IHO November 3, 2003 Order (IHO Dkt. tab 11).
Subsequently, it became apparent that, although Local 1001 asserted that
it had selected Mr. Webb as its lead counsel for the hearing, he had spent
minimal time reviewing Local 1001’s case in the months prior to the issuing
of the Trusteeship Complaint. See GEB Ex. 52 (Winston & Strawn Invoice #
1754958 of 04/28/03) (billing $24,350.00 for 80 billable hours worked by
IHO November 3, 2003 Order (IHO Dkt. tab 11).
7In the Matter of Local Union 1001 2004
partner S. Mendenhall and associate B. Franklin); (Winston & Strawn Invoice
# 1758188 of 05/19/03) (billing $6,382.50 for 18.5 billable hours worked by
partner S. Mendenhall); (Winston & Strawn Invoice # 1764095 of 06/26/03)
(billing $4,846.25 for 20.75 billable hours worked by partner S. Mendenhall
and associate B. Franklin); (Winston & Strawn Invoice # 1767814 of
07/18/03) (billing $10,078.75 for 35.25 billable hours worked by partner S.
Mendenhall, associate B. Franklin, and S. Wesclitz); (Winston & Strawn
Invoice # 1772651 of 08/18/03) (billing $3,363.75 for 9.75 billable hours
worked by partner S. Mendenhall);see also (Winston & Strawn Invoice #
1782937 of 10/22/03) (billing $10,522.50 for 30.50 billable hours worked by
partner S. Mendenhall). In total, Mr. Webb billed for only 15.75 hours of
work on behalf of Local 1001 by October 2003.See Winston & Strawn
Invoice # 1786655 of 11/14/03) (billing $87,036.25 for 257.50 billable hours
worked by partners D. Webb, M. Lydon, and S. Mendenhall, as well as
associates B. Franklin and C. Cullen) (IHO Dkt. tab 34). Mr. Lydon had spent
approximately the same amount of time as Mr. Webb in preparing the case,
and Mr. Mendenhall had worked over 250 hours on the case prior to the
The IHO further observed that both Mr. Faraci and Judge Leighton had
represented the Local for many years, including litigation opposing the
LIUNA internal reform process in the United States District Court for the
Northern District of Illinois.8 See IHO November 3, 2003 Order (IHO Dkt.
tab 11). Moreover, the current Trusteeship Complaint stems from the Chicago
District Council Trusteeship and Bruno Caruso disciplinary matter, during
which Attorney Faraci and Judge Leighton represented Local 1001.Id. Thus,
the IHO concluded, denial of the Motion for Extension of Time would not
impede Local 1001’s defense of the charges, "even supposing,arguendo, that
the Local did have a right to counsel at the Trusteeship hearing."Id.
The IHO also found unpersuasive Local 1001’s averment that refusal of
the Motion for Extension of Time would deny Local 1001’s right to a full and
fair hearing.Id. Local 1001 had argued that, "despite receiving draft charges
from the GEB Attorney in early September 2003 and the formal charges filed
8Evidence shows that Local 1001 first retained Faraci & Faraci as legal
counsel in or about January 1999.See Local 1001 Ex. 4 (January 21, 1999
Executive Board Meeting Minutes) (Judge Leighton and Peter Faraci "were
introduced to the Executive Board," provided background information,
including their experience representing LIUNA Local Union 2, and described
the services they could perform; the Executive Board unanimously decided to
retain Faraci and Faraci).
8In the Matter of Local Union 1001 2004
on September 25, 2003, it ‘was still somewhat in the dark regarding the
charges’ and has inadequate time to prepare a defense for the hearing." IHO
November 3, 2003 Order (IHO Dkt. tab 11),citing Local 1001’s Replay Brief,
p.6 (IHO Dkt. tab 7) (some internal quotations omitted). However, "there
ha[d] been substantial, direct communication between the GEB Attorney,
Local 1001, and Local 1001’s attorneys regarding the International Union’s
consideration of imposing a trusteeship" before the GEB Attorney filed the
Trusteeship Complaint on September 25, 2003. IHO November 3, 2003 Order
(IHO Dkt. tab 11). Accordingly, the IHO found that, even before the
Trusteeship Complaint was filed, Local 1001 "had an adequate understanding
of the impending charges based on discussions with the GEB Attorney over
18 months, the detailed 2002 letter from the GEB Attorney discussing the
basis for a trusteeship, and the draft complaint forwarded to the Local in the
beginning of September 2003."9 Id.
Local 1001’s Discovery Requests
On November 5, 2003, Local 1001, by and through one of its attorneys,
Mr. Mendenhall,10 moved for the disclosure of any and all evidence and
exhibits that the GEB Attorney intended to introduce at the Trusteeship
hearing.See Local 1001’s Motion for Evidence and Exhibits to be Used at
Trial of 11/5/03 (IHO Dkt. tab 13). In that motion, Local 1001 averred, "As
of November 5, 2003, only five days before the hearing date, the GEB
attorney has failed to provide any evidence including exhibits that he will
attempt to use at trial in support of the charges filed against Local 1001."Id.
at ¶ 3. Local 1001 also moved that the GEB Attorney disclose, in writing, a
list of witnesses, and the identity of organized crime members with whom the
officers of Local 1001 allegedly associated.See Local 1001’s Motion for
Written Disclosure of Witness List of 11/5/03 (IHO Dkt. tab 13); Local
1001’s Motion to Specifically Disclose and Identify the Members of
Organized Crime With Whom the Officers of Local 1001 Have Allegedly
Associated of 11/5/03 (Local 1001’s Motion for Specificity) (IHO Dkt. tab
13) (collectively, Discovery Motions).
In response to the Discovery Motions from Winston & Strawn, other
communications from Faraci and Faraci, and "inconsistent messages [from the
firms] about whether or not the lawsuit [in the Circuit Court of Cook County]
9The IHO further noted, "Neither LIUNA constitutions nor federal labor law
entitle Local 1001 to the type of extraordinary notice or specificity in pleading
in a trusteeship proceeding that the Local seems to be asserting a right to."Id.
10Mr. Mendenhall is a partner in the law firm Winston & Strawn LLP.
9In the Matter of Local Union 1001 2004
would be dropped,"11 Attorney Thomas requested that the IHO require
clarification from the Local regarding who would be representing it and who
had authority to speak with the GEB Attorney on its behalf.See Letter from
Robert M. Thomas Jr. to Peter F. Vaira of 11/6/03 (IHO Dkt. tab 15).
Attorney Thomas also filed an opposition and response to the Local’s
Discovery Motions, which delineated that the GEB Attorney had an
agreement with Faraci & Faraci making the requested list of witnesses and
copies of exhibits available.See GEB Attorney’s Opposition and Response to
Local 1001’s Discovery Motions (GEB Attorney’s Opposition to Discovery)
(IHO Dkt. tab 14). The GEB Attorney specifically objected to the Local’s
request for detailed disclosures of evidence regarding specified officers and
members’ association with organized crime.See GEB Attorney’s Opposition
to Discovery (IHO Dkt. tab 14). The GEB Attorney noted that under similar
factual circumstances, the IHO has rejected requests for detailed disclosures in
trusteeship proceedings.Id. at p.4, citing Chicago District Council, 97-30T;
In the Matter of Local 210,IHO Order and Memorandum, 95-35T (April 17,
On November 6, 2000, the IHO issued an Order requesting that the
Executive Board of Local 1001 notify the IHO which law firm represented the
Local to facilitate the disposition of pre-hearing discovery motions.See IHO
November 6, 2003 Order (IHO Dkt. tab 16). Mr. Mendenhall informed the
IHO that Mr. Webb was "currently serving as lead trial counsel for Local
1001," but requested that the IHO provide Faraci & Faraci with courtesy
copies of all documents. Letter from Samuel Mendenhall to Peter F. Vaira of
11/6/03 (IHO Dkt. tab 17). Thereafter, an Order responding to the Discovery
Motions delineated that: the GEB Attorney had agreed to expedite production
of all exhibits for reproduction by overnight delivery; the GEB Attorney
would provide a list of all documents unavailable for reproduction; the GEB
Attorney had produced a list of witnesses; and, the Trusteeship Complaint
offered sufficient detail regarding the organized crime figures with whom
particular members had associated.12 See IHO Discovery Order of 11/7/03
11Local 1001 and the GEB Attorney were apparently engaged in ongoing
negotiations regarding mutual concessions that might facilitate postponement
of the scheduled hearing.
12Local 1001 made a similar evidentiary request regarding the alleged
organized crime associations of Joseph Spingola (Spingola). Local 1001’s
Motion for Specificity, p.3 (IHO Dkt. tab 13). The IHO found that, although
the IHO previously made specific findings regarding Spingola (Chicago
10In the Matter of Local Union 1001 2004
(IHO Dkt. tab 22). The Order further stated that the IHO would conduct
intensive inquiry into the reliability of the informant testimony about
organized crime elicited at the hearing.Id. Thereafter, Local 1001 would
receive reasonable and sufficient time to respond and rebut the evidence.Id.
Motion for Substitution of Lead Counsel and Extension of Hearing
On November 7, 2003, Local 1001 filed a motion to substitute its lead
trial counsel and extend the date of the Trusteeship hearing until November
18, 2003.See Motion to Substitute Lead Trial Counsel and to Extend the
Hearing Date Before the Independent Hearing Officer to November 18, 2003
of 11/7/03 (Substitution and Extension Motion) (IHO Dkt. tab 24). The
Substitution and Extension Motion averred, "In March 2003, Local 1001
selected Dan K. Webb, of Winston & Strawn, to represent it in any trusteeship
hearing before the IHO. George N. Leighton, of Counsel, to Faraci & Faraci
was selected to second chair the litigation."13 Id. Citing an unsuccessful
attempt at judicial intervention to delay the hearing and a prior medical issue
that rendered Judge Leighton unavailable on November 11, 2003,14 Local
1001 sought to substitute Mr. Lydon, a partner of Mr. Webb’s, as lead trial
counsel, and extend the hearing date one week.Id.
GEB Attorney Luskin opposed the Local’s continuance request for
substitution of trial counsel.See Letter of Robert D. Luskin to Peter F. Vaira
of 11/10/03 (IHO Dkt. tab 25). GEB Attorney Luskin stated that LIUNA had
proposed to Mr. Faraci that it would agree to the continuation requested by
Local 1001, provided the Local dismiss the State court action to avoid risking
interruption of the Trusteeship hearing by collateral litigation.Id.
Nonetheless, Mr. Faraci relayed to the GEB Attorney that Local 1001
"indicated they cannot accept your proposal because the question of
jurisdiction created by your removal action of this matter is too important of
an issue to abandon." Letter from Peter S. Faraci to Robert D. Luskin of
11/10/03 ((IHO Dkt. tab 26). Mr. Luskin maintained that LIUNA did not
request or require any agreement about jurisdiction if jurisdictional issues
remained after the termination of the trusteeship proceedings.See Letter of
Robert D. Luskin to Peter F. Vaira of 11/10/03 (IHO Dkt. tab 25).
proof regarding Spingola’s organized crime association has no present weight
in this hearing." IHO Discovery Order of 11/7/03 (IHO Dkt. tab 22).
13This was the first indication that Local 1001 had selected Judge Leighton
as second chair for the Trusteeship hearing.
14The Substitution and Extension Motion further noted that Judge Leighton is
91 years of age.Id.
11In the Matter of Local Union 1001 2004
The IHO refused to extend the hearing date.See IHO November 10,
2003 Order (IHO Dkt. tab 27). Mr. Lydon was permitted to attend the hearing
and did, in fact, act as lead counsel for all proceedings in this matter.15 The
Trusteeship hearing began on November 11, 2003, and continued November
12-13, 2003, and December 8-9, 2003 in Chicago, Illinois. Mr. Thomas
appeared on behalf of the GEB Attorney. Messrs. Lydon, Mendenhall, Peter
Faraci, and Judge Leighton were present on behalf of Local 1001.16 Local
1001 members and officers attended the hearing; most notably, on December
8, 2003, over 100 members appeared in support of the current administration.
A licensed court reporter duly recorded the proceedings.See Transcripts of In
the Matter of LIUNA Docket Number 03-21T(Tr.).
On November 11, 2003, Local 1001 presented a Motion to Dismiss this
Matter for Failure to Comply with the Consent Decree (Consent Decree
Motion).See Local 1001’s Consent Decree Motion (IHO Dkt. tab 35). Local
1001 argued that "the GEB Attorney relied on the Consent Decree to establish
federal subject matter jurisdiction" in this case, "and the Court found federal
jurisdiction as ‘there is enough there in terms of Local 1001 . . . within the
parameters of federal jurisdiction with a consent decree."Id. at p.1. Local
1001 further argued that the GEB Attorney contended that the Consent Decree
governed the Trusteeship dispute and provided the basis for filing the
Trusteeship Complaint.Id. at p.2. Therefore, Local 1001 averred that the
GEB Attorney should be "estopped from denying that the Consent Decree
15The IHO was familiar with Mr. Lydon’s impressive background and
credentials, including both his service as Assistant U.S. Attorney for the
Northern District of Illinois and his complex litigation defense work for major
corporations. Mr. Lydon’s background and experience rendered him
eminently capable of handling the role of lead trial attorney for Local 1001.
As reflected earlier, Mr. Lydon also had previously participated in this matter,
as reflected in his firm’s billing statements.
16Judge Leighton was present for the November 2003 hearing dates.
Thereafter, Judge Leighton informed the IHO that, in his judgment, "Local
1001 is adequately represented in the Trusteeship proceedings . . . that began
hearing November 11, 2003. The local’s attorneys are Mathias A. Lydon,
Esquire; Samuel Mendenhall, Esquire; and Peter S. Faraci, Esquire. For this
reason, I ask that my name be removed from your mailing list." Letter from
George N. Leighton to Peter F. Vaira of 11/25/03 (IHO Dkt. tab 29).
12In the Matter of Local Union 1001 2004
governs this matter," and the Trusteeship Complaint dismissed for failure to
comply with the Consent Decree.17 Id.
LIUNA entered into a Consent Decree with the Construction & General
Laborers’ District Council of Chicago and Vicinity (Chicago District Council)
and the United States Attorney for the Northern District of Illinois on August
12, 1999.See United States of America and Laborers’ Int’l Union of N. Am.
v. Construction & General Laborers’ District Council of Chicago and
Vicinity, Consent Decree, No. 99 C 5229 (August 12, 1999). The Consent
Decree created the offices of Monitor, Adjudications Officer, and
Trustee/Supervisor.Id. at ¶¶ 16, 26, 32. All of these offices had terms that
expired within two years of their appointment, or in approximately September
2001.Id. at ¶¶ 25, 31, 33. None of the parties to the Consent Decree
petitioned the Court for an extension of any of those officers’ terms, nor have
any of those officers’ filed charges that are pending and relevant to this
matter.Id. Therefore, court supervision through the office of the Monitor no
longer exists under the Consent Decree.
However, the decree does contain permanent injunctions against barred
conduct committed by "all current and future officers, agents, representatives,
employees and members of the CLDC and its affiliated entities . . . ." Consent
Decree, ¶ 14. Both the GEB Attorney and the government have standing to
apply to the court for any relief for violation of the permanent injunctions on
barred conduct, including civil and criminal contempt. In addition, nothing in
the Consent Decree superseded the substantive standards of LIUNA’s Ethical
Practices Code (EPC) or the GEB Attorney’s authority under the Constitution.
Consent Decree, ¶¶ 1, 2. Moreover, the International Union Constitution
(International Constitution) and LIUNA’s Ethics and Disciplinary Procedure
(EDP) empower the IHO with independent authority to preside over
trusteeships. Based on the foregoing authority, the IHO held that his
constitutional authority to conduct trusteeship hearings was unaffected by the
consent decree and did not dismiss the Trusteeship Complaint.
17Specifically, Local 1001 averred that the GEB Attorney did not comply
with the Consent Decree by bringing the instant charges in violation of the
following language: "Notwithstanding any delegation to investigate or
prosecute, no charge may be brought under this decree without the consent
and approval of the Monitor."See Local 1001’s Consent Decree Motion
(IHO Dkt. tab 35) (emphasis added),citing Consent Decree, ¶ 15.
13In the Matter of Local Union 1001 2004
Motions in Limine
At the hearing, Local 1001 presented five motionsin limine to exclude
certain allegations and evidence regarding organized crime. Those motions
included: Local 1001’s MotionIn Limine to Strike All Pre-1995 Allegations
Regarding Organized Crime and to Preclude the Use of Any Evidence Related
to Such Allegations; Local 1001’s MotionIn Limine Regarding Evidence of
Alleged Prior LCN Influences Not Related to Current Board Members:
Michael Palermo; Local 1001’s MotionIn Limine Regarding Evidence of
Alleged Prior LCN Influences Not Related to Current Board Members: Bruno
Caruso; Local 1001’s MotionIn Limine Regarding Evidence of Alleged Prior
LCN Influences Not Related to Current Board Members: Ernest Kumerow;
and Local 1001’s MotionIn Limine Regarding Evidence of Alleged Prior
LCN Influences Not Related to Current Board Members: Joseph Spignola
(collectively, Local 1001’s MotionsIn Limine). See Local 1001’s Motions In
Limine(IHO Dkt. tab 36). Without addressing each motion specifically, the
IHO notes that the substance of those motions was a desire to preclude
evidence that was arguably tangential to the current officers of the Local. The
IHO recognized that the GEB Attorney must tie evidence regarding organized
crime to the current matter, but determined that the relevancy of specific
evidence could adequately be addressed when introduced.
Motion for Saturday or Evening Hearing Dates
At the beginning of the Trusteeship hearing on November 11, 2003, Local
1001 filed a Motion for Portions of the Hearings to Take Place on Saturdays
or in the Evenings (Motion for Alternate Hearing Schedule).See Local
1001’s Motion for Alternate Hearing Schedule (IHO Dkt. tab 37). Mr.
Mendenhall presented that the members of Local 1001 are all County and
Municipal public service employees who were unable to attend hearings
scheduled during working hours. Tr. 37:15-21 (MENDENHALL). The IHO
acknowledged the interest the membership had in the proceedings, but
declined to reschedule existing hearing dates in the interest of the planned
witnesses.Cf. In the Matter of Local Union 1175, IHO Order and
Memorandum, 03-10T (June 11, 2003) (declining to hold evening or weekend
hearings). However, in conformance with the usual custom and practice in
Trusteeship proceedings, the IHO assured counsel that the membership would
be afforded the opportunity to voice their opinions on the record. Over 100
members appeared in support of the Local on December 8 and 9, 2003.
In order to impose a proper trusteeship over Local 1001, LIUNA must
adhere to both federal law and its own internal constitutions. The Labor-
14In the Matter of Local Union 1001 2004
Management Reporting and Disclosure Act of 1959 (LMRDA) "contemplates
three essential conditions of validity [of a trusteeship]: adherence to the
constitution, a fair hearing, and a permissible purpose."Luggage Workers
Union, Local 167 v. International Leather Goods, Plastics & Novelty
Workers’ Union, et al.,316 F. Supp. 500, 504 (D. Del. 1970). The LMRDA
allows labor organizations to establish trusteeships over subordinate bodies to
correct corruption or financial malpractice, assure the performance of
collective bargaining agreements or other duties of a bargaining
representative, restore democratic procedures, or otherwise carrying out the
legitimate objects of such labor organization. 29 U.S.C. § 462.
The LMRDA empowers LIUNA to impose a trusteeship if it does so in
conformance with its own constitutions and bylaws. 29 U.S.C. §§ 462-464.
LIUNA constitutions and by-laws mirror the federal statute.See Matter of
(International’s authority to impose trusteeship over a Local expressly
provided in Constitution and confirmed in EDP). Pursuant to Article IX,
Section 7 of the International Constitution, the LIUNA General President may
appoint a trustee when:
International Constitution, Article IX, Section 7.
In addition, LIUNA may impose a trusteeship over a subordinate body to
correct officers’ mismanagement and corruption.Id. The LIUNA General
President delegates his power "to impose and review the imposition of
trusteeships over any district council, local, or other entity within the Union"
to the GEB Attorney. EDP, Section 3. Pursuant to Section 5 of the EDP, the
LIUNA IHO "shall preside over and provide rulings in" the imposition of all
trusteeship.Id. When the International Union fully complies with its own
requirements before imposing a trusteeship, the imposition does not violate
union officers’ due process rights. 29 U.S.C. §§ 411(a), 462, 464(c);see also
Trusteeship of Local 73,1996 A.O. 5, 10 (95-013-TB) (imposition of
trusteeship over Local does not implicate Section 101(a) due process rights,
unless union membership rights denied).
For proper authorization of a labor organization’s imposition of
trusteeship over a subordinate body, the LMRDA requires that the governing
15In the Matter of Local Union 1001 2004
body seeking to impose a trusteeship must give the targeted entity a full and
fair hearing. 29 U.S.C. §§ 461, 462, 464(c). "The right to a fair hearing under
§ 464(c) requires that a subordinate body be given more than just the
opportunity to be heard before an official body."Laborers’ Int’l Union of N.
Am. Local Union # 43 v. Laborers’ Int’l Union of N. Am. (Local 43 v.
LIUNA),No. C03-26 LRR at 9 (N.D. IO May 14, 2003), citing Becker v.
Industrial Union of Marine & Shipbuilding Workers, 900 F.2d 761, 768 (4th
Cir. 1990) (internal citations omitted). A fair hearing under § 464(c) requires
that the subordinate body receive written notice of the hearing, which "sets
out in writing the factual basis for the alleged violations of law of the union’s
constitution that justify the imposition" of a trusteeship.Becker, 900 F.2d at
768;see also In the Matter of Local 1058, IHO Order and Memorandum, 00-
85T (May 31, 2000) (degree of detail must be sufficient to provide
subordinate body with reasons for trusteeship and fair notice of hearing).
The trusteeship notice need not rise to the level of detail required in
judicial proceedings.Cf. Luggage Workers Union, Local 167 v. International
Leather Goods, Plastics & Novelty Workers Union, 316 F. Supp. 500, 508 (D.
Del. 1970) (notice insufficient for failure to inform local union of acts
supporting imposition of trusteeship). The notice should provide the "date,
time and location of the hearing and indicate that the local will have an
opportunity to respond to the charges."Local Union 43 at 10, citing Becker,
900 F.2d at 768 (internal citations omitted);see also International
Constitution, Article IX, Section 7. LIUNA’s International Constitution
requires adequate notice of the hearing "at least 10 days prior to the date of
the hearing." International Constitution, Article IX, Section 7. "At the
hearing itself, the union seeking to impose the trusteeship must present
evidence and witnesses in support of the reasons for imposing the
trusteeship."Local Union 43 at 9-10, citing Becker, 900 F.2d at 768. Further,
the "local must be accorded the opportunity to cross examine [the parent
union’s] witnesses and present rebuttal evidence."Id.
Both LIUNA’s EDP and EPC specifically prohibit "all current and future
officers, agents, representatives, employees, and members of the Union from
engaging in ‘barred conduct.’" EDP, Section 1, p.24; EPC,Barred Conduct,
p.22. "Barred Conduct" includes,inter alia, committing any act of
racketeering, as defined in 18 U.S.C. § 1961(1) and 29 U.S.C. §§ 186, 501(c).
SeeEDP, Appendix A, p.36; EPC, Barred Conduct, p.22. "Racketeering
activity’ means,inter alia, any act or threat involving the aforementioned
crimes that are chargeable under State law and punishable by imprisonment
for more than one year; or any act which is indictable under enumerated
sections of Titles 18 and 29 of the United States Code.Id.; see also In the
Matter of Stephen Buckley, IHO Order and Memorandum, 99-52D (October 3,
2000);In the Matter of Alan Wasserman, IHO Order and Memorandum, 97-
16In the Matter of Local Union 1001 2004
57D (October 7, 1998). Although LIUNA’s EPC and EDP do not define
"barred conduct" with an express mental state requirement, a knowledge
standard is implicit in the nature of a offense.See, e.g., In the Matter of
Dennis Gleason, Jim Felkner Jr., and L.T. Robertson, 2000 A.O. 151 (00-006-
IHO);Victor Claro v. Carlos M. Marques, 1998 A.O. 183 (98-023-IHO),
citing, In the Matter of Dennis Martire, 1997 A. O. 81, 93 n.8 (97-008-IHO).
The EDP and the EPC also prohibit LIUNA members from permitting
any member or associate of the LCN to exercise control or influence in the
conduct of the affairs of the Union. EDP, Section 1, p.24; EPC,Barred
Conduct, p.22. The IHO liberally construes LCN influence on union affairs.
In the Matter of Napoli & Fallacara,IHO Order and Memorandum, 96-65D
(September 25, 1997);In the Matter of Bifulco et al., IHO Order and
Memorandum, 96-48D (March 17, 1998). The IHO will look at any
relationship that permitted access to union affairs by barred persons.Bifulco,
96-48D. The relationship need not directly affect the operation of the union.
See, e.g., In the Matter of Coia,IHO Order and Memorandum, 97-52D
(March 8, 1999) (relationship to the affairs of the union need not on its face
affect the operation of the union);Napoli, 96-65D (apparent from the
agreement between LIUNA and the Department of Justice (DOJ), and text of
the EDP and EPC, that major aim of reform process is ridding union of
organized crime influence).
Fiduciary Duties of Labor Union Officers
Federal Labor Law
In order to safeguard labor organizations, federal law governing the
fiduciary duty of labor union officers is expansive. Title 29 U.S.C. § 501(a)
The officers, agents, shop stewards, and other representatives
of a labor organization occupy positions of trust in relation to
such organization and its members as a group. It is, therefore,
the duty of each such person, taking into account the special
problems and functions of a labor organization, to hold its
money and property solely for the benefit of the organization
and its members and to manage, invest, and expend the same
in accordance with its constitution and bylaws and any
resolutions of the governing bodies adopted thereunder, to
refrain from dealing with such organization as an adverse
party or in behalf of an adverse party in any matter connected
with his duties and from holding or acquiring any pecuniary or
personal interest which conflicts with the interests of such
organization, and to account to the organization for any profit
received by him in whatever capacity in connection with
17In the Matter of Local Union 1001 2004
transactions conducted by him or under his direction on behalf
of the organization. A general exculpatory provision in the
constitution and bylaws of such labor organization or a general
exculpatory resolution of a governing body purporting to
relieve any such person of liability for breach of the duties
declared by this section shall be void as against public policy.
29 U.S.C. § 501(a).
Title 29 U.S.C. § 501(c) prohibits the use of union property or funds for
personal use. Section 501(c) reads in pertinent part that:
[a]ny person who embezzles, steals, or unlawfully and
willfully abstracts or converts to his own use, or the use of
another, any of the moneys, funds, securities, property or other
assets of a labor organization of which he is an officer, or by
which he is employed, directly or indirectly shall be fined not
more than $10,000 or imprisoned for not more than five years,
29 U.S.C. § 501(c).
In addition to the broad description of the fiduciary duty of union officials
contained in 29 U.S.C. § 501(a), the Employee Retirement Income Security
Act of 1974 (ERISA) specifically addresses the fiduciary duties of benefit
(a) Prudent man standard of care.
(1) Subject to sections 403(c) and (d), 4042, and 4044
[29 USCS §§ 1103(c), (d), 1342, 1344], a fiduciary
shall discharge his duties with respect to a plan
solely in the interest of the participants and
beneficiaries and –
(A) for the exclusive purpose of:
(i) providing benefits to participants and
their beneficiaries; and
(ii) defraying reasonable expenses of
administering the plan;
(B) with the care, skill, prudence, and diligence
under the circumstances then prevailing that
a prudent man acting in a like capacity and
familiar with such matters would use in the
conduct of an enterprise of a like character
and with like aims;
29 U.S.C. § 1104.
18In the Matter of Local Union 1001 2004
Title 18 U.S.C. § 1027 prohibits false statements and concealment of
facts in relation to documents required by ERISA. The statute prohibits:
whoever, in any document required by ERISA to be published,
or kept as part of the records of any employee welfare benefit
plan or employee pension benefit plan, or certified to the
administrator of any such plan, makes any false statement or
representation of fact, knowing it to be false, or knowingly
conceals, covers up, or fails to disclose any fact the disclosure
of which is required by such title [29 U.S.C. §§ 1001et seq.]
or is necessary to verify, explain, clarify or check for accuracy
and completeness any report required by such title to be
published or any information required by such title to be
certified, shall be fined under this title, or imprisoned not more
than five years, or both.
18 U.S.C. § 1027
Ethical Practices Code
Several sections of the LIUNA EPC also address the fiduciary
responsibility of LIUNA officers. The EPC recognizes that any elected or
appointed person who represents LIUNA and its members has a sacred trust to
serve the best interests of the members and their families. EPC,Business and
Financial Activities of Union Officials, p.20. "Therefore, every officer and
representative must avoid any outside transaction which creates an actual or
potential conflict of interest. The special fiduciary nature of Union office
requires the highest loyalty to the duties of the office."Id.
According to the Financial Practices section of the EPC, "Union funds are
held in trust for the benefit of the membership. The membership is entitled to
assurance that union funds are not dissipated and are spent for proper
purposes. The membership is also entitled to be reasonably informed as to
how union funds are invested or used." EPC,Financial Practices, p.18. The
EPC prohibits local unions from investing of any of its funds "in a manner
which results in the personal profit or advantage of any officer or
representative of the Union."Id.
The EPC further dictates proper financial procedure for benefit funds, as
well as the related fiduciary responsibility of Union trustees. "Complete
records of the financial operations of all health, welfare and retirement funds
and programs shall be maintained in accordance with the best accounting
practice. Each Union trustee shall require that each such fund be audited
regularly." EPC,Health, Welfare and Retirement Funds, p.20.
19In the Matter of Local Union 1001 2004
Burden of Proof
The GEB Attorney must establish the grounds for a trusteeship by a
preponderance of the evidence.See In the Matter of Local 225, IHO Order
and Memorandum, 97-54T (March 17, 1998),citing In the Matter of
Construction & Laborers’ District Council of Chicago and Vicinity (Chicago
District Council), IHO Order and Memorandum, 97-30T (February 7, 1998).
A preponderance of the evidence "means such evidence as, when weighed
against that opposed to it, has the more convincing force" that something is
more likely so than not so.Hopkins v. Price Waterhouse, 737 F. Supp. 1202,
1203 (D.C. Cir. 1990);see also Nissho-Iwai Co. v. M/T Stolt Lion, 719 F.2d
34, 38 (2nd Cir. 1983). In determining whether any fact at issue has been
proven by a preponderance of the evidence, the IHO may consider and weigh
the testimony of all witnesses, regardless of who may have called them, and
all exhibits received in evidence, regardless of who may have produced them.
See Claro v. Marques, 1998 A.O. 203, 204 (98-023-IHO); see also Merzon v.
County of Suffolk, 767 F. Supp. 432, 444 (E.D.N.Y. 1991).
"A union need establish only one proper purpose to impose a
trusteeship." Chicago District Council, 97-30T; see also, Mason Tenders
District Council v. LIUNA, 884 F. Supp. 823, 836 (S.D.N.Y. 1995); LIUNA
Local Union #43,No. C03-026 (N.D. Iowa May 14, 2003). In this case, the
GEB Attorney has averred a number of grounds for imposing a trusteeship.
The Trusteeship Complaint charges that the corruption of La Cosa Nostra
(LCN) influence, a lack of democratic practices, barred conduct, ERISA
reporting violations, and protecting Local 1001 as an institution warrant the
imposition of a Trusteeship.See Trusteeship Complaint (IHO Dkt. 2).
LIUNA trusteeship proceedings are similar to administrative proceedings
in which the "rules governing the admission of evidence . . . are considerably
more relaxed."United States v. I.B.T (Wilson, Dickens & Weber), 978 F.2d
68, 72 (2d Cir. 1992);Rocker v. Celebrezze, 358 F.2d 119, 122 (2d Cir. 1966)
(footnote omitted). The hearing officer in union disciplinary proceedings
arising under the Teamsters Consent Decree regularly admits hearsay
evidence.See United States v. I.B.T (Cimino), 964 F.2d 1308, 1312 (2d Cir.
1992)aff’g, 777 F. Supp. 1130 (S.D.N.Y. 1991); Senese & Talerico, 941 F.2d
at 1297. Accordingly, reliable hearsay evidence is admissible in labor
arbitration.See, e.g., Associated Cleaning Consultants and International Bhd.
of Printing and Allied Trades Local 327, 94 LA 1246 (1990); In the Matter of
Joseph P. Crincoli (Crincoli), IHO Order and Memorandum, 97-04D (Oct.
27, 1997);Chicago District Council, 97-30T; Elkouri and Elkouri, How
Arbitration Works(4th ed. 1994).
20In the Matter of Local Union 1001 2004
The IHO has adopted the standard of reliability test of the Court in
Cimino, 964 F.2d 1308. Bifulco, 96-48D. The IHO bases hearsay evidence
decisions on a thorough review of what is probative and reliable.Chicago
District Council, 97-30T; see also Senese & Talerico, 941 F.2d at 1298, citing
Richardson v. Perales, 402 U.S. 389, 402 (1971). In determining the
reliability of hearsay, the IHO considers (1) whether the statements
corroborated each other in crucial respects; (2) whether the statements paint a
consistent picture of the relationship of the individuals; and (3) statements are
matched by law enforcement declarations in the same subject matter.Bifulco,
96-48D. "Two of the most important factors determining the reliability of
hearsay evidence are the knowledge and qualifications of the declarant, and
whether the hearsay statement was corroborated by other evidence."In the
Matter of Alfred Andrade, IHO Order and Memorandum, 00-18D (April 26,
2002);accord In the Matter of Anthony Franco, IHO Order and
Memorandum, 02-01D (December 16, 2002).
Informant Hearsay Information
A professional law enforcement officer, or former law enforcement
officer, may relate informant testimony as part of his opinion that an
individual is a member of, or associated with, organized crime.Bifulco, 96-
48D. The informant must be qualified as reliable a recognized method for
testing reliability. Informant hearsay testimony of factual occurrences may
also be accepted, provided the informant is qualified as to reliability, and the
information as to specific factual events is independently corroborated in
material part.Franco, 02-01D. The IHO also accepts hearsay statements of
former organized crime figures cooperating with law enforcement authorities,
provided their statements are deemed reliable by corroboration or other indicia
of reliability.Andrade, 00-18D.
The IHO accepts hearsay statements of unnamed informants under very
limited and closely monitored circumstances.Andrade, 00-18D (citations
omitted). Unnamed informant information must be supplied by an
organization with a defined, qualified informant program.Id. The testifying
witness must demonstrate that the organization qualified and classified the
informants.Id.; see also Wasserman, 97-57D (evidence must be corroborated
by various other sources or proven reliable to qualified law enforcement or
meet tests of specificity). Nonetheless, the IHO will not accept all law
enforcement organizations as sources of informant information. Moreover,
evidence from unidentified unknown sources lacks the necessary indicia of
reliability required for admissibility.See Crincoli, 97-04D (witness must
offer testimony of recognized method to evaluate witness’s reliability).
21In the Matter of Local Union 1001 2004
Witnesses Testifying on Behalf of the GEB Attorney
John J. O’Rourke
John J. O’Rourke (O’Rourke) is a private investigator for Quest
Consultants, who LIUNA’s Inspector General occasionally engages as an
investigator. Tr. 41:23-24 (O’ROURKE). Mr. O’Rourke has worked as an
investigator with LIUNA since May 1996, and in particular has been
investigating allegations of organized crime associations within the Chicago
area Locals of LIUNA. Tr. 730:6-15 (O’ROURKE). Mr. O’Rourke began
investigating Local 1001 in about 2000. Tr. 730:21 – 731:3 (O’ROURKE).
His Local 1001 investigation has been ongoing almost continuously to the
present time. Tr. 734:4-22 (O’ROURKE). Mr. O’Rourke testified that he
primarily concentrated on Local 1001 officers from 1969 until the present. Tr.
Mr. O’Rouke’s background includes a total of 32 years in law
enforcement, six years as a Special Agent with the Office of Naval
Intelligence and 26 years as a Special Agent for the Federal Bureau of
Investigation (FBI). Tr. 42:7-11 (O’ROURKE). Thereafter, Mr. O’Rourke
was a Cook County Inspector, assigned to the FBI Organized Crime and
Property Crime Task Force for over a year. Tr. 42:7-14 (O’ROURKE). In
total, over 23 years of Mr. O’Rourke’s service entailed organized crime
investigation. Tr. 42:19-21 (O’ROURKE). Mr. O’Rourke has been involved
in several hundred investigations of organized crime in Chicago;
approximately 75 cases have lead to convictions of Chicago organized crime
figures. Tr. 43:7-15 (O’ROURKE). Mr. O’Rourke has received hundreds of
awards and commendations for his FBI service, including commendations
from the Director of the FBI, various police officials, and the Chamber of
Commerce for law enforcement excellence. Tr. 42:24 – 43:6 (O’ROURKE).
The IHO qualified Mr. O’Rourke as an expert in the field of organized crime
influence in Chicago, particularly with respect to labor unions.18 Tr. 43:23 –
18Mr. O’Rourke has been qualified as an expert in other LIUNA hearings.
See, e.g., Chicago District Council,97-30T; In the Matter of Caruso, IHO
Order and Memorandum, 99-12D (January 10, 2001);In the Matter of
DiForti,IHO Order and Memorandum, 99-12D (January 10, 2001); In the
Matter of Matassa,IHO Order and Memorandum, 98-43D (May 12, 1999).
22In the Matter of Local Union 1001 2004
Raymond Maria (Maria), a Certified Public Accountant (CPA) since
1970, is currently self-employed as a consultant performing fraud detection,
fraud prevention, and forensic accounting services. Tr. 431:9-12, 432:1-7
(MARIA). Mr. Maria began his career working for the FBI performing
general criminal investigations from 1965 through 1968. Tr. 431:17-24
(MARIA). Thereafter, Mr. Maria worked with the firm of Ernst & Young as a
consultant and auditor, from 1968 until 1972. Tr. 432:1-10 (MARIA). In
1972, Mr. Maria returned to the FBI and worked in the area of organized
crime and labor racketeering for 12 years. Tr. 432:12-17 (MARIA). From
1984 until 1990, Mr. Maria was the appointed Deputy Inspector General, and
later Acting Inspector General, at the United States Department of Labor
(DOL). Tr. 432:19 – 432:19 (MARIA). As Deputy Inspector General for the
DOL, Mr. Maria was responsible for overseeing the Office of Labor
Racketeering, which investigated organized crime within LIUNA, the I.B.T,
the International Longshoreman’s Association, and the Hotel and Restaurant
After retiring from federal service in September 1990, Maria founded a
fraud detection/fraud prevention business. Tr. 434:3-5 (MARIA). In his
capacity as a private consultant, Maria has engaged in investigating conflicts
of interest, ethical breaches, and potential violations of ERISA and other
federal crimes for state and federal governmental agencies, corporate clients,
employee benefit plans, and labor organizations. Tr. 434:3-11 (MARIA).
After 2000, Mr. Maria became a sole proprietor. Tr. 434:9-11 (MARIA).
Throughout his career, Mr. Maria has conducted and/or supervised hundreds
of labor racketeering investigations, including violations of § 1027. Tr. 435:3-
7 (MARIA). A portion of Mr. Maria’s work includes acting as a consultant to
LIUNA Inspector General Gow. Tr. 43:15-16 (MARIA). The IHO qualified
Mr. Maria as an expert in the field of labor racketeering investigations and
benefit fraud matters.19 Tr. 436:22 (IHO).
James S. Jorgensen
James S. Jorgensen (Jorgensen) is currently the Administrator of the
Laborers’ Pension Fund (Pension Fund) and the Health and Welfare Fund of
19Mr. Maria has been qualified as an expert in other LIUNA hearings. See,
e.g., In the Matter of Anthony Franco,IHO Order and Memorandum, 02-01D
(December 16, 2002);In the Matter of Local Union 1175, Howard Beach, NY,
IHO Order and Memorandum, 03-10T (June 11, 2003).
23In the Matter of Local Union 1001 2004
the Construction and General Laborers’ District Council and Vicinity
(Welfare Fund) in Westchester, Illinois. Tr. 106:7-8 (JORGENSEN). Mr.
Jorgensen began working for the Pension & Welfare Funds (collectively,
Benefit Funds) in 1995, as Deputy Administrator. Tr. 107:13 (JORGENSEN).
Mr. Jorgensen became the Administrator of those funds on January 1, 1996,
when his predecessor retired. Tr. 107:4-7 (JORGENSEN).
Mr. Jorgensen first began his career after graduating from college in
1971; he worked in the Employee Benefits area with the Central States
Pension Fund. Tr. 106:14-16 (JORGENSEN). Thereafter, he worked as an
actuary consultant for the Siegel Company. Tr. 106:16-18 (JORGENSEN).
His last position before joining the Benefit Funds was Vice President of
Zenith Administrators, which is administrator of employment benefits. Tr.
Howard Levinson (Levinson) is certified public account (CPA), licensed
in Illinois. Tr. 322:22 – 323:11 (LEVINSON). He has been the principal
partner in the firm of Levinson, Simon & Sprung for approximately 14 years.
Id.Mr. Levinson began his career as an Internal Revenue Service (IRS)
Revenue Agent in the late 1960’s. Tr. 324:12- 13 (LEVINSON). In 1971,
Mr. Levinson received his CPA license; in 1980, he earned an MBA in
finance from the University of Chicago. Tr. 324:1-16 (LEVINSON).
Since the inception of Levinson, Simon & Sprung, approximately 80
percent of its clients are related to the Taft-Hartley field; they are either labor
unions or collectively bargained organizations set up by unions and
contractors. Tr. 324:22 – 325:7 (LEVINSON). Clients include welfare funds,
pension funds, apprenticeship funds, LMCC’s, Vacation Funds, ERISA Funds
and non-ERISA funds related to labor unions.Id.
Maria Smith (Smith) is a Senior Compliance Auditor with Levinson,
Simon & Sprung; she has held the position for over five years. Tr. 356:21-25,
357:20 (SMITH). Ms. Smith’s work involves conducting payroll compliance
audits for the various funds that employ Levinson, Simon & Sprung. Tr.
357:23-25 (SMITH). Ms. Smith has a Bachelor’s Degree in Organizational
Management from North Park University and a paralegal certificate from the
University of Illinois. Tr. 357:4-7 (SMITH). Ms. Smith is currently pursuing
two Master’s Degrees from Loyola University’s Institute of Industrial
Relations. Tr. 357:8-9 (SMITH).
24In the Matter of Local Union 1001 2004
Witnesses Testifying on Behalf of Local 1001
John Rea (Rea) has worked as a licensed private investigator since 1989.
Tr. 810:9-12, 811:18-19 (REA). In that capacity, Mr. Rea works with law
firms and corporations conducting investigations related to,inter alia,
criminal defense, commercial litigation, and products liability defense. Tr.
811:15-25 (REA). Mr. Rea graduated from the University of Illinois with a
degree in Criminal Justice. Tr. 810:15-18 (REA). During college in 1977,
Rea was a clerk at the U.S. Attorney’s Office in Chicago, and later became a
legal assistant responsible for assisting prosecutors on various cases bound for
trial. Tr. 810:23 – 811:3 (REA). Subsequently, Mr. Rea joined the Secret
Service as an agent for one year. Tr. 811:4-6 (REA). Thereafter, in or about
1985, Mr. Rea became an inspector with the Illinois State Police and worked
out of the U.S. Attorney’s Office on a judicial corruption case known as the
Greylord Project. Tr. 811:5-11 (REA).
Marvin Gittler, an attorney for 40 years, is licensed to practice in the state
of Illinois, all U.S. Circuit Courts but one, and the United States Supreme
Court. Tr. 905:14-22 (GITTLER). Mr. Gittler received an undergraduate
degree from the University of Syracuse in 1960, and a law degree from the
University of Chicago Law School in 1963. Tr. 905:25 – 906:2 (GITTLER).
Since graduating from law school, Mr. Gittler concentrated his legal practice
in the area of labor law issues, including ERISA. Tr. 908:6-9 (GITTLER).
Mr. Gittler has taught at both the Loyola Law School and the Chicago
Kent Law School, where he taught a Master’s course on the duty of fair
representation and the LMRDA. Tr. 905:11-16 (GITTLER). Mr. Gittler has
also consulted to the American Arbitration Association and given a significant
amount of lectures. Tr. 905:18-21 (GITTLER). Mr. Gittler has written many
legal articles on subjects such as Affirmative Action, picketing situations, and
the responsibility to deal with recognition situations. Tr. 908:1-5 (GITTLER).
In addition, Mr. Gittler was the recipient of the Peggy Browning Activist
Award in 2003, and was inducted into the Illinois Labor History Society in
2001. Tr. 907:3-7 (GITTLER). The Illinois Educational Labor Relations
Board has qualified Mr. Gittler as an expert in the past. Tr. 908:18-21
25In the Matter of Local Union 1001 2004
(GITTLER). The IHO accepted Mr. Gittler as an expert attorney in the area
of labor law. Tr. 912:4-10 (IHO)20.
Kathryn Kurth (Kurth) is president of the Chicago-based Kurth Lampe
Political Consulting and Public Relations Firm founded in 1996. Tr. 820:22-
25 (KURTH). Kurth Lampe performs campaign and election training with
non-profit, labor union, environmental, and women’s groups. Tr. 821:2-5
(KURTH). Ms. Kurth has been engaged in political consulting work since
1983, including numerous state and national elections Tr. 821:15-17, 822:8-
20 (KURTH). Ms. Kurth obtained a Bachelor’s Degree in History from the
University of Virginia. Tr. 821:20-25 (KURTH).
In 1996, Ms. Kurth worked as an Executive Director of LIUNA’s Atlanta
Election office. Tr. 823:13-14 (KURTH). Professor Stephen Goldberg, the
LIUNA Election Officer, hired Ms. Kurth with the approval of the GEB
Attorney and the Department of Justice. Tr. 823:15-17 (KURTH). Ms. Kurth
has also worked with the Steel Worker’s Union, the Chicago Federation of
Labor, and SAGAFTRA, the Screen Actors Guild and American Federation of
Television Radio Artists. Tr. 823:20-25 (KURTH).
Mark DeBofsky (DeBofsky), an attorney for the past 23 years, is licensed
in the state of Illinois and various federal courts. Tr. 1031:23 – 1032:2
(DEBOFSKY). Mr. DeBofsky received a Bachelor of Arts from the
University of Michigan in 1977, and his law degree from the University of
Illinois College of Law in 1980. Tr. 1032:5-7 (DEBOFSKY). Mr. DeBofsky
concentrates his practice in the representation of individuals and employee
benefit claims, individual disability insurance claims, Social Security
disability, and, to a lesser degree, employment discrimination. Tr. 1032:10-14
Mr. DeBofsky is a member of several professional organizations,
including the American Bar Association Employee Benefits Committee,
which is part of its Labor and Employment Law section. Tr. 1032:18-22
(DEBOFSKY). Mr. DeBofsky taught an LLM class in Employee Benefits
Litigation at the John Marshal Law School, as well as lectured at Loyola Law
20Mr. Gittler has been qualified as an expert in other LIUNA hearings. See,
26In the Matter of Local Union 1001 2004
School and the University of Michigan Law School. Tr. 1032:25 – 1033:5
(DEBOFSKY). Mr. DeBofsky has an extensive curriculum vitae outlining the
numerous legal articles and publications he has written, as well as seminars
that he has conducted, on the subject of ERISA. Tr. 1033:9-22
(DEBOFSKY). In addition, Mr. DeBofsky testified before a subcommittee of
the National Association of Insurance Commissioners regarding disability
clauses in employee benefit plans. Tr. 1034:1-6 (DEBOFSKY).
James Lamont (Lamont) is a senior manager with the Caliber CPA Group
(Caliber), in charge of the Payroll Audit Department; he has been employed at
Caliber since January 2003. Tr. 980:1 -981:4 (LAMONT). Prior to working
for Caliber, Thomas Havey LLP (Havey) employed Mr. Lamont for 15 years
from 1988 through 2002.21 Tr. 980:18-22 (LAMONT). Mr. Lamont
performed payroll audits for Havey, advancing to a supervisory position and
then a senior manager position before he left Havey’s employ. Tr. 981:7-10
(LAMONT). After Havey conducted the 1998 audit of Local 1001, there was
a technical review of the information, with which Mr. Lamont was not
involved. Tr. 1000:4-11 (LAMONT). Once the audit passed the technical
review, Mr. Lamont conducted the quality review, ensuring that all the papers
were there and that there were no typos or clerical errors.Id.
Prior to his employ at Havey, Mr. Lamont worked construction jobs from
1984 until 1988. Tr. 994:23-24 (LAMONT). From 1975 until 1984, Mr.
Lamont was employed in the Cost Accounting Department of Allis-Chalmers,
a farm equipment manufacturer. Tr. 994:7-14 (LAMONT). Mr. Lamont
received a Bachelor of Science in Business from Eastern Illinois University in
Local 1001 Members Who Testified at the Hearing
James Capasso Jr.
James Capasso Jr. (Capasso) is currently an Auditor for Local 1001; he
has held that officer position since 1984 when Ernest Kumerow appointed him
to the position. Tr. 546:10, 560:10-16 (CAPASSO). Mr. Capasso became a
member of Local 1001 when he began his employment in the Chicago
Department of Streets and Sanitation (Dept. of Streets & Sanitation) Asphalt
21Sometime in or about 2002, Thomas Havey separated into two entities,
Legacy Professionals, LLP, and Caliber. Tr. 993:1-21 (LAMONT).
27In the Matter of Local Union 1001 2004
Section in or about 1958; he worked summers while attending college. Tr.
529:13-25, 567:18-19 (CAPASSO). In June 1963, Mr. Capasso began
working at the Asphalt Section main office. Tr. 530:3-5 (CAPASSO). Mr.
Capasso advanced to Supervising Timekeeper in 1965, then to Career Service
Administrative Assistant II, then to Career Service Director of Administration,
and finally Supervisor of Administrative Services/Finance Officer before he
left the Dept. of Streets and Sanitation in 1986. Tr. 530:8-20 (CAPASSO).
Mr. Capasso is also currently employed full-time as the Executive
Director of the Laborers’ and Retirement Board Employees’ Annuity and
Benefit Fund of Chicago (City Pension Fund). Tr. 540:6 – 541:12
(CAPASSO). Mr. Capasso was appointed Executive Director in June 1986.
Id.Prior to becoming Executive Director, Mr. Capasso served as an
appointed Trustee of the City Pension Fund since in or about 1967, when he
was appointed by the Board of Trustees at the age of 25. Tr. 530:22 – 533:1
Nicholas Gironda (Gironda) is currently the Business Manager of Local
1001; he has held the position since his appointment in 2001. Tr. 692:4-25
(GIRONDA). Prior to assuming that position, Mr. Gironda had been
Secretary-Treasurer since 1994. Tr. 693:14-19 (GIRONDA). Before that,
Mr. Gironda had been a Business Agent since 1988. Tr. 694:23 – 695:9
(GIRONDA). Mr. Gironda began working as a laborer, and joined Local
1001, in or about 1966, when he worked in Transportation Department of the
Dept. of Streets & Sanitation. Tr. 695:14 – 696:6 (GIRONDA). In 1969, Mr.
Gironda became a Section Foreman in Loop Sanitation.Id.
Sam DeChristopher (DeChristopher) has been the Secretary-Treasurer of
Local 1001 since 2001. Tr. 699:1 (DECHRISTOPHER). In or about 2000,
Mr. DeChristopher was Recording Secretary, and was an Executive Board
member since 1994, when he was also Sergeant-at-Arms. Tr. 669:8-19
(DEBOFSKY). While Mr. DeChristopher held these unpaid officer positions,
he worked full-time for the City of Chicago. Tr. 670:3 (DECHRISTOPHER).
Mr. DeChristopher began working as a laborer in the Dept. of Streets and
Sanitation in or about 1974. Tr. 670:6-11 (DECHRISTOPHER). Sometime
in the 1980’s, Mr. DeChristopher advanced to the position of foreman over a
crew responsible for street repair. Tr. 19-35 (DECHRISTOPHER).
Robert Chianelli (Chianelli) has been the Recording Secretary of Local
1001 since 2001, is a delegate to the Laborers’ District Council of Chicago
28In the Matter of Local Union 1001 2004
and Vicinity (District Council), and a full-time Business Representative. Tr.
663:17-21, 664:16-18, 1082:25 – 1083:1 (CHIANELLI). Mr. Chianelli is also
a Business Agent for the Local, which is a full-time paid position. Tr.
663:24-25 (CHIANELLI). Prior to 2001, the City of Chicago employed Mr.
Chianelli full-time. Tr. 664:19-22 (CHIANELLI). During his employment
with the City of Chicago, Mr. Chianelli held the following unpaid officer
positions at Local 1001: in 1999, he was elected as an Auditor, and he was
appointed to the Executive Board in 2000. Tr. 665:2-6 (CHIANELLI).
Nicholas Cataudella (Cataudella) became a Local 1001 Business Agent in
or about 2002. Tr. 634:25 – 635:6 (CATAUDELLA). From mid-2000 until
mid-2002, when Mr. Cataudella worked full-time for the City of Chicago, he
also served as an Auditor of Local 1001 after the Executive Board appointed
him to the position to fill a mid-term vacancy. Tr. 649:7-10, 650:20 – 651:5
(CATAUDELLA). Mr. Cataudella joined Local 1001when he began working
for the City of Chicago in the 1980’s. Tr. 642:2-14 (CATAUDELLA). Mr.
Cataudella was a laborer for the Dept. of Streets & Sanitation, working as a
garbage man for the 43rd Ward, asphalt helper, and asphalt foreman. Tr.
635:8-10, 642:14 – 643:6 (CATAUDELLA). Sometime in or about 1986, Mr.
Cataudella owned the "Body Shop on Grand" with several partners, one of
whom was Tony Fountas, and worked there at least two days a week. Tr.
644:9 – 646:13 (CATAUDELLA). Approximately 20 years ago, Mr.
Cataudella was charged with "bookmaking or something or syndicated
bookmaking" when he was in his twenties; Mr. Cataudella was unable to
specifically recall the outcome of those charges, but assumes he was
acquitted. Tr. 648:6-26 (CATAUDELLA).
Victor Roa Sr.
Victor Roa Sr. (Roa) has been a member of Local 1001 since 1998 when
he began working for the City of Chicago as a watchman. Tr. 655:1-23,
658:2-3 (ROA). Mr. Roa is currently a laborer in the Electrical Department.
Tr. 657:18 (ROA). In 2000, Mr. Roa was elected as a Local 1001 Auditor and
served in that position for one year until he was appointed as an Executive
Board member in 2001. Tr. 656:4-24 (ROA). At some point prior to
becoming an Auditor, Mr. Roa became aware that there was a position open,
although he does not recall specifically how, and knew that the Local was
looking for a Hispanic person for the position. Tr. 658:17-23 (ROA).
FINDINGS OF FACT
1. Local 1001, located in Chicago, Illinois, has approximately 2,800
members and is a constituent Local of the Chicago District Council.
29In the Matter of Local Union 1001 2004
2. The current Executive Board of Local 1001 consists of President
Nathaniel Gibson (Gibson), Vice President Floyd Grogan (Grogan),
Recording Secretary Chianelli, Secretary-Treasurer DeChristopher, Business
Manager Gironda, and two other members, Roa and Willie Bates (Bates).See
GEB Attorney Exhibit (GEB Ex.) 1 (Local 1001 Officer History Chart).
3. The current Local 1001 delegates to the Chicago District Council are
Business Manager Gironda, President Gibson, Recording Secretary Chianelli,
Secretary-Treasurer DeChristopher, and Vice President Grogan.Id.
4. Local 1001 has three auditors: Mr. Capasso, Debbie Pucillo-Ferraris,
and Mr. Cataudella.Id.
5. Paul Reed (Reed) serves as Local 1001’s Sergeant-at-Arms.Id.
LCN Influence Over Local 1001
6. Charge One avers that a Trusteeship over Local 1001 is necessary to
correct organized crime influence over the Local, and reads as follows:
It is necessary to place Local 1001 under trusteeship for the
purpose of correcting corruption of influence of organized
crime members and associates over the affairs of Local 1001.
By placing Local 1001 under trusteeship, LIUNA will be able
to remove the influence of organized crime over the Local and
assure that the Local is administered in the best interest of its
Trusteeship Complaint, ¶¶ 45, 46 (IHO Dkt. tab 2).
The Chicago District Council Trusteeship and Bruno Caruso
7. On February 7, 1998, the Chicago District Council was placed under
Trusteeship following an extensive 19-day hearing regarding the GEB
Attorney’s Complaint for Trusteeship of 6/13/97.See GEB Ex. 2 (Chicago
22The history of organized crime in Chicago has previously been set out at
length. For a complete history of the LCN in Chicago,see Caruso, 99-12D;
30In the Matter of Local Union 1001 2004
8. As a result of that hearing, the IHO made findings relevant to Local
1001 and its current or former officers included,inter alia:
•Mr. Kumerow was appointed Local 1001
President/Business Manager in 1982, following the
resignation of Joseph Spingola. Ernest Kumerow served
as District Council President/Business Manager from
1987-94, following District Council President Joe
Spingola and District Council Business Manager James
Caporale. Mr. Kumerow was a Trustee of the District
Council Welfare Fund from 1982-94, a Trustee of the
District Council Training Fund from 1988-93, and
Chairman of the Laborers' Political League from 1993-94.
•Mr. Kumerow was the son-in-law of Anthony Accardo,
the active head of the Chicago crime family in 1982. The
IHO has found that Mr. Kumerow was an associate of
organized crime while in the Union, and owed his
position in the Union to the influence of his father-in-law.
•There is a preponderance of the evidence that Bruno
Caruso is an associate of organized crime. His
association is of long duration and accounts for his
position in the Laborers’ union organization.
•In 1991 Mr. Gironda was employed by the City of
Chicago in a supervisory position. He was also a part
time employee of Local 1001. During that year the city of
Chicago Inspector General conducted an investigation
into certain workers on no show jobs. Mr. Gironda was
suspended and demoted by the city for failure to supervise
his workers. Immediately after his suspension, Mr.
Gironda was promoted to a full time field representative
and his salary doubled by Mr. Kumerow and Bruno
GEB Ex. 2 (Chicago District Council, 97-30T).
Chicago District Council,97-30T; In the Matter of Local Union 1058,
Pittsburgh,IHO Order and Memorandum, 00-08T (March 9, 2001).
31In the Matter of Local Union 1001 2004
9. On November 25, 1998, in response to findings made by the IHO in
the Chicago District Council Trusteeship, the Executive Board "unanimously
concluded that the Board has the utmost faith and trust in Bruno Carusoand to
confirm this opinion it was suggested that maybe an independent investigator
be hired to investigate Bruno Caruso." Local 1001 Ex. 3, p.4 (November 25,
1998 Executive Board Meeting Minutes) (emphasis added).
10. Thereafter, at the same meeting,
President Caruso returned to the conference room and was told
the Board had suggested an investigator be hired to investigate
him. He thought this was a good idea as he has nothing to be
ashamed of and while he is grateful for the Board’s confidence
in him, an investigation is welcomed to confirm this
confidence. He thanked the Board for their trust in him.
11. The Local 1001 Executive Board took no further action regarding
hiring an investigator for Bruno Caruso at that meeting.
12. On January 21, 1999, the Executive Board revisited the idea of hiring
an independent investigator, this time considering the employment of John D.
Rea "in light of the trusteeship at the District Council and the possibility of
charges against Bruno or any other officers." Local 1001 Ex. 4, p.4 (Local
1001 Executive Board Meeting Minutes of 1/21/99).
13. The Executive Board engaged Rea to,inter alia, "review testimony
and depositions from witnesses who provided information regarding Bruno
Caruso. Also if possible he would interview these witnesses."Id. at p.5.
14. At the Trusteeship hearing, Mr. Rea testified that the Executive
Board gave him a document that enumerated certain allegations against Bruno
Caruso and was asked to determine the veracity of those allegations. Tr.
814:12-16 (REA). Mr. Rea conducted the investigation "for the better part of
a year," including making request for documents from the FBI, conducting
interviews of people that worked with Mr. Caruso, and obtaining and
developing criminal history information on some of the individuals identified
in the Chicago District Council opinion. Tr. 814:19 – 816:14 (REA).
15. At the end of his investigation, Mr. Rea reported to the Executive
Board that he "really couldn’t come to a conclusion one way or the other."
Tr. 816:17-21 (REA). He "just felt that [he] didn’t have enough information
to say that these people were being truthful or that the information was
accurate." Tr. 816:21-25 (REA). Mr. Rea’s investigation produced no further
results, because "the witnesses were unavailable through one form or another,
32In the Matter of Local Union 1001 2004
not knowing their identity, or they were protected witnesses or they were
probably deceased." Tr. 817:23 – 8181:1 (REA).
16. On March 3, 1999, the GEB Attorney filed disciplinary charges
against Bruno Caruso, his brother Frank Caruso Jr., his cousin Leo Caruso,
and James DiForti,23 alleging membership in the LCN, knowing association
with LCN members and associates, failure to investigate or purge LCN
influence, aiding LCN influence in LIUNA, and failure to ensure the union’s
affairs are properly conducted.See Caruso, 99-12D.
17. On January 10, 2001, after a hearing on the charges, the IHO issued a
decision that,inter alia, permanently revoked Bruno Caruso’s LIUNA
membership and barred him from holding any LIUNA office or employment
by any LIUNA entity.See Caruso, 99-12D.
18. A non-exhaustive list of findings the IHO made relevant to Local
1001 and Bruno Caruso included:
•In multiple law enforcement surveillances, Bruno Caruso
was seen in the company of high level members of
•Bruno Caruso’s organized crime connections that
facilitated his rise within LIUNA to the positions of
running Local 1001 and the Chicago District Council;
•Allegations regarding no-show jobs in the City of
Chicago, which involved Mr. Gironda failing to supervise
no-show employees, were made public in August 1991.
¶¶ 186, 223. The City of Chicago demoted and
suspended Mr. Gironda from his supervisory position. ¶
223. At the time, Mr. Gironda was also a part-time
employee of Local 1001. Immediately after his
suspension, without investigation of the allegations, Mr.
Kumerow and Bruno Caruso promoted him from part time
field representative to full-time field representative.
¶ 186. Mr. Gironda’s Local 1001 salary doubled as a
result of the promotion. ¶ 223.
23Charges against Mr. DiForti were dismissed when he died after the hearing,
but before the briefing and ruling.See Caruso, 99-12D.
33In the Matter of Local Union 1001 2004
•In 1994, when Mr. Kumerow resigned his Chicago
District Council offices only one month after an election
to a four year term, Bruno Caruso was the primary
beneficiary by being appointed to all of Mr. Kumerow’s
positions including President and Business Manager of
the Chicago District Council and Local 1001, thereby
bypassing the democratic process. This resignation and
following appointments were a complete manipulation of
the democratic practice.
19. On January 17, 2001, a Local 1001 Special Executive Board Meeting
was held to discuss the Local’s receipt of the IHO’s Order and Memorandum
in the Bruno Caruso disciplinary matter.See Local 1001 Ex. 8, p.6 (Local
1001 Minutes of Special Executive Board Meeting of 1/17/01).
20. During that meeting and in reference to the IHO opinion, Bruno
This document is available to all board members for review.
Keep documents at the Union office available to members
who may want to review it.Any member that may want to
review it must identify themselves and the purpose why they
are here. Have to be current paid up members in good
standing. They will need to call in advance to make an
I am providing all of the members with a copy of my appeal,
which I did file on Monday, [January] the 15th of 2001.
Local 1001 Ex. 8, p.6 (Local 1001 Minutes of Special Executive Board
Meeting of 1/17/01) (emphasis added).
21. None of the Executive Board members voiced any objection to the
restrictions Bruno Caruso placed on the membership’s access to the IHO
opinion, nor did any of the Executive Board members question such
restrictions in light of Bruno Caruso’s declaration that he was providing every
member a copy of his appeal.
22. During the same meeting in January 2001, the Executive Board voted
to place Bruno Caruso on administrative leave upon the advice of Judge
Leighton.Id. at p.7. However, the "Executive Board ma[de] clear to Mr.
Caruso his availability to the Local."Id.
23. The Executive Board did not actually place Bruno Caruso on
administrative leave for another month, or until February 22, 2001, after
34In the Matter of Local Union 1001 2004
threats had been recorded on the Local’s answering machine.See Local 1001
Ex. 9 (Local 1001 Executive Board Meeting Minutes of 2/22/01). The
The E-Board decided to re-visit the issue of putting Local
1001 Business Manager, Bruno Caruso on paid Administrative
leave with benefits. Two issues are factors in this decision.
(1) To protect the integrity of the Executive Board and (2) To
protect Bruno Caruso. On the [sic] 2/21/01 a threatening
message was left on the Local 1001 office answering machine.
The message was directed to Bruno Caruso. Therefore, the
Executive Board decided that in the best interest of the Board
and Bruno Caruso, effective 2/22/01, to put Bruno on paid
Local 1001 Ex. 9 (Local 1001 Executive Board Meeting Minutes of 2/22/01).
24. The Executive Board failed to engage in anything more than a
cursory investigation of any of the organized influence over Local 1001
uncovered in either the Chicago District Council Trusteeship or the Caruso
disciplinary proceeding. Moreover, the Executive Board resisted taking
anything but perfunctory remedial action against Bruno Caruso until
threatening telephone calls were received by the Local some three years after
the Chicago District Council Trusteeship findings, and a month after the IHO
banned Bruno Caruso from LIUNA.
25. Once Bruno Caruso’s removal was upheld by the Appellate Officer,
the Executive Board unanimously appointed Mr. Gironda to fill the vacancy.
He was unopposed for re-election in 2003. As noted above, Mr. Gironda was
promoted and brought to power by Mr. Kumerow and Bruno Caruso.
26. Mr. O’Rourke testified at the Trusteeship Hearing regarding
organized crime affiliations with the current officers of Local 1001.
27. Mr. O’Rourke based his testimony on three named informants. (Tr.
57:18-21, 61:21-22, 66:1-4 (O’ROURKE). Mr. O’Rourke also related
information supplied by four confidential informants. Tr. 67:22-24
28. Mr. O’Rourke related similar information from these same sources at
the Chicago District Council hearing. In that hearing, Mr. O’Rourke’s sources
knew many of the subjects personally and described their activities and
associations with specificity.
29. In the instant hearing, Mr. O’Rourke’s testimony was less explicit in
nature; he described the current officers of Local 1001 in general terms as
35In the Matter of Local Union 1001 2004
being associated with a certain organized crime crew or testified that
informants stated that certain officers were associated with organized crime
persons. No details of those associations were manifest. Mr. O’Rourke did
not describe any surveillances or intercepted conversations between the
present officers and organized crime figures.
30. Mr. O’Rourke’s testimony lacks the specificity necessary to establish
any probative value in this hearing.
Restoration of Democratic Practices
31. Charge Two alleges that a Trusteeship is necessary to restore
democratic practices at Local 1001, and reads as follows:
It is necessary to place Local 1001 under trusteeship for the
purpose of restoring democratic practices. Given the long
history of a lack of contested elections and a pattern of
replacing executive board members in mid-term with LCN
members or associates, imposition of a trusteeship over Local
1001 is necessary to restore democratic practices to the Local.
By placing Local 1001 under trusteeship, LIUNA will be able
to foster open and democratic practices within Local 1001.
Trusteeship Complaint, ¶¶ 47, 48 (IHO Dkt. tab 2).
32. Local Union elections should occur every three years; however, the
Constitution provides that officers may serve four-year terms where permitted
by law.See Constitution, Article VI, Section 1(h). Local 1001 officers
properly serve for four year terms.
History of Uncontested Elections, Officers Appointed to Fill Mid-
Term Vacancies, and Ineligible Candidates
33. The minutes of Local Executive Board meetings and special
nomination meeting minutes indicate that no opposition candidates or slates
have been nominated or run against an incumbent officer of Local 1001 in
over 30 years.See, e.g., ¶¶ 37, 38, 39; see also GEB Ex. 1 (Local 1001
Officer History Chart).
34. Vacancies in officer positions at Local 1001 have seldom occurred at
the end of a candidate’s term; with the exception of a few instances, vacancies
arose by mid-term or pre-election resignations.See GEB Ex. 4, ¶ 135
36In the Matter of Local Union 1001 2004
35. Robert E. Redd (Redd), a 28-year member of Local 1001, testified on
behalf of Local 1001. It was his belief that the history of uncontested
elections reflected nothing more than the membership’s satisfaction with the
status quo. Tr. 892 – 896 (REDD). Mr. Redd further testified that he himself
had nominated Mr. Bates for an Executive Board position in the 2003
election. Tr. 896:6-9 (REDD). Strikingly, however, Mr. Redd was unable to
relate to the IHO how a young member would work his way up the ranks at
Local 1001 to become an officer in the Local. Tr. 902 – 904 (REDD). In fact,
Mr. Redd was unaware of anyone having worked their way up to becoming an
elected officer in quite some time.Id.
36. In 1991, Local 1001 held a nomination meeting for the following
offices: President/Business Manager, Vice President, Recording Secretary,
Sergeant-at-Arms, three Auditors, three Executive Board members, and four
District Council delegates; 391 members attended the meeting.See GEB Ex
23 (Minutes of the Local 1001 Special Nomination Meeting of 5/19/91 (1991
Special Nomination Meeting Minutes)). The incumbent officers were all
nominated for re-election to their respective positions; no one ran as an
opposition candidate for any of the offices; and, the incumbents were all reelected
in an uncontested, unanimous election.Id.
37. On April 23, 1995, Local 1001 held a Nomination Meeting for the
following positions: President/Business Manager, Vice President/Business
Representative, Recording-Secretary/Business Representative, Secretary-
Treasurer/Business Representative, Sergeant-at-Arms, three auditors, three
Executive Board members, and four delegates to the District Council; 368
members attended the meeting.See GEB Ex. 24 (Minutes of the Local 1001
Nomination Meeting of 4/23/95 (1995 Nomination Meeting Minutes)). The
incumbents ran unopposed and were unanimously nominated and re-elected.
38. On May 2, 1999, Local 1001 held an Officers’ Nomination Meeting
for: President, Vice President, Recording Secretary, Secretary-Treasurer,
Business Manager, Sergeant-at-Arms, three Auditors, two Executive Board
members, and four District Council delegates; 380 members attended the
meeting.See GEB Ex. 25 (Minutes of the Local 1001 Nomination Meeting of
5/2/99 (1999 Nomination Meeting Minutes)). There were no opposition
candidates; the election was unanimous and uncontested.Id. At that time,
Bruno Caruso ran unopposed and was unanimously re-elected Business
Manager, although the Executive Board had known of the organized crime
allegations pending against him for at least five months.See Local 1001 Ex. 4
(Minutes of the January 21, 1999 Executive Board Meeting).
39. The following table illustrates the persons who have held the office
of Business Manager/President, and their years of service:
37In the Matter of Local Union 1001 2004
1970-1982 Joseph Spingola (retired one year after election)
1982-1994 Ernest Kumerow (appointed to fill mid-term vacancy)
1994-2001 Bruno Caruso (appointed to fill mid-term vacancy)24
1999-Present Nathanial Gibson (President) (uncontested election)
2001-Present Nicholas Gironda (Business Manager) (appointed to
fill mid-term vacancy)
40. Kumerow tendered a mid-term resignation from his positions as
Business Manager/President and Executive Board member on September 29,
1994, one month after being re-elected and one year before the next slated
officers’ election.See Local 1001 Ex. 13 (Minutes of Local 1001 Special
Executive Board Meeting of 9/29/94 (1994 Special Executive Board
41. At the Bruno Caruso disciplinary hearing in 1999, Mr. Gibson
testified that, despite being on Local 1001’s Executive Board at the time, he
was not aware of Kumerow’s retirement until after the election of officers in
August 1994.See GEB Ex. 4, ¶ 193 (Caruso, 99-12D). Gibson stated that
Kumerow had announced that Bruno Caruso would replace him (Kumerow) in
the District Council, as well as his dual positions at Local 1001.Id. There
was no discussion or consideration of other candidates for any of the
42. Caruso served as Local 1001’s Business Manager from 1994 until
LIUNA permanently banned from him from holding office on September 13,
2001, a period encompassing two uncontested elections.See GEB Ex. 24, p.4
(1995 Nomination Meeting Minutes); GEB Ex. 25, p.4 (1999 Nomination
Meeting Minutes; GEB Ex. 5 (In the Matter of Bruno Caruso and Leo
Caruso, 2001 A.O. 235 (01-003-IHO)).
43. The following table illustrates the persons who have held the position
of Vice President, and their years of service:
24Caruso served as Local 1001’s President/Business Manager from 1994
until 1999, when the International denied him permission to run for both
offices again.See GEB Ex. 4, ¶ 81 (Caruso, 99-12D). Thereafter, Gibson
was nominated for the position of President, and unanimously elected because
there were no opposition candidates or nominations.See GEB Ex. 25, p.4
(May 2, 1999 Nomination Meeting Minutes).
38In the Matter of Local Union 1001 2004
1970-1983 Anthony Caliva (resigned)25
1984-1989 Bruno Caruso (uncontested election)26
1989-2002 Michael Palermo (appointed; retired one year before
2003-Present Floyd Grogan (uncontested election)
44. Since at least 1970, only four members have held the office of Vice
President of Local 1001; three of those collectively held the position for over
45. The following table illustrates the persons who have held the position
of Secretary-Treasurer, and their years of service:
1970-1983 Thomas Crivellone (resigned one year before election)
1983-1994 Bruno Caruso (appointed mid-term; resigned to fill
1983-1995 mid-term Business Manager/President position
1994-2001 Nicholas Gironda (appointed mid-term; resigned to
fill mid-term Business Manager vacancy)
2003-Present Sam DeChristopher (appointed)
46. The position of Local 1001 Secretary-Treasurer has been held by
only four different members for over approximately the past 34 years; three of
those members collectively held the position for 32 of those years.
47. The following table illustrates the persons who have held the position
of Recording Secretary, and their years of service:
25Caliva resigned in 1983, but was not immediately replaced. See GEB Ex.
6(T) (Local 1001 LM-2 Report for 1983).
26In 1984, Caruso became Vice President and held that position in
simultaneously with the Secretary-Treasurer position he had been appointed to
the year before. Caruso held the office of Vice President until mid-term 1989
when he resigned.
39In the Matter of Local Union 1001 2004
1970-1972 Anthony Esposito Jr.
1972-1982 Michael Spingola (retired one year after election)
1982-1988 Michael Blasi (mid-term appointed; resigned one year
1988-1999 Nathaniel Gibson (mid-term appointed; resigned to
fill mid-term President position vacancy)
1999-2000 Shirley Esposito (mid-term appointed; resigned due
to serious illness)
2000-2001 Sam DeChristopher (mid-term appointed; resigned to
fill mid-term Secretary-Treasurer position vacancy)
2001-Present Robert Cianelli (mid-term appointed)
48. In 1999, Shirley Esposito (Esposito), the Local’s office secretary,
was elected Recording Secretary as Gibson’s replacement in an uncontested
election; she had been previously mid-term appointed to the position.See
Local 1001 Ex. 14 (Minutes of Local 1001 Special Executive Board Meeting
of 8/17/00 (2000 Special Executive Board Minutes)).
49. The following table illustrates the persons who have held the position
of Sergeant-at-Arms, and their years of service:
1970-1980 Raymond Ramicone (retired mid-term)
1980-1981 William Pape (appointed)
1981-1984 Sam Abbott (resigned in election year)
1984-1994 Nicholas Gironda (appointed as mid-term replacement;
resigned to fill mid-term vacancy in Secretary-Treasurer
1994-2000 Sam DeChristopher (appointed as mid-term
replacement; resigned to fill mid-term vacancy in
Recording Secretary position)
2000-2003 Willie Bates (appointed mid-term replacement)
2003-Present Paul Reed (uncontested election)
50. A brief overview of the Auditors of Local 1001 includes, beginning
in or before 1970: Michael Briatta (Briatta), Nicholas Cantone Jr. (Cantone
Jr.), and Fred Colasanti (Colasanti). In 1972, an election year, Michael
Cardilli (Cardilli) and Daniel DeLuca, both Executive Board members since
in or before 1970, replaced Mr. Briatta and Mr. Cantone Jr. as Auditors. In
1978, Ronald Crivellone replaced Mr. Colasanti.See GEB Ex. 1 (Local 1001
Officer History Chart).
40In the Matter of Local Union 1001 2004
51. In 1983, Auditor DeLuca, who had served for approximately twelve
years, retired from his auditor position mid-term, less than one year before the
next scheduled election. The Executive Board appointed Anthony Orrico
(Orrico) as his replacement.See GEB Ex. 6(T) (Local 1001 LM-2 Report for
1983). The next year, in 1984, Mr. Orrico resigned from his auditor position
and Mr. Capasso replaced him.See GEB Ex. 6(N) (Local 1001 LM-2 Report
52. In 1987, Bernard Spano (Spano) and the office secretary, Ms.
Esposito, replaced Ronald Crivellone and Mr. Cardilli as Auditors. For the
next 13 years Ms. Esposito, Mr. Spano, and Mr. Capasso remained the
Auditors, until Mr. Chianelli replaced Ms. Esposito in 1999.See GEB Ex. 1
(Officer History Chart).
53. In 2000, an election year, Victor Roa and Mr. Cataudella replaced
Mr. Chianelli, and Mr. Spano as Auditors.See GEB Ex. 1 (Officer History
Chart). Mr. Spano had resigned his position.Id. The Auditor positions
remained the same until the 2003 election year, when Debbie Pucillo-Ferraris
replaced Mr. Roa as an auditor.Id.
54. A brief overview of the Executive Board members of Local 1001
beginning in the 1972 election year, includes: Neil Cacciottolo (Cacciottolo),
Louis DelGuidice (DelGuidice), and Ramon Shaeffer, who remained
Executive Board members from 1972 through 1980, when William Pape
(Pape) replaced DelGuidice mid-term.See GEB Ex. 1 (Officer History
55. In 1982, one year after the previous election, Frank Roti Jr. was
appointed as mid-term replacement for Mr. Cacciottolo. Prior to the 1984
election, Mr. Schaeffer resigned his Executive Board position and Sam Caiafa
replaced him.See GEB Ex. 6(N) (Local 1001 LM-2 Report for 1984).
Ineligible Candidates and Improper Election Controls
56. On April 7, 2003, the Executive Board voted to retain the services of
Ms. Kurth (Kurth), from the firm of Kurth Lampe, for managing the work of
the June 2003 Officers’ Election preparation, monitoring, and reporting.
Local 1001 Ex. 16 (April 7, 2003 Special Executive Board Meeting Minutes,
57. Kurth Lampe’s Proposal for Election Managing and Monitoring
The Local Union would like to hold its election in mid June.
In order for that to happen successfully and within the rules of
LIUNA, a number of steps and processes must take place
41In the Matter of Local Union 1001 2004
promptly. Kurth Lampe proposes to manage and oversee
those processes in accordance with the rules. Kurth Lampe
will provide guidance and research in any instances where the
existing rules are vague or confusing.
Local 1001 Ex. 16 (Memorandum from Kitty Kurth to LIUNA Local 1001 of
58. There is no evidence of record that Local 1001 had ever engaged
Kurth Lampe, or any other firm, to provide similar service to the Local in the
59. In addition to engaging the services of Kurth Lampe, Local 1001
requested that the Illinois Department of Labor "assign a person to cover our
nominating procedures." Local 1001 Ex. 23 (Letter from Nicholas Gironda to
Ms. Melinda Szerletich of 4/23/03).
60. On May 11, 2003, Local 1001 held a Nomination Meeting, which
was attended by 175 members of the Local, Ms. Kurth, Mr. Faraci, and Judge
Leighton.See Local 1001 Ex. 17, p.1 (May 11, 2003 Nomination Meeting
Synopsis); Local 1001 Ex. 18 (May 11, 2003 Special Nomination Meeting
Minutes). Vasyl Markus, an attorney for Kurth Lampe, attended the meeting
at the request of Ms. Kurth and later submitted a report regarding the events of
the meeting. Tr. 838:4-5 (KURTH);see also Local Ex. 25 (Affidavit of Vasyl
Markus of 5/13/03). Wesley James (James) attended on behalf of the Illinois
Department of Labor, Conciliation and Mediation Division, and also later
submitted a report to Kurth Lampe.See Local 1001 Ex. 24 (Letter from
Wesley James to Mrs. Kathryn Kurth of 5/14/03).
61. Prior to that meeting, Ms. Kurth had met with the Election Judges to
go over LIUNA’s election guidelines on at least two occasions. Tr. 830:20-
25, 832:20-22 (KURTH).
62. At the beginning of the meeting, Ms. Kurth informed the
membership that she was the Executive Director for the LIUNA International
Election Officer during the first International election in 1996, and served as a
consultant to the Election Office in 2001. Local 1001 Ex. 18, pp.3-4 (May 11,
2003 Special Nomination Meeting Minutes).
63. Ms. Kurth also recited the qualifications for candidates for office to
the membership present at the meeting, citing Article V of the Constitution.
Id.at p.8. In pertinent part, Ms. Kurth stated, "No one shall be eligible to hold
office in the Local Union if the person has not been regularly working at the
calling of the International Union during the entire year immediately prior to
nomination."Id. at p.9.
42In the Matter of Local Union 1001 2004
64. There was only one person nominated for each available position.
SeeLocal 1001 Ex. 17, p.3 (May 11, 2003 Nomination Meeting Synopsis).
One member, David Torres, nominated all of the Auditors.Id. One member,
Alex Petrucelli, nominated all of the District Council delegates.Id.
65. After the nomination process was completed, observers from Ms.
Kurth’s staff and the Judges of Election verified the eligibility of both the
candidates and the nominators from an electronic membership database. Tr.
835:16-22, 840:20-21 (KURTH).
66. Ms. Kurth testified that she believed Local 1001’s 2003 Officer
Election followed democratic practices, were free, fair, and transparent, and
enjoyed a relatively high participation rate.27 Tr. 840:3-12 (KURTH). Ms.
Kurth further stated that there was no apparent physical evidence of organized
crime influence reflected during the conduct of the meeting itself. Tr. 830:6-9
67. Attorney Markus also submitted a report, in which he concluded "the
nominating meeting complied with the rules of the organization, proper
parliamentary procedure, and provided ample opportunity for dissenting views
and alternate candidacies. There was no evidence of intimidation, coercion,
unfairness, or any other activity which would affect the results of an election."
Local Ex. 25 (Report from Nominating Meeting of LIUNA Local 1001,
Sunday, May 11, 2003 from Vasyl Markus, Esq. to Kurth Lampe of 5/13/03).
68. Mr. James, from the Illinois Department of Labor, reported that he
had attended the officer nomination proceedings, wherein he witnessed the
nomination of single candidates for every office except Auditors, for which
there were three nominations for the three available positions.See Local Ex
24 (Letter from Wesley James to Mrs. Kathryn Kurth of 5/14/03).
69. At the instant hearing, upon questioning regarding candidate
eligibility posed by the IHO, Ms. Kurth testified that she was familiar with the
term "working at the calling." Tr. 840:25 (KURTH).
70. Thereafter, the following exchange took place:
27Although Ms. Kurth recalled approximately 250 members participating in
the 2003 Officers’ Election, the record reflects that there were 175 attendees
of the 2500 or more Local 1001 members.See Local 1001 Ex. 17, p.1 (May
11, 2003 Nomination Meeting Synopsis).
43In the Matter of Local Union 1001 2004
IHO: Did all of the candidates – were all of the candidates
working at the calling?
Ms. Kurth: Well according to the LIUNA Constitution if
you are a member –
IHO: That’s not answering my question. Were they
working at the calling?
Ms. Kurth: According to the LIUNA Constitution.
IHO: You made an observation and examined each one of
Ms. Kurth: Yes, they were all dues paying members.
IHO: That doesn’t mean they were working at the calling.
Ms. Kurth: That’s what the LIUNA Constitution says.
71. Under cross-examination by the GEB Attorney, Ms. Kurth elaborated
that, "according to the standard that we had used in the International Delegate
elections, if [a candidate was] a member, they were working at the calling. Tr.
72. The Rules for the 2001 LIUNA Delegate and International Officer
Elections, promulgated by Election Officer Goldberg, state:
1. Eligibility Requirements
a) To be eligible to run for a Convention delegate position,
one must be a member in good standing for at least two
years in the International Union and at least two years
in the Local Union immediately prior to nomination,
and in compliance with all other requirements or
exceptions of Article V, Section 9 of the LIUNA
Constitution, and Article V of the Uniform Local Union
b) To be eligible to run for International Office, one must
meet the above requirements . . . .
Rules for the 2001 LIUNA Delegate and International Officer Elections,
Article II, Section 1, p.32.
44In the Matter of Local Union 1001 2004
73. Article V of the Constitution states, in pertinent part, "No one shall
be eligible to hold any office in the Local Union if the person has not
regularly been working at the calling of the International Union during the
entire year immediately prior to the nomination." Constitution, Article V,
74. Ms. Kurth attempted to explain her understanding as follows: "How
can you be a dues paying member if you are not working at the calling? It
says that in order to be a member you have to be working at the calling. I’m
sorry. I don’t understand." Tr. 845:4-16 (KURTH).
75. Neither Ms. Kurth nor any of her staff spoke with any of the
nominees to determine whether they were working at the calling. Tr. 846:18-
76. When specifically questioned about Mr. Capasso’s eligibility status
in 2003, Ms. Kurth stated that she and her staff found him eligible "to the best
of [their] ability" by looking at the membership lists. Tr. 843:10-24
(KURTH). Ms. Kurth also "remembered seeing him as a Delegate [to the
convention] in 1996 and 2001." Ms. Kurth continued, "It means the
International found him eligible to be an eligible candidate for Delegate.
[F]or a Delegate you have to be working at the calling and be a dues paying
member . . . ." Tr. 844:16 – 845:1 (KURTH).
77. Ms. Kurth’s opinion that, for the International Elections, being
current in one’s dues qualified a member as working at the calling is clearly
erroneous.See In the Matter of Local 270 (McCord), IHO Order and
Memorandum, 96-17P (July 1, 1996) (affirming International Election Officer
finding that protestor, although current in dues payment, was not working at
the calling);In re: Local 500, IHO Order and Memorandum Regarding
Reconsideration, 98-45P (October 27, 1998) (mere membership in union does
not qualify as working at the calling; in order to hold office, member must
have been working at the calling for one year prior to nomination).
78. At the hearing, Ms. Kurth further stated that she would be
"surprised" to know that Mr. Capasso was the full-time administrator of the
City Pension Fund, and had been for the previous ten years, when her firm and
the Election Judges deemed him eligible to serve as a Local 1001 officer. Tr.
79. Mr. Capasso was ineligible for nomination as a candidate for an
officer’s position in 2003, regardless of his purported status as a Convention
Delegate in 1996 or 2001. The IHO notes that Mr. Capasso’s eligibility for
delegate was not challenged and, thus, his status was never ruled upon by the
International Election Officer. The initial eligibility to serve as an
International Delegate is determined by the Local 1001 Judges of Election.
45In the Matter of Local Union 1001 2004
80. In fact, based on his own admissions in correspondence with the
Pension Funds, Mr. Capasso has not been eligible to serve as a Local 1001
Auditor in any election since 1984, when he first assumed the office.See,
e.g.,GEB Ex. 12 (Letter from James Capasso to Kathleen McCarthy of
3/27/02) (Capasso admits he has not worked in the laboring industry since
1984);see also Constitution, Article V, Section 4 (defining "working at the
Evidence of Financial Misconduct
81. The Trusteeship Complaint includes four charges relating to the
alleged financial malpractice and misconduct of Local 1001.
82. Charge Three states that it is necessary to place Local 1001 under
Trusteeship to correct financial malpractice as follows:
It is necessary to place Local 1001 under trusteeship to correct
financial misconduct in the form of improper pension and
health and welfare contributions made by Local 1001 on
behalf of individuals who are ineligible to receive such
contributions in violation of duties imposed by the LIUNA
Ethical Practices Code, Financial Practices, and by 29 U.S.C.
§ 501(a) and (c).
By placing the Local under trusteeship, LIUNA will be able to
monitor the financial condition o£ the Local and prevent
improper contributions and any other financial misconduct.
Trusteeship Complaint, ¶¶ 49, 50 (IHO Dkt. tab 2).
83. Charge Four alleges that a Trusteeship is necessary to correct barred
conduct in the form of embezzlement as follows:
It is necessary to place Local 1001 under trusteeship to correct
corruption in the form of Local 1001 operating its affairs
through a pattern of racketeering activity; to wit;
embezzlement under 29 U.S.C. § 501(a) and (c), which is
defined as "barred conduct" under the LIUNA Ethics and
Disciplinary Procedure. A trusteeship is necessary to assure
that Local 1001’s affairs are conducted lawfully, for the
benefit of its members, in accordance with the LIUNA
Constitutions and not for an improper purpose.
A trusteeship is necessary to assure that the affairs of Local
1001 are conducted lawfully, for the benefit of its members
46In the Matter of Local Union 1001 2004
and in accordance with the LIUNA Constitutions and not for
an improper purpose.
Trusteeship Complaint, ¶¶ 52,53 (IHO Dkt. tab 2).
84. Charge Five avers that a Trusteeship is necessary to corruption
stemming from the Local making contributions to the Benefit Funds for
ineligible persons, stating:
It is necessary to place Local 1001 under trusteeship to correct
corruption in the form of Local 1001 operating its affairs
through a pattern of racketeering activity; to wit, mail fraud in
violation of 18 U.S.C. § 1341, which is defined as "barred
conduct" under the LIUNA Ethics and Disciplinary Procedure.
The improper pension and health and welfare contributions
described above, which resulted in ineligible persons receiving
benefits and/or receiving benefits based upon false or
misleading statements of hours worked, constitute a scheme or
artifice to deprive the funds of property.
A trusteeship is necessary to assure that the affairs of Local
1001 are conducted lawfully; for the benefit of its members
and in accordance with the LIUNA Constitutions and not for
an improper purpose.
Trusteeship Complaint, ¶¶ 54, 55 (IHO Dkt. tab 2).
85. Charge Six avers that a Trusteeship over Local 1001 is necessary to
correct corruption in the form of ERISA reporting violations:
It is necessary to place Local 1001 under trusteeship to correct
corruption is the form of Local 1001 committing violations of
ERISA substantive criminal law by the filing of untruthful,
inaccurate and incomplete contribution reports on a monthly
basis four a period of up to eighteen years in violation of 18
U.S.C. § 1027.
Trusteeship Complaint, ¶ 56 (IHO Dkt. tab 2).
The Benefit Funds
86. Local 1001 members who are employed by the City of Chicago, for
instance, in the Dept. of Streets and Sanitation, are participants in the
Laborers’ and Retirement Board Employees’ Annuity and Benefit Fund of
Chicago (City Pension Fund), which is one of the four pension fund systems
that employees of the City of Chicago are enrolled in.See
47In the Matter of Local Union 1001 2004
statute for the benefit of "any employee of an employer in a position classified
by the civil service commission thereof as labor service" and "any person
employed by the [City Pension Fund] board," as well as "any person
employed by a retirement board of any other annuity and benefit fund [in
Chicago]." 40 ILCS 5/11-110. Mr. Capasso is the Executive Director of the
City Pension Fund.
87. In contrast, at issue in this matter are the Laborers’ Pension Fund and
the Health and Welfare Fund of the Construction and General Laborers’
District Council and Vicinity Benefit Funds (Benefit Funds), for whom Mr.
Jorgenson is Administrator. The Benefit Funds were established to benefit the
officers and employees of Local Unions, employees of the Benefit Funds, and
employees of various employers who are signatories to collective bargaining
agreements entered into between the employers and the Chicago District
Council, and employers who are members of the Association of Employers
named in the Trust Agreement. A non-exhaustive list of the Association of
Employers include: The Underground Contractors’ Association, Mason
Contractors’ Association of Greater Chicago, Illinois Road Builders’
Association, and the Concrete Contractors Association of Greater Chicago.
See generally, Local 1001 Exs. 57-66 (Various Trust Agreements for the
88. The Benefit Funds currently provide pension and welfare benefits to
more than 16,500 participants, eligible retirees, and their eligible dependents.
SeeGEB Ex. 16 (Declaration of James S. Jorgenson of 12/4/02 (Jorgenson
Decl.)). These Benefit Funds are financed by hourly contributions from
participating employers, who are signatories to collective bargaining
agreements, which specify that contributions for certain employees must be
paid to the Laborers’ Benefit Funds. Tr. 110:5-17 (JORGENSON).See GEB
Ex. 16 (Declaration of James S. Jorgenson of 12/4/02 (Jorgenson Decl.)).
89. Both the Pension Fund and the Health and Welfare Fund are Taft-
Hartley Funds, governed by ERISA, and managed by a Board of Trustees
jointly comprised of a one-half Union representatives selected by the District
Council and one-half management personnel chosen by their respective
associations. Tr. 108:15-24 (JORGENSON).
90. The Benefit Funds are governed by Trust Agreements, which set out
the policies of the Benefit Funds, including all of the guidelines for the trust,
the collection of money, the contributions, and the selection of Trustees. Tr.
109:5-9 (JORGENSON). As required by ERISA, the Benefit Funds each
maintain a written Plan of Benefits.See GEB Ex. 16 (Jorgenson Decl.). The
Benefit Funds also publishes and distributes a Summary Plan Description of
benefits to all participants, as required by ERISA.Id.
48In the Matter of Local Union 1001 2004
91. The Trust Fund Agreements state that for each hour worked an
employee receives contributions submitted on his behalf by the employer,
which gives the employee and his family eligibility for insurance benefits and
generates credit toward his pension for his retirement. Tr. 113:6-10
(JORGENSON);see also, Local 1001 Exhibit Volume 2.
92. Mr. Jorgenson explained that the Benefit Funds sends a letter to each
new employer, which specifies that employers may only submit contributions
for employees that are laborers receiving salaried compensation. Tr. 211:1-4
93. Local 1001 is a contributor to the Funds for its full-time salaried and
part-time hourly employees.See GEB Ex. 16 (Jorgenson Decl.). The
definitions of Employer and Employee found in Benefit Funds’ Trust
Agreements provide that a Union can be an Employer and can contribute on
behalf of eligible Employees.See GEB Ex. 21 (Joint Appeals Decision);
("Employee" shall mean "all eligible persons employed by the Union, on
whose behalf the Union shall make payments to the Trust Estate at the times
and at the rate of payment equal to that made by any other Employer who is a
party to this Agreement.").
94. Both the Pension Fund and the Welfare Fund plans base the
determination of eligibility and coverage on contributions made by Employers
upon hours worked. The Rules and Regulations of the Pension Fund defines
"Work or Service" as:
(a) Each hour for which an Employee is paid, or entitled to
payment, by an Employer for hours of Work in Covered
Employment. These hours shall be credited to the
Employee for the computation period or periods in
which the duties are performed; and
(b) Each hour for which back pay, irrespective of
mitigation of damages, is awarded or agreed to by an
Employer to the extent that such award or agreement is
intended to compensate an Employee for periods during
which the Employee would have been engaged in
Covered Employment for the Employer. These hours
shall be credited to the Employee for the computation
period or periods to which the award or agreement
pertains rather than the computation period in which the
award, agreement, or payment was made.
GEB Ex. 21 (Joint Appeals Decision).
49In the Matter of Local Union 1001 2004
95. The collective bargaining agreements between the Chicago District
Council and Employer Associations provide for contributions to the Pension
and Welfare Funds "for each hour worked by all Employees covered by this
agreement . . . ."Id., citing Building Agreement of June 1, 2001 to May 31,
2006, Article VIII, ¶¶ 2, 3 (emphasis added).
96. Pension Fund participants become eligible for pension payouts after
five years of service at age 65, or ten years of service at age 50. Tr. 120:14-15
(JORGENSON). Under Article 1, Section 2.2 of the Rules and Regulations of
the Pension Fund,
the Pension Fund’s plan of benefits provides that an Employee
who is engaged in Covered Employment becomes a
Participant after completing at least 870 hours of Work in
Covered Employment during a twelve-month computation
period. Section 4.2 thereof provides that 1000 Hours of Work
in Covered Employment are required in order to earn one
Pension Credit. No credit is earned for less than 250 Hours;
partial credit can be earned for Hours of Work greater than
249 and less than 1000.
GEB Ex. 21 (Joint Decision of the Appeals Committee of the Laborers’
Pension Fund and Claims Committee of the Laborers’ Welfare Fund (Joint
97. "The Welfare Fund’s plan of benefits also bases eligibility for
coverage on hours of work for one or more Employers that make contributions
for work in Covered Employment." GEB Ex. 21 (Joint Appeals Decision).
Under Article 3, Section 2 of the plan of benefits, an Employee under the age
of 50 must work 500 hours during six calendar months in order to become
eligible for benefits or, alternately, 800 hours during twelve calendar months.
Id.The work requirements are reduced at age 50 and age 59. Id.
98. The Benefit Funds process voluminous amounts of data submitted
by contributing employers on a monthly basis. Tr. 110:21 – 111:14
99. The Pension Fund collects money from contributing employers and
in turn pays the benefits for retired participants; the Pension Fund processes
the applications, determines all of the necessary documentation necessary for
the applications, and entrusts the funds to professional money managers. Tr.
107:24 – 108:5 (JORGENSON).
100. The Welfare Fund is essentially an insurance company; the
Welfare Fund is self-insured for the sole purpose of covering laborers working
in the jurisdictional area of the District Council. Tr. 108:7-11
50In the Matter of Local Union 1001 2004
(JORGENSON). The Welfare Fund also processes participants’ claims and
performs other administrative functions. Tr. 108:11-12 (JORGENSON).
101. The majority of the data processed by the Benefit Funds consists of
employer contribution reports, which are contribution reports sent out on the
fifteenth of each month for the following month’s payment of contributions
that are due from each employer.Id.
102. The employer contribution reports are generally computergenerated
based upon the last amount of employees a contractor submitted
contributions on. Tr. 112:-25 (JORGENSON). That report is mailed to each
employer, with a list of their employees, their Social Security numbers, and
the Local the employee is affiliated with.Id. The capacity in which the
employee worked is not included on the report. Tr. 129:19-20
103. The employer, in turn, supplies the hours worked by each
individual multiplied by the appropriate rate of contribution for the Welfare
Fund, the Pension Fund, the Training Funds, and some Ancillary Funds, totals
the payment, and sends a check in with the report. Tr. 112:-25
104. Mr. Maria testified that an officer of the employer, such as Local
1001, must attest to the accuracy of the contribution report and remittance
completed by the employer. Tr. 440:8-10 (MARIA). The certifications serves
the purpose of making clear "to the employer that he has an obligation to be
truthful and candid and abide by the terms of the Collective Bargaining
Agreement in terms of listing all the eligible employees and then listing
accurately the number of hours for that month worked by each employee."
105. The employer contribution report and accompanying payment go
immediately to a lock box, where they are processed and put into a cash
account, which is "swept" each night. Tr. 110:21 – 111:14 (JORGENSON).
The Funds get a copy of what came in to the lock box, as well as a
reconciliation of the dollar amount for each employer.Id.
106. A data entry group examines each employer contribution report
line by line for each individual from that company, posting the actual hours
worked for that individual onto the computer system. Tr. 114:1-4
(JORGENSON). The Funds use the electronic data to keep track of how
many hours a particular participant has accrued. Tr. 114:15-19
107. The Funds accept the employer contribution report as factual when
received. Tr. 113:17-21 (JORGENSON). Mr. Maria testified that submission
51In the Matter of Local Union 1001 2004
of false information on the employer contribution report is often construed as
a felony criminal violation of 18 U.S.C. § 1027 for this very reason. Tr.
440:20-25 (MARIA). From the Benefit Funds’ perspective, the employer’s
certification and warranty of the employer contribution report is significant in
because it allows the Funds to rely on the information submitted. Tr. 441:9-
108. The Benefit Funds periodically audit each employer to verify that
they have, in fact, submitted contributions on behalf of individual’s work, also
correctly. Tr. 113:17-21 (JORGENSON). The Fund Trustees hire auditors to
check the payroll, contribution report forms, and match up the actual hours
paid versus the actual hours contributed for each employer audited. Tr. 115:4-
8 (JORGENSON). If there is a shortage of hours, the Benefit Funds send a
bill to the employer stating that the employer shorted a particular participant a
certain number of hours. Tr. 115:9-16 (JORGENSON). If the employer
cannot verify why the hours were withheld, the Fund will collect the money
from the employer and post the proper hours to the individual.Id.
109. According to Mr. Jorgenson, since in or about 1976, ERISA has
required that benefit funds conduct periodic audits of employers to ensure that
proper contributions were made on behalf of employees because ERISA
mandated that employees would not be shortchanged of credit. Tr. 227:7-19
(JORGENSON). Even if employers did not make the proper contributions,
ERISA dictated that an employee would be granted credit if they worked for
an employer covered by the benefit fund.Id.
110. The Director of the Benefit Funds Field Department generates and
assigns audits of employers. Tr. 140:21-24 (JORGENSON). The Benefit
Funds randomly rotate each of its three outside auditors each year so that the
same auditing firm does not perform the same audit twice. Tr. 115:19-23
111. Mr. Maria testified that the Benefit Funds use of outside auditors to
sample and verify, on a cyclical basis, the contributions of the more than
1,600 contributing employers to the Benefit Funds was a reasonable procedure
to apply to ensure the submission of accurate information. Tr. 442:5-16
(MARIA). "[I]t would be unreasonable, virtually impossible, [and] cost
prohibitive to examine and challenge the monthly Remittance Form from each
112. Company audits generally take place every three years. Tr. 134:3
(JORGENSON). Before Mr. Jorgenson became the Fund Administrator, there
were never any regular audits of Local Unions, because the administration felt
that "everyone in the Local Unions were honest and didn’t need an audit." Tr.
52In the Matter of Local Union 1001 2004
113. When an auditing firm performs a compliance audit on a company,
it will request three years of contribution reports from the Funds, which it will
compare against,inter alia, the company’s W-2’s, payroll records, and cash
disbursements. Tr. 133:10 – 134:17 (JORGENSON).
114. The compliance auditors ascertain whether contributions made for
an individual match up with payroll records and whether there are any hidden
employees in the cash disbursement register. Tr. 135:11 – 136:8
115. Mr. Jorgenson stated that, if the payroll records and LM-2’s show
compensation of zero, indicating an unpaid position, he would expect the
compliance auditors to bring that to the attention of the Fund. Tr. 137:6-20
116. Mr. Jorgenson testified that the Funds would not knowingly assign
an auditing firm to perform a compliance audit on a company that the firm
otherwise represented. Tr. 116:3-7 (JORGENSON). Mr. Jorgenson also
stated that, if the Funds did not have specific knowledge regarding the
auditing firm’s relationship with a company, they would nonetheless expect
the firm to inform the Funds of the conflict and recuse themselves. Tr. 116:6
– 117:11 (JORGENSON). Mr. Jorgenson related that auditing firms had
disclosed such conflicts in the past and the Funds rely on the firms’ good faith
The Havey Audit
117. On November 20, 1998, the Havey firm reported to the Benefit
Funds’ Board of Trustees the results of a routine compliance audit the firm
conducted for the period June 1, 1994 to June 30, 1998.See GEB Ex. 26
(Letter from Havey LLP to the Board of Trustees of 11/20/98 and
accompanying Audit Fact Sheets (November 1998 Havey Audit)).
118. As part of the routine compliance audit, the Benefit Funds
requested that Havey determine whether contributions to the Trust Funds were
being made in accordance with the collective bargaining agreements in effect
and with the Trust Agreements of the Funds.Id. In addition, the Trustees
requested that Havey determine whether Local 1001 was appropriately
deducting check off dues from employees.Id.
119. The November 1998 Havey Audit Report outlined the parameters
of the review conducted and further noted, "the propriety of the contributions
is the responsibility of the employer’s management."Id.
120. The November 1998 Audit report stated:
53In the Matter of Local Union 1001 2004
Our procedures included a review of the pertinent provision
of the collective bargaining agreements and compared
underlying payroll records to the Fund contribution records.
The employer records we reviewed included payroll
journals, individual earning records, payroll tax returns,
contribution reports, job classifications, and general
disbursement records as appropriate.
Our procedures related to a review of the employer’s payroll
records only and did not extend to any financial statements
of the contributing employer.
There were no exceptions found in contributions reported to
the Funds during our payroll audit period.
GEB Ex. 26 (November 1998 Havey Audit ) (emphasis added).
121. Havey represented that the audit of Local 1001 was clean. Tr.
122. When Havey performed the compliance audit of Local 1001 for the
Benefit Funds, the firm was also the auditor for the Local Union; Havey did
not disclose this apparent conflict to the Benefit Funds in 1998, and the Funds
were unaware of it at that time. Tr. 146:2-17 (JORGENSON).
123. The Benefit Funds did not become aware of the conflict until the
Collections Committee began looking at various Local Unions, specifically
how they contributed to the Funds, in an effort to get all the employers to
contribute uniformly.28 Tr. 147:1-5 (JORGENSON).
James Capasso’s Application for Pension Benefits
124. Mr. Capasso served as an unpaid Auditor for Local 1001 since
1984. Since 1986, Mr. Capasso has maintained full-time employment as the
28In 1999, the Board of Trustees of the Benefit Funds determined that,
notwithstanding the requirement of the collective bargaining agreement that
contributions be based on actual hours worked, Contributing Employers
would be permitted to pay contributions based on 40 hours per week for fulltime
salaried employees, provided that such contributions were made 52
weeks per year. Contributions for part-time employees were required to be
for actual hours worked.See GEB Ex. 21 (Joint Appeals Decision).
54In the Matter of Local Union 1001 2004
Executive Director of the City Pension Fund. Prior to that, he was employed
full-time by the City of Chicago.
125. In the spring 2002, Mr. Capasso personally came into the Benefit
Funds’ offices to apply for pension benefits. Tr. 147:10-13 (JORGENSON);
see alsoGEB Ex. 10 (James Capasso Retirement Declaration to Laborers’
Pension Fund of 3/1/02). At the time, Mr. Jorgenson testified that he
recognized Mr. Capasso’s name because he was the Administrator of the City
Pension Fund, although he had never met Mr. Capasso before.29 Tr. 147:20 –
148:2 (JORGENSON). Mr. Jorgenson was unaware that Mr. Capasso had
applied for pension until the Pension Director, Kathleen McCarthy, told him
that Mr. Capasso had submitted an application.Id.
126. When Ms. McCarthy told Mr. Jorgenson that Mr. Capasso was
retiring, Mr. Jorgenson’s first reaction was to tell Ms. McCarthy, jokingly,
"Well, you know, there is a job opening. Maybe if you’re interested in it."
Tr. 149:17-20 (JORGENSON). When Ms. McCarthy informed Mr. Jorgenson
that Mr. Capasso was not retiring from the City Pension Fund, Mr. Jorgenson
inquired what she meant. Tr. 149:24 – 150:1 (JORGENSON).
127. Ms. McCarthy told Mr. Jorgenson that Mr. Capasso was retiring
from his employment at Local 1001. Tr. 150:1-13 (JORGENSON). Mr.
Jorgenson recalled asking, "When was he working – where was he working?"
Id.Ms. McCarthy responded that Mr. Capasso was still working, and Mr.
Jorgenson recalls saying, "That’s kind of unusual."Id.
128. Mr. Jorgenson explained that he thought that Mr. Capasso was
receiving two paychecks, not only as the Administrator of the City Pension
Fund, but also from the Local.Id. Mr. Jorgenson recalls commenting to Ms.
McCarthy, "That’s a lot of hours worked. Have the attorneys check to see if
it’s a prohibited employment." Tr. 150:22 – 151:2 (JORGENSON).
129. Mr. Capasso’s application was sent to the Pension Committee for
further evaluation. Tr. 153:6-12 (JORGENSON).
130. Mr. Jorgenson testified that when the Benefit Funds and its counsel
first looked into Mr. Capasso’s application, the initial inquiry regarded
29Mr. Jorgenson testified that Mr. Capasso’s name had come up in a
professional context; the City Pension Fund is the professional equivalent of
the Benefit Funds, managing over a billion dollars in assets. Tr. 148:3 – 149:9
55In the Matter of Local Union 1001 2004
whether there was a prohibited employment issue because Mr. Capasso
wanted to continue as Administrator of the City Pension Fund and also collect
a full pension from the Laborers’ Pension Fund. Tr. 153:16-21
(JORGENSON). In other words, the Benefit Funds wanted to ascertain
whether Mr. Capasso’s continuing employment as Administrator of the City
Pension Fund would somehow disqualify him from receiving the pension he
had applied for with the Laborers’ Pension Fund. Tr. 153:22 – 154:1
131. In an effort to ascertain Mr. Capasso’ pension eligibility, Ms.
McCarthy wrote to Mr. Capasso asking questions related to IRS limits on
pensions. Tr. 605:14-21 (CAPASSO). Mr. Capasso described the inquiry as a
formality to ascertain whether he was receiving any other pensions, how much
the other pensions were for, and where they were coming from. Tr. 606:1-12
(CAPASSO). Mr. Capasso stated that, if his pension was approved, he would
have received about $1600 per month, which was "nowhere near" the IRS
132. In response to another inquiry from Ms. McCarthy regarding
whether his employment as Administer of the City Pension Fund was
prohibited employment, Mr. Capasso wrote a letter stating, "If I were asked,
‘do I work in the laboring industry,’ I would have to answer absolutely not.
We are administrative employees who are allowed to participate in the Fund
by virtue of being a ‘Retirement Board Employee’ as the name of our title so
indicates." GEB Ex. 12 (Letter from James Capasso to Kathleen McCarthy of
133. Mr. Capasso "claimed he first became employed in the
construction industry in 1984, held union membership in Local 1001 and
terminated covered employment March 31, 2002." GEB Ex. 11 (Laborers’
Pension & Welfare Fund Memo, James Capasso Determination regarding
Legitimacy of Contributions/Disqualifying Employment/IRS 515
134. The Pension Committee issued a determination regarding
disqualifying employment, the legitimacy of the contributions made on behalf
of Mr. Capasso, and certain IRS issues.See GEB Ex. 11 (James Capasso
Determination regarding Legitimacy of Contributions/Disqualifying
Employment/IRS 415 Limitations). The Pension Committee informed the
The Committee reviewed Mr. Capasso’s application, his
letter of March 27, 2002 directed to Kathleen McCarthy . . .
and the contribution records of the Fund and was unable to
make a determination regarding Mr. Capasso’s eligibility to
receive a pension from the Laborers’ Pension Fund. They
56In the Matter of Local Union 1001 2004
directed that this file be held pending additional information
regarding applicant’s employment at Local 1001. They
directed that Fund Co-Counsel write to Mr. Capasso and
advise him of pending information.
135. On April 5, 2002, Mr. Jorgenson wrote Mr. Capasso a letter
informing him that the Pension Committee was unable to make a
determination regarding his eligibility to receive a pension from the Laborers’
Pension Fund. Mr. Jorgenson explained,
It appears that you work for the [City] Retirement Board
and that such employment is not considered employment by
Local 1001. The Pension Committee is advised that the
Executive Director position is a full-time position, and you
have been a full-time employee of the Retirement Board for
a number of years.
It appears from the contribution records of the Pension Fund
that all contributions made on your behalf have come from
Laborers’ Local 1001. Since July 1984 Local 1001 has been
submitting contributions to the Pension Fund based upon
120 hours of work per month or 40 hours of work per week.
These contributions appear to have been made during the
time that you were employed full-time by the Retirement
Board. Contribution reports submitted to the Pension Fund
by Local 1001 do not indicate that you were receiving a
salary from the Local for either full or part-time
employment by the Local. The records of the Pension Fund
do not contain any participation agreement providing for
payment of contributions on your behalf by Local 1001 for
any employment by an entity other than the Local.
GEB Ex. 13, pp.1-2 (Letter from James S. Jorgenson to James Capasso
136. Mr. Jorgenson testified that the gist of his letter was to inform Mr.
Capasso that he was "in two places at once," and in order to receive a pension
from the Benefit Funds he would have to provide the Funds with additional
information. Tr. 157:13-25 (JORGENSON). Mr. Jorgenson requested
evidence of the nature and extent of Mr. Capasso’s employment with Local
1001 since July 1984, including positions of employment held, hours worked
and compensation received for such employment. GEB Ex. 13, p.2 (Letter
from James S. Jorgenson to James Capasso of 4/5/02). At the hearing, Mr.
Jorgenson stated that evidence of compensation was important to the Funds’
57In the Matter of Local Union 1001 2004
evaluation of Mr. Capasso’s application because "it shows he was actually
working, employed by the Local." Tr. 158:9-10 (JORGENSON).
137. On April 24, 2002, Mr. Capasso responded to Mr. Jorgenson’s
request for information.See GEB Ex. 16 (Letter from Kathleen McCarthy to
James Capasso of 5/31/02). In that response, Mr. Capasso stated that he had
not received any salary or hourly compensation for his services to Local 1001
from 1984 to the present, excluding contributions made to the Benefit Funds,
and reflected what he did for Local 1001 in terms of "the operations,
budgetary issues, staffing issues, and so on and so forth." Tr. 612:22 – 613:4
138. At the Trusteeship hearing, Mr. Capasso elaborated on his duties as
Auditor, stating that he received "operational calls" from Local 1001 officers
requesting information on how he would "assign a sidewalk crew," or what he
did with "pouring cracks on the street with liquid tar," or about "a guy on
disability," as well as informational calls from the Union members about their
pensions with the City Pension Fund and Local Union issues. Tr. 559:11-23,
569:11-19 (CAPASSO). In sum, Mr. Capasso asserted that, as an Auditor of
Local 1001 he was "basically available seven days a week 24 hours a day."
139. On or about April 29, 2002, the Benefit Funds compiled a report of
Mr. Capasso’s history of employee hours, which revealed a total of 25,991
total pension hours.See GEB Ex. 9 (Laborers’ Pension and Welfare Funds
Employee Hours History for James Capasso of 4/29/02). Based on his own
experience, Mr. Jorgenson testified that he believed it would be difficult to
amass that many hours in another job while running a large pension fund. Tr.
140. On May 31, 2002, Ms. McCarthy, the Pension Fund Director,
wrote to Mr. Capasso, informing him that the Pension Committee had
concluded that he was ineligible to receive a pension from the Benefit Funds.
SeeGEB Ex. 16 (Letter from Kathleen McCarthy to James Capasso of
141. The Pension Committee provided the following reasons for its
1. Given the facts presented by you, . . . you are not a
Union "Employee" for whom contributions were
required or permitted to be paid by Local 1001. Local
1001 did not pay you either a salary or hourly wages for
your services as an elected auditor of Local 1001. The
Amended Agreement of Trust of the Pension Plan
58In the Matter of Local Union 1001 2004
provides for contributions by the Union on behalf of
certain employees. Section 3(f) states:
The term "Employee" shall also mean all eligible
persons employed by the Union, on whose behalf
the Union shall make payments to the Pension
Fund at the times and at the rate of payment equal
to that made by any other Employer who is a party
to this Agreement.
The Committee noted that a Contributing Employer
covered by a collective bargaining agreement would not
be permitted to make contributions to the Fund on behalf
of persons who were either full-time salaried employees
doing bargaining unit work or hourly paid employees
doing bargaining unit work. Contributions would be
made either on all hours worked, or, for full-time salaried
employees, on the basis of 40 hours per week. The
Committee concluded that you have not been an eligible
Union Employee under the terms of the Trust Agreement.
2. You were not covered by a collective bargaining
agreement between the Fund and Local 1001. Your
employment as Executive Director of the [City Pension
Fund} is not covered by a collective bargaining
agreement and no contributions were made to the Fund
by your employer.
3. The usual and customary practice of Local 1001 of
making pension payments on behalf of Union auditors
or other elected or appointed Union officials was not
the subject of a written agreement specifying the
detailed basis on which contributions were required to
be made to the Fund. Such a written agreement is
required by Section 8 of the Trust Agreement.
4. Under the terms of Section 302(c) of the Taft-Hartley
Act, the Fund cannot accept contributions on behalf of a
person who is not an employee of a contributing
5. Under the applicable provision of ERISA the Fund is
required to pay benefits only in accordance with Fund
documents, including the Trust Agreement provisions
defining who is an Employee of the Union and
requiring a written agreement to cover any person who
59In the Matter of Local Union 1001 2004
is not employed under a collective bargaining
agreement or who does not meet the definition of
Employee of the Union. Your arrangement with Local
1001 did not qualify you to be an Employee under the
terms of the Fund.
GEB Ex. 16 (Letter from Kathleen McCarthy to James Capasso of 5/31/02).
142. Mr. Capasso appealed the Pension Committee’s decision to the
Appeals Committee of the Benefit Funds, contending the following in his
•he was employed by Local 1001 as an Auditor and properly had
contributions made to the Funds on his behalf;
•there was an agreement between the Funds and Local 1001,
which permitted the Local’s payment of contributions for
unsalaried officer positions;
•the Benefit Funds Trustees were on notice of Local 1001’s
contributions on his behalf by virtue of the audits performed by
the Fund’s auditors. Therefore, the Trustees are estopped from
refusing the contributions because they were aware of the
practice, took no action to stop the practice, and Mr. Capasso
relied on the Trustee’s tacit approval in continuing to provide
service to the Local in exchange for the benefits to be obtained
from the Funds;
•the quarterly report forms that the Benefit Funds sent to the
Local indicating "hours paid" on his behalf denoted that the
Funds did not require basing contributions on hours worked;
•and, since the entry on the report for "Rate" was left blank by
the Funds, he concluded that his rate of pay from the Local was
irrelevant and he could participate in the Funds without
receiving any salary or hourly pay from the Local.
SeeGEB Ex. 21 (Joint Appeals Decision).
143. On January 14, 2003, Mr. Jorgenson informed Mr. Capasso’s
attorney that the Joint Appeals Committee had denied his appeal.See GEB
Ex. 21 (Letter from James Jorgenson to Frederick Heiss of 1/14/03). The
attached Trustees’ decision outlined the reasons for the denial.Id. A non-exhaustive
list of those reasons included:
60In the Matter of Local Union 1001 2004
•Mr. Capasso was neither a salaried or hourly payroll employee
of Local 1001. Mr. Capasso had full-time employment since
1986 with the City Pension Fund created by state statute. The
City Pension Fund does not have a collective bargaining
agreement or other written agreement requiring contributions to
the Benefit Funds on his behalf.
•Notwithstanding the fact that Mr. Capasso was never carried on
the Local’s payroll, Local 1001 made contributions on his behalf
for 30 hours a week, a contribution amount that would result in
full pension benefit accrual and year-round welfare coverage.
Despite the Funds’ requirement that Employers base
contributions on actual hours worked, no evidence was
submitted to the Committee that Mr. Capasso ever actually
worked 30 hours. The evidence submitted by Mr. Capasso
shows only that he performed supportive and organizational
functions for the Local consistent with union membership,
assisted the leadership of the Local in political activities, and
represented the members in particular instances, but never
occupied a salaried or hourly wage position.
•There is no evidence that Mr. Capasso received IRS Form W-2s
from Local 1001, that Local 1001 reported any compensation
paid to Mr. Capasso, that the Local paid any withheld income,
Social Security, or unemployment compensation taxes to the
IRS, or that the Local covered them for workers compensation
•Local 1001 did not pay contributions on Mr. Capasso’s behalf to
the LIUNA pension fund, which is required on any employees of
•The two audit reports of Local 1001 from 1994 to 1999 did not
disclose that Mr. Capasso was not a paid employee, the Trustees
were not informed of the practice by the audits and gave no tacit
approval to the practice. Moreover, the auditing firm that
prepared the audits was also Local 1001’s audit firm, but made
no disclosure of the conflict of interest to the Funds.
•The entry on the report for "Rate," which was left blank, is the
place where the contribution rate would be inserted, "such as
$3.85 per hour for the Welfare Fund," and did not reflect any
agreement on the part of the Funds nor provide any basis for
reliance on an alleged agreement to make contributions on a
basis other than hours worked as an employee.
61In the Matter of Local Union 1001 2004
GEB Ex. 21 (Trustees’ Joint Appeals Decision).
144. Local 1001 paid a total of $104, 700 in contributions to the Benefit
Funds for Mr. Capasso when he was not a salaried employee.
Further Investigation Triggered By Mr. Capasso’s Pension
145. The Capasso pension situation triggered more internal
investigation by the Benefit Funds, including a review of the November 1998
Havey Audit. Mr. Jorgenson wrote a letter to Mr. Lamont, the lead
compliance auditor from Havey, on June 14, 2002, inquiring how Havey had
missed the fact that "an individual of the Local Union has had contributions
submitted on his behalf who was not an employee of the Union." Tr. 159:11 –
160:5 (JORGENSON);see also GEB Ex. 28 (Letter from James S. Jorgenson
to James Lamont of 6/14/02). At the time, Mr. Jorgenson "assumed it was
just a glitch and it was just one individual that they overlooked." Tr. 160:19-
146. Mr. Jorgenson testified that he received a response from Mr.
Lamont approximately two weeks later; he was surprised by the letter because
it included an attachment of a letter that Mr. Lamont claimed was sent to the
funds three years earlier. Tr. 164:9-24 (JORGENSON);see also GEB Ex. 29
(Letter from James Lamont to James Jorgenson of 7/2/02). Mr. Lamont’s
letter suggested that the attached April 30, 1999 letter was sent in response to
a request made by Mr. Jorgenson for information about payroll audits for all
the Local Unions that Havey had performed at that time.
147. The attached April 30, 1999 letter read, "The following individuals
did not receive wages from the Union. In lieu of wages, contributions were
made on their behalf to the Funds." GEB Ex. 29 (Letter from James Lamont
to James Jorgenson of 4/30/99). A list of seven names followed the statement.
Id.In his letter over three years later, Mr. Lamont wrote, "we believe the
information from our audit about this particular situation was brought to the
attention of the Fund Office over three years ago." GEB Ex. 29 (Letter from
James Lamont to James Jorgenson of 7/2/02).
148. Strikingly, however, the Havey firm had failed to mention that any
individuals were receiving contributions in lieu of salary in the November
1998 Audit Report, much less list seven names specifically. Even if Havey
did, in fact, transmit the April 30, 1999 letter to Mr. Jorgenson in spring 1999,
it was already well after Havey affirmatively represented that the Local 1001
audit was clean.
149. Mr. Jorgenson stated that he was certain the Benefit Funds never
received the letter because, as a matter of routine practice, the Funds
62In the Matter of Local Union 1001 2004
electronically scan every document received and permanently stores the
electronic image. Tr. 167:20 – 168:3 (JORGENSON). There is no record of
the document anywhere in the Funds, notwithstanding the fact that three
separate departments were handling the issue addressed in the letter at the
time the letter was allegedly mailed.Id.
150. Mr. Jorgenson stated that if he had actually received the letter
containing information about contributions in lieu of wages in 1999, he would
have immediately brought the information to the attention of the Collections
Committee or the Fund counsel for their review and determination. Tr. 169:3-
15 (JORGENSON). Mr. Jorgenson described "contributions coming in for
individuals that have not in fact received wages" as a red flag.Id.
151. Based upon the circumstances of this matter and the conflict and
conduct of the Havey firm, the IHO finds that the April 30, 1999 letter was
not sent to the Benefit Funds. Moreover, even it were sent, such a letter could
not excuse the deliberate practice of sending false information to the Benefit
Funds and paying contributions for persons who were not paid a salary or
152. As a result of the information received in Mr. Lamont’s July 2,
2002 letter, the Benefit Funds hired another auditor to re-audit Local 1001.
Tr. 170:4-6 (JORGENSON). The Benefit Funds retained Levinson Simon &
Sprung (Levinson Simon), and the re-audit of Local 1001 was conducted in
the summer 2002. Tr. 173:9-13 (JORGENSON), 358:13-18 (SMITH).
153. The initial assignment for Levinson Simon was to examine the
previous four years of Local 1001 records, from June 1, 1998 through May 31,
2002, to determine whether certain individuals who appear on the employer
contribution reports also appeared in the payroll of the Union. Tr. 328:19-22
(LEVINSON), 359:17-18 (SMITH). When Levinson Simon was hired, the
Benefit Funds informed the firm that there may be an individual or individuals
who were contributed upon but did not appear on the payroll of the Local. Tr.
154. Mr. Levinson testified that contributions must be made to the
Benefit Funds according to the contract, which assigns how contributions are
paid and on what basis, as well as ERISA law. Tr. 329:18-24 (LEVINSON).
Mr. Levinson further testified that under the contract in this instance, as well
as every instance that he has ever seen, if an individual is not paid, then
contributions cannot be made on their behalf. Tr. 330:4-8 (LEVINSON).
155. The first Levinson Simon audit of Local 1001 revealed two
problems: contributions were being made to the Benefit Funds on behalf of
individuals that did not appear on the payroll or in any other disbursement
area, and contributions for three secretaries who were working full-time and
63In the Matter of Local Union 1001 2004
should have been paid based on a participation agreement of 40 hours per
week, were being paid less. Tr. 332:4-13 (LEVINSON).
156. After receiving the result of the first Levinson Simon audit, the
Benefit Funds’ Trustees requested a broader audit of Local 1001,
encompassing ten years from June 1, 1992 through May 31, 2002.See GEB
Ex. 31 (Letter from Howard B. Levinson, CPA, to Trustees Laborers’ Pension
Funds and Health and Welfare Department of 10/31/02 with October 31, 2002
Revised Audit (Second Audit)). The Second Audit revealed that Local 1001
owed $80,684.02, not including liquidated damages or audit costs, to the
Benefit Funds for under-reported hours of individuals on payroll.Id.
157. Thereafter, the Benefit Funds requested another audit of Local
1001, expanding the review to the inception of the Benefit Funds in 1963.See
GEB Ex. 32 (Letter from Howard B. Levinson, CPA, to Jean Mashos,
Director Trustees Laborers’ Pension Funds and Health and Welfare
Department of 3/31/03, with enclosed March 3, 2003 Revised Audit (Third
Audit)). The Third Audit revealed $80,872.82 due to the Benefit Funds.Id.
158. However, the Third Audit was incomplete because Local 1001
refused to supply certain records Levinson Simon requested. Specifically,
Ms. Smith testified that she was unable to review cash disbursement journals
to see if there were any outside payments to individuals. Tr. 428:1-5
(SMITH). Ms. Smith recalled correspondence between Local 1001’s attorney
and Levinson Simon instructing that the Local had been advised not to turn
over these records.30 Tr. 429:16-18 (SMITH).
159. On July 30, 2003, Mr. Jorgenson wrote back to Mr. Lamont,
informing him that the Funds had not previously received the April 30, 1999
letter, the Funds were now aware of the conflict situation that existed at the
time of the 1998 Havey audit of Local 1001, and if, "as a result of the conflict
and resulting consequences," the Funds incurred any losses or were otherwise
prejudiced they would seek appropriate relief from Havey. GEB Ex. 30
(Letter from James Jorgenson to James Lamont of 7/30/02). Mr. Jorgenson
received no response to that letter. Tr. 173:3 (JORGENSON).
30Ms. Smith stated that the records were a necessary part of Levinson
Simon’s regular audit procedures. Tr. 429:21 (SMITH). Ms. Smith estimated
that in about 5% of the audits someone refuses part of the records requested,
but then eventually turn them over. In this case, Local 1001 never turned over
its cash disbursement records. Tr. 429:22 – 430:3 (SMITH).
64In the Matter of Local Union 1001 2004
Under-Reported Hours Reported for Clerical Staff
160. Debra Chianelli, the wife of Local 1001 Recording Secretary
Robert Chianelli, completes Local 1001 employer contribution reports to the
Benefit Funds. Tr. 511:25 – 512:25 (D. CHIANELLI).
161. Ms. Esposito completed the employer contribution reports to the
Benefits Funds until her retirement in August 2000. Tr. 514:12-14, 515:12-17
(D. CHIANELLI). Shortly before Ms. Esposito retired, Mrs. Chianelli
became involved in filling out the employer contribution reports. Tr. 515:18-
25 (D. CHIANELLI).
162. At the end of April 2000, Ms. Esposito sat down with Mrs.
Chianelli and "in about a half hour’s time told [her] what to do with the
sheets, to copy from the month before." Tr. 516:6-9 (D. CHIANELLI). The
totals were the same; Ms. Esposito showed her a previous month’s example
and instructed Mrs. Chianelli to copy the numbers onto the next month’s
report. Tr. 516:11-17 (D. CHIANELLI). Mrs. Chianelli never had any other
conversations with anyone regarding how to handle the employer contribution
reports. Tr. 516:18-20 (D. CHIANELLI).
163. After filling out the employer contribution reports, Mrs. Chianelli
presented them to Mr. Gironda for his signature. Tr. 516:23 – 517:3 (D.
CHIANELLI). Mr. Gironda signed the "Employer’s Warranty and
Acceptance," which reads in pertinent part "The undersigned hereby warrants
that this report accurately states all hours worked by all laborers in its
employ." GEB Ex. 8 (Laborer’s Pension and Welfare Fund Report for Hours
Worked in July 2003). Mr. Gironda has signed every monthly contribution
report since taking office in 2001.
164. With the exception of deleting Ms. Esposito from the reports when
she retired, the names and hours all remained the same over the three years
that Mrs. Chianelli completed the reports. Tr. 517:7-15 (D. CHIANELLI).
165. Mrs. Chianelli has worked full-time, or 40 hours per week, for
Local 1001 since being hired. Tr. 518:9-14 (D. CHIANELLI). Angela
Coglienese, the office receptionist, and Kelly Canchola, the dues clerk, are
also full-time clerical employees. Tr. 513:6 – 514:11 (D. CHIANELLI).
Each of these full-time employees was reported to have worked 30 yours per
week, or 120 hours per month, on the contribution forms.
166. Mrs. Chianelli had no understanding of why certain people were
listed as having worked 160 hours, while others were listed as having worked
120 hours; she simply repeated the numbers from the previous month’s
employer contribution report. Tr. 518:19 – 519:11 (D. CHIANELLI);see also
GEB Ex. 8 (Laborer’s Pension and Welfare Fund Reports for Hours Worked).
65In the Matter of Local Union 1001 2004
Specifically, Mrs. Chianelli had no understanding of why the 2001 employer
contribution reports listed her as working 30 hours per week, rather than the
40 hours she actually worked. Tr. 528:3-7 (D. CHIANELLI).
167. Mrs. Chianelli testified that, in 2001, she knew Auditor Capasso,
who she saw on the premises about once a month; Vice President Grogan,
who she saw on the premises a couple of times per week; Sergeant-at-Arms
Bates, who she saw once a month at meetings; Auditor Cataudella, who she
saw once a month at meetings; Mr. Roa, who she saw once a month at
meetings; and her husband, District Council Delegate Chianelli, who worked
full-time for the City of Chicago Dept. of Transportation, and attended
meetings at the Local once a month. Tr. 520:9 – 523:14 (D. CHIANELLI).
168. As per her instructions, Mrs. Chianelli reported to the Funds that
all of the aforementioned officers worked 120 actual hours.See GEB Ex. 8
(Laborer’s Pension and Welfare Fund Reports for Hours Worked).
169. From 1963 until 2002, the contributions report forms had five
columns for "actual hours worked in period," wherein the amount of hours
worked each week were filled in, and a final column, "Total Hours," where
the sum of the previous weekly columns was entered.See, e.g., GEB Ex. 8
(Laborer’s Pension and Welfare Fund Report for Hours Worked in July 1963;
Laborer’s Pension and Welfare Fund Report for Hours Worked in July 2001).
170. Mrs. Chianelli testified that the remittance forms changed in or
about July 2002, reflecting only the monthly, as opposed to weekly, totals for
actual hours worked. Tr. 523:20 – 524:4 (D. CHIANELLI). However, in
keeping with the practice of carrying previous month’s totals forward, the
monthly totals remained the same as for previous employer contribution
reports. Tr. 524:9-11 (D. CHIANELLI).
171. On June 27, 2002, Mr. Levinson informed the Trustees of the
Benefit Funds about the extent of the under-reported hours of individuals on
payroll.See GEB Ex. 33 (Letter from Howard B. Levinson, CPA, to Trustees
Laborers’ Pension Funds and Health and Welfare Department of 6/27/02).
Local 1001 owed $43,750.05 in contributions to LECET, the Pension Fund,
the Training Fund, and the Welfare Fund for under-reported hours from July
1, 1998 to May 31, 2002, including 10% penalties, exclusive of interest.Id.
172. At some point in or about July 2002, Business Manager Gironda
gave Mrs. Chianelli instructions not to report Mr. Capasso, Mr. Grogan, and
Mr. Roa on the monthly employer contribution reports. Tr. 526:5-9 (D.
CHIANELLI). Handwritten notes on the July 2002 employer contribution
reports, which were not Mrs. Chianelli’s, read, "James Capasso√ Do Not Post
Hrs. Per KMG 7·30; Floyd Grogan√ Do Not Post Hrs. Per KMG 7·30; Victor
Roa Sr.√ Do Not Post Hrs. Per KMG 7·30." Tr. 524:12-16 (D.
66In the Matter of Local Union 1001 2004
CHIANELLI);see also GEB Ex. 8 (Laborer’s Pension and Welfare Fund
Reports for Hours Worked).
173. During that same period, Mr. Gironda instructed Mrs. Chianelli to
begin recording her own hours, as well as those of Ms. Canchola and Ms.
Conglienese, as 160 actual hours worked instead of 120 hours. Tr. 525:17 –
526:22 (D. CHIANELLI). Mrs. Chianelli testified that she had no
understanding of why those numbers were increased. Tr. 526:23-25 (D.
174. The Benefit Funds informed Local 1001 about the discrepancy on
August 2, 2002.See GEB Ex. 35 (Letter from Joe Gilleran to Int Local 1001
of 8/2/02). Local 1001’s accountants reviewed the audit, had no disagreement
with the result, and paid the Benefit Funds $43,750.05 in full by check.See
GEB Ex. 35 (Letter from Mark DeBofsky to Patrick T. Wallace, Fund
Counsel, of 11/12/02); GEB Ex. 36 (Local 1001 Check No. 30608 of
175. Resolution of the remainder of Local 1001’s outstanding debt to
the Benefit Funds remains unresolved.
Improper Contributions for Non-Payroll Persons
176. The Third Audit, encompassing the years 1963 to 2002, revealed
33 individuals listed on Local 1001 employer contribution reports to the
Benefit Funds who were not on Local 1001’s payroll or tax records.See GEB
Ex. 32 (Letter from Howard B. Levinson, CPA, to Jean Mashos, Director
Trustees Laborers’ Pension Funds and Health and Welfare Department of
177. Ten of the persons on whose behalf Local 1001 made illegal
Benefit Funds contributions are deceased pensioners who are no longer
receiving payments from the Benefit Funds. In total, Local 1001 expended
$213,172.91 of the memberships’ funds making benefit contributions,
including pension and welfare, for the following persons not on the Union
payroll: Joseph Briatta, $7,200.04; Louis Briatta, $3,617.04; Neil Cacciottolo,
$29,012.40; Anthony Caliva, $112.80; Fred Colasanti, $21,963.76; Thomas
Crivellone, $204.00; Daniel DeLuca, $37,001.02; Alexander Maggi,
$30,839.12; James Pilas, $9,788.95; and Frank Roti, $73,533.60.
178. Eight of the persons on whose behalf Local 1001 made illegal
Benefit Funds contributions are non-vested participants who incurred a
permanent break in service and lost all previous credits. In total, Local 1001
expended $69,061.68 of the memberships’ funds making benefit
contributions, including pension and welfare, for the following persons not on
the Union payroll: Michael Briatta Sr., $3,574.80; Nicholas Cantone,
67In the Matter of Local Union 1001 2004
$3,574.80; Ronald Crivellone, $26,564.60; Louis DelGuidice, $25,964.40;
Anthony Esposito, $1,206.40; Michael Larmon, $3,132.48; Anthony Orrico,
$3,664.20; and John Wilken, $1,380.00.
179. Eight of the persons on whose behalf Local 1001 made illegal
Benefit Funds contributions are pensioners who will have their benefits
decreased or suspended to deduct credit earned before they were on payroll.
The individuals had received benefits for periods of time, and their benefits
were calculated on periods of time for which they were not eligible to receive
contributions in their behalf. Tr. 446:4-7 (MARIA). In total, Local 1001
expended $264,150.30 of the memberships’ funds making benefit
contributions, including pension and welfare, for the following persons not on
the Union payroll: Julius Bataglini, $1,254.40 (future benefit offset); Sam
Caifa,31 $42,034.80 (suspended)32; Michael Cardilli, $51,041.20 (suspended);
Bruno Caruso, $2,300 (future benefit offset); William Pape, $53, 515.20
(suspended); Ramon Schaeffer, $35,300.40 (suspended); Bernard Spano,
$75,128.10 (suspended); Michael Spignola, $3,575.80 (future benefit offset).
180. Seven of the persons on whose behalf Local 1001 made illegal
Benefit Funds contributions will not receive any pension credits for the period
that they were not on Local 1001’s payroll. In total, Local 1001 expended
$284,138.52 of the memberships’ funds making benefit contributions,
including pension and welfare, for the following persons not on the Union
payroll: Willie Bates, $13,185.20; James Capasso,33 $104,885.70; Nick
Cataudella, $12,331.20; Robert Chianelli, $20,818.50; Sam DeChristopher,
$55,914.90; Floyd Grogan, $60,591.90; and Victor Roa Sr., $16,411.12.See
GEB Ex. 7.
181. From the inception of the Pension Fund in 1963 until 2002, the
Local contributed $396,465.11 in pension payments for persons not on its
31Mr. Caifa was not on the Local’s payroll from February 1984 through
February 1994, but the Local contributed $17,218.00 to the Benefit Funds in
his behalf. Tr. 447:1-6 (MARIA). Based on the information submitted by the
Local, the Benefit Funds paid Mr. Caifa $65,054.00 in pension benefits he
was ineligible to receive. Tr. 447:9-11 (MARIA).
32None of the suspended persons were ever eligible to receive contributions
on their behalf.
33Approximately 10% of the total contributions Local 1001 paid to the
Benefit Funds for the 33 persons not on the payroll were submitted in Mr.
Capasso’s behalf. Tr. 454:2-15 (MARIA).
68In the Matter of Local Union 1001 2004
payroll; in turn, the Benefit Funds paid $578,036.00 in pension benefits to
those ineligible persons.Id.
182. From the inception of the Welfare Funds in 1963 until 2002, the
Local contributed $434,157.38 in welfare payments for persons not on its
payroll; in turn, the Benefit Funds paid $125,493.34 in welfare benefits to
those ineligible persons.Id. Moreover, seemingly all of the ineligible
recipients of these contributions had primary insurance elsewhere through
their primary employers. Thus, Local 1001 expended its assets to provide
insurance for individuals who would admittedly only use this "secondary
insurance" as back-up when their primary insurance did not provide coverage.
Tr. 606, 689, 690.
183. The Benefit Funds have a fiduciary responsibility to try to make
the Funds whole. Tr. 447:20-25 (MARIA). "If damage has been done to the
Fund, it’s their responsibility to take reasonable measures in an effort to
recover money that was in effect given as a benefit to ineligible participants."
184. Local 1001 maintained that the contributions paid to the Benefit
Funds in lieu of salary for certain officers were done in conformance with an
oral understanding with the Benefit Funds, as well as "custom and practice,"
which allowed the Local to submit contributions on behalf of unsalaried
185. At the hearing, counsel for Local 1001 inquired about the Benefit
Funds’ internal investigation regarding whether there was any oral
understanding or custom and practice that permitted Local 1001’s
contributions to the Benefit Funds for unpaid officers. Mr. Jorgenson related
Mr. Faraci: I asked him whether or not his attorneys [Co-
Counsel to the Benefit Funds] inquired with him [Mr.
Jorgenson] whether or not there was a custom and practice.
Mr. Jorgensen: A custom regarding?
Mr. Faraci: A custom and practice with Local 1001 with
regards to individuals who were Auditors and Executive
Board members getting contributions paid to them in lieu of
Mr. Jorgensen: Well they did ask me to research the records
to see if there was anything in the file that ever revealed
something like this in the past, and I didn't find anything.
69In the Matter of Local Union 1001 2004
Not only I looked, but I think just about every other staff
member in the place did.
Mr. Faraci: That's different than custom and practice. They
were actually looking for a written document regarding this.
Mr. Jorgensen: Right -- no, we didn't -- we did go back to
individuals that had worked there and have now retired. We
asked them if there was ever anything that was discussed
verbally that they recall with a prior administrator. We
asked the people who were running the Field Department at
that time if they recall anything like that, and there was no
recollection by anybody.
Tr. 239:8 – 240:9.
186. Counsel for Local 1001 questioned Mr. Levinson regarding
whether Local 1001’s contributions paid in lieu of salary for certain officers
were an anomaly.
Mr. Faraci: So in your career you’ve never seen
contributions in lieu of payments.
Mr. Levinson: That is not legal.
Mr. Faraci: What’s not legal about it?
Mr. Levinson: It’s a violation of ERISA, as I understand it,
and the IRS rules as I understand them.
187. Mr. Levinson explained the tax issue by saying that individuals
cannot receive compensation in the form of nontaxable benefits; "any
compensation that an individual receives has to be subject to income taxes."
Tr. 355:7-23 (LEVINSON). ERISA requires that "work performed" be
measured in terms outlined in the contract and/or participation agreement that
a union official is under.Id. According to Mr. Levinson, the definition is the
same in all Funds; "the proper reporting to the Funds is based on earnings and
188. By July 31, 2002, Mr. Jorgenson had informed Messrs. Bates,
Caiafa, Cataudella, DeChristopher, Chianelli, Grogan, Pape, Roa, and Spano
that the Benefit Funds required information regarding their Local 1001
employment to verify eligibility for Pension and Health Benefits.See GEB
Ex. 16. In those letters, Mr. Jorgenson requested the same information he had
70In the Matter of Local Union 1001 2004
previously requested from Mr. Capasso, i.e., evidence of the nature and extent
of their employment, hours worked, compensation received, and whether the
employment was full or part-time.Id.
189. All of the aforementioned persons were ultimately deemed
ineligible for Pension and Health Benefits, which they appealed. The
Trustees’ Joint Appeals Committee denied all of the appeals in conjunction
with Mr. Capasso’s appeal for the same reasons statedsupra at ¶¶ 141, 143.
SeeGEB Ex. 16 (Joint Appeals Decision).
Additional Evidence Supporting the Need for Trusteeship
190. In Charge Seven, the GEB Attorney alleges that a Trusteeship over
Local 1001 is necessary to carry out legitimate objectives and protect Local
1001 as an institution, reading as follows:
The "objects" of Local Unions are set forth in Article II,
Section 1 of the Uniform Local Union Constitution ("ULUC")
and include the responsibility "[t]o conduct its affairs in a
manner which would most tend to enhance, conserve and
protect the welfare and interest of the International Union, its
affiliates and members." ULUC Article II,§ 1(c).
In light of the evidence developed by the LIUNA Inspector
General and the facts set forth in the above paragraphs, it is
necessary to place Local 1001 under trusteeship to carry out
the legitimate objects of the union and to protect Local 1001
as an institution. Given the influence of organized crime, lack
of democratic practices and financial misconduct., which have
impaired the Local’s ability to accomplish the basic tasks
required for the operation of the local and which threaten to
unduly burden the time and resources of the General
President, the Independent Hearing Officer and the Chicago
District Council, Local 1001 is currently unable to carry out
the legitimate objects of the union.
By placing Local 1001 under trusteeship, LIUNA will be able
to protect Local 1001 as an institution by conducting its affairs
in a manner that would most tend to enhance, conserve and
protect the welfare and interest of the International Union, its
affiliates and members.
Trusteeship Complaint, ¶¶ 57 -59 (IHO Dkt. tab 2).
Retention of Attorney DeBofsky Relating to Capasso’s Appeal of
the Laborers’ Pension Fund Denial of Benefits
71In the Matter of Local Union 1001 2004
191. On June 24, 2002, Mark DeBofsky, Esquire (DeBofsky), met with
Peter Faraci and Judge Leighton regarding "issues raised by Mr. Capasso’s
claims for pension benefits." Local 1001 Ex. 56 (Letter from Mark D.
DeBofsky to Peter S. Faraci of 6/25/02).
192. In a letter dated the following day, Mr. DeBofsky stated, "Since
Mr. Capasso is already represented by counsel, it is presumed that counsel
will adequately protect his interest in appealing the Laborers’ Pension Fund
determination of non-qualification for pension."Id. Mr. DeBofsky then
agreed to work with Mr. Faraci and Judge Leighton, ostensibly to represent
the Local’s interest in Capasso’s "appeal because of its belief that it was in
compliance with the Laborers’ Pension Fund rules and governing trust as well
as concern that an adverse determination by the Fund may have repercussions
against the Local."Id.
193. On October 10, 2002, prior to the Benefit Funds’ Joint Appeals
Committee final resolution regarding the eligibility of certain individuals to
participate in the Benefit Funds, Mr. DeBofsky filed a declaratory judgment
action on behalf of Local 1001 in the United States District Court for the
Northern District of Illinois.See GEB Ex. 14. Local 1001’s lawsuit
challenged the denial of individual claimants’ pension and welfare eligibility.
Id.As even Mr. DeBofsky conceded at the hearing, the clear beneficiaries of
a successful lawsuit were the claimants, not Local 1001. Tr. 1043:1 – 1044:2
194. It does not escape notice that Mr. Capasso, nor any of the other
claimants, did not personally file the federal lawsuit on their own behalf, as
they would be required to personally expend funds to pay for it.
195. Mr. DeBofsky attempted to explain that the money expended on
the lawsuit would have been refunded to Local 1001 if it was successful;
ironically, the Local stood to gain money if the lawsuit were unsuccessful
because it would no longer pay contributions for the unsalaried officers.
196. Ultimately, the action was unsuccessful.See GEB Ex. 17, GEB
Ex. 18. At a minimum, Mr. DeBofsky’s services cost the Local $7,500.00.
Expenses Related to Monitoring the June 2003 Officers’ Election
197. During the election following Bruno Caruso’s expulsion from
LIUNA, the Executive Board of Local 1001 made much ado about
monitoring/certifying/legitimizing the June 2003 Officers’ Election.
198. As notedsupra ¶ 56, the Executive Board retained the services of
Kurth Lampe "to oversee the process of Nomination, Eligibility Verification
72In the Matter of Local Union 1001 2004
and the Election and Ballot Counting as well as the Election Reporting
Process." Local 1001 Ex. 16 (Memorandum from Kitty Kurth to LIUNA
Local 1001 of 4/7/03). Kurth Lampe’s fee for the project, excluding printing
and mailing costs, was "$3,500 per month for the months of April, May and
199. Local 1001 expended $10,500 for Kurth Lampe to oversee its June
2003 Officers’ Election.Id.
200. There is no evidence on this record suggesting that the Local had
ever engaged services comparable to Kurth Lampe’s in prior elections. The
IHO is unclear why the Local would go to the unprecedented expense of
engaging these services, absent an effort to impart a presumption of
legitimacy to its election and negate issues that may become controversial in
the apparent Trusteeship situation already progressing with the International.
LIUNA has a duty, under Article IX, Section 7 of the International
Constitution, to provide Local 1001 with a fair hearing when imposing a
trusteeship.See International Constitution, Article IX, Section 7. A full and
fair hearing implies the procedural requirements of notice of charges and date
and nature of hearing, presentation of evidence and witnesses in support of the
reasons for imposing trusteeship, with opportunity for cross-examination, and
opportunity to present evidence in rebuttal.Id., see also 29 U.S.C. §§ 401 et
seq., 462, 464. If hearing is conducted fairly and in accordance with the
purposes outlined in 20 U.S.C. § 462, a presumption of regularity will attach.
See, e.g., Luggage Workers Union v. International Leather Goods, 316 F.
Supp. 500 (D. Del. 1970);Benda v. Grand Lodge of Int’l Assoc. of Machinists
& Aerospace Workers, 584 F.2d 308 (CA9 Cal), cert dismd 441 U.S. 937, 99
S. Ct. 2065.
In this matter, the GEB Attorney presented Local 1001 with the 60
paragraph Trusteeship Complaint, which clearly delineated the alleged
grounds for trusteeship.See Trusteeship Complaint (IHO Dkt. tab 2). On
September 25, 2003, the GEB Attorney notified every member of Local 1001
of the date, time and place of the hearing Local about the time and place of the
hearing, approximately 50 days before the scheduled hearing date.Id. Thus,
the GEB Attorney clearly fulfilled LIUNA notification requirements.
Prior to the hearing, Local 1001 vigorously objected to the IHO’s denial
of its request for an extension of the Trusteeship hearing to accommodate Mr.
Webb’s schedule on the basis that it denied the Local lead counsel of its
choosing. The IHO views the Executive Board’s insistence on Mr. Webb as
73In the Matter of Local Union 1001 2004
lead trial counsel, in light of his unavailability and limited participation in the
Trusteeship proceedings, as an apparent attempt to delay further the
Trusteeship hearing.34 In his stead, Messrs. Lydon, Mendenhall, Faraci, and
Judge Leighton competently represented Local 1001. The record is clear,
based on their firm’s correspondence and billings, that both law firms were
working on the case throughout 2003, months before the GEB Attorney
actually filed the Trusteeship Complaint; thus, although not required, the
Local effectively had counsel of its choice.See GEB Exs. 44, 46, 47, 48, 49,
50, 51, 52.
During the hearing, the GEB Attorney and counsel for Local 1001 both
called five witnesses, not including the seven Local 1001 members who
testified. Local 1001 fully availed itself of the opportunity to cross-examine
the witnesses. The GEB Attorney presented 52 exhibits, Local 1001
submitted 66 exhibits, and the IHO admitted all proffered evidence into the
record. The five-day hearing resulted in a written transcript of 1091 pages of
testimony. Most of the members of the Executive Board were present every
day, and many members attended the December hearing dates. Both the GEB
Attorney and counsel for Local 1001 filed comprehensive Post-Hearing Briefs
and Reply Briefs.
The IHO adhered to the requirements for a full and fair hearing, as
outlined under federal law. Numerous federal courts have upheld the IHO’s
application of the federal standards.See, e.g., Local 43 v. LIUNA at 9; Dennis
Gleason, et al. v. Laborers’ International Union of North America,No. 00-
CV-2341 (C.D. Ill. May 14, 2002);Laborers’ International Union of North
America, et al. v. Caruso, et al.,1998 U.S. Dist. LEXIS 9708 (N.D. Ill. June
18, 1998),aff’d by 197 F.3d 1195, 1999 U.S. App. LEXIS 33429 (7th Cir. Ill.
34When Local 1001 selected Mr. Webb as lead trial counsel, he was
representing Citadel Investments Group, LLC in an ongoing arbitration, the
remaining portion of which was scheduled for arbitration on November 9-11,
2003. Local 1001’s Reply Brief in Support of Its Motion to Extend the
Hearing Date of 10/21/03 (IHO Dkt. tab 7). In addition, Mr. Webb
represented Microsoft Corporation in an ongoing complex litigation matter in
the United States District Court for the Western District of Washington
(Seattle), scheduled for trial on December 1, 2003.Id. Mr. Webb was
scheduled to move to Seattle shortly after completion of the Citadel arbitration
for intense trial preparation.Id. As a result, Local 1001 requested a delay in
the hearing date until "sometime in January 2004.Id. Moreover, the evidence
confirms that Mr. Webb had not meaningfully engaged in the Trusteeship
proceedings up until that time.
74In the Matter of Local Union 1001 2004
1999). The IHO has considered all of the arguments advanced at the
Trusteeship hearing and in the parties’ briefings, whether or not specifically
addressed herein. Arguments not discussed in this opinion have been
considered and found both to be unpersuasive and not to warrant extended
discussion.Cf. In the Matter of Fresina, et al., 1998 A.O. 115, 141 n.11 (98-
Permitting LCN Influence Over Local 1001
Local 1001 has had a long history of organized crime influence. Due to
the insidious nature of organized crime, once it has infiltrated a labor
organization, organized crime influence does not disappear on its own despite
the removal of some officials.See Chicago District Council, 97-30T; Local
1058,00-08T. Therefore, the IHO cannot ignore the organized crime
connections in Local 1001, as late as the administration of Bruno Caruso in
The IHO observes that the situation within Local 1001 is factually similar
to the circumstances that led to the imposition of Supervision over Local
1058, in Pittsburgh. In that matter, there was significant association of the
union’s officers with organized figures during the 1970’s until 1984.See In
the Matter of Local 1058,IHO Order and Memorandum, 99-08T (March 9,
2001). After 1984, specific contacts between the officers of Local 1058 and
organized crime figures were sporadic and isolated. Despite limited contact
between Union officers and organized crime figures in the years immediately
preceding the hearing, the IHO noted that only four persons held the position
of Business Manager from 1970 through 2000. Those individuals met
regularly with organized crime figures from the 1970’s through 1984.
Furthermore, Local 1058 held uncontested elections for 30 years. Based upon
the combination of the organized connections of the prior officers and those
still in office, and the lack of contested elections, Local 1058 was placed in
Supervision. Despite somewhat historical organized crime connections, the
prior association of the former and present officers could not be ignored in the
context of the intent of the LIUNA reform process.
Similarly, here two persons held the combined position of Local 1001
Business Manager/President from 1982 until 2001. Mr. Kumerow and Bruno
Caruso were each proven associates or members of the Chicago Crime family.Bruno Caruso, 99-12D, aff’d, 2001
A.O. 235. Mr. Kumerow was the son-in-law of Anthony Accardo, at that time
the head of the Chicago crime family whose influence in Chicago LIUNA
affairs is well documented. Despite having no background in the labor
movement, Mr. Kumerow became the Business Manager of the most powerful
LIUNA Local in Chicago. In 1994, after holding office for 12 years and
running unopposed for three elections, he suddenly resigned two months after
his third election and shortly after the death of his father-in-law.
75In the Matter of Local Union 1001 2004
The Local 1001 Executive Board unanimously appointed Bruno Caruso
following Mr. Kumerow’s resignation. Mr. Caruso served as Business
Manager from 1994 until 2001, when his LIUNA membership was
permanently revoked for his organized crime association.See Bruno Caruso,
99-12D,aff’d, 2001 A.O. 235. Thereafter, Local 1001’s Executive Board
unanimously appointed current Business Manager Gironda, Bruno Caruso’s
cousin, as Bruno Caruso’s replacement. Current Business Manager Gironda
was brought to power and promoted by Mr. Kumerow and Bruno Caruso after
being suspended from the City of Chicago for failing to supervise workers in a
no show job scandal.See Bruno Caruso, Chicago District Council, 99-12D, ¶
The IHO views Local 1001’s allegiance to Capasso as equally significant.
While the Business Manager of Local 1001, Mr. Kumerow appointed Mr.
Capasso to an auditor position. The LIUNA Auditor position is a historic relic
left over from the early part of the 20th century when Union officers
maintained all financial records themselves. When, as here, a LIUNA local
employs a CPA to maintain its financial records, there is no required activity
for auditors; the position has no realistic importance.See McGough v. Bohne,
et al.,IHO Order and Memorandum, 03-04TB (October 1, 2003).
Nonetheless, once appointed Auditor, Mr. Capasso remained in the
unpaid, part-time position for approximately 19 years, receiving pension and
health and welfare benefits for which the Local expended over $104,000.00.
When the Benefit Funds challenged Mr. Capasso’s pension eligibility, Local
1001 hired an attorney with Local 1001 funds to file a federal lawsuit,
essentially on his behalf. The IHO cannot ignore the connection of the
nomination by Mr. Kumerow to a position that ostensibly afforded Mr.
Capasso a lucrative second pension funded by the Local. The IHO finds such
allegiance disturbing evidence of the ongoing influence of organized crime
within Local 1001.
The organized crime association and presence within Local 1001 is far
more continuous and recent than evidenced in the Local 1058 matter. In
addition, as in Local 1058, there have been no contested Local 1001 elections
for 30 years. These two factors standing alone indicate a need for Trusteeship
over this Local.
Restoration of Democratic Practices
Local 1001’s history of uncontested elections remains undisputed on the
record. While Local 1001 did aver that the membership chose their officers
and elected officers not previously appointed to their positions, the argument
overstates the import of the two solitary occasions when these happenings
occurred. In 30 years, Local 1001 has never had a contested election. In 30
76In the Matter of Local Union 1001 2004
years, with few exceptions, officers have not completed their terms, but have
resigned voluntarily so that the Executive Board could appoint an interim
office holder who would enter the election as an incumbent. Every candidate
for 30 years has been unopposed.
A great many LIUNA local unions have long periods where elections are
unopposed. Notwithstanding this fact, where there is a demonstrated history
of organized crime influence in the Union, the IHO views unopposed elections
for sustained periods of time with close scrutiny.See Local 1058, CITE. The
IHO does not approach this situation in a vacuum, unfamiliar with the history
of the labor movement in Chicago. The history of the Chicago District
Council and its members is a classic example of the influence of organized
crime in the labor movement. The factual situation of uncontested elections,
described in that decision, is a disturbing picture of what can happen when a
labor union is thoroughly infiltrated by organized crime.
Local 1001 election candidates were often well-recognized crime
associates, which starkly demonstrates how the history of uncontested
elections and mid-term appointments result from the influence of organized
crime and its continuing stronghold on Local 1001. The IHO cannot ignore
the sponsors of some of the officers of Local 1001. The Local’s history of
uncontested elections is the natural outcome of the organized crime influence
within this Local.
The Local’s recent employ of Ms. Kurth and her staff from Kurth Lampe
for the 2003 Officers’ Election did nothing to further the air of legitimacy they
wished to ascribe to their election process. In fact, engaging Kurth Lampe’s
services had the opposite effect. Only when the Inspector General turned his
attention towards the Local, did Local 1001 make a demonstration of
conducting a nomination meeting before a former member of the International
Election Officer’s staff; there is no evidence that the Local ever found it
necessary to engage similar services in past elections. The IHO finds it
difficult to understand why those services were construed necessary for the
wholly uncontested election in 2003. Moreover, the only service that Kurth
Lampe might have performed which would arguably have been beneficial to
the Local, testing candidate eligibility, it failed to carry out with any accuracy.
Mr. Capasso is not working at the calling, and was not and is not
qualified to hold the position of Auditor. Local 1001 argued that Mr. Capasso
qualifies to hold office under Article V, Section 4(c) of the Constitution. That
provision is used expressly to qualify persons who are working at the calling
in the Union movement, such as serving on a joint organizing task force.See
Matter of Local 477 (Dawn DeFraties),No. 01-SEO-13 (May 16, 2001).
LIUNA amended the Constitution in 1991 to specifically exclude office or
clerical personnel in LIUNA locals from working at the calling.See
Constitution, Article V, Section 4(c).
77In the Matter of Local Union 1001 2004
It follows that an administrative person working in a pension fund would
be even more removed from the calling. "In amending Article V to prohibit
administrative persons from qualifying as working at the calling, the drafters
noted that popularity with members or heavy involvement in Union activities
is not substitute for working at the calling as a requirement for office."In re
Local 500,IHO Order and Memorandum for Reconsideration, 98-45P
(October 27, 1998),citing Protest of McGregor, Local 597, Hearings Panel
Decision, Case C-10 (adopted by the General Executive Board August 17,
1993). Thus, a person working in an administrative capacity in a pension or
welfare fund is not working at the calling. Moreover, in his attempt to justify
receipt of a second pension from the Benefit Funds, Mr. Capasso was required
to inform the Pension Fund that he would not be receiving two pensions from
the laboring industry. Mr. Capasso wrote, "If I were asked ‘do I work in the
laboring industry,’ I would have to answer absolutely not."See GEB Ex. 12
(Letter from James Capasso to Kathleen McCarthy of 3/27/02).
Improper Contributions to Benefit Funds
In the Trusteeship Complaint, the GEB Attorney charged that Local 1001
made improper pension and health and welfare contributions on behalf of
individuals who are ineligible to receive such contributions in violation of
duties imposed by the LIUNA EPC and by 29 U.S.C. § 501(a) and (c). The
charges relate to Local 1001’s payment of substantial contributions to the
Benefit Funds, over a period of at least 18 years, on behalf of 33 individuals
who occupied part-time officer positions and were not on the Local 1001
payroll. Local 1001 defended the propriety of these payments, alleging,inter
alia, an oral understanding, as well as reliance upon custom and practice, with
the Benefit Funds allowing them to pay contributions on the part of unpaid
Local 1001 averred that it relied on past "custom and practice" when
making its contributions to the Benefit Funds by averring that the Benefit
Funds were aware of the contributions and accepted them as proper and, if the
contributions were improper, the Benefit Funds had the ultimate responsibility
for halting the payments. The IHO is unpersuaded for three reasons. First, as
discussedinfra, and as uncontrovertibly stated by Mr. Jorgenson at the
hearing, the Benefit Funds were patently unaware of any such custom and
practice. Thorough investigation on the part of the Benefit Funds revealed no
information supporting Local 1001’s claim. Second, as even the Havey firm
was careful to mention in its November 1998 Audit Report, "the propriety of
the contributions is the responsibility of the employer’s management." GEB
Ex. 26 (November 1998 Havey Audit). The Local 1001 Executive Board had
a fiduciary duty to the membership of the Local, under 29 U.S.C. § 501(a), to
78In the Matter of Local Union 1001 2004
protect the assets of the Local. This includes investigating the propriety of the
Union expenditures. Third, the audit performed by Havey did not put the
Funds on notice of any impropriety, as Havey’s report was inaccurate.
Local 1001 also asserted that there was an oral understanding between the
Benefit Funds and the Local, which permitted contributions on behalf of
uncompensated officers. Local 1001 supported this contention by asserting
that, since 1982, it was authorized by the Benefit Funds to pay contributions
for Executive Board members, Auditors, and the office staff at a rate of 120
hours per month rather than 160. According to Local 1001, the agreement not
only authorized the reduction of hours for clerical staff, but also evidenced the
Benefit Funds’ awareness that uncompensated officers were receiving
contributions on their behalf.
In support of the averment that there was an agreement with the Benefit
Funds, Local 1001 produced March 18, 1982 Executive Board Meeting
Minutes and an affidavit from Thomas Crivellone, who was a field
representative for the Benefit Funds from 1978 through 1983.See Local 1001
Ex. 27 (Local 1001 March 18, 1982 Executive Board Meeting Minutes);
Local 1001 Ex. 42 (Affidavit of Thomas Crivellone of 1/22/03). The March
18, 1982 Executive Board Meeting Minutes reflect,
Chairman [Ernest Kumerow] reported that in the interest of
cutting expenses he was able to get approval from the Health
and Welfare Fund to pay 120 hours instead of 160 hours per
month welfare and pension fund for Executive Board
Members, Auditors, . . . and the office staff, effective the
month of February. The Board agreed that this will add up to
substantial savings. The Board approved the action taken.
Local 1001 Ex. 27 (Local 1001 March 18, 1982 Executive Board Meeting
Minutes). Mr. Crivellone’s affidavit states, "In 1982, as the result of a
discussion with James Murphy, the Pension and Welfare Funds’
Administrator, Local 1001 was permitted to reduce the hours of contribution
for salaried and/or hourly wage earners and non-salaried and non-wage
earners to 120 hours per month."
The IHO views this evidence with great skepticism. Local 1001’s
Executive Board Minutes, if confirmation of anything at all, are only proof
that Mr. Kumerow made certain statements at that particular meeting. Mr.
Murphy, the former Administrator, who the Local attributes with acceptance
of the alleged agreement, did not testify at the hearing, nor were any of his
staff able to recall such an agreement.See supra, ¶ 185. Nothing in this
record verifies acceptance of the agreement by the Benefit Funds. Mr.
Crivellone’s affidavit, made some more than 20 years after the alleged
agreement was made, adds nothing to the Local’s argument. Mr. Crivellone’s
79In the Matter of Local Union 1001 2004
statement runs entirely counter to the hearing testimony of Mr. Jorgenson,
who stated that the Trustees and office staff, past and present, were unaware
of the practice until the first Levinson Simon audit revealed the discrepancies.
Furthermore, the alleged oral agreement is a clear violation of ERISA.
Title 29 USCS § 186(c)(5) requires that payments from employer to employee
benefit trust funds be made according to a written agreement setting forth the
detailed basis on which such payments are to be made.See 29 U.S.C. §
186(c)(5). The requirement of written agreement for employer contributions
to trust funds, binding trusts, and existence of beneficiaries' legal rights to
contributions is not satisfied by slightly different versions of written
agreements never accepted by both parties, by oral collateral agreement, by
oral modification of written trust agreement, or by unratified side-letter
agreement made by union official without authority.See Central States
Southeast & Southwest Areas Pension Fund v Kraftco, Inc., 589 F Supp 1061
(1984, MD Tenn),affd without op 780 F2d 1020 (1985, CA6 Tenn) and affd
without op780 F2d 1022 (1985, CA6 Tenn) and revd on other grounds799
F2d 1098(1986, CA6 Tenn). Strict compliance with the terms of § 186(c) is
required to settle a qualifying Taft-Hartley trust.See Bricklayers, Masons &
Plasterers International Union v Stuart Plastering Co., 512 F2d 1017 (1975,
CA5 Fla). Section 186(c)(5) does not allow an employer to contribute to a
trust fund on behalf of, or for benefit of, individuals that are not employees of
contributing employer.See Mazzei v Rock-N-Around Trucking, Inc., 246 F3d
956 (CA7 Ill 2001).
Regardless of whether the purported oral agreement with the Benefit
Funds actually existed or the Benefit Funds’ former Administrator, Mr.
Murphy, was somehow complicit in it, the arrangement violated the terms of
the Trust Agreement, as outlinesupra ¶¶ 141, 143, and ERISA. The Local
produced no written agreement with the Benefit Funds, which would have
allowed it to either underreport certain clerical hours or pay contributions on
behalf of uncompensated officers. The Benefit Funds’ Administrator
explicitly denied any agreement existed.
Local 1001 further attempted to justify the Benefit Fund contribution
payments because the Executive Board adequately disclosed the contributions
to the membership. In support of that averment, the Local offered the
testimony of Attorney Gittler. Mr. Gittler stated that the one line sentence,
"Historically contributions for health and welfare and pension benefits have
been made for the following positions: Sergeant at Arms, Auditors, Executive
Board Members", which was read every four years during the nomination
meetings at the end of a resolution designating officer salaries, provided
adequate notice to the membership regarding the benefit payments. Tr.
934:11-23 (GITTLER). Although Mr. Gittler opined this was adequate
disclosure to the membership, the IHO rejects his opinion as having no basis
in law or fact.
80In the Matter of Local Union 1001 2004
The recitation, "historically contributions for health and welfare and
pension benefits," stated none of the pertinent facts necessary to apprise the
membership of the cost or the propriety of the contributions, the number of
positions funded, or the duration of the payments.See, e.g. GEB Ex.23 (May
1991 Nomination Meeting Minutes). The simple statement, added after the
announcement of the officers’ salaries, was not a disclosure. It was
misleading. The statement gave no indication that the law required persons
receiving benefit contributions be salaried or hourly employees. The
statement gave no indication that, by virtue of the contributions, unsalaried
officers would be eligible for second pensions, which they were ineligible for
regardless of the membership vote. This tactic of inserting a portion of a
proposal in a motion, making it appear that the membership knowingly
approved of it, is from the old labor school of the 1940’s and 1950’s. It is
precisely the type of conduct the regulations outlined in the LMRDA are
designed to prevent.
Most importantly, the passage of this motion could not legitimatize the
procedure. The general membership may not condone an illegal action,
regardless of the disclosure.See 29 USC § 501(a) ("A general exculpatory
provision in the constitution and bylaws of such a labor organization or a
general exculpatory resolution of a governing body purporting to relieve any
such person of liability for breach of the duties declared by this section shall
be void as against public policy."). Local 1001’s reliance onMcNamara v.
Johnson,522 F.2d 1157 (7th Cir. 1975), is misplaced.
Local 1001’s several explanations as to the legitimacy of the contribution
payments to the Benefit Funds lack any credibility. Even absent the showing
of fiduciary misconduct and other grounds relied upon by the GEB Attorney
to establish grounds for Trusteeship over Local 1001, demonstrated financial
malpractice is a sufficient and independent basis for imposing a trusteeship
over the Local.See In re Trusteeship of Local Union 73, 1996 A.O. 5, 11 (95-
013-TB) (affirming trusteeship based, in part, on failure of local to comply
with instructions from LIUNA to adequately document expenditures or to
adopt appropriate accounting systems to distinguish between personal and
business uses of union assets);International Bhd of Boilermakers v. Local
Lodge 714, 845 F.2d 687, 693 (7th Cir. 1988) (cases where local officers are
lining their own pockets constituted financial malpractice under trusteeship
provisions of LMRDA);IBT v. Local Union 705, 144 L.R.R.M. (BNA) 2676
(N.D. Ill. 1993) (Local union compelled to comply with trusteeship based on
financial malpractice of executive board including improper distribution of
funds). The IHO concludes that position of the management of the Union, in
continuing to assert the propriety of such a blatant misuse of union funds in
face of compelling evidence to the contrary, is a solid reason for placing the
union in trusteeship and replacing that management.
81In the Matter of Local Union 1001 2004
Evidence of Misappropriation
The GEB Attorney further charged that the conduct discussedsupra, also
supports finding that Local 1001 Local 1001 operated its affairs through a
pattern of racketeering activity; to wit; embezzlement under 29 U.S.C. §
501(a) and (c), which is defined as "barred conduct" under the LIUNA EPC.
In order to prove a violation of 29, § 501(c), the GEB Attorney must
demonstrate that the officers acted with specific criminal intent to deprive the
Union of its funds and that they converted the funds to their own use or the
use of another.See United States v. Welch, 728 F.2d 1113, (8th Cir. 1984);
United States v. Thoradarson,646 F.2d 1323 (9th Cir.), cert. denied, 454 U.S.
1055 (1981). "If union official profits personally through the use or receipt of
union funds, . . . the official bears the burden of proving that the transaction
was validly authorized in accordance with union’s constitution and bylaws
after adequate disclose, and it does not exceed fair range of reasonableness."
Teamsters, Chauffeurs, Warehousemen and Helpers, Local 764 v.
Greenawalt, et al.,919 F. Supp. 774 (M.D. Pa. 1996).
InUnited States v. Oliva, the Third Circuit Court of Appeals adopted a
totality of the circumstances test when determining the requisite fraudulent
intent.United States v. Oliva, 46 F.3d 320, 324 (3d Cir. 1995). The Court of
Appeals upheld the District Court’s jury instruction, which read in pertinent
. . . that in determining the issues of knowledge and fraudulent
intent, you may consider any statement made and acts done by
the defendant . . . as well as all of the facts and circumstances
in evidence which surround or attend the defendant’s action or
statements, or which may aid you in determining the
defendant’s state of mind.
Id. Accordingly, the IHO applies the totality of the circumstances test in
determining the specific intent required by 29 U.S.C. § 501(c).See, e.g., In
the Matter of Dennis Martire, IHO Order and Memorandum, 96-54D (April
29, 1997);In the Matter of Rene Torres, IHO Order and Memorandum, 98-
05D (July 22, 1998);In the Matter of Peter J. Fosco, IHO Order and
Memorandum 98-65D (October 14, 1999). Therefore, "fraudulent intent may
be inferred from the circumstances surrounding the transaction[s] without a
showing of specific intent . . . ."In the Matter of Gleason, 2000 A.O. 151,
158 (00-006-IHO). Fraudulent intent can be proved "by showing that [the]
defendant was sufficiently aware of the facts that he was acting wrongfully
and in contravention of the trust placed in him by the union and its members."
Id., citing, Welch, 728 F.2d at 1116 (citations and internal quotations omitted).
Local 1001 did not have valid authorization to pay contributions to the
Benefit Funds for uncompensated officers based on custom and practice, an
82In the Matter of Local Union 1001 2004
alleged oral agreement, or membership approval. Listing ineligible persons
on an employer contribution report and then paying contributions on their
behalf to a benefit plan is tantamount to the misapplication of the general
assets of the Union. Tr. 444:3-7 (MARIA). Local 1001 contributions to the
Benefit Funds are paid from the General Fund of the Local. Tr. 451:13-14
Further, the contributions paid on behalf of the part-time, uncompensated
Local officers far exceeded the fair range of reasonableness. These officer
positions traditionally require attendance at monthly meetings for which
LIUNA locals offer the officers a small monthly stipend. Under no theory
could uncompensated part-time officers qualify for the receipt of a full
pension or welfare benefits. Nevertheless, for at least 18 years, the Local has
made sizeable financial contributions on behalf of these individuals. While
the reporting to the Department of Labor that the officers received no
compensation, the Local simultaneously filed employer contribution reports
with the Benefit Funds suggesting that the same individuals had worked actual
hours consistent with full-time employment.See GEB Ex. 6 (Local 1001
Local LM-2 Reports 1982 -2002); GEB Ex. 8 (Misc. Local 1001 Employer
Contribution Reports to the Benefit Funds). All of the part-time officers had
full-time employment elsewhere.
A prime example of this illegal practice is the payment of pension and
welfare contributions for Mr. Capasso. Since 1986, Mr. Capasso has been
employed as the full-time Executive Director of the City Pension Fund. The
City Pension Fund pays Mr. Capasso a salary based on his full-time
administration, and provides him with full pension and welfare benefits. Prior
to his employee as Executive Director, Mr. Capasso was full-time employed
and receiving benefits from the City of Chicago in another position.
Nonetheless, when he was appointed as a Local 1001 auditor to fill a vacancy
in 1984, the Local commenced paying contributions to the Benefit Funds that
would ultimately have resulted in Mr. Capasso receiving second full pension
and welfare benefits had his claim not been denied.
The fact that Mr. Capasso’s position as Auditor had no real attendant
responsibilities has been previously examined,supra. Aware that the position
required no actual duties, Local 1001 attempted to justify the payments to Mr.
Capasso on the basis that his position as Auditor made him available for
advice and counsel to the membership and officers on various matters, such as
pension advice. However, supplying advice on pension matters is part of Mr.
Capasso’s full-time job with the City Benefit Fund. Mr. Capasso also
contended he supplied advice about laying asphalt, based on his experience
working labor during the summers when he was in college over 40 years ago.
If the LIUNA members working today require advice on laying blacktop from
someone who worked a summer job more than 40 years ago, the skills of this
Union are in dire shape. In short, there is absolutely no reasonable basis on
83In the Matter of Local Union 1001 2004
which the Executive Board could have concluded that Mr. Capasso should
become a fully-vested pensioner by virtue of his Auditor position.
The IHO has no difficulty concluding that the enormous contributions the
Local has made on of behalf of unpaid officers wrongfully deprived the Union
of its assets and was, at best, unreasonable. In addition, evidence that the
Local under-reported over $80,000 in contributions for clerical employees
supports a further conclusion that the Local was, in fact, funding its
contributions for ineligible participants by purposely reducing the number of
hours reported for the office staff. In some, the officers have violated their
fiduciary duty and misappropriated funds.
ERISA Reporting Violations
The GEB Attorney has also charged that Local 1001’s filing of
untruthful, inaccurate and incomplete contribution reports on a monthly basis
for a period of up to 18 years violates 18 U.S.C. § 1027 and offers further
proof that the Trusteeship is necessary. Section 1027 of Title 18 specifically
prohibits the making of false statements to ERISA funds in connection with
reports filed by employers to those funds. The employer contribution reports
submitted to the Benefit Funds by Local 1001, in particular Mr. Gironda,
contain a certification that must be signed by an officer of the employer.See,
e.g.,GEB Ex. 8 (Misc. Local 1001 Employer Contribution Reports).
There is no dispute on this record whether Mr. Giranda, and other officers
of Local 1001 before him, signed the contribution report certifications on a
monthly basis before submitting them to the Benefit Funds. Rather, Local
1001 contended that the information contained in the reports was and is not
false, and therefore that the certifications are true and correct. In support of
that averment, Local 1001 presented convoluted theories under which the
unpaid officers were both employees, and the "actual hours" reported did not
necessarily mean actual hours that the officers worked. This argument is
The Benefit Funds’ require a certification, which reads "we hereby certify
that this report includes all hours worked by all laborers in our employee."
See, e.g.,GEB Ex. 8 (Misc. Local 1001 Employer Contribution Reports). The
plain language of the certification speaks for itself. In addition, the
certification report clearly required, at least until 2002, that employers list
"actual hours worked" in weekly columns, followed by a monthly total.
Although the form physically changed in 2002, omitting the necessity to input
weekly figures, the input for total monthly hours worked, as well as the
certification that the report states those hours accurately, remained unchanged.
There is nothing on the report that could possibly indicate that Local 1001 was
required to report anything less than or other than actual hours worked.
Finally, the officers were well aware of the vesting requirements of the
84In the Matter of Local Union 1001 2004
Benefit Funds, which required an employee to work a specified minimum
hours before receiving benefits. For the Benefit Funds’ information, officials
at Local 1001 were required to certify to the Benefit Funds that the individuals
worked and were paid, for example in the case of the Pension Fund, over 870
hours per year at Local 1001. To accomplish the vesting of unpaid officers,
Local 1001 officials falsely certified that those individuals worked 120 actual
hours per month in violation of 29 USC 1027.
Conduct Inconsistent with LIUNA’s Internal Reform Process
During the investigation of Local 1001 conducted by the Inspector
General’s Office, several members of Local 1001 refused to cooperate with
requests for interviews by the Inspector General in furtherance of ongoing
disciplinary investigations.See GEB Ex. 40 (Letter from Robert D. Luskin to
Peter Faraci of 11/10/03). Each of these members told the LIUNA Inspector
that they refused to submit to any interviews upon the advice of Mr. Faraci.
Id.In a letter responding to Inspector O’Rourke’s "attempt to question the
employees and members of the Executive Board of Local 1001 about the
trusteeship matter currently before the Independent Hearing Officer," Mr.
Faraci contended that he had "been retained to represent the Executive Board
and employees of Local 1001 for some time now." GEB Ex. 39 (Letter from
Peter S. Faraci to John J. O’Rourke of 11/7/03). Specifically, Mr. Faraci
averred, "Any communication you seek to have with the employees or
Executive Board of Local 1001 must be directed through my office. Do not
attempt to contact them without my knowledge and approval."Id.
Mr. Faraci’s assertion and the member’s refusal to cooperate do not
comport with stated LIUNA policy. LIUNA adopted The Revised General
Executive Board’s Policy on Payment of Legal Fees with Union Funds (The
GEB Policy on Payment of Legal Fees) on February 5, 2000.See EPC,
Revised Policy on Payment of Legal Fees, p.14. "The GEB Policy on
Payment of Legal Fees flatly prohibits the use of union funds to represent
individual union members in disciplinary investigations or prosecutions."
GEB Ex. 40 (Letter from Robert D. Luskin to Peter Faraci of 11/10/03). As
counsel for Local 1001, Mr. Faraci could not advise individual members
without violating GEB Policy and raising grounds for disqualifying his further
representation of the Local.Id. Moreover, Mr. Faraci’s instruction
contradicted each member’s affirmative duty to cooperate fully with the
Inspector General, irrespective of advice of counsel, as clearly delineated in
LIUNA’s EDP.Id., see also EDP, Section 4, pp. 30-31.
Both the IHO and the Appellate Officer have made clear on numerous
occasions that members’ refusal to cooperate with the Office of the Inspector
General or the GEB Attorney will not be tolerated.See In the Matter of Caci,
1998 A.O. 55, 69-70 (97-016-IHO, 98-009-IHO, 98-012-IHO) (entitling GEB
Attorney to exercise powers conferred in EDP without interference);In the
85In the Matter of Local Union 1001 2004
questions fully and truthfully, knowing defiance subject to discipline);In the
Matter of Garcia, 1996 A.O. 105 (96-010-IHO) (interfering with the IG’s
investigation by forbidding subordinates to provide information under threat
of termination constitutes obstruction);In the Matter of Anthony Franco, IHO
Order and Memorandum, 02-01D (December 16, 2002) (burdening charged
party at all times with full cooperation in every particular with those
representing Union as a body);In the Matter of Prudencio Martinez, IHO
Order and Memorandum, 01-18D (August 8, 2002) (obstructing IGO by
providing investigator falsified minutes justifying fraudulent severance plan);
(Apr. 24, 2001) (refusing to appear for deposition improper and warrants
discipline );In the Matter of Baker, Herod & Ventura, IHO Order and
Memorandum, 98-01D (May 27, 1998) (prohibiting members’ choosing
which investigation to cooperate with or ignoring IG requests for interview);
1997) (refusing IG interview or GEB deposition constitutes barred conduct);
(integrity of LIUNA process depends upon ability of IG and GEB Attorney to
obtain truthful interview and deposition answers; members cannot ignore
official investigation); 96-86D (Sept. 25, 1997) (refusing GEB Attorney or IG
interview plain obstruction and barred conduct). Given the circumstances
involved in this matter, the IHO now reiterates a strong admonishment against
members or attorneys attempting to obviate the unambiguous authority vested
internal reform process.See EDP, Sections 3 & 4. Every LIUNA member is
obligated "to observe, conform and comply with . . . all of the rules,
regulations, policies, practices and lawful orders" of LIUNA and "to refrain
from interfering with the proper conduct of all the business" of the Union.
Constitution, Article III, Sections 3(b) & (d).
In sum, Local 1001 has impressed the IHO that the Executive Board has
hindered the spirit and intent of LIUNA’s Internal Reform Movement. Prior
to and throughout the Trusteeship proceedings in this matter, Local 1001 has
maintained an antagonistic stance towards the International Union, which is
inconsistent with the ideals that the reform movement has adopted since 1995.
The IHO would be errant if failing to note critically that this uncooperative
posture, which has permeated Local 1001’s dealings with the International
Union, is an unacceptable deterrent to the sweeping reforms LIUNA has
1. There is a preponderance of the evidence that Local 1001 continues
to be infiltrated by organized crime. This is based upon the fact that the two
86In the Matter of Local Union 1001 2004
Business Managers/Presidents, Ernest Kumerow and Bruno Carouso, who
have held those offices from 1984 to 2001, have been recognized organized
crime associates. Bruno Caruso, who held office from 1994 to 2001, was
removed from office by the IHO on charges of being an associate of organized
crime. Once organized crime has infiltrated a union it does not disappear
upon the removal of a suspect officer. Mr. Gironda, the present Business
Manager, was brought to power and promoted by Mr. Kumerow and Bruno
Caruso, after being suspended by the City of Chicago for failure to supervise
personnel in a no show work incident. Mr. Gironda succeeded Bruno Caruso
when he was removed. The combination of the administration of these
individuals and the Local’s history of 30 years without one contested election
presents a situation that the IHO has recognized cannot be ignored in the
LIUNA reform process. The Local 1001 situation is more extreme than that
of Local 1058 in Pittsburgh, which was placed under supervision in a similar
factual situation in 2000.
2. There is a preponderance of the evidence to prove that Local 1001
has paid pension and health and welfare benefits for 33 individuals who were
not salaried employees and had no right to pensions or welfare benefits. The
potential financial ramifications based upon the contributions made and the
benefits paid and potential benefits to be paid are substantial, and constitute
clear evidence of financial malpractice and possible federal criminal
violations. The factual situation of the payments on behalf of James Capasso,
and the local’s attempt to justify them are farcical, and are prime examples of
the need to replace the management structure of Local 1001.
3. As further evidence of financial malpractice, while making the
aforementioned illegal contributions on behalf of Mr. Capasso and others,
Local 1001 made less than required pension and welfare contributions on
behalf of the paid office and secretarial staff of Local 1001. It is a reasonable
inference that the reason for the shortfall payments on behalf of the working
office and secretarial staff was the shortage created by the need to make the
illegal payments on behalf of the unpaid individuals noted above. There is a
preponderance of the evidence that Local 1001 has committed numerous
violations of the ERISA statute.
4. In making these conclusions, the IHO notes a disturbing attitude of
Local 1001 and its professional consultants regarding the LIUNA reform
process. The reform process was instituted to engage all LIUNA personnel
into an active campaign to combat corruption. This is not accomplished as
evidenced in this matter by union officials hiding in the tall grass, hoping their
improper activities will not be noticed, and when discovered, engaging in
patently obvious attempts to justify them. The IHO also notes that the
improper efforts here go to the pension and welfare funds, an area that has not
been the main focus of the independent officers in the reform effort. Let there
87In the Matter of Local Union 1001 2004
be no doubt that misuse of pension and welfare funds are a subject of this
reform effort, and will be dealt with accordingly.
Trusteeship over Local 1001 is necessary to correct organized crime
influence over the Local, correct financial malpractice, and restore democratic
PETER F. VAIRA
Robert D. Luskin, Esquire
Robert M Thomas Jr., Esquire
Mathias A. Lydon, Esquire
Samuel Mendenhall, Esquire
Peter S. Faraci, Esquire
Laborers for JUSTICE©
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