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CONTENTS I. PROCEDURAL BACKGROUND II. FACTUAL FINDINGS CONTAINED IN THE ELECTION OFFICER'S DECISION III. INVESTIGATION SUBSEQUENT TO THE ELECTION OFFICER'S DECISION A. Additional Improper Fundraising SchemesIV. LEGAL ANALYSIS WITH RESPECT TO DISQUALIFICATION1. DNC Swap SchemeB. Mr. Carey's Knowledge of These Improper Schemes A. Racketeering in the International Brotherhood of Teamsters I. PROCEDURAL BACKGROUND On August 21, 1997, Barbara Zack Quindel, the Election Officer for the International Brotherhood of Teamsters (the "IBT"), after an investigation of several months, issued her decision concerning post-election protests regarding the 1996 International officer election (the "1996 election"). See Decision of Election Officer in In re: Jeraldine Cheatem, et al., dated August 21, 1997 (the "Election Officer's decision of August 21, 1997"). The Election Officer, in that decision, found as a factual matter that several contributions, totaling over two hundred thousand dollars, had been made by third parties to Mr. Carey's reelection campaign (the "Carey campaign") in violation of the Rules for the 1995-1996 IBT International Union Delegate and Officer Election (the "Election Rules" or "Rules"). The Election Officer further determined, based on the evidence available to her at that time, that (1) individuals working on the Carey campaign were responsible for soliciting these improper contributions and (2) Mr. Carey himself did not have knowledge of, or involvement in, these violations. Notwithstanding the latter determination, the Election Officer stated that "[i]f, subsequent to the issuance of this decision, evidence is brought to the Election Officer's attention that could warrant disqualification of Mr. Carey . . ., the Election Officer will consider it." Id. at 119. Additional evidence did come to light after the Election Officer's decision
of August 21, 1997. On September 18, 1997, three individuals associated with the
Carey campaign -- Jere Nash, Martin Davis and Michael Ansara -- each pled guilty
in the United States District Court for the Southern District of New York to
felonies arising out of their conduct on behalf of the Carey campaign. n1 As
part of their respective plea agreements, these three individuals each agreed to
cooperate fully with the United States Attorney's Office. n1 Mr. Nash pled guilty to one count of conspiracy and one count of making
false statements. Mr. Davis pled guilty to one count of conspiracy, one count of
embezzling union funds and one count of mail fraud. Mr. Ansara pled guilty to The Election Officer subsequently reopened her investigation into whether Mr.
Carey had knowledge of, or involvement in, the illegal acts engaged in by
Messrs. Nash, Davis and Ansara. At the outset of that investigation, the
Election Officer discovered information which led her to recuse herself from any
further investigation. See Election Officer's September 23, 1997 letter to the
Honorable David N. Edelstein. By Judge Edelstein's Order, dated September 29,
1997, I was designated Election Officer "for the sole purpose of
investigating and deciding the issue of disqualification of Ronald Carey from
the rerun election." See September 29, 1997 Order at 2. II. FACTUAL FINDINGS CONTAINED IN THE ELECTION OFFICER'S DECISION The Election Officer, in her August 21, 1997 decision, made certain factual findings concerning violations by the Carey campaign, which findings are not challenged by the parties to this post-election protest. Those findings are summarized below. Mr. Carey began his campaign for reelection as General President of the IBT in 1994. The law firm of Cohen, Weiss & Simon ("Cohen Weiss") worked as counsel to his campaign. Cohen Weiss had represented Mr. Carey previously, including during his 1991 campaign. Susan Davis, a partner at Cohen Weiss, served as the principal attorney for the Carey campaign. In late 1995, Mr. Carey hired the November Group, a Washington-based political consulting firm, to work on his campaign. Martin Davis, one of the principals of the November Group, had worked on Mr. Carey's 1991 campaign, and, through the November Group, had provided services periodically to the IBT from 1992 through 1995. In February 1996, Mr. Carey hired Jere Nash as his campaign manager. Mr. Nash, a political consultant, had previously served as a consultant to the IBT in 1992, 1994 and 1996. In or about April 1996, the November Group retained Share Group, Inc. ("Share Group"), a telemarketing firm in the Boston area, to assist with fundraising for the Carey campaign. Share Group was run by Michael Ansara. In July 1996, following the IBT International Convention, Mr. Nash and Mr. Davis agreed that the November Group should conduct a large direct mail campaign to coincide with the mailing of ballots to IBT members. Although the direct mail campaign would cost several hundred thousand dollars, Mr. Nash and Mr. Davis considered this mail campaign essential to ensuring Mr. Carey's reelection. Mr. Nash and Mr. Davis believed that some of the funds for this direct mail campaign, as well as funds for other campaign activities, could be raised from wealthy individuals who were not members of the IBT. In August or September 1996, Mr. Nash spoke with Cohen Weiss about setting up a committee to accept donations from non-IBT members to support the Carey campaign. Shortly thereafter, Cohen Weiss established this committee, which was named the Teamsters for a Corruption Free Union (the "TCFU"). Funds from the TCFU were ultimately transferred to the November Group to pay for expenses related to the Carey campaign. In August 1996, Mr. Davis asked Mr. Ansara to raise $15,000 to $20,000 for
the Carey campaign. Mr. Davis informed Mr. Ansara that the IBT Election Rules
prohibited employers from contributing or soliciting contributions for the
campaign, but he indicated that Mr. Ansara could have spouses of employers
contribute, so long as those spouses did not themselves employ anyone. Mr.
Ansara proceeded to raise $1,250 for the Carey campaign from the spouses of
other executives of Share Group, as well as $96,250 from his wife, Barbara
Arnold. n2 Of these funds, $95,000 was provided to the TCFU and the remaining
$2,500 was provided directly to the Carey campaign. n2 Ms. Arnold was reimbursed for money she contributed to the TCFU through
various schemes implemented by Messrs. Ansara and Davis. A discussion of these
schemes can be found at pp. 75-78 of the Election Officer's decision of August
21, 1997. On or about September 30, 1996, Mr. Davis and Mr. Ansara had a meeting at which they discussed, among other things, the critical need to raise additional money for the Carey campaign. Mr. Davis explained that the race was very close and that the Hoffa campaign was raising four or five times as much money as the Carey campaign. Mr. Davis stated that he believed Mr. Carey would lose the election if considerable additional sums of money were not raised. At this meeting and at a subsequent meeting on October 5, 1996, Messrs. Davis and Ansara conceived of a contribution swap scheme to raise additional funds for the Carey campaign through the TCFU. The scheme, as devised by Messrs. Davis and Ansara, was to identify wealthy, non-employer supporters of certain political causes or candidates and to obtain contributions from them for the Carey campaign through the TCFU. In exchange, the IBT would make a contribution in a larger amount to a political organization or advocacy group (generally a get-out-the-vote advocacy group) supported by these wealthy individuals. In early October 1996, Mr. Ansara asked Charles Blitz, an acquaintance of Mr. Ansara's, to solicit contributions for the Carey campaign pursuant to this swap scheme. Mr. Blitz agreed. It was agreed that Mr. Blitz would send contribution checks from these wealthy individuals to Mr. Ansara, who would hold the checks until he learned that the corresponding IBT contribution had been made. IBT political contributions were coordinated by William ("Bill") Hamilton, who was appointed in January 1995 as the IBT Director of Government Affairs. It was Mr. Hamilton's responsibility to recommend to Mr. Carey entities to which IBT political contributions might be made, as well as to recommend the amounts of such contributions. In mid to late October 1996, Mr. Nash met with Monie Simpkins, Mr. Carey's Executive Secretary, at the Carey campaign headquarters. Mr. Nash told Ms. Simpkins that the IBT would be making contributions to certain political organizations and, in return, donations would be made to the campaign. Mr. Nash told Ms. Simpkins that it was important that she expedite these contribution requests when they arrived at her desk. Mr. Nash subsequently called Ms. Simpkins concerning contribution requests
which, he informed her, were being sent from Mr. Hamilton to her. Mr. Nash asked
that she expedite each of these requests. Mr. Carey was often out of town during
this time and communicated with Ms. Simpkins by telephone. Ms. Simpkins informed
Mr. Carey of these requests by telephone when he was out of the office. The
documentary record, and the testimony of Ms. Simpkins, indicates that Mr. Carey
approved these requests. n3 n3 On three of the four requests, Ms. Simpkins signed both Mr. Carey's
initials and her own. On the first request, she signed only her own initials.
Ms. Simpkins stated that Mr. Carey approved this request and that she simply
failed to sign his initials. Mr. Carey testified in a deposition before the
Election Officer that he has no recollection of these requests, but assumes that
he approved these expenditures because Ms. Simpkins initialed the requests,
signifying his approval. The Election Officer found the following contributions by the IBT, all of which came out of the IBT's general treasury, to be part of this improper swap scheme (referred to herein as the "the TCFU swap scheme"):
n4 The IBT check for $475,000 was made payable to the Committee for a
Responsible Congress (the "CRC"), an affiliate of Citizen Action. As a result of these donations by the IBT, which were made over the span of a
week and which totaled $735,000, the Carey campaign received $227,500 in
contributions from wealthy individuals. n5 n5 The Election Officer, in her decision of August 21, 1997, identified only
$110,000 in donations to the Carey campaign that had been obtained as part of
the TCFU swap scheme. Since then, a total of $227,500 in contributions to the
Carey campaign have been identified: (a) $110,000 was donated to the TCFU in
exchange for the IBT contribution to Citizen Action; (b) $75,000 was donated to
the TCFU in exchange for the two IBT contributions to Project Vote; and (c)
$42,500 was provided by the NCSC to the November Group in exchange for the IBT
contribution to the NCSC. The November Group applied these funds from the NCSC
to the direct mail fees of the Carey campaign. In early November 1996, the November Group, on behalf of the Carey campaign, distributed 1,697,214 pieces of direct mail campaign literature, timed to coincide with the mailing of the ballots. The count of unchallenged ballots was concluded on December 14, 1996. A first supplemental count was concluded on December 18, and a second occurred during the period of January 8-10, 1997. A recount took place during the period of March 24-27, 1997. A total of 486,300 ballots were cast union-wide, representing 35.9% of eligible IBT voters. Mr. Carey was declared the winner for the office of General President, having won by 15,918 votes. On August 21, 1997, the Election Officer issued her decision, determining, among other things, that (1) the TCFU swap scheme and (2) the contributions to the TCFU made or solicited by employers and spouses of employers, were improper fundraising activities which violated the Election Rules. Because the Election Officer concluded that those violations may have affected the outcome of the election, she invalidated the election results and ordered a rerun election. The Election Officer further concluded, based on the evidence available to her at that time, that Mr. Carey had no contemporaneous knowledge of these illicit fundraising schemes. As previously stated, after the Election Officer issued her decision,
significant testimonial and documentary evidence came to light. This evidence
not only identified four additional improper fundraising schemes, but more
importantly, provided substantive additional information with respect to Mr.
Carey's knowledge of certain of these improper schemes. The most important new
evidence is the testimony of Messrs. Nash and Davis, obtained after they entered
felony pleas and agreed to cooperate with the United States Attorney's Office.
n6 Significant new documentary evidence was also obtained after the Election
Officer's decision, including documents obtained pursuant to subpoenas issued to
law firms representing the Carey campaign and the IBT. n7 Section A, below,
discusses the additional improper fundraising schemes which were revealed in the
recent testimony of Messrs. Nash and Davis. Section B addresses the issue of Mr.
Carey's knowledge of, and participation in, these improper schemes and those
previously identified by the Election Officer. n6 Messrs. Nash and Davis were interviewed by the Election Officer before they pled guilty, but did not provide a complete and accurate account of their fundraising activities during those interviews. n7 In addition to interviewing Messrs. Nash and Davis, my staff and I
interviewed numerous other factual witnesses and reviewed thousands of documents
(including documents and interview memoranda from the files of the former
Election Officer). My office issued testimonial and/or documentary subpoenas to
the following individuals and entities: William Hamilton; Richard Trumka; Cohen
Weiss and Simon; Zuckerman, Spaeder, Goldstein, Taylor & Kolker; Project
Vote, the NCSC; and the AFL-CIO. A. Additional Improper Fundraising Schemes The recent testimony of Messrs. Nash and Davis reveal the following
additional improper schemes to raise funds for the Carey campaign. 1. DNC Swap Scheme Martin Davis stated at his interview with our office that, during the 1996 campaign, he conceived of the idea of extracting or "leveraging" contributions from members of the Democratic party in exchange for IBT contributions to the Democratic National Committee (the "DNC") and its affiliated organizations. Mr. Davis stated that he discussed this scheme with Jere Nash and Bill Hamilton, and that both approved of the scheme. Prior to the 1996 campaign, the IBT had already intended to make contributions to the DNC and its affiliates during the 1996 federal campaign. Mr. Davis' plan was to obtain donations to the Carey campaign from wealthy donors identified by the DNC in exchange for larger than anticipated contributions from the IBT to the DNC. In the Spring and Summer of 1996, Mr. Davis told individuals associated with the DNC and the Clinton-Gore '96 Reelection Committee, including Terry McAuliffe, that he wanted to help the DNC by raising more money from the IBT than the DNC originally anticipated. Mr. Davis asked if the DNC, in exchange, could raise $100,000 for the Carey campaign. In June or July 1996, Mr. Davis was informed by either the Clinton-Gore '96 Re-election Committee or the DNC that they had identified a donor who was willing to give $100,000 to the Carey campaign. However, it was later determined that this person was an "employer," as that term is defined under the Election Rules and, therefore, could not contribute. Mr. Davis continued to urge Mr. McAuliffe and others associated with the DNC to identify an eligible donor to the Carey campaign. Mr. Davis also asked Jere Nash to request that Bill Hamilton postpone payment of the IBT's contributions to the DNC until an eligible donor or donors had been identified. According to Mr. Nash, Mr. Hamilton agreed to delay the IBT's contributions. Mr. Davis' request that Mr. Hamilton delay the IBT's contributions to the DNC is memorialized by a handwritten notation on an August 10, 1996 memorandum from Richard Sullivan of the DNC, requesting IBT contributions totaling approximately $1 million. Mr. Davis reviewed and then forwarded this memorandum to Mr. Hamilton at the IBT, with a handwritten note stating, "I'll let you know when they [the DNC] have fulfilled their commitments." Ultimately, the DNC never succeeded in locating an eligible donor to the Carey campaign. Despite the fact that no funds were raised for the Carey campaign through
this DNC swap scheme, it is clear that the individuals who participated in the
scheme violated the Election Rules. The Election Rules provide that "[n]o
Union funds . . . shall be used, directly or indirectly, to promote the
candidacy of any individual." Art. XII, Sec. 1(b)(3). Here, IBT funds --
the IBT's contribution to the DNC -- were used as leverage in an attempt to
obtain funds for the Carey campaign, in clear violation of the Election Rules. 2. Contributions by Non-IBT Union Officials to the Carey Campaign The Election Rules prohibit high-ranking officials of unions other than the
IBT from contributing or soliciting funds for an IBT candidate because such
officials are deemed "employers" under the Rules. Art. XII, Sec.
1(b)(1). See Election Officer's Advisory on Campaign Contributions and
Disclosure 10 (Nov. 1997) (incorporating definition of employer in 29 U.S.C. §
402(e), which includes as an employer any person acting "as an agent of an
employer in relation to an employee"). In clear contravention of the
Election Rules, Messrs. Davis and Nash obtained significant contributions for
the Carey campaign from non-IBT union officials. Mr. Davis stated that he
approached Paul Booth, the National Organizing Director of the American
Federation of State, County, and Municipal Employees ("AFSCME") and
Richard Trumka, Secretary-Treasurer of the American Federation of Labor and
Congress of Industrial Organization ("AFL-CIO"), and asked each to
raise $50,000 for the Carey campaign. n8 Mr. Nash stated that these non-IBT
union officials raised a total of approximately $77,100 in cash and checks for
the Carey campaign: $27,100 from Mr. Booth and $50,000 from Mr. Trumka. Mr. Nash
stated that the cash donations were funneled into the Carey campaign through
various members of the IBT. n8 Nash stated that he was told that Andrew Stern, President of Services Employees International Union ("SEIU"), also agreed to raise $50,000 for the Carey campaign. Mr. Nash stated that he learned in the Summer or Fall of 1996 that Mr. Stern had not yet raised his $50,000 commitment. Mr. Nash subsequently approached Ed James, an attorney representing SEIU who, Mr. Nash was informed, could determine whether Mr. Stern would fulfill his commitment. Mr. James later verified the commitment and agreed to attempt to raise the $50,000. Mr. James ultimately raised $16,000 from non-employers, which was contributed to the TCFU. Although Mr. James was not a union official, he was still prohibited from soliciting funds because, as a member of a law firm, he was an employer. The Election Officer, in her decision, made reference to Mr. James's solicitations, totaling $16,000, but was not aware that Mr. James was approached as part of a larger scheme to solicit funds from non-IBT union officials. According to Mr. Nash, Mr. James also benefited the Carey campaign through
the following additional arrangement. Mr. James' wife, who is a public relations
executive, agreed to hire a Carey campaign staff member (Steve Wattenmaker)
immediately after the campaign, thus allowing Mr. Wattenmaker to accept a
reduced salary from the Carey campaign for approximately the last three months
of the campaign. The testimony of Mr. Davis and Mr. Nash with respect to these solicitations
is confirmed by Mr. Booth. Mr. Booth has stated (1) that he was contacted by
Messrs. Davis and Nash and asked to raise funds for the Carey campaign, and (2)
that he did, in fact, raise funds for the Carey campaign. Mr. Booth believes
that he raised between $30,000 and $35,000 in cash and checks for the Carey
campaign, although he did not keep any records. Mr. Booth also stated that, of
the total amount raised by AFSCME, $20,000 was raised in cash by Gerald McEntee,
International President of AFSCME. Mr. McEntee has stated that he solicited the
$20,000 in cash from Paul and Michael Kelly, the owners of Kelly Press, a
company that does work for AFSCME. The Carey campaign did not identify Paul and
Michael Kelly's contribution of $20,000 in its campaign disclosure forms. n9 n9 Paul and Michael Kelly clearly are "employers" under the
Election Rules, and therefore are ineligible to make contributions. Mr. Trumka was subpoenaed by my office, but refused to testify, asserting his
Fifth Amendment right against self-incrimination. 3. Funneling IBT Funds to the November Group Through the AFL-CIO and Citizen Action In the Fall of 1996, Mr. Davis sought to raise an additional $100,000 to cover more of the costs of the direct mail campaign to be conducted by the November Group for the Carey campaign. Mr. Davis initially sought to raise these funds by arranging for another IBT contribution to Citizen Action. In late October 1996, Citizen Action agreed that if Mr. Davis could obtain an additional contribution from the IBT of $150,000, Citizen Action would pay the November Group $100,000. Mr. Davis told Mr. Nash that he wanted the IBT to make another contribution to Citizen Action which would, like the first contribution to Citizen Action for $475,000, benefit the Carey campaign. To follow up on Mr. Davis' request, on October 31, 1996, Ira Arlook of Citizen Action sent Mr. Hamilton a request for an additional $150,000 contribution from the IBT. In that letter, Mr. Arlook noted that the IBT had already "been extremely generous in supporting [Citizen Action's] efforts." Mr. Hamilton turned down this request from Citizen Action. Mr. Hamilton wrote to Mr. Arlook on November 1, 1996, stating, "[m]uch as I'd like to, we can't do the additional request." Mr. Nash stated that he was told by Mr. Hamilton that an additional contribution to Citizen Action could not be justified, since the IBT had recently given the group $475,000. After learning that Mr. Hamilton denied the Citizen Action request for $150,000, Mr. Davis stated that he approached Richard Trumka, the Secretary-Treasurer of the AFL-CIO, and asked whether his union could donate $150,000 to Citizen Action. Mr. Davis explained to Mr. Trumka that such a donation by the AFL-CIO would help the Carey campaign. According to Mr. Davis, Mr. Trumka indicated that the AFL-CIO did not have any money to contribute. Mr. Davis stated that he and Mr. Trumka then agreed that if Mr. Davis could persuade the IBT to give $150,000 to the AFL-CIO, Mr. Trumka would have the AFL-CIO provide $150,000 to Citizen Action. Mr. Davis then asked Mr. Nash to arrange for the IBT to contribute $150,000 to the AFL-CIO in order to benefit the Carey campaign. Mr. Nash asked Mr. amilton to recommend such a contribution, and Mr. Hamilton agreed to submit a request to contribute $150,000 of IBT funds to the AFL-CIO. By memorandum dated October 31, 1996, Mr. Hamilton asked for Mr. Carey's approval "to move $150,000 in general treasury funds to the AFL-CIO's [political action committee] COPE program to help finance get-out-the-vote activity in selected Labor '96 states." The request was approved on November 1, 1996, and a check for $150,000 was sent to the AFL-CIO. According to Mr. Davis, the AFL-CIO then transferred $150,000 to Citizen Action, which then forwarded $100,000 to the November Group. This $100,000 was applied by Mr. Davis to the costs of the direct mail campaign conducted by the November Group for the Carey campaign. This contribution to the AFL-CIO in the amount of $150,000 was the last of a
series of political contributions by the IBT designed to raise money for the
Carey campaign. The other contributions were part of the TCFU swap scheme,
described above, by which $735,000 of IBT general treasury funds were
contributed, in the period of a week, to the NCSC, Project Vote and Citizen
Action. Thus, including the contribution to the AFL-CIO, Mr. Carey, between
October 17, 1996 and November 1, 1996, made political contributions totaling
$885,000 from the IBT's general treasury. These contributions, in turn,
triggered donations in the amount of $327,500 to his campaign. 4. Cash Contribution by Theodore Kheel In September 1996, Theodore Kheel, a prominent labor attorney and an
employer, was solicited by Mr. Davis for a contribution to the Carey campaign.
n10 Mr. Kheel stated that he would agree to contribute $20,000 to the Carey
campaign, but that he wanted an assurance from Mr. Davis that his contribution
would be kept confidential. Mr. Davis assured Mr. Kheel that his contribution
would not be disclosed. n10 In our interview of him, Mr. Kheel stated that he employs a full-time
bookkeeper and a full-time secretary. Mr. Kheel was originally contacted by
Charles McDonald of Union Privilege, but was subsequently contacted by Mr.
Davis. On September 20, 1996, Mr. Davis met Mr. Kheel at his office in New York and received from Mr. Kheel an envelope containing $20,000 in cash. Mr. Kheel stated at his interview that he obtained these funds by making two $5,000 cash withdrawals from his bank account and taking $10,000 in cash from his safety deposit box. The Carey campaign did not report Mr. Kheel's $20,000 contribution in its campaign disclosure forms. * * * In sum, the improper campaign activities contained in the Election Officer's
decision of August 21, 1997, combined with those which came to light subsequent
to her decision, reveal a total of six improper schemes used by the Carey
campaign to generate funds for the campaign: (1) the contributions by employers
and the spouses of employers to the TCFU, which raised approximately $113,500;
(2) the TCFU swap scheme involving IBT contributions to Project Vote, the NCSC,
and Citizen Action, which raised approximately $227,500; (3) the DNC swap
scheme, which failed to raise any money; (4) the contributions from officials at
AFSCME and AFL-CIO, which raised approximately $77,100; (5) the funneling of IBT
funds to the November Group through the AFL-CIO and Citizen Action, which raised
approximately $100,000; and (6) the cash contribution from Theodore Kheel, which
raised $20,000. Through these schemes, the Carey campaign improperly raised a
total of approximately $538,100. B. Mr. Carey's Knowledge of These Improper Schemes Critical to any decision concerning whether Mr. Carey should be disqualified as a candidate in the rerun election is whether he participated in, or had knowledge of, any of the six improper fundraising schemes identified above. If Mr. Carey had no knowledge of these schemes, disqualification, as the Election Officer noted in her August 21, 1997 decision, would be inappropriate. If, on the other hand, Mr. Carey participated in certain of the schemes or had contemporaneous knowledge of them, the disqualification of Mr. Carey would have to be considered as a possible remedy to these serious violations. The following three witnesses, apart from Mr. Carey himself, provide
significant evidence with respect to whether Mr. Carey was aware of, or
participated in, any or all of the improper fundraising schemes: Jere Nash, Bill
Hamilton and Monie Simpkins. n11 As discussed below, each of these individuals
had contact with Mr. Carey during his campaign and, according to their
statements, discussed with Mr. Carey important information related to certain of
these improper schemes. Mr. Carey's testimony with respect to these schemes and
his conversations with Mr. Nash, Mr. Hamilton and Ms. Simpkins is also analyzed
below. n11 I interviewed Mr. Davis and Mr. Ansara following their guilty pleas.
Neither related any discussions with Mr. Carey concerning any of these improper
schemes. 1. Jere Nash's Testimony Regarding Mr. Carey's Knowledge of Fundraising Schemes I interviewed Mr. Nash on October 9, 1997, shortly after my appointment. Mr. Nash testified that he either participated in or had knowledge of all six of the above-mentioned improper fundraising schemes. In addition, as set forth below, Mr. Nash stated that he discussed information concerning certain of these schemes with Mr. Carey. With respect to the DNC swap scheme, Mr. Nash stated that in the Spring of 1996, Mr. Davis informed him that he had spoken with Terry McAuliffe, a representative of the Clinton-Gore '96 Reelection Committee and told Mr. McAuliffe that Mr. Davis would help to raise large amounts of money from the IBT for the DNC in return for the DNC finding donors for the Carey campaign. Mr. Nash stated that he subsequently spoke to Bill Hamilton, who agreed to postpone IBT contributions to the DNC until the DNC had located a willing and acceptable donor to the Carey campaign. In the Fall of 1996, Mr. Davis requested that Mr. Nash ask Mr. Carey to call Mr. McAuliffe to thank him for his fundraising efforts on behalf of the Carey campaign. Mr. Nash stated that he then asked Mr. Carey to place this call to Mr. McAuliffe to thank him for his help with fundraising for his campaign. Mr. Nash stated he was later told by Mr. Carey that he had called Mr. McAuliffe and left a message. With respect to the effort to raise funds from non-IBT union officials, Mr.
Nash stated he was informed of that effort by Mr. Davis in or about the Spring
of 1996. Mr. Davis told Mr. Nash that Paul Booth of AFSCME, Richard Trumka of
the AFL-CIO, and Andrew Stern, the President of the SEIU, had agreed to raise
$50,000 each for Mr. Carey's campaign. Mr. Nash recalls several occasions during
the campaign when he specifically discussed with Mr. Carey the fundraising
efforts of those individuals. Mr. Nash stated that he regularly discussed with
Mr. Carey a multi-page fundraising chart documenting the various sources of
funding for the Carey campaign and comparing, for each source of funds, the
actual contribution received by the campaign to date with the anticipated
contribution. The first few pages of these fundraising charts listed individuals
and committees within the IBT that were providing financial support to Mr.
Carey's campaign. The last page or two listed non-IBT sources of financial
support. The identified non-IBT sources included the AFL-CIO, AFSCME, SEIU, as
well as the names of Martin Davis and Michael Ansara, who Mr. Carey was told
were helping to raise money for the Carey campaign. n12 Mr. Nash would review
these fundraising charts with Mr. Carey and answer any questions Mr. Carey had
about the sources and amounts identified on the charts. Often, when Mr. Carey
was traveling, Mr. Nash would fax the fundraising charts to Mr. Carey and
discuss the charts with Mr. Carey over the telephone. n12 Mr. Nash stated that, after the campaign, he destroyed any copies of
these fundraising charts he had retained and deleted these charts from his
computer files. The fundraising charts specifically identified the AFL-CIO, AFSCME and SEIU as having each committed to raise $50,000 for the Carey campaign. Mr. Nash stated that he informed Mr. Carey that Mr. Trumka was the official at the AFL-CIO who had promised to raise that money. Mr. Nash vividly recalls a discussion he had with Mr. Carey concerning Mr. Trumka's anticipated contribution to the Carey campaign. During at least one conversation with Mr. Nash in the Fall of 1996, Mr. Carey was agitated that Mr. Trumka had not yet provided the $50,000 that he had agreed to raise. According to Mr. Nash, Mr. Carey stated, in substance, that it was unreasonable that Mr. Trumka was taking so long to provide his contribution because Mr. Carey, as General President of the IBT, had helped Mr. Trumka get elected Secretary-Treasurer of the AFL-CIO. Mr. Nash also recalls, after the election, reviewing with Mr. Carey the final
amounts raised from non-IBT union officials. After the election, Mr. Nash
created a document entitled "Carey campaign Financial Statement --
September 1995 through November 1996." One of the line items included on
this financial statement is for "non-Teamster funds" raised during the
campaign, and the amount listed for this line item is $102,100. Mr. Nash stated
that he informed Mr. Carey that $27,100 of these "non-Teamster funds"
had come from Mr. Booth of AFSCME, $50,000 had come from Mr. Trumka of the
AFL-CIO, $20,000 had come from Mr. Kheel and $5,000 had come from Merle DeLancey,
the owner of DeLancey Printing, which provided printing services to the Carey
campaign. n13 n13 Mr. Nash stated that he did not recall whether he informed Mr. Carey
about the contributions from Mr. Kheel and Mr. DeLancey prior to January 1997.
Mr. Nash did not include the $16,000 collected by Mr. James, the attorney for
SEIU, in this "non-Teamster" category because that money had been
deposited in the TCFU account. With respect to the TCFU swap scheme, Mr. Nash stated that, in or about the Summer of 1996, Mr. Davis and Mr. Nash agreed that the November Group would undertake a $700,000 direct mail campaign on behalf of the Carey campaign. Messrs. Davis and Nash further agreed that the Carey campaign would raise and pay $300,000 toward the cost of that direct mail effort, and Mr. Davis would be responsible for raising the remaining $400,000. In or about October 1996, Mr. Nash stated that Mr. Davis informed him of a plan by which Mr. Davis hoped to raise funds to pay for his part of the direct mail campaign. Mr. Davis told Mr. Nash that wealthy individuals would contribute to the TCFU in exchange for contributions by the IBT to political advocacy organizations supported by those individuals. Mr. Nash stated that Mr. Hamilton was aware that these IBT contributions would be used to raise funds for the Carey campaign, and agreed to seek approval to make contributions to these advocacy groups as part of the swap. Pursuant to his agreement, Mr. Hamilton submitted requests to Mr. Carey for contributions to the NCSC, Project Vote, and Citizen Action. Mr. Nash recalls a specific conversation with Mr. Carey concerning the TCFU
swap scheme. Mr. Nash recalls that the first contribution request relating to
the TCFU swap scheme was for Citizen Action in mid-October 1996. n14 Mr. Nash
stated that he received a telephone call from Mr. Hamilton informing Mr. Nash
that Mr. Carey had denied the request. After learning this from Mr. Hamilton,
Mr. Nash called Mr. Carey to discuss the contribution request. Mr. Nash recalls
using his cellular phone to reach Mr. Carey n15 . Mr. Nash asked Mr. Carey why
he had rejected the request. Mr. Carey stated that he did not know what the
purpose of the contribution was. Mr. Nash replied that the proposed contribution
would help Martin Davis with fundraising for the Carey campaign. Mr. Nash stated
that Mr. Carey then approved the contribution. Mr. Nash has reviewed his
cellular phone records and, based on that review, believes that his phone call
with Mr. Carey regarding Citizen Action was on or about October 16 or 17, 1996.
n16 n14 Mr. Nash's recollection is supported by the memorandum from Citizen Action to Bill Hamilton, dated October 14, 1996, requesting an IBT contribution of $225,000. With respect to the TCFU swap scheme, Mr. Hamilton never waited more than a few days after receiving a written request from these organizations to submit his memorandum to Mr. Carey. Indeed, as detailed below, Mr. Hamilton's memoranda would at times pre-date the organization's request. n15 Mr. Nash stated that Mr. Carey may have been out of town, and that, in such situtations, Ms. Simpkins would have connected Mr. Nash's call to Mr. Carey. n16 We are in possession of only two memoranda in October 1996 from Mr.
Hamilton to Mr. Carey regarding Citizen Action: an October 21, 1996 memorandum
requesting $225,000 and an October 23, 1996 memorandum requesting $475,000.
Because (1) Mr. Nash recalls that Citizen Action was the first contribution
requested as part of the TCFU swap scheme and (2) Mr. Nash's review of his
cellular phone records indicates that he spoke to Mr. Carey about Citizen Action
on or about October 16 or 17, 1996, the evidence indicates that the first
request to Mr. Carey for a Citizen Action contribution, which request was
initially rejected by Mr. Carey, pre-dates by several days the October 21, 1996
memorandum. It may be the case that an earlier memorandum, possibly reflecting
Mr. Carey's initial rejection of the Citizen Action request, was destroyed or
removed from the IBT files. Shortly thereafter, Mr. Nash met with Ms. Simpkins. At this meeting, Mr. Nash
informed Ms. Simpkins that the IBT was going to be making contributions to
certain political organizations. In exchange, Mr. Nash explained, the Carey
campaign would be receiving contributions from certain individuals. Mr. Nash
informed Ms. Simpkins that these contribution requests needed to be expedited.
Mr. Nash also told Ms. Simpkins to inform him if Mr. Carey had any questions
regarding these contribution requests. Ms. Simpkins agreed to expedite these
requests as best she could and to inform Mr. Nash if Mr. Carey had any questions
about them. Thereafter, Mr. Nash would call Ms. Simpkins to notify her that an
important contribution request was being sent to her. 2. Bill Hamilton's Statements Regarding Mr. Carey's Knowledge of Fundraising Schemes Bill Hamilton was hired by Mr. Carey in January 1995 as the Director of Government Affairs, with responsibility for, among other things, recommending which political organizations, if any, should receive contributions, and the amount of those contributions. Mr. Hamilton held this position with the IBT until July 29, 1997, when he submitted his resignation to Mr. Carey. As stated above, both Mr. Davis and Mr. Nash testified that Mr. Hamilton was aware of, and participated in, the TCFU swap scheme, the DNC swap scheme, and the funneling of IBT funds to the November Group through the AFL-CIO and Citizen Action. In his interview with the Election Officer in April 1997, however, Mr. Hamilton denied knowledge of the TCFU swap scheme (the only swap scheme known to the Election Officer at that time). When my office subpoenaed Mr. Hamilton, he refused to testify, citing his Fifth Amendment right against self-incrimination. Although it is not essential to my decision to determine whether Mr. Hamilton was involved in these schemes, I believe the record evidence clearly demonstrates such involvement. First, it is difficult to conceive how these swap schemes could have functioned without Mr. Hamilton's participation. In order for these swap schemes to work, a specified amount of money had to be contributed to a particular organization within a certain period of time. Because Mr. Hamilton was the sole individual at the IBT responsible for recommending to Mr. Carey the recipient, amount, and timing of political contributions, he must have had knowledge of, and participated in, these swap schemes. Moreover, the documentary record corroborates the testimony of Mr. Nash and Mr. Davis with respect to Mr. Hamilton's participation in these swap schemes. For example, with respect to the DNC swap scheme, Mr. Davis attached the following note to a DNC request for contributions that he forwarded to Mr. Hamilton: "I'll let you know when they [the DNC] have fulfilled their commitments." With respect to the TCFU swap involving the NCSC, it appears that Mr. Hamilton's recommendation to Mr. Carey for a contribution to the NCSC pre-dated the NCSC's request to Mr. Hamilton for such funds. On October 16, 1996, Mr. Hamilton sent a memorandum to Mr. Carey stating that "[w]e have been asked to provide $85,000 for the NCSC's get-out-the-vote effort . . . that will be especially helpful in places like Florida . . .." The NCSC contribution was approved on October 17, 1996. However, the NCSC's request to Mr. Hamilton for a contribution was dated October 18, 1996 and faxed to Mr. Hamilton on October 21, 1996. Moreover, the NCSC's request made no mention of the NCSC's activities in Florida, but rather represented that the NCSC would use any contribution "to do a non-partisan voter guide mailing in selected areas concerning the Virginia Senate candidates." There is a similar sequence disparity with respect to the scheme to funnel IBT funds to the November Group. Mr. Hamilton's request for $150,000 payable to the "AFL-CIO's COPE program" was dated October 31, 1996, and was approved by Mr. Carey on November 1, 1996. The request from Mr. Trumka to Mr. Hamilton for those funds is dated November 1, 1996, and makes no reference to the "COPE program." Thus, the testimonial and documentary evidence demonstrates that Mr. Hamilton was involved in these swap schemes. The central issue before me, however, is not whether Mr. Hamilton knew of these schemes, but whether Mr. Carey had such knowledge. On this issue, Mr. Hamilton provides two pieces of significant evidence. First, on March 14, 1997, two days after evidence of a possible swap scheme emerged, Mr. Hamilton was interviewed by an attorney from the Zuckerman Spaeder firm, which had been recently retained by the IBT. The attorney's type-written memorandum of that interview indicates that Mr. Hamilton acknowledged that he spoke to Mr. Carey about the Citizen Action contribution between the time of the first and second requests for funding. The memorandum of Mr. Hamilton's March 14, 1997 interview provides: "Hamilton said he recalls speaking with Carey about the Citizen's [sic] Action contribution, but he does not recall whether he did so with respect to the first request for $225,000 or the second request for $475,000. He thinks the conversation occurred 'very quickly' and was about the 'concept,' and not the details, of a contribution. He thinks the conversation occurred in between the first ($225,000) and second ($475,000) memos, and he is not sure which idea was the subject of the conversation."In his subsequent interview by the Election Officer, Mr. Hamilton did not relate this conversation with Mr. Carey regarding Citizen Action. As discussed in greater detail below, Mr. Hamilton's statement is important because Mr. Carey claims to be unable to recall any discussion regarding Citizen Action with anyone at the IBT or the Carey campaign. Mr. Hamilton's statement also serves as some corroboration for Mr. Nash's testimony that Mr. Hamilton informed him that Mr. Carey had rejected the first Citizen Action request. The second piece of evidence from Mr. Hamilton is a statement he made to the
Election Officer in April 1997 that Mr. Carey, on November 3, 1996, complained
to him at a Local 135 stewards dinner in Indianapolis about the use of funds
from the general treasury. As discussed above, Mr. Carey authorized $885,000 in
political contributions between October 16, 1996 and November 1, 1996, and all
of these contributions were paid from the IBT's general treasury because there
were no available funds in the IBT's political action committee, DRIVE. Mr.
Carey's expression of concern on November 3, 1996 about general treasury funds
appears inconsistent with his current testimony, detailed below, that he was
unaware of the financial condition of the general treasury during this critical
period. 3. Monie Simpkins' Testimony With Respect To Mr. Carey's Knowledge of Fundraising Schemes I interviewed Ms. Simpkins on October 22, 1997. Ms. Simpkins was hired as Mr. Carey's Executive Secretary in 1993, and remains in that position today. As Executive Secretary, Ms. Simpkins performs various administrative duties, including, among other things, keeping Mr. Carey abreast of important matters when he is out of the IBT office. In October 1996, Jere Nash asked Ms. Simpkins to meet with him at Carey campaign headquarters. During their meeting, Ms. Simpkins said Mr. Nash told her that the IBT would be making contributions to various groups in exchange for donations to the Carey campaign through the TCFU. Mr. Nash told Ms. Simpkins that she would be receiving memoranda relating to these IBT contributions and requested that she expeditiously obtain approval for them from Mr. Carey. Mr. Nash stated that this had been approved by the attorneys. Subsequently, Ms. Simpkins stated that she had a conversation with Mr. Carey in which she told him that Mr. Nash had talked to her about the IBT making certain political contributions. Ms. Simpkins stated that in or about mid-October 1996, she received approximately four memoranda from Bill Hamilton requesting approval of certain contributions. Ms. Simpkins specifically recalls a request for a $475,000 contribution to Citizen Action, a request for a $75,000 contribution to Project Vote, a separate request for a $100,000 contribution to Project Vote, and a request for an $85,000 contribution to the NCSC. With respect to each of these four requests, Ms. Simpkins stated that Mr. Nash notified her that she would be receiving a memorandum regarding the particular contribution, and told her that she should expedite its approval. According to Ms. Simpkins, Mr. Carey was out of the office when she received these contribution requests. When she spoke with Mr. Carey by telephone, she discussed each of these four memoranda with him. Ms. Simpkins stated that she told Mr. Carey, in substance, that each contribution request was one that Mr. Nash had called about. Ms. Simpkins stated that she told Mr. Carey the substance of the memoranda, the name of the proposed recipient of the contribution and the amount of the requested contribution. Mr. Carey approved each of the contributions and never inquired into Mr. Nash's connection to these requests. After Mr. Carey approved each request, Ms. Simpkins signed Mr. Carey's and her initials to the request memorandum. Ms. Simpkins stated that she inadvertently signed the memorandum requesting approval to make a contribution to the NCSC with only her initials, although Mr. Carey had approved that request. After each request was approved, the initialed memorandum was retrieved by Mr. Hamilton's secretary or someone else in his department. In March 1997, Ms. Simpkins read newspaper reports of a controversy involving the TCFU. She asked Susan Davis of Cohen Weiss to meet with her, and Ms. Davis agreed. At their meeting, Ms. Simpkins told Ms. Davis of the conversation she had had with Mr. Nash in October 1996. Ms. Davis stated that she had known nothing about the contribution swap scheme explained to Ms. Simpkins by Mr. Nash. Ms. Davis asked Ms. Simpkins if she had spoken with Mr. Carey about this scheme, and she replied that she had not. Within a few days of her meeting with Ms. Davis, Ms. Simpkins was interviewed
by the IBT in-house General Counsel and an attorney with the Zuckerman Spaeder
firm, which had been retained by the IBT. Ms. Simpkins initially told these
individuals that she had not obtained Mr. Carey's approval for the contribution
requests at issue. Ms. Simpkins then retracted that statement and said that she
had obtained Mr. Carey's approval for at least one of the contribution requests.
n17 During our interview of Ms. Simpkins, she explained that when she was
interviewed by IBT counsel, she initially attempted to minimize Mr. Carey's
involvement in these contributions because she wanted to be a "loyal
gatekeeper" for Mr. Carey. n17 Attorney notes from that interview indicate that Ms. Simpkins stated that
her meeting with Mr. Nash was subsequent to a conference at LaGuardia Airport
involving Mr. Carey, Mr. Nash and Susan Davis. Ms. Simpkins recently stated, in
our interview of her, that she was not sure whether her meeting with Mr. Nash
was before or after the LaGuardia Airport meeting. Mr. Carey has given three sworn depositions: July 17, 1997 before the
Election Officer; October 28, 1997 before the Independent Review Board; and
November 10, 1997 before me and my staff. n18 Mr. Carey has steadfastly denied
in his testimony having any knowledge of these improper fundraising schemes and
claims to have no recollection of the specific conversations recounted by Mr.
Nash, Mr. Hamilton and Ms. Simpkins. I discuss below the credibility of Mr.
Carey's testimony. n18 The transcripts of these three depositions shall be referred to below as
Carey Dep. I, Carey Dep. II and Carey Dep. III, respectively. With respect to the TCFU swap scheme, Mr. Carey, while not contesting that he authorized each of the four political contributions at issue, claims that he has no recollection of having authorized those contributions -- including the $475,000 contribution to Citizen Action -- and claims that he has no recollection of discussing those contributions with anyone, including Mr. Nash, Mr. Hamilton or Ms. Simpkins. As set forth below, I find Mr. Carey's testimony not credible for several reasons. First, Mr. Nash, Mr. Hamilton and Ms. Simpkins all recall discussing the Citizen Action contribution with Mr. Carey, and I do not believe that they testified falsely. Mr. Nash was a very credible witness, who tried to be as precise and factual as possible. He has pled guilty to felonies relating to his fundraising activities, entered into a cooperation agreement with the Government, and awaits sentencing. Mr. Nash has a strong incentive to tell the truth. If he lies, his cooperation agreement can be nullified and he would receive no leniency in his sentence. Nor do I believe that Ms. Simpkins would fabricate conversations with Mr. Carey. She is still Mr. Carey's Executive Assistant and considers herself loyal to Mr. Carey. Ms. Simpkins has no motive to falsely implicate Mr. Carey. Indeed, Ms. Simpkins initially attempted to minimize Mr. Carey's involvement, believing that to be consistent with her role as a loyal gatekeeper. Finally, while I believe that Mr. Hamilton was not forthcoming with the IBT's attorneys and the Election Officer with respect to his own involvement in these schemes, I do not believe that Mr. Hamilton had a motive to fabricate a conversation with Mr. Carey about Citizen Action. Having found that Mr. Nash, Mr. Hamilton and Ms. Simpkins had discussions with Mr. Carey about Citizen Action, I must next determine whether those conversations made Mr. Carey aware of the TCFU swap scheme. Mr. Carey's conversation with Mr. Nash was the most explicit. Mr. Nash spoke to Mr. Carey after learning that Mr. Carey had rejected the request for Citizen Action. Mr. Nash asked Mr. Carey why he rejected the contribution. Mr. Carey said that he did not know the purpose of the contribution. Mr. Nash, in response, did not explain to Mr. Carey how Citizen Action planned to use the funds. Rather, Mr. Nash simply informed Mr. Carey that the proposed contribution would help Martin Davis with fundraising for the Carey campaign. Mr. Carey asked no questions about whether Citizen Action would use the funds in a manner acceptable to the IBT. Mr. Carey simply approved the contribution on the basis of Mr. Nash's statement that the contribution would help with fundraising for his campaign. Mr. Nash clearly communicated to Mr. Carey the improper nature of this expenditure. Indeed, when asked in our deposition whether Mr. Nash, in October 1996, ever told him "that the Citizen Action contribution would help your campaign?", Mr. Carey responded: "No. And if he did, we wouldn't be sitting here today because that [contribution] would have never taken place." Carey Dep. III at 26. Mr. Carey's conversations with Ms. Simpkins also establish his knowledge that the IBT political contributions would help his campaign's fundraising efforts. Ms. Simpkins told Mr. Carey that Mr. Nash had called about each of the four requests for political contributions at issue here. If Mr. Carey were truly unaware of the scheme, he would have pursued the issue of Mr. Nash's involvement with either Ms. Simpkins, Mr. Nash or both. As Mr. Carey himself testified: "I don't know what Jere Nash would have to do with political contributions. . . . He had nothing to do with the union. His function was campaign manager." Carey Dep. I at 119. With respect to Mr. Hamilton's conversation with Mr. Carey concerning Citizen Action, there is no indication in the attorney's interview memorandum that Mr. Nash's name was mentioned or that Mr. Hamilton informed Mr. Carey that such a contribution would benefit his campaign. Nevertheless, Mr. Hamilton was the third person to assert that he discussed the Citizen Action contribution with Mr. Carey. It is, thus, hard to believe that Mr. Carey has no recollection of any of these discussions about Citizen Action. Indeed, given the unprecedented size of the Citizen Action contribution, and the troubled financial condition in October 1996 of the IBT's general treasury and the IBT's political action committee, DRIVE, I find it completely untenable that Mr. Carey, notwithstanding his admittedly hectic schedule, has no recollection of the Citizen Action contribution. The contribution to Citizen Action was far larger than any prior donation by the IBT to that group. As noted above, Mr. Hamilton initially sought Mr. Carey's approval to contribute $225,000 in IBT general treasury funds to Citizen Action. In his subsequent memorandum of October 23, 1996, Mr. Hamilton requested approval to more than double the Citizen Action contribution to $475,000, which Mr. Carey approved. However, even a contribution of $225,000 dwarfed any of the IBT's prior contributions to Citizen Action. For example, between 1992 and 1996, the IBT and DRIVE contributed the following amounts to Citizen Action: $3,000 on June 3, 1992; $2,100 on July 22, 1992; $5,000 on December 8, 1992; $5,000 on April 23, 1993; $5,000 on November 5, 1993; $5,000 on October 27, 1994; $7,500 on June 5, 1995; $15,000 on October 3, 1995; $5,000 on December 12, 1995; and $5,000 on February 15, 1996. Accordingly, prior to October 1996, the average IBT contribution to Citizen Action was $5,760 and the total contributions over those four years was $57,600. The requested $225,000 contribution was approximately 40 times larger than the average Citizen Action contribution and four times larger than the total contributions over those four years. The $475,000 contribution which Mr. Carey ultimately approved from general treasury funds was over 80 times larger than the average contribution to Citizen Action and over eight times larger than the total contributions. I find it unbelievable that Mr. Carey would have no recollection of ever having discussed that $475,000 contribution with Mr. Nash, Mr. Hamilton or Ms. Simpkins. This conclusion is supported by the fact that others at the IBT considered this Citizen Action request highly irregular. Joseph Selsavage, the IBT Director of Accounting, explained that when the request for a check to Citizen Action in the amount of $475,000 arrived at his department on October 24, 1996, there was significant controversy within the IBT about the propriety of issuing a check in such an amount, even with Mr. Carey's approval. Mr. Selsavage was aware, as were others at the IBT, that the union was experiencing a negative cash flow for the year and had been depleting its assets at a rapid rate. The IBT began the 1996 calendar year with approximately $29 million in net assets. By the end of the year, the IBT was left with only $16 million in net assets. As explained by Mr. Selsavage, it also had been the practice in prior years to seek approval from the IBT's General Executive Board (the "GEB") for contributions from general treasury funds in excess of $10,000. To Mr. Selsavage's knowledge, the IBT had never previously made a political contribution out of general treasury funds for as large an amount as was requested for Citizen Action, with or without GEB approval. According to Mr. Selsavage, when he brought the check request for Citizen
Action to the attention of the IBT's Secretary-Treasurer, Tom Sever, Mr. Sever's
reaction was that it would be irresponsible to issue such a large check without
first polling the GEB, and also that the amount of money for Citizen Action was
unreasonably high in light of the financial condition of the IBT. Mr. Sever
ultimately agreed, after considerable discussion with others, and at the
insistence of then-IBT General Counsel, Judy Scott, to issue the check. n19 n19 Ms. Scott advised Mr. Sever that GEB approval was not needed for the
contribution to Citizen Action. Mr. Sever agreed to allow the check to be issued
to Citizen Action, on the condition that Ms. Scott produce a written opinion or
memorandum explaining the legal basis for her view. It was not until January
1997, three months after the contribution, that Ms. Scott provided Mr. Sever
with a memorandum. According to Mr. Selsavage, Mr. Sever viewed this memorandum
as inadequate because, among other things, it failed to address the specific
contribution to Citizen Action. Ms. Scott left the IBT in February 1997. In addition to Messrs. Selsavage and Sever, others at the IBT also viewed the contribution to Citizen Action, as well as those to Project Vote and the NCSC, with considerable skepticism. For instance, Mr. Carey's Executive Assistant, Aaron Belk, explained to us that he was authorized to approve these requests, but refused to do so. First, Mr. Belk was of the view that funds for political or advocacy groups should be contributed from DRIVE, not from IBT general treasury funds. Mr. Belk also believed that it was unreasonable to contribute these funds to political or advocacy groups so late in October, when it seemed clear that the outcome of the Presidential race and other key federal races would not be effected by these contributions. It is important also to emphasize that the Citizen Action contribution was
only one of several political contributions that Mr. Carey authorized to be made
in October 1996 from the IBT's general treasury funds. As stated above, between
October 17, 1996 and November 1, 1996 -- a period of two weeks -- political
contributions totaling $885,000 were made to the NCSC, Project Vote, Citizen
Action and the AFL-CIO as part of the Carey campaign's improper fundraising
schemes. Moreover, at the same time Mr. Carey was authorizing unprecedented
amounts to be contributed from the IBT general treasury, he was also informed
that (1) his campaign was in need of substantial amounts of money for a direct
mailing and (2) his once-substantial lead in polls commissioned by his campaign
had deteriorated. Mr. Carey recalls attending a meeting at LaGuardia Airport
with Mr. Nash and Susan Davis on October 21, 1996 -- three days before Mr. Carey
approved the $475,000 Citizen Action contribution. Mr. Carey testified that, at
that meeting, he was informed by Mr. Nash that his 25-30 point lead in the polls
had eroded and that the most recent poll showed Mr. Carey and Mr. Given the financial condition of the IBT and the depletion of DRIVE funds, it
is difficult to believe that Mr. Carey would have no recollection of authorizing
any of these substantial contributions. In an attempt, perhaps, to explain his
failure of recollection, Mr. Carey maintained in his deposition with my office
that, in October 1996, he was unaware of the specific financial condition of the
IBT and unaware of the financial condition of the DRIVE fund. Carey Dep. III at
20-21. Mr. Carey's claim that he had no awareness in October 1996 that the DRIVE
funds had been depleted is directly contradicted by the documentary evidence
demonstrating that Mr. Carey personally authorized a $500,000 loan to DRIVE on
October 1, 1996. Mr. Carey's testimony on this issue is as follows: Q. In October of 1996, were you aware of the financial condition of the DRIVE fund?In what appears to be a similar attempt to place his actions in a better light, Mr. Carey, in all three depositions, repeatedly emphasized that it was his understanding that expenditures that were made from the general treasury funds for political contributions would be reimbursed with DRIVE funds. Indeed, in our deposition Mr. Carey asserted that, with respect to the $885,000 that was spent on political contributions between October 17, 1996 and November 1, 1996, "[s]ome of that money had to come out of our political action committee which is DRIVE." Carey Dep. III at 8. When questioned about this purported policy of reimbursing general treasury funds with DRIVE funds, Mr. Carey (1) did not indicate who told him of the policy; (2) did not know whether the policy was memorialized; (3) stated that the policy was discretionary, not mandatory; and (4) did not know who at the IBT, apart from himself, could authorize the transfer of funds from DRIVE to the general treasury. Carey Dep. III at 13-18. Finally, Mr. Carey conceded that he never inquired as to whether any portion of the $885,000 expended from general treasury funds had been reimbursed. Carey Dep. III at 19. Two days after Mr. Carey's deposition, his attorneys confirmed in a submission to my office that none of the $885,000 in political donations from the general treasury had been reimbursed by DRIVE. Counsel, however, stated in their submission: "Mr. Carey's mistaken [belief] about the use of DRIVE funds to reimburse the general treasury is both honestly held and irrelevant to the contributions in this case." Submission of Steptoe & Johnson, LLP, dated November 12, 1997. On the contrary, Mr. Carey's testimony on the source and propriety of these contributions is highly relevant to the necessary credibility assessment of his testimony as a whole. Mr. Carey personally authorized the disbursement of $885,000 of general treasury funds over a two week period in amounts unprecedented in size and concentration. He did this at a time when the IBT was suffering a negative cash flow, and in a period when the net assets of the IBT had been depleted by half. He did this despite the statement in Mr. Hamilton's October 23, 1997 Project Vote memorandum that "we've hit the treasury pretty hard" by these contributions, and despite his own knowledge that the DRIVE fund was so badly depleted that it required a $500,000 loan. A finder of fact would be entirely justified in drawing an inference that Mr. Carey sought to mislead his interrogators with his claim that the unprecedented and controversial contributions would ultimately not be charges upon the general treasury because of the "reimbursement" mechanism, which he offered in all three depositions as a bogus palliative to the real harm that was done to the general treasury. * * * Accordingly, with respect to the TCFU swap scheme, I find that Mr. Carey
approved the expenditure of $735,000 from the IBT's general treasury for
contributions to the NCSC, Project Vote and Citizen Action, based on his
understanding that those contributions would assist his campaign's fundraising
efforts. n20 Mr. Carey's use of union funds for the benefit of his campaign was
a clear and serious violation of the Election Rules. n20 Because Ms. Simpkins has no clear recollection of mentioning Mr. Nash's
name in connection with the October 31, 1996 request for $150,000 to the
AFL-CIO, I am not prepared to find on this record that Mr. Carey improperly
approved that contribution. Similarly, because there is no evidence in this
record that Mr. Carey was informed that the IBT's contributions to the DNC were
being used to benefit his campaign, I find that Mr. Carey was not a participant
in the DNC swap scheme. Mr. Carey claims that he had no knowledge of the scheme by Messrs. Nash and Davis to raise funds from non-IBT union officials, including Richard Trumka of the AFL-CIO. Mr. Carey testified that he has a very professional and friendly relationship with Mr. Trumka, whom he has known for six years, and that he supported Mr. Trumka's slate during the last AFL-CIO election. Carey Dep. III at 25-26. Mr. Carey, in our deposition, correctly stated that it would have violated the Election Rules for Mr. Trumka to have raised funds for his campaign. Mr. Carey further stated that, if he had been informed that Mr. Trumka was raising money for his campaign, he would recall such a conversation. Carey Dep. III at 26. Weighing against Mr. Carey's general denial is Mr. Nash's testimony, described above, that he specifically discussed with Mr. Carey the plan to raise funds from other unions and specifically identified Mr. Trumka and Mr. Booth as having committed to raise $50,000 each for the Carey campaign. Mr. Nash has a vivid recollection of a conversation with Mr. Carey concerning Mr. Trumka's failure to raise his funds in a timely fashion. As I previously stated, Mr. Nash is a credible witness and his testimony is corroborated by Mr. Booth, who admits to raising between $30,000 and $35,000 for the Carey campaign. As mentioned earlier, Mr. Trumka has refused to testify pursuant to his Fifth Amendment right against self-incrimination. * * * On this record, and in light of Mr. Carey's testimony as a whole, I find that
Mr. Carey was, in fact, informed by Mr. Nash of the campaign's ongoing efforts
to improperly raise funds from non-IBT union officials. By failing to instruct
Mr. Nash to stop these fundraising activities, Mr. Carey intentionally violated
the Election Rules. IV. LEGAL ANALYSIS WITH RESPECT TO DISQUALIFICATION Mr. Carey has now been found, among other things, to have expended substantial funds from the IBT's general treasury for the benefit of his campaign for union office. The remaining question to be resolved is whether, as a proper and necessary remedy, he should be disqualified under the Election Rules from running as a candidate in the rerun election. Consideration of the question of disqualification calls for an analysis of the history and purposes of the Consent Decree and its role in reforming the IBT. The Consent Decree was entered into between the United States Government and the IBT on March 14, 1989. The Decree brought to an end a civil racketeering lawsuit that had been filed by the Government in June 1988 against the IBT, its General Executive Board, individual members of the board, and La Cosa Nostra and individual members of that organization (the "RICO Action"). See Complaint, United States of America v. IBT, et al., 88 Civ 4486 (DNE) (the "Complaint"). The Decree, by its terms, announced its principal purpose and objective to be the elimination of what had been intractable conditions of institutional corruption in the IBT. To achieve its remedial purposes, the Consent Decree established sweeping changes in both the IBT's electoral and disciplinary processes. See United States v. IBT, 905 F.2d 610, 612-13 (2d Cir. 1990). The Consent Decree, by its terms, seeks the dual objectives of ridding the
Union of corruption and maintaining democratic institutions in the Union. See
Consent Decree at 2 ("WHEREAS, the union defendants agree that there should
be no criminal element or La Cosa Nostra corruption of any part of the IBT; and
WHEREAS, the union defendants agree that it is imperative that the IBT, as the
largest trade union in the free world, be maintained democratically, with
integrity and for the sole benefit of its members and without unlawful outside
influence"). In particular, the Decree contemplates that establishing and
maintaining free and democratic IBT elections -- in which the rank and file is
given the right to vote free from coercion in a process liberated from improper
outside influence -- will be a primary mechanism for cleansing the union of its
connections to corruption and organized crime. The disqualification analysis
must be conducted in light of the Decree's two goals. A. Racketeering in the International Brotherhood of Teamsters The IBT is the largest trade union in the United States with approximately
1.4 million members in the United States and Canada. Allegations of links
between the IBT and organized crime surfaced as early as the 1940s and 1950s.
Throughout the ensuing four decades, a series of Congressional investigations
and civil and criminal prosecutions by the Department of Justice demonstrated
pervasive organized crime control of the councils and power of the IBT. n21 n21 The reader wishing to review a representative sample of a very large
volume of sources on this subject may consult the following: President's
Commission on Organized Crime, The Edge: Organized Crime, Business, and Labor
Unions (1986) ("President's Commission"); Steven Brill, The Teamsters
(1978); Dan La Botz, Rank and File Rebellion (1990); and Kenneth C. Crowe, How
the Rank and File Took Back the Teamsters (1993). It is entirely accurate to state that the most notorious characteristic of the Teamsters in the decades preceding entry of the 1989 Consent Decree was broad based racketeering activity associated with manipulated elections, porous general and special fund treasuries and the well-known corruption of a series of International General Presidents. The Government's RICO complaint, filed on June 28, 1988 by the Justice Department against the IBT, contained a series of formal allegations that asserted an institutional alliance with every organized crime family in America, an intricate system of payoffs, kickbacks and extravagant benefits that pillaged the assets of the Union, an enforcement mechanism predicated upon intimidation and violence, and a power structure that fiercely resisted, by any means at hand, insurgent or reforming leadership. See Complaint. The Complaint led in due course to the entry of the controlling Consent Decree in this case. By endorsing, entering into, and submitting itself to the policing mechanisms of the Decree, the IBT acknowledged the pervasive corruption and racketeering activity that the Complaint had identified. More importantly, the IBT and its officers consented to the conferral upon the Government and its agents of supervisory power over the Union's leadership and affairs that was more extensive than that provided by federal statute or prevailing case law. In 1986, two years before the Government filed its RICO action against the IBT, the Presidents' Commission on Organized Crime had recommended action to uproot corruption in the Teamsters, suggesting that a "[s]ustained commitment of governmental resources to dislodge organized crime from the IBT through a combination of criminal prosecutions, civil action, and administrative proceedings is the only approach that offers even a modest hope of success in the long run." (President's Commission at 138). The civil RICO action that followed was the first attempt to submit an entire international labor union to federal court supervision under the remedial powers of civil RICO. See Kenneth C. Crowe, Collision: How the Rank and File Took Back the Teamsters 13 (1993) ("Crowe"). Although the 1989 Consent Decree constituted a novel and precedent-setting attempt to bring an entire international union within the scope of federal remedial oversight pursuant to the RICO statute, government supervision as a means to eliminate corruption in organized labor was nothing new. The recognition that court-appointed receivers could play a role in resolving internal union disputes -- pursuant to "inherent jurisdiction" rather than statutory authority -- first appeared in the 1930s. Michael J. Goldberg, Cleaning Labor's House: Institutional Reform Litigation in the Labor Movement, Duke L.J. 903, 929 -34 (1989) ("Goldberg"). See Chalghian v. IBT, 114 N.J. Eq. 497 (Ch. 1933) (court appointed custodial "receiver-trustee" to manage the funds of a local which fraudulently collected dues but afforded members no union representation). In the following decades, courts began to appoint receivers or special masters in union corruption and union democracy litigation, sometimes using the threat of receiverships as a means of compelling structural reforms in unions. Goldberg at 933-34. See also Local No. 11 of the Int'l Ass'n of Bridge, Structural Ornamental Ironworkers v. McKee, 114 N.J. Eq. 555 (Ch. 1933) (appointing receiver to preserve assets of a corrupt local, and to "operate its business in a legal manner, free of oppression by interlopers such as the international officers"). An unprecedented use of the receivership power occurred following the election of Jimmy Hoffa as President of the IBT in 1957. Goldberg at 934-35. In 1958-1961, a trusteeship in the form of a three-person Board of Monitors was imposed upon the union under a consent agreement resulting from a lawsuit filed by 13 rank and file Teamsters from the New York area. The delegates alleged that "Hoffa had stacked the 1956 union convention with illegal delegates in order to guarantee his election as president." James B. Jacobs, Busting the Mob: United States v. Cosa Nostra 168 (1994) ("Jacobs"). The trusteeship collapsed in 1961, however, because Hoffa and the GEB continually frustrated the Board of Monitors by refusing to bring charges against corrupt officials and litigating every decision of the board. Jacobs at 168. Soon thereafter, the Union reelected Hoffa as its General President. Id. According to one commentator, the trusteeship over the IBT was the "high-water mark of union reform litigation in the pre-[LMRDA] era. It remains one of the most ambitious efforts at judicially supervised union reform ever undertaken." Goldberg at 934. Because common law receiverships and trusteeships did not effectively deal with the problems of organized crime in labor unions, Congress, in 1959, passed the Landrum-Griffin Act. Goldberg at 934-35. The legislation, which became the Labor-Management Reporting and Disclosure Act of 1959, 29 U.S.C. §§ 401-531 (1985) (the "LMRDA"), was designed to rid unions, particularly the IBT, of organized crime and to increase democratic control by the rank and file. See George Kannar, Making the Teamsters Safe for Democracy, Yale L. J. 1645, 1646 n.9 (1993) ("Kannar"). In enacting the LMRDA, Congress was interested in curbing abuse by entrenched union leadership and encouraging challenges to such leadership, in light of union failures to observe high standards of responsibility and ethical conduct. See Illario v. Frawley, 426 F. Supp. 1132 (D.N.J. 1977). Wirtz v. Local 153, 389 U.S. 463, 470-71 (1968) ("The legislative history [of the LMRDA] shows that Congress weighed how best to legislate against revealed abuses in union elections without departing needlessly from its long-standing policy against unnecessary governmental intrusion into internal union affairs"). The LMRDA contains various measures to promote democracy, including a "bill of rights" for members of labor organizations in elections (29 U.S.C. §§ 411(a)(1) - (5)), standards and procedures for union officer elections (29 U.S.C. § 481(a)-(i)), and an enforcement mechanism for violations of the election standards and procedures (29 U.S.C. §§ 482(a)-(d)), which provides that the Secretary of Labor may bring an action in the district court to have the results of an election set aside. If the district court finds, after a trial upon the merits, a violation of Section 481 that may have affected the outcome of the election, "the court shall declare the election, if any, to be void and direct the conduct of a new election under supervision of the Secretary. . . ." 29 U.S.C. § 482(c)(2). Until the enactment of the LMRDA, federal labor law had placed no
restrictions on the rank and file's choice of their leaders. See Hill v.
Florida, 325 U.S. 538, 541 (1945) (under prior legislation, union members'
"own best judgment, not that of someone else, was to be their guide").
With the passage of the LMRDA, however, Congress retreated from the position of
unmitigated choice, prohibiting individuals convicted of various felonies from
holding union office for thirteen years under 29 U.S.C. § 504(a). n22 See
Hodgson v. Chain Serv. Restaurant, 355 F. Supp. 180, 183 (S.D.N.Y. 1973)
("Realizing . . . that a democratic election would not, in itself,
eliminate dishonest officials, the legislators provided safeguards which they
believed would prevent irresponsible and unscrupulous persons from gaining
control of union government"). n22 29 U.S.C. § 504(a) provides, in pertinent part: "No person who . . .has been convicted of, or served any part of a prison term resulting from his conviction of, robbery, bribery, extortion, embezzlement, grand larceny, burglary, arson, violation of narcotics laws, murder, rape, assault with intent to kill . . . any felony involving abuse or misuse of such person's position or employment in a labor organization or employee benefit plan to seek or obtain an illegal gain at the expense of the members of the labor organization or the beneficiaries of the employee benefit plan, or conspiracy to commit any such crimes or attempt to commit any such crimes, or a crime in which any of the foregoing crimes is an element, shall serve or be permitted to serveSection 504(b) provides that a person who willfully violates the section will be fined up to $10,000, or imprisoned for not more than five years, or both. - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - Despite the comprehensive mechanism established by the LMRDA, the legislation was not completely effective in combating the intractable corruption in the Teamsters Union. Goldberg at 919; Michael H. Belzer, Book Review: Kenneth C. Crowe, Collision: How the Rank and File Took Back the Teamsters, Indus. & Lab. Rel. Rev. 870, 871 (1995). Nor did more traditional prosecutorial attacks on the infiltration of the labor movement by organized crime meet with more success. Both criminal prosecutions and civil suits for injunctive relief or damages against union officials and management proved ineffective. Goldberg at 927. While "such cases often succeeded in jailing an offender here or halting an abuse there, . . . they fail[ed] to root out deeply entrenched patterns of labor racketeering." Goldberg at 927-28. It was against this background that the Government began to use the civil RICO statute for cleansing corruption from unions. Goldberg at 907. The statute, which was enacted in 1970, seemed well suited to this purpose given its broad remedial provisions. Such provisions conferred upon courts the power to impose structural reforms and even long term trusteeships in order to eradicate racketeering influence in labor unions. Jacobs at 12-13. The Justice Department first used the device of civil RICO to combat union corruption against Teamsters Local 560, in March 1982. Jacobs at 31, 33. See United States v. Local 560 (IBT), 694 F. Supp. 1158, 1192 (D.N.J. 1988). Local 560 was the Union City, New Jersey local dominated by Anthony ("Tony Pro") Provenzano and his family for decades. See . Crowe at 17. The court's remedial order removed the entire executive board of the local from office, providing for a court-appointed trustee to serve "for a curative period of sufficient length" to "dispel the existing atmosphere of intimidation within Local 560, to restore union democracy, and to ensure that racketeers do not obtain positions of trust within the local." Jacobs at 35; Goldberg at 907. Thereafter, the Government asked that the court enjoin two former members of the executive board from running for local union office on the grounds that the defendants continued to dominate the union. United States v. Local 560 (IBT), 694 F. Supp. at 1185. The court granted the motion enjoining the officers from running for office, reasoning that: "it is not a desirable or healthy thing for the Court at the Government's request to step in and interfere with the free, unfettered choice of Local 560's members. . . . Normally, the members should be free to elect incompetent, unwise or even dishonest officials if they choose. They would simply have to live with the consequences of their choice. However, more than mere competence, wisdom or honesty is involved here. There is involved the question of the renewed subjugation of a major union local to an organized crime group. The consequences of such a development would extend far beyond the membership of Local 560. The public at large is hurt by racketeer domination of a union. . . . The public interest in racketeer free corporations and unions overrides the interest of . . . members of unions freely to select their officers. " Id. at 1192 (emphasis added).Eventually, after repeated use of the civil RICO statute against locals of the IBT and other unions, the present action was filed. According to one commentator, the "civil RICO suit against the IBT [in this case] may well constitute the most ambitious institutional reform litigation in American history." Jacobs at 177. The broad nature of the lawsuit against the IBT became a model for RICO litigation against other unions beset by corruption. And, in turn, the Consent Decree entered in this lawsuit eventually became a model for other Consent Decrees. See United States v. District Council of Carpenters, 880 F. Supp. 1051, 1061 (S.D.N.Y. 1995) (interpreting consent decree in Carpenters Union, which was "modeled on" Consent Decree in this case); United States v. Mason Tenders District Council of Greater N. Y., No. 94 Civ. 6487, 1997 WL 340993 (S.D.N.Y. June 20, 1997) (goals of consent decree ending RICO action against Mason Tenders District Council were virtually identical to the goals of the Consent Decree in this case). This background demonstrates that interference with union autonomy in order
to combat entrenched corruption has long constituted a permissible exercise of
federal power. While interference with union autonomy has never been favored as
an end in itself, it has been regarded as a permissible means for cleansing
labor unions of racketeering for the better part of this century. The Consent
Decree entered in this litigation is one in a series of mechanisms that has
evolved as an attempt -- by the Congress, the courts, and the Justice Department
-- to address the novel public policy challenge of eliminating corruption and
fostering democracy in labor unions. B. The Consent Decree: Its Terms and Interpretation To fulfill its remedial purposes, the Consent Decree, as noted, established sweeping changes in both the IBT's disciplinary and electoral processes. See United States v. IBT, 905 F.2d 610, 612-13 (2d Cir. 1990). The disciplinary mechanism established by the Consent Decree contemplated two phases. In the first phase, which lasted until the certification of the 1991 election results, the Decree established the positions of (1) an Independent Administrator, who was delegated the disciplinary powers of the IBT's General President and/or General Executive Board; and (2) an Investigations Officer, who was given the authority to investigate the operation of the IBT and its affiliates and to initiate disciplinary charges and trusteeship proceedings. Consent Decree, Section F(12)(A). In the second phase, the decree established an Independent Review Board (the "IRB") to investigate allegations of corruption in the IBT, and to institute disciplinary charges or to make disciplinary recommendations. In cases where the IBT or its affiliates failed to take appropriate action, the IRB was further empowered to convene hearings, issue written decisions, and "take whatever steps are appropriate to insure proper implementation of" its decisions. Consent Decree, Section G(a),(e) - (j). In addition to the changes that the Consent Decree imposed on the IBT's disciplinary mechanism, the Decree imposed changes upon the IBT's electoral process. The Consent Decree intended that maintaining free and democratic IBT elections -- in which the rank and file is given the right to vote free of coercion and manipulation of the electoral process -- would be a primary mechanism for cleansing the union of its long-standing connections to organized crime. See United States v. IBT, 742 F. Supp. 94, 96 ((S.D.N.Y. 1990) ("[N]o question is more central to the ultimate success of this Consent Decree than this proposed framework for the first fully democratic, secret ballot elections in the history of a union which has been the historic marionette of organized crime"). The Decree appointed an Election Officer (to be designated by the district
court) to "supervise" the 1991 and 1996 IBT elections and to resolve
all disputes concerning the conduct and/or results of the elections. Consent
Decree, Sections F(12)(D)(ix) and B(3)(1). n23 Pursuant to the Consent Decree,
the first direct, secret ballot, rank and file elections in the IBT's history
(for the position of International President and for the GEB) were held in 1991.
Candidates for International office were nominated by secret ballot votes of
delegates to the IBT convention, who were themselves, for the first time in
thirty years, elected by the membership shortly before the Convention. Goldberg
at 997-98. This salutary process was repeated in 1996. n23 In an amendment to the Consent Decree, entered February 8, 1995, the
"rights and duties conferred upon the 1991 Election Officer" were
conferred upon the 1996 Election Officer. This amendment also conferred the
Independent Administrator's duty to "hear disputes about the conduct and/or
results of elections" upon an Election Appeals Master to be appointed by
the Court. I was appointed as the Election Appeals Master by order of the Court
dated February 7, 1995. On September 29, 1997, I was also appointed as the
Election Officer for the sole purpose of investigating and deciding whether Mr.
Carey should be disqualified from the rerun election. During the course of both elections, hundreds of protests from candidates and rank and file members were investigated by the Election Officer, some of which were appealed to the Independent Administrator (in 1991) or, the Election Appeals Master (in 1996), and some of which were appealed to the United States District Court and to the United States Court of Appeals for the Second Circuit. The Election Officer's duties were very broad, and included ruling upon qualifications of delegates to the Convention, screening Union periodicals for impermissible campaigning, securing access for candidates to campaign sites, and supervising the collection and tally of ballots. The Consent Decree thus established a functional separation between the disciplinary and electoral authority that it delegated. While the investigatory and disciplinary authority of the IBT were conferred upon the IRB (and, previously, the Investigations Officer and Independent Administrator), the Election Officer's function is to broadly supervise the IBT elections to ensure that the election process is free, fair, open and informed. See United States v. IBT, 86 F.3d 271, 274 (2d Cir. 1996); United States v. IBT, 723 F. Supp. 203, 206 (S.D.N.Y. 1989). See also 95 Elec. App. 75, at 26 (Feb. 6, 1996) (KC) (upholding Election Officer's remedy, which was "reasonably calibrated to correct any adverse impact on the election process"); 96 Elec. App. 251, at 3 (Oct. 15, 1996) (KC) ("The purpose of remedies under the election Rules is to level the playing field"). This structure differs from that of many other similar consent decrees, which consolidate general oversight power. See United States v. Mason Tenders District Council of Greater N.Y., No. 94 Civ. 6487, 1997 WL 340993 (S.D.N.Y. 1997); United States v. District Council of Carpenters, 880 F. Supp. 1051 (S.D.N.Y. 1995); United States v. Local 6A Cement & Concrete Workers, 832 F. Supp. 674 (S.D.N.Y. 1993). As described, the Consent Decree has "established an entire institutional structure" in order to achieve its purposes. United States v. IBT, 954 F.2d 801, 810 (2d Cir. 1992). This structure must, of course, function within the broad guidelines established by the Consent Decree itself. See United States v. IBT, 998 F.2d 1101, 1107 (2d Cir. 1993) ("A court may not replace the terms of a consent decree with its own, no matter how much of an improvement it would make in effectuating the decree's goals.") As with any other contract, the intent of the Decree must be ascertained with reference to the four corners of the Decree, or, if necessary, to other interpretative aids such as the context in which the Decree was negotiated. Id. at 1106. Because the Consent Decree establishes guidelines for its own application, statutory limits on the federal regulation of labor unions will not always apply. The intent of the Decree governs the applicability of such limits. Thus, in United States v. IBT, 931 F.2d 177 (2d Cir. 1991), the Second Circuit found that the Election Officer could order the use of an IBT membership list inconsistent with the LMRDA, reasoning that "the Election Officer's authority under the Consent Decree . . . clearly contemplates some use of the membership list, consented to by the IBT, beyond that permitted by the LMRDA." Id. at 188. Similarly, the Second Circuit rejected a challenge to an election rule providing that each "accredited candidate" for Union office could have his campaign literature published in the IBT's monthly magazine. Responding to the IBT's objection that the rule encroached on its First Amendment right to refrain from speaking at all, the court emphasized that "by consenting to the Election Officer's power under the Consent Decree, the IBT waived any objection to the Election Officer's exercise of legitimate authority." Id. The Second Circuit has also emphasized the independent nature of the
institutional structure established by the Consent Decree, through its holding
that the exercise of power pursuant to the Decree is not preempted by binding
labor arbitration. See United States v. IBT, 954 F.2d 801 (2d Cir. 1992)
(upholding an order of the Election Officer directing the reinstatement of an
employee who was terminated because of campaign activities, even though finding
was inconsistent with that of arbitrator pursuant to a collective bargaining
agreement). n24 Judge Edelstein's holding that the meaning of "supervise"
should encompass "connotations connected to" the use of the term in
the "labor law field" was intended to imply only that the term should
be interpreted "in its most expansive and proactive meaning." United
States v. IBT, 723 F. Supp. 203, 206 (S.D.N.Y. 1989). On numerous occasions, the Second Circuit has broadly sanctioned the use of federal control, consistent with the intent of the Consent Decree, to eliminate corruption and promote democracy in the Teamsters Union. For example, in United States v. IBT, 981 F.2d 1362 (2d Cir. 1992), the Second Circuit upheld the Independent Administrator's determination that the president of an IBT local breached his fiduciary duties by failing to investigate allegations of the vice-president's ties to organized crime. In upholding the Administrator's penalty barring the individual from holding any IBT office in the future, the Second Circuit stated that the penalty, while severe, was appropriate in light of the IBT's "crimson record of corruption," and efforts "to maintain the institutional integrity of the Union and to dissipate a climate where union officials acquiesce in the criminal exploits of their colleagues." Id. at 1372. In United States v. IBT, 905 F.2d 610 (2d Cir. 1990), the Second Circuit upheld the decision of the Independent Administrator suspending two IBT officers because the individuals had, based on underlying federal criminal convictions, conducted themselves in a manner that brought reproach upon the IBT in violation of the IBT Constitution. The court held that the Independent Administrator was not bound by a GEB interpretation of the IBT Constitution that would preclude the charges, since the Consent Decree delegated to the court-appointed officer the broad power to interpret the IBT Constitution relating to disciplinary matters. Id. at 618. See also United States v. IBT, 941 F.2d 1292, 1298 (2d Cir. 1991) (upholding decision of Independent Administrator imposing lifetime suspensions and termination of health and welfare benefits to local union officers who had associated with organized crime; Administrator was empowered to oversee the IBT's internal disciplinary affairs, and punishment "served the Decree's objective of severing ties between the IBT and organized crime."); United States v. IBT, 19 F.3d 816 (2d. Cir. 1994) (upholding decision of Independent Administrator permanently barring from IBT member who had knowingly associated with members of La Cosa Nostra). The Second Circuit has also sanctioned the wide use of federal control to promote democracy in the Union. See United States v. IBT, 931 F.2d 177, 187 (2d Cir. 1991) (affirming election rule providing that each "accredited candidate" for union office could have his campaign literature published in the IBT's monthly magazine; Consent Decree's grant of broad supervisory authority to the Election Officer conferred that officer with "substantial discretion to impose election rules and procedures that ensure that the upcoming elections are free, fair and informed"); United States v. IBT, 86 F.3d 271, 274 (2d Cir. 1996) (Election Rule allowing Election Officer to review and approve local union publications in order to prevent Union-financed publications from endorsing or supporting particular candidates for Union office was authorized, where Election Rule was "important measure for bringing democratic control to the IBT and for ridding it of influence by criminal elements"). Moreover, the Second Circuit has broadly sanctioned the use of federal control to achieve the purposes of the Consent Decree by finding that, pursuant to the All Writs Act, the district court can issue orders to third parties in order to effectuate the purposes of the Decree. See United States v. IBT, 948 F.2d 98 (2d Cir. 1992) (upholding order of Election Officer conferring limited access to employer premises where no feasible alternative for campaigning for candidates for union office was available). The court found that All Writs Act power was available as "necessary or appropriate" to the court's jurisdiction, especially in light of the "Strong public interest in the ongoing effort in this litigation to open the IBT to democratic processes and purge the union of organized crime influence." Id. at 103. Pursuant to the broad supervisory authority conferred upon the Election
Officer by the Consent Decree, the Election Officer has promulgated rules to
provide guidelines for the conduct of the elections and to regulate the exercise
of the Election Officer's own authority. n25 These Election Rules give the
Election Officer the general authority to interpret and enforce the Rules, and
"to take all necessary actions in supervising the election process to
insure fair, honest, open and informed elections." Article 1 of the Rules
for the 1995-1996 IBT International Union Delegate and Officer Election (the
"Election Rules"). n25 Interested parties had the opportunity to object to the final Election
Rules, which were submitted to Judge Edelstein for approval. This process
occurred in both the 1990-91 and 1995-96 election cycles. See United States v.
IBT, 86 F.3d 271 (2d Cir. 1996); United States v. IBT, 742 F. Supp. 94 (S.D.N.Y.
1990); United States v. IBT, 931 F.2d 177 (2d Cir. 1991); United States v. IBT,
896 F. Supp. 1349 (S.D.N.Y. 1995). The Election Rules contain a provision governing remedies for election misconduct. The provision provides that if: "the Election Officer determines that the Rules have been violated or that any other conduct has occurred which may prevent or has prevented a fair, honest, open and informed election, the Election Officer may take whatever remedial action is appropriate." Art. XIV, Sec. 4.This provision lists 26 remedies which may (without limitation) constitute "appropriate" remedial action. One such remedy is "disqualifying any member from seeking any delegate, alternate delegate or international officer position." Art. XIV, Sec. 4(c). This provision was not objected to by the parties when the final Election Rules were promulgated, and was subsequently endorsed by the Court. See United States v. IBT, 896 F. Supp. 1349 (S.D.N.Y. 1995) (reviewing objections to 1995-96 Election Rules). Thus, disqualification of candidates is a permissible exercise of the Election Officer's remedial authority under the Consent Decree, as well as under the Election Rules. n26 - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n26 Similarly, there were no objections to an identical provision regarding
remedies that appeared in the final version of the 1990-91 Election Rules. See
Article XI, Section 2 of the Rules for the 1990-91 IBT International Union
Delegate and Officer Election (the "1991 Rules"). This protest raises the question of whether, in the exercise of discretion,
the Election Officer should disqualify Mr. Carey, based on Mr. Carey's knowledge
of, and participation in, Election Rules violations designed to further his
campaign, violations that have already resulted in felony convictions for three
individuals. The Election Rules themselves provide little explicit guidance as
to when the remedy of disqualification would be warranted. n27 Disqualification
is by nature an anti-democratic remedy, which removes, in part, the choice of
union leadership from the rank and file and places it squarely in the hands of
the Government. See, e.g., United States v. Local 560 (IBT), 694 F. Supp. 1158,
1192 (D.N.J. 1988) ("it is not a desirable or healthy thing for the Court
at the Government's request to step in and interfere with the free, unfettered
choice" of union's members). For this reason, and because election
misconduct can typically be remedied by measures far short of disqualification,
the Election Officer has not often resorted to disqualification to remedy
election misconduct. n28 n27 However, in addition to the general disqualification provision, the current version of the Election Rules does contain two (identical) permissive disqualification provisions addressed to the specific misconduct of "interference with voting." For example, the section of the Election Rules pertaining to delegate elections and the section pertaining to international elections both contain the following provision: "No person or entity shall limit or interfere with the right of any IBT member to vote, including, but not necessarily limited to, the right to independently determine how to cast his/her vote, the right to mark his/her vote in secret and the right to mail the ballot himself/herself. No person or entity may encourage or require an IBT member to mark his/her ballot in the presence of another person or to give his/her ballot to any person or entity for marking or mailing.n28 This discussion does not apply to Election Officer's disqualification of candidates for failure to meet preliminary qualification requirements, which is uncontroversial. See, e.g., 96 Elec. App. 50 (Jan. 3, 1996) (KC). - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - Moreover, disqualification of candidates might not always be warranted in the exercise of discretion because, as described above, the primary role of the Election Officer is not to punish election misconduct, but to guard the democratic process from the effects of misconduct. See 96 Elec. App. 195, at 5 (May 30, 1996) (GSB) ("The Election Officer's mandate under the Rules is not to discipline and punish but to ensure that the democratic process proceeds fairly and openly"). For the most part, punishment is better left to other entities. Undoubtedly, the IRB, which can hold formal hearings allowing the admission of "facts, evidence, or testimony," is better suited than the Election Officer, who gathers evidence on an inquisitorial model, to punish members of the union for malfeasance. Moreover, the IRB can impose punitive remedies: if the IRB determines, for example, after appropriate process, that Mr. Carey's actions violated the IBT Constitution, available remedies will include suspending or expelling Mr. Carey from the union, or preventing him from holding office for a fixed period of time. See IBT Const. Art. XIX, Sec. 10(a). A finding that a candidate may have committed a crime also can be referred to the United States Attorney or state prosecutor. Nevertheless, the Election Officer may sometimes find punishment of
candidates or their supporters appropriate to serve remedial purposes, when such
actions are required in order to achieve a deterrent effect or to otherwise
preserve the integrity of the electoral process. n29 n29 In such circumstances, because disqualification would be remedial, rather than punitive, the requirements of 29 U.S.C. § 411(a)(5) (prohibiting the discipline of union members without (A) written service of specific charges; (B) a reasonable time to prepare a defense; and (C) a full and fair hearing) would not apply. There is strong support for the proposition that disqualification of a candidate from a union election by a court-appointed monitor does not constitute discipline within the meaning of the statute. See United States v. Mason Tenders District Council of Greater N.Y., No. 94 Civ. 6487, 1997 WL 340993, at *7 (S.D.N.Y. 1997) (monitor's disqualification of candidate for local office when investigation uncovered evidence of candidate's history of corruption was not discipline within the meaning of § 411(a)(5)). See also Department of Labor v. Aluminum, Brick & Glass Workers Int'l Union, 941 F.2d 1172, 1180 (11th Cir. 1991) (members disqualified from voting or running for office were not "otherwise disciplined" within meaning of provision). But see Gesnik v. Machinists, 831 F.2d 214, 217 (10th Cir. 1987). Indeed, the Consent Decree did not contemplate that the process requirements
of Section 411(a)(5) would apply to the Election Officer's exercise of remedial
authority, including the authority to disqualify candidates. For example, while
the Consent Decree contemplates that the Election Officer may disqualify
candidates in appropriate circumstances, it did not intend that the Election
Officer (unlike the IRB) would hold hearings in which the Election Officer would
accept "facts, evidence and testimony" from interested parties.
Consent Decree, Sec. G(g). The fact that Section 411(a)(5) does not, consistent
with the Consent Decree, apply to the remedial decisions of the Election Officer
is further confirmed by the fact that Art. XIII of the Election Rules
incorporates certain provisions of the LMRDA, but not Section 411(a)(5). See,
e.g., United States v. IBT, 931 F.2d 177, 188-89 (2d Cir. 1991) (Election
Officer's authority under Consent Decree contemplated uses of IBT membership
lists beyond that permitted by the LMRDA). Prior decisions by the Election Officer and the Election Appeals Master concerning the improper donation of IBT funds to a campaign offer limited guidance regarding whether and under what circumstances disqualification is an appropriate remedy. For example, in In Re: Thomas Gilmartin et al., P-032-LU245-PNJ, (Jan. 5, 1996), aff'd, 95 Elec. App. 75 (Feb. 6, 1996) (KC), a protest was granted and sustained concerning the donation of IBT funds to a network of activists who held themselves out as an issue-based group. These activists were members of the Real Teamsters Caucus (the "RTC"). The RTC was formed after Mr. Carey and other members of the General Executive Board abolished the IBT's former Area Conferences. The RTC denied that it supported or opposed any candidate for IBT office. 95 Elec. App. 75, at 6 & 17. The protest filed in Gilmartin alleged, among other things, that the RTC was primarily an anti-Carey campaign organization. Therefore, according to the protest, IBT contributions to the RTC were improper under the Rules. Gilmartin, P-032-LU245-PNJ at 6. IBT subordinate bodies had contributed approximately $116,000 to the RTC. The Election Officer found, and the Appeals Master affirmed, that the RTC was primarily a campaign organization. The Election Officer and the Appeals Master agreed that it was objectively foreseeable that contributions to the RTC would have the effect of opposing Mr. Carey and supporting his adversaries in the coming electoral contest. Therefore, it was held that IBT contributions to the RTC were improper under the Election Rules. The remedy ordered by the Election Officer and sustained by the Appeals Master essentially required only that the RTC repay the portion of IBT funds remaining in its possession (approximately $80,000). 95 Elec. App. 75, at 25. No candidates were disqualified as a result of the improper use of IBT funds in the Gilmartin case. For several reasons, however, little significance should be attached to the fact that disqualification was not invoked as the appropriate remedy in Gilmartin. First, the improper donations of IBT funds to a campaign in Gilmartin were discovered and returned to the IBT long before the election cycle had been completed. In other words, there was no finding made in Gilmartin that the improper donations had an impact on the outcome of the election. The Election Officer specifically noted that she had "not made any finding that the monies [which were improperly donated from the IBT to the RTC] were actually used for campaigning, but [merely] that the contribution of the monies had the foreseeable effect of opposing Mr. Carey." Gilmartin, P-032-LU245-PNJ at 99-100. For this reason, it was relatively simple to remedy the harm of the misconduct by ordering that the RTC return the donations it had received to the IBT. Furthermore, the culpability of the individuals involved with the decision to make improper IBT donations in the Gilmartin case is less pronounced than of those involved with the improper fundraising schemes involved here. There was a genuine dispute in Gilmartin as to whether the RTC was a campaign organization or an issue-based group. If it had been concluded that the RTC fell into the later category, then IBT contributions to the group would have been entirely proper. By contrast, in this case, three individuals have already pled guilty to federal felonies involving their unlawful fundraising activities. Moreover, there can be no colorable argument that it would somehow be proper to make donations out of IBT general treasury funds in order to induce contributions to a candidate's campaign. The improper funneling of IBT funds to a campaign was also considered in Thompson, P-1025-LU745-SOU (Nov. 1, 1996), aff'd, 96 Elec. App. 268 (Nov. 12, 1996) (KC). In Thompson, the Election Officer determined that T.C. Stone, an incumbent union official, had implemented a scheme to generate contributions to his campaign through salary raises for local officials. This resulted in contributions to his campaign of $35,000. The Election Officer held and the Appeals Master affirmed that Mr. Stone had violated the Rules by raising funds through this scheme. The remedy ordered was that Mr. Stone's campaign repay the $35,000 to the IBT. Notwithstanding the finding that he had implemented a scheme whereby he improperly funneled IBT funds to his campaign, Mr. Stone was not disqualified from running for office. Thompson, P-1025-LU745-SOU at 11. There are several reasons why disqualification would not have been an appropriate remedy and, indeed, was not considered in the Thompson case. First, the scheme used by Mr. Stone to generate contributions to his campaign was discovered prior to the election. Thompson, P-1025-LU745-SOU at 2. Therefore, it was still possible to remedy the potential injury to the electoral process by requiring that Mr. Stone's campaign repay the money to the IBT. Second, just as in Gilmartin, criminal conduct was not acknowledged to have been committed by members of the candidate's campaign team in Thompson. These and other distinguishing facts (including the quantum of IBT funds donated improperly) help to explain why the remedy of disqualification was not invoked or even considered in the Thompson holding. In contrast, disqualification has been found to constitute an appropriate exercise of the Election Officer's discretion in cases where election misconduct was particularly egregious. Thus, in the 1990-91 election cycle, the Election Officer disqualified the Informed Teamsters Slate from a local delegate election, based on "pervasive and egregious" election misconduct by the local's officers and executive board, who had close connections to the disqualified slate. See Post 73-LU63-CLA (June 17, 1991), aff'd, 91 Elec. App. 167 (June 22, 1991) (SA). Although the Informed Teamsters prevailed at the poll, the Election Officer certified their opponents as the election victors, in view of his finding that the slate and their supporters had "sabotaged" the election. The objectionable behavior included, among other things: solicitation, collection and marking of ballots; repeated disregard for the directives of the Election Officer; and interference with the Election Officer's investigation processes. There were also allegations that supporters of the Informed Teamsters Slate threatened members of the opposing slate in connection with the Election Officer's investigation. The Election Officer determined that "[d]isqualification is the only conceivable remedy in this unique situation." He explained that timing constraints did not permit a second rerun election without delaying the IBT delegate convention: Normally [this] finding [of election misconduct] would result in a new election being ordered. Since this rerun election[superior][ n30 ][/superior] was conducted only three weeks prior to the IBT Convention, it is now impossible for the Election Officer to order a new election in this Local. . . . Thus, the normal remedy for these violations -- another election -- is foreclosed. n31 Post 73-LU63-CLA at 22.- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n30 The Election Officer had ordered a prior rerun election based on his determination that the slates were not positioned on the ballot in accordance with the results of a lot drawing held for ballot placement. That violation was not the result of misconduct by either slate. n31 The Election Officer's remedy also took into account the fact that the
Carey Slate had defeated the Informed Teamsters Slate in the initial election,
and the closeness of the results in the second election. In affirming the exercise of the Election Officer's discretion, the Independent Administrator implied that even if there had been time for a rerun election, it could not have been fair, given the Informed Teamsters Slate's egregious misconduct and blatant disrespect for the Election Rules. In short, a rerun election would simply provide the Informed Teamsters Slate with "another opportunity to ignore and discredit the Election Rules." 91 Elec. App. 167 (SA). According to the Independent Administrator, "any candidate (or slate of candidates), who demonstrates such a blatant disregard of the sacredness of the secret ballot process must be precluded from participating in the election process." He further emphasized that the Informed Teamsters Slate had "demonstrated a total and complete disregard of any basic concept of decency and fair play. Obviously, their interest in being elected took precedence over the members' interests. This cannot be tolerated. The members' right to a free, fair, and open election is paramount and cannot be compromised." Id. The disqualification of the Informed Teamsters Slate was affirmed by Judge Edelstein. Judge Edelstein's Order of Oct. 11, 1991. The case at hand does not closely resemble any of the prior cases that have arisen under the Consent Decree. The past decisions of the Election Officer simply do not provide any clear guidance in these circumstances, which are entirely unprecedented: the General President of the IBT tolerated violations of funding Rules and authorized large disbursements from the IBT treasury, in order to further his own campaign. These monies were used to fund an improper mailing of over a million pieces of campaign literature in support of Mr. Carey's slate. The swap scheme bought a mailing that, it may be inferred from the evidence, impacted upon the outcome of the election, by reversing poll trends favoring Mr. Carey's opponent. The Election Officer has already concluded that these mailings "may have affected" the outcome of the election, and thus ordered a rerun election. Mr. Carey is, under the Election Rules, strictly liable for the Election Rules violations that have occurred. Art. XII, Sec. 1(b)(9) ("Candidates are strictly liable to insure that each contribution received is permitted under the Rules. Prohibited contributions must be returned promptly"). This provision ensures candidate accountability for violations of funding rules which, as set forth above, are necessary to ensure a fair, open and informed electoral process. It must be noted, however, that because Mr. Carey may be held strictly accountable for violations in the course of the campaign, and as a consequence has suffered nullification of his campaign victory, it does not necessarily follow that disqualification would constitute a proper exercise of discretion in the present circumstances. The foremost concern in fashioning an appropriate remedy should be, as demonstrated by past decisions of the Election Officer, what course of action can be selected to ensure that the rerun election is fair, credible and conducive to the strengthening of IBT electoral institutio |