I.  INTRODUCTION

Since 1989 the International Brotherhood of Teamsters (IBT) has been operating under a court order (the Consent Decree) that established an independent monitoring system of which the current Independent Review Board (IRB) is a part and required the inclusion of anti-racketeering provisions in the IBT Constitution to ensure that organized crime would not be permitted to exploit the union as it had in the past. The Consent Decree puts the IBT under an affirmative, legally enforceable duty to combat organized crime and racketeering. It was imposed upon the union in large part because IBT leaders had ignored evidence of organized crime infiltration and corruption.

Apart from this legal obligation, the current IBT administration, beginning in 1999, voluntarily undertook a comprehensive reform program designed to instill trust, restore the IBT's reputation, and demonstrate that the Teamsters Union could police itself: The IBT's anti-racketeering program has been carried out under the name Project RISE, which stands for "Respect, Integrity, Strength, and Ethics." Although some aspects of the union's anti-racketeering program are independent of Project RISE — such as the commitment to take appropriate investigative and other steps to protect the union from organized crime influences —"Project RISE" is commonly understood within the union as a shorthand term for all IBT-initiated anti-racketeering reform efforts. Documents with the Project RISE logo summarize its mission as "fulfilling our commitment to run a clean union." IBT leaders have made numerous statements of support for the reform program to union members, government officials, and the media, and have used its existence as a reason to end or modify the Consent Decree.

This report describes issues identified by IBT investigators operating under their mandate to fulfill the union's obligations under the Consent Decree and its commitment to implement the anti-racketeering measures announced by IBT leaders. The issues go to the heart of the union's anti-racketeering program: infiltration of Teamster entities by the Chicago organized crime family and attempts to stifle IBT investigations of organized crime-related corruption in that area. An appendix to this report describes each issue in greater detail, and a confidential appendix contains additional source materials and references. The report concludes with recommendations for resolving the identified issues and restoring the credibility of the IBT's reform program.

II. SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS

During the past year, and especially since June 2003, it has become increasingly obvious that the IBT leadership's commitment to the reforms symbolized by Project RISE has wavered. As a result, the credibility of the IBT anti-racketeering reform program has been severely undermined. A perception has taken root among both supporters and opponents of the reforms that the IBT's top leadership no longer supports the program and will not permit anti-racketeering investigations to threaten the most powerful remaining organized crime influences in the union, which are centered in the Chicago area. As described in this report, there is substantial evidence to support this perception.

In September 2003, IBT investigators received reports from intelligence sources who were in positions to know about developments within the Chicago Teamsters community and Chicago organized crime circles to the effect that the Chicago organized crime family — known as the Chicago "Outfit" — had concluded that its interests in

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Teamster matters were threatened by IBT investigative activities and had ordered those activities shut down. This objective would be accomplished by influential current and former union officials, including the current president of Chicago Joint Council 25 (JC25 President) and the executive assistant to the IBT general president (Executive Assistant).

A full investigation is required to establish whether and to what extent the Chicago Outfit is behind efforts to shut down organized crime-related investigative activities in that area. Such an investigation is warranted because any organized crime influences that reach into the general president's office revive the issues that led to the Consent Decree and cannot be ignored. Moreover, while it has yet to be established that the Chicago Outfit was behind them, there is no doubt that there have been efforts to limit and ultimately eliminate IBT investigations in Chicago. Since mid 2003, for example, the following has occurred:

• Despite substantial unresolved issues relating to organized crime and corruption, an IBT investigation of Local 726 was ended after the Executive Assistant made repeated statements questioning the need for the Local 726 investigation. The purported basis for ending the investigation and withdrawing the general president's personal representative who had been assigned to it was a letter by the personal representative, the writing of which had been orchestrated by the Executive Assistant.

• The Executive Assistant conducted a similar lobbying campaign against continuing the IBT investigation of Local 786, to which the same personal representative had been assigned. Once again, the Executive Assistant orchestrated the writing of a letter from the personal representative that he used to support his argument that the investigation should be ended.

·           The Executive Assistant took steps to conceal his role in generating the letters he used to justify his argument that the Local 726 and Local 786 investigations should be ended.

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·         The Local 786 investigation, while not shut down until February 2004, was severely narrowed in December 2003 in a way that excluded addressing any organized crime-related issues.

·         Charges against three Teamsters, including one who knowingly associated with an organized crime member, that were recommended in June 2003 on the basis of an interim report concerning the Local 786 investigation have not been filed.

·         A February 2003 recommendation to begin an overt investigation of Local 714 in Chicago because of multiple issues related to organized crime, corruption, and the reappearance of conditions that led that local to be placed into trusteeship based upon a 1996 IRB report, was not acted upon until June 2003. When the recommendation was reiterated at that time, the general president ordered the issues turned over to the IRB.

·         The Executive Assistant has made repeated efforts to keep invoices for Chicago-related investigations from being paid for arbitrary reasons.

·         In January and February 2004, after IBT investigators attempted to interview Chicago-area Teamsters believed to have knowledge relevant to carrying out the IBT's anti-racketeering mandate, strong complaints were made by the JC25 President to the office of the general president and the IBT general counsel.

·         By mid February, following repeated Chicago-based complaints that reached the general president's office after each interview that was conducted, the IBT investigative team stated that it would produce a comprehensive report on the organized crime and other issues under investigation in the Chicago area, including the high-level efforts to derail the team's anti-racketeering activities, and request a meeting with the general president to address them.

·         On February 24, 2004, IBT investigators were instructed by the general president's office to stop all investigative activity in Chicago pending submission of this report.

The attempts to stop anti-racketeering investigations in Chicago occurred in the context of mounting evidence that more, not less, investigative activity is warranted in the Chicago area. Among the issues that need to be addressed are the following:

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·              Whether Local 726 Teamster supervisors have been engaging in an ongoing practice — extending through at least February 2004 — of soliciting bribes from Local 726 rank-and-file members in exchange for full-time. City of Chicago jobs and lucrative overtime jobs, and the extent to which this practice implicates organized crime;

·              Whether organized crime members and associates who, according to the present principal officer of Local 726, had many contacts with the former principal officer who resigned in April 2003 continue to have contact or' association with present executive board members;

·              Whether charges should be brought against seven active Local 726 members and one member on withdrawal status who have been identified by intelligence sources and public documents as members or associates of the Chicago Outfit;

·              Whether kickbacks or other improper payments were generated through a dental and vision plan maintained by the Local 727 Health and Welfare Plan;

·              Whether the trustees of the Local 727 pension and benefit plans violated their fiduciary duties by permitting persons and entities with ties to organized crime, involvement in racketeering schemes, or both, to be vendors to or employees of the plans;

·              Whether a Local 727 business agent is associated with organized crime and/or has engaged in prohibited associations with organized crime figures, and whether payments to the business agent from the local's benefit plans reflect fair compensation for services actually rendered to the plans pursuant to an arm's-length employment agreement;

·              Whether the principal officer of Local 743 entered into sham collective bargaining agreements with two employers and whether those employers have ties to organized crime;

·              Whether the current principal officer of Local 743 is involved in the video poker machine business and whether he has contact, through that business or otherwise, with individuals associated with organized crime;

·              Whether Local 781's current principal officer, who is also the vice president of Joint Council 25, has engaged in a prohibited association with William T. Hogan Jr., a barred member;

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·              Whether the charges proposed in the June 2003 interim report concerning Local 786 should be filed against: (1) the Local 786 benefit fund's administrator for knowingly associating with an organized crime member who is a barred Teamster; (2) the benefit fund's collections manager for providing false information and receiving full-time compensation for less than full-time work; and (3) the Local 786 benefit fund's assistant administrator for refusing to appear for a sworn statement;
 

·           Whether and to what extent organized crime continues to control or influence the affairs of Local 786;

·           Whether and to what extent Local 786 employers who were associated with or controlled by organized crime failed to make proper contributions to the Local 786-affiliated benefit funds because of corrupt or illegal schemes and practices; and

·         Whether the current Local 786 principal officer and other members of the local's executive board abused their fiduciary duties by misappropriating in excess of $8,000.00 of local union funds for their personal benefit in violation of IBT written policy.

Issues relating to organized crime infiltration and associated corruption in the Chicago area are numerous and cut across jurisdictional lines. They include allegations relating to Joint Council 25 and to IBT representatives in the area. Some service providers and vendors used by multiple locals in the Chicago area and/or their affiliated benefit funds have apparent organized crime connections and have been implicated in racketeering schemes, or both. There is a pattern of Teamster employers, many of which have demonstrable organized crime connections, using nonunion labor to perform jobs that are or could be subject to a collective bargaining agreement, a practice that is apparently condoned by some Teamster leaders. There is also a widespread perception among Chicago-area Teamsters that William Hogan Jr. continues to exercise substantial influence throughout Joint Council 25 and is involved in various schemes affecting Teamster entities

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in the area, despite his status as a barred member with whom other Teamsters cannot associate. According to confidential sources, Hogan, the JC25 President, and the Executive Assistant are key figures behind the attempts to shut down IBT investigations in Chicago. IBT investigators have found substantial evidence to support the perception of Hogan's continued influence, such as an October 2003 meeting between Hogan and the current Joint Council 25 vice president.

A comprehensive effort is required to address the pervasive organized crime and corruption issues in Chicago and to restore the credibility of the IBT's anti-racketeering reform program. That credibility cannot be restored if IBT officials known to be hostile to investigating organized crime and corruption issues, particularly in the Chicago area, are permitted to exercise authority over investigative activities. Thus, the Executive Assistant should be sequestered from any such responsibility and any replacement be sincerely committed to the union's announced anti-racketeering principles and objectives. In addition, educational events should be planned to counter what appears to have been an intentional campaign of disinformation about IBT anti-racketeering activities and to reinforce the union's commitment to genuine cultural reform. Finally, certain investigative and administrative decisions that may have been influenced by attempts to shut down the anti-racketeering reform efforts should be reexamined.

There is still time to redeem the integrity of the IBT's anti-racketeering program before its credibility is irreparably damaged and the public statements of Teamster leaders in support of reform are deemed to have been fraudulent. Credibility cannot be restored, however, if Teamster leaders attempt to maintain a balancing act between taking the steps

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necessary to combat racketeering and responding to pressure from those who oppose genuine reform. A clear choice must be made. If the IBT leadership chooses to carry out its public commitment to genuine anti-racketeering reform, then it will have to confront strongly entrenched interests in Chicago, address on their merits numerous unresolved issues of organized crime influence and corruption, and hold Teamster entities in that area to the same standards as the rest of the union.

IlI BACKGROUND

A.          The IBT's Anti-Racketeering Commitment

The IBT's ongoing commitment to rid itself of organized crime influence and racketeering was expressed in a formal General Executive Board (GEB) resolution as well as in numerous public statements by top union officials. Stier Anderson's role in helping the union to fulfill this commitment has been described and reaffirmed in numerous contexts, beginning with the June 8, 1999 retainer letter which confirmed that the IBT was retaining Edwin H. Stier "to assist the IBT in assuring that it is fully capable of protecting its membership and the public from exploitation of the Union by organized crime and corrupt officials." One task was to develop a strategy "to deter, to the fullest extent possible, wrongful conduct by IBT officials and to assure that if evidence of such conduct surfaces, it will be dealt with swiftly and fairly."¹

The union's commitment, and Stier Anderson's role in helping to carry it out, was reiterated many times in a variety of public and private forums. On July 23, 1999, for example, General President James P. Hoffa announced in an IBT publication "a new initiative to eradicate corruption and any remaining mafia influences in the Teamsters

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Union." Hoffa "'made the promise that we would take dramatic steps to remove any remaining influence of organized crime from our union, and set new, higher standards for a corruption-free union,' and announced that the GEB "'unanimously passed a resolution for a comprehensive, internal anti-corruption plan; a self-policing plan unlike any other union.- Stier was also quoted in that article as follows: "`I am convinced that Jim Hoffa and the leaders of this union are committed to running a clean union and are determined to remove any remaining vestiges of organized crime.² Later that year, General President Hoffa was pictured on the cover of Teamster standing next to James M. Kossler, a former FBI agent who supervised key organized crime investigations, and Stier over the statement — "'We will run a clean union.- Inside the magazine, in a signed message, the general president strongly affirmed his commitment to eradicating corruption: "I am absolutely committed to our new anti-corruption program because I believe it is essential to our long-term success and growth.... If there are any hidden mob associates in the union, we will identify and remove them. This will set a clear standard for dealing with the threat of mob influence in the future."³

Predictably, there was skepticism about the sincerity of the union's announced commitment to fighting organized crime and corruption. In a July 7, 1999 New York Times article, for example, prominent labor reporter Steven Greenhouse stated that "some labor relations experts questioned whether Mr. Hoffa might be appointing Mr. Stier less to clean up the union than to impress the Government with his plan to put in place his own anti-corruption program." One labor relations expert, Richard Hurd of Cornell University, "asked whether Mr. Hoffa might someday fire Mr. Stier, the way President Richard M. Nixon once

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fired the special prosecutor Archibald Cox, if Mr. Stier's anti-corruption mechanism targets Mr. Hoffa or his close allies." Hurd was further quoted as follows: "`Naming Stier is the kind of thing you'd expect a reformer to do, not the kind of thing you'd expect someone who had questionable intentions .... I'm reluctant to say this is proof that Hoffa is serious, but it's certainly a positive sign. The truth will be in how it plays out.'" The article also attributed to Stier the following: "Mr. Stier said . . . that he would quit if he grew convinced that Mr. Hoffa was not serious about fighting corruption or was undercutting him."⁴

In February 2000, IBT General Counsel Patrick J. Szymanski wrote to the chief of the FBI's Organized Crime and Drug Operations Section to request assistance "that will enable the Union to remove any remaining vestiges of organized crime and to prevent any future attempt by organized crime to infiltrate or influence the Union, its officers and members." Szymanski's letter stated that the IBT's top officers were "personally and irrevocably dedicated" to the goal of protecting the union from organized crime. To this end, the letter continued, "the Union has embarked upon a far-reaching Anti-Corruption Program headed by former prosecutor Ed Stier and former [FBI] Special Agent Jim Kossler." As part of this program, Szymanski made the "commitment" that the union and "its retained independent investigators will provide the Bureau with any reports and relevant information generated from disclosed information, as well as any evidence of criminal conduct that might be gathered in the course or our own investigations." In its concluding paragraph, the letter stated: "The IBT is committed to fighting corruption of any form and allegations involving organized crime will be given our highest priority."⁵

On October 4, 2001, in a letter to Andrew W. Schilling of the U.S. Attorney's Office for the Southern District of New York concerning discussions about the 1989 Consent Decree, Szymanski expressed frustration with the Government's "failure to recognize the accomplishments of this administration and its fidelity to the principles embodied in the Consent Decree," noting that the IBT had "hired experienced former federal law enforcement officers to conduct a study to identify and deal with any remaining organized crime influence in the Union."⁶

In October 2002, the IBT released its comprehensive investigative study of organized crime influence in the union, thereby completing the first phase of the union's Project RISE reform program. Accompanying the organized crime study's release were public statements by the IBT's top leaders reported in numerous media outlets reiterating their commitment to keep the union free of organized crime influences.⁷ As the organized crime study itself made clear, however, the true test of the union's commitment lay in the future: "If the Teamsters Union adheres faithfully to the principles of Project RISE, it will culminate a process that has lasted for a century and involved combating powerful outside forces arrayed against the vital interests of union members." The report also made clear that the existence of a credible internal enforcement mechanism — and the union's commitment to use it — was the most important difference between today's IBT and the entity that was brought under government monitorship in 1989: "The most important change in the IBT has been its commitment to a credible program of self policing and cultural reform."⁸

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The union's commitment to anti-racketeering reform was reiterated as recently as the September/October 2003 issue of Teamster, which contained a section that referred to the organized crime study. It concluded: "Although the Teamsters have come a long way in rooting out corruption, union leaders realize it is important to operate internal systems that will sustain a commitment to protecting the members and the union."⁹

Despite the IBT leaders' repeated public commitments to combat organized crime and corruption, many Teamsters, as well as Government officials and other interested outsiders, have remained skeptical. Fueling skepticism is the perception that corruption and organized crime influences are deeply rooted within the Teamsters Union and that IBT leaders, although they pay lip service to reform, will not back up their reform principles when confronted with specific cases. Clearly, the only way to make the anti-racketeering commitment credible is to demonstrate that the union can and will move decisively against corrupt elements in the union no matter how powerful and politically influential they may appear to be. This is the ultimate test of the IBT's or any organization's commitment to reform. Given the Teamsters Union's history of involvement with organized crime, its poor public image, and the adversarial relationships it has had with law enforcement agencies, passing this test was certain to be a difficult process that could succeed only if IBT leaders provided strong support to anti-racketeering measures.

B.         Building a Credible Self-Policing System

Because building an effective internal intelligence gathering, investigation, and enforcement system was essential to the credibility of the union's anti-racketeering

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commitment, Stier Anderson and Kossler assembled a team of experienced attorneys and investigators.

Most of the team members already knew a great deal about the union from participating in the earlier stages of the reform program. To help it carry out the organized crime study and other aspects of Project RISE, the union had assembled a team and board of advisors that, in the words of the study, "provided as comprehensive a reservoir of knowledge and expertise concerning organized crime, the Teamsters, and related issues as has ever been assembled.^"10 These persons contributed their talents, experience, and reputations to the reform effort because they genuinely believed the union's leadership was committed to it. They helped persuade others — outsiders such as government officials, legislators, journalists, and academics, as well as Teamsters at all levels — to share that belief.

As the anti-racketeering program progressed from theory to practice, the IBT investigative team began developing intelligence networks in key parts of the country, including Chicago, establishing and maintaining relationships with law enforcement agencies, conducting investigations, and assisting the lBT in the prosecution of individual charges and trusteeship proceedings. All of these activities were designed to carry out the IBT's responsibilities under the Consent Decree, as well as the public commitments the union had made.

The system that developed from the IBT's commitment to reform is designed to be at least as effective a deterrent to organized crime infiltration and racketeering as is the system of external monitoring imposed by the Consent Decree. At the same time, the IBT

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investigative team sought to build upon the many relationships it developed with Teamsters at all levels to enlist members of the union in the ongoing struggle against racketeers. The investigative team has operated on the premise that the overwhelming majority of Teamsters are honest and support the goals of the reform program. Consequently, IBT investigators were able to obtain significant cooperation from current and former Teamster members, officers, and service providers. The information provided by union sources is an important complement to what investigators are able to obtain through their own expertise, liaison with government agencies, and network of sources who have in-depth knowledge about local underworld groups.

To be effective in combating the kinds of organized crime and racketeering threats that can be expected to confront the Teamsters Union, the self-policing system must have the ability to carry out investigations at three basic levels. First, there is an "intake" level in which the investigators receive and analyze leads and intelligence information, but do not initiate further action other than to maintain contact with ongoing sources of intelligence. Second, there is a covert level of investigation in which the investigators attempt to corroborate new intelligence by searching databases, interviewing cooperating witnesses, drawing upon their law enforcement expertise and connections, and using other techniques that do not involve openly confronting the subjects of the investigation. Finally, there are overt investigations that seek information from relevant sources, including subjects, which may need to invoke the powers of the general president or other authority to demand documents and testimony. Sometimes the three levels overlap, as when overt inquiries contribute to intelligence gathering.

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While most investigative field work, especially at the intelligence gathering stage, is carried out by investigators, it is important to the success of the system that attorneys and investigators work as a team. In overt investigations, Stier Anderson attorneys conduct most of the questioning, review documentary evidence, analyze testimony and the entire evidentiary record, conduct research, and write the reports. At the intelligence gathering and covert stages, attorneys must be in regular contact with investigators to evaluate the significance of information being received against appropriate standards, such as those set by the Consent Decree, the IBT Constitution, and legal standards. They sometimes interview cooperative witnesses as part of the evaluation process. The attorneys also help the investigators prioritize their efforts, ensure that evidence meets appropriate standards of relevance and weight, and determine when matters need to be shared with outside agencies such as the FBI or IRB. Moreover, because the attorneys have a national overview that individual investigators may not, they can help spot patterns and facilitate the sharing of critical information between investigators in different regions.

By 2003, the IBT could point to a solid record of achievement in fulfilling its anti-racketeering commitment. Building on the foundation of the field studies they had conducted at 80 Teamster locals, the team of former prosecutors, retired FBI agents, and others with relevant experience that conducted the organized crime study had begun to construct the kind of ongoing intelligence network required to detect current and future organized crime influences. Members of the team had developed cooperative relationships with federal and state law enforcement agencies, and in 2002 and 2003, members of the IBT investigative team cooperated with the IRB in investigations in New York and Texas.¹¹

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The IBT was also beginning to demonstrate that it could investigate, bring charges, and prosecute cases on its own, without relying on the IRB or other outsiders to do so. In November 2002, for example, charges were filed against an IBT vice president based on evidence developed solely by the IBT's own investigators.¹²

Up to that point, the union's leaders had demonstrated the requisite level of commitment and support to the process of building and maintaining an effective self-policing system. There were delays, inconsistencies, and resistance from certain quarters, but these could be attributed to the predictable difficulties any organization is likely to encounter when trying to implement important changes. Especially since mid 2003, however, there have been increasing signs that persons and organizations with a vested interest in avoiding scrutiny of their practices were attempting to shut down the reform program. As summarized below, there is reason to believe that the epicenter of this resistance is in Chicago and involves the Chicago Outfit.

IV. UNRAVELING OF THE IBT'S REFORM COMMITMENT IN 2003

A.         The Persistent Threat of the Chicago Outfit

For as long as the IBT has been in existence, Chicago has been an important center of Teamster economic and political strength as well as the source of corrupt influences that have threatened the integrity of the entire union. In 1908 IBT General President Daniel J. Tobin stood off a challenge from racketeer-inspired Chicago Teamsters. Tobin's display of courage and integrity on that occasion probably saved the fledgling IBT from an early demise.¹³ Nearly a century later, the racketeer threat to the union emanating from Chicago persists largely because of the continued vitality of the Chicago Outfit. While many other

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traditional organized crime groups have lost most of their strength because of the intense law enforcement campaigns against them during the past three decades, the Outfit remains, as the Chicago Crime Commission described it in 1997, "alive and well and operating in various levels of government and business in Chicago."¹⁴

The perpetual high level of official corruption in Chicago has been an important factor in the Outfit's survival and continued prosperity. A series of federal probes in the 1980s and continuing into the 1990s exposed a thoroughly corrupt Chicago court system and led to the convictions of state legislators, judges, law enforcement officers, and lawyers. Other federal cases damaged the hierarchy of the Chicago Outfit.¹⁵ In recent years, however, government resources have been heavily committed to the war on terrorism and other priorities, lessening the law enforcement pressure on the Outfit.

The Teamsters and other unions have played prominent roles in the culture of corruption that has prevailed in Chicago. Some of the Chicago Outfit's associations with Teamster locals include Local 777's longtime president, Joseph Glimco Sr., who was a member of the Outfit and, according to some sources a capo in the organization;¹⁶ Local 786 official James V. Cozzo, a high-ranking member of the Outfit who was permanently barred from the Teamsters based upon charges that he was a member of organized crime;¹⁷ and Dominic Senese, Local 703 president in the late 1980s and a powerful Chicago labor leader, who was barred from the IBT in 1990 for being a member and associating with members of organized crime.¹⁸ In addition, the IRB proposed charges against Local 738's Secretary-Treasurer and Principal Officer Peter Agliata, son-in-law of Joseph Ferriola, one-time head of the Outfit, for knowingly associating with members of

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organized crime. In 1993 Agliata entered into an agreement with the IRB and resigned his IBT membership.¹⁹ Former Local 714 member Salvatore Galioto, who was involved with Teamster officials in equipment rental for film production, was associated with the Chicago Outfit through its West Side street crew. Galioto's uncle is underboss James Marcello and his father is a lieutenant in the Outfit. In May 2000, Galioto pleaded guilty to charges relating to a Medicare fraud scheme.²⁰ Yet another example is Teamster Local 731 rank­and-file member Peter DiFronzo, who resigned his membership in 1998 following IRB charges alleging him to be an Outfit member and chief lieutenant for his brother, Outfit boss John DiFronzo.²¹

In 1997 the Chicago Crime Commission reported that the Outfit remained "viable and strong" and concluded that it was "not in decline, just more subtle." The Outfit, according to the Commission's report, "is more flexible and adaptable than ever before. Its power and wealth has never been more sound and difficult to permeate."²²

The Chicago Crime Commission's 1997 observations about the Outfit's continuing vitality are, if anything, even more true today based upon what IBT investigators have learned from intelligence gathering and investigative activity. Moreover, the other conditions that have always made the Teamsters Union vulnerable to organized crime influence are currently present in Chicago.²³ Ongoing political corruption helps ensure the Outfit's survival and prosperity and in some cases — such as the City of Chicago's "Hired Truck Program," discussed in the appendix to this report (Tab 7) and the City's Streets and Sanitation Department (Appendix, Tab 1)— has a direct impact on the union. Federal pressure on the Outfit and the corrupt system that allows it to thrive has not disappeared,

as evidenced by the recent indictment of a former Illinois governor.²⁴ Federal resources are, however, currently stretched thin due to other priorities. Finally, and most important, the union's internal resistance to racketeer influences is weak in Chicago. Consequently, anti-racketeering measures in that area require strong IBT leadership to succeed. As discussed below, during the past year that leadership has not been forthcoming.

B.        Confidential Source Information Concerning Attempts by the Chicago Outfit To Shut Down IBT Investigations

Beginning in September 2003, IBT investigators received reports from confidential intelligence sources — who were in positions to know about developments within the Chicago Teamsters community as well as Chicago organized crime circles —to the effect that the Outfit had concluded that its interests were threatened by IBT investigative activities and had ordered those activities shut down. According to the sources, this objective would be accomplished by influential union officials, including the JC25 President and the Executive Assistant, who would use their positions to stop IBT investigations in Chicago.

One confidential source ("Source A"), who investigators have independent reason to believe has Outfit connections, stated that the Outfit is extremely upset by "Project RISE" and at General President Hoffa for starting it, and has ordered it stopped. Source A reported that there was too much money involved in control of Teamster pension and health and welfare funds in Chicago for the Outfit to tolerate Project RISE. The Executive Assistant, current JC25 President, and a former barred JC25 President were sabotaging Project RISE pursuant to Outfit instructions, according to Source A.²⁵

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A second confidential source ("Source B"), a local union officer, stated that the JC25 President was attempting to block the "Project RISE" investigation into Local 786 and was using his close relationship with the Executive Assistant to accomplish this.²⁶ (See discussion of Local 786 issues in the appendix to this report, Tab 5.)

A third confidential source ("Source C"), a former Teamster with ongoing contacts inside the union, reported that the Executive Assistant was fronting a move by Chicago Teamsters to derail "Project RISE" and that the Executive Assistant had been promised by the Chicago Teamsters that if he were fired as a result of his efforts on their behalf, they would hire him back as a union consultant.²⁷

A fourth confidential source ("Source D"), a local union officer, stated that the current principal officer of Local 330 had interceded with the JC25 President to keep "Project RISE" from becoming involved in an investigation of the current principal officer's alleged organized crime connections, after which someone influential had called the Executive Assistant to get the investigation stopped. (See discussion of Local 330 issues in the appendix to this report, Tab 6.)²⁸

A fifth confidential source ("Source E"), who investigators have independent reason to believe has Outfit connections, confirmed the information from other sources that the Outfit has ordered Project RISE shut down.²⁹

A sixth confidential source ("Source F") provided information relating to the current JC25 President's initial understanding of the nature of the IBT investigations in Chicago. The source reported being present at a meeting of Teamster officials in the Chicago area during the period when the rules for Project RISE were being drafted and at which the

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former joint council president and the current JC25 President were present. According to Source F, the current JC25 President explained that Project RISE investigations would be superficial and for show only.³⁰

C.        Independent Corroboration of Confidential Source Information

The IBT investigative team does not assume that information from intelligence sources is accurate. It is precisely for this reason that additional steps — including overt investigations when warranted — are necessary. However, covert inquiries and analysis of intelligence information and other evidence produced independent corroboration of the intelligence sources and left little doubt that, whether emanating from the Outfit or not, there have in fact been attempts to shut down or severely restrict IBT investigations in Chicago. Indeed, these attempts constitute the strongest corroboration of the information received from confidential sources. Thus, a full investigation is required to establish whether and to what extent the Chicago Outfit is behind efforts to shut down organized crime-related investigations in that area.

1.          Resistance to Ongoing and Proposed Formal Investigations in 2003

In early 2003, two formal IBT-initiated investigations were in progress in Chicago, and IBT investigators had obtained evidence warranting the opening of a third. By the end of the year, IBT support for one of the ongoing investigations had been prematurely withdrawn, the other substantially narrowed to eliminate the organized crime-related issues, and the proposed third investigation referred to the IRB. This outcome appears to have been in large part the result of the Executive Assistant's persistent opposition to IBT

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investigations in Chicago in response to pressure from certain Chicago Teamster leaders anxious to keep the entities they controlled free from scrutiny.

Since his appointment in 1999, when the current IBT administration took office, the Executive Assistant has been in a position to exercise a great deal of control and influence over decisions requiring the approval of the general president. In addition to having virtually daily access to the general president and thereby being in a superior position to make his views on various issues known, the Executive Assistant has exercised direct authority over a number of functions that affect the IBT's anti-racketeering program. For example, the individuals who have been appointed as personal representatives of the general president to assist in IBT-initiated investigations were already serving as international representatives and as such continued to report, as a practical matter, to the Executive Assistant. The Executive Assistant is in a position to affect the processing of invoices to pay investigators and, through his approval authority for travel, can monitor and affect the payment of investigation-related expenses. In short, the key position occupied by the Executive Assistant offers an excellent opportunity to sabotage the anti-racketeering program if the incumbent in that position is so inclined.

Before mid 2003, there were few obvious signs that the Executive Assistant was hostile to Project RISE or the IBT's anti-racketeering program in general, except for two brief but troubling incidents during the summer of 2002. Earlier that year, as described in the appendix to this report (Tabs 1 & 5), a personal representative of the general president had been appointed to assist the investigation of issues concerning Chicago Locals 726 and 786. In July 2002, the Executive Assistant summoned the personal representative to

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Washington to explain why he and Stier Anderson were pursuing the investigation of Local 726 when, according to the Executive Assistant, there was no organized crime involvement in the local. During that month, a rumor circulated that the Executive Assistant was going to fire the personal representative for failing to keep him apprized of what was going on in the investigations of Locals 726 and 786. The personal representative was not fired, however, and the Executive Assistant disavowed any intention of doing so.³¹

In late August 2002, while the general president was on vacation, the Executive Assistant arbitrarily refused to authorize the payment of an invoice for the lead investigator in Chicago who was assisting in the Local 726 and Local 786 investigations. Although this was the second troublesome incident in the space of little more than a month involving the Executive Assistant and Chicago investigations, the matter was resolved upon the return of the general president and these incidents did not appear to be significant until they were followed by more serious attempts to interfere with Chicago-based investigations beginning in mid 2003.

On February 26, 2003, Stier Anderson recommended to the IBT that it launch a formal investigation, with the appointment of a personal representative, into issues concerning Chicago Local 714. These issues included apparent ties between individuals occupying positions of authority in Local 714 and organized crime figures, and the reappearance of conditions that led to the trusteeship imposed upon the local as the result of a 1996 IRB report.³² For months, no action was taken in response to this request.

While the Local 714 investigation request was pending, IBT investigators in Chicago continued to develop information relevant to Local 714 issues as well as intelligence

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information concerning other Chicago-area Teamster entities. In addition, the IBT personal representative for the investigations of Locals 726 and 786, assisted by the investigative team, had been examining documents and beginning to take sworn statements of witnesses in connection with the issues concerning these locals. On June 10, 2003, the investigators took the sworn statement of a Teamster who is the daughter of organized crime lieutenant and barred member James Cozzo. Her sister, Cozzo's other daughter, was the assistant administrator of Local 786's affiliated benefit funds. The first Cozzo daughter described interactions between her father and the benefit funds' administrator.³³

The June 10 interview followed a series of attempts to obtain evidence relevant to the Local 786 investigation from individuals with known or suspected connections to the Chicago Outfit. On February 19, the investigators took the sworn statement of an individual with reputed Chicago Outfit connections, who was employed by both the local and several of its affiliated benefit funds, to inquire about evidence that he had a no-show job at either the local or the funds. On February 20 and again on March 11, the benefit funds administrator was interviewed about the no-show job issue as well as about his own contacts with Outfit member Cozzo (this administrator was the son of the former principal officer of Local 786 who was allegedly put in that position by the Outfit, was barred from the union after resigning in response to IRB charges, and plead guilty to federal charges of accepting bribes from an employer). On April 29, 2003, Cozzo's other daughter, a Teamster on withdrawal status, refused to appear for her scheduled sworn statement.³⁴

Thus, it is reasonable to infer that by June 2003 at least one prominent Outfit member, James Cozzo, was well aware of IBT investigative activities concerning Local 786

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and its affiliated benefit funds — both of which, according to intelligence sources, are influenced by Cozzo and his Outfit cohorts.³⁵

In the meantime, there were significant developments related to the Local 726 investigation. In April 2003, the local's principal officer, who had been at the center of allegations concerning organized crime ties, resigned to take a position with the State of Illinois. In June the new principal officer confirmed to the Local 726 investigative team that the former principal officer had in fact associated with members of organized crime. That same month, however, the Executive Assistant took the position that the investigation of that local should be ended because the former principal officer had resigned and the new principal officer had stated that there was no longer evidence of organized crime in the local. On June 13, 2003, in response to a request from the Executive Assistant, the Local 726 representative wrote a letter to the Executive Assistant indicating that the new Local 726 principal officer stated there was no longer organized crime influence in the local. The personal representative's letter noted, however, that some organized crime issues remained unresolved.³⁶

On June 25, 2003, Stier Anderson submitted an interim report to the IBT recommending the filing of charges against three Local 786 Teamsters: first, against the administrator of Local 786-affiliated benefit funds for associating over a six-to-seven year period with barred Teamster and Chicago Outfit lieutenant Cozzo and for providing false testimony about the work attendance of a subordinate; second, against one of Cozzo's daughters, who was assistant administrator of Local 786's affiliated benefit funds and a close friend of the administrator, for failing to appear for a sworn statement; and, third,

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against an employee of the benefit fund and the union for receiving full-time pay for less than full-time services and for providing false testimony regarding his attendance atwork.³⁷ At a meeting with the general president in June, Stier reiterated the need to act on the February 2003 recommendation to investigate issues related to Local 714. Instead, without explanation, the general president in July instructed that the Local 714 issues be referred to the IRB. No action was taken in response to the Local 786 charge recommendations, and when Stier raised the matter again with the general president in July, he was told that the charges were too minor.³⁸

With progress on IBT investigations in Chicago retarded by the Local 714 referral to the IRB and the failure to file the recommended charges concerning Local 786, the Executive Assistant initiated a series of actions to roll back the overt investigations still in progress in Chicago and to inhibit general investigative activity in that area:

·              In August 2003, while the general president was on vacation, the Executive Assistant refused for the second year to approve payment of bills for Chicago-based investigators.³⁹

·           In early September, the Executive Assistant instructed the personal representative for the Local 726 and Local 786 investigations not to perform any work, including collecting information or performing additional audits, for any local in Chicago without clearing it with him first.⁴⁰

·           On September 9, the personal representative sent a letter to the Executive Assistant stating that the U.S. Department of Labor (DOL) had just completed an audit of Local 786 and, according to what the local's attorney claimed had been conveyed to him, had found no issues. Solely on this basis, the personal representative's letter stated that it was time to "further evaluate as to our need to remain in Teamster Local 786, unless or until more information would come to light."⁴¹

On the same date, September 9, the personal representative sent a letter to the Executive Assistant stating that, given the current principal officer of

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Local 726's statement that "he believes there are no other sources of negative influence [organized crime] affecting the Local now that [the former principal officer] is gone," his assignment as personal representative to Local 726 should be terminated.⁴²

·              On September 15, without notifying Stier Anderson, the general president terminated the personal representative's assignment with respect to Local 726.⁴³

On September 23 the Executive Assistant was present at a meeting in IBT headquarters to discuss the nonpayment of the Chicago investigators' bills and the status of the organized crime investigations nationwide, including Locals 726 and 786. Participating in the meeting were the general president, the general secretary-treasurer, the general counsel, the Executive Assistant, and Edwin H. Stier. When the discussion turned to Locals 726 and 786, the Executive Assistant argued that the investigations of these locals should be terminated. As a pretext for this argument, the Executive Assistant referred to letters from the general president's personal representative purporting to recommend shutting down the investigations, without revealing that the Executive Assistant had orchestrated the writing of these letters.⁴⁴

·           At the end of the September 23 meeting, Stier left with the understanding that any decision to remove the personal representative from any local under investigation would be discussed by everyone first, and that, in the absence of such a discussion, the personal representative would not be removed from his position in Local 786 and would be reinstated in Local 726.

·           Less than one week later, on September 29 the Executive Assistant took steps to procure from the personal representative a letter recommending that the Local 786 investigation be terminated and then the Executive Assistant took further steps to cover up his role in procuring this letter.⁴⁵

Following this series of events, the Local 726 investigation remained effectively shut down, while the Local 786 investigation proceeded until December 12, 2003, when the general counsel relayed an instruction from the general president that the investigators were authorized only to complete a document review regarding personal expense abuse

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by Local 786's principal officer and to take the principal officer's final sworn statement. Any other activity had to be cleared with the general president's office.⁴⁶

Thus, by the end of 2003, the actual and proposed overt IBT investigations in the Chicago area had been shut down, severely restricted, or, in the case of Local 714, referred to the IRB. In addition, it was completely clear by that time that the Executive Assistant was hostile to conducting any level of investigative activity in Chicago and was using his influential position to sabotage the IBT investigative team. This was consistent with the informant information that was being received during this period concerning Chicago Outfit pressure to stop IBT investigations in Chicago.

2     Events Leading to the February 24, 2004 Order To Shut Down Chicago Investigations

There was also corroboration of the informant information to the effect that the JC25 President was heavily involved in opposing IBT anti-racketeering investigations in Chicago and was closely coordinating his opposition with the Executive Assistant. As described below, the combined efforts of the Executive Assistant, the JC25 President, and their allies succeeded in bringing about the complete shutdown of Chicago investigations in 2004.

Although the vigorous opposition to IBT anti-racketeering investigations in Chicago spearheaded by the Executive Assistant and the JC25 President had succeeded in all but eliminating overt investigations in that area by the end of 2003, the investigative team continued to conduct intelligence gathering and covert activities pursuant to the mandate given to Stier and Kossler when the current administration announced its reform program in 1999, as described above. The investigative team considered these activities as the

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minimum necessary to comply with the IBT's legal obligations under the Consent Decree, much less with the more aggressive anti-racketeering stance the union had taken under the banner of Project RISE. Accordingly, the investigative team continued to receive and evaluate intelligence information, conduct informal interviews of Teamster and non-Teamster witnesses on a voluntary basis, gather and examine documents from various public sources, maintain liaison with law enforcement agencies and the IRB, and prepare memoranda and evaluations concerning specific findings and broad trends in the Chicago area, many of which have been incorporated into this report and its appendices.

Even this level of anti-racketeering activity, however, proved to be intolerable to the Teamster forces in Chicago behind the opposition to IBT reform efforts in that area and to their ally in Washington, the Executive Assistant. Their combined opposition in 2004 resulted in the February 24 shutdown of all investigative activities in Chicago, which is the context in which this report has been written.

On February 9, 2004, an IBT investigator met with the principal officer of a Chicago-area local for the purpose of arranging an informal interview. The meeting was cordial, the investigator and the officer conversed at length on a variety of subjects, and the officer agreed to meet the investigator three days later on February 12.⁴⁷ The investigator's reason for wanting to talk to the officer was squarely within the mandate given to the network of investigators assembled by the IBT to carry out the anti-racketeering program: gathering information relevant to organized crime infiltration of the union. Multiple sources had identified this particular officer as an individual who, while personally honest, was

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knowledgeable about a broad range of topics relevant to the Chicago Outfit's relationship with Teamster entities and Outfit-inspired schemes.

The investigator's contact with the officer provoked a strong and immediate reaction from certain Chicago Teamster leaders and their allies. Complaints were made to the IBT general president, not by the officer,. but by others apparently threatened by the prospect of his speaking freely to the investigator. An attorney —whose firm's clients have included the JC25 President's local, the barred former Joint Council President Hogan in a civil action, the former Local 726 principal officer who was the subject of organized crime association issues, and other Chicago-area Teamster individuals and entities about which there have been allegations relevant to the anti-racketeering program —was to be present at any interview of the officer, ostensibly at the officer's request. However, a source who was in a position to have accurate information has stated that the officer was told by the attorney to cancel his scheduled meeting with the investigator and to have an attorney present at any future interview.⁴⁸

The intense interest in this matter by individuals other than the officer who was to be interviewed and the apparent pressure on that officer to have a lawyer, who had represented other interested parties present at any interview, is consistent with the confidential source information about the reasons behind the resistance to IBT investigations in Chicago. These actions bespeak fear of what the officer and others like him might reveal if they were allowed to speak freely with IBT investigators. Indeed, at the same time, complaints from Chicago were also raised about IBT investigators interviewing two Teamster members regarding alleged organized crime issues at their local. In

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response to this series of complaints, Stier informed the IBT that a report detailing the outstanding organized crime and other issues in the Chicago area and efforts to shut down the investigation would be prepared and a meeting with the general president requested to address these issues.

Then, on February 24, 2004, Stier was formally instructed to stop all investigations in the Chicago area pending completion of this report. The instruction, which came from the general president's office, was relayed to Stier by General Counsel Szymanski and Bruce Maffeo, who has represented IBT officials in various matters and has participated in negotiations with federal authorities in New York concerning a modification of the 1989 Consent Decree. Maffeo stated that the general president had requested him to participate in the conversation with Stier and Szymanski. In response to Stier's question about situations warranting interviews or other investigative action, he was instructed to clear any such actions with Szymanski, but Szymanski in turn would have to gain approval from the general president for certain investigative activities, all of which was a significant departure from prior investigative practice.⁴⁹ As the reaction (described below) to one attempt to obtain such clearance made clear, however, the practical effect of the February 24 order was to extinguish any meaningful investigative authority in Chicago.

Before this order to shut down investigative activity in Chicago, an interview had been scheduled with two Chicago-area Teamster officials to discuss the City of Chicago's Hired Truck Program, about which there had been extensive publicity in Chicago-area media during early 2004. As described in detail elsewhere (Appendix, Tab 7), information about this program is highly relevant to an issue at the heart of the union's anti‑

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racketeering program: organized crime infiltration of Teamster entities and the loss of Teamster jobs to nonunion labor associated with mob-controlled companies. The interview of the two Teamster officers was entirely voluntary and was expected to be friendly — they had initiated action against the Hired Truck Program and had no apparent reason to refrain from discussing it. Because of the February 24 shutdown order, however, the interview was postponed until clearance could be obtained from Szymanski.⁵⁰

On February 27, with Szymanski's approval, an IBT investigator called one of the two officers to reschedule the interview. The officer told the investigator that a person the officer declined to identify — because he had been told not to — had instructed him not to allow anyone from "Project RISE" to interview him. Later inquiries established that this instruction had not come from Szymanski. It had, however, according to the Teamster officer, come from "Washington." Contemporaneous with these events, the JC25 President had called Szymanski to complain that IBT investigators were continuing to conduct investigations in Chicago.^51.

Thus, for the second time in two weeks the planned interview of knowledgeable Teamsters in furtherance of the IBT's anti-racketeering program elicited strenuous objections, not from the interviewees, but from others apparently concerned about what they might say.

Since the February 24 shutdown order, the Chicago investigative team has been primarily occupied in supporting the preparation of this report. Members of the team have also, however, received unsolicited reports from multiple Teamster sources to the effect that IBT investigations in the Chicago area have been shut down and Project RISE is

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finished. As if to confirm such rumors, on April 1, 2004, during the final preparation of this report, the Executive Assistant — without knowledge of the General Counsel — directed the transfer of the project manager of the ^"Anti-Corruption Committee" (Project RISE) to the Education Department because of the "conclusion of this committee.^"52 This precipitous action before this report was even completed is one of a series of recent indications that the forces against the anti-racketeering program in the union have succeeded in destroying the credibility of IBT self-policing in the Chicago area and within the union itself.

V.        EVIDENCE OF ORGANIZED CRIME INFLUENCE AND CORRUPTION IN CHICAGO

The attempts to stop anti-racketeering activities in Chicago occurred in the context of mounting evidence that more, not less, investigative activity is warranted in that area.

Some of the specific issues that require investigation are summarized below and are described in greater detail in the appendix to this report. Because these issues are, or should be, the subjects of ongoing investigations, certain details have been omitted here to avoid compromising the investigations before they are completed and to protect the confidentiality of certain sources. This is particularly important because of evidence that some individuals within the union are actively hostile to investigative activity in the Chicago area. For this reason, some of the source materials, including the endnotes to the appendix, have been retained in a separate confidential appendix.

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A.        Patterns of Organized Crime Influence and Racketeering Activities in the Chicago Area

Traditionally, the Chicago Outfit and other organized crime groups have exploited labor unions in a variety of ways. As the Chicago Crime Commission described in its 1997 report, the infiltration of labor unions often begins through the awarding of jobs to friends, associates, and relatives of organized crime members or persons connected to them. Some of these individuals then rise to positions of influence within the union, giving them control over benefit fund monies and access to dues, as well as the power to appoint other "connected" individuals to union positions. Once a union is infiltrated, the organized crime group can benefit in a number of ways, including:

·              Concessions to favored, mob-connected companies allowing them advantages in bidding or allowing them to hire nonunion workers to avoid paying overtime or benefits;

·              Allowing a favored contractor to form a new company with a different name with the understanding that there will be no strikes or organizing campaigns at the new company;

·              Contracts steered to mob-owned businesses;

·              Mob-connected employers paying off union officials to avoid signing a collective bargaining agreement;

·              Organized crime figures, with the help of compliant union officials and workers, slowing down work or delivery of supplies to extort money from disfavored contractors;

·              Organized crime members and associates, or their relatives, being put on union payrolls without having to work;

·              Pension and health and welfare fund trustees being influenced to favor mob interests;

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·             Mob-controlled unions making campaign contributions to ingratiate themselves with politicians; and

·             Mob-controlled unions using construction and other work sites to promote illegal gambling and loansharking activities.⁵³

The issues identified by IBT investigators suggest that Teamster entities in the Chicago area are being subjected to many of these classic methods of organized-crime exploitation. For example, information from multiple sources indicates, among other things, that:

·             Numerous Teamster officers, members, employees, and service providers may have connections to the Chicago Outfit;

·             The Outfit is behind a variety of corrupt schemes that involve or affect Teamsters entities in the Chicago area;

·             Outfit-connected companies displace Teamsters with nonunion labor; and

·             Affiliated benefit funds have employed or contracted with Outfit-connected individuals and entities who have engaged in questionable practices.

 

By September 2003, for example, the IBT investigative team had noted an emerging pattern in which persons and entities with organized crime connections provide nonunion labor in apparent violation of existing contracts or benefit from substandard contracts and the failure to provide adequate representation to union members. This is discussed in detail in the appendix to this report (Tab 7).

Another pattern of evidence, which is discussed in Tab 8 of the appendix, indicates that William Hogan Jr., who was permanently barred from the union and who may have substantial organized crime connections, has a continuing influence over Chicago-area

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Teamster entities and is associating with present Chicago Teamsters who are prohibited from doing so.

A pattern also exists with respect to service providers to locals and especially benefit funds, which intelligence sources consistently identify as prime targets of organized crime. These issues are discussed in Tab 9 of the appendix and in connection with individual locals, as further described below.

B.           Issues Centering around Specific Locals and Individuals

The patterns identified above and described in more detail in the appendix to this report cut across jurisdictional lines and, in varying degrees, affect Teamsters throughout Joint Council 25. In addition, there are unresolved issues centering around specific locals and individuals. In two cases (Locals 330 and 714) at least some of these issues were being investigated by the IRB at the time of this report. The issues centering around two other locals (Locals 726 and 786) were the subjects of IBT investigations that have been halted, as described above. Issues centering around three additional locals (Locals 727, 743, and 781) that were identified as a result of intelligence gathering and covert investigative activity will require overt investigations to resolve. In total, these locals comprise nearly one-third of all locals in Joint Council 25, and include locals headed by the president, vice president, and recording secretary of the joint council.

1.         Local 726

As described in Section IV of this report, the IBT investigation of Local 726 was abruptly terminated on September 19, 2003, an action that was orchestrated by the Executive Assistant as part of the ongoing resistance to IBT anti-racketeering efforts in

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Chicago. As a result of this termination, significant issues concerning Local 726 remain unresolved and require further investigation, either because they have not been fully addressed or have not yet been addressed at all. These include:

·           Whether and to what extent there is an ongoing practice of bribe solicitation — extending through at least February 2004 — by Local 726 Teamster supervisors of rank-and-file Local 726 members in exchange for full-time City of Chicago jobs and lucrative overtime jobs, and the extent to which this practice implicates organized crime;

·           Whether Local 726 executive board members knew of or participated in the solicitation and receiving of bribes by Teamster supervisors from fellow Teamsters, and if so, what actions were taken pursuant to their fiduciary obligations to investigate such activities;

·           Whether organized crime members and associates—who, according to the present principal officer of Local 726, had many contacts with the former principal officer who resigned in April 2003 — continue to have contact or association with present executive board members;

·           Whether charges should be brought against seven active Local 726 members and one member on withdrawal status identified by intelligence sources and public documents as alleged associates of organized crime in Chicago; and

·           Whether the Coalition for Better Government (CBG), an independent political action committee which is run by two convicted felons who are associated with organized crime and receives over 40 percent of its revenue from Local 726 members,, continues to exert a corrupt influence over Local 726 members' job security and assignments, including overtime, and whetherthis occurs in collusion with or through the acquiescence of Local 726 executive board members

Evidence of recent organized crime influence and corruption centering around Local 726 is extensive and is described in the appendix to this report (Tab 1). In January 2004, for example, the Chicago Sun-Times ran a series of cover stories that featured a longtime Teamster general foreman of motor-truck drivers in the Chicago Department of

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Transportation (COOT), who retired in 2002. He was identified in the news story as an organized crime associate and was identified by federal authorities in a 1996 criminal case as an associate or member of the 26th Street/Chinatown street crew of the Chicago Outfit.

In August 2003, after many months of effort, IBT investigators obtained sworn testimony that this same COOT general foreman, while still a member of Local 726, extorted "Christmas gifts" from at least one 10-year member of Local 726 in the amount of $500.00 every Christmas from 1994 through 2001 in exchange for a job that included coveted overtime. The member estimated that several hundred other Local 726 members likely paid bribes.

There is no reason to believe that the 2002 retirement of the former general foreman ended either the pattern of bribe solicitation or the Outfit links to that practice. On the contrary, there is evidence indicating that the successor to the retired CDOT supervisor who was featured in recent Chicago media accounts may be continuing his practice of accepting bribes and may have ties to organized crime. Moreover, the practice of soliciting bribes appears to extend to other City of Chicago departments. As recently as February 2004, IBT investigators received evidence that a Teamster foreman at a Chicago Streets and Sanitation yard is currently soliciting substantial bribes in exchange for providing full-time City jobs to seasonal employees.

Following the resignation in April 2003 of the former Local 726 principal officer, the current principal officer disclosed that his predecessor had numerous contacts with individuals who are organized crime members and associates, one of whom made contact with the current officer in the spring of 2003. Whether prohibited contacts with the principal

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officer or other executive board members continue is not known because of the premature termination of this investigation in September 2003. Other indications, however, of continued organized crime influence in the local exist, including the identification of seven active members of the local, and one member on withdrawal status, who are alleged to have organized crime connections, and the links between local members and the political action group CBG, which has ties to the Chicago Outfit.

Because the Local 726 investigation was prematurely and improperly terminated, important issues going to the heart of the IBT's anti-racketeering program remain unresolved. Accordingly, this investigation should be reinstated and a personal representative reappointed so that these issues can be addressed.

2.         Local 727

Local 727 was included in the Project RISE field study of 85 Teamster locals because of its history of organized crime associations. For many years, the principal officer of the local was a member of the Chicago Outfit. Upon his retirement in 1981, one of his sans succeeded him as principal officer. That son, in turn, was removed from his position by the IRS in 1992 for violating his fiduciary duty by failing to investigate and to act with respect to allegations and evidence that a business agent of the local was associating with the Chicago Outfit (see Appendix, Tab 2).

Another of the Chicago Outfit member's sons took over as principal officer in 1992 and has continued to serve in that capacity since then. He has also been a trustee to the local's affiliated pension and other benefit funds and is the current president of Joint Council 25. (He has been referred to in this report as the "JC25 President.")

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Despite the close familial connections of the current Local 727 principal officer to an Outfit member and to a former principal officer removed for failing to investigate the organized crime ties of a business agent, the Project RISE field study found no demonstrable current organized crime influence or systemic corruption in Local 727. Accordingly, it was placed in the category of locals that appeared to have developed an anti-racketeering culture and sufficient internal controls to make future organized crime infiltration unlikely. Information received following completion of the field study, however, indicates that, in the case of this local, appearances may have been deceiving. That information warrants an overt investigation to resolve the following issues:

·           Whether kickbacks or other improper payments were generated through a dental and vision plan maintained by the Local 727 Health and Welfare Plan, and whether the plan's trustees violated their fiduciary duties with respect to the dental and vision services portion of the plan;

·           Whether the trustees of the Local 727-affiliated benefit plans violated their fiduciary duties by permitting persons and entities with ties to organized crime, involvement in racketeering schemes, or both, to be vendors to or employees of the plans under questionable circumstances; and

·           Whether a Local 727 business agent is associated with organized crime and has engaged in prohibited associations with organized crime figures, and whether payments to the business agent from the local's affiliated benefit plans reflect fair compensation for services actually rendered to the plans pursuant to an arm's-length employment agreement.

These issues were uncovered as a result of allegations made to IBT investigators concerning the dental/vision portion of the Local 727 Health and Welfare Plan. As detailed in the appendix to this report (Tab 2), persons knowledgeable about the dental portion of the plan, and who had dealings with third parties who purportedly insured or helped administer the dental/vision portion of the plan, provided information and documentation

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indicating that the amounts paid to third parties were grossly excessive and that service providers were misled in a way that minimized the payments to them and maximized funds available to third-party intermediaries. Their information, and independent corroboration obtained through investigation, revealed apparent irregularities in the administration of the dental/vision portion of the plan, suggesting that it may have been used for improper purposes. These include:

·           During the period 1993-2000, the sums paid to brokers and other third-party intermediaries appear to have been grossly excessive in relation to the services provided;

·           Plan representatives appear to have misled and withheld information from the dental service providers in an effort to reduce the amount spent on dental services and thereby inflate the sums available to the intermediaries;

·           In a further effort to minimize the amount spent on dental services and thereby maximize the money available to the intermediaries, general dentists in the provider group were pressured to provide services normally performed by specialists or to forego performing specialized procedures;

·           Questionable expenses, such as gifts to Local 727 personnel, meals with a person with organized crime ties who had been convicted in a racketeering scheme involving a union-sponsored dental/vision plan, and unspecified "consulting fees" were apparently charged to the plan;

·           The trustees of the Local 727 Health and Welfare Plan, who included the JC25 President, apparently allowed these practices to continue from at least 1993 to at least 2000; and

·           Money from the Local 727 plan followed a circuitous route: first, to an "insurer" entity owned by a dentist in Florida; then back to an account in Illinois opened in the name of the main dental service provider organization, but not authorized by that organization; and finally a lesser amount to the dental service providers' authorized account. IBT investigators familiar with fraud and kickback schemes recognized this pattern as characteristic of such schemes, which are designed to mislead auditors and legitimate service providers about the amount paid to brokers, consultants, or other third parties.

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There were also concerns arising from the backgrounds of persons and entities involved in the administration of the dental/vision plan. Since at least 1993, there has been a pattern of persons and entities who have received payments from the plan having had ties to organized crime figures, having been implicated in racketeering schemes, or both.

In addition to the issues relating specifically to the dental/vision plan, there was a similar pattern of payments from the Local 727 Health and Welfare Plan to persons and entities with apparent organized crime ties. These payments include salaries paid to a Local 727 business agent who received more than $50,000.00 from the benefit funds in the plans' 2002-2003 fiscal year, in addition to his pay from the local as a full-time business agent. Also, this business agent is not a member of Local 727, which appears to be inconsistent with Teamster practice.⁵⁴ Preliminary investigation has revealed that this business agent has possible organized crime ties and that there is reason to question the extent to which he performed legitimate administrative services for the funds. The apparent organized crime ties of the business agent were discovered in the course of reviewing documentation to corroborate the information provided concerning the dental/vision plan. IBT investigators noticed that among the persons listed as having received substantial payments for performing "administrative" services to one or more of the benefit plans was a Local 727 business agent who had the same name as an individual known to law enforcement as an associate of Outfit boss John DiFronzo. Additional investigation established that the business agent in question is the son of the DiFronzo associate and revealed additional evidence of possible organized crime associations (see Appendix, Tab 2).

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Additionally, Dane Passo, a former IBT representative who was barred from the union by the IRB in 2002 along with William T. Hogan Jr. in connection with a scheme to benefit a Chicago labor leasing firm (see Appendix, Tab 8) was placed on the Local 727 payroll as a business agent and also paid substantial sums from the benefit funds in 2001-2002, in an apparent accommodation to Passo after he took an unpaid leave of absence from his lBT position when he was charged by the IRB in 2001.

Further investigation is required to resolve the issues described above and in the appendix. This investigation will require overt activities such as sworn interviews of Local 727 officers, members, employees, and service providers to the local and its affiliated funds, as well as the inspection of relevant documents. A personal representative is requested to facilitate these activities.

3.           Local 743

Local 743 was included in the Project RISE field study because of the local's historic connections to organized crime. The field study revealed unresolved issues concerning the local's vulnerability to organized crime and other corrupting influences, and information received following the completion of the field study has heightened concern over these issues. They include:

·        Whether the local's principal officer or other Local 743 officers have allowed Donald Peters, a former principal officer of the local who was a named defendant in the government's 1988 civil RICO complaint that led to the current Consent Decree, to be involved in the affairs of Local 743 in violation of the Consent Decree and the agreement settling the RICO case and whether any Local 743 officers have associated with Peters without having investigated his alleged ties to organized crime;

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·           Whether the current principal officer has allowed Robert J. Simpson Jr., Peters's successor as Local 743 principal officer who was removed from office by the lRB, effectively to hold a position of trust or responsibility, or otherwise to influence the affairs of Local 743 in violation of a court order;

·           Whether the current principal officer entered into sham collective bargaining agreements with two employers and whether those employers have ties to organized crime;

·           Whether the current principal officer continues to be involved in the video poker machine business and whether he has contact, through the video poker machine business or otherwise, with individuals associated with organized crime; and

·           Whether the Local 743 Health and Welfare Trust is engaged in a relationship with a service provider detrimental to the local's membership.

The concern about continued involvement in the local's affairs by Peters arises from Peters's identification as an organized crime associate. Peters had a close association with Allen Dorfman in connection with the Central States Pension Fund (CSPF). The government's 1988 civil RICO complaint alleged that Peters, a trustee to the CSPF, surrendered authority over investment decisions to Dorfman knowing that Dorfman was controlled by organized crime figures. Peters was also identified as an organized crime associate because of his close relationship with Outfit members Joseph Lombardo- and Dominic Senese (see Appendix, Tab 3). The settlement of the RICO case barred Peters from holding any positions as an officer, agent, representative, or employee of the IBT or any IBT subordinate body, or any IBT-affiliated employee benefit fund. Notwithstanding this agreement and the identification of Peters as an organized crime associate, his successor, Simpson, was barred from holding any IBT positions in 1994 following an IRB

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charge that he had allowed Peters to continue to represent and be involved in the affairs of Local 743 and because he failed to investigate Peters's alleged organized crime ties.

In the context of this history, witnesses have alleged that Peters has continued to be involved in Local 743's affairs, has visited its offices, and at least as recently as 2002 has attended a 743-sponsored Christmas party with the apparent approval of the current principal officer. Similar issues have been raised with respect to Simpson, who was also banned from holding any position with the IBT or any IBT-affiliated entity, or from obtaining employment, consulting, or other work with the union or its affiliates. Witnesses have stated that, despite this order, Simpson is frequently in the Local 743 offices, meets on a regular basis with the current principal officer, and virtually runs the local. Additionally, witnesses and intelligence sources have reported that the former and current principal officers spend a great deal of time at an establishment known to be frequented by Chicago Outfit figures.

IBT investigators have independently confirmed that the current principal officer and Simpson have been together both at the Local 743 office and elsewhere, including the establishment known to be frequented by Outfit figures. There is conflicting information from witnesses concerning both the Peters and Simpson allegations, including whether Peters was present at the 2002 Christmas party, but IBT investigators have been prevented from exploring the evidence further because of the February 24, 2004 shutdown order described earlier in this report.

Former Principal Officer Chester A. Glanton, now deceased, provided information concerning two Local 743 collective bargaining agreements of questionable legitimacy,

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which Glanton characterized as "shams" in a November 2000 interview. Investigators have uncovered circumstances corroborating Glanton's allegation that the contracts are shams and indicating that the sham employers may have ties to organized crime, narcotics trafficking, and money-laundering. Additional information indicates that the current principal officer continues to operate an amusement business that supplies video poker machines and jukeboxes. Law enforcement authorities report that the video poker machine business is an industry subject to mob control. Additionally, at least one of the restaurants that has housed a jukebox supplied by the current principal officer is known by law enforcement to be frequented by major Mexican drug traffickers (see Appendix, Tab 3).

Finally, the Project RISE field study documented that Local 743 while under trusteeship severed its relationship with its former insurance contract administrator, Group Administrator's, Ltd. (GA), which is owned by Allen M. Dorfman's son David Dorfman (see Appendix, Tabs 2, 3, and 9), after a 1995 study commissioned by the local showed that Dorfman's firm charged excessive fees. Notwithstanding this earlier action, annual reports filed with the federal government indicated that Local 743 again made payments tc Dorfman's company between 2002 and 2003.

An overt investigation with the assistance of a personal representative is require( to resolve these issues.

4.           Local 781

Issues concerning Local 781 arose because of information and investigative activity related to the broader issue of whether William T. Hogan Jr. continues to exercise influence

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over Teamster individuals and entities despite his having been barred from the union by the IRB in 2002. This broader issue is discussed in the appendix to this report (Tab 8). The current specific issues that require investigation in connection with Local 781 are:

·           Whether Local 781's current principal officer, who is also the vice president of Joint Council 25, has engaged in a prohibited association with William T. Hogan Jr., a barred member; and

·           Whether Local 781 is engaged in a business relationship with Group Administrators, Ltd., a benefit funds service provider, that is detrimental to the union.

 

William Hogan Jr., former president of Joint Council 25 and principal officer of Local 714, was permanently barred by the IRB in 2002 for attempting to cause Las Vegas Local 631 to enter into a substandard contract in collusion with Richard Simon, a labor broker with ties to organized crime, and former IBT representative Dane Passo (barred along with Hogan) (see Appendix, Tab 8). Since May 29, 2002, the date of the IRB order permanently barring Hogan from the union, Teamsters have been prohibited from knowingly associating with him. Notwithstanding this prohibition, investigation has determined that on October 28, 2003, the current principal officer of Local 781 and Hogan met at a restaurant near the local's office and spent an estimated two hours and forty-five minutes together under circumstances suggesting that the meeting was "knowing" and "purposeful" (see Appendix, Tab 4). An overt investigation with the assistance of a personal representative of the general president is required to ascertain the full circumstances of this and any other contact between the principal officer of Local 781 and Hogan to determine whether it constitutes prohibited association with a barred member

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warranting the filing of charges, and to ascertain whether the association was part of an effort by Hogan to continue to exercise influence in the union despite his barred status.

In addition, GA has received substantial payments from Local 781's Health and Welfare Fund, according to Form 5500s for the years 1993 through 2002. As noted, GA is run by the son of Allen Dorfman, who was a prominent associate of the Chicago Outfit and who played a major role in the Outfit's infiltration of the IBT's CSPF. The historic association of both Dorfmans with organized crime-inspired exploitation of Teamster-affiliated funds, coupled with more recent issues concerning high administrative fees attributed to GA in connection with a Local 743 health and welfare plan (see Appendix, Tab 3), warrants scrutiny of any current dealings with this firm to determine whether they are in accord with the union's fiduciary responsibilities.

5.           Local 786

As detailed in the appendix to this report (Tab 5), an interim report on the investigation of Local 786 proposed the filing of charges against three Local 786 members, but to date, no charges have been filed. The remaining Local 786 investigation was severely limited in scope in December 2003 and then halted along with other Chicago investigations on February 24, 2004. These restrictions, culminating in the February 24, 2004 shutdown order, have left significant issues centering around Local 786 unresolved. The issues include:

·              Whether the charges proposed in the June 2003 interim report should be filed against: (1) the Local 786 benefit funds administrator, a Teamster, for knowingly associating with an organized crime member who is a barred Teamster and for providing false information; (2) the benefit funds collections manager, also a Teamster, for providing false information and receiving full‑

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time compensation for less than full-time work; and (3) the Local 786 benefit funds assistant administrator, also a Teamster, for refusing to appear for her sworn statement;

·           Whether the current Local 786 principal officer and other members of the local's executive board abused their fiduciary duties by misappropriating in excess of $8,000.00 of local union funds for their personal benefit in violation of lBT written policy;

·           Whether and to what extent organized crime continues to control or influence the affairs of Local 786; and

·           Whether and to what extent Local 786 employers who are associated with or controlled by organized crime failed to make proper contributions to the Local 786-affiliated benefit funds because of corrupt or illegal schemes and practices.

Local 786 was included in the Project RISE field study because of organized crime-related charges made by the IRB and it's predecessor, the Investigations Officer (10), against local members and employees. In 1990 Local 786 official James Cozzo was barred from the union for being an organized crime member and for associating with then Chicago Outfit boss Joseph Lombardo. In 1996 the IRB proposed charges against Principal Officer Waiter Hoff for failing to answer questions during his sworn examination before the IRB, and in 1997 the local's executive board permanently expelled Hoff, who was indicted by federal authorities for accepting money to allow a contractor to avoid paying thousands of dollars to Local 786-affiliated health and welfare funds. Hoff later pleaded guilty to two counts of the indictment.

Investigation established that Hoff s son, an assistant administrator of several Local 786-affiliated benefit funds, had associated with organized crime member Cozzo who, as described above, was permanently barred from the Teamsters in 1990. He also provided

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false and misleading testimony concerning the work of a subordinate, who, other evidence established, was not performing the full-time work for the funds for which he was being paid and who is alleged to have organized crime connections of his own. As described earlier, a charge was also recommended against one of Cozzo's daughters for failing to appear for her sworn statement. Failure to bring charges against Cozzo's daughter or other Teamsters for refusing to appear for a sworn statement undermines the general president's authority to conduct investigations as mandated by the Consent Decree.

In addition to the unresolved issues relating to the charges proposed in the interim report, there were other issues left unresolved by the premature narrowing and later shutting down of the Local 786 investigation. The most serious of these involve the continued influence of the Chicago Outfit on Local 786, and whether Outfit-affiliated employers fail to make proper contributions to the local's affiliated benefit funds.

Outfit influence in the affairs of Local 786 continued at least through Hoff s fall from power in 1996. One indication of the hold the Chicago Outfit had on this local at least until the mid 1990s is the information that emerged from the FBI operation that led to the indictment of Hoff and others (see Appendix, Tab 5).

Information obtained by IBT investigators indicates that an Outfit member has obtained control over a major Local 786 employer and also exercises control and influence over other Local 786 employers. Allegations from several sources indicate that the Outfit exercises control over Local 786 and its current principal officer through this reputed Outfit member/employer and also Outfit member James Cozzo.

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In conjunction with allegations of association with organized crime figures and continued control by the Chicago Outfit, there were allegations that various employers were receiving preferential treatment from the local, especially with respect to contributions to the Local 786-affiliated benefit funds. These companies include the company alleged to be controlled by an Outfit member, as noted above, as well as other companies with organized crime connections. One alleged scheme, sometimes referred to as a "2-for-I" arrangement, allows favored employers to carry as union members — and to pay into benefit funds on their behalf — only one out of every three employees of the company, the others being nonunionized workers.

While the Local 786 investigation was in progress, investigators were unable to obtain from the trustees of the Local 786-affiliated benefit funds the documents necessary to resolve the issues of no show employment, failure of favored employers to contribute fully to the funds, and other fund-related issues (see Appendix, Tab 5).

The investigation should be reinstated in full, with the continued assistance of a personal representative to address these issues.

6.          Local 714

In 1996 the IRB recommended the imposition of a trusteeship based upon an extensive investigation that revealed that Local 714 was being run for the benefit of its then principal officer, William Hogan Jr., its then president, James M. Hogan, its then recording secretary, Robert A. Hogan, and their friends and family. The IRB found that nepotism and favoritism were prominent factors controlling entry into and work assignments in the local's trade show/movie division, and that businesses owned by the Hogans and their friends and

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relatives, some of whom were Local 714 members in positions of authority, did business with and were dependent upon Local 714 employers. As a result of the IRB's recommendations, Local 714 was placed in trusteeship in 1996. Following June 1998 elections and the end of the trusteeship the following month, Robert A. Hogan — William Hogan, Jr.'s son — became the local's principal officer. In 1998 Robert Hogan appointed his uncle, James M. Hogan, to the newly created position of administrative director, and in 1999 he appointed his father to the newly created position of director of organizing and government relations. Thus, by 1999 the same three Hogans for whose benefit the local was being run prior to the trusteeship, according to the IRB's 1996 report, were once again occupying key positions in the local.

Local 714 was one of the locals reviewed during the Project RISE organized crime study. It was placed in Category C because the field study revealed serious unresolved issues, some of which related to organized crime. Other information relevant to Local 714 surfaced during the IRB investigation into attempts by William Hogan Jr. and IBT Representative Dane Passo to secure a contract with Local 631 in Las Vegas for a Chicago-based temporary labor company connected to Hogan family members. As noted, the IRB's investigation of this issue resulted in the permanent bar from Teamster membership of both Hogan and Passo, which took effect in May 2002. Because of the bar, Local 714 members and other Teamsters are prohibited from associating with Hogan and Passe. Nevertheless, after May 2002 Project RISE investigators continued to receive information indicating that Hogan still exercised control over the affairs of Local 714 and that he and Passo continued to associate with Teamsters.

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Following the release of the organized crime study in the fall of 2002, Local 714 representatives were informed that the local had been placed in Category C because of unresolved issues and because the local had not fully cooperated with the field study. The local's attorney, Marvin Sacks, and James M. Hogan offered to cooperate voluntarily in an effort to resolve the outstanding issues. Accordingly, in December 2002 Sacks was requested to provide certain categories of documents, and in January 2003 Project RISE representatives met with Sacks, Robert Hogan, and Local 714 President Joseph Martucci. Sacks produced only a few of the documents requested, and those had all been provided to the IRB during its 1995-1996 investigation. Before agreeing to schedule interviews of Local 714 officers, Sacks requested a statement of Project RISE's authority to conduct them. In response to this request, a February 26, 2003 memorandum was prepared for the lBT general counsel in which the issues surrounding Local 714 were described. The memorandum recommended that a formal investigation of Local 714 be initiated by the IBT and that a personal representative of the lBT general president be appointed to assist in the investigation and to make clear the authority behind investigative requests for documents and interviews. The memorandum also noted the following:.

During our preliminary inquiries into the issues surrounding Local 714 we received the strong impression from multiple sources that the local is widely perceived as "special" by many within the union because of the reputed political power of the Hogans and their allies. Many seemed to believe that rules and standards applicable elsewhere do not apply to Local 714, and that no serious effort will be made to deal with issues there. Thus, dealing fairly but decisively with the Local 714 issues that remain unresolved constitutes a major test of the union's commitment to its reform program.⁵⁵

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No action was taken in response to this memorandum until June 2003. Intelligence gathering and covert investigative activities continued, however, and by June the case for initiating a formal investigation of Local 714 was even more compelling_ In a meeting with the general president in June, Stier strongly reiterated the recommendation to conduct such an investigation and to appoint a personal representative to assist in it. Instead, in July Stier was instructed to turn the Local 714 issues over to the IRB.

7.         Local 330

There are allegations from multiple sources to the effect that the current principal officer of Local 330 has associated with Outfit figures on a continuing basis and that the Executive Assistant maneuvered to ensure that there would be no IBT investigation of the Local 330 principal officer's alleged organized crime associations. The Executive Assistant allegedly did this at the request of the Local 330 principal officer.

The IRB has questioned witnesses about the allegations, and IBT investigators have provided the IRB with information concerning this issue. It is not clear, however, what the scope of the IRB investigation is concerning this local, and the IRB has not requested the IBT to cease investigative activities with respect to it. Nevertheless, IBT investigators have been instructed not to look into the. allegations surrounding the principal officer of Local 330, ostensibly because of the IRB's involvement (see Appendix, Tab 6).

8.         Individual Issues

Among the unresolved issues relating to Chicago-area Teamster entities are whether two Teamsters have engaged in prohibited associations with organized crime figures.

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a.           IBT Organizer

A Chicago-based IBT organizer, who was a former business representative for Chicago Local 705, has been identified in one published and in numerous unpublished law enforcement reports as an organized crime associate. Confidential sources have provided corroboration of these reports and have indicated that the organizer is a low level associate of the Outfit. Additional investigation is required to determine the extent of the organizer's Outfit ties and whether he associates with Outfit figures (see Appendix, Tab 10).

b.           Local 743 Member and Employee of the Central States Health and Welfare Fund

Investigation disclosed evidence that a member of Local 743 who is the daughter of Outfit member and barred Teamster James Cozzo and who also works at the Central States Health and Welfare Fund, has had multiple contacts for many years, including recent association, with an alleged organized crime associate and former Local 726 member. As explained in the appendix to this report (Tab 11), the evidence is sufficient to warrant the filing of charges against the Local 743 member.

C.        Summary

The current unresolved issues within the mandate of the IBT's anti-racketeering program encompass a significant percentage and cross-section of Chicago-area Teamster entities. Especially given the long relationship between organized crime and the Teamsters in Chicago, the recurring signs that Outfit influence and systemic corruption persist in the union are cause for serious concern.

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The identification of certain issues in this report does not reflect a conclusion th misconduct has actually occurred in the examples given. Indeed, it is likely that investigation will reveal in some instances that there was either no misconduct or that was less serious than it at first appeared. In the normal course of a fully functioning anti- racketeering program, many such issues are resolved when an investigation determines that no formal proceedings need be initiated. Even when the evidence warrants such proceedings, there will be a full and fair opportunity to explore the merits of any charges of misconduct before sanctions are imposed. The issue here is not the ultimate outcome of the identified issues, but whether political forces opposed to genuine anti-racketeering: reforms will prevent them from being investigated at all.

VI. CONCLUSIONS

A. Opponents of Reform Have Successfully Deflected Badly Need Efforts To Combat Remaining Organized Crime Influences and Corruption in Chicago-Area Teamster Entities

Nothing in this report is intended to suggest that there should be no oversight of 11 investigative activities or that there cannot be good faith disagreements about spec issues that may arise in the course of pursuing the union's anti-racketeering program. Union representatives who are genuinely committed to the anti-racketeering program co debate, for example, whether particular charges are warranted based upon the evidence in a specific case, how resources should be allocated to address multiple priorities , or  kinds of procedures and safeguards should be part of the investigative and enforcement process to insure fairness. The 2003-2004 resistance to anti-racketeering investigation in Chicago, however, did not result from good faith differences of opinion among persons

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genuinely committed to the IBT's professed anti-racketeering principles. Instead, the refusal to tolerate even threshold levels of investigation in Chicago was a nullification of those principles by persons who wish to have their activities remain immune from scrutiny.

The opposition to the IBT's anti-racketeering reform efforts by certain Chicago-area Teamster leaders and their ally at IBT headquarters closely resembles the resistance Chicago-area leaders of a Laborers International Union (LIUNA) local displayed in the face of that union's reform efforts. In a March 2, 2004 decision placing a Chicago LIUNA local into trusteeship because of organized crime influence over the local, the hearing officer described that resistance as follows:

Local 1001 has impressed the [hearing officer] that the Executive Board has hindered the spirit and intent of LIUNA's Internal Reform Movement. Prior to and throughout the Trusteeship proceedings in this matter, Local 1001 has maintained an antagonistic stance towards the International Union, which is inconsistent with the ideals that the reform movement has adopted since 1995. . . . [T]his uncooperative posture, which has permeated Local 1001's dealings with the International Union, is an unacceptable deterrent to the sweeping reforms LIUNA has undertaken.⁵⁶

B. The IBT's 2003-2004 Refusal To Confront Serious Issues of Organized Crime Influence and Corruption in the Chicago Area Represents the Failure of a Crucial Test of Its Commitment to Its Professed Anti-Racketeering Reform Program

If the current shutdown of lBT anti-racketeering efforts in Chicago is allowed to stand, the reason for it will be obvious to both Teamsters and outsiders: the continued influence of the Chicago Outfit and the culture of corruption that has flourished in that area for as long as the union has. The obstacles to reform in Chicago are not new. What was supposed to be new was the IBT leadership's commitment to overcoming those obstacles

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C.           In Chicago and Elsewhere the IBT Reform Effort Has Lost Credibility

Already, the restraints imposed upon investigations in the Chicago area, culminating in the February 24, 2004 shutdown order, have damaged the IBT's credibility, caused needless expense, and undermined fundamental trade union values. The reform agenda proclaimed by IBT leaders a short time ago has been turned on its head — instead of taking credit for aggressive anti-racketeering efforts in Chicago, key Teamster officials are actively discouraging them, while anti-reform forces are spreading the word that they have successfully shutdown Project RISE. To keep the anti-racketeering effort going under these conditions, investigators have been forced to employ methods that are less efficient, but that will be less likely to provoke political resistance of the kind described in this report. Indeed, this report itself would not be necessary but for the resistance of key Chicago-area Teamsters acting through the Executive Assistant.

The ultimate victims of the increasingly successful resistance to reform efforts in Chicago are the many Teamsters who have been and will be victimized by racketeering schemes that strike at the heart of trade union values, such as those favoring nonunion and mob-connected employers.

VII. RECOMMENDATIONS

The IBT needs to take immediate steps if it is to restore the credibility of its anti-racketeering reform program. Indeed, continuing to represent that the union is committed to reform under the present circumstances could be viewed as a fraud on union members, government agencies, and the public. Fortunately, the union's past backing of unprecedented reform measures has built up an anti-racketeering infrastructure and a

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reservoir of political support within the union for reform measures that can be used to reverse the present decline in the credibility of the IBT reform program. To accomplish this objective, the following steps are recommended.

A.        Renewal of Reform Commitment

The kinds of cultural and institutional changes that are required to fulfill the IBT's commitment to "run a dean union" cannot be imposed from the outside. The union, itself, beginning with its top leadership, must decide whether it intends to fulfill that commitment. If it does, that intention should be reaffirmed to dispel the perception to the contrary that is spreading throughout the union.

B.       Comprehensive Investigation of Chicago Issues

No reaffirmation of the union's anti-racketeering reform principles will be credible unless it is accompanied by concrete steps to reassure union members, government agencies, and the public that the IBT is serious about its commitment to protecting the union from racketeer influences. By far the greatest present concentration of such influences is in the Chicago area. Accordingly, the union should not only remove the current restrictions on investigative activity in Chicago, but should undertake a comprehensive investigation of organized crime and racketeering issues there. Doing so not only constitutes the appropriate response to the many unresolved issues there, but will be the most effective way of restoring the credibility of the union's anti-racketeering program.

As evidenced by the intense opposition IBT investigators have received to date when they have attempted to address issues in Chicago, any genuine anti-racketeering

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effort there will face stiff resistance. Those offering the resistance can be expected to assert various pretexts to thwart reform efforts, including (1) that there should be no "overlap" between the IBT's anti-racketeering efforts and those of the IRB; (2) that any IBT-initiated investigative activity in Chicago or elsewhere should await the outcome of negotiations with the government to amend the Consent Decree; and (3) that any organized crime or racketeering issues should be turned over to the IRB. None of these proffered reasons constitute a credible explanation for the current pressure to shut down investigations in Chicago, nor are they an excuse to delay taking the steps necessary to restore the integrity of the union's reform program.

C.        Ensuring that IBT Officials Who Oversee Investigations Are Committed to Reform

According to more than one intelligence source, the Executive Assistant has played a key role in Chicago Outfit-instigated attempts to prevent or shut down IBT investigations that threaten Outfit interests. We reiterate that we do not assume allegations from intelligence sources are true. Indeed, testing the credibility of such allegations is one of the most important and complex functions of an internal investigative system.

Apart from the allegations concerning the Executive Assistant, however, his own actions have demonstrated that at a minimum he is actively hostile to pursuing the kinds of investigative and enforcement actions needed in the Chicago area to carry out the union's commitment to its anti-racketeering program. It is inconsistent with the IBT's public commitments for the Executive Assistant to continue to have authority and influence in that program, including the ability to supervise personal representatives of the general

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president. Thus, he should be sequestered from any role in approving, monitoring, or otherwise influencing any IBT investigation or enforcement proceeding. It should be axiomatic that any lBT official chosen to oversee the union's investigative and enforcement activities genuinely believe in and support the anti-racketeering program.

D.            Educational Programs To Counteract Disinformation

Addressing Chicago issues in a way that makes clear the IBT's determination to resolve them will speak louder than any words in conveying the message that the union is serious about the commitments it made to eradicate organized crime influences. An effort should also be made, however, to reassure members and interested outsiders by correcting certain rumors and misinformation that have accompanied attempts to sabotage lBT investigations in Chicago. It should be made clear, for example, that the suspension of certain Project RISE activities pending the outcome of Consent Decree negotiations does not extend to investigations of organized crime and racketeering issues.

E.            Review and Reappraisal of Investigative, Administrative, and Enforcement Decisions Affected by Sabotage of Reform Program

Certain decisions that may have been affected by efforts to sabotage the anti-racketeering program should be reviewed and reevaluated. These include decisions to terminate personal representative assignments and decisions against filing charges.

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ENDNOTES

1.         Letter from Edwin H. Stier to James P. Hoffa (June 8, 1999), 1.

2.         IBT Press Release, "Hoffa Announces Anti-Mob Initiative," Teamster News, 29 July 1999, 1.

3.         "Message from the General President," Teamster, Oct. 1999, 1.

4.         Steven Greenhouse, "Hoffa Chooses Leader for Reform Effort," New York Times, 7 July 1999, A16.

5.         Letter from Patrick J. Szymanski to Thomas Fuentes (Feb. 23, 2000), 1, 8.

6.         Letter from Patrick J. Szymanski to Andrew W. Schilling (Oct. 4, 2001), 1-2.

7.         E.g., Steven Greenhouse, "Teamsters Have Cleaner Union Study Finds," New York Times, 3 Oct. 2002, A20; Richard A. Ryan, "Teamsters mob-free, study says," Detroit News, 3 Oct. 2002, Sec. Business, 1; Philip Dine, "Organized Crime Loses Sway over Teamsters Union, Study Says," St. Louis Post-Dispatch, 4 Oct. 2002; John D. Schulz, "Clean & Crime-Free," Traffic World, 14 Oct. 2002.

8.         Stier, Anderson & Malone, The Teamsters: Perception and Reality, An Investigative Study of Organized Crime Influence in the Union (2002), 524-526 (Organized Crime Report) (emphasis added).

9.         "The Next 100 Years: Visions of the Future," Teamster, Sept./Oct. 2003, 31.

10.    Organized Crime Report, 20.

11.    Stier, Anderson & Malone, Report of Investigation into Allegations of Prohibited Associations with Organized Crime Figures and Violations of Fiduciary Duties, Local 810, New York, New York (July 2002); Stier, Anderson & Malone, Results of Preliminary Investigation into Allegations of Misconduct by Principal Officer, Local 98⁸, Houston, Texas (Feb. 2003).

12.    Stier, Anderson & Malone, Report of investigation into Allegations of Prohibited Associations with Organized Crime Figures and Violations of Fiduciary Duties, Local 107, Philadelphia, Pennsylvania (Nov. 2002).

13.    Organized Crime Report, 62-63.

14.    Chicago Crime Commission, The New Faces of Organized Crime 1997, 8.

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15.       Organized Crime Report, Appendix 1, Tab D, Recent Evolution and Current Status of Organized Crime Families in Selected Cities, 91-92.

16.       Organized Crime Report, Confidential Appendix 2, Tab 43.

17.       See Appendix, Tab 5.

18.       Organized Crime Report, Confidential Appendix 2, Tab 18.

19.       Id., Tab 42.

20.       Id., Tab 52; "Law & Order: Man pleads guilty in Medicare scheme," St. Louis Post Dispatch, 17 May 2000, Sec. Metro, B2.

21.       Organized Crime Report, Confidential Appendix 2, Tab 53.

22.       The New Faces of Organized Crime 1997, 9, 14.

23.       See Organized Crime Report, 507-508.

24.        E.g., Matt O'Connor and Roy Gibson, "Ryan indicted; U.S. charges former governor with pattern of corruption; Prosecutor says family, pals gained," Chicago Tribune 8 Dec. 2003, Sec. News, 1.

25.       Interviews of Confidential Source A.

26.       Interview of Confidential Source B.

27.       Interview of Confidential Source C.

28.       Interview of Confidential Source D.

29.       Interview of Confidential Source E.

30.       Interview of Confidential Source F.

31.       Confidential Appendix, Chronology, July 16-17, 2002.

32.       Confidential Appendix, Tab 12, Feb. 26, 2003 memorandum.

33.       Confidential Appendix, Chronology, June 10, 2003.

34.       See Appendix, Tab 5.

35.       Id.

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36.               Appendix, Tab 1; Confidential Appendix, Chronology, June 13, 2003.

37.               See Appendix, Tab 5, Exhibit A.

38.               Confidential Appendix, Chronology, June 2003, July 22, 2003.

39.               Id., Late Aug. 2003.

40.               Id., Sept. 4-5, 2003.

41.               Id., Sept. 9, 2003.

42.               Id.

43.               Id., Sept. 19, 2003.

44.               Id., Sept. 23, 2003.

45.               Id., Sept. 29, 2003.

46.               Id., Dec. 12, 2003.

47.               IBT Field Representative, Interview of Confidential Source (Feb. 9, 2004).

48.               IBT Field Representative, Interview of Confidential Source (Feb. 18, 2004), 1

49.               Memorandum to File from Howard T. Anderson (Mar. 8, 2004), 1-2.

50.               Id.,2.

51.               Id., 2-3.

52.               Confidential Appendix, Chronology, Apr. 1, 2004.

53.                The New Faces of Organized Crime 1997, 24-25.

54.               Memorandum to File from Susan J. Charen (Apr. 2, 2004).

55.               Confidential Appendix, Tab 12, Feb. 26, 2003, 11-12.

56.               Order, In the Matter of LIUNA Local Union 1001 (No. 03-21T Mar. 2, 2004),

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REPORT AND RECOMMENDATIONS

ISSUES CONCERNING CHICAGO ORGANIZED CRIME
INFILTRATION OF TEAMSTER ENTITIES AND ATTEMPTS
TO UNDERMINE IBT ANTI-RACKETEERING REFORMS

APPENDIX

Prepared for the

International Brotherhood of Teamsters

Submitted By
Stier Anderson, LLC
April 2004

Table of Contents
APPENDIX

Tab 1*   Issues Relating to Local 726

Tab 2     Issues Relating to Local 727

Tab 3     Issues Relating to Local 743

Tab 4     Issues Relating to Local 781

Tab 5     Issues Relating to Local 786

Tab 6     Issues Relating to Local 330

Tab 7   Issues Relating to the Use of Nonunion Labor and Its Connection to Organized Crime

Tab 8   Issues Relating to William T. Hogan Jr.'s Continuing Influence over Chicago-Area Teamsters

Tab 9     Issues Relating to Local and Benefit Fund Service Providers

Tab 10           Issues Relating to International Organizer Nick M. Petrecca

Tab 11           Issues Relating to Teamster Member Sylvia Cozzo

*The endnotes for all of the reports in this Appendix are located in corresponding tabs in the Confidential Appendix.

ISSUES RELATING TO LOCAL 726

The investigation of Local 726, which began in March 2002, was abruptly terminated by the IBT on September 15, 2003, without notice to Stier Anderson which was coordinating the IBT's anti-racketeering program. As noted in the main report, the termination of this investigation is part of a larger effort to impede or shut down the IBT's anti-racketeering investigative efforts in Chicago. Notwithstanding these efforts, significant issues remain regarding Local 726 that require further investigation either because they have not been fully addressed or have not yet been addressed at all. Accordingly, a personal representative should be reappointed to Local 726 and the investigation reopened to address the following issues:

·           Whether and to what there is an ongoing practice of bribe solicitation extending through February 2004 — by Local 726 Teamster supervisors of rank-and-file Local 726 members in exchange for full-time City of Chicago jobs and lucrative overtime jobs, and the extent to which this practice implicates organized crime;

·           Whether Local 726 executive board members knew of or participated in the solicitation and receiving of bribes by Teamster supervisors from fellow Teamsters, and if so, what actions were taken pursuant to their fiduciary obligations to investigate such activities;

·           Whether organized crime members and associates —who, according to the present principal officer of Local 726, had many contacts with Principal Officer Dan Stefanski who resigned in April 2003 — continue to have contact or association with present executive board members;

·           Whether charges should be brought against seven active Local 726 members and one member on withdrawal status identified by intelligence sources and public documents as alleged associates of organized crime in Chicago; and

Whether the Coalition for Better Government (CBG), an independent political action committee which is run by two convicted felons who are associated with organized crime and receives over 40 percent of its revenue from Local

1

726 members, continues to exert a corrupt influence over 726 members' job security and assignments, including overtime, and whether this occurs in collusion with or through the acquiescence of Local 726 executive board members.

I.            BACKGROUND

A.          Basis for Inclusion in Project RISE Field Study

Local 726, located in Chicago, Illinois, was selected for the Project RISE field study because the IBT's Ethical Practices Committee (EPC) had received organized crime-related allegations involving this local. Specifically, in August 1994, the IBT general president granted permission for trustees of Local 726 to conduct elections. The local had been placed in trusteeship in October 1993 following an IRB report that documented the improper use of local union funds for personal benefit by members of the executive board. In September 1994, an anonymous, yet detailed, complaint was made to the EPC and Michael Holland, who was designated to serve as the independent election officer for the local's election, alleging campaign improprieties by the American Party Slate. The charges included that the slate had ties and received financial support from members of the Chicago Outfit. That slate lost the election and it was never proven-that they in fact received financing from any organized crime figures.

B.          Field Study Results

A limited field study was conducted in 2001 of Local 726 consisting only of an interview of Daniel E. Stefanski, then secretary-treasurer and principal officer. Stefanski was elected secretary-treasurer and principal officer of Local 726 in December 1994, having become a 726 member as a driver in Streets and Sanitation, a City of Chicago

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department, in 1979.¹ The field study was limited in nature because EPC allegations generated by an anonymous letter narrowly focused on a 1994 opposition slate and its possible ties to organized crime. Stefanski stated that there were two issues that overshadowed the 1994 election. The first related to the earlier misuse of funds by the executive board and the second was that the American Party Slate, which included candidates Tony Cianciarulo (secretary-treasurer), Frank Tummillo (president), and Ted Zook (recording secretary), supposedly received funding from people who were associated with Gianotti's Restaurant, a reputed organized crime hangout. Stefanski pointed out that the American Party Slate lost the election and it was never shown there was any organized crime money involved. No one connected to the American Party Slate ran in the 1999 election.

Documents obtained during the field study show that Dominic Longo, a non-Teamster supervisor for the City of Chicago who worked as the Airport Manager, supported the American Party Slate and was deeply involved in campaigning for the slate. As described below, Longo later became a leader of the Coalition for Better Government (CBG), an independent political action committee with numerous ties to Local 726. In addition, the 1994 anonymous letter stated that Longo worked nights at Gianotti's restaurant, a known organized crime hangout.

After completion of the limited field study, a confidential source came forward alleging that the local had ties to organized crime. In addition, other allegations, including unfair selection of routes and assignment of overtime for certain members, also came to

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light. As a result, on February 19, 2002, the IBT authorized an investigation into these matters.

Local 726 was placed in Category C — for locals requiring immediate attention in the field study report because of the active IBT investigation into allegations of organized crime a d preferential assignment of routes and overtime that was initiated in February 2002

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C.      Initiation of Investigation

On February 19, 2002, based upon Stier Anderson's recommendation, General President Hoffa authorized an investigation into Local 726, assigning William A. Moore to be his personal representative, and simultaneously notifying the local and its members of the investigation. Hoffa informed Moore that he was to investigate complaints "concerning the activities of Robert Abbinanti and concerning the selection of routes and the assignment of overtime for certain members." Hoffa also informed the local that Stier Anderson was directed to work with Moore on this investigation.²

Local 726 is a municipal local of approximately 5,200 members, about 42 percent of whom work for the City of Chicago with a substantial number employed by the Department of Aviation (495) and the Department of Streets and Sanitation (737).³ Between the time of the Project RISE field study and the initiation of this investigation, IBT field investigators in Chicago received allegations regarding both organized crime member Abbinanti^'s contact with Local 726 and favoritism by certain supervisors in the assignment of jobs and routes for Local 726 members.

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1.           Abbinanti

A former member of Local 726, Abbinanti is publicly listed as an associate of the Chicago Outfit in the 1997 Chicago Crime Commission report, "The New Faces of Organized Crime." The report indicated that in 1994 Abbinanti pleaded guilty, along with organized crime member Marco D'Amico, head of the Elmwood Park Street crew, in a racketeering case involving sports betting, extortion to collect gambling debts, and loan sharking.⁴ Abbinanti was a dues paying member of Local 726 until July 1995.⁵ Abbinanti was released from prison in 2001.⁶ IBT field representatives received information that Dan Stefanski, the principal officer of Local 726 until April 2003, was overheard in 2000 in a bar discussing D'Amico's imminent release from prison.

2.           Payment of Bribes for Favored Treatment

The investigators also had met with Local 726 members who worked for the City of Chicago and who indicated that they must pay a sum of money to obtain the more desirable routes or overtime for snow removal. They identified a Teamster and City foreman as the ones who allegedly collected these cash payments ⁷

II.           CURRENT ISSUES

A.          The Solicitation of Bribes by Teamster Supervisors from Teamster Members

Nick M. Lococo was a Teamster general foreman of motor truck drivers in the Chicago Department of Transportation (CDOT) for many years. Lococo retired in 2002 and was featured in a cover story in the January 2004 Chicago Sun-Times as having "mob ties" (with the nickname of Nick "The Stick" Lococo) and was said to be a reputed "juice"

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collector.' Lococo was identified by the federal government in a criminal case in 1996 as an associate of the 26th Street/Chinatown crew of the Chicago Outfit. This crew was involved in "hijacking, loan-sharking, gambling and many killings which took place in the Chicago area."⁹ The conclusion that Lococo was involved with this crew was based in part upon wiretaps of a bookmaking establishment that made repeated telephone calls to a small group of individuals including Lococo.¹⁰ (Lococo was also a participant in the corruption-laden City Hired Truck Program, discussed in Appendix, Tab 7, acting as the contact person for the Hired Truck Program for the CDOT, at least until he retired in 2002.¹¹) It was alleged that Lococo solicited and accepted bribes from fellow Teamsters in exchange for the assignment of jobs that paid substantial overtime.

After many months of investigative efforts, sworn testimony was elicited in August 2003 that Lococo, while in his position as an CDOT general foreman and still a Teamster, extorted "Christmas gifts" from at least one 10-year member of Local 726 in the amount of $500.00 every Christmas from 1994 through 2001 in exchange for a job that included coveted overtime. His job involved running a machine, such as an edger or paver, instead of only driving a truck which involved no overtime. This member worked year-round for three-to-four years in CDOT and prior to that alternated between CDOT and the Department of Aviation. During his time at CDOT, he earned $20,000.00 to $30,000.00 in overtime every year and claimed that there were likely several hundred other Local 726 members out of a total of 450 to 500 Teamster workers at the airport who also paid bribes to Lococo for the coveted overtime jobs. Those close to Lococo collected the bribes. The member knew that other members paid bribes because he often had discussions with them

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about Lococo's mandatory "Christmas gifts," which consisted of putting money into a Christmas card. The member further testified that he had no incentive to report the solicitation of bribes by his supervisor to Local 726 officers or business agents because the amount of overtime pay he was receiving in the more lucrative job ($20,000.00 to $30,000.00) was so much greater than the $500.00 he had to pay to keep the job. Even the member's accountant suggested he  just pay the bribe and keep working the overtime. ¹² As discussed below, the member was subsequently laid off in April 2003.

When Lococo retired from the local in June 2002, he was replaced by Teamster Joseph J. Senese, a Local 726 member, as a CDOT general foreman. Law enforcement sources stated that Senese is an organized crime associate, having been arrested, like Lococo, for illegal bookmaking early in the 1990s, and may have been a wire room operator. Also, like Lococo, Senese is believed to be an associate of the 26th Street/Chinatown crew of the Chicago Outfit.¹³ The 10-year Local 726 member who last .paid a bribe in December 2001 to Lococo was told in October 2003 by a Teamster steward and friend that the reason he was laid off in April 2003 was that he did not know how the game is played,"' adding that he "`didn't do the right thing' at Christmas time in 2002." By this reference to Christmas time, the Teamster understood that he should also have made a "Christmas gift" payment to Senese, Lococo's replacement. Thus, it is his impression that bribes are still being paid for lucrative overtime jobs.¹⁴

Additionally, as recent as February 2004, the field representatives in Chicago received evidence that a Teamster foreman at a Chicago Streets and Sanitation yard is currently soliciting substantial bribes in exchange for providing full-time City jobs to

seasonal employee  xxxxxx    . member,¹⁵ began  working on a part-time, seasonal basis at the 3200 South Kedzie yard in December 2004. The seasonal job he was working extended from December through March, and consisted of working two hours a day, except when it snowed. During a snow storm, he worked an eight-hour shift on a garbage route while the full-time employees plowed snow, and often he then worked an additional eight hours  on the snow shift. As a seasonal employee, he paid monthly dues to Local 726 but believes he did not get any representation. xxxx said hat there would be a seniority list for seasonal employees who wanted to become full-time City employees, but on his second day of employment he learned that was not the case when he was told by other employees that the only way to get a full-time job was to have "political clout" by working in a campaign or to pay a bribe.  xxxxx     said that he was approached in early February by the yard supervisor (whom he identified but is not named here), also a Teamster, and told that, if he wanted a full-time job, the cost would be $10,000.00. When he asked what he got for $10,000.00, the supervisor replied that he would receive "his own truck" to drive, "a preferred route close to home, and job security." He told the supervisor that he "did not have that kind of money" and later heard that others had paid only $5,000.00 as a bribe, but that the price had "gone up."¹⁶

The statements of these two Teamsters concerning paying bribes to fellow Teamster supervisors for preferential treatment — either for lucrative overtime jobs or for becoming full-time City employees corroborate each other and when viewed in the context of the January 2004 series of articles about the Hired Truck Program in the Chicago Sun-Times in which bribes were paid for inclusion in the program (described in

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Appendix, Tab 7) paint a picture of widespread corruption in City jobs held by Teamsters and others. Most alarming is that this corruption may have connections to organized crime. Allegations that the executive board of Local 726 has turned its back regarding the solicitation of bribes from its members by other Teamsters — discussed below — implicates Teamster leadership in this corruption.

B.         Knowledge of Local 726 Executive Board of the Solicitation and Payment of Bribes

As noted, IBT field representatives in Chicago received numerous allegations that not only were Local 726 members being forced to pay money for better routes, full-time jobs, and overtime, but that Local 726 executive board members knew about these payments but did nothing to stop them.''

When asked whether the Local 726 executive board knew of Lococo's demands for "Christmas gifts," the 10-year member asserted that "[i]t was pretty much common knowledge, but I don't know if they were ever aware or not.... [I)t's hard to say on that." By "common knowledge," the member meant that he believed that the 450 to 500 Teamsters working at the airport knew about Lococo's demand for bribes.¹⁸

Following Stefanski's departure in April 2003, Thomas P. Clair became secretary-treasurer and principal officer of Local 726. Prior to that, Clair had served as recording secretary and business agent under Stefanski beginning in 1995. In his August 2003 statement, Clair confirmed that rumors about members making payments at Christmas to supervisors were widespread as recent as Christmas 2002 when he heard that Lococo had "received $70,000 as a Christmas gift" from the Teamsters he supervised. Although Clair

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had also heard rumors "throughout the years" that Lococo associated with organized crime, he had no specific knowledge that that was true. Even so, Clair dismissed the $70,000.00 rumor because it was just a rumor. Clair indicated that: "Nobody came to me personally, and said, `Well, I had to give Lococo $1,000 at Christmas time.' I mean if that would have been brought to my attention, I would have investigated it." Clair assumed that other 726 officials also heard the rumors, but that no one investigated it. Clair also noted that small gifts for supervisors at Christmas were normal, but that $500.00 from one Teamster was not.¹⁹ By extrapolation, if the 10-year member's "gift" of $500.00 to Lococo was a typical gift and the rumor that Lococo received $70,000.00 in "Christmas gifts" were true, then approximately 140 members of Local 726 would have paid bribes to Lococo in 2002

Interactions with Lococo by Local 726 officers may have given the appearance that they condoned Lococo's solicitation of bribes. For example, Clair testified that Stefanski would typically have lunch with Lococo two to three times a year, lunches that Stefanski acknowledged ^.20  Following Stefanski's departure to state employment in April 2003, Lococo, a reputed organized crime associate, has attempted to continue his contacts with Local 726. Lococo made telephone calls from April through May 2003 to Clair, the new principal officer, wanting to "have lunch." They spoke once, and since then, according to Clair's August 2003 statement, he has not returned Lococo's calls ^.21 Because the Local 726 investigation was abruptly terminated, however, the validity of Clair's statements have not yet been examined.

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Moreover, because the investigation of Local 726 was terminated without notice to Stier Anderson in September 2003 shortly after the sworn statements were obtained from Clair and the 10-year Local 726 member, we were not able to take statements from the other 726 officers and business agents or to further investigate the issues raised by Clair. Accordingly, Stier Anderson has been unable to verify whether (1) other executive board members were aware of the solicitation by Teamster supervisors of bribes from Local 726 members and (2) whether the current executive board no longer has any contacts with the organized crime members and associates with whom Stefanski had contact as an officer through April 2003.

C.          The Influence of Organized Crime Figures in Local 726

The investigation of organized crime associations at Local 726 focused on organized crime associates Abbinanti and Lococo. In addition, Stier Anderson has identified eight other members of Local 726 (seven active and one on withdrawal status) who are alleged to have organized crime connections.

1.         Abbinanti and Stefanski

As discussed above, Robert Abbinanti was identified as an organized crime associate by the Chicago Crime Commission in 1997, specifically as a member or associate of the North Side, Elmwood Park street crew and was in prison at that time.²² In April 1995, Abbinanti pleaded guilty to racketeering, illegal gambling, attempted extortion, and use of a firearm and sentenced to 60 months in prison. The same criminal acts resulted in the sentencing of Marco D'Amico, who led the criminal "`Enterprise,'" to more than 12 years in prison. D'Amico, who was considered to be a "principal member"

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of the Elmwood Park crew, was a protege of Joe ("the Builder") Andriacchi and was an associate of John ("No Nose") DiFronzo, who law enforcement believes is the head of the Chicago Outfit. Abbinanti, a Teamster truck driver for Streets and Sanitation, is related through marriage to D'Amico and a member of D'Amico's crew. Law enforcement concluded that Streets and Sanitation "has been a tremendous source of patronage over the years for the First Ward pots who dole out no-show jobs to outfit `associates' as a reward for their criminal behavior. “²³

Critical to the downfall of D'Amico and many other Outfit associates, including politicians, judges, and an attorney, was the role played by mob attorney-turned informant Robert Cooley, who testified in seven high profile trials, all of which resulted in defendants being found guilty or entering pleas. Cooley "is considered to be one of the most successful government operatives in history."²⁴ In a sworn affidavit, Cooley, who remains in the witness protection program, stated that he had maintained a line of credit with Abbinanti for the purpose of placing illegal gambling bets. During the time he was placing bets with Abbinanti, Cooley was introduced in about 1989 to Stefanski by Abbinanti at a restaurant on Grand Avenue in Chicago, an area known to be center of an Outfit crew. At this time, Stefanski was a 726 member driving a truck for Streets and Sanitation. Cooley had observed Stefanski with Abbinanti at the restaurant. Cooley stated that Abbinanti told him that Stefanski was a "close friend" and that they "had known each other for years." Abbinanti further identified Stefanski "as one of the operators who worked within the bookmaking operation" in the late 1980s.²⁵

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A former law enforcement sources corroborated Cooley's recollection that Stefanski is a close friend of Abbinanti.²⁶ Abbinanti's employment with the Teamsters overlapped Stefanski's tenure as principal officer by six months when Abbinanti was found guilty of racketeering, as discussed above. His Local 726 status is listed as "on suspension" by July 14, 1995.²⁷

When interviewed, Stefanski denied being friends with Abbinanti, denied socializing with him or gambling with him, and also denied knowing what a wire room was. Stefanski further denied witnessing Abbinanti engaged in bookmaking or engaging in bookmaking himself. Likewise, he denied knowing Abbinanti was an organized crime associate. ²⁸

Another mob associate, xxxx xxxx, also an informant, received a reduced prison sentence for agreeing to testify, however, D'Amico pleaded guilty. xxxx  worked for D'Amico as a bookmaker and juice loan and street tax collector.²⁹ In May 2001, a confidential source reported that Stefanski frequented a North Side bar, later determined to be the Magic Touch, and informed the manager that D'Amico would soon be released from the federal penitentiary. Stefanski then offered a $20,000.00 reward for anyone who would provide xxxx 's current address. Stefanski asserted that the Teamsters would "put up" the reward money. The confidential source also reported that this information was provided to him by the bartender. This source also related his understanding that Stefanski was a "close friend" of Abinanti's, who had been recently released from federal prison.³⁰

During his sworn statement, Stefanski acknowledged he had been to the Magic Touch bar during the 2000 through 2002 time period and that he had had a conversation

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with the regular bartender there, a person with whom he had played softball years earlier. Stefanski, however, denied that he had ever discussed D'Amico with a Magic Touch bartender, yet admitted that xxxx 's name may have come up in conversation because he and this bartender both knew xxxx . Stefanski claimed, however, that in the conversation with the bartender, money was never offered for information about xxxx 's whereabouts nor was there conversation about the fact that D'Amico was being released from prison.³¹

Significantly, the circumstances described by the confidential source of where, when, and with whom the conversation in question took place and the fact that xxxx 's name was mentioned all were confirmed by Stefanski. No further efforts to establish that Stefanski made the statements attributed to him by the confidential source have been made since Stefanski resigned his position as Local 726 principal officer in April 2003 because the lBT decided that it did not want to pursue possible charges against Stefanski. The IBT so concluded because Stefanski had resigned, even though he is still subject to charges while on withdrawal status. Indeed, the IRB charges against then Local 786 -member    James Cozzo in 1990 for being an organized crime member and associating with organized crime members were brought after Cozzo resigned from the IBT and was on withdrawal status, ostensibly to assure that he would be unable to rejoin the IBT in the future and prevent others from associating with him.³²

2.          Lococo's Involvement with Local 726 Officers

In addition to claims that he solicited and accepted bribes from fellow Teamsters for coveted job assignments, Lococo, an alleged organized crime associate, had direct

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contacts with Local 726 officers. As noted above, Lococo telephoned Clair in the spring of 2003 in an apparent attempt to continue his influence with Local 726 after Stefanski's resignation. The significance of these telephone calls to Clair must be considered in light of Lococo's previous contact with Stefanski, as well as Stefanski's other contacts with associates and members of organized crime in Chicago. That is, Local 726 had been receptive to such influence in the past and might still be.

In August 2003, after the investigation had been in progress for 18 months, Clair became the first Teamster willing to go on the record concerning Stefanski's contacts with organized crime members and associates. Clair testified that he knew that Stefanski had had lunch with Bruno Caruso at least two or three times since Caruso was ousted as the principal officer of a LIUNA local in 1999 for being a member of organized crime. Clair knew they had lunch together because Stefanski would tell Clair about it. Clair told Stefanski on one or two occasions that he should "stay[] away from" Caruso because of Caruso's organized crime connections, but that Stefanski's reaction was something like, "F... you. Don't worry about it. I'll do what I want to do."³³ Clair also stated that he had heard that Richard Carbonaro, a Local 726 member, was an organized crime associate and that Carbonaro and Stefanski called Clair one night when they were together at PaI Joey's, a known mob hangout.³⁴ Clair reiterated that he warned Stefanski about staying away from places where mob people hang out, but that his entreaties "fell on deaf ears. ³⁵

Clair also testified that before Stefanski left office he advised Clair, while discussing Lococo, "`you've got to learn to deal with these people,"' a reference that Clair interpreted to be to individuals connected with "the mob." Clair stated he told Stefanski that he, Clair,

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wanted nothing to do with "th[o]se people" and that as Teamsters they had been told to stay away from organized crime individuals.³⁶

Because the investigation was terminated only four weeks after Clair's sworn statement regarding organized crime and the local, Stier Anderson did not have the opportunity to determine (a) whether Clair's assertion that he has had no contact, except one telephone call, with Lococo since Stefanski left in April 2003 is accurate, (b) whether other Local 726 officers have had contact with Lococo, and (c) whether Clair or other officers have contact with any other organized crime associates or members. Without such determinations, no conclusion can be made as to whether Local 726 is free of the contacts with organized crime members and associates that existed less than one year ago.

3.         Other Organized Crime Associates in Local 726

An initial and limited review of the Local 726 membership list in 2002 disclosed a total of five members of Local 726 including Lococo and Senese, discussed above, who local law enforcement, intelligence, and public documents suggest are associates of the Chicago Outfit. Since that time, three additional 726 members have also been identified as alleged organized crime associates.

a.          Member No. 1

This member was listed by the Chicago Crime Commission in a 1993 unpublished chart and identified by local law enforcement sources in 1997 as an associate of the 26th

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Street Crew and had earlier been arrested twice for gambling and operating a wire room in the early 1980s.³⁷

b.         Member No. 2

This member was identified by local law enforcement sources as a Melrose Park Crew associate in 2001.³⁸

C.         Member No. 3

This member was also listed in an unpublished 1993 Chicago Crime Commission chart as an associate of the 26th Street Crew and likewise identified by local law enforcement in 1997.³⁹

d.           Member No. 4

This member was arrested three times between 1978 and 1981 for battery, unlawful use of a weapon, and criminal damage to property; listed in the unpublished Chicago Crime Commission chart in 1993 as an associate of the North Side Crew; and identified by local law enforcement as an associate of the Grand Avenue Crew (an alternative name for the North Side Crew) in 1988 and 1997.⁴⁰

e.           Member No. 5

This member, a contributor to the Coalition for Better Government (discussed below), was identified in 1997 by local law enforcement as a member of the Boyz in the Hood burglary/theft crew; was arrested five times between 1989 and 1991 for theft, burglary, forgery, and criminal trespass; and listed by the Chicago Crime Commission in an unpublished chart as an associate of the West Side Crew in 1993.⁴¹

f.              Member No. 6

This member, also a CBG contributor, was identified in 1997 by local law enforcement as a member of the Boyz in the Hood burglary/theft crew; arrested twice in 1992 and 1993 for battery and criminal trespass; and listed in the unpublished Chicago Crime Commission chart in 1993 as an associate of the Elmwood Park Crew. ⁴²

g.           Summary

Stier Anderson intended to seek updated information on these Local 726 members and, then, based upon the success of the initial review, proceed to conduct a thorough review of all 726 members, cross-referencing them to lists of organized crime members and associates. Thereafter, Stier Anderson would have considered recommending the filing of charges against some or all of these Local 726 members as part of its broader investigative report on Local 726. But our investigation, as discussed, was abruptly terminated without notice in September 2003 shortly after Clair's statement and before any report could be prepared and charges recommended.

D.         The Influence of the Coalition for Better Government in Local 726 Affairs and Its Ties to Organized Crime

Allegations were received that contributions to the CBG, a Chicago political action committee, were required for job security in Local 726 and that CBG was used to place organized crime associates in city jobs ⁴³ CBG has been described in a local newspaper report as "a group of political tough guys who do the mayor's bidding" and as an organization "run by a few convicts on the public payroll.⁴⁴_" Its history of political

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contributions show a pattern of support for Alderman Dick Mell and his son-in-law, Governor Rod Blagojevich.⁴⁵

CBG collects substantial "contributions" from many Local 726 members. For example, from February 1998 through September 2001, one member contributed over $2,500.00 to CBG, an amount that Clair stated was substantial and not typical of what a Local 726 member would contribute. Another Local 726 member contributed in excess of $3,200.00 to CBG over a four-year period. Overall, for the July 1997 through December 2001 time frame, some 106 Local 726 members (and 3 spouses) contributed more than $50,000.00 to CBG, which was approximately 42 percent of the total contributions raised by the CBG during the time period.⁴⁶ Former Local 726 Principal Officer Stefanski, who resigned in April 2003, had close ties to CBG and donated Local 726 political action committee funds to CBG totaling $6,950.00 from October 1997 to September 2001.⁴⁷ Stefanski acknowledged that not only did CBG have close ties to the mayor's office, but that they actually work as "operatives for the mayor's office" and that the mayor's office determined what candidates CBG should support.⁴⁸

CBG is led by John Boyle, an ex-felon and associate of the Chicago Outfit. Boyle previously ran an armored car company, which had a contract with the Illinois Tollway Authority to transfer coins from the various toll sites around the Chicago area to the Federal Reserve. Boyle pleaded guilty and was sentenced to more than three years in federal prison for embezzling four million dollars in coins from the Federal Reserve Bank of Chicago.⁴⁹

The other leader of CBG is Dominic Longo, also a convicted felon having been involved in voter fraud in the 1980s. Longo has been a member of both Local 726 and Local 786 and has been in and out of Teamster work. For about five years he was a bartender at Gianotti_'s Restaurant, widely considered to be an organized crime hangout. As noted above, Longo also campaigned for the American Party Slate in 1994, which was accused of having ties to organized crime. Currently, Longo is a City of Chicago Park dispatcher and according to Principal Officer Clair, currently supervises Teamsters.⁵⁰ One present Local 726 member stated that from the beginning of his time as a member he was repeatedly approached by Longo to work on political campaigns and to buy tickets to political events. This 726 member refused to campaign for CBG candidates and bought CBG tickets only once, refusing to buy any thereafter though he was often asked to do so. When he complained to Lococo about his not moving from seasonal status to career service, the complaining member was told that the reason he was having trouble was because "'[y]ou didn't do the right thing for that guy out there,"' and the "'guy"' was a reference to Longo.⁵¹

This account is consistent with allegations made in the anonymous letter sent to the IBT's EPC in 1994 (discussed above), which stated:

If you do not buy tickets and support his choice, you are punished by him. He will discipline 726 members for minor work offenses much harsher than supporters who commit bigger violations just because they are in his Democratic political patronage organization and buy tickets and solicit votes which is a clear violation of the Federal Shakman decree.⁵²

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Still another present member described Longo as a "vicious supervisor who treated people terribly." The member stated that, if you failed to campaign or buy tickets, the probability increased that you would have problems with him. The member stated that Stefanski, who had run against Longo, was now in bed with him and was doing his "`bidding."' When the member complained at membership meetings to Stefanski about Longo's demands, Stefanski, according to the member, would say "`it's Chicago,"' meaning "that nothing could be done about it." This member also had a meeting in the mid 1990s with Stefanski, Clair, and several other individuals during which all of the problems at O'Hare were discussed, but nothing was ever done to correct them.⁵³

These observations were confirmed by several other Local 726 members, all of whom described CBG as exerting significant control over their job security, their ability to go from seasonal to full-time City employment, and their ability to receive preferred jobs, like those commanding lucrative overtime. These 726 members also agreed that CBG through Longo and Boyle would not be able to exert such influence without the Local 726 executive board at least being aware of, if not "in bed" with, CBG.⁵⁴ Even though Longo is no longer a foreman at O'Hare Airport, one Teamster claimed that he can still "`get to people"' through other foremen such as Nick Lamonica and Dennis Sepanik. The latter of whom contributed to CBG.<sup>55</sup> One Teamster summed up the collusion between CBG and the 726 executive board as "`corrupt"' and the executive board as "unresponsive to any of the problems within the local."⁵⁶

Additionally, the CBG has been linked publicly with Chris Spina, a former longtime City of Chicago employee, who has been described as "a `rising star' in the Chicago

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Outfit's Grand Avenue Street crew," and who is a close family friend of Local 743 member Sylvia Cozzo, the daughter of James Cozzo, a barred Teamster and organized crime lieutenant. Spina has also been linked to Outfit lieutenant Joey Lombardo and member Joe "the Builder" Andriacchi and recently was called a "mob connected ex-boss_" in a local television investigative story on city employees falsifying their time records⁵⁷.  A confidential source confirmed that Spina is an Outfit associate who "grew up in the Grand Avenue neighborhood" and is in business with other Outfit associates and members." (See Appendix, Tab 11.)

Clair has stated that Local 726 will no longer contribute to CBG, and during his first nine months in office, according to a review of CBG filings, Local 726 has not so contributed.⁵⁹ As of a March 2004 review, however, many Local 726 members continued to "donate_" to CBG. In an update to the earlier analysis, IBT field representatives have documented that between January 1, 2002 and October 31, 2003, 144 Local 726 members donated in excess of $40,000.00 to CBG. This represents 22 percent of the contributions to CBG during that time period. Similar to the earlier analysis, this updated analysis shows a pattern of virtually all members making identical contribution of $300.00 in 2003.⁶⁰ In addition, several members had and continue to have roles on the CBG board. Of six present directors of CBG, four are current Local 726 members and two are former members." Thus, CBG continues to have direct involvement with and influence in Local 726. The Project RISE field study received an allegation that the officers of Local 726 — prior to Stefanski _'s slate winning in 1994 — required the members to kick back a portion of their salaries to the principal officer of Local 726 in order to keep their jobs with the City

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of Chicago.⁶² It appears that Local 726 may have to some extent replaced the previous kickback scheme with forced contributions to CBG. But much more extensive investigation is required to document CBG's role in the affairs of Local 726 members and to determine if such a kickback scheme is operating today.

III.          SUMMARY

The evidence presented here requires the conclusion that the Local 726 investigation was prematurely and improperly terminated. Important questions remain unresolved: (1) organized crime's continued interest in the affairs of Local 726; (2) the presence of seven active members and one member on withdrawal status who have organized crime connections; (3) the solicitation by Teamster supervisors and the payment of bribes by Teamster members; (4) the knowledge of 726 officers of the payment of bribes by Teamster members to Teamster supervisors; and (5) the role of the Coalition for Better Government, a group associated with organized crime, in job security of 726 members. Accordingly, this investigation should be reinstated in full with the reappointment of a personal representative so that these questions can be addressed.

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ISSUES RELATING TO LOCAL 727

The Project RISE field study concluded that there was no demonstrable current organized crime influence or systemic corruption in Local 727, and the local was placed in the category for locals that appeared to have developed anti-racketeering cultures and sufficient internal controls to make future organized crime infiltration unlikely. Information received following completion of the field study, however, indicated that in the case of this local, appearances may have been deceiving. That information warrants an overt investigation to resolve the following issues:

·         Whether kickbacks or other improper payments were generated through a dental and vision plan maintained by the Local 727-affiliated Health and Welfare Plan, and whether the plan's trustees, who included the principal officer of the local and current Joint Council 25 president, violated their fiduciary duties with respect to the dental and vision services portion of the plan_;

·         Whether the trustees of the Local 727-affiliated benefit plans violated their fiduciary duties by permitting persons and entities with ties to organized crime, involvement in racketeering schemes, or both, to be vendors to or employees of the plans under questionable circumstances; and

·         Whether a Local 727 business agent is associated with organized crime and has engaged in prohibited associations with organized crime figures, and whether payments to the business agent from the local's affiliated benefit plans reflect fair compensation for services actually rendered to the plans pursuant to an arm's-length employment agreement.

 

I.          BACKGROUND

A.          Basis for Inclusion in Field Study

Local 727, headquartered in Chicago, was included in the Project RISE field study of 85 Teamster locals because of its history of organized crime associations. For many years, the secretary-treasurer and principal officer of Local 727 was James Eco Coli, who

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was identified by law enforcement during the 1970s as a member of the Chicago organized crime family. In a 1978 document prepared for the White House by the attorneys in charge of the Chicago and Cleveland organized crime strike forces, Local 727 under James Eco Coli was described as follows:

This is a small union of slightly over 3,000 members. It is the personal fiefdom of James Eco Coli, syndicate member, burglar, convicted armed robber and strong arm man. He is a close associate of Joey Aiuppa and Anthony Accardo. Experienced investigators have termed his misuse of union funds as one of the most egregious abuses of union power they have seen. For example, the union usually takes in approximately $400,000 per year in union funds. In one year alone Coli had $150,000 paid to himself for salary and benefits. The union constitution, carefully drawn by some of the best labor lawyers, vest all power in Coli to give raises and benefits. Coli is currently under investigation by the Chicago Strike Force for misuse of union funds.¹

In 1981, upon the retirement of James Eco Coli (who died the following year), one of his four sons, James L. Coli, became the secretary-treasurer and principal officer of Local 727. The other three sons are John, Michael, and William, all of whom, as discussed herein, are key figures in the local and its affiliated funds. James L. Coli was described in Project RISE field study interviews as a "step-brother," who grew up in California, apart from the other brothers.

One of the business agents for Local 727 during the 1980s was Joseph Talerico. In 1990 the Independent Administrator (IA), the predecessor to the IRB, found that Talerico had brought reproach upon the union by unlawfully refusing to answer questions before a federal grand jury investigating the skimming of funds from the Stardust Casino in Las Vegas, resulting in his conviction for criminal contempt and his having been held in civil

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contempt, and by knowingly associating with Joseph Aiuppa, John Cerone, and other members of the Cosa Nostra organized crime syndicate. This finding was upheld by Judge David N. Edelstein on August 27, 1990.² Also charged in the same set of proceedings were James V. Cozzo, then an official of Local 786, and Dominic Senese, a former official with Local 703. Talerico and Senese appealed to the Second Circuit, which, in August 1991, upheld Edelstein's order barring them from Teamster membership for life.³

In May 1992, the IA found that James L. Coli had violated his fiduciary duty by failing to investigate and to act with respect to allegations and evidence that Talerico was associating with a Cosa Nostra member. As a penalty, Coli was ordered to permanently remove himself from his position as Local 727 secretary-treasurer and never to seek or accept employment, consulting, or other work with Local 727 or any other IBT-affiliated entity. Because of numerous favorable character submissions made on Coli's behalf, however, the IA permitted him to retain his IBT membership so that he could, if he wished, obtain work as a rank-and-file member with non-IBT-affiliated entities having collective bargaining agreements with the Teamsters. This decision was upheld by Judge Edelstein in July 1992.⁴

John T. Coli succeeded his step-brother as secretary-treasurer and principal officer of Local 727, a position he holds to this day. John Coli's brother, Michael Coli, became president of the local and another brother, William Coli, became administrator of the local's affiliated benefit funds.

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B.         Results of Field Study

During the field study, Principal Officer John Coli reported that, although he is the step-brother of his ousted predecessor, James L. Coli, the two are not close and see each other only occasionally at family outings. According to John Coli, James L. Coli has not had any connection to the local since his removal from office and is no longer even a member. Talerico also has had no contact with the local.⁵

John Coli first worked as a parking industry employee as a Teamster in 1971 and was elected vice president of Local 727 in 1981, the same year his father retired. According to Coli, since becoming principal officer in 1992, he has increased the membership of the local, improved benefits, upgraded record keeping procedures, and instituted a computer system to track grievances, project budget expenditures, and maintain accurate monthly per-capita membership records. He also stated that business agents and stewards were more accountable to the leadership and membership. The computer system was programmed to record and track the business agents' telephone calls into the union's offices and their visits to the work sites. Business agents are required to call into the local at least three times a day and regularly visit their assigned work sites. These calls and visits are recorded and the computerized records are maintained by the local. In addition, at least one business agent is required to be present at Local 727's office for the first and last two hours of every work day to answer any questions from members. John Coli also reported that, since taking over in 1992, he had negotiated better contracts, resulting in better salaries and benefits for members. He said that hourly wages for members employed in the garage industry have doubled during that period and

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contracts are now negotiated by a bargaining team that consists of two executive board members, a business agent, a steward, and three rank-and-file members. Other local officers and employees who were interviewed during the field study supported Coli's contentions concerning these matters.⁶

Coli reported that the local has three affiliated benefit funds: pension, health and welfare, and legal assistance. Joseph M. Burns of the law firm Jacobs, Burns, Orlove, Stanton & Hernandez is counsel for the funds, while Charles Orlove of the same firm is counsel for the local. At the time of Coli's interview, the pension and health and welfare funds had as union trustees John Coli and Becky Strzechowski, while the employer trustees were Thomas J. Moriarty of the Funeral Director Services Association and David Wolpin of Piser-Weinstein Menorah Chapels. The funds initiated an audit system to detect and collect delinquent employer contributions.⁷

All of the Local 727 officers and employees interviewed denied the existence of any organized crime influences or associations in the local, and William Coli, the administrator of the benefit funds, said that none of the service providers to the funds had organized crime associations.⁸ The field study concluded that there was no demonstrable current organized crime influence or systemic corruption in Local 727, and the local was placed in "Category A," the category covering locals for which there was no current evidence of organized crime influence or control, and that gave "every appearance of having developed cultures antithetical to racketeering and sufficient internal controls to make future infiltration by organized crime highly unlikely.⁹

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II.          CURRENT ISSUES

In the course of pursuing unresolved issues relating to other locals in the Chicago area and developing general intelligence sources, IBT field representatives began to receive additional information concerning Local 727 and its affiliated benefit funds. As described below, some of this information is sufficiently plausible and corroborated through independent sources to warrant overt investigation with the assistance of a personal representative of the general president.

A.          Allegations Concerning Dental and Vision Plan

A person whose former position in the union had made him familiar with many of the practices followed in the union by Teamster leaders in the Chicago area told IBT field representatives that he believed kickbacks to union officials were generated through a dental and vision plan maintained on behalf of Local 727 members. He identified a consultant familiar with Teamster-related pension and health and welfare funds in the Chicago area (the Consultant) and one of the service providers to the plan (the Service Provider) as persons who could provide further information.

1.          Summary of Information Provided by Consultant and Service Provider

The Consultant and the Service Provider were familiar with the operation of Local 727's dental and vision plan (Dental/Vision Plan) from March 1995 until early 2000.¹⁰ During most of that time, until late 1998, dental services for the plan were provided through Midwest Illinois Dental Associates, PC (MIDA), which consisted of four dental offices with two separate outside offices. Dental Consultants and Management (DCM) channeled money that had been collected from Local 727 employers to MIDA. Norman K. Landman,

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a dentist who resided in the Miami, Florida area, was DCM's principal. Each month DCM distributed checks to MIDA to pay the dentists who provided services under the Dental/Vision Plan. MIDA was supposed to receive a flat rate of $16.50 per member per month, which DCM would distribute to the participating dental offices according to a "percent of utilization" formula based upon the number of patients each office was handling. Thus, if there were 2,000 members covered by the plan, then DCM was supposed to receive $16.50 x 2,000 = $33,000.00 each month, to be allocated among the dentists according to the formula

In addition to the $16.50 per member per month DCM was supposed to pay to the MIDA dentists, $2.50 per member per month was to be furnished by DCM for a "specialty fund" that would cover the cost of oral surgeons or other dental specialists who provided services that could not be performed by the regular dentists who were members of the service provider group. Cyiris, Inc., a company owned and operated by George Michaelides and Robert Donovan, also received a share of the funds provided by DCM, ostensibly for administrative services. These included developing activities/distribution breakdown reports that were distributed to trustees and receiving membership eligibility lists from dentists and redirecting them to Local 727 for verification.

Administering the plan was relatively simple. Because there was no individualized billing or claims processing, the chief administrative task was maintaining a current list of eligible members. In most such plans, according to the Consultant, an eligibility list is distributed to participating dental offices on a monthly or other regular basis. Such a list enables dentists to determine whether a prospective patient is a member of the plan. It

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would also enable MIDA to determine whether it was receiving the correct amount from DCM each month, which was based on $16.50 multiplied by the total members in the plan.

The Consultant and the Service Provider said, however, that no plan membership list was ever provided to MIDA or the participating dental offices. They encountered strong resistance when they attempted to obtain from Local 727, Cyiris, or DCM accurate information about the number of participants in the plan. Instead, the dental offices would compile their own lists of patients claiming to be entitled to benefits under the plan and would call Local 727, or fax names to the local's office, to determine whether these prospective patients were eligible.

In response to their inquiries, the Consultant and Service Provider had received vague information that the Dental/Vision Plan had about 2,000 members. This was consistent with the monthly payments DCM was sending to MIDA in the amount of $32,971.00 ($32,971.00 divided by $16.50 per member = 1,998 members). In late 1998 or early 1999, they learned that the plan was funded by contributions made by employers at a rate of $28.00 per member per month. (As discussed below, Form 5500s filed by the Local 727 Health and Welfare Fund between 1993 and 1998 reported 2,326 members of the Dental/Vision Plan each year, and the contribution per member was reported as $27.25. The number of members and the contribution rate was not reported for 1999 or later years.) This information made the Consultant and Service Provider suspicious because of the large gap between the $28.00 per member per month collected from employers and transferred to DCM, and the $16.50 per member per month MIDA had been receiving. Extrapolating from the $28.00 per member per month and what they knew had

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been paid to the dentists, they estimated DCM had retained 29 percent of the plan's income from employer contributions. (As the 5500s reveal, the gap between what DCM and the dentists received was apparently even larger than the Consultant and Service Provider suspected because the amounts the MIDA dentists had been receiving were less than $16.50 per member per month x 2,326 members.)

The large retention by DCM could not be justified on account of an unusually large administrative burden on DCM . As noted, the administrative load was light, and most of the minimal administration required — chiefly verifying eligibility for services — was done^, by the dental offices themselves and one or two Local 727 employees. All DCM really did was act as a conduit for payments.

The Consultant described other suspicious circumstances surrounding the administration of the plan. For example, despite the $2.50 per member per month paid to a "speciality fund," ostensibly to cover special services such as orthodontic work that could not be performed by the regular dentists serving the plan, DCM frequently pressured the MIDA dentists to perform these kinds of services, suggesting that the speciality fund was being used for other purposes. Indeed, as described below, the Consultant and Service Provider produced documents they said reflected Landman's personal expenses — some of them questionable on their face — that were paid out of this fund.

According to the Consultant, Phillip Mesi Jr. appeared to be DCM's link to the Local 727 plan. He received a commission and apparently had the power to choose contractors such as DCM. However, he performed no other services for the plan.

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