Final Order of Trusteeship over Laborers local 1001

IHO order imposing trusteeship as a PDF File  Get Acrobat Reader to read & print

Complaint for Trusteeship and See Chicago Laborers District Council Trusteeship RICO Files

1

In the Matter of

Local Union Local Union 1001

Chicago, Illinois

Laborers’ International Union of North America

Independent Hearing Officer

Docket No. 03-21T

Decided: March 2, 2004

ORDER

PROCEDURAL HISTORY

This Order and Memorandum addresses the Complaint for Trusteeship

over Laborers’ International Union of North America (LIUNA) Local Union

1001 (Local 1001), Chicago, Illinois, filed by the LIUNA General Executive

Board (GEB) Attorney on September 25, 2003. See Complaint for

Trusteeship In Re Trusteeship Proceeding of Local 1001(Chicago, Illinois) of

9/25/03 (Trusteeship Complaint) (IHO Dkt. tab 2). By way of the Trusteeship

Complaint and an enclosed letter, the GEB Attorney properly informed Local

1001 members and officers of the reasons for and constitutional grounds

supporting the Trusteeship. See Letter from Robert D. Luskin to the Officers

and Members of Local 1001 (Chicago, Illinois) of 9/25/03 (Trusteeship

Notice) (IHO Dkt. tab 2). The Trusteeship Complaint alleges that the

imposition of a trusteeship is necessary due to a number of serious and

substantial irregularities in the operation of Local 1001 including: corruption,

financial misconduct, breaches of basic fiduciary practices, and undemocratic

practices. See Trusteeship Complaint (IHO Dkt. tab 2). In the Trusteeship

Notice, the GEB Attorney informed the members and officers of Local 1001

that the Independent Hearing Officer (IHO) would hold a hearing regarding

whether the Trusteeship is warranted on November 3, 2003. See Trusteeship

Notice (IHO Dkt. tab 2). 

Local 1001’s Motion for an Extension of Time 

On October 8, 2003, Local 1001 submitted a Motion to Extend Hearing

Date before the IHO, by and through one of its attorneys, Dan K. Webb.1 See

1 Mr. Webb is a partner in the law firm Winston & Strawn LLP.

2 In the Matter of Local Union 1001 2004

Local 1001’s Motion to Extend Hearing Date before the Independent Hearing

Officer of 10/8/03 (Motion for Extension of Time) (IHO Dkt. tab 3). In that

motion, Mr. Webb represented that Local 1001 had chosen him as lead trial

counsel for the Trusteeship hearing and, due to a pre-existing trial

commitment, he was unavailable until on or about January 5, 2004. Id. The

GEB Attorney opposed the Motion for Extension of Time because the GEB

Attorney had already engaged in extensive negotiations with Local 1001 and

its attorneys regarding the need for a supervision or trusteeship.2 See GEB

Attorney’s Opposition and Response to Local 1001’s Motion to Extend the

Hearing Date of 10/15/03 (Opposition Motion) (IHO Dkt. tab 5). In addition,

the GEB Attorney contended that the law firm of Faraci and Faraci,

principally Peter Faraci3 and George Leighton (Judge Leighton), a formal

federal judge, had represented Local 1001 for a number of years.4 Id. As

__________________________

2 The IHO does not view the negotiations as evidence of the Local’s

awareness of a need for Trusteeship. The matter is discussed only to show

notice and the involvement of attorneys in the process. The GEB Attorney

engaged in negotiations with Local 1001 and its attorneys from in or about

Spring 2002 until the filing of the Trusteeship Complaint in September 2003.

For instance, GEB Attorney Robert Luskin had unsuccessfully attempted to

contact Business Manager Gironda by telephone several times in or before

March 2002, to arrange a meeting with Local 1001 Executive Board members

for discussion regarding an Agreement of Voluntary Supervision. See Letter

from Robert D. Luskin to Nicholas Gironda of 3/27/02 (IHO Dkt. tab 7).

After receiving no response, GEB Attorney Luskin wrote a letter requesting

that Business Manager Gironda select dates in April 2002, for a meeting in

Chicago with Local 1001’s Executive Board. Id. On May 7, 2002, GEB

Attorney Luskin met with Local 1001’s Executive Board and its attorneys in

Chicago. See Letter from Peter S. Faraci and George N. Leighton to Robert

D. Luskin of 5/20/02 (IHO Dkt. tab 7). Following that meeting, Mr. Faraci

and George Leighton received a proposed draft Supervision Agreement,

which they distributed to the Executive Board. Id. Thereafter, Mr. Faraci and

George Leighton informed GEB Attorney Luskin that the Executive Board

members would “consider whether Supervision of Local 1001 is warranted”

after the GEB Attorney provided detailed information regarding the

allegations in the draft Supervision Agreement for their review. Id.

3 All references to “Mr. Faraci” in this Order and Memorandum denote Peter

Faraci, as opposed to his father Dominick Faraci, unless otherwise noted.

4 The IHO notes that Peter Faraci wrote a letter to Secretary-Treasurer

DeChristopher in April 2002, in response to their meeting on April 5, 2002,

which outlined various fee arrangements “in the event that the International

Union (LIUNA) seeks to impose an Emergency Trusteeship on Local 1001.”

3 In the Matter of Local Union 1001 2004

counsel of record for Local 1001 in United States District Court litigation

opposing the LIUNA internal reform program, Mr. Faraci and Judge Leighton

were familiar with Local 1001 and all aspects of the LIUNA internal reform

process. Id. Finally, the GEB Attorney argued that the serious allegations

contained in the Trusteeship Complaint warranted a hearing without a two month

delay, especially considering the possibility that the proposed extension

would render the situation unresolved when the Construction & General

Laborers’ District Council of Chicago and Vicinity (Chicago District Council)

elections occurred in March 2004.5 See Opposition Motion (IHO Dkt. tab 5).

Thereafter, Local 1001 submitted a reply brief and exhibits, arguing that

fundamental fairness required that the IHO grant the requested 60-day

extension because, based upon the history of the matter, a 60-day delay would

not prejudice the parties; Local 1001 counsel needed to prepare to defend the

charges; and Chicago District Council Elections were not a basis for denying

the extension. See Local 1001’s Reply Brief in Support of Its Motion to

Extend the Hearing Date of 10/21/03 (IHO Dkt. tab 7). Local 1001 also

contended that failure to grant the delay would deprive Local 1001 of the right

to select counsel of its choosing. Id.

In an effort to reach a mutually acceptable resolution to the issue, the IHO

scheduled a telephone conference regarding Local 1001’s Motion for

Extension of Time. See IHO October 22, 2003 Order (IHO Dkt. tab 8). The

October 23, 2003 telephone hearing included discussions between the IHO,

GEB Attorney Luskin, Attorney Thomas, from the Office of the GEB

Attorney, and Attorney Webb. See IHO November 3, 2003 Order (IHO Dkt.

tab 11).

At the conclusion of the lengthy telephone hearing and upon

approval of the participating attorneys, the IHO continued

_______________________

GEB Ex. 48, p.3 (Letter from Peter S. Faraci to Sam DeChristopher,

Secretary-Treasurer, of 4/16/02). Markedly, the outline of legal services

scheduled to begin “early on or by May 7, 2002” included a “[r]eview of

pleadings already prepared,” discussed the “preparation of [a] motion for

temporary restraining order and for a preliminary injunction,” and anticipated

“preparation of hearing” and “gathering of evidence, including interview of

potential witnesses.” Id.

5 The GEB Attorney argued that allowing the election of District Council

delegates, who might be subject to removal through a trusteeship, would be

unfair to both the members of Local 1001 and the District Council. See

Opposition Motion (IHO Dkt. tab 5).

4 In the Matter of Local Union 1001 2004

settlement negotiations regarding the Trusteeship, specifically

the appointment of a mutually agreeable Deputy Trustee, until

the end of business on Friday, October 24, 2003. During the

telephone hearing, the IHO advised all parties that a

November hearing date would be reissued upon failure to

reach an agreement by the imposed deadline. Mr. Webb

represented that, in the absence of an agreement, he would

withdraw as counsel for Local 1001.

IHO November 3, 2003 Order (IHO Dkt. tab 11). The parties were ultimately

unable to reach an agreement regarding the appointment of a Deputy Trustee

acceptable to both of them. Consequently, on October 29, 2003, the IHO

scheduled the Trusteeship hearing for November 11, 2003. See IHO October

29, 2003 Scheduling Order (IHO Dkt. tab 9).

On or about October 31, 2003, Local 1001, by and through another one of

its attorneys, Judge Leighton, filed a Verified Complaint for Injunctive and

Other Relief, as well as an Emergency Motion for Preliminary Injunction in

the Circuit Court of Cook County, Illinois. See V.Compl. for Inj. and Other

Relief (Local 1001’s Complaint), County, Mun. Employees’, Supervisors’ and

Foremen’s Union, Local 1001 (Chicago, Illinois) v. Laborers’ Int’l Union of

N. Am., No. 03CH18226 (Cook Cty., IL Cir. Ct., Ch. filed October 31, 2003);

Emergency Mot. For Prelim. Inj. (Local 1001’s Emergency Injunction

Motion), Local 1001 v. LIUNA, No. 03CH18226 (Cook County, IL Cir. Ct.,

Ch. filed October 31, 2003) (IHO Dkt. tab 10). Local 1001’s Complaint

sought “to preliminarily enjoin LIUNA and those empowered to act on

LIUNA’s behalf” from denying Local 1001’s Motion for Extension of Time

and proceeding with the scheduled November 11, 2003 Trusteeship hearing

“on the grounds that doing so would deny Local 1001 the right to counsel of

its choice, would be manifestly unfair and prejudicial.”6 Local 1001’s

Complaint, ¶ 1 (IHO Dkt. tab 10). Local 1001’s Emergency Injunction

Motion stated, inter alia, that the IHO never formally denied Local 1001’s

Motion for Extension of Time, but instead issued a scheduling order “which

neither addressed nor denied Local 1001’s motion.” Local 1001’s Emergency

Injunction Motion, ¶¶ 4, 5 (IHO Dkt. tab 10). Local 1001 then argued, “the

______________________

6     Local 1001’s Complaint states, “Local 1001 retained Dan K. Webb of

Winston & Strawn LLP in March of 2003 to serve as lead trial counsel if

charges were brought by the IHO and resulted in a trusteeship hearing.” Local

1001’s Complaint, ¶ 9 (IHO Dkt. tab 10); see also GEB Ex. 46 (Letter from

Dan K. Webb to Executive Board of Local 1001 of 3/4/03 (Winston Strawn

Engagement Letter)).

5 In the Matter of Local Union 1001 2004

IHO’s decision to deny Local 1001’s motion for extension was arbitrary,

prejudicial, fundamentally unfair and deprived Local 1001 of its right to

counsel of its choosing.” Id. at ¶ 6.

         LIUNA filed a Notice of Removal from the Circuit Court of Cook County

on November 4, 2003. See LIUNA’s Notice of Removal, Local 1001 v.

LIUNA, (No. 03-CV-7828) (N.D. Il). On November 5, 2003, Local 1001 filed

a Motion to Remand and an Emergency Motion to Stay the hearing date

pending resolution of its Motion to Remand. See Emergency Motion by Local

1001 to Stay 11/11/03 Hearing Date of 11/5/03, Local 1001 v. LIUNA, (No.

03-CV-7828); Memorandum in Support of Emergency Motion to Stay of

11/5/03, Local 1001 v. LIUNA, (No. 03-CV-7828); Plaintiff’s Motion to

Remand of 11/5/03, Local 1001 v. LIUNA, (No. 03-CV-7828). On November

6, 2003, LIUNA opposed the Emergency Motion to Stay and sought to

dismiss the action. See Defendant’s Motion to Dismiss and Opposition to

Emergency Motion to Stay, Local 1001 v. LIUNA, (No. 03-CV-7828). Judge

Gettleman issued an order denying Local 1001’s Motion to Remand. See

Minute Order of 12/5/03 by Hon. Robert W. Gettleman: Plaintiff’s Motion to

Remand is Denied, Local 1001 v. LIUNA, (No. 03-CV-7828). The court

dismissed the case without prejudice as moot on December 19, 2003. See

Minute Order of 12/19/03 by Hon. Robert W. Gettleman Terminating case

Local 1001 v. LIUNA (No. 03-CV-7828).

        On November 3, 2003, the IHO issued an Order denying the Motion for

Extension of Time and confirming the previously scheduled dates for the

Trusteeship hearing, November 11-13, 2003. See IHO November 3, 2003

Order (IHO Dkt. tab 11). The Order also addressed Local 1001’s position and

the GEB Attorney’s opposition thereto. Id. Specifically, the IHO focused on

whether Local 1001 had a right to counsel and whether denial of the motion

would hinder the Local’s right to a full and fair hearing.

        In discussing Local 1001’s selection of Mr. Webb as counsel for the

Trusteeship hearing and the Local’s alleged right to counsel of its own

choosing, the IHO noted that:

federal case law unequivocally denies a local union the right

to an attorney in trusteeship proceedings, much less counsel of

its own choosing. See supra, Trusteeship Legal Standards.7

___________________________

7 In pertinent part, the Trusteeship Standards read:

Courts have found that the presence or participation of

attorneys is not mandated by the fair hearing requirement of

6 In the Matter of Local Union 1001 2004

Based on those enunciated federal decisions, the IHO does not

concur that “Local 1001 has an unfettered right to select its

own counsel.” Local 1001’s Reply Brief, p.7 (IHO Dkt. tab

7); see also Air Wisconsin Pilots, at *19. Article IX, Section 7

of the International Constitution clearly delineates Local

1001’s rights, which does not include any right to counsel.

See International Constitution, Article IX, Section 7.

IHO November 3, 2003 Order (IHO Dkt. tab 11).

       Subsequently, it became apparent that, although Local 1001 asserted that

it had selected Mr. Webb as its lead counsel for the hearing, he had spent

minimal time reviewing Local 1001’s case in the months prior to the issuing

of the Trusteeship Complaint. See GEB Ex. 52 (Winston & Strawn Invoice #

1754958 of 04/28/03) (billing $24,350.00 for 80 billable hours worked by

___________________________

29 U.S.C. § 464. An overwhelming weight of authority

supports this conclusion. See, e.g., Raushcher v. Bakery,

Confectionery & Tobacco Workers Int’l Union, 1993 U.S.

Dist. LEXIS 14288, NO. CIV. A. 93-5629, 1993 WL 409192,

T *2 (E.D. Pa. 1993); Tam v. Rutledge, 475 F. Supp. 559, 569

(D. Haw. 1979) (fact that local was not allowed to have

counsel present does not deprive local of fair hearing); Int’l

Bhd. of Elec. Workers Local 1186 v. Eli, 307 F. Supp. 495,

510 (D.Haw. 1969) (rejecting argument that refusal to permit

local to have counsel present during trusteeship hearing

deprived local of a fair hearing); Devine v. McCarron, 1997

U.S. Dist. LEXIS 9626, NO. 96 CIV. 5093 (CSH), 1997 WL

379708, at *6 (S.D.N.Y. 1997) (local union is not deprived of

a fair hearing if it is not allowed counsel present);

Boilermakers’ Bldg. Ass’n v. Int’l Bhd. of Boilermakers, Iron

Ship Builders, Blacksmiths, Forgers & Helpers, Boilermakers

Local 500, 1990 U.S. Dist. LEXIS 17204, NO. CIV. 90-318-

FR, CIV. 90-337-FR, 1990 WL 209714, at *13 (D. Or. Dec.

13, 1990) (assistance of counsel is not an essential element of

fair hearing requirement); Air Wis. Pilots Protection Comm. v.

Sanderson, 1989 U.S. Dist. LEXIS 6143, NO. 87 C 3382 1989

WL 58273, at *6 (N.D. Ill. 1989) (fact that charged party was

not allowed counsel present will not render hearing

procedurally defective).

IHO November 3, 2003 Order (IHO Dkt. tab 11).

7 In the Matter of Local Union 1001 2004

partner S. Mendenhall and associate B. Franklin); (Winston & Strawn Invoice

# 1758188 of 05/19/03) (billing $6,382.50 for 18.5 billable hours worked by

partner S. Mendenhall); (Winston & Strawn Invoice # 1764095 of 06/26/03)

(billing $4,846.25 for 20.75 billable hours worked by partner S. Mendenhall

and associate B. Franklin); (Winston & Strawn Invoice # 1767814 of

07/18/03) (billing $10,078.75 for 35.25 billable hours worked by partner S.

Mendenhall, associate B. Franklin, and S. Wesclitz); (Winston & Strawn

Invoice # 1772651 of 08/18/03) (billing $3,363.75 for 9.75 billable hours

worked by partner S. Mendenhall); see also (Winston & Strawn Invoice #

1782937 of 10/22/03) (billing $10,522.50 for 30.50 billable hours worked by

partner S. Mendenhall). In total, Mr. Webb billed for only 15.75 hours of

work on behalf of Local 1001 by October 2003. See Winston & Strawn

Invoice # 1786655 of 11/14/03) (billing $87,036.25 for 257.50 billable hours

worked by partners D. Webb, M. Lydon, and S. Mendenhall, as well as

associates B. Franklin and C. Cullen) (IHO Dkt. tab 34). Mr. Lydon had spent

approximately the same amount of time as Mr. Webb in preparing the case,

and Mr. Mendenhall had worked over 250 hours on the case prior to the

hearing.

         The IHO further observed that both Mr. Faraci and Judge Leighton had

represented the Local for many years, including litigation opposing the

LIUNA internal reform process in the United States District Court for the

Northern District of Illinois.8 See IHO November 3, 2003 Order (IHO Dkt.

tab 11). Moreover, the current Trusteeship Complaint stems from the Chicago

District Council Trusteeship and Bruno Caruso disciplinary matter, during

which Attorney Faraci and Judge Leighton represented Local 1001. Id. Thus,

the IHO concluded, denial of the Motion for Extension of Time would not

impede Local 1001’s defense of the charges, “even supposing, arguendo, that

the Local did have a right to counsel at the Trusteeship hearing.” Id.

        The IHO also found unpersuasive Local 1001’s averment that refusal of

the Motion for Extension of Time would deny Local 1001’s right to a full and

fair hearing. Id. Local 1001 had argued that, “despite receiving draft charges

from the GEB Attorney in early September 2003 and the formal charges filed

____________________________ 

8 Evidence shows that Local 1001 first retained Faraci & Faraci as legal

counsel in or about January 1999. See Local 1001 Ex. 4 (January 21, 1999

Executive Board Meeting Minutes) (Judge Leighton and Peter Faraci “were

introduced to the Executive Board,” provided background information,

including their experience representing LIUNA Local Union 2, and described

the services they could perform; the Executive Board unanimously decided to

retain Faraci and Faraci).

8 In the Matter of Local Union 1001 2004

on September 25, 2003, it ‘was still somewhat in the dark regarding the

charges’ and has inadequate time to prepare a defense for the hearing.” IHO

November 3, 2003 Order (IHO Dkt. tab 11), citing Local 1001’s Replay Brief,

p.6 (IHO Dkt. tab 7) (some internal quotations omitted). However, “there

ha[d] been substantial, direct communication between the GEB Attorney,

Local 1001, and Local 1001’s attorneys regarding the International Union’s

consideration of imposing a trusteeship” before the GEB Attorney filed the

Trusteeship Complaint on September 25, 2003. IHO November 3, 2003 Order

(IHO Dkt. tab 11). Accordingly, the IHO found that, even before the

Trusteeship Complaint was filed, Local 1001 “had an adequate understanding

of the impending charges based on discussions with the GEB Attorney over

18 months, the detailed 2002 letter from the GEB Attorney discussing the

basis for a trusteeship, and the draft complaint forwarded to the Local in the

beginning of September 2003.”9 Id.

Local 1001’s Discovery Requests

      On November 5, 2003, Local 1001, by and through one of its attorneys,

Mr. Mendenhall,10 moved for the disclosure of any and all evidence and

exhibits that the GEB Attorney intended to introduce at the Trusteeship

hearing. See Local 1001’s Motion for Evidence and Exhibits to be Used at

Trial of 11/5/03 (IHO Dkt. tab 13). In that motion, Local 1001 averred, “As

of November 5, 2003, only five days before the hearing date, the GEB

attorney has failed to provide any evidence including exhibits that he will

attempt to use at trial in support of the charges filed against Local 1001.” Id.

at ¶ 3. Local 1001 also moved that the GEB Attorney disclose, in writing, a

list of witnesses, and the identity of organized crime members with whom the

officers of Local 1001 allegedly associated. See Local 1001’s Motion for

Written Disclosure of Witness List of 11/5/03 (IHO Dkt. tab 13); Local

1001’s Motion to Specifically Disclose and Identify the Members of

Organized Crime With Whom the Officers of Local 1001 Have Allegedly

Associated of 11/5/03 (Local 1001’s Motion for Specificity) (IHO Dkt. tab

13) (collectively, Discovery Motions).

       In response to the Discovery Motions from Winston & Strawn, other

communications from Faraci and Faraci, and “inconsistent messages [from the

firms] about whether or not the lawsuit [in the Circuit Court of Cook County]

______________________________

9 The IHO further noted, “Neither LIUNA constitutions nor federal labor law

entitle Local 1001 to the type of extraordinary notice or specificity in pleading

in a trusteeship proceeding that the Local seems to be asserting a right to.” Id.

10 Mr. Mendenhall is a partner in the law firm Winston & Strawn LLP.

9 In the Matter of Local Union 1001 2004

would be dropped,”11 Attorney Thomas requested that the IHO require

clarification from the Local regarding who would be representing it and who

had authority to speak with the GEB Attorney on its behalf. See Letter from

Robert M. Thomas Jr. to Peter F. Vaira of 11/6/03 (IHO Dkt. tab 15).

Attorney Thomas also filed an opposition and response to the Local’s

Discovery Motions, which delineated that the GEB Attorney had an

agreement with Faraci & Faraci making the requested list of witnesses and

copies of exhibits available. See GEB Attorney’s Opposition and Response to

Local 1001’s Discovery Motions (GEB Attorney’s Opposition to Discovery)

(IHO Dkt. tab 14). The GEB Attorney specifically objected to the Local’s

request for detailed disclosures of evidence regarding specified officers and

members’ association with organized crime. See GEB Attorney’s Opposition

to Discovery (IHO Dkt. tab 14). The GEB Attorney noted that under similar

factual circumstances, the IHO has rejected requests for detailed disclosures in

trusteeship proceedings. Id. at p.4, citing Chicago District Council, 97-30T;

In the Matter of Local 210, IHO Order and Memorandum, 95-35T (April 17,

1995).

            On November 6, 2000, the IHO issued an Order requesting that the

Executive Board of Local 1001 notify the IHO which law firm represented the

Local to facilitate the disposition of pre-hearing discovery motions. See IHO

November 6, 2003 Order (IHO Dkt. tab 16). Mr. Mendenhall informed the

IHO that Mr. Webb was “currently serving as lead trial counsel for Local

1001,” but requested that the IHO provide Faraci & Faraci with courtesy

copies of all documents. Letter from Samuel Mendenhall to Peter F. Vaira of

11/6/03 (IHO Dkt. tab 17). Thereafter, an Order responding to the Discovery

Motions delineated that: the GEB Attorney had agreed to expedite production

of all exhibits for reproduction by overnight delivery; the GEB Attorney

would provide a list of all documents unavailable for reproduction; the GEB

Attorney had produced a list of witnesses; and, the Trusteeship Complaint

offered sufficient detail regarding the organized crime figures with whom

particular members had associated.12 See IHO Discovery Order of 11/7/03

_________ 

11 Local 1001 and the GEB Attorney were apparently engaged in ongoing

negotiations regarding mutual concessions that might facilitate postponement

of the scheduled hearing.

12 Local 1001 made a similar evidentiary request regarding the alleged

organized crime associations of Joseph Spingola (Spingola). Local 1001’s

Motion for Specificity, p.3 (IHO Dkt. tab 13). The IHO found that, although

the IHO previously made specific findings regarding Spingola (Chicago

District Council, 97-30T), “the IHO raises a rebuttable presumption that any

10 In the Matter of Local Union 1001 2004

(IHO Dkt. tab 22). The Order further stated that the IHO would conduct

intensive inquiry into the reliability of the informant testimony about

organized crime elicited at the hearing. Id. Thereafter, Local 1001 would

receive reasonable and sufficient time to respond and rebut the evidence. Id.

Motion for Substitution of Lead Counsel and Extension of Hearing

       On November 7, 2003, Local 1001 filed a motion to substitute its lead

trial counsel and extend the date of the Trusteeship hearing until November

18, 2003. See Motion to Substitute Lead Trial Counsel and to Extend the

Hearing Date Before the Independent Hearing Officer to November 18, 2003

of 11/7/03 (Substitution and Extension Motion) (IHO Dkt. tab 24). The

Substitution and Extension Motion averred, “In March 2003, Local 1001

selected Dan K. Webb, of Winston & Strawn, to represent it in any trusteeship

hearing before the IHO. George N. Leighton, of Counsel, to Faraci & Faraci

was selected to second chair the litigation.”13 Id. Citing an unsuccessful

attempt at judicial intervention to delay the hearing and a prior medical issue

that rendered Judge Leighton unavailable on November 11, 2003,14 Local

1001 sought to substitute Mr. Lydon, a partner of Mr. Webb’s, as lead trial

counsel, and extend the hearing date one week. Id.

         GEB Attorney Luskin opposed the Local’s continuance request for

substitution of trial counsel. See Letter of Robert D. Luskin to Peter F. Vaira

of 11/10/03 (IHO Dkt. tab 25). GEB Attorney Luskin stated that LIUNA had

proposed to Mr. Faraci that it would agree to the continuation requested by

Local 1001, provided the Local dismiss the State court action to avoid risking

interruption of the Trusteeship hearing by collateral litigation. Id.

Nonetheless, Mr. Faraci relayed to the GEB Attorney that Local 1001

“indicated they cannot accept your proposal because the question of

jurisdiction created by your removal action of this matter is too important of

an issue to abandon.” Letter from Peter S. Faraci to Robert D. Luskin of

11/10/03 ((IHO Dkt. tab 26). Mr. Luskin maintained that LIUNA did not

request or require any agreement about jurisdiction if jurisdictional issues

remained after the termination of the trusteeship proceedings. See Letter of

Robert D. Luskin to Peter F. Vaira of 11/10/03 (IHO Dkt. tab 25).

___________

proof regarding Spingola’s organized crime association has no present weight

in this hearing.” IHO Discovery Order of 11/7/03 (IHO Dkt. tab 22).

13 This was the first indication that Local 1001 had selected Judge Leighton

as second chair for the Trusteeship hearing.

14 The Substitution and Extension Motion further noted that Judge Leighton is

91 years of age. Id.

11 In the Matter of Local Union 1001 2004

      The IHO refused to extend the hearing date. See IHO November 10,

2003 Order (IHO Dkt. tab 27). Mr. Lydon was permitted to attend the hearing

and did, in fact, act as lead counsel for all proceedings in this matter.15 The

Trusteeship hearing began on November 11, 2003, and continued November

12-13, 2003, and December 8-9, 2003 in Chicago, Illinois. Mr. Thomas

appeared on behalf of the GEB Attorney. Messrs. Lydon, Mendenhall, Peter

Faraci, and Judge Leighton were present on behalf of Local 1001.16 Local

1001 members and officers attended the hearing; most notably, on December

8, 2003, over 100 members appeared in support of the current administration.

A licensed court reporter duly recorded the proceedings. See Transcripts of In

the Matter of LIUNA Docket Number 03-21T (Tr.).

Pre-Hearing Motions

Motion to Dismiss for Failure to Comply with the Consent Decree

         On November 11, 2003, Local 1001 presented a Motion to Dismiss this

Matter for Failure to Comply with the Consent Decree (Consent Decree

Motion). See Local 1001’s Consent Decree Motion (IHO Dkt. tab 35). Local

1001 argued that “the GEB Attorney relied on the Consent Decree to establish

federal subject matter jurisdiction” in this case, “and the Court found federal

jurisdiction as ‘there is enough there in terms of Local 1001 . . . within the

parameters of federal jurisdiction with a consent decree.” Id. at p.1. Local

1001 further argued that the GEB Attorney contended that the Consent Decree

governed the Trusteeship dispute and provided the basis for filing the

Trusteeship Complaint. Id. at p.2. Therefore, Local 1001 averred that the

GEB Attorney should be “estopped from denying that the Consent Decree

___________________________

15 The IHO was familiar with Mr. Lydon’s impressive background and

credentials, including both his service as Assistant U.S. Attorney for the

Northern District of Illinois and his complex litigation defense work for major

corporations. Mr. Lydon’s background and experience rendered him

eminently capable of handling the role of lead trial attorney for Local 1001.

As reflected earlier, Mr. Lydon also had previously participated in this matter,

as reflected in his firm’s billing statements.

16 Judge Leighton was present for the November 2003 hearing dates.

Thereafter, Judge Leighton informed the IHO that, in his judgment, “Local

1001 is adequately represented in the Trusteeship proceedings . . . that began

hearing November 11, 2003. The local’s attorneys are Mathias A. Lydon,

Esquire; Samuel Mendenhall, Esquire; and Peter S. Faraci, Esquire. For this

reason, I ask that my name be removed from your mailing list.” Letter from

George N. Leighton to Peter F. Vaira of 11/25/03 (IHO Dkt. tab 29).

12 In the Matter of Local Union 1001 2004

governs this matter,” and the Trusteeship Complaint dismissed for failure to

comply with the Consent Decree.17 Id.

        LIUNA entered into a Consent Decree with the Construction & General

Laborers’ District Council of Chicago and Vicinity (Chicago District Council)

and the United States Attorney for the Northern District of Illinois on August

12, 1999. See United States of America and Laborers’ Int’l Union of N. Am.

v. Construction & General Laborers’ District Council of Chicago and

Vicinity, Consent Decree, No. 99 C 5229 (August 12, 1999). The Consent

Decree created the offices of Monitor, Adjudications Officer, and

Trustee/Supervisor. Id. at ¶¶ 16, 26, 32. All of these offices had terms that

expired within two years of their appointment, or in approximately September

2001. Id. at ¶¶ 25, 31, 33. None of the parties to the Consent Decree

petitioned the Court for an extension of any of those officers’ terms, nor have

any of those officers’ filed charges that are pending and relevant to this

matter. Id. Therefore, court supervision through the office of the Monitor no

longer exists under the Consent Decree.

     However, the decree does contain permanent injunctions against barred

conduct committed by “all current and future officers, agents, representatives,

employees and members of the CLDC and its affiliated entities . . . .” Consent

Decree, ¶ 14. Both the GEB Attorney and the government have standing to

apply to the court for any relief for violation of the permanent injunctions on

barred conduct, including civil and criminal contempt. In addition, nothing in

the Consent Decree superseded the substantive standards of LIUNA’s Ethical

Practices Code (EPC) or the GEB Attorney’s authority under the Constitution.

Consent Decree, ¶¶ 1, 2. Moreover, the International Union Constitution

(International Constitution) and LIUNA’s Ethics and Disciplinary Procedure

(EDP) empower the IHO with independent authority to preside over

trusteeships. Based on the foregoing authority, the IHO held that his

constitutional authority to conduct trusteeship hearings was unaffected by the

consent decree and did not dismiss the Trusteeship Complaint.

___________________________ 

17 Specifically, Local 1001 averred that the GEB Attorney did not comply

with the Consent Decree by bringing the instant charges in violation of the

following language: “Notwithstanding any delegation to investigate or

prosecute, no charge may be brought under this decree without the consent

and approval of the Monitor.” See Local 1001’s Consent Decree Motion

(IHO Dkt. tab 35) (emphasis added), citing Consent Decree, ¶ 15.

13 In the Matter of Local Union 1001 2004

Motions in Limine

      At the hearing, Local 1001 presented five motions in limine to exclude

certain allegations and evidence regarding organized crime. Those motions

included: Local 1001’s Motion In Limine to Strike All Pre-1995 Allegations

Regarding Organized Crime and to Preclude the Use of Any Evidence Related

to Such Allegations; Local 1001’s Motion In Limine Regarding Evidence of

Alleged Prior LCN Influences Not Related to Current Board Members:

Michael Palermo; Local 1001’s Motion In Limine Regarding Evidence of

Alleged Prior LCN Influences Not Related to Current Board Members: Bruno

Caruso; Local 1001’s Motion In Limine Regarding Evidence of Alleged Prior

LCN Influences Not Related to Current Board Members: Ernest Kumerow;

and Local 1001’s Motion In Limine Regarding Evidence of Alleged Prior

LCN Influences Not Related to Current Board Members: Joseph Spignola

(collectively, Local 1001’s Motions In Limine). See Local 1001’s Motions In

Limine (IHO Dkt. tab 36). Without addressing each motion specifically, the

IHO notes that the substance of those motions was a desire to preclude

evidence that was arguably tangential to the current officers of the Local. The

IHO recognized that the GEB Attorney must tie evidence regarding organized

crime to the current matter, but determined that the relevancy of specific

evidence could adequately be addressed when introduced.

Motion for Saturday or Evening Hearing Dates

   At the beginning of the Trusteeship hearing on November 11, 2003, Local

1001 filed a Motion for Portions of the Hearings to Take Place on Saturdays

or in the Evenings (Motion for Alternate Hearing Schedule). See Local

1001’s Motion for Alternate Hearing Schedule (IHO Dkt. tab 37). Mr.

Mendenhall presented that the members of Local 1001 are all County and

Municipal public service employees who were unable to attend hearings

scheduled during working hours. Tr. 37:15-21 (MENDENHALL). The IHO

acknowledged the interest the membership had in the proceedings, but

declined to reschedule existing hearing dates in the interest of the planned

witnesses. Cf. In the Matter of Local Union 1175, IHO Order and

Memorandum, 03-10T (June 11, 2003) (declining to hold evening or weekend

hearings). However, in conformance with the usual custom and practice in

Trusteeship proceedings, the IHO assured counsel that the membership would

be afforded the opportunity to voice their opinions on the record. Over 100

members appeared in support of the Local on December 8 and 9, 2003.

LEGAL STANDARDS

Trusteeship Requirements

      In order to impose a proper trusteeship over Local 1001, LIUNA must

adhere to both federal law and its own internal constitutions. The Labor-

14 In the Matter of Local Union 1001 2004

Management Reporting and Disclosure Act of 1959 (LMRDA) “contemplates

three essential conditions of validity [of a trusteeship]: adherence to the

constitution, a fair hearing, and a permissible purpose.” Luggage Workers

Union, Local 167 v. International Leather Goods, Plastics & Novelty

Workers’ Union, et al., 316 F. Supp. 500, 504 (D. Del. 1970). The LMRDA

allows labor organizations to establish trusteeships over subordinate bodies to

correct corruption or financial malpractice, assure the performance of

collective bargaining agreements or other duties of a bargaining

representative, restore democratic procedures, or otherwise carrying out the

legitimate objects of such labor organization. 29 U.S.C. § 462.

        The LMRDA empowers LIUNA to impose a trusteeship if it does so in

conformance with its own constitutions and bylaws. 29 U.S.C. §§ 462-464.

LIUNA constitutions and by-laws mirror the federal statute. See Matter of

Tomasello & Curvin, 1998 A.O. 17, 27 (97-021-IHO, 97-022-IHO)

(International’s authority to impose trusteeship over a Local expressly

provided in Constitution and confirmed in EDP). Pursuant to Article IX,

Section 7 of the International Constitution, the LIUNA General President may

appoint a trustee when:

[t]he General President finds, in his opinion, that action by

him is necessary for the purpose of correcting corruption or

financial malpractice, assuring the performance of collective

bargaining agreements or other duties of a bargaining

representative, restoring democratic procedures or otherwise

carrying out legitimate objects of such subordinate body or the

International Union, or to protect the organization as an

institution. . . .

International Constitution, Article IX, Section 7.

        In addition, LIUNA may impose a trusteeship over a subordinate body to

correct officers’ mismanagement and corruption. Id. The LIUNA General

President delegates his power “to impose and review the imposition of

trusteeships over any district council, local, or other entity within the Union”

to the GEB Attorney. EDP, Section 3. Pursuant to Section 5 of the EDP, the

LIUNA IHO “shall preside over and provide rulings in” the imposition of all

trusteeship. Id. When the International Union fully complies with its own

requirements before imposing a trusteeship, the imposition does not violate

union officers’ due process rights. 29 U.S.C. §§ 411(a), 462, 464(c); see also

Trusteeship of Local 73, 1996 A.O. 5, 10 (95-013-TB) (imposition of

trusteeship over Local does not implicate Section 101(a) due process rights,

unless union membership rights denied).

        For proper authorization of a labor organization’s imposition of

trusteeship over a subordinate body, the LMRDA requires that the governing

15 In the Matter of Local Union 1001 2004

body seeking to impose a trusteeship must give the targeted entity a full and

fair hearing. 29 U.S.C. §§ 461, 462, 464(c). “The right to a fair hearing under

§ 464(c) requires that a subordinate body be given more than just the

opportunity to be heard before an official body.” Laborers’ Int’l Union of N.

Am. Local Union # 43 v. Laborers’ Int’l Union of N. Am. (Local 43 v.

LIUNA), No. C03-26 LRR at 9 (N.D. IO May 14, 2003), citing Becker v.

Industrial Union of Marine & Shipbuilding Workers, 900 F.2d 761, 768 (4th

Cir. 1990) (internal citations omitted). A fair hearing under § 464(c) requires

that the subordinate body receive written notice of the hearing, which “sets

out in writing the factual basis for the alleged violations of law of the union’s

constitution that justify the imposition” of a trusteeship. Becker, 900 F.2d at

768; see also In the Matter of Local 1058, IHO Order and Memorandum, 00-

85T (May 31, 2000) (degree of detail must be sufficient to provide

subordinate body with reasons for trusteeship and fair notice of hearing).

        The trusteeship notice need not rise to the level of detail required in

judicial proceedings. Cf. Luggage Workers Union, Local 167 v. International

Leather Goods, Plastics & Novelty Workers Union, 316 F. Supp. 500, 508 (D.

Del. 1970) (notice insufficient for failure to inform local union of acts

supporting imposition of trusteeship). The notice should provide the “date,

time and location of the hearing and indicate that the local will have an

opportunity to respond to the charges.” Local Union 43 at 10, citing Becker,

900 F.2d at 768 (internal citations omitted); see also International

Constitution, Article IX, Section 7. LIUNA’s International Constitution

requires adequate notice of the hearing “at least 10 days prior to the date of

the hearing.” International Constitution, Article IX, Section 7. “At the

hearing itself, the union seeking to impose the trusteeship must present

evidence and witnesses in support of the reasons for imposing the

trusteeship.” Local Union 43 at 9-10, citing Becker, 900 F.2d at 768. Further,

the “local must be accorded the opportunity to cross examine [the parent

union’s] witnesses and present rebuttal evidence.” Id.

Barred Conduct

Both LIUNA’s EDP and EPC specifically prohibit “all current and future

officers, agents, representatives, employees, and members of the Union from

engaging in ‘barred conduct.’” EDP, Section 1, p.24; EPC, Barred Conduct,

p.22. “Barred Conduct” includes, inter alia, committing any act of

racketeering, as defined in 18 U.S.C. § 1961(1) and 29 U.S.C. §§ 186, 501(c).

See EDP, Appendix A, p.36; EPC, Barred Conduct, p.22. “Racketeering

activity’ means, inter alia, any act or threat involving the aforementioned

crimes that are chargeable under State law and punishable by imprisonment

for more than one year; or any act which is indictable under enumerated

sections of Titles 18 and 29 of the United States Code. Id.; see also In the

Matter of Stephen Buckley, IHO Order and Memorandum, 99-52D (October 3,

2000); In the Matter of Alan Wasserman, IHO Order and Memorandum, 97-

16 In the Matter of Local Union 1001 2004

57D (October 7, 1998). Although LIUNA’s EPC and EDP do not define

“barred conduct” with an express mental state requirement, a knowledge

standard is implicit in the nature of a offense. See, e.g., In the Matter of

Dennis Gleason, Jim Felkner Jr., and L.T. Robertson, 2000 A.O. 151 (00-006-

IHO); Victor Claro v. Carlos M. Marques, 1998 A.O. 183 (98-023-IHO),

citing, In the Matter of Dennis Martire, 1997 A. O. 81, 93 n.8 (97-008-IHO).

The EDP and the EPC also prohibit LIUNA members from permitting

any member or associate of the LCN to exercise control or influence in the

conduct of the affairs of the Union. EDP, Section 1, p.24; EPC, Barred

Conduct, p.22. The IHO liberally construes LCN influence on union affairs.

In the Matter of Napoli & Fallacara, IHO Order and Memorandum, 96-65D

(September 25, 1997); In the Matter of Bifulco et al., IHO Order and

Memorandum, 96-48D (March 17, 1998). The IHO will look at any

relationship that permitted access to union affairs by barred persons. Bifulco,

96-48D. The relationship need not directly affect the operation of the union.

See, e.g., In the Matter of Coia, IHO Order and Memorandum, 97-52D

(March 8, 1999) (relationship to the affairs of the union need not on its face

affect the operation of the union); Napoli, 96-65D (apparent from the

agreement between LIUNA and the Department of Justice (DOJ), and text of

the EDP and EPC, that major aim of reform process is ridding union of

organized crime influence).

Fiduciary Duties of Labor Union Officers

Federal Labor Law

In order to safeguard labor organizations, federal law governing the

fiduciary duty of labor union officers is expansive. Title 29 U.S.C. § 501(a)

states:

The officers, agents, shop stewards, and other representatives

of a labor organization occupy positions of trust in relation to

such organization and its members as a group. It is, therefore,

the duty of each such person, taking into account the special

problems and functions of a labor organization, to hold its

money and property solely for the benefit of the organization

and its members and to manage, invest, and expend the same

in accordance with its constitution and bylaws and any

resolutions of the governing bodies adopted thereunder, to

refrain from dealing with such organization as an adverse

party or in behalf of an adverse party in any matter connected

with his duties and from holding or acquiring any pecuniary or

personal interest which conflicts with the interests of such

organization, and to account to the organization for any profit

received by him in whatever capacity in connection with

17 In the Matter of Local Union 1001 2004

transactions conducted by him or under his direction on behalf

of the organization. A general exculpatory provision in the

constitution and bylaws of such labor organization or a general

exculpatory resolution of a governing body purporting to

relieve any such person of liability for breach of the duties

declared by this section shall be void as against public policy.

29 U.S.C. § 501(a).

Title 29 U.S.C. § 501(c) prohibits the use of union property or funds for

personal use. Section 501(c) reads in pertinent part that:

[a]ny person who embezzles, steals, or unlawfully and

willfully abstracts or converts to his own use, or the use of

another, any of the moneys, funds, securities, property or other

assets of a labor organization of which he is an officer, or by

which he is employed, directly or indirectly shall be fined not

more than $10,000 or imprisoned for not more than five years,

or both.

29 U.S.C. § 501(c).

In addition to the broad description of the fiduciary duty of union officials

contained in 29 U.S.C. § 501(a), the Employee Retirement Income Security

Act of 1974 (ERISA) specifically addresses the fiduciary duties of benefit

plan trustees:

(a) Prudent man standard of care.

(1) Subject to sections 403(c) and (d), 4042, and 4044

[29 USCS §§ 1103(c), (d), 1342, 1344], a fiduciary

shall discharge his duties with respect to a plan

solely in the interest of the participants and

beneficiaries and –

(A) for the exclusive purpose of:

(i) providing benefits to participants and

their beneficiaries; and

(ii) defraying reasonable expenses of

administering the plan;

(B) with the care, skill, prudence, and diligence

under the circumstances then prevailing that

a prudent man acting in a like capacity and

familiar with such matters would use in the

conduct of an enterprise of a like character

and with like aims;

29 U.S.C. § 1104.

18 In the Matter of Local Union 1001 2004

Title 18 U.S.C. § 1027 prohibits false statements and concealment of

facts in relation to documents required by ERISA. The statute prohibits:

whoever, in any document required by ERISA to be published,

or kept as part of the records of any employee welfare benefit

plan or employee pension benefit plan, or certified to the

administrator of any such plan, makes any false statement or

representation of fact, knowing it to be false, or knowingly

conceals, covers up, or fails to disclose any fact the disclosure

of which is required by such title [29 U.S.C. §§ 1001 et seq.]

or is necessary to verify, explain, clarify or check for accuracy

and completeness any report required by such title to be

published or any information required by such title to be

certified, shall be fined under this title, or imprisoned not more

than five years, or both.

18 U.S.C. § 1027

Ethical Practices Code

Several sections of the LIUNA EPC also address the fiduciary

responsibility of LIUNA officers. The EPC recognizes that any elected or

appointed person who represents LIUNA and its members has a sacred trust to

serve the best interests of the members and their families. EPC, Business and

Financial Activities of Union Officials, p.20. “Therefore, every officer and

representative must avoid any outside transaction which creates an actual or

potential conflict of interest. The special fiduciary nature of Union office

requires the highest loyalty to the duties of the office.” Id.

According to the Financial Practices section of the EPC, “Union funds are

held in trust for the benefit of the membership. The membership is entitled to

assurance that union funds are not dissipated and are spent for proper

purposes. The membership is also entitled to be reasonably informed as to

how union funds are invested or used.” EPC, Financial Practices, p.18. The

EPC prohibits local unions from investing of any of its funds “in a manner

which results in the personal profit or advantage of any officer or

representative of the Union.” Id.

The EPC further dictates proper financial procedure for benefit funds, as

well as the related fiduciary responsibility of Union trustees. “Complete

records of the financial operations of all health, welfare and retirement funds

and programs shall be maintained in accordance with the best accounting

practice. Each Union trustee shall require that each such fund be audited

regularly.” EPC, Health, Welfare and Retirement Funds, p.20.

19 In the Matter of Local Union 1001 2004

EVIDENTIARY ISSUES

Burden of Proof

The GEB Attorney must establish the grounds for a trusteeship by a

preponderance of the evidence. See In the Matter of Local 225, IHO Order

and Memorandum, 97-54T (March 17, 1998), citing In the Matter of

Construction & Laborers’ District Council of Chicago and Vicinity (Chicago

District Council), IHO Order and Memorandum, 97-30T (February 7, 1998).

A preponderance of the evidence “means such evidence as, when weighed

against that opposed to it, has the more convincing force” that something is

more likely so than not so. Hopkins v. Price Waterhouse, 737 F. Supp. 1202,

1203 (D.C. Cir. 1990); see also Nissho-Iwai Co. v. M/T Stolt Lion, 719 F.2d

34, 38 (2nd Cir. 1983). In determining whether any fact at issue has been

proven by a preponderance of the evidence, the IHO may consider and weigh

the testimony of all witnesses, regardless of who may have called them, and

all exhibits received in evidence, regardless of who may have produced them.

See Claro v. Marques, 1998 A.O. 203, 204 (98-023-IHO); see also Merzon v.

County of Suffolk, 767 F. Supp. 432, 444 (E.D.N.Y. 1991).

“A union need establish only one proper purpose to impose a

trusteeship.” Chicago District Council, 97-30T; see also, Mason Tenders

District Council v. LIUNA, 884 F. Supp. 823, 836 (S.D.N.Y. 1995); LIUNA

Local Union #43, No. C03-026 (N.D. Iowa May 14, 2003). In this case, the

GEB Attorney has averred a number of grounds for imposing a trusteeship.

The Trusteeship Complaint charges that the corruption of La Cosa Nostra

(LCN) influence, a lack of democratic practices, barred conduct, ERISA

reporting violations, and protecting Local 1001 as an institution warrant the

imposition of a Trusteeship. See Trusteeship Complaint (IHO Dkt. 2).

Hearsay Evidence

LIUNA trusteeship proceedings are similar to administrative proceedings

in which the “rules governing the admission of evidence . . . are considerably

more relaxed.” United States v. I.B.T (Wilson, Dickens & Weber), 978 F.2d

68, 72 (2d Cir. 1992); Rocker v. Celebrezze, 358 F.2d 119, 122 (2d Cir. 1966)

(footnote omitted). The hearing officer in union disciplinary proceedings

arising under the Teamsters Consent Decree regularly admits hearsay

evidence. See United States v. I.B.T (Cimino), 964 F.2d 1308, 1312 (2d Cir.

1992) aff’g, 777 F. Supp. 1130 (S.D.N.Y. 1991); Senese & Talerico, 941 F.2d

at 1297. Accordingly, reliable hearsay evidence is admissible in labor

arbitration. See, e.g., Associated Cleaning Consultants and International Bhd.

of Printing and Allied Trades Local 327, 94 LA 1246 (1990); In the Matter of

Joseph P. Crincoli (Crincoli), IHO Order and Memorandum, 97-04D (Oct.

27, 1997); Chicago District Council, 97-30T; Elkouri and Elkouri, How

Arbitration Works (4th ed. 1994).

20 In the Matter of Local Union 1001 2004

The IHO has adopted the standard of reliability test of the Court in

Cimino, 964 F.2d 1308. Bifulco, 96-48D. The IHO bases hearsay evidence

decisions on a thorough review of what is probative and reliable. Chicago

District Council, 97-30T; see also Senese & Talerico, 941 F.2d at 1298, citing

Richardson v. Perales, 402 U.S. 389, 402 (1971). In determining the

reliability of hearsay, the IHO considers (1) whether the statements

corroborated each other in crucial respects; (2) whether the statements paint a

consistent picture of the relationship of the individuals; and (3) statements are

matched by law enforcement declarations in the same subject matter. Bifulco,

96-48D. “Two of the most important factors determining the reliability of

hearsay evidence are the knowledge and qualifications of the declarant, and

whether the hearsay statement was corroborated by other evidence.” In the

Matter of Alfred Andrade, IHO Order and Memorandum, 00-18D (April 26,

2002); accord In the Matter of Anthony Franco, IHO Order and

Memorandum, 02-01D (December 16, 2002).

Informant Hearsay Information

A professional law enforcement officer, or former law enforcement

officer, may relate informant testimony as part of his opinion that an

individual is a member of, or associated with, organized crime. Bifulco, 96-

48D. The informant must be qualified as reliable a recognized method for

testing reliability. Informant hearsay testimony of factual occurrences may

also be accepted, provided the informant is qualified as to reliability, and the

information as to specific factual events is independently corroborated in

material part. Franco, 02-01D. The IHO also accepts hearsay statements of

former organized crime figures cooperating with law enforcement authorities,

provided their statements are deemed reliable by corroboration or other indicia

of reliability. Andrade, 00-18D.

The IHO accepts hearsay statements of unnamed informants under very

limited and closely monitored circumstances. Andrade, 00-18D (citations

omitted). Unnamed informant information must be supplied by an

organization with a defined, qualified informant program. Id. The testifying

witness must demonstrate that the organization qualified and classified the

informants. Id.; see also Wasserman, 97-57D (evidence must be corroborated

by various other sources or proven reliable to qualified law enforcement or

meet tests of specificity). Nonetheless, the IHO will not accept all law

enforcement organizations as sources of informant information. Moreover,

evidence from unidentified unknown sources lacks the necessary indicia of

reliability required for admissibility. See Crincoli, 97-04D (witness must

offer testimony of recognized method to evaluate witness’s reliability).

21 In the Matter of Local Union 1001 2004

WITNESSES

Witnesses Testifying on Behalf of the GEB Attorney

John J. O’Rourke

John J. O’Rourke (O’Rourke) is a private investigator for Quest

Consultants, who LIUNA’s Inspector General occasionally engages as an

investigator. Tr. 41:23-24 (O’ROURKE). Mr. O’Rourke has worked as an

investigator with LIUNA since May 1996, and in particular has been

investigating allegations of organized crime associations within the Chicago

area Locals of LIUNA. Tr. 730:6-15 (O’ROURKE). Mr. O’Rourke began

investigating Local 1001 in about 2000. Tr. 730:21 – 731:3 (O’ROURKE).

His Local 1001 investigation has been ongoing almost continuously to the

present time. Tr. 734:4-22 (O’ROURKE). Mr. O’Rourke testified that he

primarily concentrated on Local 1001 officers from 1969 until the present. Tr.

735:1-6 (O’ROURKE).

Mr. O’Rouke’s background includes a total of 32 years in law

enforcement, six years as a Special Agent with the Office of Naval

Intelligence and 26 years as a Special Agent for the Federal Bureau of

Investigation (FBI). Tr. 42:7-11 (O’ROURKE). Thereafter, Mr. O’Rourke

was a Cook County Inspector, assigned to the FBI Organized Crime and

Property Crime Task Force for over a year. Tr. 42:7-14 (O’ROURKE). In

total, over 23 years of Mr. O’Rourke’s service entailed organized crime

investigation. Tr. 42:19-21 (O’ROURKE). Mr. O’Rourke has been involved

in several hundred investigations of organized crime in Chicago;

approximately 75 cases have lead to convictions of Chicago organized crime

figures. Tr. 43:7-15 (O’ROURKE). Mr. O’Rourke has received hundreds of

awards and commendations for his FBI service, including commendations

from the Director of the FBI, various police officials, and the Chamber of

Commerce for law enforcement excellence. Tr. 42:24 – 43:6 (O’ROURKE).

The IHO qualified Mr. O’Rourke as an expert in the field of organized crime

influence in Chicago, particularly with respect to labor unions. 18 Tr. 43:23 –

44:2 (IHO).

18 Mr. O’Rourke has been qualified as an expert in other LIUNA hearings.

See, e.g., Chicago District Council, 97-30T; In the Matter of Caruso, IHO

Order and Memorandum, 99-12D (January 10, 2001); In the Matter of

DiForti, IHO Order and Memorandum, 99-12D (January 10, 2001); In the

Matter of Matassa, IHO Order and Memorandum, 98-43D (May 12, 1999).

22 In the Matter of Local Union 1001 2004

Raymond Maria

Raymond Maria (Maria), a Certified Public Accountant (CPA) since

1970, is currently self-employed as a consultant performing fraud detection,

fraud prevention, and forensic accounting services. Tr. 431:9-12, 432:1-7

(MARIA). Mr. Maria began his career working for the FBI performing

general criminal investigations from 1965 through 1968. Tr. 431:17-24

(MARIA). Thereafter, Mr. Maria worked with the firm of Ernst & Young as a

consultant and auditor, from 1968 until 1972. Tr. 432:1-10 (MARIA). In

1972, Mr. Maria returned to the FBI and worked in the area of organized

crime and labor racketeering for 12 years. Tr. 432:12-17 (MARIA). From

1984 until 1990, Mr. Maria was the appointed Deputy Inspector General, and

later Acting Inspector General, at the United States Department of Labor

(DOL). Tr. 432:19 – 432:19 (MARIA). As Deputy Inspector General for the

DOL, Mr. Maria was responsible for overseeing the Office of Labor

Racketeering, which investigated organized crime within LIUNA, the I.B.T,

the International Longshoreman’s Association, and the Hotel and Restaurant

Employees’ International. Id.

After retiring from federal service in September 1990, Maria founded a

fraud detection/fraud prevention business. Tr. 434:3-5 (MARIA). In his

capacity as a private consultant, Maria has engaged in investigating conflicts

of interest, ethical breaches, and potential violations of ERISA and other

federal crimes for state and federal governmental agencies, corporate clients,

employee benefit plans, and labor organizations. Tr. 434:3-11 (MARIA).

After 2000, Mr. Maria became a sole proprietor. Tr. 434:9-11 (MARIA).

Throughout his career, Mr. Maria has conducted and/or supervised hundreds

of labor racketeering investigations, including violations of § 1027. Tr. 435:3-

7 (MARIA). A portion of Mr. Maria’s work includes acting as a consultant to

LIUNA Inspector General Gow. Tr. 43:15-16 (MARIA). The IHO qualified

Mr. Maria as an expert in the field of labor racketeering investigations and

benefit fraud matters.19 Tr. 436:22 (IHO).

James S. Jorgensen

James S. Jorgensen (Jorgensen) is currently the Administrator of the

Laborers’ Pension Fund (Pension Fund) and the Health and Welfare Fund of

19 Mr. Maria has been qualified as an expert in other LIUNA hearings. See,

e.g., In the Matter of Anthony Franco, IHO Order and Memorandum, 02-01D

(December 16, 2002); In the Matter of Local Union 1175, Howard Beach, NY,

IHO Order and Memorandum, 03-10T (June 11, 2003).

23 In the Matter of Local Union 1001 2004

the Construction and General Laborers’ District Council and Vicinity

(Welfare Fund) in Westchester, Illinois. Tr. 106:7-8 (JORGENSEN). Mr.

Jorgensen began working for the Pension & Welfare Funds (collectively,

Benefit Funds) in 1995, as Deputy Administrator. Tr. 107:13 (JORGENSEN).

Mr. Jorgensen became the Administrator of those funds on January 1, 1996,

when his predecessor retired. Tr. 107:4-7 (JORGENSEN).

Mr. Jorgensen first began his career after graduating from college in

1971; he worked in the Employee Benefits area with the Central States

Pension Fund. Tr. 106:14-16 (JORGENSEN). Thereafter, he worked as an

actuary consultant for the Siegel Company. Tr. 106:16-18 (JORGENSEN).

His last position before joining the Benefit Funds was Vice President of

Zenith Administrators, which is administrator of employment benefits. Tr.

106:18-22 (JORGENSEN).

Howard Levinson

Howard Levinson (Levinson) is certified public account (CPA), licensed

in Illinois. Tr. 322:22 – 323:11 (LEVINSON). He has been the principal

partner in the firm of Levinson, Simon & Sprung for approximately 14 years.

Id. Mr. Levinson began his career as an Internal Revenue Service (IRS)

Revenue Agent in the late 1960’s. Tr. 324:12- 13 (LEVINSON). In 1971,

Mr. Levinson received his CPA license; in 1980, he earned an MBA in

finance from the University of Chicago. Tr. 324:1-16 (LEVINSON).

Since the inception of Levinson, Simon & Sprung, approximately 80

percent of its clients are related to the Taft-Hartley field; they are either labor

unions or collectively bargained organizations set up by unions and

contractors. Tr. 324:22 – 325:7 (LEVINSON). Clients include welfare funds,

pension funds, apprenticeship funds, LMCC’s, Vacation Funds, ERISA Funds

and non-ERISA funds related to labor unions. Id.

Marie Smith

Maria Smith (Smith) is a Senior Compliance Auditor with Levinson,

Simon & Sprung; she has held the position for over five years. Tr. 356:21-25,

357:20 (SMITH). Ms. Smith’s work involves conducting payroll compliance

audits for the various funds that employ Levinson, Simon & Sprung. Tr.

357:23-25 (SMITH). Ms. Smith has a Bachelor’s Degree in Organizational

Management from North Park University and a paralegal certificate from the

University of Illinois. Tr. 357:4-7 (SMITH). Ms. Smith is currently pursuing

two Master’s Degrees from Loyola University’s Institute of Industrial

Relations. Tr. 357:8-9 (SMITH).

24 In the Matter of Local Union 1001 2004

Witnesses Testifying on Behalf of Local 1001

John Rea

John Rea (Rea) has worked as a licensed private investigator since 1989.

Tr. 810:9-12, 811:18-19 (REA). In that capacity, Mr. Rea works with law

firms and corporations conducting investigations related to, inter alia,

criminal defense, commercial litigation, and products liability defense. Tr.

811:15-25 (REA). Mr. Rea graduated from the University of Illinois with a

degree in Criminal Justice. Tr. 810:15-18 (REA). During college in 1977,

Rea was a clerk at the U.S. Attorney’s Office in Chicago, and later became a

legal assistant responsible for assisting prosecutors on various cases bound for

trial. Tr. 810:23 – 811:3 (REA). Subsequently, Mr. Rea joined the Secret

Service as an agent for one year. Tr. 811:4-6 (REA). Thereafter, in or about

1985, Mr. Rea became an inspector with the Illinois State Police and worked

out of the U.S. Attorney’s Office on a judicial corruption case known as the

Greylord Project. Tr. 811:5-11 (REA).

Marvin Gittler

Marvin Gittler, an attorney for 40 years, is licensed to practice in the state

of Illinois, all U.S. Circuit Courts but one, and the United States Supreme

Court. Tr. 905:14-22 (GITTLER). Mr. Gittler received an undergraduate

degree from the University of Syracuse in 1960, and a law degree from the

University of Chicago Law School in 1963. Tr. 905:25 – 906:2 (GITTLER).

Since graduating from law school, Mr. Gittler concentrated his legal practice

in the area of labor law issues, including ERISA. Tr. 908:6-9 (GITTLER).

Mr. Gittler has taught at both the Loyola Law School and the Chicago

Kent Law School, where he taught a Master’s course on the duty of fair

representation and the LMRDA. Tr. 905:11-16 (GITTLER). Mr. Gittler has

also consulted to the American Arbitration Association and given a significant

amount of lectures. Tr. 905:18-21 (GITTLER). Mr. Gittler has written many

legal articles on subjects such as Affirmative Action, picketing situations, and

the responsibility to deal with recognition situations. Tr. 908:1-5 (GITTLER).

In addition, Mr. Gittler was the recipient of the Peggy Browning Activist

Award in 2003, and was inducted into the Illinois Labor History Society in

2001. Tr. 907:3-7 (GITTLER). The Illinois Educational Labor Relations

Board has qualified Mr. Gittler as an expert in the past. Tr. 908:18-21

25 In the Matter of Local Union 1001 2004

(GITTLER). The IHO accepted Mr. Gittler as an expert attorney in the area

of labor law. Tr. 912:4-10 (IHO)20.

Kathryn Kurth

Kathryn Kurth (Kurth) is president of the Chicago-based Kurth Lampe

Political Consulting and Public Relations Firm founded in 1996. Tr. 820:22-

25 (KURTH). Kurth Lampe performs campaign and election training with

non-profit, labor union, environmental, and women’s groups. Tr. 821:2-5

(KURTH). Ms. Kurth has been engaged in political consulting work since

1983, including numerous state and national elections Tr. 821:15-17, 822:8-

20 (KURTH). Ms. Kurth obtained a Bachelor’s Degree in History from the

University of Virginia. Tr. 821:20-25 (KURTH).

In 1996, Ms. Kurth worked as an Executive Director of LIUNA’s Atlanta

Election office. Tr. 823:13-14 (KURTH). Professor Stephen Goldberg, the

LIUNA Election Officer, hired Ms. Kurth with the approval of the GEB

Attorney and the Department of Justice. Tr. 823:15-17 (KURTH). Ms. Kurth

has also worked with the Steel Worker’s Union, the Chicago Federation of

Labor, and SAGAFTRA, the Screen Actors Guild and American Federation of

Television Radio Artists. Tr. 823:20-25 (KURTH).

Mark DeBofsky

Mark DeBofsky (DeBofsky), an attorney for the past 23 years, is licensed

in the state of Illinois and various federal courts. Tr. 1031:23 – 1032:2

(DEBOFSKY). Mr. DeBofsky received a Bachelor of Arts from the

University of Michigan in 1977, and his law degree from the University of

Illinois College of Law in 1980. Tr. 1032:5-7 (DEBOFSKY). Mr. DeBofsky

concentrates his practice in the representation of individuals and employee

benefit claims, individual disability insurance claims, Social Security

disability, and, to a lesser degree, employment discrimination. Tr. 1032:10-14

(DEBOFSKY).

Mr. DeBofsky is a member of several professional organizations,

including the American Bar Association Employee Benefits Committee,

which is part of its Labor and Employment Law section. Tr. 1032:18-22

(DEBOFSKY). Mr. DeBofsky taught an LLM class in Employee Benefits

Litigation at the John Marshal Law School, as well as lectured at Loyola Law

20 Mr. Gittler has been qualified as an expert in other LIUNA hearings. See,

e.g., Caruso, 99-12D.

26 In the Matter of Local Union 1001 2004

School and the University of Michigan Law School. Tr. 1032:25 – 1033:5

(DEBOFSKY). Mr. DeBofsky has an extensive curriculum vitae outlining the

numerous legal articles and publications he has written, as well as seminars

that he has conducted, on the subject of ERISA. Tr. 1033:9-22

(DEBOFSKY). In addition, Mr. DeBofsky testified before a subcommittee of

the National Association of Insurance Commissioners regarding disability

clauses in employee benefit plans. Tr. 1034:1-6 (DEBOFSKY).

James Lamont

James Lamont (Lamont) is a senior manager with the Caliber CPA Group

(Caliber), in charge of the Payroll Audit Department; he has been employed at

Caliber since January 2003. Tr. 980:1 -981:4 (LAMONT). Prior to working

for Caliber, Thomas Havey LLP (Havey) employed Mr. Lamont for 15 years

from 1988 through 2002.21 Tr. 980:18-22 (LAMONT). Mr. Lamont

performed payroll audits for Havey, advancing to a supervisory position and

then a senior manager position before he left Havey’s employ. Tr. 981:7-10

(LAMONT). After Havey conducted the 1998 audit of Local 1001, there was

a technical review of the information, with which Mr. Lamont was not

involved. Tr. 1000:4-11 (LAMONT). Once the audit passed the technical

review, Mr. Lamont conducted the quality review, ensuring that all the papers

were there and that there were no typos or clerical errors. Id.

Prior to his employ at Havey, Mr. Lamont worked construction jobs from

1984 until 1988. Tr. 994:23-24 (LAMONT). From 1975 until 1984, Mr.

Lamont was employed in the Cost Accounting Department of Allis-Chalmers,

a farm equipment manufacturer. Tr. 994:7-14 (LAMONT). Mr. Lamont

received a Bachelor of Science in Business from Eastern Illinois University in

1975.

Local 1001 Members Who Testified at the Hearing

James Capasso Jr.

James Capasso Jr. (Capasso) is currently an Auditor for Local 1001; he

has held that officer position since 1984 when Ernest Kumerow appointed him

to the position. Tr. 546:10, 560:10-16 (CAPASSO). Mr. Capasso became a

member of Local 1001 when he began his employment in the Chicago

Department of Streets and Sanitation (Dept. of Streets & Sanitation) Asphalt

21 Sometime in or about 2002, Thomas Havey separated into two entities,

Legacy Professionals, LLP, and Caliber. Tr. 993:1-21 (LAMONT).

27 In the Matter of Local Union 1001 2004

Section in or about 1958; he worked summers while attending college. Tr.

529:13-25, 567:18-19 (CAPASSO). In June 1963, Mr. Capasso began

working at the Asphalt Section main office. Tr. 530:3-5 (CAPASSO). Mr.

Capasso advanced to Supervising Timekeeper in 1965, then to Career Service

Administrative Assistant II, then to Career Service Director of Administration,

and finally Supervisor of Administrative Services/Finance Officer before he

left the Dept. of Streets and Sanitation in 1986. Tr. 530:8-20 (CAPASSO).

Mr. Capasso is also currently employed full-time as the Executive

Director of the Laborers’ and Retirement Board Employees’ Annuity and

Benefit Fund of Chicago (City Pension Fund). Tr. 540:6 – 541:12

(CAPASSO). Mr. Capasso was appointed Executive Director in June 1986.

Id. Prior to becoming Executive Director, Mr. Capasso served as an

appointed Trustee of the City Pension Fund since in or about 1967, when he

was appointed by the Board of Trustees at the age of 25. Tr. 530:22 – 533:1

(CAPASSO).

Nicholas Gironda

Nicholas Gironda (Gironda) is currently the Business Manager of Local

1001; he has held the position since his appointment in 2001. Tr. 692:4-25

(GIRONDA). Prior to assuming that position, Mr. Gironda had been

Secretary-Treasurer since 1994. Tr. 693:14-19 (GIRONDA). Before that,

Mr. Gironda had been a Business Agent since 1988. Tr. 694:23 – 695:9

(GIRONDA). Mr. Gironda began working as a laborer, and joined Local

1001, in or about 1966, when he worked in Transportation Department of the

Dept. of Streets & Sanitation. Tr. 695:14 – 696:6 (GIRONDA). In 1969, Mr.

Gironda became a Section Foreman in Loop Sanitation. Id.

Sam DeChristopher

Sam DeChristopher (DeChristopher) has been the Secretary-Treasurer of

Local 1001 since 2001. Tr. 699:1 (DECHRISTOPHER). In or about 2000,

Mr. DeChristopher was Recording Secretary, and was an Executive Board

member since 1994, when he was also Sergeant-at-Arms. Tr. 669:8-19

(DEBOFSKY). While Mr. DeChristopher held these unpaid officer positions,

he worked full-time for the City of Chicago. Tr. 670:3 (DECHRISTOPHER).

Mr. DeChristopher began working as a laborer in the Dept. of Streets and

Sanitation in or about 1974. Tr. 670:6-11 (DECHRISTOPHER). Sometime

in the 1980’s, Mr. DeChristopher advanced to the position of foreman over a

crew responsible for street repair. Tr. 19-35 (DECHRISTOPHER).

Robert Chianelli

Robert Chianelli (Chianelli) has been the Recording Secretary of Local

1001 since 2001, is a delegate to the Laborers’ District Council of Chicago

28 In the Matter of Local Union 1001 2004

and Vicinity (District Council), and a full-time Business Representative. Tr.

663:17-21, 664:16-18, 1082:25 – 1083:1 (CHIANELLI). Mr. Chianelli is also

a Business Agent for the Local, which is a full-time paid position. Tr.

663:24-25 (CHIANELLI). Prior to 2001, the City of Chicago employed Mr.

Chianelli full-time. Tr. 664:19-22 (CHIANELLI). During his employment

with the City of Chicago, Mr. Chianelli held the following unpaid officer

positions at Local 1001: in 1999, he was elected as an Auditor, and he was

appointed to the Executive Board in 2000. Tr. 665:2-6 (CHIANELLI).

Nicholas Cataudella

Nicholas Cataudella (Cataudella) became a Local 1001 Business Agent in

or about 2002. Tr. 634:25 – 635:6 (CATAUDELLA). From mid-2000 until

mid-2002, when Mr. Cataudella worked full-time for the City of Chicago, he

also served as an Auditor of Local 1001 after the Executive Board appointed

him to the position to fill a mid-term vacancy. Tr. 649:7-10, 650:20 – 651:5

(CATAUDELLA). Mr. Cataudella joined Local 1001when he began working

for the City of Chicago in the 1980’s. Tr. 642:2-14 (CATAUDELLA). Mr.

Cataudella was a laborer for the Dept. of Streets & Sanitation, working as a

garbage man for the 43rd Ward, asphalt helper, and asphalt foreman. Tr.

635:8-10, 642:14 – 643:6 (CATAUDELLA). Sometime in or about 1986, Mr.

Cataudella owned the “Body Shop on Grand” with several partners, one of

whom was Tony Fountas, and worked there at least two days a week. Tr.

644:9 – 646:13 (CATAUDELLA). Approximately 20 years ago, Mr.

Cataudella was charged with “bookmaking or something or syndicated

bookmaking” when he was in his twenties; Mr. Cataudella was unable to

specifically recall the outcome of those charges, but assumes he was

acquitted. Tr. 648:6-26 (CATAUDELLA).

Victor Roa Sr.

Victor Roa Sr. (Roa) has been a member of Local 1001 since 1998 when

he began working for the City of Chicago as a watchman. Tr. 655:1-23,

658:2-3 (ROA). Mr. Roa is currently a laborer in the Electrical Department.

Tr. 657:18 (ROA). In 2000, Mr. Roa was elected as a Local 1001 Auditor and

served in that position for one year until he was appointed as an Executive

Board member in 2001. Tr. 656:4-24 (ROA). At some point prior to

becoming an Auditor, Mr. Roa became aware that there was a position open,

although he does not recall specifically how, and knew that the Local was

looking for a Hispanic person for the position. Tr. 658:17-23 (ROA).

FINDINGS OF FACT

1. Local 1001, located in Chicago, Illinois, has approximately 2,800

members and is a constituent Local of the Chicago District Council.

29 In the Matter of Local Union 1001 2004

2. The current Executive Board of Local 1001 consists of President

Nathaniel Gibson (Gibson), Vice President Floyd Grogan (Grogan),

Recording Secretary Chianelli, Secretary-Treasurer DeChristopher, Business

Manager Gironda, and two other members, Roa and Willie Bates (Bates). See

GEB Attorney Exhibit (GEB Ex.) 1 (Local 1001 Officer History Chart).

3. The current Local 1001 delegates to the Chicago District Council are

Business Manager Gironda, President Gibson, Recording Secretary Chianelli,

Secretary-Treasurer DeChristopher, and Vice President Grogan. Id.

4. Local 1001 has three auditors: Mr. Capasso, Debbie Pucillo-Ferraris,

and Mr. Cataudella. Id.

5. Paul Reed (Reed) serves as Local 1001’s Sergeant-at-Arms. Id.

LCN Influence Over Local 1001

6. Charge One avers that a Trusteeship over Local 1001 is necessary to

correct organized crime influence over the Local, and reads as follows:

It is necessary to place Local 1001 under trusteeship for the

purpose of correcting corruption of influence of organized

crime members and associates over the affairs of Local 1001.

By placing Local 1001 under trusteeship, LIUNA will be able

to remove the influence of organized crime over the Local and

assure that the Local is administered in the best interest of its

membership.

Trusteeship Complaint, ¶¶ 45, 46 (IHO Dkt. tab 2).

The Chicago District Council Trusteeship and Bruno Caruso

Disciplinary Hearings

7. On February 7, 1998, the Chicago District Council was placed under

Trusteeship following an extensive 19-day hearing regarding the GEB

Attorney’s Complaint for Trusteeship of 6/13/97. See GEB Ex. 2 (Chicago

District Council, 97-30T).22

22 The history of organized crime in Chicago has previously been set out at

length. For a complete history of the LCN in Chicago, see Caruso, 99-12D;

30 In the Matter of Local Union 1001 2004

8. As a result of that hearing, the IHO made findings relevant to Local

1001 and its current or former officers included, inter alia:

• Mr. Kumerow was appointed Local 1001

President/Business Manager in 1982, following the

resignation of Joseph Spingola. Ernest Kumerow served

as District Council President/Business Manager from

1987-94, following District Council President Joe

Spingola and District Council Business Manager James

Caporale. Mr. Kumerow was a Trustee of the District

Council Welfare Fund from 1982-94, a Trustee of the

District Council Training Fund from 1988-93, and

Chairman of the Laborers’ Political League from 1993-94.

• Mr. Kumerow was the son-in-law of Anthony Accardo,

the active head of the Chicago crime family in 1982. The

IHO has found that Mr. Kumerow was an associate of

organized crime while in the Union, and owed his

position in the Union to the influence of his father-in-law.

• There is a preponderance of the evidence that Bruno

Caruso is an associate of organized crime. His

association is of long duration and accounts for his

position in the Laborers’ union organization.

• In 1991 Mr. Gironda was employed by the City of

Chicago in a supervisory position. He was also a part

time employee of Local 1001. During that year the city of

Chicago Inspector General conducted an investigation

into certain workers on no show jobs. Mr. Gironda was

suspended and demoted by the city for failure to supervise

his workers. Immediately after his suspension, Mr.

Gironda was promoted to a full time field representative

and his salary doubled by Mr. Kumerow and Bruno

Caruso. ¶¶ 229-231.

GEB Ex. 2 (Chicago District Council, 97-30T).

Chicago District Council, 97-30T; In the Matter of Local Union 1058,

Pittsburgh, IHO Order and Memorandum, 00-08T (March 9, 2001).

31 In the Matter of Local Union 1001 2004

9. On November 25, 1998, in response to findings made by the IHO in

the Chicago District Council Trusteeship, the Executive Board “unanimously

concluded that the Board has the utmost faith and trust in Bruno Caruso and to

confirm this opinion it was suggested that maybe an independent investigator

be hired to investigate Bruno Caruso.” Local 1001 Ex. 3, p.4 (November 25,

1998 Executive Board Meeting Minutes) (emphasis added).

10. Thereafter, at the same meeting,

President Caruso returned to the conference room and was told

the Board had suggested an investigator be hired to investigate

him. He thought this was a good idea as he has nothing to be

ashamed of and while he is grateful for the Board’s confidence

in him, an investigation is welcomed to confirm this

confidence. He thanked the Board for their trust in him.

Id.

11. The Local 1001 Executive Board took no further action regarding

hiring an investigator for Bruno Caruso at that meeting.

12. On January 21, 1999, the Executive Board revisited the idea of hiring

an independent investigator, this time considering the employment of John D.

Rea “in light of the trusteeship at the District Council and the possibility of

charges against Bruno or any other officers.” Local 1001 Ex. 4, p.4 (Local

1001 Executive Board Meeting Minutes of 1/21/99).

13. The Executive Board engaged Rea to, inter alia, “review testimony

and depositions from witnesses who provided information regarding Bruno

Caruso. Also if possible he would interview these witnesses.” Id. at p.5.

14. At the Trusteeship hearing, Mr. Rea testified that the Executive

Board gave him a document that enumerated certain allegations against Bruno

Caruso and was asked to determine the veracity of those allegations. Tr.

814:12-16 (REA). Mr. Rea conducted the investigation “for the better part of

a year,” including making request for documents from the FBI, conducting

interviews of people that worked with Mr. Caruso, and obtaining and

developing criminal history information on some of the individuals identified

in the Chicago District Council opinion. Tr. 814:19 – 816:14 (REA).

15. At the end of his investigation, Mr. Rea reported to the Executive

Board that he “really couldn’t come to a conclusion one way or the other.”

Tr. 816:17-21 (REA). He “just felt that [he] didn’t have enough information

to say that these people were being truthful or that the information was

accurate.” Tr. 816:21-25 (REA). Mr. Rea’s investigation produced no further

results, because “the witnesses were unavailable through one form or another,

32 In the Matter of Local Union 1001 2004

not knowing their identity, or they were protected witnesses or they were

probably deceased.” Tr. 817:23 – 8181:1 (REA).

16. On March 3, 1999, the GEB Attorney filed disciplinary charges

against Bruno Caruso, his brother Frank Caruso Jr., his cousin Leo Caruso,

and James DiForti,23 alleging membership in the LCN, knowing association

with LCN members and associates, failure to investigate or purge LCN

influence, aiding LCN influence in LIUNA, and failure to ensure the union’s

affairs are properly conducted. See Caruso, 99-12D.

17. On January 10, 2001, after a hearing on the charges, the IHO issued a

decision that, inter alia, permanently revoked Bruno Caruso’s LIUNA

membership and barred him from holding any LIUNA office or employment

by any LIUNA entity. See Caruso, 99-12D.

18. A non-exhaustive list of findings the IHO made relevant to Local

1001 and Bruno Caruso included:

• In multiple law enforcement surveillances, Bruno Caruso

was seen in the company of high level members of

organized crime;

• Bruno Caruso’s organized crime connections that

facilitated his rise within LIUNA to the positions of

running Local 1001 and the Chicago District Council;

• Allegations regarding no-show jobs in the City of

Chicago, which involved Mr. Gironda failing to supervise

no-show employees, were made public in August 1991.

¶¶ 186, 223. The City of Chicago demoted and

suspended Mr. Gironda from his supervisory position. ¶

223. At the time, Mr. Gironda was also a part-time

employee of Local 1001. Immediately after his

suspension, without investigation of the allegations, Mr.

Kumerow and Bruno Caruso promoted him from part time

field representative to full-time field representative.

¶ 186. Mr. Gironda’s Local 1001 salary doubled as a

result of the promotion. ¶ 223.

23 Charges against Mr. DiForti were dismissed when he died after the hearing,

but before the briefing and ruling. See Caruso, 99-12D.

33 In the Matter of Local Union 1001 2004

• In 1994, when Mr. Kumerow resigned his Chicago

District Council offices only one month after an election

to a four year term, Bruno Caruso was the primary

beneficiary by being appointed to all of Mr. Kumerow’s

positions including President and Business Manager of

the Chicago District Council and Local 1001, thereby

bypassing the democratic process. This resignation and

following appointments were a complete manipulation of

the democratic practice.

Caruso, 99-12D.

19. On January 17, 2001, a Local 1001 Special Executive Board Meeting

was held to discuss the Local’s receipt of the IHO’s Order and Memorandum

in the Bruno Caruso disciplinary matter. See Local 1001 Ex. 8, p.6 (Local

1001 Minutes of Special Executive Board Meeting of 1/17/01).

20. During that meeting and in reference to the IHO opinion, Bruno

Caruso stated,

This document is available to all board members for review.

Keep documents at the Union office available to members

who may want to review it. Any member that may want to

review it must identify themselves and the purpose why they

are here. Have to be current paid up members in good

standing. They will need to call in advance to make an

appointment.

I am providing all of the members with a copy of my appeal,

which I did file on Monday, [January] the 15th of 2001.

Local 1001 Ex. 8, p.6 (Local 1001 Minutes of Special Executive Board

Meeting of 1/17/01) (emphasis added).

21. None of the Executive Board members voiced any objection to the

restrictions Bruno Caruso placed on the membership’s access to the IHO

opinion, nor did any of the Executive Board members question such

restrictions in light of Bruno Caruso’s declaration that he was providing every

member a copy of his appeal.

22. During the same meeting in January 2001, the Executive Board voted

to place Bruno Caruso on administrative leave upon the advice of Judge

Leighton. Id. at p.7. However, the “Executive Board ma[de] clear to Mr.

Caruso his availability to the Local.” Id.

23. The Executive Board did not actually place Bruno Caruso on

administrative leave for another month, or until February 22, 2001, after

34 In the Matter of Local Union 1001 2004

threats had been recorded on the Local’s answering machine. See Local 1001

Ex. 9 (Local 1001 Executive Board Meeting Minutes of 2/22/01). The

minutes reflect:

The E-Board decided to re-visit the issue of putting Local

1001 Business Manager, Bruno Caruso on paid Administrative

leave with benefits. Two issues are factors in this decision.

(1) To protect the integrity of the Executive Board and (2) To

protect Bruno Caruso. On the [sic] 2/21/01 a threatening

message was left on the Local 1001 office answering machine.

The message was directed to Bruno Caruso. Therefore, the

Executive Board decided that in the best interest of the Board

and Bruno Caruso, effective 2/22/01, to put Bruno on paid

administrative leave.

Local 1001 Ex. 9 (Local 1001 Executive Board Meeting Minutes of 2/22/01).

24. The Executive Board failed to engage in anything more than a

cursory investigation of any of the organized influence over Local 1001

uncovered in either the Chicago District Council Trusteeship or the Caruso

disciplinary proceeding. Moreover, the Executive Board resisted taking

anything but perfunctory remedial action against Bruno Caruso until

threatening telephone calls were received by the Local some three years after

the Chicago District Council Trusteeship findings, and a month after the IHO

banned Bruno Caruso from LIUNA.

25. Once Bruno Caruso’s removal was upheld by the Appellate Officer,

the Executive Board unanimously appointed Mr. Gironda to fill the vacancy.

He was unopposed for re-election in 2003. As noted above, Mr. Gironda was

promoted and brought to power by Mr. Kumerow and Bruno Caruso.

26. Mr. O’Rourke testified at the Trusteeship Hearing regarding

organized crime affiliations with the current officers of Local 1001.

27. Mr. O’Rourke based his testimony on three named informants. (Tr.

57:18-21, 61:21-22, 66:1-4 (O’ROURKE). Mr. O’Rourke also related

information supplied by four confidential informants. Tr. 67:22-24

(O’ROURKE).

28. Mr. O’Rourke related similar information from these same sources at

the Chicago District Council hearing. In that hearing, Mr. O’Rourke’s sources

knew many of the subjects personally and described their activities and

associations with specificity.

29. In the instant hearing, Mr. O’Rourke’s testimony was less explicit in

nature; he described the current officers of Local 1001 in general terms as

35 In the Matter of Local Union 1001 2004

being associated with a certain organized crime crew or testified that

informants stated that certain officers were associated with organized crime

persons. No details of those associations were manifest. Mr. O’Rourke did

not describe any surveillances or intercepted conversations between the

present officers and organized crime figures.

30. Mr. O’Rourke’s testimony lacks the specificity necessary to establish

any probative value in this hearing.

Restoration of Democratic Practices

31. Charge Two alleges that a Trusteeship is necessary to restore

democratic practices at Local 1001, and reads as follows:

It is necessary to place Local 1001 under trusteeship for the

purpose of restoring democratic practices. Given the long

history of a lack of contested elections and a pattern of

replacing executive board members in mid-term with LCN

members or associates, imposition of a trusteeship over Local

1001 is necessary to restore democratic practices to the Local.

By placing Local 1001 under trusteeship, LIUNA will be able

to foster open and democratic practices within Local 1001.

Trusteeship Complaint, ¶¶ 47, 48 (IHO Dkt. tab 2).

32. Local Union elections should occur every three years; however, the

Constitution provides that officers may serve four-year terms where permitted

by law. See Constitution, Article VI, Section 1(h). Local 1001 officers

properly serve for four year terms.

History of Uncontested Elections, Officers Appointed to Fill Mid-

Term Vacancies, and Ineligible Candidates

33. The minutes of Local Executive Board meetings and special

nomination meeting minutes indicate that no opposition candidates or slates

have been nominated or run against an incumbent officer of Local 1001 in

over 30 years. See, e.g., ¶¶ 37, 38, 39; see also GEB Ex. 1 (Local 1001

Officer History Chart).

34. Vacancies in officer positions at Local 1001 have seldom occurred at

the end of a candidate’s term; with the exception of a few instances, vacancies

arose by mid-term or pre-election resignations. See GEB Ex. 4, ¶ 135

(Caruso, 99-12D).

36 In the Matter of Local Union 1001 2004

35. Robert E. Redd (Redd), a 28-year member of Local 1001, testified on

behalf of Local 1001. It was his belief that the history of uncontested

elections reflected nothing more than the membership’s satisfaction with the

status quo. Tr. 892 – 896 (REDD). Mr. Redd further testified that he himself

had nominated Mr. Bates for an Executive Board position in the 2003

election. Tr. 896:6-9 (REDD). Strikingly, however, Mr. Redd was unable to

relate to the IHO how a young member would work his way up the ranks at

Local 1001 to become an officer in the Local. Tr. 902 – 904 (REDD). In fact,

Mr. Redd was unaware of anyone having worked their way up to becoming an

elected officer in quite some time. Id.

36. In 1991, Local 1001 held a nomination meeting for the following

offices: President/Business Manager, Vice President, Recording Secretary,

Sergeant-at-Arms, three Auditors, three Executive Board members, and four

District Council delegates; 391 members attended the meeting. See GEB Ex

23 (Minutes of the Local 1001 Special Nomination Meeting of 5/19/91 (1991

Special Nomination Meeting Minutes)). The incumbent officers were all

nominated for re-election to their respective positions; no one ran as an

opposition candidate for any of the offices; and, the incumbents were all reelected

in an uncontested, unanimous election. Id.

37. On April 23, 1995, Local 1001 held a Nomination Meeting for the

following positions: President/Business Manager, Vice President/Business

Representative, Recording-Secretary/Business Representative, Secretary-

Treasurer/Business Representative, Sergeant-at-Arms, three auditors, three

Executive Board members, and four delegates to the District Council; 368

members attended the meeting. See GEB Ex. 24 (Minutes of the Local 1001

Nomination Meeting of 4/23/95 (1995 Nomination Meeting Minutes)). The

incumbents ran unopposed and were unanimously nominated and re-elected.

Id.

38. On May 2, 1999, Local 1001 held an Officers’ Nomination Meeting

for: President, Vice President, Recording Secretary, Secretary-Treasurer,

Business Manager, Sergeant-at-Arms, three Auditors, two Executive Board

members, and four District Council delegates; 380 members attended the

meeting. See GEB Ex. 25 (Minutes of the Local 1001 Nomination Meeting of

5/2/99 (1999 Nomination Meeting Minutes)). There were no opposition

candidates; the election was unanimous and uncontested. Id. At that time,

Bruno Caruso ran unopposed and was unanimously re-elected Business

Manager, although the Executive Board had known of the organized crime

allegations pending against him for at least five months. See Local 1001 Ex. 4

(Minutes of the January 21, 1999 Executive Board Meeting).

39. The following table illustrates the persons who have held the office

of Business Manager/President, and their years of service:

37 In the Matter of Local Union 1001 2004

PRESIDENT/BUSINESS MANAGER

1970-1982 Joseph Spingola (retired one year after election)

1982-1994 Ernest Kumerow (appointed to fill mid-term vacancy)

1994-2001 Bruno Caruso (appointed to fill mid-term vacancy)24

1999-Present Nathanial Gibson (President) (uncontested election)

2001-Present Nicholas Gironda (Business Manager) (appointed to

fill mid-term vacancy)

40. Kumerow tendered a mid-term resignation from his positions as

Business Manager/President and Executive Board member on September 29,

1994, one month after being re-elected and one year before the next slated

officers’ election. See Local 1001 Ex. 13 (Minutes of Local 1001 Special

Executive Board Meeting of 9/29/94 (1994 Special Executive Board

Minutes)).

41. At the Bruno Caruso disciplinary hearing in 1999, Mr. Gibson

testified that, despite being on Local 1001’s Executive Board at the time, he

was not aware of Kumerow’s retirement until after the election of officers in

August 1994. See GEB Ex. 4, ¶ 193 (Caruso, 99-12D). Gibson stated that

Kumerow had announced that Bruno Caruso would replace him (Kumerow) in

the District Council, as well as his dual positions at Local 1001. Id. There

was no discussion or consideration of other candidates for any of the

positions. Id.

42. Caruso served as Local 1001’s Business Manager from 1994 until

LIUNA permanently banned from him from holding office on September 13,

2001, a period encompassing two uncontested elections. See GEB Ex. 24, p.4

(1995 Nomination Meeting Minutes); GEB Ex. 25, p.4 (1999 Nomination

Meeting Minutes; GEB Ex. 5 (In the Matter of Bruno Caruso and Leo

Caruso, 2001 A.O. 235 (01-003-IHO)).

43. The following table illustrates the persons who have held the position

of Vice President, and their years of service:

24 Caruso served as Local 1001’s President/Business Manager from 1994

until 1999, when the International denied him permission to run for both

offices again. See GEB Ex. 4, ¶ 81 (Caruso, 99-12D). Thereafter, Gibson

was nominated for the position of President, and unanimously elected because

there were no opposition candidates or nominations. See GEB Ex. 25, p.4

(May 2, 1999 Nomination Meeting Minutes).

38 In the Matter of Local Union 1001 2004

VICE PRESIDENT

1970-1983 Anthony Caliva (resigned)25

1984-1989 Bruno Caruso (uncontested election)26

1989-2002 Michael Palermo (appointed; retired one year before

election)

2003-Present Floyd Grogan (uncontested election)

44. Since at least 1970, only four members have held the office of Vice

President of Local 1001; three of those collectively held the position for over

32 years.

45. The following table illustrates the persons who have held the position

of Secretary-Treasurer, and their years of service:

SECRETARY-TREASURER

1970-1983 Thomas Crivellone (resigned one year before election)

1983-1994 Bruno Caruso (appointed mid-term; resigned to fill

1983-1995 mid-term Business Manager/President position

vacancy)

1994-2001 Nicholas Gironda (appointed mid-term; resigned to

fill mid-term Business Manager vacancy)

2003-Present Sam DeChristopher (appointed)

46. The position of Local 1001 Secretary-Treasurer has been held by

only four different members for over approximately the past 34 years; three of

those members collectively held the position for 32 of those years.

47. The following table illustrates the persons who have held the position

of Recording Secretary, and their years of service:

25 Caliva resigned in 1983, but was not immediately replaced. See GEB Ex.

6(T) (Local 1001 LM-2 Report for 1983).

26 In 1984, Caruso became Vice President and held that position in

simultaneously with the Secretary-Treasurer position he had been appointed to

the year before. Caruso held the office of Vice President until mid-term 1989

when he resigned.

39 In the Matter of Local Union 1001 2004

RECORDING SECRETARY

1970-1972 Anthony Esposito Jr.

1972-1982 Michael Spingola (retired one year after election)

1982-1988 Michael Blasi (mid-term appointed; resigned one year

after election)

1988-1999 Nathaniel Gibson (mid-term appointed; resigned to

fill mid-term President position vacancy)

1999-2000 Shirley Esposito (mid-term appointed; resigned due

to serious illness)

2000-2001 Sam DeChristopher (mid-term appointed; resigned to

fill mid-term Secretary-Treasurer position vacancy)

2001-Present Robert Cianelli (mid-term appointed)

48. In 1999, Shirley Esposito (Esposito), the Local’s office secretary,

was elected Recording Secretary as Gibson’s replacement in an uncontested

election; she had been previously mid-term appointed to the position. See

Local 1001 Ex. 14 (Minutes of Local 1001 Special Executive Board Meeting

of 8/17/00 (2000 Special Executive Board Minutes)).

49. The following table illustrates the persons who have held the position

of Sergeant-at-Arms, and their years of service:

SERGEANT-AT-ARMS

1970-1980 Raymond Ramicone (retired mid-term)

1980-1981 William Pape (appointed)

1981-1984 Sam Abbott (resigned in election year)

1984-1994 Nicholas Gironda (appointed as mid-term replacement;

resigned to fill mid-term vacancy in Secretary-Treasurer

position)

1994-2000 Sam DeChristopher (appointed as mid-term

replacement; resigned to fill mid-term vacancy in

Recording Secretary position)

2000-2003 Willie Bates (appointed mid-term replacement)

2003-Present Paul Reed (uncontested election)

50. A brief overview of the Auditors of Local 1001 includes, beginning

in or before 1970: Michael Briatta (Briatta), Nicholas Cantone Jr. (Cantone

Jr.), and Fred Colasanti (Colasanti). In 1972, an election year, Michael

Cardilli (Cardilli) and Daniel DeLuca, both Executive Board members since

in or before 1970, replaced Mr. Briatta and Mr. Cantone Jr. as Auditors. In

1978, Ronald Crivellone replaced Mr. Colasanti. See GEB Ex. 1 (Local 1001

Officer History Chart).

40 In the Matter of Local Union 1001 2004

51. In 1983, Auditor DeLuca, who had served for approximately twelve

years, retired from his auditor position mid-term, less than one year before the

next scheduled election. The Executive Board appointed Anthony Orrico

(Orrico) as his replacement. See GEB Ex. 6(T) (Local 1001 LM-2 Report for

1983). The next year, in 1984, Mr. Orrico resigned from his auditor position

and Mr. Capasso replaced him. See GEB Ex. 6(N) (Local 1001 LM-2 Report

for 1984).

52. In 1987, Bernard Spano (Spano) and the office secretary, Ms.

Esposito, replaced Ronald Crivellone and Mr. Cardilli as Auditors. For the

next 13 years Ms. Esposito, Mr. Spano, and Mr. Capasso remained the

Auditors, until Mr. Chianelli replaced Ms. Esposito in 1999. See GEB Ex. 1

(Officer History Chart).

53. In 2000, an election year, Victor Roa and Mr. Cataudella replaced

Mr. Chianelli, and Mr. Spano as Auditors. See GEB Ex. 1 (Officer History

Chart). Mr. Spano had resigned his position. Id. The Auditor positions

remained the same until the 2003 election year, when Debbie Pucillo-Ferraris

replaced Mr. Roa as an auditor. Id.

54. A brief overview of the Executive Board members of Local 1001

beginning in the 1972 election year, includes: Neil Cacciottolo (Cacciottolo),

Louis DelGuidice (DelGuidice), and Ramon Shaeffer, who remained

Executive Board members from 1972 through 1980, when William Pape

(Pape) replaced DelGuidice mid-term. See GEB Ex. 1 (Officer History

Chart).

55. In 1982, one year after the previous election, Frank Roti Jr. was

appointed as mid-term replacement for Mr. Cacciottolo. Prior to the 1984

election, Mr. Schaeffer resigned his Executive Board position and Sam Caiafa

replaced him. See GEB Ex. 6(N) (Local 1001 LM-2 Report for 1984).

Ineligible Candidates and Improper Election Controls

56. On April 7, 2003, the Executive Board voted to retain the services of

Ms. Kurth (Kurth), from the firm of Kurth Lampe, for managing the work of

the June 2003 Officers’ Election preparation, monitoring, and reporting.

Local 1001 Ex. 16 (April 7, 2003 Special Executive Board Meeting Minutes,

p.2).

57. Kurth Lampe’s Proposal for Election Managing and Monitoring

Services stated,

The Local Union would like to hold its election in mid June.

In order for that to happen successfully and within the rules of

LIUNA, a number of steps and processes must take place

41 In the Matter of Local Union 1001 2004

promptly. Kurth Lampe proposes to manage and oversee

those processes in accordance with the rules. Kurth Lampe

will provide guidance and research in any instances where the

existing rules are vague or confusing.

Local 1001 Ex. 16 (Memorandum from Kitty Kurth to LIUNA Local 1001 of

4/7/03).

58. There is no evidence of record that Local 1001 had ever engaged

Kurth Lampe, or any other firm, to provide similar service to the Local in the

past.

59. In addition to engaging the services of Kurth Lampe, Local 1001

requested that the Illinois Department of Labor “assign a person to cover our

nominating procedures.” Local 1001 Ex. 23 (Letter from Nicholas Gironda to

Ms. Melinda Szerletich of 4/23/03).

60. On May 11, 2003, Local 1001 held a Nomination Meeting, which

was attended by 175 members of the Local, Ms. Kurth, Mr. Faraci, and Judge

Leighton. See Local 1001 Ex. 17, p.1 (May 11, 2003 Nomination Meeting

Synopsis); Local 1001 Ex. 18 (May 11, 2003 Special Nomination Meeting

Minutes). Vasyl Markus, an attorney for Kurth Lampe, attended the meeting

at the request of Ms. Kurth and later submitted a report regarding the events of

the meeting. Tr. 838:4-5 (KURTH); see also Local Ex. 25 (Affidavit of Vasyl

Markus of 5/13/03). Wesley James (James) attended on behalf of the Illinois

Department of Labor, Conciliation and Mediation Division, and also later

submitted a report to Kurth Lampe. See Local 1001 Ex. 24 (Letter from

Wesley James to Mrs. Kathryn Kurth of 5/14/03).

61. Prior to that meeting, Ms. Kurth had met with the Election Judges to

go over LIUNA’s election guidelines on at least two occasions. Tr. 830:20-

25, 832:20-22 (KURTH).

62. At the beginning of the meeting, Ms. Kurth informed the

membership that she was the Executive Director for the LIUNA International

Election Officer during the first International election in 1996, and served as a

consultant to the Election Office in 2001. Local 1001 Ex. 18, pp.3-4 (May 11,

2003 Special Nomination Meeting Minutes).

63. Ms. Kurth also recited the qualifications for candidates for office to

the membership present at the meeting, citing Article V of the Constitution.

Id. at p.8. In pertinent part, Ms. Kurth stated, “No one shall be eligible to hold

office in the Local Union if the person has not been regularly working at the

calling of the International Union during the entire year immediately prior to

nomination.” Id. at p.9.

42 In the Matter of Local Union 1001 2004

64. There was only one person nominated for each available position.

See Local 1001 Ex. 17, p.3 (May 11, 2003 Nomination Meeting Synopsis).

One member, David Torres, nominated all of the Auditors. Id. One member,

Alex Petrucelli, nominated all of the District Council delegates. Id.

65. After the nomination process was completed, observers from Ms.

Kurth’s staff and the Judges of Election verified the eligibility of both the

candidates and the nominators from an electronic membership database. Tr.

835:16-22, 840:20-21 (KURTH).

66. Ms. Kurth testified that she believed Local 1001’s 2003 Officer

Election followed democratic practices, were free, fair, and transparent, and

enjoyed a relatively high participation rate.27 Tr. 840:3-12 (KURTH). Ms.

Kurth further stated that there was no apparent physical evidence of organized

crime influence reflected during the conduct of the meeting itself. Tr. 830:6-9

(KURTH).

67. Attorney Markus also submitted a report, in which he concluded “the

nominating meeting complied with the rules of the organization, proper

parliamentary procedure, and provided ample opportunity for dissenting views

and alternate candidacies. There was no evidence of intimidation, coercion,

unfairness, or any other activity which would affect the results of an election.”

Local Ex. 25 (Report from Nominating Meeting of LIUNA Local 1001,

Sunday, May 11, 2003 from Vasyl Markus, Esq. to Kurth Lampe of 5/13/03).

68. Mr. James, from the Illinois Department of Labor, reported that he

had attended the officer nomination proceedings, wherein he witnessed the

nomination of single candidates for every office except Auditors, for which

there were three nominations for the three available positions. See Local Ex

24 (Letter from Wesley James to Mrs. Kathryn Kurth of 5/14/03).

69. At the instant hearing, upon questioning regarding candidate

eligibility posed by the IHO, Ms. Kurth testified that she was familiar with the

term “working at the calling.” Tr. 840:25 (KURTH).

70. Thereafter, the following exchange took place:

27 Although Ms. Kurth recalled approximately 250 members participating in

the 2003 Officers’ Election, the record reflects that there were 175 attendees

of the 2500 or more Local 1001 members. See Local 1001 Ex. 17, p.1 (May

11, 2003 Nomination Meeting Synopsis).

43 In the Matter of Local Union 1001 2004

IHO: Did all of the candidates – were all of the candidates

working at the calling?

Ms. Kurth: Well according to the LIUNA Constitution if

you are a member –

IHO: That’s not answering my question. Were they

working at the calling?

Ms. Kurth: According to the LIUNA Constitution.

IHO: You made an observation and examined each one of

them?

Ms. Kurth: Yes, they were all dues paying members.

IHO: That doesn’t mean they were working at the calling.

Ms. Kurth: That’s what the LIUNA Constitution says.

Tr. 841:1-18.

71. Under cross-examination by the GEB Attorney, Ms. Kurth elaborated

that, “according to the standard that we had used in the International Delegate

elections, if [a candidate was] a member, they were working at the calling. Tr.

842:11-13 (KURTH).

72. The Rules for the 2001 LIUNA Delegate and International Officer

Elections, promulgated by Election Officer Goldberg, state:

1. Eligibility Requirements

a) To be eligible to run for a Convention delegate position,

one must be a member in good standing for at least two

years in the International Union and at least two years

in the Local Union immediately prior to nomination,

and in compliance with all other requirements or

exceptions of Article V, Section 9 of the LIUNA

Constitution, and Article V of the Uniform Local Union

Constitution.

b) To be eligible to run for International Office, one must

meet the above requirements . . . .

Rules for the 2001 LIUNA Delegate and International Officer Elections,

Article II, Section 1, p.32.

44 In the Matter of Local Union 1001 2004

73. Article V of the Constitution states, in pertinent part, “No one shall

be eligible to hold any office in the Local Union if the person has not

regularly been working at the calling of the International Union during the

entire year immediately prior to the nomination.” Constitution, Article V,

Section 4.

74. Ms. Kurth attempted to explain her understanding as follows: “How

can you be a dues paying member if you are not working at the calling? It

says that in order to be a member you have to be working at the calling. I’m

sorry. I don’t understand.” Tr. 845:4-16 (KURTH).

75. Neither Ms. Kurth nor any of her staff spoke with any of the

nominees to determine whether they were working at the calling. Tr. 846:18-

21 (KURTH).

76. When specifically questioned about Mr. Capasso’s eligibility status

in 2003, Ms. Kurth stated that she and her staff found him eligible “to the best

of [their] ability” by looking at the membership lists. Tr. 843:10-24

(KURTH). Ms. Kurth also “remembered seeing him as a Delegate [to the

convention] in 1996 and 2001.” Ms. Kurth continued, “It means the

International found him eligible to be an eligible candidate for Delegate.

[F]or a Delegate you have to be working at the calling and be a dues paying

member . . . .” Tr. 844:16 – 845:1 (KURTH).

77. Ms. Kurth’s opinion that, for the International Elections, being

current in one’s dues qualified a member as working at the calling is clearly

erroneous. See In the Matter of Local 270 (McCord), IHO Order and

Memorandum, 96-17P (July 1, 1996) (affirming International Election Officer

finding that protestor, although current in dues payment, was not working at

the calling); In re: Local 500, IHO Order and Memorandum Regarding

Reconsideration, 98-45P (October 27, 1998) (mere membership in union does

not qualify as working at the calling; in order to hold office, member must

have been working at the calling for one year prior to nomination).

78. At the hearing, Ms. Kurth further stated that she would be

“surprised” to know that Mr. Capasso was the full-time administrator of the

City Pension Fund, and had been for the previous ten years, when her firm and

the Election Judges deemed him eligible to serve as a Local 1001 officer. Tr.

8-11 (KURTH).

79. Mr. Capasso was ineligible for nomination as a candidate for an

officer’s position in 2003, regardless of his purported status as a Convention

Delegate in 1996 or 2001. The IHO notes that Mr. Capasso’s eligibility for

delegate was not challenged and, thus, his status was never ruled upon by the

International Election Officer. The initial eligibility to serve as an

International Delegate is determined by the Local 1001 Judges of Election.

45 In the Matter of Local Union 1001 2004

80. In fact, based on his own admissions in correspondence with the

Pension Funds, Mr. Capasso has not been eligible to serve as a Local 1001

Auditor in any election since 1984, when he first assumed the office. See,

e.g., GEB Ex. 12 (Letter from James Capasso to Kathleen McCarthy of

3/27/02) (Capasso admits he has not worked in the laboring industry since

1984); see also Constitution, Article V, Section 4 (defining “working at the

calling”).

Evidence of Financial Misconduct

81. The Trusteeship Complaint includes four charges relating to the

alleged financial malpractice and misconduct of Local 1001.

82. Charge Three states that it is necessary to place Local 1001 under

Trusteeship to correct financial malpractice as follows:

It is necessary to place Local 1001 under trusteeship to correct

financial misconduct in the form of improper pension and

health and welfare contributions made by Local 1001 on

behalf of individuals who are ineligible to receive such

contributions in violation of duties imposed by the LIUNA

Ethical Practices Code, Financial Practices, and by 29 U.S.C.

§ 501(a) and (c).

By placing the Local under trusteeship, LIUNA will be able to

monitor the financial condition o£ the Local and prevent

improper contributions and any other financial misconduct.

Trusteeship Complaint, ¶¶ 49, 50 (IHO Dkt. tab 2).

83. Charge Four alleges that a Trusteeship is necessary to correct barred

conduct in the form of embezzlement as follows:

It is necessary to place Local 1001 under trusteeship to correct

corruption in the form of Local 1001 operating its affairs

through a pattern of racketeering activity; to wit;

embezzlement under 29 U.S.C. § 501(a) and (c), which is

defined as “barred conduct” under the LIUNA Ethics and

Disciplinary Procedure. A trusteeship is necessary to assure

that Local 1001’s affairs are conducted lawfully, for the

benefit of its members, in accordance with the LIUNA

Constitutions and not for an improper purpose.

A trusteeship is necessary to assure that the affairs of Local

1001 are conducted lawfully, for the benefit of its members

46 In the Matter of Local Union 1001 2004

and in accordance with the LIUNA Constitutions and not for

an improper purpose.

Trusteeship Complaint, ¶¶ 52,53 (IHO Dkt. tab 2).

84. Charge Five avers that a Trusteeship is necessary to corruption

stemming from the Local making contributions to the Benefit Funds for

ineligible persons, stating:

It is necessary to place Local 1001 under trusteeship to correct

corruption in the form of Local 1001 operating its affairs

through a pattern of racketeering activity; to wit, mail fraud in

violation of 18 U.S.C. § 1341, which is defined as “barred

conduct” under the LIUNA Ethics and Disciplinary Procedure.

The improper pension and health and welfare contributions

described above, which resulted in ineligible persons receiving

benefits and/or receiving benefits based upon false or

misleading statements of hours worked, constitute a scheme or

artifice to deprive the funds of property.

A trusteeship is necessary to assure that the affairs of Local

1001 are conducted lawfully; for the benefit of its members

and in accordance with the LIUNA Constitutions and not for

an improper purpose.

Trusteeship Complaint, ¶¶ 54, 55 (IHO Dkt. tab 2).

85. Charge Six avers that a Trusteeship over Local 1001 is necessary to

correct corruption in the form of ERISA reporting violations:

It is necessary to place Local 1001 under trusteeship to correct

corruption is the form of Local 1001 committing violations of

ERISA substantive criminal law by the filing of untruthful,

inaccurate and incomplete contribution reports on a monthly

basis four a period of up to eighteen years in violation of 18

U.S.C. § 1027.

Trusteeship Complaint, ¶ 56 (IHO Dkt. tab 2).

The Benefit Funds

86. Local 1001 members who are employed by the City of Chicago, for

instance, in the Dept. of Streets and Sanitation, are participants in the

Laborers’ and Retirement Board Employees’ Annuity and Benefit Fund of

Chicago (City Pension Fund), which is one of the four pension fund systems

that employees of the City of Chicago are enrolled in. See

47 In the Matter of Local Union 1001 2004

http://civicfed.org/pages/Status. The City Pension Fund was created by

statute for the benefit of “any employee of an employer in a position classified

by the civil service commission thereof as labor service” and “any person

employed by the [City Pension Fund] board,” as well as “any person

employed by a retirement board of any other annuity and benefit fund [in

Chicago].” 40 ILCS 5/11-110. Mr. Capasso is the Executive Director of the

City Pension Fund.

87. In contrast, at issue in this matter are the Laborers’ Pension Fund and

the Health and Welfare Fund of the Construction and General Laborers’

District Council and Vicinity Benefit Funds (Benefit Funds), for whom Mr.

Jorgenson is Administrator. The Benefit Funds were established to benefit the

officers and employees of Local Unions, employees of the Benefit Funds, and

employees of various employers who are signatories to collective bargaining

agreements entered into between the employers and the Chicago District

Council, and employers who are members of the Association of Employers

named in the Trust Agreement. A non-exhaustive list of the Association of

Employers include: The Underground Contractors’ Association, Mason

Contractors’ Association of Greater Chicago, Illinois Road Builders’

Association, and the Concrete Contractors Association of Greater Chicago.

See generally, Local 1001 Exs. 57-66 (Various Trust Agreements for the

Benefit Funds).

88. The Benefit Funds currently provide pension and welfare benefits to

more than 16,500 participants, eligible retirees, and their eligible dependents.

See GEB Ex. 16 (Declaration of James S. Jorgenson of 12/4/02 (Jorgenson

Decl.)). These Benefit Funds are financed by hourly contributions from

participating employers, who are signatories to collective bargaining

agreements, which specify that contributions for certain employees must be

paid to the Laborers’ Benefit Funds. Tr. 110:5-17 (JORGENSON). See GEB

Ex. 16 (Declaration of James S. Jorgenson of 12/4/02 (Jorgenson Decl.)).

89. Both the Pension Fund and the Health and Welfare Fund are Taft-

Hartley Funds, governed by ERISA, and managed by a Board of Trustees

jointly comprised of a one-half Union representatives selected by the District

Council and one-half management personnel chosen by their respective

associations. Tr. 108:15-24 (JORGENSON).

90. The Benefit Funds are governed by Trust Agreements, which set out

the policies of the Benefit Funds, including all of the guidelines for the trust,

the collection of money, the contributions, and the selection of Trustees. Tr.

109:5-9 (JORGENSON). As required by ERISA, the Benefit Funds each

maintain a written Plan of Benefits. See GEB Ex. 16 (Jorgenson Decl.). The

Benefit Funds also publishes and distributes a Summary Plan Description of

benefits to all participants, as required by ERISA. Id.

48 In the Matter of Local Union 1001 2004

91. The Trust Fund Agreements state that for each hour worked an

employee receives contributions submitted on his behalf by the employer,

which gives the employee and his family eligibility for insurance benefits and

generates credit toward his pension for his retirement. Tr. 113:6-10

(JORGENSON); see also, Local 1001 Exhibit Volume 2.

92. Mr. Jorgenson explained that the Benefit Funds sends a letter to each

new employer, which specifies that employers may only submit contributions

for employees that are laborers receiving salaried compensation. Tr. 211:1-4

(JORGENSON).

93. Local 1001 is a contributor to the Funds for its full-time salaried and

part-time hourly employees. See GEB Ex. 16 (Jorgenson Decl.). The

definitions of Employer and Employee found in Benefit Funds’ Trust

Agreements provide that a Union can be an Employer and can contribute on

behalf of eligible Employees. See GEB Ex. 21 (Joint Appeals Decision);

(“Employee” shall mean “all eligible persons employed by the Union, on

whose behalf the Union shall make payments to the Trust Estate at the times

and at the rate of payment equal to that made by any other Employer who is a

party to this Agreement.”).

94. Both the Pension Fund and the Welfare Fund plans base the

determination of eligibility and coverage on contributions made by Employers

upon hours worked. The Rules and Regulations of the Pension Fund defines

“Work or Service” as:

(a) Each hour for which an Employee is paid, or entitled to

payment, by an Employer for hours of Work in Covered

Employment. These hours shall be credited to the

Employee for the computation period or periods in

which the duties are performed; and

(b) Each hour for which back pay, irrespective of

mitigation of damages, is awarded or agreed to by an

Employer to the extent that such award or agreement is

intended to compensate an Employee for periods during

which the Employee would have been engaged in

Covered Employment for the Employer. These hours

shall be credited to the Employee for the computation

period or periods to which the award or agreement

pertains rather than the computation period in which the

award, agreement, or payment was made.

GEB Ex. 21 (Joint Appeals Decision).

49 In the Matter of Local Union 1001 2004

95. The collective bargaining agreements between the Chicago District

Council and Employer Associations provide for contributions to the Pension

and Welfare Funds “for each hour worked by all Employees covered by this

agreement . . . .” Id., citing Building Agreement of June 1, 2001 to May 31,

2006, Article VIII, ¶¶ 2, 3 (emphasis added).

96. Pension Fund participants become eligible for pension payouts after

five years of service at age 65, or ten years of service at age 50. Tr. 120:14-15

(JORGENSON). Under Article 1, Section 2.2 of the Rules and Regulations of

the Pension Fund,

the Pension Fund’s plan of benefits provides that an Employee

who is engaged in Covered Employment becomes a

Participant after completing at least 870 hours of Work in

Covered Employment during a twelve-month computation

period. Section 4.2 thereof provides that 1000 Hours of Work

in Covered Employment are required in order to earn one

Pension Credit. No credit is earned for less than 250 Hours;

partial credit can be earned for Hours of Work greater than

249 and less than 1000.

GEB Ex. 21 (Joint Decision of the Appeals Committee of the Laborers’

Pension Fund and Claims Committee of the Laborers’ Welfare Fund (Joint

Appeals Decision)).

97. “The Welfare Fund’s plan of benefits also bases eligibility for

coverage on hours of work for one or more Employers that make contributions

for work in Covered Employment.” GEB Ex. 21 (Joint Appeals Decision).

Under Article 3, Section 2 of the plan of benefits, an Employee under the age

of 50 must work 500 hours during six calendar months in order to become

eligible for benefits or, alternately, 800 hours during twelve calendar months.

Id. The work requirements are reduced at age 50 and age 59. Id.

98. The Benefit Funds process voluminous amounts of data submitted

by contributing employers on a monthly basis. Tr. 110:21 – 111:14

(JORGENSON).

99. The Pension Fund collects money from contributing employers and

in turn pays the benefits for retired participants; the Pension Fund processes

the applications, determines all of the necessary documentation necessary for

the applications, and entrusts the funds to professional money managers. Tr.

107:24 – 108:5 (JORGENSON).

100. The Welfare Fund is essentially an insurance company; the

Welfare Fund is self-insured for the sole purpose of covering laborers working

in the jurisdictional area of the District Council. Tr. 108:7-11

50 In the Matter of Local Union 1001 2004

(JORGENSON). The Welfare Fund also processes participants’ claims and

performs other administrative functions. Tr. 108:11-12 (JORGENSON).

101. The majority of the data processed by the Benefit Funds consists of

employer contribution reports, which are contribution reports sent out on the

fifteenth of each month for the following month’s payment of contributions

that are due from each employer. Id.

102. The employer contribution reports are generally computergenerated

based upon the last amount of employees a contractor submitted

contributions on. Tr. 112:-25 (JORGENSON). That report is mailed to each

employer, with a list of their employees, their Social Security numbers, and

the Local the employee is affiliated with. Id. The capacity in which the

employee worked is not included on the report. Tr. 129:19-20

(JORGENSON).

103. The employer, in turn, supplies the hours worked by each

individual multiplied by the appropriate rate of contribution for the Welfare

Fund, the Pension Fund, the Training Funds, and some Ancillary Funds, totals

the payment, and sends a check in with the report. Tr. 112:-25

(JORGENSON).

104. Mr. Maria testified that an officer of the employer, such as Local

1001, must attest to the accuracy of the contribution report and remittance

completed by the employer. Tr. 440:8-10 (MARIA). The certifications serves

the purpose of making clear “to the employer that he has an obligation to be

truthful and candid and abide by the terms of the Collective Bargaining

Agreement in terms of listing all the eligible employees and then listing

accurately the number of hours for that month worked by each employee.”

Tr.440:14-19 (MARIA).

105. The employer contribution report and accompanying payment go

immediately to a lock box, where they are processed and put into a cash

account, which is “swept” each night. Tr. 110:21 – 111:14 (JORGENSON).

The Funds get a copy of what came in to the lock box, as well as a

reconciliation of the dollar amount for each employer. Id.

106. A data entry group examines each employer contribution report

line by line for each individual from that company, posting the actual hours

worked for that individual onto the computer system. Tr. 114:1-4

(JORGENSON). The Funds use the electronic data to keep track of how

many hours a particular participant has accrued. Tr. 114:15-19

(JORGENSON).

107. The Funds accept the employer contribution report as factual when

received. Tr. 113:17-21 (JORGENSON). Mr. Maria testified that submission

51 In the Matter of Local Union 1001 2004

of false information on the employer contribution report is often construed as

a felony criminal violation of 18 U.S.C. § 1027 for this very reason. Tr.

440:20-25 (MARIA). From the Benefit Funds’ perspective, the employer’s

certification and warranty of the employer contribution report is significant in

because it allows the Funds to rely on the information submitted. Tr. 441:9-

19 (MARIA).

108. The Benefit Funds periodically audit each employer to verify that

they have, in fact, submitted contributions on behalf of individual’s work, also

correctly. Tr. 113:17-21 (JORGENSON). The Fund Trustees hire auditors to

check the payroll, contribution report forms, and match up the actual hours

paid versus the actual hours contributed for each employer audited. Tr. 115:4-

8 (JORGENSON). If there is a shortage of hours, the Benefit Funds send a

bill to the employer stating that the employer shorted a particular participant a

certain number of hours. Tr. 115:9-16 (JORGENSON). If the employer

cannot verify why the hours were withheld, the Fund will collect the money

from the employer and post the proper hours to the individual. Id.

109. According to Mr. Jorgenson, since in or about 1976, ERISA has

required that benefit funds conduct periodic audits of employers to ensure that

proper contributions were made on behalf of employees because ERISA

mandated that employees would not be shortchanged of credit. Tr. 227:7-19

(JORGENSON). Even if employers did not make the proper contributions,

ERISA dictated that an employee would be granted credit if they worked for

an employer covered by the benefit fund. Id.

110. The Director of the Benefit Funds Field Department generates and

assigns audits of employers. Tr. 140:21-24 (JORGENSON). The Benefit

Funds randomly rotate each of its three outside auditors each year so that the

same auditing firm does not perform the same audit twice. Tr. 115:19-23

(JORGENSON).

111. Mr. Maria testified that the Benefit Funds use of outside auditors to

sample and verify, on a cyclical basis, the contributions of the more than

1,600 contributing employers to the Benefit Funds was a reasonable procedure

to apply to ensure the submission of accurate information. Tr. 442:5-16

(MARIA). “[I]t would be unreasonable, virtually impossible, [and] cost

prohibitive to examine and challenge the monthly Remittance Form from each

employer.” Id.

112. Company audits generally take place every three years. Tr. 134:3

(JORGENSON). Before Mr. Jorgenson became the Fund Administrator, there

were never any regular audits of Local Unions, because the administration felt

that “everyone in the Local Unions were honest and didn’t need an audit.” Tr.

223:2-24 (JORGENSON).

52 In the Matter of Local Union 1001 2004

113. When an auditing firm performs a compliance audit on a company,

it will request three years of contribution reports from the Funds, which it will

compare against, inter alia, the company’s W-2’s, payroll records, and cash

disbursements. Tr. 133:10 – 134:17 (JORGENSON).

114. The compliance auditors ascertain whether contributions made for

an individual match up with payroll records and whether there are any hidden

employees in the cash disbursement register. Tr. 135:11 – 136:8

(JORGENSON).

115. Mr. Jorgenson stated that, if the payroll records and LM-2’s show

compensation of zero, indicating an unpaid position, he would expect the

compliance auditors to bring that to the attention of the Fund. Tr. 137:6-20

(JORGENSON).

116. Mr. Jorgenson testified that the Funds would not knowingly assign

an auditing firm to perform a compliance audit on a company that the firm

otherwise represented. Tr. 116:3-7 (JORGENSON). Mr. Jorgenson also

stated that, if the Funds did not have specific knowledge regarding the

auditing firm’s relationship with a company, they would nonetheless expect

the firm to inform the Funds of the conflict and recuse themselves. Tr. 116:6

– 117:11 (JORGENSON). Mr. Jorgenson related that auditing firms had

disclosed such conflicts in the past and the Funds rely on the firms’ good faith

disclosures. Id.

The Havey Audit

117. On November 20, 1998, the Havey firm reported to the Benefit

Funds’ Board of Trustees the results of a routine compliance audit the firm

conducted for the period June 1, 1994 to June 30, 1998. See GEB Ex. 26

(Letter from Havey LLP to the Board of Trustees of 11/20/98 and

accompanying Audit Fact Sheets (November 1998 Havey Audit)).

118. As part of the routine compliance audit, the Benefit Funds

requested that Havey determine whether contributions to the Trust Funds were

being made in accordance with the collective bargaining agreements in effect

and with the Trust Agreements of the Funds. Id. In addition, the Trustees

requested that Havey determine whether Local 1001 was appropriately

deducting check off dues from employees. Id.

119. The November 1998 Havey Audit Report outlined the parameters

of the review conducted and further noted, “the propriety of the contributions

is the responsibility of the employer’s management.” Id.

120. The November 1998 Audit report stated:

53 In the Matter of Local Union 1001 2004

Our procedures included a review of the pertinent provision

of the collective bargaining agreements and compared

underlying payroll records to the Fund contribution records.

The employer records we reviewed included payroll

journals, individual earning records, payroll tax returns,

contribution reports, job classifications, and general

disbursement records as appropriate.

Our procedures related to a review of the employer’s payroll

records only and did not extend to any financial statements

of the contributing employer.

***

There were no exceptions found in contributions reported to

the Funds during our payroll audit period.

GEB Ex. 26 (November 1998 Havey Audit ) (emphasis added).

121. Havey represented that the audit of Local 1001 was clean. Tr.

144:13 (JORGENSON).

122. When Havey performed the compliance audit of Local 1001 for the

Benefit Funds, the firm was also the auditor for the Local Union; Havey did

not disclose this apparent conflict to the Benefit Funds in 1998, and the Funds

were unaware of it at that time. Tr. 146:2-17 (JORGENSON).

123. The Benefit Funds did not become aware of the conflict until the

Collections Committee began looking at various Local Unions, specifically

how they contributed to the Funds, in an effort to get all the employers to

contribute uniformly.28 Tr. 147:1-5 (JORGENSON).

James Capasso’s Application for Pension Benefits

124. Mr. Capasso served as an unpaid Auditor for Local 1001 since

1984. Since 1986, Mr. Capasso has maintained full-time employment as the

28 In 1999, the Board of Trustees of the Benefit Funds determined that,

notwithstanding the requirement of the collective bargaining agreement that

contributions be based on actual hours worked, Contributing Employers

would be permitted to pay contributions based on 40 hours per week for fulltime

salaried employees, provided that such contributions were made 52

weeks per year. Contributions for part-time employees were required to be

for actual hours worked. See GEB Ex. 21 (Joint Appeals Decision).

54 In the Matter of Local Union 1001 2004

Executive Director of the City Pension Fund. Prior to that, he was employed

full-time by the City of Chicago.

125. In the spring 2002, Mr. Capasso personally came into the Benefit

Funds’ offices to apply for pension benefits. Tr. 147:10-13 (JORGENSON);

see also GEB Ex. 10 (James Capasso Retirement Declaration to Laborers’

Pension Fund of 3/1/02). At the time, Mr. Jorgenson testified that he

recognized Mr. Capasso’s name because he was the Administrator of the City

Pension Fund, although he had never met Mr. Capasso before.29 Tr. 147:20 –

148:2 (JORGENSON). Mr. Jorgenson was unaware that Mr. Capasso had

applied for pension until the Pension Director, Kathleen McCarthy, told him

that Mr. Capasso had submitted an application. Id.

126. When Ms. McCarthy told Mr. Jorgenson that Mr. Capasso was

retiring, Mr. Jorgenson’s first reaction was to tell Ms. McCarthy, jokingly,

“Well, you know, there is a job opening. Maybe if you’re interested in it.”

Tr. 149:17-20 (JORGENSON). When Ms. McCarthy informed Mr. Jorgenson

that Mr. Capasso was not retiring from the City Pension Fund, Mr. Jorgenson

inquired what she meant. Tr. 149:24 – 150:1 (JORGENSON).

127. Ms. McCarthy told Mr. Jorgenson that Mr. Capasso was retiring

from his employment at Local 1001. Tr. 150:1-13 (JORGENSON). Mr.

Jorgenson recalled asking, “When was he working – where was he working?”

Id. Ms. McCarthy responded that Mr. Capasso was still working, and Mr.

Jorgenson recalls saying, “That’s kind of unusual.” Id.

128. Mr. Jorgenson explained that he thought that Mr. Capasso was

receiving two paychecks, not only as the Administrator of the City Pension

Fund, but also from the Local. Id. Mr. Jorgenson recalls commenting to Ms.

McCarthy, “That’s a lot of hours worked. Have the attorneys check to see if

it’s a prohibited employment.” Tr. 150:22 – 151:2 (JORGENSON).

129. Mr. Capasso’s application was sent to the Pension Committee for

further evaluation. Tr. 153:6-12 (JORGENSON).

130. Mr. Jorgenson testified that when the Benefit Funds and its counsel

first looked into Mr. Capasso’s application, the initial inquiry regarded

29 Mr. Jorgenson testified that Mr. Capasso’s name had come up in a

professional context; the City Pension Fund is the professional equivalent of

the Benefit Funds, managing over a billion dollars in assets. Tr. 148:3 – 149:9

(JORGENSON).

55 In the Matter of Local Union 1001 2004

whether there was a prohibited employment issue because Mr. Capasso

wanted to continue as Administrator of the City Pension Fund and also collect

a full pension from the Laborers’ Pension Fund. Tr. 153:16-21

(JORGENSON). In other words, the Benefit Funds wanted to ascertain

whether Mr. Capasso’s continuing employment as Administrator of the City

Pension Fund would somehow disqualify him from receiving the pension he

had applied for with the Laborers’ Pension Fund. Tr. 153:22 – 154:1

(JORGENSON).

131. In an effort to ascertain Mr. Capasso’ pension eligibility, Ms.

McCarthy wrote to Mr. Capasso asking questions related to IRS limits on

pensions. Tr. 605:14-21 (CAPASSO). Mr. Capasso described the inquiry as a

formality to ascertain whether he was receiving any other pensions, how much

the other pensions were for, and where they were coming from. Tr. 606:1-12

(CAPASSO). Mr. Capasso stated that, if his pension was approved, he would

have received about $1600 per month, which was “nowhere near” the IRS

pension limitation. Id.

132. In response to another inquiry from Ms. McCarthy regarding

whether his employment as Administer of the City Pension Fund was

prohibited employment, Mr. Capasso wrote a letter stating, “If I were asked,

‘do I work in the laboring industry,’ I would have to answer absolutely not.

We are administrative employees who are allowed to participate in the Fund

by virtue of being a ‘Retirement Board Employee’ as the name of our title so

indicates.” GEB Ex. 12 (Letter from James Capasso to Kathleen McCarthy of

3/27/02).

133. Mr. Capasso “claimed he first became employed in the

construction industry in 1984, held union membership in Local 1001 and

terminated covered employment March 31, 2002.” GEB Ex. 11 (Laborers’

Pension & Welfare Fund Memo, James Capasso Determination regarding

Legitimacy of Contributions/Disqualifying Employment/IRS 515

Limitations).

134. The Pension Committee issued a determination regarding

disqualifying employment, the legitimacy of the contributions made on behalf

of Mr. Capasso, and certain IRS issues. See GEB Ex. 11 (James Capasso

Determination regarding Legitimacy of Contributions/Disqualifying

Employment/IRS 415 Limitations). The Pension Committee informed the

Fund Trustees,

The Committee reviewed Mr. Capasso’s application, his

letter of March 27, 2002 directed to Kathleen McCarthy . . .

and the contribution records of the Fund and was unable to

make a determination regarding Mr. Capasso’s eligibility to

receive a pension from the Laborers’ Pension Fund. They

56 In the Matter of Local Union 1001 2004

directed that this file be held pending additional information

regarding applicant’s employment at Local 1001. They

directed that Fund Co-Counsel write to Mr. Capasso and

advise him of pending information.

Id.

135. On April 5, 2002, Mr. Jorgenson wrote Mr. Capasso a letter

informing him that the Pension Committee was unable to make a

determination regarding his eligibility to receive a pension from the Laborers’

Pension Fund. Mr. Jorgenson explained,

It appears that you work for the [City] Retirement Board

and that such employment is not considered employment by

Local 1001. The Pension Committee is advised that the

Executive Director position is a full-time position, and you

have been a full-time employee of the Retirement Board for

a number of years.

It appears from the contribution records of the Pension Fund

that all contributions made on your behalf have come from

Laborers’ Local 1001. Since July 1984 Local 1001 has been

submitting contributions to the Pension Fund based upon

120 hours of work per month or 40 hours of work per week.

These contributions appear to have been made during the

time that you were employed full-time by the Retirement

Board. Contribution reports submitted to the Pension Fund

by Local 1001 do not indicate that you were receiving a

salary from the Local for either full or part-time

employment by the Local. The records of the Pension Fund

do not contain any participation agreement providing for

payment of contributions on your behalf by Local 1001 for

any employment by an entity other than the Local.

GEB Ex. 13, pp.1-2 (Letter from James S. Jorgenson to James Capasso

of 4/5/02).

136. Mr. Jorgenson testified that the gist of his letter was to inform Mr.

Capasso that he was “in two places at once,” and in order to receive a pension

from the Benefit Funds he would have to provide the Funds with additional

information. Tr. 157:13-25 (JORGENSON). Mr. Jorgenson requested

evidence of the nature and extent of Mr. Capasso’s employment with Local

1001 since July 1984, including positions of employment held, hours worked

and compensation received for such employment. GEB Ex. 13, p.2 (Letter

from James S. Jorgenson to James Capasso of 4/5/02). At the hearing, Mr.

Jorgenson stated that evidence of compensation was important to the Funds’

57 In the Matter of Local Union 1001 2004

evaluation of Mr. Capasso’s application because “it shows he was actually

working, employed by the Local.” Tr. 158:9-10 (JORGENSON).

137. On April 24, 2002, Mr. Capasso responded to Mr. Jorgenson’s

request for information. See GEB Ex. 16 (Letter from Kathleen McCarthy to

James Capasso of 5/31/02). In that response, Mr. Capasso stated that he had

not received any salary or hourly compensation for his services to Local 1001

from 1984 to the present, excluding contributions made to the Benefit Funds,

and reflected what he did for Local 1001 in terms of “the operations,

budgetary issues, staffing issues, and so on and so forth.” Tr. 612:22 – 613:4

(CAPASSO).

138. At the Trusteeship hearing, Mr. Capasso elaborated on his duties as

Auditor, stating that he received “operational calls” from Local 1001 officers

requesting information on how he would “assign a sidewalk crew,” or what he

did with “pouring cracks on the street with liquid tar,” or about “a guy on

disability,” as well as informational calls from the Union members about their

pensions with the City Pension Fund and Local Union issues. Tr. 559:11-23,

569:11-19 (CAPASSO). In sum, Mr. Capasso asserted that, as an Auditor of

Local 1001 he was “basically available seven days a week 24 hours a day.”

Tr. 594:1(CAPASSO).

139. On or about April 29, 2002, the Benefit Funds compiled a report of

Mr. Capasso’s history of employee hours, which revealed a total of 25,991

total pension hours. See GEB Ex. 9 (Laborers’ Pension and Welfare Funds

Employee Hours History for James Capasso of 4/29/02). Based on his own

experience, Mr. Jorgenson testified that he believed it would be difficult to

amass that many hours in another job while running a large pension fund. Tr.

153:2-5 (JORGENSON).

140. On May 31, 2002, Ms. McCarthy, the Pension Fund Director,

wrote to Mr. Capasso, informing him that the Pension Committee had

concluded that he was ineligible to receive a pension from the Benefit Funds.

See GEB Ex. 16 (Letter from Kathleen McCarthy to James Capasso of

5/31/02).

141. The Pension Committee provided the following reasons for its

decision:

1. Given the facts presented by you, . . . you are not a

Union “Employee” for whom contributions were

required or permitted to be paid by Local 1001. Local

1001 did not pay you either a salary or hourly wages for

your services as an elected auditor of Local 1001. The

Amended Agreement of Trust of the Pension Plan

58 In the Matter of Local Union 1001 2004

provides for contributions by the Union on behalf of

certain employees. Section 3(f) states:

The term “Employee” shall also mean all eligible

persons employed by the Union, on whose behalf

the Union shall make payments to the Pension

Fund at the times and at the rate of payment equal

to that made by any other Employer who is a party

to this Agreement.

The Committee noted that a Contributing Employer

covered by a collective bargaining agreement would not

be permitted to make contributions to the Fund on behalf

of persons who were either full-time salaried employees

doing bargaining unit work or hourly paid employees

doing bargaining unit work. Contributions would be

made either on all hours worked, or, for full-time salaried

employees, on the basis of 40 hours per week. The

Committee concluded that you have not been an eligible

Union Employee under the terms of the Trust Agreement.

2. You were not covered by a collective bargaining

agreement between the Fund and Local 1001. Your

employment as Executive Director of the [City Pension

Fund} is not covered by a collective bargaining

agreement and no contributions were made to the Fund

by your employer.

3. The usual and customary practice of Local 1001 of

making pension payments on behalf of Union auditors

or other elected or appointed Union officials was not

the subject of a written agreement specifying the

detailed basis on which contributions were required to

be made to the Fund. Such a written agreement is

required by Section 8 of the Trust Agreement.

4. Under the terms of Section 302(c) of the Taft-Hartley

Act, the Fund cannot accept contributions on behalf of a

person who is not an employee of a contributing

employer.

5. Under the applicable provision of ERISA the Fund is

required to pay benefits only in accordance with Fund

documents, including the Trust Agreement provisions

defining who is an Employee of the Union and

requiring a written agreement to cover any person who

59 In the Matter of Local Union 1001 2004

is not employed under a collective bargaining

agreement or who does not meet the definition of

Employee of the Union. Your arrangement with Local

1001 did not qualify you to be an Employee under the

terms of the Fund.

GEB Ex. 16 (Letter from Kathleen McCarthy to James Capasso of 5/31/02).

142. Mr. Capasso appealed the Pension Committee’s decision to the

Appeals Committee of the Benefit Funds, contending the following in his

appeal:

• he was employed by Local 1001 as an Auditor and properly had

contributions made to the Funds on his behalf;

• there was an agreement between the Funds and Local 1001,

which permitted the Local’s payment of contributions for

unsalaried officer positions;

• the Benefit Funds Trustees were on notice of Local 1001’s

contributions on his behalf by virtue of the audits performed by

the Fund’s auditors. Therefore, the Trustees are estopped from

refusing the contributions because they were aware of the

practice, took no action to stop the practice, and Mr. Capasso

relied on the Trustee’s tacit approval in continuing to provide

service to the Local in exchange for the benefits to be obtained

from the Funds;

• the quarterly report forms that the Benefit Funds sent to the

Local indicating “hours paid” on his behalf denoted that the

Funds did not require basing contributions on hours worked;

• and, since the entry on the report for “Rate” was left blank by

the Funds, he concluded that his rate of pay from the Local was

irrelevant and he could participate in the Funds without

receiving any salary or hourly pay from the Local.

See GEB Ex. 21 (Joint Appeals Decision).

143. On January 14, 2003, Mr. Jorgenson informed Mr. Capasso’s

attorney that the Joint Appeals Committee had denied his appeal. See GEB

Ex. 21 (Letter from James Jorgenson to Frederick Heiss of 1/14/03). The

attached Trustees’ decision outlined the reasons for the denial. Id. A non-exhaustive

list of those reasons included:

60 In the Matter of Local Union 1001 2004

• Mr. Capasso was neither a salaried or hourly payroll employee

of Local 1001. Mr. Capasso had full-time employment since

1986 with the City Pension Fund created by state statute. The

City Pension Fund does not have a collective bargaining

agreement or other written agreement requiring contributions to

the Benefit Funds on his behalf.

• Notwithstanding the fact that Mr. Capasso was never carried on

the Local’s payroll, Local 1001 made contributions on his behalf

for 30 hours a week, a contribution amount that would result in

full pension benefit accrual and year-round welfare coverage.

Despite the Funds’ requirement that Employers base

contributions on actual hours worked, no evidence was

submitted to the Committee that Mr. Capasso ever actually

worked 30 hours. The evidence submitted by Mr. Capasso

shows only that he performed supportive and organizational

functions for the Local consistent with union membership,

assisted the leadership of the Local in political activities, and

represented the members in particular instances, but never

occupied a salaried or hourly wage position.

• There is no evidence that Mr. Capasso received IRS Form W-2s

from Local 1001, that Local 1001 reported any compensation

paid to Mr. Capasso, that the Local paid any withheld income,

Social Security, or unemployment compensation taxes to the

IRS, or that the Local covered them for workers compensation

injuries.

• Local 1001 did not pay contributions on Mr. Capasso’s behalf to

the LIUNA pension fund, which is required on any employees of

the Local.

• The two audit reports of Local 1001 from 1994 to 1999 did not

disclose that Mr. Capasso was not a paid employee, the Trustees

were not informed of the practice by the audits and gave no tacit

approval to the practice. Moreover, the auditing firm that

prepared the audits was also Local 1001’s audit firm, but made

no disclosure of the conflict of interest to the Funds.

• The entry on the report for “Rate,” which was left blank, is the

place where the contribution rate would be inserted, “such as

$3.85 per hour for the Welfare Fund,” and did not reflect any

agreement on the part of the Funds nor provide any basis for

reliance on an alleged agreement to make contributions on a

basis other than hours worked as an employee.

61 In the Matter of Local Union 1001 2004

GEB Ex. 21 (Trustees’ Joint Appeals Decision).

144. Local 1001 paid a total of $104, 700 in contributions to the Benefit

Funds for Mr. Capasso when he was not a salaried employee.

Further Investigation Triggered By Mr. Capasso’s Pension

Application

145. The Capasso pension situation triggered more internal

investigation by the Benefit Funds, including a review of the November 1998

Havey Audit. Mr. Jorgenson wrote a letter to Mr. Lamont, the lead

compliance auditor from Havey, on June 14, 2002, inquiring how Havey had

missed the fact that “an individual of the Local Union has had contributions

submitted on his behalf who was not an employee of the Union.” Tr. 159:11 –

160:5 (JORGENSON); see also GEB Ex. 28 (Letter from James S. Jorgenson

to James Lamont of 6/14/02). At the time, Mr. Jorgenson “assumed it was

just a glitch and it was just one individual that they overlooked.” Tr. 160:19-

20 (JORGENSON).

146. Mr. Jorgenson testified that he received a response from Mr.

Lamont approximately two weeks later; he was surprised by the letter because

it included an attachment of a letter that Mr. Lamont claimed was sent to the

funds three years earlier. Tr. 164:9-24 (JORGENSON); see also GEB Ex. 29

(Letter from James Lamont to James Jorgenson of 7/2/02). Mr. Lamont’s

letter suggested that the attached April 30, 1999 letter was sent in response to

a request made by Mr. Jorgenson for information about payroll audits for all

the Local Unions that Havey had performed at that time.

147. The attached April 30, 1999 letter read, “The following individuals

did not receive wages from the Union. In lieu of wages, contributions were

made on their behalf to the Funds.” GEB Ex. 29 (Letter from James Lamont

to James Jorgenson of 4/30/99). A list of seven names followed the statement.

Id. In his letter over three years later, Mr. Lamont wrote, “we believe the

information from our audit about this particular situation was brought to the

attention of the Fund Office over three years ago.” GEB Ex. 29 (Letter from

James Lamont to James Jorgenson of 7/2/02).

148. Strikingly, however, the Havey firm had failed to mention that any

individuals were receiving contributions in lieu of salary in the November

1998 Audit Report, much less list seven names specifically. Even if Havey

did, in fact, transmit the April 30, 1999 letter to Mr. Jorgenson in spring 1999,

it was already well after Havey affirmatively represented that the Local 1001

audit was clean.

149. Mr. Jorgenson stated that he was certain the Benefit Funds never

received the letter because, as a matter of routine practice, the Funds

62 In the Matter of Local Union 1001 2004

electronically scan every document received and permanently stores the

electronic image. Tr. 167:20 – 168:3 (JORGENSON). There is no record of

the document anywhere in the Funds, notwithstanding the fact that three

separate departments were handling the issue addressed in the letter at the

time the letter was allegedly mailed. Id.

150. Mr. Jorgenson stated that if he had actually received the letter

containing information about contributions in lieu of wages in 1999, he would

have immediately brought the information to the attention of the Collections

Committee or the Fund counsel for their review and determination. Tr. 169:3-

15 (JORGENSON). Mr. Jorgenson described “contributions coming in for

individuals that have not in fact received wages” as a red flag. Id.

151. Based upon the circumstances of this matter and the conflict and

conduct of the Havey firm, the IHO finds that the April 30, 1999 letter was

not sent to the Benefit Funds. Moreover, even it were sent, such a letter could

not excuse the deliberate practice of sending false information to the Benefit

Funds and paying contributions for persons who were not paid a salary or

hourly wage.

152. As a result of the information received in Mr. Lamont’s July 2,

2002 letter, the Benefit Funds hired another auditor to re-audit Local 1001.

Tr. 170:4-6 (JORGENSON). The Benefit Funds retained Levinson Simon &

Sprung (Levinson Simon), and the re-audit of Local 1001 was conducted in

the summer 2002. Tr. 173:9-13 (JORGENSON), 358:13-18 (SMITH).

153. The initial assignment for Levinson Simon was to examine the

previous four years of Local 1001 records, from June 1, 1998 through May 31,

2002, to determine whether certain individuals who appear on the employer

contribution reports also appeared in the payroll of the Union. Tr. 328:19-22

(LEVINSON), 359:17-18 (SMITH). When Levinson Simon was hired, the

Benefit Funds informed the firm that there may be an individual or individuals

who were contributed upon but did not appear on the payroll of the Local. Tr.

329:6-8 (LEVINSON).

154. Mr. Levinson testified that contributions must be made to the

Benefit Funds according to the contract, which assigns how contributions are

paid and on what basis, as well as ERISA law. Tr. 329:18-24 (LEVINSON).

Mr. Levinson further testified that under the contract in this instance, as well

as every instance that he has ever seen, if an individual is not paid, then

contributions cannot be made on their behalf. Tr. 330:4-8 (LEVINSON).

155. The first Levinson Simon audit of Local 1001 revealed two

problems: contributions were being made to the Benefit Funds on behalf of

individuals that did not appear on the payroll or in any other disbursement

area, and contributions for three secretaries who were working full-time and

63 In the Matter of Local Union 1001 2004

should have been paid based on a participation agreement of 40 hours per

week, were being paid less. Tr. 332:4-13 (LEVINSON).

156. After receiving the result of the first Levinson Simon audit, the

Benefit Funds’ Trustees requested a broader audit of Local 1001,

encompassing ten years from June 1, 1992 through May 31, 2002. See GEB

Ex. 31 (Letter from Howard B. Levinson, CPA, to Trustees Laborers’ Pension

Funds and Health and Welfare Department of 10/31/02 with October 31, 2002

Revised Audit (Second Audit)). The Second Audit revealed that Local 1001

owed $80,684.02, not including liquidated damages or audit costs, to the

Benefit Funds for under-reported hours of individuals on payroll. Id.

157. Thereafter, the Benefit Funds requested another audit of Local

1001, expanding the review to the inception of the Benefit Funds in 1963. See

GEB Ex. 32 (Letter from Howard B. Levinson, CPA, to Jean Mashos,

Director Trustees Laborers’ Pension Funds and Health and Welfare

Department of 3/31/03, with enclosed March 3, 2003 Revised Audit (Third

Audit)). The Third Audit revealed $80,872.82 due to the Benefit Funds. Id.

158. However, the Third Audit was incomplete because Local 1001

refused to supply certain records Levinson Simon requested. Specifically,

Ms. Smith testified that she was unable to review cash disbursement journals

to see if there were any outside payments to individuals. Tr. 428:1-5

(SMITH). Ms. Smith recalled correspondence between Local 1001’s attorney

and Levinson Simon instructing that the Local had been advised not to turn

over these records.30 Tr. 429:16-18 (SMITH).

159. On July 30, 2003, Mr. Jorgenson wrote back to Mr. Lamont,

informing him that the Funds had not previously received the April 30, 1999

letter, the Funds were now aware of the conflict situation that existed at the

time of the 1998 Havey audit of Local 1001, and if, “as a result of the conflict

and resulting consequences,” the Funds incurred any losses or were otherwise

prejudiced they would seek appropriate relief from Havey. GEB Ex. 30

(Letter from James Jorgenson to James Lamont of 7/30/02). Mr. Jorgenson

received no response to that letter. Tr. 173:3 (JORGENSON).

30 Ms. Smith stated that the records were a necessary part of Levinson

Simon’s regular audit procedures. Tr. 429:21 (SMITH). Ms. Smith estimated

that in about 5% of the audits someone refuses part of the records requested,

but then eventually turn them over. In this case, Local 1001 never turned over

its cash disbursement records. Tr. 429:22 – 430:3 (SMITH).

64 In the Matter of Local Union 1001 2004

Under-Reported Hours Reported for Clerical Staff

160. Debra Chianelli, the wife of Local 1001 Recording Secretary

Robert Chianelli, completes Local 1001 employer contribution reports to the

Benefit Funds. Tr. 511:25 – 512:25 (D. CHIANELLI).

161. Ms. Esposito completed the employer contribution reports to the

Benefits Funds until her retirement in August 2000. Tr. 514:12-14, 515:12-17

(D. CHIANELLI). Shortly before Ms. Esposito retired, Mrs. Chianelli

became involved in filling out the employer contribution reports. Tr. 515:18-

25 (D. CHIANELLI).

162. At the end of April 2000, Ms. Esposito sat down with Mrs.

Chianelli and “in about a half hour’s time told [her] what to do with the

sheets, to copy from the month before.” Tr. 516:6-9 (D. CHIANELLI). The

totals were the same; Ms. Esposito showed her a previous month’s example

and instructed Mrs. Chianelli to copy the numbers onto the next month’s

report. Tr. 516:11-17 (D. CHIANELLI). Mrs. Chianelli never had any other

conversations with anyone regarding how to handle the employer contribution

reports. Tr. 516:18-20 (D. CHIANELLI).

163. After filling out the employer contribution reports, Mrs. Chianelli

presented them to Mr. Gironda for his signature. Tr. 516:23 – 517:3 (D.

CHIANELLI). Mr. Gironda signed the “Employer’s Warranty and

Acceptance,” which reads in pertinent part “The undersigned hereby warrants

that this report accurately states all hours worked by all laborers in its

employ.” GEB Ex. 8 (Laborer’s Pension and Welfare Fund Report for Hours

Worked in July 2003). Mr. Gironda has signed every monthly contribution

report since taking office in 2001.

164. With the exception of deleting Ms. Esposito from the reports when

she retired, the names and hours all remained the same over the three years

that Mrs. Chianelli completed the reports. Tr. 517:7-15 (D. CHIANELLI).

165. Mrs. Chianelli has worked full-time, or 40 hours per week, for

Local 1001 since being hired. Tr. 518:9-14 (D. CHIANELLI). Angela

Coglienese, the office receptionist, and Kelly Canchola, the dues clerk, are

also full-time clerical employees. Tr. 513:6 – 514:11 (D. CHIANELLI).

Each of these full-time employees was reported to have worked 30 yours per

week, or 120 hours per month, on the contribution forms.

166. Mrs. Chianelli had no understanding of why certain people were

listed as having worked 160 hours, while others were listed as having worked

120 hours; she simply repeated the numbers from the previous month’s

employer contribution report. Tr. 518:19 – 519:11 (D. CHIANELLI); see also

GEB Ex. 8 (Laborer’s Pension and Welfare Fund Reports for Hours Worked).

65 In the Matter of Local Union 1001 2004

Specifically, Mrs. Chianelli had no understanding of why the 2001 employer

contribution reports listed her as working 30 hours per week, rather than the

40 hours she actually worked. Tr. 528:3-7 (D. CHIANELLI).

167. Mrs. Chianelli testified that, in 2001, she knew Auditor Capasso,

who she saw on the premises about once a month; Vice President Grogan,

who she saw on the premises a couple of times per week; Sergeant-at-Arms

Bates, who she saw once a month at meetings; Auditor Cataudella, who she

saw once a month at meetings; Mr. Roa, who she saw once a month at

meetings; and her husband, District Council Delegate Chianelli, who worked

full-time for the City of Chicago Dept. of Transportation, and attended

meetings at the Local once a month. Tr. 520:9 – 523:14 (D. CHIANELLI).

168. As per her instructions, Mrs. Chianelli reported to the Funds that

all of the aforementioned officers worked 120 actual hours. See GEB Ex. 8

(Laborer’s Pension and Welfare Fund Reports for Hours Worked).

169. From 1963 until 2002, the contributions report forms had five

columns for “actual hours worked in period,” wherein the amount of hours

worked each week were filled in, and a final column, “Total Hours,” where

the sum of the previous weekly columns was entered. See, e.g., GEB Ex. 8

(Laborer’s Pension and Welfare Fund Report for Hours Worked in July 1963;

Laborer’s Pension and Welfare Fund Report for Hours Worked in July 2001).

170. Mrs. Chianelli testified that the remittance forms changed in or

about July 2002, reflecting only the monthly, as opposed to weekly, totals for

actual hours worked. Tr. 523:20 – 524:4 (D. CHIANELLI). However, in

keeping with the practice of carrying previous month’s totals forward, the

monthly totals remained the same as for previous employer contribution

reports. Tr. 524:9-11 (D. CHIANELLI).

171. On June 27, 2002, Mr. Levinson informed the Trustees of the

Benefit Funds about the extent of the under-reported hours of individuals on

payroll. See GEB Ex. 33 (Letter from Howard B. Levinson, CPA, to Trustees

Laborers’ Pension Funds and Health and Welfare Department of 6/27/02).

Local 1001 owed $43,750.05 in contributions to LECET, the Pension Fund,

the Training Fund, and the Welfare Fund for under-reported hours from July

1, 1998 to May 31, 2002, including 10% penalties, exclusive of interest. Id.

172. At some point in or about July 2002, Business Manager Gironda

gave Mrs. Chianelli instructions not to report Mr. Capasso, Mr. Grogan, and

Mr. Roa on the monthly employer contribution reports. Tr. 526:5-9 (D.

CHIANELLI). Handwritten notes on the July 2002 employer contribution

reports, which were not Mrs. Chianelli’s, read, “James Capasso √ Do Not Post

Hrs. Per KMG 7·30; Floyd Grogan √ Do Not Post Hrs. Per KMG 7·30; Victor

Roa Sr. √ Do Not Post Hrs. Per KMG 7·30.” Tr. 524:12-16 (D.

66 In the Matter of Local Union 1001 2004

CHIANELLI); see also GEB Ex. 8 (Laborer’s Pension and Welfare Fund

Reports for Hours Worked).

173. During that same period, Mr. Gironda instructed Mrs. Chianelli to

begin recording her own hours, as well as those of Ms. Canchola and Ms.

Conglienese, as 160 actual hours worked instead of 120 hours. Tr. 525:17 –

526:22 (D. CHIANELLI). Mrs. Chianelli testified that she had no

understanding of why those numbers were increased. Tr. 526:23-25 (D.

CHIANELLI).

174. The Benefit Funds informed Local 1001 about the discrepancy on

August 2, 2002. See GEB Ex. 35 (Letter from Joe Gilleran to Int Local 1001

of 8/2/02). Local 1001’s accountants reviewed the audit, had no disagreement

with the result, and paid the Benefit Funds $43,750.05 in full by check. See

GEB Ex. 35 (Letter from Mark DeBofsky to Patrick T. Wallace, Fund

Counsel, of 11/12/02); GEB Ex. 36 (Local 1001 Check No. 30608 of

11/12/02).

175. Resolution of the remainder of Local 1001’s outstanding debt to

the Benefit Funds remains unresolved.

Improper Contributions for Non-Payroll Persons

176. The Third Audit, encompassing the years 1963 to 2002, revealed

33 individuals listed on Local 1001 employer contribution reports to the

Benefit Funds who were not on Local 1001’s payroll or tax records. See GEB

Ex. 32 (Letter from Howard B. Levinson, CPA, to Jean Mashos, Director

Trustees Laborers’ Pension Funds and Health and Welfare Department of

3/31/03).

177. Ten of the persons on whose behalf Local 1001 made illegal

Benefit Funds contributions are deceased pensioners who are no longer

receiving payments from the Benefit Funds. In total, Local 1001 expended

$213,172.91 of the memberships’ funds making benefit contributions,

including pension and welfare, for the following persons not on the Union

payroll: Joseph Briatta, $7,200.04; Louis Briatta, $3,617.04; Neil Cacciottolo,

$29,012.40; Anthony Caliva, $112.80; Fred Colasanti, $21,963.76; Thomas

Crivellone, $204.00; Daniel DeLuca, $37,001.02; Alexander Maggi,

$30,839.12; James Pilas, $9,788.95; and Frank Roti, $73,533.60.

178. Eight of the persons on whose behalf Local 1001 made illegal

Benefit Funds contributions are non-vested participants who incurred a

permanent break in service and lost all previous credits. In total, Local 1001

expended $69,061.68 of the memberships’ funds making benefit

contributions, including pension and welfare, for the following persons not on

the Union payroll: Michael Briatta Sr., $3,574.80; Nicholas Cantone,

67 In the Matter of Local Union 1001 2004

$3,574.80; Ronald Crivellone, $26,564.60; Louis DelGuidice, $25,964.40;

Anthony Esposito, $1,206.40; Michael Larmon, $3,132.48; Anthony Orrico,

$3,664.20; and John Wilken, $1,380.00.

179. Eight of the persons on whose behalf Local 1001 made illegal

Benefit Funds contributions are pensioners who will have their benefits

decreased or suspended to deduct credit earned before they were on payroll.

The individuals had received benefits for periods of time, and their benefits

were calculated on periods of time for which they were not eligible to receive

contributions in their behalf. Tr. 446:4-7 (MARIA). In total, Local 1001

expended $264,150.30 of the memberships’ funds making benefit

contributions, including pension and welfare, for the following persons not on

the Union payroll: Julius Bataglini, $1,254.40 (future benefit offset); Sam

Caifa,31 $42,034.80 (suspended)32; Michael Cardilli, $51,041.20 (suspended);

Bruno Caruso, $2,300 (future benefit offset); William Pape, $53, 515.20

(suspended); Ramon Schaeffer, $35,300.40 (suspended); Bernard Spano,

$75,128.10 (suspended); Michael Spignola, $3,575.80 (future benefit offset).

180. Seven of the persons on whose behalf Local 1001 made illegal

Benefit Funds contributions will not receive any pension credits for the period

that they were not on Local 1001’s payroll. In total, Local 1001 expended

$284,138.52 of the memberships’ funds making benefit contributions,

including pension and welfare, for the following persons not on the Union

payroll: Willie Bates, $13,185.20; James Capasso,33 $104,885.70; Nick

Cataudella, $12,331.20; Robert Chianelli, $20,818.50; Sam DeChristopher,

$55,914.90; Floyd Grogan, $60,591.90; and Victor Roa Sr., $16,411.12. See

GEB Ex. 7.

181. From the inception of the Pension Fund in 1963 until 2002, the

Local contributed $396,465.11 in pension payments for persons not on its

31 Mr. Caifa was not on the Local’s payroll from February 1984 through

February 1994, but the Local contributed $17,218.00 to the Benefit Funds in

his behalf. Tr. 447:1-6 (MARIA). Based on the information submitted by the

Local, the Benefit Funds paid Mr. Caifa $65,054.00 in pension benefits he

was ineligible to receive. Tr. 447:9-11 (MARIA).

32 None of the suspended persons were ever eligible to receive contributions

on their behalf.

33 Approximately 10% of the total contributions Local 1001 paid to the

Benefit Funds for the 33 persons not on the payroll were submitted in Mr.

Capasso’s behalf. Tr. 454:2-15 (MARIA).

68 In the Matter of Local Union 1001 2004

payroll; in turn, the Benefit Funds paid $578,036.00 in pension benefits to

those ineligible persons. Id.

182. From the inception of the Welfare Funds in 1963 until 2002, the

Local contributed $434,157.38 in welfare payments for persons not on its

payroll; in turn, the Benefit Funds paid $125,493.34 in welfare benefits to

those ineligible persons. Id. Moreover, seemingly all of the ineligible

recipients of these contributions had primary insurance elsewhere through

their primary employers. Thus, Local 1001 expended its assets to provide

insurance for individuals who would admittedly only use this “secondary

insurance” as back-up when their primary insurance did not provide coverage.

Tr. 606, 689, 690.

183. The Benefit Funds have a fiduciary responsibility to try to make

the Funds whole. Tr. 447:20-25 (MARIA). “If damage has been done to the

Fund, it’s their responsibility to take reasonable measures in an effort to

recover money that was in effect given as a benefit to ineligible participants.”

Id.

184. Local 1001 maintained that the contributions paid to the Benefit

Funds in lieu of salary for certain officers were done in conformance with an

oral understanding with the Benefit Funds, as well as “custom and practice,”

which allowed the Local to submit contributions on behalf of unsalaried

officers.

185. At the hearing, counsel for Local 1001 inquired about the Benefit

Funds’ internal investigation regarding whether there was any oral

understanding or custom and practice that permitted Local 1001’s

contributions to the Benefit Funds for unpaid officers. Mr. Jorgenson related

the following:

Mr. Faraci: I asked him whether or not his attorneys [Co-

Counsel to the Benefit Funds] inquired with him [Mr.

Jorgenson] whether or not there was a custom and practice.

Mr. Jorgensen: A custom regarding?

Mr. Faraci: A custom and practice with Local 1001 with

regards to individuals who were Auditors and Executive

Board members getting contributions paid to them in lieu of

compensation.

Mr. Jorgensen: Well they did ask me to research the records

to see if there was anything in the file that ever revealed

something like this in the past, and I didn’t find anything.

69 In the Matter of Local Union 1001 2004

Not only I looked, but I think just about every other staff

member in the place did.

Mr. Faraci: That’s different than custom and practice. They

were actually looking for a written document regarding this.

Mr. Jorgensen: Right — no, we didn’t — we did go back to

individuals that had worked there and have now retired. We

asked them if there was ever anything that was discussed

verbally that they recall with a prior administrator. We

asked the people who were running the Field Department at

that time if they recall anything like that, and there was no

recollection by anybody.

Tr. 239:8 – 240:9.

186. Counsel for Local 1001 questioned Mr. Levinson regarding

whether Local 1001’s contributions paid in lieu of salary for certain officers

were an anomaly.

Mr. Faraci: So in your career you’ve never seen

contributions in lieu of payments.

Mr. Levinson: That is not legal.

Mr. Faraci: What’s not legal about it?

Mr. Levinson: It’s a violation of ERISA, as I understand it,

and the IRS rules as I understand them.

Tr. 353:13-19.

187. Mr. Levinson explained the tax issue by saying that individuals

cannot receive compensation in the form of nontaxable benefits; “any

compensation that an individual receives has to be subject to income taxes.”

Tr. 355:7-23 (LEVINSON). ERISA requires that “work performed” be

measured in terms outlined in the contract and/or participation agreement that

a union official is under. Id. According to Mr. Levinson, the definition is the

same in all Funds; “the proper reporting to the Funds is based on earnings and

hours worked.” Id.

188. By July 31, 2002, Mr. Jorgenson had informed Messrs. Bates,

Caiafa, Cataudella, DeChristopher, Chianelli, Grogan, Pape, Roa, and Spano

that the Benefit Funds required information regarding their Local 1001

employment to verify eligibility for Pension and Health Benefits. See GEB

Ex. 16. In those letters, Mr. Jorgenson requested the same information he had

70 In the Matter of Local Union 1001 2004

previously requested from Mr. Capasso, i.e., evidence of the nature and extent

of their employment, hours worked, compensation received, and whether the

employment was full or part-time. Id.

189. All of the aforementioned persons were ultimately deemed

ineligible for Pension and Health Benefits, which they appealed. The

Trustees’ Joint Appeals Committee denied all of the appeals in conjunction

with Mr. Capasso’s appeal for the same reasons stated supra at ¶¶ 141, 143.

See GEB Ex. 16 (Joint Appeals Decision).

Additional Evidence Supporting the Need for Trusteeship

190. In Charge Seven, the GEB Attorney alleges that a Trusteeship over

Local 1001 is necessary to carry out legitimate objectives and protect Local

1001 as an institution, reading as follows:

The “objects” of Local Unions are set forth in Article II,

Section 1 of the Uniform Local Union Constitution (“ULUC”)

and include the responsibility “[t]o conduct its affairs in a

manner which would most tend to enhance, conserve and

protect the welfare and interest of the International Union, its

affiliates and members.” ULUC Article II, § 1(c).

In light of the evidence developed by the LIUNA Inspector

General and the facts set forth in the above paragraphs, it is

necessary to place Local 1001 under trusteeship to carry out

the legitimate objects of the union and to protect Local 1001

as an institution. Given the influence of organized crime, lack

of democratic practices and financial misconduct., which have

impaired the Local’s ability to accomplish the basic tasks

required for the operation of the local and which threaten to

unduly burden the time and resources of the General

President, the Independent Hearing Officer and the Chicago

District Council, Local 1001 is currently unable to carry out

the legitimate objects of the union.

By placing Local 1001 under trusteeship, LIUNA will be able

to protect Local 1001 as an institution by conducting its affairs

in a manner that would most tend to enhance, conserve and

protect the welfare and interest of the International Union, its

affiliates and members.

Trusteeship Complaint, ¶¶ 57 -59 (IHO Dkt. tab 2).

Retention of Attorney DeBofsky Relating to Capasso’s Appeal of

the Laborers’ Pension Fund Denial of Benefits

71 In the Matter of Local Union 1001 2004

191. On June 24, 2002, Mark DeBofsky, Esquire (DeBofsky), met with

Peter Faraci and Judge Leighton regarding “issues raised by Mr. Capasso’s

claims for pension benefits.” Local 1001 Ex. 56 (Letter from Mark D.

DeBofsky to Peter S. Faraci of 6/25/02).

192. In a letter dated the following day, Mr. DeBofsky stated, “Since

Mr. Capasso is already represented by counsel, it is presumed that counsel

will adequately protect his interest in appealing the Laborers’ Pension Fund

determination of non-qualification for pension.” Id. Mr. DeBofsky then

agreed to work with Mr. Faraci and Judge Leighton, ostensibly to represent

the Local’s interest in Capasso’s “appeal because of its belief that it was in

compliance with the Laborers’ Pension Fund rules and governing trust as well

as concern that an adverse determination by the Fund may have repercussions

against the Local.” Id.

193. On October 10, 2002, prior to the Benefit Funds’ Joint Appeals

Committee final resolution regarding the eligibility of certain individuals to

participate in the Benefit Funds, Mr. DeBofsky filed a declaratory judgment

action on behalf of Local 1001 in the United States District Court for the

Northern District of Illinois. See GEB Ex. 14. Local 1001’s lawsuit

challenged the denial of individual claimants’ pension and welfare eligibility.

Id. As even Mr. DeBofsky conceded at the hearing, the clear beneficiaries of

a successful lawsuit were the claimants, not Local 1001. Tr. 1043:1 – 1044:2

(DEBOFSKY).

194. It does not escape notice that Mr. Capasso, nor any of the other

claimants, did not personally file the federal lawsuit on their own behalf, as

they would be required to personally expend funds to pay for it.

195. Mr. DeBofsky attempted to explain that the money expended on

the lawsuit would have been refunded to Local 1001 if it was successful;

ironically, the Local stood to gain money if the lawsuit were unsuccessful

because it would no longer pay contributions for the unsalaried officers.

196. Ultimately, the action was unsuccessful. See GEB Ex. 17, GEB

Ex. 18. At a minimum, Mr. DeBofsky’s services cost the Local $7,500.00.

Expenses Related to Monitoring the June 2003 Officers’ Election

197. During the election following Bruno Caruso’s expulsion from

LIUNA, the Executive Board of Local 1001 made much ado about

monitoring/certifying/legitimizing the June 2003 Officers’ Election.

198. As noted supra ¶ 56, the Executive Board retained the services of

Kurth Lampe “to oversee the process of Nomination, Eligibility Verification

72 In the Matter of Local Union 1001 2004

and the Election and Ballot Counting as well as the Election Reporting

Process.” Local 1001 Ex. 16 (Memorandum from Kitty Kurth to LIUNA

Local 1001 of 4/7/03). Kurth Lampe’s fee for the project, excluding printing

and mailing costs, was “$3,500 per month for the months of April, May and

June.” Id.

199. Local 1001 expended $10,500 for Kurth Lampe to oversee its June

2003 Officers’ Election. Id.

200. There is no evidence on this record suggesting that the Local had

ever engaged services comparable to Kurth Lampe’s in prior elections. The

IHO is unclear why the Local would go to the unprecedented expense of

engaging these services, absent an effort to impart a presumption of

legitimacy to its election and negate issues that may become controversial in

the apparent Trusteeship situation already progressing with the International.

DISCUSSION

Full and Fair Hearing Requirements

LIUNA has a duty, under Article IX, Section 7 of the International

Constitution, to provide Local 1001 with a fair hearing when imposing a

trusteeship. See International Constitution, Article IX, Section 7. A full and

fair hearing implies the procedural requirements of notice of charges and date

and nature of hearing, presentation of evidence and witnesses in support of the

reasons for imposing trusteeship, with opportunity for cross-examination, and

opportunity to present evidence in rebuttal. Id., see also 29 U.S.C. §§ 401 et

seq., 462, 464. If hearing is conducted fairly and in accordance with the

purposes outlined in 20 U.S.C. § 462, a presumption of regularity will attach.

See, e.g., Luggage Workers Union v. International Leather Goods, 316 F.

Supp. 500 (D. Del. 1970); Benda v. Grand Lodge of Int’l Assoc. of Machinists

& Aerospace Workers, 584 F.2d 308 (CA9 Cal), cert dismd 441 U.S. 937, 99

S. Ct. 2065.

In this matter, the GEB Attorney presented Local 1001 with the 60

paragraph Trusteeship Complaint, which clearly delineated the alleged

grounds for trusteeship. See Trusteeship Complaint (IHO Dkt. tab 2). On

September 25, 2003, the GEB Attorney notified every member of Local 1001

of the date, time and place of the hearing Local about the time and place of the

hearing, approximately 50 days before the scheduled hearing date. Id. Thus,

the GEB Attorney clearly fulfilled LIUNA notification requirements.

Prior to the hearing, Local 1001 vigorously objected to the IHO’s denial

of its request for an extension of the Trusteeship hearing to accommodate Mr.

Webb’s schedule on the basis that it denied the Local lead counsel of its

choosing. The IHO views the Executive Board’s insistence on Mr. Webb as

73 In the Matter of Local Union 1001 2004

lead trial counsel, in light of his unavailability and limited participation in the

Trusteeship proceedings, as an apparent attempt to delay further the

Trusteeship hearing.34 In his stead, Messrs. Lydon, Mendenhall, Faraci, and

Judge Leighton competently represented Local 1001. The record is clear,

based on their firm’s correspondence and billings, that both law firms were

working on the case throughout 2003, months before the GEB Attorney

actually filed the Trusteeship Complaint; thus, although not required, the

Local effectively had counsel of its choice. See GEB Exs. 44, 46, 47, 48, 49,

50, 51, 52.

During the hearing, the GEB Attorney and counsel for Local 1001 both

called five witnesses, not including the seven Local 1001 members who

testified. Local 1001 fully availed itself of the opportunity to cross-examine

the witnesses. The GEB Attorney presented 52 exhibits, Local 1001

submitted 66 exhibits, and the IHO admitted all proffered evidence into the

record. The five-day hearing resulted in a written transcript of 1091 pages of

testimony. Most of the members of the Executive Board were present every

day, and many members attended the December hearing dates. Both the GEB

Attorney and counsel for Local 1001 filed comprehensive Post-Hearing Briefs

and Reply Briefs.

The IHO adhered to the requirements for a full and fair hearing, as

outlined under federal law. Numerous federal courts have upheld the IHO’s

application of the federal standards. See, e.g., Local 43 v. LIUNA at 9; Dennis

Gleason, et al. v. Laborers’ International Union of North America, No. 00-

CV-2341 (C.D. Ill. May 14, 2002); Laborers’ International Union of North

America, et al. v. Caruso, et al., 1998 U.S. Dist. LEXIS 9708 (N.D. Ill. June

18, 1998), aff’d by 197 F.3d 1195, 1999 U.S. App. LEXIS 33429 (7th Cir. Ill.

34 When Local 1001 selected Mr. Webb as lead trial counsel, he was

representing Citadel Investments Group, LLC in an ongoing arbitration, the

remaining portion of which was scheduled for arbitration on November 9-11,

2003. Local 1001’s Reply Brief in Support of Its Motion to Extend the

Hearing Date of 10/21/03 (IHO Dkt. tab 7). In addition, Mr. Webb

represented Microsoft Corporation in an ongoing complex litigation matter in

the United States District Court for the Western District of Washington

(Seattle), scheduled for trial on December 1, 2003. Id. Mr. Webb was

scheduled to move to Seattle shortly after completion of the Citadel arbitration

for intense trial preparation. Id. As a result, Local 1001 requested a delay in

the hearing date until “sometime in January 2004. Id. Moreover, the evidence

confirms that Mr. Webb had not meaningfully engaged in the Trusteeship

proceedings up until that time.

74 In the Matter of Local Union 1001 2004

1999). The IHO has considered all of the arguments advanced at the

Trusteeship hearing and in the parties’ briefings, whether or not specifically

addressed herein. Arguments not discussed in this opinion have been

considered and found both to be unpersuasive and not to warrant extended

discussion. Cf. In the Matter of Fresina, et al., 1998 A.O. 115, 141 n.11 (98-

019-IHO).

Permitting LCN Influence Over Local 1001

Local 1001 has had a long history of organized crime influence. Due to

the insidious nature of organized crime, once it has infiltrated a labor

organization, organized crime influence does not disappear on its own despite

the removal of some officials. See Chicago District Council, 97-30T; Local

1058, 00-08T. Therefore, the IHO cannot ignore the organized crime

connections in Local 1001, as late as the administration of Bruno Caruso in

2001.

The IHO observes that the situation within Local 1001 is factually similar

to the circumstances that led to the imposition of Supervision over Local

1058, in Pittsburgh. In that matter, there was significant association of the

union’s officers with organized figures during the 1970’s until 1984. See In

the Matter of Local 1058, IHO Order and Memorandum, 99-08T (March 9,

2001). After 1984, specific contacts between the officers of Local 1058 and

organized crime figures were sporadic and isolated. Despite limited contact

between Union officers and organized crime figures in the years immediately

preceding the hearing, the IHO noted that only four persons held the position

of Business Manager from 1970 through 2000. Those individuals met

regularly with organized crime figures from the 1970’s through 1984.

Furthermore, Local 1058 held uncontested elections for 30 years. Based upon

the combination of the organized connections of the prior officers and those

still in office, and the lack of contested elections, Local 1058 was placed in

Supervision. Despite somewhat historical organized crime connections, the

prior association of the former and present officers could not be ignored in the

context of the intent of the LIUNA reform process.

Similarly, here two persons held the combined position of Local 1001

Business Manager/President from 1982 until 2001. Mr. Kumerow and Bruno

Caruso were each proven associates or members of the Chicago Crime family.

See Chicago District Council, 97-30T; Bruno Caruso, 99-12D, aff’d, 2001

A.O. 235. Mr. Kumerow was the son-in-law of Anthony Accardo, at that time

the head of the Chicago crime family whose influence in Chicago LIUNA

affairs is well documented. Despite having no background in the labor

movement, Mr. Kumerow became the Business Manager of the most powerful

LIUNA Local in Chicago. In 1994, after holding office for 12 years and

running unopposed for three elections, he suddenly resigned two months after

his third election and shortly after the death of his father-in-law.

75 In the Matter of Local Union 1001 2004

The Local 1001 Executive Board unanimously appointed Bruno Caruso

following Mr. Kumerow’s resignation. Mr. Caruso served as Business

Manager from 1994 until 2001, when his LIUNA membership was

permanently revoked for his organized crime association. See Bruno Caruso,

99-12D, aff’d, 2001 A.O. 235. Thereafter, Local 1001’s Executive Board

unanimously appointed current Business Manager Gironda, Bruno Caruso’s

cousin, as Bruno Caruso’s replacement. Current Business Manager Gironda

was brought to power and promoted by Mr. Kumerow and Bruno Caruso after

being suspended from the City of Chicago for failing to supervise workers in a

no show job scandal. See Bruno Caruso, Chicago District Council, 99-12D, ¶

223.

The IHO views Local 1001’s allegiance to Capasso as equally significant.

While the Business Manager of Local 1001, Mr. Kumerow appointed Mr.

Capasso to an auditor position. The LIUNA Auditor position is a historic relic

left over from the early part of the 20th century when Union officers

maintained all financial records themselves. When, as here, a LIUNA local

employs a CPA to maintain its financial records, there is no required activity

for auditors; the position has no realistic importance. See McGough v. Bohne,

et al., IHO Order and Memorandum, 03-04TB (October 1, 2003).

Nonetheless, once appointed Auditor, Mr. Capasso remained in the

unpaid, part-time position for approximately 19 years, receiving pension and

health and welfare benefits for which the Local expended over $104,000.00.

When the Benefit Funds challenged Mr. Capasso’s pension eligibility, Local

1001 hired an attorney with Local 1001 funds to file a federal lawsuit,

essentially on his behalf. The IHO cannot ignore the connection of the

nomination by Mr. Kumerow to a position that ostensibly afforded Mr.

Capasso a lucrative second pension funded by the Local. The IHO finds such

allegiance disturbing evidence of the ongoing influence of organized crime

within Local 1001.

The organized crime association and presence within Local 1001 is far

more continuous and recent than evidenced in the Local 1058 matter. In

addition, as in Local 1058, there have been no contested Local 1001 elections

for 30 years. These two factors standing alone indicate a need for Trusteeship

over this Local.

Restoration of Democratic Practices

Local 1001’s history of uncontested elections remains undisputed on the

record. While Local 1001 did aver that the membership chose their officers

and elected officers not previously appointed to their positions, the argument

overstates the import of the two solitary occasions when these happenings

occurred. In 30 years, Local 1001 has never had a contested election. In 30

76 In the Matter of Local Union 1001 2004

years, with few exceptions, officers have not completed their terms, but have

resigned voluntarily so that the Executive Board could appoint an interim

office holder who would enter the election as an incumbent. Every candidate

for 30 years has been unopposed.

A great many LIUNA local unions have long periods where elections are

unopposed. Notwithstanding this fact, where there is a demonstrated history

of organized crime influence in the Union, the IHO views unopposed elections

for sustained periods of time with close scrutiny. See Local 1058, CITE. The

IHO does not approach this situation in a vacuum, unfamiliar with the history

of the labor movement in Chicago. The history of the Chicago District

Council and its members is a classic example of the influence of organized

crime in the labor movement. The factual situation of uncontested elections,

described in that decision, is a disturbing picture of what can happen when a

labor union is thoroughly infiltrated by organized crime.

Local 1001 election candidates were often well-recognized crime

associates, which starkly demonstrates how the history of uncontested

elections and mid-term appointments result from the influence of organized

crime and its continuing stronghold on Local 1001. The IHO cannot ignore

the sponsors of some of the officers of Local 1001. The Local’s history of

uncontested elections is the natural outcome of the organized crime influence

within this Local.

The Local’s recent employ of Ms. Kurth and her staff from Kurth Lampe

for the 2003 Officers’ Election did nothing to further the air of legitimacy they

wished to ascribe to their election process. In fact, engaging Kurth Lampe’s

services had the opposite effect. Only when the Inspector General turned his

attention towards the Local, did Local 1001 make a demonstration of

conducting a nomination meeting before a former member of the International

Election Officer’s staff; there is no evidence that the Local ever found it

necessary to engage similar services in past elections. The IHO finds it

difficult to understand why those services were construed necessary for the

wholly uncontested election in 2003. Moreover, the only service that Kurth

Lampe might have performed which would arguably have been beneficial to

the Local, testing candidate eligibility, it failed to carry out with any accuracy.

Mr. Capasso is not working at the calling, and was not and is not

qualified to hold the position of Auditor. Local 1001 argued that Mr. Capasso

qualifies to hold office under Article V, Section 4(c) of the Constitution. That

provision is used expressly to qualify persons who are working at the calling

in the Union movement, such as serving on a joint organizing task force. See

Matter of Local 477 (Dawn DeFraties), No. 01-SEO-13 (May 16, 2001).

LIUNA amended the Constitution in 1991 to specifically exclude office or

clerical personnel in LIUNA locals from working at the calling. See

Constitution, Article V, Section 4(c).

77 In the Matter of Local Union 1001 2004

It follows that an administrative person working in a pension fund would

be even more removed from the calling. “In amending Article V to prohibit

administrative persons from qualifying as working at the calling, the drafters

noted that popularity with members or heavy involvement in Union activities

is not substitute for working at the calling as a requirement for office.” In re

Local 500, IHO Order and Memorandum for Reconsideration, 98-45P

(October 27, 1998), citing Protest of McGregor, Local 597, Hearings Panel

Decision, Case C-10 (adopted by the General Executive Board August 17,

1993). Thus, a person working in an administrative capacity in a pension or

welfare fund is not working at the calling. Moreover, in his attempt to justify

receipt of a second pension from the Benefit Funds, Mr. Capasso was required

to inform the Pension Fund that he would not be receiving two pensions from

the laboring industry. Mr. Capasso wrote, “If I were asked ‘do I work in the

laboring industry,’ I would have to answer absolutely not.” See GEB Ex. 12

(Letter from James Capasso to Kathleen McCarthy of 3/27/02).

Financial Irregularities

Improper Contributions to Benefit Funds

In the Trusteeship Complaint, the GEB Attorney charged that Local 1001

made improper pension and health and welfare contributions on behalf of

individuals who are ineligible to receive such contributions in violation of

duties imposed by the LIUNA EPC and by 29 U.S.C. § 501(a) and (c). The

charges relate to Local 1001’s payment of substantial contributions to the

Benefit Funds, over a period of at least 18 years, on behalf of 33 individuals

who occupied part-time officer positions and were not on the Local 1001

payroll. Local 1001 defended the propriety of these payments, alleging, inter

alia, an oral understanding, as well as reliance upon custom and practice, with

the Benefit Funds allowing them to pay contributions on the part of unpaid

officers.

Local 1001 averred that it relied on past “custom and practice” when

making its contributions to the Benefit Funds by averring that the Benefit

Funds were aware of the contributions and accepted them as proper and, if the

contributions were improper, the Benefit Funds had the ultimate responsibility

for halting the payments. The IHO is unpersuaded for three reasons. First, as

discussed infra, and as uncontrovertibly stated by Mr. Jorgenson at the

hearing, the Benefit Funds were patently unaware of any such custom and

practice. Thorough investigation on the part of the Benefit Funds revealed no

information supporting Local 1001’s claim. Second, as even the Havey firm

was careful to mention in its November 1998 Audit Report, “the propriety of

the contributions is the responsibility of the employer’s management.” GEB

Ex. 26 (November 1998 Havey Audit). The Local 1001 Executive Board had

a fiduciary duty to the membership of the Local, under 29 U.S.C. § 501(a), to

78 In the Matter of Local Union 1001 2004

protect the assets of the Local. This includes investigating the propriety of the

Union expenditures. Third, the audit performed by Havey did not put the

Funds on notice of any impropriety, as Havey’s report was inaccurate.

Local 1001 also asserted that there was an oral understanding between the

Benefit Funds and the Local, which permitted contributions on behalf of

uncompensated officers. Local 1001 supported this contention by asserting

that, since 1982, it was authorized by the Benefit Funds to pay contributions

for Executive Board members, Auditors, and the office staff at a rate of 120

hours per month rather than 160. According to Local 1001, the agreement not

only authorized the reduction of hours for clerical staff, but also evidenced the

Benefit Funds’ awareness that uncompensated officers were receiving

contributions on their behalf.

In support of the averment that there was an agreement with the Benefit

Funds, Local 1001 produced March 18, 1982 Executive Board Meeting

Minutes and an affidavit from Thomas Crivellone, who was a field

representative for the Benefit Funds from 1978 through 1983. See Local 1001

Ex. 27 (Local 1001 March 18, 1982 Executive Board Meeting Minutes);

Local 1001 Ex. 42 (Affidavit of Thomas Crivellone of 1/22/03). The March

18, 1982 Executive Board Meeting Minutes reflect,

Chairman [Ernest Kumerow] reported that in the interest of

cutting expenses he was able to get approval from the Health

and Welfare Fund to pay 120 hours instead of 160 hours per

month welfare and pension fund for Executive Board

Members, Auditors, . . . and the office staff, effective the

month of February. The Board agreed that this will add up to

substantial savings. The Board approved the action taken.

Local 1001 Ex. 27 (Local 1001 March 18, 1982 Executive Board Meeting

Minutes). Mr. Crivellone’s affidavit states, “In 1982, as the result of a

discussion with James Murphy, the Pension and Welfare Funds’

Administrator, Local 1001 was permitted to reduce the hours of contribution

for salaried and/or hourly wage earners and non-salaried and non-wage

earners to 120 hours per month.”

The IHO views this evidence with great skepticism. Local 1001’s

Executive Board Minutes, if confirmation of anything at all, are only proof

that Mr. Kumerow made certain statements at that particular meeting. Mr.

Murphy, the former Administrator, who the Local attributes with acceptance

of the alleged agreement, did not testify at the hearing, nor were any of his

staff able to recall such an agreement. See supra, ¶ 185. Nothing in this

record verifies acceptance of the agreement by the Benefit Funds. Mr.

Crivellone’s affidavit, made some more than 20 years after the alleged

agreement was made, adds nothing to the Local’s argument. Mr. Crivellone’s

79 In the Matter of Local Union 1001 2004

statement runs entirely counter to the hearing testimony of Mr. Jorgenson,

who stated that the Trustees and office staff, past and present, were unaware

of the practice until the first Levinson Simon audit revealed the discrepancies.

Furthermore, the alleged oral agreement is a clear violation of ERISA.

Title 29 USCS § 186(c)(5) requires that payments from employer to employee

benefit trust funds be made according to a written agreement setting forth the

detailed basis on which such payments are to be made. See 29 U.S.C. §

186(c)(5). The requirement of written agreement for employer contributions

to trust funds, binding trusts, and existence of beneficiaries’ legal rights to

contributions is not satisfied by slightly different versions of written

agreements never accepted by both parties, by oral collateral agreement, by

oral modification of written trust agreement, or by unratified side-letter

agreement made by union official without authority. See Central States

Southeast & Southwest Areas Pension Fund v Kraftco, Inc., 589 F Supp 1061

(1984, MD Tenn), affd without op 780 F2d 1020 (1985, CA6 Tenn) and affd

without op 780 F2d 1022 (1985, CA6 Tenn) and revd on other grounds799

F2d 1098 (1986, CA6 Tenn). Strict compliance with the terms of § 186(c) is

required to settle a qualifying Taft-Hartley trust. See Bricklayers, Masons &

Plasterers International Union v Stuart Plastering Co., 512 F2d 1017 (1975,

CA5 Fla). Section 186(c)(5) does not allow an employer to contribute to a

trust fund on behalf of, or for benefit of, individuals that are not employees of

contributing employer. See Mazzei v Rock-N-Around Trucking, Inc., 246 F3d

956 (CA7 Ill 2001).

Regardless of whether the purported oral agreement with the Benefit

Funds actually existed or the Benefit Funds’ former Administrator, Mr.

Murphy, was somehow complicit in it, the arrangement violated the terms of

the Trust Agreement, as outline supra ¶¶ 141, 143, and ERISA. The Local

produced no written agreement with the Benefit Funds, which would have

allowed it to either underreport certain clerical hours or pay contributions on

behalf of uncompensated officers. The Benefit Funds’ Administrator

explicitly denied any agreement existed.

Local 1001 further attempted to justify the Benefit Fund contribution

payments because the Executive Board adequately disclosed the contributions

to the membership. In support of that averment, the Local offered the

testimony of Attorney Gittler. Mr. Gittler stated that the one line sentence,

“Historically contributions for health and welfare and pension benefits have

been made for the following positions: Sergeant at Arms, Auditors, Executive

Board Members”, which was read every four years during the nomination

meetings at the end of a resolution designating officer salaries, provided

adequate notice to the membership regarding the benefit payments. Tr.

934:11-23 (GITTLER). Although Mr. Gittler opined this was adequate

disclosure to the membership, the IHO rejects his opinion as having no basis

in law or fact.

80 In the Matter of Local Union 1001 2004

The recitation, “historically contributions for health and welfare and

pension benefits,” stated none of the pertinent facts necessary to apprise the

membership of the cost or the propriety of the contributions, the number of

positions funded, or the duration of the payments. See, e.g. GEB Ex.23 (May

1991 Nomination Meeting Minutes). The simple statement, added after the

announcement of the officers’ salaries, was not a disclosure. It was

misleading. The statement gave no indication that the law required persons

receiving benefit contributions be salaried or hourly employees. The

statement gave no indication that, by virtue of the contributions, unsalaried

officers would be eligible for second pensions, which they were ineligible for

regardless of the membership vote. This tactic of inserting a portion of a

proposal in a motion, making it appear that the membership knowingly

approved of it, is from the old labor school of the 1940’s and 1950’s. It is

precisely the type of conduct the regulations outlined in the LMRDA are

designed to prevent.

Most importantly, the passage of this motion could not legitimatize the

procedure. The general membership may not condone an illegal action,

regardless of the disclosure. See 29 USC § 501(a) (“A general exculpatory

provision in the constitution and bylaws of such a labor organization or a

general exculpatory resolution of a governing body purporting to relieve any

such person of liability for breach of the duties declared by this section shall

be void as against public policy.”). Local 1001’s reliance on McNamara v.

Johnson, 522 F.2d 1157 (7th Cir. 1975), is misplaced.

Local 1001’s several explanations as to the legitimacy of the contribution

payments to the Benefit Funds lack any credibility. Even absent the showing

of fiduciary misconduct and other grounds relied upon by the GEB Attorney

to establish grounds for Trusteeship over Local 1001, demonstrated financial

malpractice is a sufficient and independent basis for imposing a trusteeship

over the Local. See In re Trusteeship of Local Union 73, 1996 A.O. 5, 11 (95-

013-TB) (affirming trusteeship based, in part, on failure of local to comply

with instructions from LIUNA to adequately document expenditures or to

adopt appropriate accounting systems to distinguish between personal and

business uses of union assets); International Bhd of Boilermakers v. Local

Lodge 714, 845 F.2d 687, 693 (7th Cir. 1988) (cases where local officers are

lining their own pockets constituted financial malpractice under trusteeship

provisions of LMRDA); IBT v. Local Union 705, 144 L.R.R.M. (BNA) 2676

(N.D. Ill. 1993) (Local union compelled to comply with trusteeship based on

financial malpractice of executive board including improper distribution of

funds). The IHO concludes that position of the management of the Union, in

continuing to assert the propriety of such a blatant misuse of union funds in

face of compelling evidence to the contrary, is a solid reason for placing the

union in trusteeship and replacing that management.

81 In the Matter of Local Union 1001 2004

Evidence of Misappropriation

The GEB Attorney further charged that the conduct discussed supra, also

supports finding that Local 1001 Local 1001 operated its affairs through a

pattern of racketeering activity; to wit; embezzlement under 29 U.S.C. §

501(a) and (c), which is defined as “barred conduct” under the LIUNA EPC.

In order to prove a violation of 29, § 501(c), the GEB Attorney must

demonstrate that the officers acted with specific criminal intent to deprive the

Union of its funds and that they converted the funds to their own use or the

use of another. See United States v. Welch, 728 F.2d 1113, (8th Cir. 1984);

United States v. Thoradarson, 646 F.2d 1323 (9th Cir.), cert. denied, 454 U.S.

1055 (1981). “If union official profits personally through the use or receipt of

union funds, . . . the official bears the burden of proving that the transaction

was validly authorized in accordance with union’s constitution and bylaws

after adequate disclose, and it does not exceed fair range of reasonableness.”

Teamsters, Chauffeurs, Warehousemen and Helpers, Local 764 v.

Greenawalt, et al., 919 F. Supp. 774 (M.D. Pa. 1996).

In United States v. Oliva, the Third Circuit Court of Appeals adopted a

totality of the circumstances test when determining the requisite fraudulent

intent. United States v. Oliva, 46 F.3d 320, 324 (3d Cir. 1995). The Court of

Appeals upheld the District Court’s jury instruction, which read in pertinent

part:

. . . that in determining the issues of knowledge and fraudulent

intent, you may consider any statement made and acts done by

the defendant . . . as well as all of the facts and circumstances

in evidence which surround or attend the defendant’s action or

statements, or which may aid you in determining the

defendant’s state of mind.

Id. Accordingly, the IHO applies the totality of the circumstances test in

determining the specific intent required by 29 U.S.C. § 501(c). See, e.g., In

the Matter of Dennis Martire, IHO Order and Memorandum, 96-54D (April

29, 1997); In the Matter of Rene Torres, IHO Order and Memorandum, 98-

05D (July 22, 1998); In the Matter of Peter J. Fosco, IHO Order and

Memorandum 98-65D (October 14, 1999). Therefore, “fraudulent intent may

be inferred from the circumstances surrounding the transaction[s] without a

showing of specific intent . . . .” In the Matter of Gleason, 2000 A.O. 151,

158 (00-006-IHO). Fraudulent intent can be proved “by showing that [the]

defendant was sufficiently aware of the facts that he was acting wrongfully

and in contravention of the trust placed in him by the union and its members.”

Id., citing, Welch, 728 F.2d at 1116 (citations and internal quotations omitted).

Local 1001 did not have valid authorization to pay contributions to the

Benefit Funds for uncompensated officers based on custom and practice, an

82 In the Matter of Local Union 1001 2004

alleged oral agreement, or membership approval. Listing ineligible persons

on an employer contribution report and then paying contributions on their

behalf to a benefit plan is tantamount to the misapplication of the general

assets of the Union. Tr. 444:3-7 (MARIA). Local 1001 contributions to the

Benefit Funds are paid from the General Fund of the Local. Tr. 451:13-14

(MARIA).

Further, the contributions paid on behalf of the part-time, uncompensated

Local officers far exceeded the fair range of reasonableness. These officer

positions traditionally require attendance at monthly meetings for which

LIUNA locals offer the officers a small monthly stipend. Under no theory

could uncompensated part-time officers qualify for the receipt of a full

pension or welfare benefits. Nevertheless, for at least 18 years, the Local has

made sizeable financial contributions on behalf of these individuals. While

the reporting to the Department of Labor that the officers received no

compensation, the Local simultaneously filed employer contribution reports

with the Benefit Funds suggesting that the same individuals had worked actual

hours consistent with full-time employment. See GEB Ex. 6 (Local 1001

Local LM-2 Reports 1982 -2002); GEB Ex. 8 (Misc. Local 1001 Employer

Contribution Reports to the Benefit Funds). All of the part-time officers had

full-time employment elsewhere.

A prime example of this illegal practice is the payment of pension and

welfare contributions for Mr. Capasso. Since 1986, Mr. Capasso has been

employed as the full-time Executive Director of the City Pension Fund. The

City Pension Fund pays Mr. Capasso a salary based on his full-time

administration, and provides him with full pension and welfare benefits. Prior

to his employee as Executive Director, Mr. Capasso was full-time employed

and receiving benefits from the City of Chicago in another position.

Nonetheless, when he was appointed as a Local 1001 auditor to fill a vacancy

in 1984, the Local commenced paying contributions to the Benefit Funds that

would ultimately have resulted in Mr. Capasso receiving second full pension

and welfare benefits had his claim not been denied.

The fact that Mr. Capasso’s position as Auditor had no real attendant

responsibilities has been previously examined, supra. Aware that the position

required no actual duties, Local 1001 attempted to justify the payments to Mr.

Capasso on the basis that his position as Auditor made him available for

advice and counsel to the membership and officers on various matters, such as

pension advice. However, supplying advice on pension matters is part of Mr.

Capasso’s full-time job with the City Benefit Fund. Mr. Capasso also

contended he supplied advice about laying asphalt, based on his experience

working labor during the summers when he was in college over 40 years ago.

If the LIUNA members working today require advice on laying blacktop from

someone who worked a summer job more than 40 years ago, the skills of this

Union are in dire shape. In short, there is absolutely no reasonable basis on

83 In the Matter of Local Union 1001 2004

which the Executive Board could have concluded that Mr. Capasso should

become a fully-vested pensioner by virtue of his Auditor position.

The IHO has no difficulty concluding that the enormous contributions the

Local has made on of behalf of unpaid officers wrongfully deprived the Union

of its assets and was, at best, unreasonable. In addition, evidence that the

Local under-reported over $80,000 in contributions for clerical employees

supports a further conclusion that the Local was, in fact, funding its

contributions for ineligible participants by purposely reducing the number of

hours reported for the office staff. In some, the officers have violated their

fiduciary duty and misappropriated funds.

ERISA Reporting Violations

The GEB Attorney has also charged that Local 1001’s filing of

untruthful, inaccurate and incomplete contribution reports on a monthly basis

for a period of up to 18 years violates 18 U.S.C. § 1027 and offers further

proof that the Trusteeship is necessary. Section 1027 of Title 18 specifically

prohibits the making of false statements to ERISA funds in connection with

reports filed by employers to those funds. The employer contribution reports

submitted to the Benefit Funds by Local 1001, in particular Mr. Gironda,

contain a certification that must be signed by an officer of the employer. See,

e.g., GEB Ex. 8 (Misc. Local 1001 Employer Contribution Reports).

There is no dispute on this record whether Mr. Giranda, and other officers

of Local 1001 before him, signed the contribution report certifications on a

monthly basis before submitting them to the Benefit Funds. Rather, Local

1001 contended that the information contained in the reports was and is not

false, and therefore that the certifications are true and correct. In support of

that averment, Local 1001 presented convoluted theories under which the

unpaid officers were both employees, and the “actual hours” reported did not

necessarily mean actual hours that the officers worked. This argument is

frivolous.

The Benefit Funds’ require a certification, which reads “we hereby certify

that this report includes all hours worked by all laborers in our employee.”

See, e.g., GEB Ex. 8 (Misc. Local 1001 Employer Contribution Reports). The

plain language of the certification speaks for itself. In addition, the

certification report clearly required, at least until 2002, that employers list

“actual hours worked” in weekly columns, followed by a monthly total.

Although the form physically changed in 2002, omitting the necessity to input

weekly figures, the input for total monthly hours worked, as well as the

certification that the report states those hours accurately, remained unchanged.

There is nothing on the report that could possibly indicate that Local 1001 was

required to report anything less than or other than actual hours worked.

Finally, the officers were well aware of the vesting requirements of the

84 In the Matter of Local Union 1001 2004

Benefit Funds, which required an employee to work a specified minimum

hours before receiving benefits. For the Benefit Funds’ information, officials

at Local 1001 were required to certify to the Benefit Funds that the individuals

worked and were paid, for example in the case of the Pension Fund, over 870

hours per year at Local 1001. To accomplish the vesting of unpaid officers,

Local 1001 officials falsely certified that those individuals worked 120 actual

hours per month in violation of 29 USC 1027.

Conduct Inconsistent with LIUNA’s Internal Reform Process

During the investigation of Local 1001 conducted by the Inspector

General’s Office, several members of Local 1001 refused to cooperate with

requests for interviews by the Inspector General in furtherance of ongoing

disciplinary investigations. See GEB Ex. 40 (Letter from Robert D. Luskin to

Peter Faraci of 11/10/03). Each of these members told the LIUNA Inspector

that they refused to submit to any interviews upon the advice of Mr. Faraci.

Id. In a letter responding to Inspector O’Rourke’s “attempt[] to question the

employees and members of the Executive Board of Local 1001 about the

trusteeship matter currently before the Independent Hearing Officer,” Mr.

Faraci contended that he had “been retained to represent the Executive Board

and employees of Local 1001 for some time now.” GEB Ex. 39 (Letter from

Peter S. Faraci to John J. O’Rourke of 11/7/03). Specifically, Mr. Faraci

averred, “Any communication you seek to have with the employees or

Executive Board of Local 1001 must be directed through my office. Do not

attempt to contact them without my knowledge and approval.” Id.

Mr. Faraci’s assertion and the member’s refusal to cooperate do not

comport with stated LIUNA policy. LIUNA adopted The Revised General

Executive Board’s Policy on Payment of Legal Fees with Union Funds (The

GEB Policy on Payment of Legal Fees) on February 5, 2000. See EPC,

Revised Policy on Payment of Legal Fees, p.14. “The GEB Policy on

Payment of Legal Fees flatly prohibits the use of union funds to represent

individual union members in disciplinary investigations or prosecutions.”

GEB Ex. 40 (Letter from Robert D. Luskin to Peter Faraci of 11/10/03). As

counsel for Local 1001, Mr. Faraci could not advise individual members

without violating GEB Policy and raising grounds for disqualifying his further

representation of the Local. Id. Moreover, Mr. Faraci’s instruction

contradicted each member’s affirmative duty to cooperate fully with the

Inspector General, irrespective of advice of counsel, as clearly delineated in

LIUNA’s EDP. Id., see also EDP, Section 4, pp. 30-31.

Both the IHO and the Appellate Officer have made clear on numerous

occasions that members’ refusal to cooperate with the Office of the Inspector

General or the GEB Attorney will not be tolerated. See In the Matter of Caci,

1998 A.O. 55, 69-70 (97-016-IHO, 98-009-IHO, 98-012-IHO) (entitling GEB

Attorney to exercise powers conferred in EDP without interference); In the

85 In the Matter of Local Union 1001 2004

Matter of Martire, 1997 A.O. 81, 93 (97-008-IHO) (obligated to answer IG

questions fully and truthfully, knowing defiance subject to discipline); In the

Matter of Garcia, 1996 A.O. 105 (96-010-IHO) (interfering with the IG’s

investigation by forbidding subordinates to provide information under threat

of termination constitutes obstruction); In the Matter of Anthony Franco, IHO

Order and Memorandum, 02-01D (December 16, 2002) (burdening charged

party at all times with full cooperation in every particular with those

representing Union as a body); In the Matter of Prudencio Martinez, IHO

Order and Memorandum, 01-18D (August 8, 2002) (obstructing IGO by

providing investigator falsified minutes justifying fraudulent severance plan);

In the Matter of Joseph Truncale, IHO Order and Memorandum, 00-54D

(Apr. 24, 2001) (refusing to appear for deposition improper and warrants

discipline );In the Matter of Baker, Herod & Ventura, IHO Order and

Memorandum, 98-01D (May 27, 1998) (prohibiting members’ choosing

which investigation to cooperate with or ignoring IG requests for interview);

In the Matter of Panepinto, IHO Order and Memorandum, 97-10D (July 3,

1997) (refusing IG interview or GEB deposition constitutes barred conduct);

In the Matter of Catania, IHO Order and Memorandum, In the Matter of

Joseph P. Crincoli, IHO Order and Memorandum, 97-04D (Oct. 27, 1997)

(integrity of LIUNA process depends upon ability of IG and GEB Attorney to

obtain truthful interview and deposition answers; members cannot ignore

official investigation); 96-86D (Sept. 25, 1997) (refusing GEB Attorney or IG

interview plain obstruction and barred conduct). Given the circumstances

involved in this matter, the IHO now reiterates a strong admonishment against

members or attorneys attempting to obviate the unambiguous authority vested

in the Offices of the Inspector General and GEB Attorney as part of LIUNA’s

internal reform process. See EDP, Sections 3 & 4. Every LIUNA member is

obligated “to observe, conform and comply with . . . all of the rules,

regulations, policies, practices and lawful orders” of LIUNA and “to refrain

from interfering with the proper conduct of all the business” of the Union.

Constitution, Article III, Sections 3(b) & (d).

In sum, Local 1001 has impressed the IHO that the Executive Board has

hindered the spirit and intent of LIUNA’s Internal Reform Movement. Prior

to and throughout the Trusteeship proceedings in this matter, Local 1001 has

maintained an antagonistic stance towards the International Union, which is

inconsistent with the ideals that the reform movement has adopted since 1995.

The IHO would be errant if failing to note critically that this uncooperative

posture, which has permeated Local 1001’s dealings with the International

Union, is an unacceptable deterrent to the sweeping reforms LIUNA has

undertaken.

CONCLUSIONS

1. There is a preponderance of the evidence that Local 1001 continues

to be infiltrated by organized crime. This is based upon the fact that the two

86 In the Matter of Local Union 1001 2004

Business Managers/Presidents, Ernest Kumerow and Bruno Carouso, who

have held those offices from 1984 to 2001, have been recognized organized

crime associates. Bruno Caruso, who held office from 1994 to 2001, was

removed from office by the IHO on charges of being an associate of organized

crime. Once organized crime has infiltrated a union it does not disappear

upon the removal of a suspect officer. Mr. Gironda, the present Business

Manager, was brought to power and promoted by Mr. Kumerow and Bruno

Caruso, after being suspended by the City of Chicago for failure to supervise

personnel in a no show work incident. Mr. Gironda succeeded Bruno Caruso

when he was removed. The combination of the administration of these

individuals and the Local’s history of 30 years without one contested election

presents a situation that the IHO has recognized cannot be ignored in the

LIUNA reform process. The Local 1001 situation is more extreme than that

of Local 1058 in Pittsburgh, which was placed under supervision in a similar

factual situation in 2000.

2. There is a preponderance of the evidence to prove that Local 1001

has paid pension and health and welfare benefits for 33 individuals who were

not salaried employees and had no right to pensions or welfare benefits. The

potential financial ramifications based upon the contributions made and the

benefits paid and potential benefits to be paid are substantial, and constitute

clear evidence of financial malpractice and possible federal criminal

violations. The factual situation of the payments on behalf of James Capasso,

and the local’s attempt to justify them are farcical, and are prime examples of

the need to replace the management structure of Local 1001.

3. As further evidence of financial malpractice, while making the

aforementioned illegal contributions on behalf of Mr. Capasso and others,

Local 1001 made less than required pension and welfare contributions on

behalf of the paid office and secretarial staff of Local 1001. It is a reasonable

inference that the reason for the shortfall payments on behalf of the working

office and secretarial staff was the shortage created by the need to make the

illegal payments on behalf of the unpaid individuals noted above. There is a

preponderance of the evidence that Local 1001 has committed numerous

violations of the ERISA statute.

4. In making these conclusions, the IHO notes a disturbing attitude of

Local 1001 and its professional consultants regarding the LIUNA reform

process. The reform process was instituted to engage all LIUNA personnel

into an active campaign to combat corruption. This is not accomplished as

evidenced in this matter by union officials hiding in the tall grass, hoping their

improper activities will not be noticed, and when discovered, engaging in

patently obvious attempts to justify them. The IHO also notes that the

improper efforts here go to the pension and welfare funds, an area that has not

been the main focus of the independent officers in the reform effort. Let there

87 In the Matter of Local Union 1001 2004

be no doubt that misuse of pension and welfare funds are a subject of this

reform effort, and will be dealt with accordingly.

DECISION

Trusteeship over Local 1001 is necessary to correct organized crime

influence over the Local, correct financial malpractice, and restore democratic

practices.

________________________

PETER F. VAIRA

INDEPENDENT

HEARING OFFICER

Robert D. Luskin, Esquire

Robert M Thomas Jr., Esquire

Mathias A. Lydon, Esquire

Samuel Mendenhall, Esquire

Peter S. Faraci, Esquire

Local 1001

Laborers for JUSTICE© 1997-2004 All Rights reserved. Not for republication on the internet without permission. 
Jim McGough, Director
2615 West Peterson Avenue
Chicago, Il 60659
773-878-1002 (tel)
773-409-1503 (eFax number)
laborers@comcast.net