board you did not
10 know of any other audits that were conducted on Local
12 A. There are none on file.
13 Q. Let me rephrase that.
14 In terms of the audit from 1998 that you were
15 talking about.
16 A. Yes.
17 Q. Were there any other audits performed before
18 1998, and what dates were they performed on?
19 A. I don't think that there was any others.
20 Q. Would there be any record if there was some
21 type of audit?
22 A. It would be in the files, yes. Yeah. We did
23 check, and there were none in the files. I think there
24 was two audits performed in the whole period.
25 Q. Can you give us the dates when those were
2 A. Well the one we have on file here, and I
3 think there was one that -- first one that Havey did
4 was -- when was it? '98 to 2002?
5 Q. And when was the -- there was an earlier one
7 A. I think there was one after that -- no.
8 There was one -- the one from '95. I'm not sure if it
9 was 2000 or if it was Local 1001, but there was -- I
10 think there was two audits on file prior to us looking
11 at this.
12 Q. Those particular audits would be kept in your
13 file for 1001.
14 A. Yes. We don't throw them away.
15 Q. Do you know of any other accounting firms
16 that had performed audits on Local 1001 other than
18 A. It was just Havey.
19 Q. Back in 1998 when the Havey accounting firm
20 performed the audits, what other accounting firms was
21 the Fund using?
22 A. Their names?
23 Q. Yes.
24 A. We were using Grant Thornton and Richard J.
1 Q. And who made the determination to hire Havey
2 & Associates for the 1001 audit?
3 A. It was just a routine audit. It wasn't
4 hiring. They were already on retainer so to speak.
5 Our Field Department just assigned them. At that time
6 it was just a routine audit and they just gave it to
8 Q. Earlier you had made reference to obtaining
9 Social Security records of individuals. Can you
10 explain to us what the relevance would be of obtaining
11 Social Security records of individuals applying for a
13 A. There are times in which somebody says that
14 they were working for an employer, and we have no
15 records that show that the person was. We will go back
16 and ask for a Social Security Statement, and that
17 Social Security Statement will tell you the quarterly
18 payments made by the employer that these people were
19 working for their entire work history. It's as a
20 check and also at times to verify that a person was in
21 fact employed by a certain employer when they claim
22 that they were. Most of this is probably pre-ERISA,
23 because after pre-ERISA we did audits pretty
24 religiously. Prior to ERISA it was -- the audits
25 weren't conducted as faithfully.
1 After ERISA the law states that contributions
2 made are required to be made. So in other words,
3 whether or not the money came in, we're required to
4 credit it.
5 Q. So prior to that you were more concerned with
6 whether or not money was coming in prior to ERISA?
7 A. Prior to that I wasn't there. But after
8 ERISA pretty much mandated that you go out and make
9 periodic audits of all employers. And there's times
10 when somebody will come in and say that, "I worked
11 there for so and so," and for whatever reason the
12 auditor or somebody missed it, and we can verify his
13 employment if he was in fact there. Or the company may
14 be out of business, and we have no way of knowing
15 whether they worked there or not, and we can verify
16 that through Social Security.
17 Q. So that would be a means that the Fund could
18 use independent from getting documents from the Local
19 with regards to working reports. They could find that
20 out on their own.
21 A. It's only done during pension applications.
22 We don't use it for audits or anything. If somebody
23 comes in and applies for pension and there's -- he's
24 either -- not just a year short, maybe just hours short
25 of having a full pension, and we'll go check and we'll
1 use that to help his credit.
2 Q. Would there be any other times when you would
3 take a look at the Social Security records?
4 A. No.
5 Q. Also, just so we're clear on this, ERISA
6 began in 1974?
7 A. It was signed into law September 14th, 1972,
8 '73. Was it? There was a grace period for most Funds
9 to comply. It's usually by the beginning of the next
10 plan year. So most of the plans complied by 1976.
11 Q. Okay. And then after that went into effect,
12 at that point ERISA put the burden on the Fund then to
13 conduct these periodic audits?
14 A. It was up to the Fund to make sure that all
15 contributions came in because, like I said, ERISA
16 stipulated that whether or not -- nobody's going to be
17 shortchanged of credit. If they work for an employer
18 and he didn't submit contributions they were granted
20 Q. Again this responsibility went to the Fund,
21 not to the Local 1001, correct?
22 A. Yes, the Fund. The onus is on the Fund to go
23 out and audit.
24 Q. Now take a look further in that same group of
25 documents, Number 16, to what is labeled as Exhibit
1 Number 2. And it's titled the "Amended Health and
2 Welfare Department of the Construction and General
3 Laborers' District Council."
4 MR. THOMAS: Your Exhibit 16?
5 MR. FARACI: This is your Exhibit 16. I'm
6 still in that same exhibit.
7 MR. THOMAS: Tab 16, Exhibit 2. Is that what
8 you're saying?
9 MR. FARACI: Correct.
10 THE INDEPENDENT HEARING OFFICER: What page
11 are you on?
12 MR. LYDON: There aren't pages numbered, but
13 it's about that far in and it looks like this.
14 MR. FARACI: Go to the end of the document
15 that we were just looking at. It's right there.
16 THE INDEPENDENT HEARING OFFICER: All right.
17 BY MR. FARACI:
18 Q. Again earlier you had testified that there's
19 two separate documents that control, correct?
20 A. Yes.
21 Q. And this would be the document which controls
22 which --
23 A. This is the Health and Welfare. This is the
24 old one. We have not amended this yet -- well, we're
25 in the process of amending it, but it hasn't been
1 adopted by the Board. We did the pension first because
2 we're restating the plan. This is the last restated
3 and amended in August of 1990.
4 Q. Again if you take a look at Section 3, which
5 is page 22 of this document under "Report on
6 Contributions and Production of Records."
7 A. Yes.
8 Q. Section -- about seven lines down begins "The
9 Trustees may at any time have an audit made by an
10 independent certified public accountant of its
11 representatives --
12 MR. LYDON: "Or its".
13 BY MR. FARACI:
14 Q. "Or its," I'm sorry, "representatives of the
15 payroll of any Employer in connection with the said
16 contributions and/or said reports," correct?
17 A. Correct.
18 Q. And again, this would give the Fund the
19 ability to conduct these audits at will; is that
21 A. Yes.
22 Q. Now if you turn to a little bit earlier. I
23 apologize for this. This is under "Article I," page
24 two of the same document where it defines "Employer."
25 Now if you could, I would like you to take a look at
1 paragraphs (b), (c) and (d). We'll address them one at
2 a time. Please take a look at (b) first.
3 Now taking a look at paragraph (b), earlier
4 you made reference to possible written agreements that
5 would go outside the scope of these agreements,
7 A. Well I said that if there was anything that
8 was outside of the scope, that it should be in writing
9 and approved by the Board. I think that's what I was
10 trying to refer to.
11 Q. Okay. If you can look now at paragraph (e)
12 at the bottom there. And I'll read it to you. "By any
13 course of conduct, including but not limited to, oral
14 representations to Employees, representatives of the
15 Council, Trustees, attorneys or other persons, ratifies
16 or accepts the provisions of any Collective Bargaining
17 Agreement which requires contributions to the Trust
18 Estate continued hereby or of this Agreement itself, or
19 of any other written instrument which binds such
20 Employer to make contributions to the Pension Fund, or
21 is estopped to deny such obligation."
22 Now you would agree that based on that
23 provision there can be oral agreements, correct?
24 A. Yes, according to this. I'm not sure this is
25 going to be in the new Trust Agreement.
1 Q. That wasn't my question. My question was:
2 Based on paragraph (e), under definition of "Employer,"
3 you could have an oral agreement for an employer,
5 A. Well it says, "oral representation to
6 Employees, representatives of the Council, Trustees,
7 attorneys or other persons, ratifies or accepts the
8 provisions of any Collective Bargaining Agreement which
9 requires contributions."
10 Q. And again, that's dealing with employer not
11 employee, correct?
12 A. Right.
13 Q. Now look down to the very last paragraph
14 there of the same -- on page four it reads: "A person
15 or entity that has become an Employer under this
16 Agreement shall continue as such until it is no longer
17 obligated pursuant to a Written Agreement or other
18 legally enforceable obligation to make contributions to
19 the Trust Estate."
20 Now you would agree that once Local 1001
21 begins making these contributions to the Fund, the only
22 way they can stop is by a written agreement to do so,
24 A. Yes.
25 Q. And there was no written agreement after
1 Local 1001 began making these contributions to stop,
2 was there?
3 MR. THOMAS: Objection. Again it assumes a
4 fact not in evidence. It assumes that the
5 contributions are legitimate. In other words, what
6 this governs is legitimate contributions. It doesn't
7 govern improper or illegal contributions. There is no
8 legal requirement under this or any other document that
9 the Fund be required to continue accepting illegal
11 So when Mr. Faraci says they're required to
12 accept it, that's premised upon the assumption that
13 these are proper, legal contributions.
14 MR. FARACI: And for the record, your Honor,
15 it is our position that these are proper contributions.
16 It's his position that they're not proper.
17 THE INDEPENDENT HEARING OFFICER: Okay.
18 That's where you're going with this.
19 MR. FARACI: Pardon?
20 THE INDEPENDENT HEARING OFFICER: That's
21 where you're going with this.
22 MR. FARACI: Can I continue?
23 THE INDEPENDENT HEARING OFFICER: Yeah. Go
25 BY MR. FARACI:
1 Q. Now if you take a look now at Section 3,
2 titled "Employee".
3 THE INDEPENDENT HEARING OFFICER: You had an
4 objection. I think you stated it, we argued it, and
5 you made your point. It's the point of argument what
6 you're saying and so -- you had made an objection, and
7 I don't think it was --
8 MR. THOMAS: The objection is a misleading
9 question, and the response is misleading as well
10 because it assumes a fact that is not established.
11 THE INDEPENDENT HEARING OFFICER: That's a
12 matter for argument. I understand. Go ahead.
13 MR. FARACI: I'm not sure if he actually
14 answered, the objection came after or before. Maybe
15 THE INDEPENDENT HEARING OFFICER reporter can just let
16 us know. (Record
18 BY MR. FARACI:
19 Q. Mr. Jorgensen, look a little further into
20 Section 3 which defines "Employee".
21 A. Yes.
22 Q. And read over paragraph (b) for me.
23 A. Okay.
24 Q. Now I'm going to read that also. It says,
25 "Any person employed by an Employer who performs work
1 within the jurisdiction of the Council as said
2 jurisdiction is set forth in any applicable Collective
3 Bargaining Agreement or by any custom or practice in
4 the geographic area within which the Employer operates
5 and his Employees perform work."
6 Now you would agree that under that portion,
7 after the "or" word that the individuals of Local 1001
8 are employees, correct?
9 A. Well the employees -- I'm not sure I follow
10 your question on that.
11 Q. Under the definition here, Section 3 of this
12 agreement, the individuals of Local 1001 that we're
13 talking about here today, would qualify as being an
14 employee under that definition, correct?
15 MR. THOMAS: Mr. Vaira, there's something
16 very unclear in that question. The question doesn't
17 tell us whether we're talking about people who were
18 paid compensation or people who were not paid
19 compensation. I think there's a huge distinction.
20 MR. FARACI: I don't think there is a
21 distinction if you read that portion of it.
22 THE INDEPENDENT HEARING OFFICER: I have a
23 question. Didn't the attorneys already come to that
24 conclusion? His attorneys already come to that
25 conclusion and decided they weren't.
1 MR. FARACI: We're going to get to what his
2 attorneys' conclusions are later. Right now I would
3 like clarifications on different areas of these
4 documents that both the Trustees and the attorneys
5 could have based their opinions on.
6 THE INDEPENDENT HEARING OFFICER: This guy
7 wasn't the guy that made the opinion. The attorneys
8 came up with the opinion. You're making an argument
9 that the definition of "Employee" is ill taken by the
10 Trust, meaning the Trust has a body.
11 MR. FARACI: No. I'm asking him as the
12 Pension Director whether or not he believes that they
13 could be qualified under this definition.
14 THE INDEPENDENT HEARING OFFICER: They
15 already made that decision. His attorneys have told
16 him no way. And am I correct your attorneys have --
17 THE WITNESS: Yes. They made a decision that
18 they were not.
19 THE INDEPENDENT HEARING OFFICER: And you
20 went to court in front of Judge Shadur and they --
21 Judge Shadur --
22 MR. FARACI: Judge Shadur never decided that.
23 The case was dismissed on standing alone. It had
24 nothing to do with that.
25 THE INDEPENDENT HEARING OFFICER: Okay. All
2 MR. FARACI: And I think -- my questions are
3 directed to him. Counsel was allowed to ask him
4 opinions and he was allowed to answer.
5 THE INDEPENDENT HEARING OFFICER: Not that
6 way. Not that way. Counsel didn't ask him those
7 opinions. Counsel asked him a couple of opinions was
8 this significant or not significant. You're going
9 really -- to a really -- an intellectual -- a legal
10 opinion. You're asking a guy who went to his lawyers
11 and his lawyers told him.
12 MR. FARACI: Exactly. And the GEB attorney
13 is claiming that my clients are guilty of violating
14 these same rules and regulations that you're talking
15 about that you say he needs two different law firms to
17 THE INDEPENDENT HEARING OFFICER: So?
18 MR. FARACI: So I think I'm entitled to ask
19 him those questions.
20 THE INDEPENDENT HEARING OFFICER: He's going
21 to say, "I asked my lawyers."
22 MR. FARACI: That's not what he said though.
23 He said "Yes."
24 THE INDEPENDENT HEARING OFFICER: I'm going
25 to rule right now, right now. I'm going to cut off
1 this line of questioning. All these legal opinions and
2 decisions, his answer will be, "See my lawyers. I
3 asked my lawyers." And there is no use going through
4 this again and again asking him what his lawyers told
5 him or why he disagrees or agrees with his lawyers.
6 The Fund is taking a position, am I correct?
7 MR. THOMAS: Absolutely.
8 THE INDEPENDENT HEARING OFFICER: It has
9 taken a position, and I see no reason to ask the
10 client, "Is your lawyers wrong or not?"
11 Do you rely upon your lawyers?
12 THE WITNESS: Yes.
13 THE INDEPENDENT HEARING OFFICER: And you
14 made this decision and you denied it?
15 THE WITNESS: Yes.
16 THE INDEPENDENT HEARING OFFICER: That's it.
17 That's it. You may make -- I cut you off for proof.
18 I'm cutting off this line of questioning.
19 MR. FARACI: Could I ask him whether or not
20 they inquired to custom and practice, that being the
21 attorneys. I would like to know if the attorneys
22 inquired of Mr. Jorgensen whether or not there was a
23 custom and practice that went on.
24 THE INDEPENDENT HEARING OFFICER: If he
1 THE WITNESS: Did the attorneys inquire with
3 MR. FARACI: Yes, with you.
4 MR. THOMAS: I'm sorry. Doesn't that call
5 for a privileged communication?
6 THE INDEPENDENT HEARING OFFICER: He may ask
7 it. I don't think that calls for privilege. I think
8 you're going no place with this because he's just
9 simply going to answer, "I asked my lawyers. I asked
10 my lawyers. They gave me -- and that's how he got
12 MR. FARACI: All I wanted to know is if his
13 lawyers asked him if there was a custom and practice in
14 place based on the fact that that's what seven
15 different individuals make in their applications for
17 THE INDEPENDENT HEARING OFFICER: And that
18 doesn't prove anything. If the lawyers -- go ahead and
19 ask him.
20 THE WITNESS: I don't recall them asking me
21 if -- for an interpretation. Generally it's the other
22 way around. That's why they're lawyers. And the one
23 thing this does say is "operates as employees, perform
24 work." I think that was the question that our
25 attorneys had. They reviewed this. They made their
1 recommendations to the Board of Trustees, and I carried
2 out their orders.
3 BY MR. FARACI:
4 Q. That's a long answer, but that wasn't exactly
5 what Mr. Vaira said I could ask.
6 THE INDEPENDENT HEARING OFFICER: You said
7 that you never asked him.
8 MR. FARACI: I asked him whether or not his
9 attorneys inquired with him whether or not there was a
10 custom and practice.
11 THE INDEPENDENT HEARING OFFICER: He said no.
12 THE WITNESS: A custom regarding?
13 MR. FARACI: A custom and practice with Local
14 1001 with regards to individuals who were Auditors and
15 Executive Board members getting contributions paid to
16 them in lieu of compensation.
17 THE WITNESS: Well they did ask me to
18 research the records to see if there was anything in
19 the file that ever revealed something like this in the
20 past, and I didn't find anything. Not only I looked,
21 but I think just about every other staff member in the
22 place did.
23 BY MR. FARACI:
24 Q. That's different than custom and practice.
25 They were actually looking for a written document
1 regarding this.
2 A. Right -- no, we didn't -- we did go back to
3 individuals that had worked there and have now retired.
4 We asked them if there was ever anything that was
5 discussed verbally that they recall with a prior
6 administrator. We asked the people who were running
7 the Field Department at that time if they recall
8 anything like that, and there was no recollection by
10 Q. Mr. Jorgensen, you were going on about
11 different individuals that you talked to.
12 A. Yes.
13 Q. If you could just first off list who these
14 individuals were and then we'll get into what you
15 talked about with them and when these conversations
16 took place. So first list for me who you spoke with.
17 THE INDEPENDENT HEARING OFFICER: What
18 subject -- tell me where we are with these questions.
19 What is the question you asked him about who he's
20 talked to?
21 MR. FARACI: He volunteered to tell me that
22 he talked to people about whether or not there was a
23 custom and practice or whether or not this had been
24 going on for years. He said, "I talked to
25 individuals." I'm just asking who he talked to, when
1 he talked to them, and what they talked about.
2 THE INDEPENDENT HEARING OFFICER: What would
3 that prove?
4 MR. FARACI: It's going to prove whether or
5 not the Fund looked into custom and practice. It's
6 going to tell me what he did. They definitely have
7 fiduciary responsibility.
8 THE INDEPENDENT HEARING OFFICER: I think I
9 said it before. Your argument is this: He stated some
10 facts and they -- and he took these facts to his
11 lawyers. His lawyers said, "Let's cut this off." And
12 they did. Now were the lawyers wrong based upon the
13 information they had? That's up to you to convince me.
14 But beating him up and asking him what they did and
15 what they didn't do -- the lawyers -- we're there.
16 MR. LYDON: I don't think he's beating him
17 up. He is entitled to find out -- what he's asking is
18 what the lawyers inquired of. In other words, he's
19 trying to find out what the investigation was that they
20 did before they made this determination and decision.
21 Did they make inquiry about custom and practice.
22 THE INDEPENDENT HEARING OFFICER: I fail to
23 see how that -- you have come to a conclusion and your
24 argument is that the Fund improperly denied these --
25 they took the wrong position and said you shouldn't
1 deny them pension benefits because 1001 did everything
3 MR. FARACI: That's not what I'm saying. I'm
4 trying to find out what they base their investigation
6 THE INDEPENDENT HEARING OFFICER: What are
7 you saying?
8 MR. FARACI: My question is, what they based
9 these decisions on. Did they go out and speak to
10 individuals? I mean the Pension Fund has to make a
11 determination whether or not people are qualified.
12 He's brought it to our attention that this was
13 something out of the ordinary and that they had to talk
14 to lawyers and they had to talk to different
15 individuals to figure out whether or not these people
16 were qualified for pensions.
17 THE INDEPENDENT HEARING OFFICER: And the
18 lawyers came to a conclusion that they should deny
19 these pensions. Do you have any problem with that?
20 The lawyers came to that conclusion and the Fund
22 MR. FARACI: Lawyers are entitled to come to
23 whatever opinion they would like.
24 THE INDEPENDENT HEARING OFFICER: Okay.
25 Okay. But getting to the point that they did. Now
1 where are we -- where does that take us in this
2 particular proceeding that I'm conducting now?
3 MR. FARACI: In this proceeding they're
4 making allegations that what the men and women of Local
5 1001 did not only was improper, but they're saying it
6 was illegal. I would like to know what they -- in this
7 entire -- according to Mr. Jorgensen this entire thing
8 originated from an investigation that they conducted.
9 THE INDEPENDENT HEARING OFFICER: Time out.
10 Time out. The Pension Fund made a decision concerning
11 these pensions. All right? And they denied it. And
12 in doing so they left an inference that what the 1001
13 and its Executive Office did was improper, perhaps
14 illegal. All right? Now what do I do about that?
15 What do I do with that now? Now here I am, I'm sitting
16 here. You're wanting to cross examine him on what his
17 lawyers were thinking.
18 MR. LYDON: Not what they were thinking, what
19 they inquired about. Because I suspect what you're
20 going to hear down the line is an opinion that this was
21 illegal. Then what --
22 THE INDEPENDENT HEARING OFFICER: I'm sure
23 I'm going to hear that, but what good does that do me
24 now to have him tell what he's done with his lawyers,
25 and where is it going to lead me in this particular --
1 your defense is, "The Pension Fund was wrong and we
2 were right."
3 MR. LYDON: As to the denial, that's true.
4 But as I understand this case, it goes more to what the
5 Local 1001 was doing.
6 THE INDEPENDENT HEARING OFFICER: Okay. All
7 right. What's that have to do with asking them --
8 MR. LYDON: What inquiries did he make? I
9 don't know. We're trying to find out what the root of
10 the evidence is that 1001 did.
11 MR. MENDENHALL: Especially without any
12 documents, Mr. Vaira.
13 THE INDEPENDENT HEARING OFFICER: Gentlemen,
14 you can tell me whatever you want to tell me. We know
15 that the Pension Fund has denied. The Pension Fund has
16 denied these pensions, okay? And you may say these
17 guys were completely off the wall, they didn't have any
18 basis for doing so, and you were really playing it
19 straight. Okay? Now, that -- I believe that may be
20 your defense, that the 1001 -- that the Pension Fund
21 was incorrect. What else do you want to know from him
22 that's going to take us any further in this direction?
23 MR. FARACI: Just to bring up another point
24 if I could. Mr. Thomas raised the issue earlier with
25 regards to a lawsuit that Local 1001 had filed, and I
1 assume somewhere down the road he's going to say that
2 this was not a proper lawsuit. I know he already
3 raised the issue about Rule 11 motions that were
5 THE INDEPENDENT HEARING OFFICER: I asked
6 that question. I asked that question. I said, "What
7 am I to take from that lawsuit?" And he said, "It's
8 just history." You folks told me, "You can't pay
9 attention to the lawsuit because it was dismissed on a
10 procedural ground," okay? So if that's your position,
11 then let's stop worrying about that lawsuit, all right?
12 Okay? Well that's what you said.
13 MR. FARACI: That was one of the areas. I
14 also raised several other ones.
15 THE INDEPENDENT HEARING OFFICER: You paid
16 your -- you told me that's what it was, that's your
18 Now, let me go back to this question. What
19 am I doing in this particular proceeding about
20 questioning him any further about if his lawyers were
21 wrong or right?
22 MR. FARACI: I'm not asking if his lawyers
23 were wrong or right. I'm just asking for the details
24 of the investigation. That's all. I would like to
25 know -- he mentions to me that he spoke to individuals.
1 He mentions it in his letter to Mr. Capasso that he
2 spoke to someone. I think it was his April 5th letter
3 where he says, "We spoke to someone." We would just
4 like to know who he spoke to and what they spoke about.
5 THE INDEPENDENT HEARING OFFICER: Gentlemen,
6 I'm cutting off this line of cross examination. Move
7 to another subject.
8 BY MR. FARACI:
9 Q. Mr. Jorgensen, are you familiar with the
10 denial letter that was sent out to Mr. Capasso which
11 was dated May 31st, 2001?
12 A. After the denial after his appeal?
13 Q. The May 31st letter. Bear with me for one
14 second. I'll get it out for you. I don't know if you
15 have that listed on there.
16 MS. NAGLE: Number 13?
17 MR. FARACI: I was looking for the May 31st
19 Could we just take a minute?
20 THE INDEPENDENT HEARING OFFICER: What's the
22 MR. FARACI: May 31st, 2002. We can move on.
23 THE INDEPENDENT HEARING OFFICER: Are you
24 sure it's not the April 5th letter?
25 THE WITNESS: There's a copy in here under
1 Volume Three.
2 THE INDEPENDENT HEARING OFFICER: Was it
3 attached to that lawsuit? No, that wouldn't be.
4 MR. FARACI: If we can get back to that one.
5 If we can get this one marked as Number 1. I'm
6 referring to this as I think we may only have two
7 copies of it. Here it is there.
8 (Whereupon Respondent's Exhibit
9 Number 1 was marked for
11 THE INDEPENDENT HEARING OFFICER: May 31st is
12 the exhibit attached to 16.
13 MR. FARACI: Yes, that is. Thank you.
14 THE INDEPENDENT HEARING OFFICER: So we are
15 referring to Exhibit 16.
16 BY MR. FARACI:
17 Q. GEB Exhibit 16 on May 31st, 2002 letter.
18 If you could just review that letter real
19 quick. That was authored by Kathleen McCarthy?
20 A. Right.
21 Q. You were cod on it.
22 A. Right.
23 Q. With regards to that letter, that letter was
24 dated May 31st, 2002, correct?
25 A. Yes.
1 Q. And that's the same May 31 --
2 MR. FARACI: It's your Exhibit 16.
3 MR. THOMAS: Okay.
4 MR. FARACI: If you go to the --
5 MR. THOMAS: In the attachments?
6 THE INDEPENDENT HEARING OFFICER: The -- it's
7 the first one of the attachments to 16.
8 MR. THOMAS: Towards the back.
9 THE INDEPENDENT HEARING OFFICER: Right after
10 the blank page. There's a blank page and then --
11 MR. THOMAS: Got it.
12 BY MR. FARACI:
13 Q. And earlier you had testified that the Fund
14 documents were also amended on May 31st, 2002, correct?
15 A. Which one? The Trust Agreement?
16 Q. Correct.
17 A. I'm not sure.
18 Q. If you go to Exhibit 1 of that same package,
19 Tab Number 16 of the GEB attorney, Exhibit 1. See
21 A. Okay.
22 Q. Take a look down there and it says, "With
23 amendments through May 31st, 2002."
24 A. All right.
25 Q. And also Mr. Capasso's letter sent out on May
1 31st, 2002, correct?
2 A. Same date, yes.
3 Q. Which Restated Agreements were being applied
4 to Mr. Capasso? Would that be the amended ones as of
5 May 31st, or something prior to that in terms of your
6 reviewing his application.
7 A. Well I would think that this is something --
8 this is something prior because even though it says
9 "with amendments through May 31, I don't think it was
10 signed until a later date until the Board reviewed it.
11 You'll have the amendment up until then, but then it's
12 not normally signed and executed and approved.
13 Q. So the document that you --
14 A. Actually no, I'm sorry. The Board of
15 Trustees reviewed this on May 13th, 2002.
16 Q. That would be Mr. Capasso's case, correct?
17 A. No. This is the Restated Agreement and
18 Declaration of Trust. I mean I know it has with
19 amendments through May 31 of '02, but nothing happened
20 between May 13th, when the Board meeting was of the
21 full Board, and through the end of the month. So they
22 made it with amendments through the end of the month.
23 Q. But it was then executed by you on the 28th,
25 A. Yes.
1 Q. And correct me if I'm wrong. It really
2 wouldn't be in effect until it was signed by everybody?
3 I don't know. Or would it take effect immediately?
4 A. They authorized and approved it on May 13th
5 -- at the May 13th, '02 Board meeting.
6 Q. So that would be the document that was relied
8 A. Yes.
9 Q. And earlier you were testifying with regards
10 to your -- when you first became employed by the Fund.
11 I just want to make sure I've got the right dates.
12 That was 1995?
13 A. Yes.
14 Q. And your position at that time was Deputy
16 A. Correct.
17 Q. What were your responsibilities and duties at
18 that time?
19 A. Well my responsibilities and duties were to
20 review everything that the Administrator did.
21 Basically the Administrator had pretty much let
22 everyone know that it was a short period of time before
23 he would retire. It was sort of an assistant to what
24 he did. He had the ultimate authority, obviously, with
25 the Trustees designating those responsibilities to him,
1 but in his absence I was running the show. He was ill
2 quite a bit and he was off work.
3 Q. So during that period it was really like a
4 transition period for you to take over as the Fund
6 A. Yes.
7 Q. And can you give us a more detailed
8 description of what your actual duties and
9 responsibilities are as the Fund Director?
10 A. My current responsibilities?
11 Q. Correct.
12 A. Well I wish I had brought that with me.
13 Q. Just a brief --
14 A. I oversee the entire operations of the Funds
15 through the direction of the Trustees. I conduct all
16 the Board meetings. The departments that I run are the
17 Claims Department, the Pension Department, the
18 Collections Department, the accounting, the computer.
19 All the installation and implementation of new projects
20 that the Trustees do I oversee.
21 Q. In that overseeing earlier you had described
22 the department that receives these particular
23 remittance forms, correct?
24 A. Yes.
25 Q. And earlier -- I just want to make sure we're
1 clear on this. We were about half way through in this
2 binder. But if you take a look at them, I just want to
3 be sure on this.
4 But if you take a look at them, I believe you
5 testified that these were prepared by the Fund and then
6 sent to the Local for signature; is that correct?
7 A. The heading with the "Report for the Hours
8 Worked --
9 MR. FARACI: One second. These are the
10 Labor, Pension and Welfare Funds for Chicago. These
11 are the reporting documents that he was talking about
13 And if you go all the way to the end of Tab
14 Number 2 for GEB Exhibit 16 and turn back one page
15 you'll find it.
16 THE INDEPENDENT HEARING OFFICER: All right.
17 BY MR. FARACI:
18 Q. What I would like to find out is which of
19 these -- which information on this form is filled in by
20 the Fund and which is filled in by the Local?
21 A. You can actually see the different colors in
22 the ink. The reports are generated off the computer.
23 As you can see the top it says they were reports for
24 the hours worked and have the month in question. And
25 it will have the Federal ID number, it will have the
1 phone number, it will have the address to which it's
2 sent. And then the bottom of the page which you'll
3 have is the various rates, the Welfare, the Pension,
4 the Training, and the total amount that's due, and --
5 Q. Okay. So the total amount that's due to the
7 A. Right.
8 Q. Okay. And the portion above that would be
9 filled in by the Local? Is that what you're saying?
10 A. Yes. Yes. And then in turn they would do
11 the arithmetic and the tabulation on what's owed.
12 MS. NAGLE: Mr. Faraci, is it the GEB 8 or
14 MR. FARACI: GEB Exhibit 16 all the way to
15 the end of it.
16 THE WITNESS: You can go about to the very
17 last one on there if you want.
18 MR. THOMAS: No. You're looking at something
20 THE WITNESS: You're looking at the
21 remittance form.
22 MR. FARACI: Some of the copies are -- it
23 looks like are on a different page, but it looks like
24 -- but I think it's your actual Exhibit 8.
25 THE INDEPENDENT HEARING OFFICER: It's
1 Exhibit 8. We got you. Okay. That's a remittance
3 MR. THOMAS: Right.
4 THE INDEPENDENT HEARING OFFICER: Okay.
5 Now go ahead, Mr. Faraci.
6 BY MR. FARACI:
7 Q. I now want you to take a look at the actual
8 letter in 2002 that you had sent to Mr. Lamont
9 requesting certain information from him.
10 A. Okay.
11 Q. And earlier you had testified that --
12 actually hold off on that letter for now.
13 In 1998 -- I'm sorry. In 1999 --
14 A. Right.
15 Q. -- there was some reason why you had asked
16 Havey to do this audit. Can you explain to us again
17 what the reason was for doing the audit?
18 A. My '99 letter to Havey?
19 Q. No. I'm sorry. '98 when Havey conducted the
20 initial audit, you said there was some special reason
21 why it was conducted. I think you referenced it was
22 conducted for all of the Locals.
23 A. I'm not following you.
24 MR. THOMAS: Mr. Vaira, I think he's merging
25 two separate ideas. There was a routine audit at the
1 end of '98, and then there was the request in the
2 spring of '99 for some specific hourly information with
3 respect to several different Locals, including 1001.
4 There's two different points.
5 BY MR. FARACI:
6 Q. So 1998 the audit was just a routine audit?
7 A. Right.
8 Q. And in 1999 something occurred that you
9 decided you needed to find out some some more
10 information regarding particular Locals; is that
12 A. That's correct, yes.
13 Q. What was that event?
14 A. The Collections Committee had met and there
15 was never a clear-cut policy on part-time employees for
16 contractors or the amount of hours submitted for Local
17 Unions. They asked us to do a study as far as what
18 hours were coming in from Local Unions. And some were
19 reporting 160 hours a week. Some were reporting 120.
20 It was a lot. And so at that time the Trustees said,
21 "We're going to make a decision on how to treat
22 part-time employees for regular contractors and how
23 we're going to have the Local Unions pay." And the
24 decision was made that the Local Unions are to submit
25 40 hours for all full-time employees or actual hours
1 worked for part-time. And that policy went into
2 effect. It was -- the effective date I think was
3 sometime in 2000. And the District Council at one of
4 their meetings told all the Local Unions that from now
5 on that's how the reporting will be.
6 One of the reasons I asked for this was
7 because we had some numbers on some of the Locals and
8 we wanted to check these -- because the other Locals
9 were paying 140, we wanted to check these to see what
10 their back-up paper was. And we sent that out, and
11 that's the issue -- by the time the meeting took place,
12 nothing had come in. Their letter that they claimed
13 sent in was actually on a Friday. The meeting was on a
14 Monday. So there's no way we would have had it on the
15 agenda anyway. So the Trustees, without the
16 documentation in hand, decided that they were going to
17 just implement this policy across the board.
18 Q. You said there was certain Locals that you
19 had chosen that you needed a -- that you had some
20 information on. Which Locals would that be?
21 A. It's in the letter. I'm not sure where the
22 letter is at.
23 Q. That would be --
24 Q. We weren't singling anybody out. We just
25 needed additional information for --
1 MR. THOMAS: Tab 27.
2 THE WITNESS: -- for these Locals. You're
3 right. Local 1, 76, 152, 1001, 1006 and 1092.
4 BY MR. FARACI:
5 Q. You said you had some various information on
6 the Locals. I'm just curious what that information
8 A. All the other Locals were submitting 40
9 hours, and we wanted to review the records on these
10 individuals -- on these individual Locals so we could
11 find out the number of hours worked for each employee.
12 Q. And -- I'm sorry. How many hours was Local
13 1001 contributing for at that time?
14 A. On the remittance report?
15 Q. Correct.
16 A. I'm not sure. I would have to look at
17 something that would be in here. I think it was 120
19 Q. Could it be 30 hours versus the 40 that you
20 were talking about?
21 A. Right.
22 Q. And that would have been what drew it to your
23 attention, correct?
24 A. I think it was 120 hours, yes.
25 Q. Now you mentioned --
1 A. No one in the past had been told how many
2 hours to submit, so they were going to try to get
3 everything clarified. This had nothing to do with
4 anything that's currently taking place. This was just
5 a routine letter that went out. We were trying to get
6 some information.
7 Q. But it was important at that time period to
8 figure out what contributions were being made for each
9 Local and make sure that they were all up to speed for
10 the 40 hours, correct?
11 A. That's correct, yes.
12 Q. So at that time this was a fairly urgent
13 request that you made of Mr. Lamont to give you that
14 information, correct?
15 A. Yes.
16 Q. And you also testified that you wanted to
17 have that information prior to your meeting which would
18 have been on a Monday, correct?
19 A. Yes. It says on the bottom of the letter,
20 "which meets on Monday, May 3, 1999."
21 Q. Now when you didn't receive this -- you're
22 telling us you hadn't received it before this meeting
23 -- or actually that you never received it. Did it come
24 to your -- did you make a decision whether or not you
25 should call Mr. Lamont and ask him for these results
1 and ask him if he had begun the project that you asked
2 him to do?
3 A. I don't recall if I called him or not.
4 Generally if we don't get something on file from one of
5 our -- either I would call or the Field Department
6 would call. But I don't recall. I don't know. At
7 that point I think the decision already had been made
8 among the Trustees that they were going to go with the
9 40 hour rule.
10 Q. But you needed this information before you
11 could come to that determination, correct?
12 A. No.
13 Q. So you just wanted to know it for what
15 A. It was just for the record. We wanted to see
16 if there was any discrepencies there.
17 Q. And when you never received a response from
18 him you didn't think about calling him sooner than
20 A. The meeting was over and it wasn't -- it
21 didn't make a difference on the decision that the
22 Trustees made.
23 Q. In your initial letter you referenced a phone
24 conversation with Mr. Lamont? I'm sorry.
25 Let me ask you this question: Prior to Mr.
1 Lamont receiving your letter, did you have a phone
2 conversation with him on April 23rd, 1999, which was
3 referenced in your letter of April 26th, 1999.
4 A. Well --
5 Q. If you take a look at that same letter we're
6 talking -- look at --
7 A. It may have been a conference call, as I
8 mentioned, with J. Peter Dowd, which is one of our
10 Q. So it was important enough to get Mr. Lamont
11 on the phone prior to you sending him the letter with
12 your attorney to speak about these issues with him,
14 A. Well I don't know if this was the -- you're
15 looking back at these years. I don't truthfully know
16 if the purpose of the call was to -- specifically for
17 this or if it was other issues also.
18 Q. Well let me ask you this question: If the
19 purpose of the call was for this letter, then it was a
20 very important issue that you were raising between your
21 attorney, Mr. Dowd, yourself, and Mr. Lamont, correct?
22 A. Right.
23 Q. And also you had raised earlier in your
24 direct examination that you felt it was Havey &
25 Associates or any accounting firm's responsibility to
1 tell you if there was a conflict with regards to who
2 they were representing, correct?
3 A. Yes.
4 Q. Back in the 1990's was there a time when
5 Bruno Caruso sat as a Trustee of the Pension or Health
6 and Welfare Fund?
7 A. Yes. Bruno Caruso was on the Welfare Fund
8 when I started there in 1995. I don't know when he was
9 appointed. During the Trusteeship he was removed,
10 among others. I think that was in '97.
11 Q. And the Trusteeship proceeding and the
12 Chicago District Council proceedings both came down
13 while you were the Fund Administrator, correct?
14 A. Yes.
15 Q. And at that point you knew of the allegations
16 of Mr. Caruso and the other individuals for the Chicago
17 District Council? Let me rephrase that.
18 You knew they were alleged members of
19 organized crime, correct?
20 A. That was among the other things that they had
21 charged them with, yeah.
22 Q. And ultimately you learned that Mr. Vaira
23 ruled against the Chicago District Council and imposed
24 a Trusteeship?
25 A. Yes.
1 Q. And ultimately you learned that Mr. Vaira
2 ruled against Mr. Caruso, correct?
3 A. Yes.
4 Q. After you had learned of both of those things
5 and your knowledge with regards to Mr. Caruso sat on
6 the Fund, did you think it was important to review who
7 was conducting audits for Local 1001?
8 A. No, we didn't single him out. As you can
9 see, it says, "We would like this review performed for
10 all Local Unions with priority for the following Local
11 Unions: 1, 76, 152, 1001, 1006 and 1092." And I don't
12 truthfully recall why there was a priority on that.
13 Q. What I was asking was, did it come to your
14 attention -- did it come to your attention during that
15 time period, since these allegations were made against
16 Mr. Caruso, that maybe you should do some further
17 investigation regarding Local 1001 to make sure there
18 was no conflict of auditors or anyone while you were
19 handling these matters.
20 MR. THOMAS: Objection. Your ruling came
21 down in, I believe, early 2001, and it was affirmed in
22 September of 2001. So if he's asking did you revisit
23 this question in the fall of 2001, that's very
24 different from spring of 1999.
25 THE INDEPENDENT HEARING OFFICER: My question
1 is: Where are you going with this? I'm taking from
2 this that you say that there's some problem with them
3 employing Havey?
4 MR. FARACI: All I'm saying is he's testified
5 that he's putting the blame on Havey for not telling
6 him it was -- it was their responsibility for him to
7 tell him there was a conflict regarding auditors. He's
8 putting the blame on Local 1001 that they were not
9 making proper contributions.
10 THE INDEPENDENT HEARING OFFICER: Take it one
11 at a time. Your questions about Havey reflected that
12 -- you insinuated that they should have been aware that
13 Havey wasn't doing a good job or something like that?
14 MR. FARACI: No. My question was whether or
15 not he felt as the Director of the Fund he should do
16 further investigations when looking into Local 1001 and
17 ordering someone to do an audit of them to make sure
18 there was no conflict. He already has stated -- his
19 position is he believed it was up to Havey to make that
20 determination, not him.
21 THE INDEPENDENT HEARING OFFICER: I believe
22 that's right, and it's up to the -- I mean the client
23 should do some looking, but it's up to the professional
24 to tell him whether or not he has a conflict.
25 By the way, Havey is pretty responsible, at
1 least at the time. Sometime years ago when I defended
2 the first of the Winston & Strawn partners -- managing
3 partners who were convicted, my client was in --
4 MR. LYDON: Who? Wait a minute. Winston &
5 Strawn --
6 THE INDEPENDENT HEARING OFFICER: Yeah.
7 Winston & Strawn's managing partner who I defended, and
8 the audit was done by Havey. They did a nice job. And
9 I'm defending this guy down in Washington, D.C. for
10 defrauding Winston & Strawn.
11 MR. FARACI: What I was trying to get out of
12 the witness was back -- exactly what you're getting at.
13 Is during that time period Havey probably represented a
14 majority of the Labor Unions in this area. So he
15 probably -- should have come to his attention that he
16 should take a look and see if there's a --
17 THE INDEPENDENT HEARING OFFICER: I don't buy
18 that. I don't buy that. Havey at that time was a very
19 respected --
20 MR. FARACI: I'm not saying they're not
21 respected. I'm just talking about whether or not there
22 might be a conflict.
23 THE INDEPENDENT HEARING OFFICER: And the
24 conflict is always on the -- if you're going anyplace
25 with that, you're not moving me. Okay. Go ahead.
1 I'm not making a referral about your law
2 firm. That's a public thing. That was my client. And
3 Havey did a very nice job and put the nails in the
4 coffin of my client.
5 MR. FARACI: Can we take just five minutes?
6 THE INDEPENDENT HEARING OFFICER: Sure.
7 MR. FARACI: I just want to double check
9 (Whereupon a break was taken in
10 the proceedings after which the
11 following proceedings were had:)
12 MR. FARACI: I think we're done. I'm just
13 asking to reserve the right to recall Mr. Jorgensen.
14 THE INDEPENDENT HEARING OFFICER: All right.
16 Mr. Thomas, Mr. Faraci says he's done with
17 the caveat he reserves the right to call Mr. Jorgensen
18 back, and we're -- it's 5:20 here. What do you say?
19 MR. THOMAS: Well I have under ten minutes,
20 probably under five. I really think it's two
22 THE INDEPENDENT HEARING OFFICER: Okay.
23 Under ten -- we'll hold you to under ten.
24 MR. THOMAS: Hold me to under ten please.
25 REDIRECT EXAMINATION
2 MR. THOMAS:
3 Q. Mr. Jorgensen, Mr. Faraci went through a
4 number of the Trust Agreements, in fact different
5 iterations of the Trust Agreements, and he had you read
6 the definition -- or part of the definition of
7 "Employer", part of the definition of "Employee," and
8 so forth.
9 A. Right.
10 Q. Even if someone is constituted an employee
11 under the terms of the Trust Agreements, does that give
12 the employer the right to list those people as having
13 worked hours that they didn't work?
14 A. No, I don't think so.
15 Q. Do you understand my question?
16 A. Right. There's more -- you can't incorporate
17 into the Trust Agreement all of the provisions of what
18 ERISA constitutes as a true employee.
19 Q. So even if by either one of those technical
20 definitions under the Trust Agreements someone is an
21 employee, do you agree or disagree that that's a
22 separate question of whether the remittance reports are
23 accurate and whether they satisfy ERISA.
24 A. Yes.
25 Q. Okay. For example, let me ask you to turn to
1 Exhibit 8. These are the remittance reports?
2 A. Yes.
3 Q. Now let's take the -- let's just take the
4 very last page, 2003. Leaving aside any definitions of
5 "Employee," what -- at the very top of that document it
6 says, "Report for". Report for what?
7 A. Hours worked.
8 Q. Hours worked. So that's independent of
9 whether or not someone's an employee or not under the
10 terms of the Trust Agreement, right? This represents
11 hours worked, right?
12 A. Right.
13 Q. Okay. And the following document which we've
14 reviewed, which is your internal compilation of those
15 hours, also represents hours worked, right?
16 A. Those are the hours taken off of -- the
17 totals taken off of their remittance reports for each
18 month for each year.
19 Q. Yes. And so if Exhibit 8 indicates hours
20 worked, your data assumes these are hours worked; is
21 that right?
22 A. What you would find here -- for example, this
23 July, 2003, you can take any one of these people and
24 look that up on this form here and you will see that
25 that should match up. There's 160 hours, for example,
1 it should say 160 hours for that same time period on
2 this report.
3 Q. Now in the lawsuit that was filed and in the
4 various appeals that were filed, did any of the
5 litigants on 1001's side of the aisle make the
6 representation either in court or to the Funds that
7 there had been some sort of an agreement here? Did
8 that come up?
9 A. I think that one individual alluded to a --
10 and I don't recall the name -- to a --
11 MR. FARACI: If I can just interject. I want
12 to make clear if you're talking about the actual
13 appeals or if you're talking about the documents that
14 were filed in the U.S. District Court.
15 MR. THOMAS: I said both.
16 THE INDEPENDENT HEARING OFFICER: Take one at
17 a time.
18 BY MR. THOMAS:
19 Q. To your knowledge, in the papers that were
20 filed in the lawsuit, did anyone make the allegation --
21 anyone on 1001's side make the allegation that these
22 are proper because the Funds have agreed to this. Is
23 that part of their allegation?
24 A. Accepting contributions for non-compensated
25 employees? Is that your question? Or the amount of
1 hours submitted?
2 Q. I'm trying to respond to Mr. Farce's cross
3 where he questioned you about whether the Funds had
4 some sort of a tacit or express agreement.
5 A. There was an allegation that that had taken
6 place on one of the individuals. I don't recall the
7 individual's name offhand.
8 Q. Okay.
9 A. Like I said, the Trustees instructed me to
10 look into this. And there was a number of people that
11 we contacted and none of them recall.
12 Q. So you've testified about what the Funds did
13 to determine -- to verify whether there was such an
14 agreement or whether there was not such an agreement.
15 My question to you is: In any of the pleadings,
16 whether in Federal District Court or in the appeals,
17 did any of the litigants from 1001 ever produce to
19 A. No.
20 Q. -- any evidence of such an agreement?
21 A. No.
22 MR. THOMAS: Nothing further, Mr. Vaira.
23 (Witness excused.)
24 THE INDEPENDENT HEARING OFFICER: Gentlemen,
25 I have a question to ask you here. Am I ever going to
1 find out what the alternative services these
2 individuals supplied that they were getting compensated
3 for. I mean --
4 MR. THOMAS: Well many of these people I'm
5 calling as witnesses. Of the 33 who received these --
6 for whom these contributions were made, several are
7 deceased, many are retired, and some are on our witness
9 THE INDEPENDENT HEARING OFFICER: Well I'm
10 just looking for -- I can hear that once a week when he
11 came in and gave readings from Clarence Darrow or
12 something, that was worth something. Or he came in and
13 painted a great picture in front of everyone. I mean
14 am I going to get some idea what the quid pro quo was
15 that they got the contributions for?
16 MR. THOMAS: Well I don't view that as part
17 of my burden of proof. I do intend to call some of
18 these people to question them about this.
19 THE INDEPENDENT HEARING OFFICER: Okay.
20 MR. THOMAS: I can't speak to what 1001 --
21 THE INDEPENDENT HEARING OFFICER: I know what
22 position 1001 is taking is that they can put it in for
23 persons who are not -- they have given some service but
24 they're not paid for it, and I want to know what the
25 service is. And I would be looking forward to hearing
2 MR. THOMAS: I will represent to you just
3 broadly, not with person by person, but broadly most of
4 these people are Auditors, E Board members and alike.
5 So they're uncompensated officers or other positions at
6 the Local. And the LM-2's reflect zero in
8 THE INDEPENDENT HEARING OFFICER: But I'm
9 just saying as far as what the picture is just so that
10 I will be interested to see where we're going.
11 MR. LYDON: Your question is whether these
12 were total ghosts or whether in fact they performed
13 some service.
14 THE INDEPENDENT HEARING OFFICER: Your letter
15 said there was some services. I'm picturing something
16 here and somebody -- you know, once a month a guy comes
17 in and puts on a great artistic performance or
19 MR. THOMAS: And actually I'm not going to
20 raise that because I was just talking to Mr. Lydon
21 about this. If matters go as I think they will
22 tomorrow, I will be through my part of the case except
23 for the 1001 employees who have -- that they've agreed
24 to produce. And I just want to put everybody on notice
25 I would like those people here Thursday. Mr. Capasso
1 was specifically subpoenaed for today. He's not shown.
2 The other people I've talked to Mr. Faraci and to Mr.
3 Lydon about as, you know, not needing to subpoena them
4 because they're going to work with me on making them
5 available. I just would like to make sure that happens
6 because Thursday appears to be wide open and I would
7 like to get those witnesses on and off.
8 THE INDEPENDENT HEARING OFFICER: Okay. All
10 MR. FARACI: Just so we could be heard.
11 Which ones do you want for sure on Thursday because
12 some of these guys have to run the Local.
13 MR. THOMAS: I'll be happy to --
14 THE INDEPENDENT HEARING OFFICER: Okay. I
15 know that. I've had that before. I understand that
16 guys run the Local come back and forth. I've seen it.
17 We can go off the record here for today.
18 (Which were all the proceedings
19 had in the above-entitled cause
20 on this date.)