2. Independent Corroboration of Allegation Independent documentary and circumstantial evidence corroborated the information provided by the Consultant and Service Provider and tended to strengthen the possibility that the Dental/Vision Plan had been used to generate kickbacks or other improper payments. a. Documents Filed by Local 727 Health and Welfare Fund Form 5500s (Annual Return/Report of Employee Benefit Plan) filed by Local 727’s Health and Welfare Plan confirm that between March 1, 1995, and February 29, 2000 (the plan used a fiscal year that began on March 1 of each year), DCM received a total of at least $4,047,680.00 in connection with dental and vision care services provided under the plan. In “Notes to Financial Statements” for the Local 727 Health and Welfare Fund, DCM’s services were described as follows: “Dental and vision benefits are fully insured through Dental Consultants & Management under a group insurance contract.”” The yearly payments to DCM and the number of members covered by the dental/vision part of the plan were reported as follows:12 | No. of Members | Amount Paid to DCM | | | | | | 1995 | 2,326 | $ 760,602.00 | | 1996 | 2,326 | 760,596.00 | | 1997 | 2,326 | 760,602.00 | | 1998 | 2,326 | 798,562.00* | | 1999 | Not provided | 967,318.00 | | | | $4,047,680.00 |
____________ * This amount was reported on the 1998 Form 5500, Schedule A, but in separate reports on changes in net assets available for benefits the amount paid for “group dental and vision coverage” for the 1998 fiscal year was given as $932,168.00.13 10
In the plan’s 5500 for fiscal year 2000, the following appeared in the “Notes to Financial Statements:” “Effective March 1, 2000, dental and vision benefits are provided on a self-funded basis through Leahy and Associates.“14 Inspection of the plan’s 5500s for the two years prior to 1995 (when the Consultant and Service Provider became involved in the provision of dental services to the plan) revealed that in 1993 and 1994 an entity called “IHCS, Inc.” in 1993 and “International Health Care Services, Inc.” in 1994 was paid $760,602.00 in each year to provide what appear to be the same services DCM began providing in 1995. This sum is identical or nearly identical to the amount paid to DCM in 1995 through 1997. The number of members eligible to receive benefits � 2,326 � is also identical to the number reported by DCM in every year from 1995 through 1998; in 1999, no number of members was provided for the dental/vision part of the plan.15 In the 1994 Form 5500, IHCS is listed followed by “c/o Dental Care Plus Management Corp.” A note to the financial statements that year stated that: “Dental and vision benefits are fully insured through Dental Care Plus Management under a group insurance contract.“16 During the period Dental Care Plus Management and IHCS (identified in public databases as its affiliate) were providing services to the Local 727 plan, the president and another officer of Dental Care Plus Management were indicted by federal authorities in Chicago for participating in a kickback scheme with a union business agent in connection with the provision of dental services to the Service Employees International Union Local 73’s benefit plan and found guilty.17 11 Throughout the period 1993 through 2002, the Local 727 Health and Welfare Plan’s Form 5500s concerning the dental/vision services provide little detail. In most years, only the name of the vendor (IHCS, DCM, Leahy) and the gross amount paid to that entity are provided. In the few places where additional details are provided, however, they tend to support the allegation that the fees paid to DCM were excessive. In 1993, for example, IHCS is reported as receiving $760,602.00 � identical to what DCM received two years later � out of which $532,421.00 was deducted for “claims charged,” leaving a total retention to IHCS of $228,181.00, all of which was listed under the category: “Administrative service or other fees.”18 A 30 percent retention rate, according to the Consultant, is excessive by any standard and would be especially so given the little that was required to administer the plan during the years DCM was involved with it. From 1994 through 1999, dental/vision services were classified as “nonexperience�rated contracts,” and no figure was provided for “Administrative service or other fees.” Also, there was an entry of $27.25 in the category “Premium rate or subscription charge” for 1994 through 1998. This is very close to the $28.00 per member per month amount the Consultant and Service Provider reported learning about for the first time in 1999 or 2000, which made them suspicious because of the large gap between what DCM was receiving and what the dentists were paid. The only additional detail reported in this category in the 5500s for 1995-1998 was to allocate the $27.25 “[p]remium rate or subscription charge” on a ratio of $21.50 per month per member for dental and $5.75 per month per member for vision.19 12 The Form 5500s filed by the Local 727 Health and Welfare Plan since the termination of DCM’s contract in March 2000 are even less detailed concerning dental and vision services than their predecessors. The gross expenditures for these services are reported as follows: 2000 | � $ 599, 857.00 | 2001 | � 809,216.00 | 2002 | � 1,037,930.0020 |
It is not clear what role Leahy and Associates plays in connection with the provision of dental and vision services. The 2002 Form 5500 reported that Leahy and Associates received $95,059.00 as a “consultant.” As discussed elsewhere (see discussion of Leahy & Associates in Appendix, Tab 9), the principal figure in the firm, John J. Leahy, and another Leahy & Associates officer, were indicted by federal authorities in September 2003 for participating in a fraudulent scheme designed to manipulate insurance premiums to benefit entities controlled by members of the Duff family, which has been publicly linked to organized crime.
Other circumstances reinforce the appearance of irregularity in the administration of this fund. In contrast to the number of members reported for the general Health and Welfare Fund which fluctuated, the number of members in the Dental and Vision Plan remained constant at 2,326 from at least 1993 until 1999, when no number was reported.21 Moreover, the 2,326 figure helps explain why, according to the Consultant and Service Provider, representatives of the plan, the local, and DCM resisted telling them how many members were eligible for services under the fund. If the true number had been revealed, 13 it would have confirmed that the dentists were receiving less than the agreed-upon amount, thereby generating additional money for DCM. b. Apparent Excessiveness of Administrative Costs In 1995 the Board of Trustees of Chicago Local 743’s Health Trust (the counterpart to Local 727’s Health and Welfare Plan) retained a consultant to review the operations of the Trust for the purpose of determining whether there were “any potential lapses of fiduciary obligation owed to Plan participants and beneficiaries.”22 The consultant’s report quoted court decisions establishing that under ERISA the fiduciaries of employee benefit plans have a duty to act with “`complete and undivided loyalty to the beneficiaries”‘ and are under an “`unwavering duty to make decisions with single-minded devotion to [the] plan’s participants and beneficiaries. 22 With this standard in mind, the consultant reviewed the administrative costs reported by the Local 743 plan to determine whether they were excessive as compared with those of comparable plans. Noting that recent comparative surveys had found that total operating costs for most health and welfare plans in virtually all size categories averaged between 7-10 percent of total income, the consultant questioned the 28 percent and 25 percent amounts for the Local 743 plan in 1992 and 1993, respectively. 24 The consultant expressed concern that “if a disproportionate amount of Trust assets are being expended on administrative costs, the Trustees are not acting ‘solely in the interest of the participants and beneficiaries’ or for the exclusive purpose of providing benefits’ to participants. �25 The consultant concluded: “These objective comparative reports should be considered by the Trustees and reflect the unreasonableness of the current costs. �26 14 The apparent administrative costs associated with the Local 727 Dental/Vision Plan are comparable to those found excessive by the Local 743 study in 1995. As described above, the two sources of the allegations concerning the Local 727 plan estimated a 29 percent ratio, while in the one year that the administrative costs of the Local 727 Dental/Vision Plan were clearly set forth in the Form 5500 filed by the plan’s trustees (1993), these costs were 30 percent of the Dental/Vision Plan’s total income. Moreover, examination of the documents provided by the Consultant and Service Provider in conjunction with the other information they provided indicates that the actual amount retained by DCM may have been substantially higher than 30 percent. The information and documents provided by the Consultant and Service Provider did not account for any vision services that may have been provided under the plan. According to the Consultant, it was doubtful whether any such services were actually provided. Public filings by the Local 727 Health and Welfare Plan are uninformative concerning the vision services, accept for the ratio set forth in certain years allocating the $760,602.00 provided to DCM between the dental and vision portions of the plan at $21.50 dental/$5.75 vision, or a ratio of dental to vision of approximately 4:1. As discussed below, we accounted for vision services by adding an assumed amount. Apart from the Consultant’s opinion that expenditures for vision services were minimal or nonexistent, there is reason to believe that this assumption of additional expenditures for vision providers may be quite conservative. In 1993, the one year during which total administrative expenses for both the vision and dental portion of the plan were listed on the Form 5500 filed by the Local 727 Health and Welfare Plan, administrative expenses 15 and fees were 30 percent of the total, which was identical ($760,602.00) to the amounts later received by DCM based upon the same reported number of plan members (2,326). The money to fund the Dental/Vision Plan followed a circuitous route to get from the employers that contributed it to the professionals who actually performed services for Local 727 members. As reported on the Form 5500s for the years 1995-1998, employers were charged $27.25 per month per qualifying Local 727 member. The total number of members reported on the forms was 2,326, making the total employer contribution $760,602.00 per year. All of that was forwarded to DCM, headquartered in Florida. Instead of forwarding the requisite sums to the bank account maintained by the MIDA dental providers in Illinois, however, DCM sent monthly checks of $32,971.00 to a second “MIDA” account that had been opened without MIDA’s authorization in a different bank by one of the principals of the Cyiris firm that performed certain administrative services in connection with the plan. From that account, $20,000.00 per month was provided to the authorized MIDA account that was under the control of the Service Provider and was used to distribute payments to the participating dentists. The total of $240,000.00 per year covered all dental services provided by MIDA.27 As noted, additional dental services were to be provided by specialists as needed, and $5,000.00 per month was to be forwarded to a separate account for that purpose. According to the Consultant, as time went on the amount actually provided for specialist services became less and the pressure to avoid such services, or to avoid paying for them, became greater. Accordingly, during at least the middle years of the DCM/MIDA relationship, it appears that only approximately $25,000.00 per year was paid to 16 practitioners for specialist services. Thus, approximately $265,000.00 � about 35 percent of the $760,602.00 sent to DCM from the Local 727 fund � can be verified through the Consultant, the Service Provider and the records they provided as having gone to the dentists who provided services to eligible Local 727 members. In addition, the records reflected that substantial payments were made � $8,000.00-9,000.00 in some months �to a dentist the Consultant said was not part of the MIDA group. One of the Cyiris principals had informed the Consultant and Service Provider that this outside dentist had to receive a portion of the money DCM had provided. The Consultant questioned whether and to what extent this dentist actually provided bona fide services to the Local 727 members, but assuming he did, and projecting the rate seen during the months shown on the available documentation, we have arbitrarily added $100,000.00 to the total of $265,000.00 in documented legitimate dental services to represent the possible provision of additional legitimate services. To this total of $365,000.00 we have added 20 percent � $72,000.00 � to represent possible vision services, although the Consultant was strongly of the opinion that no such services were provided by DCM. (The 20 percent is derived from the ratio reflected in the years the plan’s 5500s allocated employer contributions between dental and vision services.) Even adding these amounts based upon conservative assumptions, however, the resulting total of $437,000.00 leaves a percentage retained by DCM and other third parties of approximately 43 percent, not counting the $60,000.00 broker fee that was paid in at least two years to the Mesi firm. 17 IBT investigators with experience in investigating fraud and kickback schemes have identified certain characteristics of such schemes in the money flow described above, particularly the use of dual “MIDA” accounts, which can be a device to mislead both actual service providers and auditors.28 C. The LIUNA Dental Plan Case The apparent irregularities in the Local 727 Dental/Vision Plan, as described above, bear distinct similarities to a scheme that involved the Laborers International Union of North America (LIUNA), as well as Florida and Chicago organized crime figures, and was the subject of a federal prosecution. Moreover, at least two persons who were involved in the LIUNA scheme appear in the documentation available concerning the Local 727 plan. In the LIUNA case, the government alleged that mobsters, mob-affiliated insurance and health care service provider representatives, and LIUNA officials conspired in a kickback scheme designed to enrich the union defendants in return for exercising their influence to obtain union health and insurance benefits contracts for the companies paying kickbacks.29 The scheme began in 1970, with the establishment of a dental care program by LIUNA’s Chicago local. Two local officers, Angelo Fosco and James Caporale, arranged to give the dental contract to Consultants and Administrators, Inc. (C & A), a company in which Fosco and Daniel Milano, Sr., an auditor for the local, had an interest. In return for giving the contract to C &A, three union officers, including Fosco, received cash payments based on the number of union members covered by the plan each month. In addition, Fosco’s son, Paul Fosco, was made a vice president of C &A.30 18 No Teamsters were indicted in connection with this case. Case-related documents, however, noted that C & A rented its office from former IBT Local 753, which used C & A for its dental plan. C & A also provided services to two other Teamster locals (706 and 703), according to the case documents, and one Teamster official (Dominic Senese of Local 703) was alleged to have received cash kickbacks.31 In 1972 C & A sought the dental benefits contract for union members in Florida. In exchange for kickbacks to union officials there, C & A obtained the Florida contract through an entity called “Dental/Vision Care Centers” (DVCC). The agreement called for DVCC to pay 15 percent of the gross monthly premiums to a series of dummy corporations that funneled the money to the Florida LIUNA officials. While the Florida scheme was in progress, the trustees of the LIUNA Chicago local’s health and welfare fund expanded the dental plan to include vision care. C & A obtained the contract for these services through a kickback arrangement similar to the one being carried out in Florida. As in Florida, kickbacks were disguised as payments to an entity that was purportedly performing a legitimate service, i.e., checking members’ eligibility32. In a separate kickback scheme to obtain LIUNA life insurance contracts, the conspirators purchased a life insurance company and arranged for it to get LIUNA contracts in Florida and the midwest. In connection with the midwest contract, which was arranged by Angelo Fosco, the kickback payments were funneled through a dummy corporation run by Fosco’s son (Paul Fosco), disguised as commissions. These payments had to be supplemented when “the Outfit” was upset that not enough money was coming in. 33 19 Although he was not indicted in the case, Phillip Mesi Sr., a member of the Chicago Outfit, was mentioned in case documents as having attended meetings with some of those involved in the scheme. Mesi’s son, Phillip Mesi Jr., was employed by C & A, according to one such document. The same document noted that Mesi Sr. was “slowly turning over his control of business operations” to Phillip Mesi Jr.34 Expense reports submitted by DCM to the Local 727 Dental Plan in 1995 and 1996 sought reimbursement for: a “gift for Paul Fosco;” “Material for snore guards, Paul Fosco and Smith;” meals with “P. Fosco” and “Phil Masi;” and “Christmas gifts to Masi & Coli office.”35 The Consultant confirmed that the “P. Fosco” referred to in these expense reports, who was a friend of DCM’s Norman Landman, is the same Paul Fosco who was a defendant in the LIUNA dental plan case described above. The Consultant knew of no services provided by Fosco to the Dental/Vision Plan The “Phil Masi” [sic] in the expense reports is apparently either Phillip Mesi Sr., a Chicago Outfit member who, according to case files, was present at meetings with the LIUNA dental plan conspirators, or, more likely, his son Phillip Mesi Jr. who was the broker for the Local 727 Dental/Vision Plan, as discussed further below. According to one document relating to the case, Mesi Jr. was also an employee of C & A and was then in the process of assuming control over his father’s business operations.36 Phillip Mesi Sr. died in 2001. At least one other member of the Mesi family, Sam Mesi (1900-1971), was a member of the Outfit. He was described in one publication as a “third generation gangster, prominent on Chicago’s West Side.”37 Form 5500s filed by Local 727’s Health and Welfare Plan from 1994 to 1998 list Phillip Mesi Jr.’s company (Epman Enterprises) 20 as an insurance broker, as discussed below. During those years, Epman received a total of $826,907.00 from the Fund, at least $120,000.00 of which represented commissions for the dental and vision plan. d. Summary The evidence uncovered to date concerning Local 727’s Dental/Vision Plan raises serious issues that will require further investigation to resolve. Some of these issues relate to apparent irregularities in the plan itself, suggesting that it may have been used for improper purposes: � During the period 1993 – 2000, the sums paid to brokers and other third party intermediaries appear to have been grossly excessive in relation to the services provided. � Plan representatives appear to have misled and withheld information from the dental service providers in an effort to reduce the amount spent on dental services and thereby inflate the sums available to the intermediaries. � In a further effort to minimize the amount spent on dental services and thereby maximize the money available to the intermediaries, general dentists in the provider group were pressured to provide services normally performed by specialists. � Questionable expenses, such as gifts to Local 727 personnel, meals with a person with organized crimes ties who had been convicted in a racketeering scheme involving a union-sponsored dental/vision plan, and unspecified “consulting fees,” were apparently charged to the plan. � The trustees of the Local 727 Health and Welfare Plan, who included the principal officer of Local 727 and current head of Joint Council 25, apparently allowed these practices to continue from at least 1993 to at least 2000 . Equally serious concerns arise from the backgrounds of persons and entities involved in the administration of the Dental/Vision Plan. Since at least 1993, there has 21 been a pattern of persons and entities who have received payments from the plan having had ties to organized crime figures, been implicated in racketeering schemes, or both: - Phillip Mesi Jr. was the broker who arranged for the dental/vision services to be provided through DCM, a Florida entity headed by Norman Landman. Mesi Jr.’s father, Phillip Mesi Sr., and his uncle, Sam Mesi, were notorious members of the Chicago Outfit. According to documents relating to 1980s-1990s prosecutions concerning a dental/vision plan scheme, Mesi Jr. was taking over control of his father’s business. Although neither was indicted, Mesi Sr. and Mesi Jr. were involved in a company that was at the center of a kickback scheme involving a LIUNA dental and vision plan, according to case documents.
- Paul Fosco, whose father Angelo was a prominent member of the Chicago Outfit, was convicted of racketeering offenses and imprisoned in the LIUNA scheme. Expenses for meals with Paul Fosco and gifts to Fosco were apparently part of the administrative expenses charged to the Local 727 plan.
- The entity that preceded DCM and through which dental/vision services were provided in 1993-1994 was “International Healthcare Services, Inc. c/o Dental Care Plus Management Corp.” The president and another officer of Dental Care Plus were indicted in a kickback scheme involving dental services to a union-affiliated benefit plan.
- The successor to DCM was Leahy and Associates, through which a self-funded dental/vision plan was provided beginning in 2000. In September 2003, the principal figure in Leahy and Associates and another officer were indicted in connection with a Chicago-based scheme to defraud a public agency and insurance companies, including Ullico, a union-owned company, to benefit entities owned by the Duff family, which has been publicly linked to organized crime.
Throughout the 1993-2000 period, Local 727 Secretary-Treasurer Coli was a union trustee and his brother William was the administrator of the health and welfare plan. An overt investigation with the assistance of a personal representative is required to determine: (1) whether the apparent irregularities associated with the dental/vision portion of Local 727’s Health and Welfare Plan reflect kickbacks or other improper 22 payments; (2) whether there were breaches of fiduciary duty or other misconduct by the trustees of the plan and/or those responsible for its administration; and (3) whether there was organized crime influence in the administration of the plan. B. Other Issues Related to Pension/Benefit Plans In addition to the issues described above, which relate specifically to the dental/vision portion of Local 727’s Health and Welfare Plan, there were other issues related to the background of persons or entities receiving payments from the Health and Welfare Plan and other pension/benefit plans affiliated with the local. Once again, there was a pattern of payments from the plans to persons and entities with apparent organized crime ties. 1. Marble Insurance Agency/Jack P. Cerone The 1993 Form 5500 filed by Local 727’s Health and Welfare Plan reported commission payments to “Marble Insurance Agency” of Addison, Illinois.38 In a 1996 decision by the federal court overseeing the IBT Consent Decree, Marble Insurance Agency was identified as owned and operated by Jack P. Cerone. The court noted that Cerone’s father had been convicted of conspiracy to promote a racketeering enterprise and interstate fraud or communication in aid of racketeering in 1986 and that he had been identified as a member of La Cosa Nostra. Cerone alleged that Charles M. Carberry, Investigations Officer under the Consent Decree, began an investigation of him which led to Local 727’s Health and Welfare Plan and other Teamster-related clients being told he was associated with organized crime. As a consequence, the Local 727 plan severed its business relationship with Cerone in July 1993.39 23 Concerning Cerone’s complaint that he was improperly severed from his business relationship with the Local 727 plan and other Teamster entities, the court reiterated that Cerone had admitted that he “knowingly associated with his father John Phillip Cerone” and had conceded “that John Phillip Cerone has been identified as a member of organized crime.” Noting that “the Consent Decree imposes on the IBT, itself, the obligation of using its best efforts to rid itself of the corrupting influence of organized crime,” the court found that the union’s actions leading to the severing of business relationships with Cerone “were not only appropriate, but were mandated by the IBT’s obligation under the Consent Decree to rid itself of the corrupting influence of organized crime.�40 Thus, it appears that the 1993 payment to Marble Insurance Agency referenced in the Local 727 Health and Welfare Plan Form 5500 for 1993 represented the last payment to Cerone’s company before the relationship with Cerone was severed for the reasons summarized by the court. 2. Epman Enterprises/Phillip Mesi Jr. The apparent successor to Cerone’s company as the recipient of commissions from the Health and Welfare Plan was Epman Enterprises, operated by Phillip Mesi Jr. Mesi’s links to the Chicago Outfit, which are described above, were at least as substantial as those attributed to Cerone and found by the court to have warranted the IRB and union actions that resulted in severing Cerone’s business relationships with IBT entities. Indeed, both Mesi Jr. and Cerone Jr. are mentioned in litigation documents concerning the LIUNA dental/vision plan scheme.41 24 Beginning in 1994, the Local 727 Health and Welfare Plan Form 5500s reported sums paid to Epman Enterprises, 421 North Spring, LaGrange Park, Illinois (Mesi’s home address), as “insurance fees and commissions paid to agents and brokers.” These payments were reported as follows through 1998 (no insurance commission payments were reported by the Fund after 1998):42 1994—- | $ 124,949.00 | (Group Life, S&A, Hosp. & Comp. Maj. Med. Ins.) | 1995 � | 136,088.00 | (Group Life, S&A, Hosp. & Comp. Maj. Med. Ins.) | � | “60,010.80 Per Year” | (Dental & Vision Care) | 1996 � | 147,915.00 | (Group Life, S&A, Hosp. & Comp. Maj. Med. Ins.) | � | 60,011.00 | (Dental & Vision) | 1997 � | 159,922.00 | (Group Life, S&A, Hosp. & Comp. Maj. Med. Ins.) | 1998 � | 138,034.00 | (Group Life, S&A, Hosp. & Comp. Maj. Med. ins.) | TOTAL: | $ 826, 929, 00 | |
3. National Investment Services/William Hogan Jr. and James M. Hogan IBT field representatives have learned that federal authorities are investigating allegations that, beginning in approximately 1998, William Hogan Jr., now a barred member, and James M. Hogan of Local 714, were paid $500,000.00 each to obtain business for NIS and that through their efforts NIS greatly expanded its volume of business.43 William Hogan Jr.’s organized crime ties and evidence that he continues to have influence on Teamster entities and individuals in the Chicago area are discussed elsewhere (see Appendix, Tab 8). 25
From 1998 through 2001, the Local 727 Health and Welfare Plan Form 5500s listed National Investment Services (NIS) as an “Investment Manager,” for which it was paid as follows:44 1998 | $10,864.00 | 1999 | 21,533.00 | 2000 | 17,748.00 | 2001 | 8,868.00 | | | $59,013.00 |
NIS was also listed as an Investment Manager for the Local 727 Pension Plan beginning in 1998, and received the following amounts:45 1998 | $15,003.00 | 1999 | 54,234.00 | 2000 | 121,525.00 | 2001 | 117,375.00 | 2002 | 117, 338.00 | | $425,475.00 |
4. Use of Funds To Compensate Employees Examination of Form 5500s filed on behalf of Local 727-affiliated benefit funds revealed that the funds have been used to pay salaries to numerous persons who also received salaries from Local 727, itself. The payments to several persons who have received significant amounts from both the local and funds raise questions about whether the funds are being used for purposes other than to advance the interests of their members. a, Joseph Belli As discussed in more detail below, Joseph Belli has been a business agent for Local 727 since 1991. Since 1994 he has been the local’s highest paid business agent, 26 receiving $97,176.00 according to the local’s most recent available LM-2 filing (2002) and is one of the highest paid non-officer business agents in Joint Council 25. However, Belli has also received substantial pay more than $54,000.00 in 2002 � as an “administrative” employee of the local’s pension and benefit plans. When this pay is added to his business agent salary, Belli may be the most highly compensated non-officer business agent in the joint council.46 Apart from evidence (summarized below) that Belli may have ties to organized crime figures, there are serious questions about whether the payments Belli received from these plans represented an arm’s-length and reasonable compensation arrangement for actual administrative services rendered. An overt investigation is required to determine the nature and extent of the administrative services provided by Belli to the pension and benefit plans and whether the payments comport with applicable fiduciary standards for administering the plans. b. Dane Passo In May 2001, the IRB recommended that charges be filed against Dane Passo and William Hogan Jr. in connection with a scheme to favor a company owned by a friend of Hogan’s, Richard Simon, which provided temporary labor.47 Passo was then employed by the IBT as an international representative at a salary of approximately $90,000.00 per year .48 After the IRB recommended charges against him, Passo took an unpaid leave of absence from his IBT position. On May 29, 2002, the IRB released its decision on the charges against Passo and Hogan and they were permanently barred from the union.49 27 The LM-2s and 5500s filed by Local 727 and its affiliated benefit plans revealed payments to Passo totalling $112,183.00, apparently representing employment from mid 2001, when Passo resigned his IBT position, to mid 2002, when the IRB decision barred him from holding any Teamster-related employment. Of this amount, $41,827.00 was paid to Passo from the affiliated benefit plans. The local had employed him as a business agent at the benefit plans as an administrative employee.50 Essentially, Local 727 and its affiliated plans replaced � and increased �the salary Passo had lost when he resigned his IBT position in the wake of the IRB’s proposed charge. Passo’s 2001-2002 employment was not per se illegal or improper, assuming he did not remain employed after the IRB’s May 2002 decision. Especially in the context of the other unresolved issues concerning the administration of Local 727’s funds, however, his employment as an “administrative” employee, in addition to being paid as a business agent for the local, after leaving his IBT job in the wake of charges proposed by the IRB raises the issue of whether his hiring was an arm’s-length transaction that was required because of a need for his services to help administer the plans or was instead an accommodation to Passo in response to the loss of his IBT position. 4. Summary Examination of the public filings of Local 727’s affiliated benefit plans, which was prompted by the above-described allegations concerning the provision of dental/vision services, revealed a similar pattern of payments to persons and entities with organized crime ties under circumstances that raised questions about whether the transactions in question were arm’s-length, reasonable, and consistent with the trustees’ fiduciary duties. 28 C. Possible Organized Crime Ties of Business Agent In the course of examining forms filed by Local 727’s Health and Welfare Plan to check the accuracy of allegations concerning dental and vision services, as described above, IBT investigators took note of the large number of persons paid out of the plan to do administrative work, one of whom, Joseph Belli, was also a business agent for Local 727. The investigators had earlier received information from law enforcement linking a Joseph Belli to the Chicago Outfit, and covert steps were taken to determine whether the Joseph Belli associated with Local 727 had ties to organized crime. As detailed below, there are sufficient indicia that the Joseph Belli of Local 727 may have engaged in prohibited associations with organized crime figures to warrant an overt investigation. 1. Background Joseph Belli became a business agent for Local 727 on March 11, 1991.51 He appears to have replaced Joseph Talerico in that position, who, as described above, was barred from the union by the IA in 1990 because of his organized crime ties. The local’s annual LM-2s indicated that Talerico did not receive a full year’s salary in 1990, presumably reflecting his removal from the union. Talerico was not reported as a business agent in 1991; instead, Belli’s name appeared on the same line on which Talerico’s name had appeared in previous years. During 1989, the last full year he worked for Local 727, Talerico received a total of $38,300.00 in salary and other disbursements, according to the LM-2 filed by the local for that year. Belli’s first full year was 1992, during which, according to the local’s LM-2, he made a total of $40,887.00. That was approximately $1,500.00 less than the highest paid business agent, Frank Callahan, who had been in that position since 29 1968. Callahan apparently retired in 199452 and, according to LM-2s, Belli has been the local’s highest paid non-officer business agent since then,” According to James Malizzio, a Local 727 member interviewed during the Project RISE field study, Belli is the business agent who represents the parking lot attendants in the local. 54 Belli was approximately 44 years old when he first became a business agent for Local 727 in 1991. Prior to that, he was a truck driver for National Superior Fur Dressing & Dyeing Co. of Chicago.55 Although Belli has been listed as a business agent on every LM-2 filed by Local 727 since 1991, he is not on the TITAN system as a member of Local 727, which appears to be an unusual circumstance for a local business agent.” In a 1996 audit report, Belli was listed as an “agent” for the local’s benefit funds, with 50 percent of his time devoted to fund duties.57 In 2001 Belli received $87,761.00 in salary and other disbursements from the local, $36,932.00 as an employee of the local’s health and welfare fund, and $17,347.00 as an employee of the local’s pension fund, for a total of $142,040.00.58 He may also have received a salary in 2000 as an employee of the local’s “Legal and Educational Assistance Plan” because its Form 5500 listed Belli as receiving $6,896.00 as an employee. He was, however, not named on the 5500s for 2001 and 2002 by the Legal and Education Assistance Plan, but in both years the plan reported payments to employees who were not named.59 In 2002, the most recent year for which LM-2s and 5500s are available, Belli received $97,176.00 from Local 727; $29,652.00 from the Health and Welfare Fund; and $26,231.00 from the pension fund, for a total of $153,059.00.60 30 2. Information from Confidential Sources The following information concerning Belli was obtained from confidential sources known by iBT investigators to be knowledgeable about the Chicago Outfit; � One confidential source (“Confidential Source A”) stated that Belli’s father, also named Joseph Belli (hereinafter “Belli Sr.”) is an Outfit member and the son (“Belli Jr.”) is an associate of the Chicago Outfit. � A second confidential source (“Confidential Source B”) reported seeing Belli, Jr. frequently in the company of an individual known to Confidential Source B as a low level Outfit associate. � Confidential Source B also reported that both Belli Sr. and Belli Jr. were known to have patronized Armand’s restaurant in Elmwood Park, Illinois, where both were observed on more than one occasion in the company of prominent Outfit figures John and Peter DiFronzo. (IBT investigators know independently that Armand’s is a favorite meeting place of the DiFronzos.) 3. Corroboration of Confidential Source Information The timing and circumstances of Belli’s original hire in 1991, shortly after the ouster of Outfit associate Joseph Talerico, his rise to the highest paid business agent position in the local without, apparently, becoming a member, and the large amounts he has received from pension/benefit funds tend to corroborate the information provided by confidential sources. Other indicia that Outfit influence may have been a factor in Belli’s employment and that he may have engaged in prohibited associations include the following: � Belli’s father is listed in at least one unpublished Chicago Outfit chart as a close associate of John DiFronzo, who has been the acting boss of the Chicago Outfit.61 � Law enforcement surveillances of DiFronzo conducted in 1995 established that Belli Sr. frequently met with DiFronzo at DiFronzo’s home, drove DiFronzo to various locations, and also met with Peter DiFronzo, an Outfit lieutenant and former iBT Local 731 member who was barred from the IBT by the IRB.62 31 � During the surveillance period (January-August 1995), DiFronzo was under observation for approximately 75 hours, and Belli Sr. was observed in his company more than 40 percent of that time.” � DiFronzo made numerous visits to Belli Sr.’s home, then at 1701 N. 72nd Court, Elmwood Park, Illinois. Belli Jr., who was then a business agent for Local 727, lived next door at 1705 N. 72nd Court. 14 � In 1992 Belli Sr. and Belli Jr. were arrested and charged with battery in connection with the beating of Belli Jr.’s brother-in-law. The charge was administratively dismissed.65 � Both Belli Sr. and Belli Jr. purchased their residences on N. 72nd Court in Elmwood Park from Midwest Bank and Trust Company Trust No. 90-5911, created on January 11, 1990, by persons who have yet to be identified. (No mortgage was identified relating to Belli Jr.’s purchase of his residence.) In April 1990, however, a Joseph Andriacchi, believed to be the same Andriacchi considered by law enforcement to be the underboss of the Chicago Outfit, executed a transfer of interest to the trust.66 � Property records show that Belli Jr. and his father jointly owned a condominium in Williams Bay, Wisconsin, which was developed by HEG Properties, a company linked to Outfit associate and former Local 714 member Salvatore Galioto (see references to Galioto in discussion of William Hogan Jr.’s continuing influence in Tab 8 of this Appendix) and which has a high concentration among its owners of persons who appear to be Outfit members and associates or their relatives. Belli Jr.’s close neighbors at the Williams Bay complex appear to include relatives of such prominent Outfit figures as John DiFronzo and Marco D’Amico.67 IlI. CONCLUSION AND RECOMMENDATION During the past decade, the number of persons and entities employed by or having business relationships with Local 727 and its affiliated benefit plans who have had ties to organized crime, been implicated in racketeering schemes, or both, is a circumstance that by itself is disturbing, especially in light of the local’s history of organized crime influence. Coupled with specific allegations concerning a dental/vision plan and questionable circumstances surrounding the employment of at least two persons who have received 32 substantial sums of money from both the local and the plans, these organized crime/racketeering ties suggest that some degree of Outfit influence � and corruption associated with it � persists in the local. Further investigation is required to resolve the issues raised by intelligence sources and covert investigation to date. This investigation will need to include overt activities such as sworn interviews of Local 727 officers, members, employees, and service providers to the local and its affiliated benefit funds, as well as the inspection of relevant documents. A personal representative is requested to facilitate these activities. 33 33
ISSUES RELATING TO LOCAL 743 The investigation of Local 743 during the Project RISE field study revealed a number of serious issues regarding the local’s vulnerability to organized crime and other corrupting influences. Investigation following the completion of the field study has heightened concern over these issues. Appointment of a personal representative will facilitate a comprehensive investigation of the following issues: � Whether the local’s principal officer, Robert D. Walston, or other Local 743 officers have allowed Donald Peters, a former principal officer of the local who was a named defendant in the government’s 1988 civil RICO complaint that led to the current Consent Decree, to be involved in the affairs of Local 743 in violation of the Consent Decree and the agreement settling the RICO case and whether Walston or other Local 743 officers associated with Peters without having investigated his alleged ties to organized crime; o Whether Walston has allowed Robert Simpson Jr., Peters’s successor as Local 743 principal officer who was removed from office by the iRB, effectively to hold a position of trust or responsibility, or otherwise influence the affairs of Local 743 in violation of a court order; o Whether Walston entered into sham collective bargaining agreements with two employers and whether those employers have ties to organized crime; o Whether Walston continues to be involved in the video poker machine business and whether he has contact, through the video poker machine business or otherwise, with individuals associated with organized crime; and o Whether the Local 743 Health and Welfare Trust is engaged in a relationship with a service provider detrimental to the local’s membership. I. BACKGROUND Local 743, located in Chicago, Illinois, and chartered in 1941, was at one time the largest local in the IBT. As of 2002, with approximately 14,000 members, it was the third largest local. Local 743 represents a diverse membership including librarians, clerical 1 was comprised primarily of warehouse workers, but with the closing of a number of large retail employers, Local 743 is now comprised primarily of clerical employees. Local 743’s current president and principal officer is Robert D. Walston. In 2001, Walston succeeded Chester A. Glanton, the local’s first elected president. Glanton’s presidency followed the removal of President Robert J. Simpson Jr. by the IRB in 1995. Simpson had been removed from office because he allowed Donald Peters, the Local 743 president who preceded him, to be involved in the affairs of Local 743 after Peters was prohibited from doing so by virtue of the 1989 Consent Decree and Settlement Order resolving the government’s civil RICO action against the IBT. The current issues concerning Local 743 are a direct result of � and intertwined with � the local’s history, in particular, the circumstances surrounding the removal of successive presidents from office. Therefore, the relevant details of Local 743’s history are discussed more fully below A. Basis for Inclusion in the Project RISE Field Study Local 743 was included in the field study because a review of public documents indicated that the local had connections to organized crime. In particular, concerns were raised as to whether any Local 743 officials who had been removed for corruption still had any connections to the local, and whether any organized crime figures were connected to the affairs of Local 743. B. Results of the Field Study Based upon a review of documents pertaining to the local and its affiliated benefit funds, interviews of current and former executive board members, local employees and 2 members, and others, the field study concluded that, although outwardly the local demonstrated a commitment to the membership, conditions existed that jeopardized the stability of the local and raised questions of corruption As described below, sources interviewed during the field study expressed the belief that Peters and Simpson continued to have influence over the local. Furthermore, evidence revealed that Walston continued to be involved in the rental of amusements, including jukeboxes and video poker machines. The video poker machine business is reportedly controlled by organized crime. In addition, preliminary research suggested that Walston signed questionable collective bargaining agreements with establishments that may have connections to organized crime. The field study also identified concerns involving Local 743’s health and welfare fund and its early connections to convicted labor racketeer Allen Dorfman (deceased) and more recent connections to his son, David Dorfman, and the son’s company, Group Administrators, Ltd. (GA), the fund’s former contract administrator. In addition, for many years the health and welfare fund had retained a consultant, Alex Selwood, whose services duplicated the services of GA. At the conclusion of the field study, Local 743 was placed in Category C �for locals under investigation or requiring investigation � because of concerns regarding questionable collective bargaining agreements entered into by union officials with companies allegedly connected to organized crime, alleged continued improper influence by past officers who were removed from their positions, and improper associations with organized crime figures. 3 Il. CURRENT ISSUES Investigation conducted subsequent to the field study has amplified the concerns addressed in the report. A personal representative will facilitate the gathering of documentary and testimonial evidence necessary to substantiate or refute these concerns. A. Whether the Local’s Principal Officer, Robert D. Walston or Other Local 743 Officers Allowed Donald Peters To Be Involved in the Affairs of Local 743 in Violation Of the 1989 Consent Decree and Settlement Agreement and Whether Walston or Other Local 743 Officers Associated with Peters without Having Investigated Peters’s Alleged Ties to Organized Crime As noted above, Robert Walston became president and principal officer of Local 743 in 2001, succeeding Chester Glanton (deceased). Elected in 1996, Glanton succeeded Robert Simpson Jr., who had been removed as principal officer by the IRB. Simpson had succeeded Donald Peters, who had held the position of principal officer since about 1946. In addition to the presidency of Local 743, Glanton, Simpson, and Peters also held positions at the international level. Anticipating the government’s impending civil RICO action against the IBT, Peters retired as principal officer effective April 1, 1988, but maintained his other IBT positions until he was forced to resign all positions.’ The government’s civil RICO complaint against the lBT and the general executive board was filed June 28, 1988, and named Peters as one of the defendants. On March 14, 1989, Peters became a party to the court-approved settlement of the civil RICO case. As part of the agreement, “Peters agreed to resign permanently all his International positions effective immediately and to `permanently retire from all positions as an officer, agent, representative or employee of the lBT or any IBT subordinate body’ [and] `from all 4 positions as a trustee, agent, representative or employee of any IBT-affiliated employee benefit fund.2 Peters was not barred from membership in the IBT. Peters’s alleged organized crime connections, including his connections to Allen Dorfman, whom he permitted to take over the decision-making for the Central States Pension Fund (CSPF), even though he knew that Dorfman was controlled by organized crime figures, was described in the IRB charges against him.’ Peters was identified as an organized crime associate because of his close relationships with Dorfman and organized crime members Joseph (the Clown) Lombardo and Dominic Senese. During the federal investigation into the CSPF, a court authorized wiretap intercepted a December 21, 1979 meeting that included Peters boasting to Chicago organized crime capo Joseph Lombardo that Peters controlled the votes of Local 743’s delegates to the IBT convention.4 Following Peters’s resignation, Simpson, a longtime organizer and vice president of Local 743, became president on Peters’s recommendation. Peters and Simpson had known each other since 1953 and had a close relationship. In 1995, the lRB barred Simpson from holding any positions with the IBT because he had allowed Peters to continue to represent and be involved in the affairs of Local 743, and because he had failed to investigate Peters’s alleged organized crime ties.5 Like Peters, Simpson was not barred from membership. As indicated above, Simpson was followed as principal officer by Chester Glanton, who became ill and left office in 2001. Walston followed Glanton into the presidency. Notwithstanding changes in leadership, witnesses have stated that Peters continued to be involved in Local 743 and to visit Local 743 offices. In February 2004, a 5 retired IBT member stated under oath that Simpson brought Peters to Local 743’s 2002 Christmas party. The party was held in the organizing room of the local’s offices. Local 743 officers and business agents were in attendance. This retired member recalled two other members, including a current officer, talking to Peters at the party. He also recalled a third member asking, “What’s he doing here[?]” Peters remained at the party for at least a couple of hours and the witness recalled that Peters “was introduced by Bob Walston to everybody at the party.” 6 The current officer identified by this witness was interviewed and stated that Peters did not attend the 2002 Christmas party, “had not been around” Local 743’s offices, and exerted no influence on the current officers. He stated that Peters’s only contact with Local 743 concerned his pension and other benefits.7 Another member who attended the 2002 Christmas party also stated that Peters was not there.8 During the Project RISE field study in February 2001, another Local 743 member stated that it was “common knowledge” that Peters was deeply involved in, and exerted pressure and influence over, the Local 743 leadership. Peters was observed at the local two-to-three times per week. During Glanton’s illness, “Peters ha[d] free-reign of the local.” This member characterized Peters as a “disturbing factor at Local 743.”9 B. Whether Walston Allowed Robert Simpson Jr. Effectively To Hold a Position of Trust or Responsibility or Otherwise Influence the Affairs of Local 743 in Violation of a Court Order On June 30, 1994, the IRB proposed charges against Simpson for “allowing and condoning Donald Peters to continue to act as a representative of Local 743 and to incur expenses paid by the Local despite a prohibition against Peters acting in this capacity.” 6 The IRB charges described Peters’s ties to the Chicago Outfit.10 The matter was adjudicated by the IRB and on July 25, 1995, the IRB issued its decision upholding the charges, stating that Simpson’s conduct made “him unfit to serve in any position of trust or responsibility within the IBT or any of its affiliates.” The IRB “permanently barred [Simpson] from holding any position with the IBT, or any IBT affiliated entity11 and from �obtain[ing] employment, consulting or other work with the lBT, or any IBT-affiliated entity.”” Charges were brought against the Local 743 officers and a trusteeship was imposed on the local based upon Simpson’s maintaining ties with Peters and the Local 743 officers giving union cars to retiring officials, including Peters.12 On June 1, 1996, Local 743 was released from trusteeship. Glanton became Local 743’s first elected president. Under Simpson, Walston had been a business agent and Richard Lopez an organizer. When Glanton became president, he rehired Walston and Lopez, both of whom had been fired during the trusteeship. Glanton was reelected in 1998 with Walston on his ticket as secretary-treasurer and Lopez as recording secretary.13 A major political rift developed between Glanton and Walston. Walston was instrumental in having charges brought against Glanton for improper use of union funds, but the charges were ultimately dismissed by the GEB.14 In November 2000, Glanton stated that he was receiving treatment for ongoing health problems and that in his absence, Walston, then secretary-treasurer, allowed Simpson, barred from any official position, to have “far too much input” into the operation of the local. Glanton observed Simpson at Local 743’s offices several times meeting with Walston and Lopez, usually in Walston’s office. Glanton further stated that Simpson may 7 have been running the local through Walston. Glanton recalled that Simpson originally brought Walston into Local 743 from Local 600. Glanton retired in May 2001 and Walston succeeded him as principal officer.15 A retired member employed by Local 743 during Walston’s presidency testified that he observed Simpson in the Local 743 offices once or twice a week, with no specific pattern, “talking to everybody.” “[W]hat surprised me about Bob [Simpson] is Bob chewing out one of the organizers for doing something, and I thought I didn’t know he was still boss.” Walston and Simpson spent a lot of time together in the office, and this witness also heard that Simpson and Walston spent a lot of time together at a bathhouse they visited “about every other day.”16 This former member believed that Simpson ran the local. He further advised that Walston met Simpson every day at a bathhouse with Chicago Outfit figures.17 In August 2001, a former employee of Local 743 stated that Walston was “very close” to Simpson and that Simpson basically ran the local, “using Walston as a front.” According to this witness, Simpson was in Local 743’s office almost every business day and believed that Walston violated IBT rules by allowing Simpson to “dictate policy.” This former employee stated that he was fired by Walston for political reasons.18 A current Local 743 member stated that Simpson, although retired, “continue[d] to attend all union meetings to `see what is going on.”‘ This member does not work in the local’s office and thus “would not know if [Simpson] spends time there.”19 Another Local 743 member stated that Simpson was involved in the last (as of February 2001) Local 743 election. For example, rumors and innuendo were attributed to Simpson that portrayed 8 one of the candidates as an alcoholic, and he attended a ballot counting. This witness characterized Simpson as a “personal friend” of Walston and suggested that this accounts for Simpson’s presence at union functions.20 IBT field representatives have also observed Walston with Simpson. Simpson was seen taking 10 to 20 boxes from his vehicle and loading them into a truck belonging to Walston.21 Simpson’s car was seen at 7133 South 86th Street, Justice, Illinois, Walston’s residence and the registered address for Shannon’s Amusements, Walston’s video poker machine business.22 Walston was also observed with Simpson outside the Russian Turkish Bathhouse.23 The American Business Index lists the president of Division Street Russian Bathhouse as Joe Colucci � which is corroborated in his January 2000 obituary. Illinois corporate records identify James A. Colucci as president and registered agent. Joe Colucci’s obituary listed Jimmy Jr. as his surviving son. Intelligence information indicated that the Division Street Russian Turkish Bath House is owned by a George Colucci � who has been identified as Joseph Colucci’s brother � an individual identified by the Chicago Crime Commission and Chicago Police Department intelligence records as a major gambling boss in the Chicago area. Though frequented by politicians and businessmen, this location is known as an organized crime meeting place.24 Further supporting the allegation that Simpson had input into Local 743 matters, a Local 743 trustee stated that, in May 2001, Walston met with Simpson and Victor Smith, “who purports to be a labor arbitrator who brags about his union and organized crime connections. “25 9 Contradicting claims that Simpson still had control over Local 743, a current officer of the local stated that Simpson “has no influence over the Executive Board or members of the union.” He acknowledged that “Simpson often attend[ed] membership meetings and stop[ped] in the offices every few weeks to make [insurance] payments,” and “while in the offices, he may provide answers to questions” or give advice to less experienced business agents. According to this officer, Simpson has not met with management or engaged in organizing. This witness has gone to the bathhouse with Walston on a few occasions and knew that Simpson frequented this bathhouse as well 26 During the Project RISE field study, Walston acknowledged that Simpson was barred from “holding office, working for a vendor, or receiving remuneration from the Local or the IBT.” He also acknowledged that Peters was “permanently barred from International and fund related positions” because he breached his fiduciary duty and associated with Allen Dorfman, Outfit capo Lombardo, and others. Walston claimed that neither Simpson nor Peters had any influence over the executive board or local union business.27 Another current Local 743 officer also interviewed in 2001 stated that Simpson and Peters have no influence over Local 743.28 Based upon the decision and order of the IRB, Simpson was effectively prohibited from holding a “position of trust or responsibility” in the local, the IBT, or its affiliates. In its decision against Simpson, the IRB concluded that, “as the principal officer of Local 743, Simpson was required to ensure that he and the Local did not assist Peters in violating the settlement agreement which had been entered as a court order.”29 Likewise, Principal 10 Officer Walston’s “position of trust” required him to make the same efforts to ensure that Simpson was not involved in the affairs of the local in violation of the court’s order. C. Whether Walston Entered into Sham Collective Bargaining Agreements with Two Employers and Whether the Employers Have Ties to Organized Crime The legitimacy of two Local 743 collective bargaining agreements negotiated and approved by Walston in 1999 was raised by former Principal Officer Glanton during the Project RISE field study. The contracts are with Bella Notte Restaurant and EI Cubano Meats. Glanton characterized these contracts as “shams,” stating that their only purpose was to provide health and welfare benefits to Walston’s friends. Glanton explained that the president/principal officer signs all legitimate Local 743 contracts, however, the Bella Notte and EI Cubano contracts have no place for his signature nor would he have signed them.30 Glanton explained that the local has standard procedures governing new collective bargaining agreements, including creation of a negotiating committee, ratification by the membership, creation of a summary sheet, assignment of a business agent by the principal officer, and review by the principal officer. With respect to the two “sham” contracts, Glanton did not receive a summary sheet, did not appoint a business agent, did not review or sign them, and never discussed them with Walston. In 1999, Walston signed the contracts and apparently assigned himself as business agent. Glanton also asserted that restaurants and meat wholesalers are outside the typical jurisdiction of Local 743. Bella Notte and EI Cubano each had bargaining units of only two to three people. Glanton stated that it was surprising for such companies to offer the top health and welfare plan, 11 rate of approximately six dollars per hour. In addition, although the individual who had successfully organized a new employer is entitled to a monetary reward, Walston did not claim one for organizing Bella Notte or EI Cubano; instead, he turned it over to an organizer to collect.31 Confirming Glanton’s statements, a review of Local 743’s collective bargaining agreements with EI Cubano Meats and Bella Notte Restaurant for the period May 1, 1999, through April 30, 2002, revealed that both agreements cover only full-time office and clerical employees and set a minimum wage rate of $5.75 to $6.75 per hour. Significantly, both contracts have provisions providing the Local 743 “Plan A Medical Plan,” without employee contributions, and both contracts include management as eligible employees covered by the plan.32 There are apparently three restaurants that have operated under the name Bella Notte. The IBT Research Department’s summary sheet listed the work site address of the Bella Notte as 160 West North Avenue, Chicago, Illinois. Grand Avenue was handwritten in, but then scratched out on the summary sheet.33 The TITAN report for Bella-Notte lists the Grand Avenue address which Local 743 officer Richard Lopez advised was the site of the Bella Notte restaurant under contract with Local 743.34 The contract is signed by Ramon Aguirre for the company and by Robert Walston for the union. (The signature of a Carlos Aguirre appears on the contract on behalf of the union; this may be an error.35) A former Local 786 member stated that James Cozzo, barred from the union for mob associations, is an owner of the Bella Notte Restaurant on Grand Avenue.36 12 TITAN records reflected three IBT members who are employees of Bella Note: Ramon, Francisco, and Juan Aguirre. According to a media account, three Aguirre brothers own Bella Notte restaurants. Francisco Aguirre was previously a chef at the Rosebud Cafe.37 According to a confidential source, Outfit members Lombardo and Joe (the Builder) Andriacchi have hidden ownership interests in the Rosebud Cafe. The source reported that “Andriacchi `held court’ every Friday night at the original Rosebud.” On one occasion, the source overheard Andriacchi berating the owner of record of the Rosebud for his expenditure of Rosebud funds.38 A credit report that was part of the IBT’s contract file identified a Ramone Aguirre as the owner of the Bella Notte Restaurants, 1372 West Grand Avenue.39 In 1995, the original applicant for a liquor license for a restaurant doing business as “Bella Notte,” located at 6063 West Dempster Avenue, Morton Grove, was Ramon Aguirre. An application was made in 1999 at the same location under the name, “Bellavia Services, Inc.” for “Bella Via Restorante.” One of the listed incorporators of the Bellavia is Suzette Bellavia. Cheryl A. Villalobos was listed as an incorporator, vice-president, and secretary of the corporation.40 Suzette Bellavia and Cheryl Villalobos have been identified as the daughters of organized crime associate Robert Bellavia.41 Robert Bellavia is the uncle of former IBT representative Dane Passo, who was barred from the union by the IRB in 2002.42 At least one Aguirre family member has other business interests. Ramon Aguirre is the president and registered agent of Aguirre Building Maintenance Inc. Records relating to this business were subpoenaed by the federal government in an investigation 13 that resulted in the indictment of members of the mob-connected Duff family and Local 727 contract administrator John J. Leahy, president of Leahy & Associates, a service provider to numerous Teamster benefit funds, for defrauding the City of Chicago. (See Appendix, Tab 9.) The subpoena called for the City to produce its records of payments to Aguirre Building Maintenance. 43 Records of the Cook County Recorder of Deeds revealed that Francisco and Gloria Aguirre were grantees of property located at 1711 North 72nd Court, Elmwood Park, Illinois, from grantor Midwest Bank and Trust Company, Trust Number 90-5911. Joseph J. and Carol A. Belli and Joseph and Elaine Belli were separately grantees of parcels near the Aguirre property (1705 North 72nd Court and 1701 North 72nd Court, respectively) and both received their property on the same day from the same trust as the Aguirres. Publicly recorded documents also revealed that in 1990, Joseph Andriacchi � another Outfit boss �was one of the individuals who transferred property rights into Trust 90-5911.44 Joseph J. Belli Sr. has been observed by law enforcement in the frequent company of another Outfit boss, John DiFronzo. Belli’s son, Joseph J. Belli Jr., is a business agent for Local 727.45 (See Appendix, Tab 2.) In summary, the information obtained by IBT investigators concerning the first of the two Local 743 contracts Glanton characterized as “sham” tends to support that characterization as well as reveal a pattern of apparent organized crime associations by the owners of the establishment. As noted, the second suspect contract entered into by Walston was with EI Cubano Meats. Robert Casimiro has been identified as EI Cubano Meats’s owner and in multiple 14 law enforcement records as a “major narcotics trafficker and money launderer.” He is married to Julia Medina-Herrera, reportedly a member of the Herrera family, which is recognized as a major heroin organization. A confidential informant claimed that Casimiro has been a major drug trafficker in the Chicago area. The informant was involved in a case in approximately 1998 or 1999 where Casimiro was considered to be the probable source of the drugs.46 D. Whether Walston Continues To Be Involved in the Video Poker Machine Business and Whether He Has Contact with Individuals Associated with Organized Crime Walston’s possible association with individuals having organized crime ties through his involvement in the video poker machine business raises serious concerns. Glanton, who elevated Walston to secretary-treasurer in 1999, had concerns about Walston’s involvement in the video poker machine business. Glanton advised that he discussed this with Walston, who acknowledged to Glanton that he was in the video poker business. Glanton saw two or three machines in Walston’s truck. At that time Walston told Glanton that he made money from the machines.47 Glanton, directly or through another person (his recollection was unclear), asked Walston to divest himself of the video poker machine business because in Chicago it has a reputation of being organized crime controlled. Walston agreed, saying that he had turned the business over to his daughter and was having nothing more to do with it. Glanton expressed the belief that Walston may have been in the video poker business.48 In 2004, a Local 743 officer indicated that Walston continued to maintain video poker machines. This officer stated that Walston had machines in a Hispanic 15 neighborhood and that he might have some in the neighborhood of 26th Street and Pulaski as well. Walston, according to this member, spent much of his time on weekends visiting these locations in order to make collections. The Local 743 officer also stated that “the vending industry in Chicago is infiltrated by organized crime and `you wouldn’t want to mess with those guys.”‘ He thought that the business “`went bust”‘ and the local received frequent calls from an equipment company to which Walston was in debt. This witness stated that he knew Anthony D’Amico � who had been a Local 786 member � and that he believed D’Amico may have originally introduced Walston to the vending business.” A retired IBT member also stated that Walston and D’Amico were friends, and Walston bought video poker machines from D’Amico.50 In 1997, D’Amico was permanently barred for knowingly associating with organized crime member James Cozzo, but this decision was reversed by the 26th lBT international Convention, finding the evidence was insufficient to sustain the charge.51 Notwithstanding this ruling on the merits of the specific association case presented against D’Amico, intelligence sources confirm D’Amico’s reputation for having Outfit connections. Whether or not these connections rise to the level of prohibited associations, they tend to corroborate reports that Walston’s involvement with D’Amico in the video poker business was part of a pattern of behavior linking him to Outfit figures. Although possession of video poker machines is not illegal, gambling in connection with the machines is illegal. According to a recent Chicago Tribune article reporting on a raid of 11 businesses, the Chicago Crime Commission has reported that video poker machines have become a major income source for the Chicago Outfit.52 The Cook County 16 sheriff’s office has noted a “disturbing expansion of mob-controlled video gambling.” Another recent article reported that “[o]ne machine can make up to $100,000 in profits a year [,] half of that money goes to the mob.”53 During the Project RISE field study, a Local 743 member stated that Walston transported “video machines in broad daylight during business hours,” and further stated that he was told Walston received a telephone call at the local requesting Walston “`fix the machine”‘ at the Jalisco Restaurant. Walston was observed in 2000 moving a jukebox from the Jalisco Restaurant, on West 31st Street, to his residence, which is also the address of Shannon’s Amusements, Walston’s vending machine company. Illinois Secretary of State corporate records identified Walston as the president of Shannon’s Amusements, Inc. Records on file with the state, however, indicated a “delinquent and inactive status” since 1997. In 2000, a Local 743 employee responsible for filing documents received by the local, including Walston’s “`personal filings,”‘ stated that Walston received documents related to Shannon Amusements at the local which were filed in his “personal file cabinet.” She also stated that, on one occasion, she went with Walston during their lunch hour to Local 743 employer El Cubano Meats. At the owner’s request, Walston used his key to empty the “gambling machine” that was on the premises and divided the proceeds.54 Walston’s activities suggest that the business still operates. Moreover, the owner of the Jalisco Restaurant advised an iBT field representative that Walston was the individual to speak with regarding vending machines. When specifically questioned about renting machines, the owner provided Walston’s telephone number at Local 743’s offices. 17 Law enforcement records identified Jalisco Restaurant as being frequented by major Mexican drug traffickers.55 Walston also spent a great deal of time at Puerto Del Mar Restaurant, going there in the morning and evening hours. Walston appears to have a relationship with the owner, Nicolas Baca. Walston has been seen on multiple occasions in the kitchen, helping himself to coffee, and sitting at a table reserved for the owners. Baca has been identified by a confidential drug informant as a large-scale narcotics trafficker.56 On at least two occasions, Walston has been observed with Victor Smith of Victor Smith & Associates. As discussed above, Smith is purported to be a labor arbitrator who has bragged about his union and organized crime connections. A confidential law enforcement source advised that Smith made loans to individuals and, in at least one situation, threatened a person with bodily harm if he did not repay the loan. At the offices of Victor Smith & Associates, Walston and Smith were overheard discussing issues related to Local 743.57 E. Whether the Local 743 Health and Welfare Trust Is Engaged in a Relationship with a Service Provider, Group Administrators, Ltd., Detrimental to the Local’s Membership As discussed above, Donald Peters’s organized crime connections were directly linked to his involvement with Allen Dorfman. Local 743’s health and welfare fund was founded in 1955 under Peters and Dorfman served as its administrator. Dorfman maintained this position even after his 1972 conviction for fraudulent conduct related to the CSPF. In 1981, Dorfman, organized crime member Lombardo, former IBT General President Roy Williams, and others were indicted in connection with their attempt to bribe 18 U.S. Senator Howard Canon with assets from the CSPF. Dorfman was murdered after his conviction and shortly before he was scheduled to be sentenced. His son David replaced him at the health and welfare fund. David Dorfman’s company, Group Administrators, became the contract administrator hired by the insurance company servicing the fund. David Dorfman’s partner, William Webbe, had been an employee of Allen Dorfman and it was Webbe’s office that was often used for private meetings between Allen Dorfman, Peters, and Lombardo. Following Peters’s removal and Simpson becoming president, GA continued to serve as the contract administrator for Local 743’s health and welfare fund. As previously discussed, a trusteeship was imposed upon Local 743 in 1994. The trustee identified financial and administrative concerns involving the health and welfare fund. He noted, among other things, that the administrative expenses for the fund were high. In addition, the contract administrator, GA, was accountable to the insurance company rather than the fund. The trustee retained an outside attorney to conduct an independent assessment of the fund.58 The attorney reported in October of 1995 that each of the fund’s insurance contracts had a provision for administrative services to be provided by the insurance company and the fee for such service was included in the fixed costs charged by the insurance carrier. Since the creation of the fund, this service had been provided by a Dorfman-owned company. The administration of the contract had never been subject to competitive bidding, other than in the context of changing the insurance carrier. Every insurance company, upon securing the contact, retained a Dorfman-owned company to provide administrative services. 19 Total administrative costs to the fund in the two years analyzed (1992 and 1993) were 28 percent and 25 percent of the total contributions for each of those years, respectively. By comparison, total operating costs for other comparable health and welfare plans averaged 7 percent to 10 percent of total income. The report concluded that the administrative costs were excessive. Most of the excessive costs were attributable to the fees paid to David Dorfman’s company.59 During the trusteeship of Local 743, GA was terminated in March 1996. In May, the Local 743 employee trustees brought a class action suit against the four fund trustees, based in part on the allegation that they breached their fiduciary duties under ERISA by authorizing excessive expenditures of fund assets on administrative services and payments to Dorfman and GA. The lawsuit was settled with defendants agreeing to pay $275,000.00, $150,000.00 of which went to the fund. Douglas Matook of Associated Third Party Administrators (ATPA) replaced GA as the third party administrator. One of the fund trustees complained to his fellow trustees about this company because they refused to pay some of his medical bills. These claims did not fall within the fund’s legal ability to pay, but had been approved in the past by Dorfman’s company. The trustee wanted to fire ATPA and bring back GA. This effort was stopped by then president Glanton after he conferred with the IBT. ATPA was eventually replaced by Tedro & Associates. Notwithstanding the Dorfmans’ historic connections to organized crime, the findings of the trustee and the independent report, the termination of GA in 1996, and the class action lawsuit that was settled in 2000, the Local 743-affiliated health fund either continued 20 or renewed its relationship with GA. In its 2002 Form 5500 covering March 1, 2002 through February 28, 2003, GA is the first service provider listed and is identified as, “Contract administrator.” Fees and commissions of $18,778.00 were paid to GA. Tedro and Associates was also identified as “contract administrator,” and received fees and commissions of $82,942.00.60 In a separate but related matter, it should be noted that the Local 743 Health and Welfare Trust employed Thomas Havey, LLP as its public accounting firm during the same time period. Identified as the auditor, Havey, received $28,775.00 in fees and commissions. Schedule C of the Form 5500 indicated that Havey, at 30 North LaSalle, Suite 4200, Chicago, had been terminated, the explanation being that “the firm is no longer practicing public accounting.”61 Thomas Havey has been described as the dominant accounting firm for labor unions. 62 Two members of the firm, one partner and one accountant, pleaded guilty in 2002 to “federal criminal charges of `aiding a conspiracy’ to defraud the United States by helping union officials hide on government disclosure forms how they spent more than $1.5 million in union dues.“63 The accounting firm helped the vice-president of the ironworkers union hide his daughter’s embezzlement of over $100,000.00 from an ironworkers benefit fund. Havey’s accountant and partner not only hid the expenditures but did not inform other trustees about it. 64 The same Form 5500 also identified Legacy Professionals, LLP, at 30 North LaSalle Street, Suite 4200, Chicago, as the preparer of the forma Legacy Professionals is located at the same address as Thomas Havey, LLP and is apparently the successor to the Havey 21 firm.65 Thus, any claim that connections to Havey have been severed require additional examination. It should also be noted that prior to the field study, Local 743 employed a consultant, Alex Selwood, who performed services duplicative of the services provided by GA. Selwood was discharged in 1995. Selwood’s wife, Connie Selwood, operated a company called Security Programs, Inc. which provided services to Local 743’s severance and retirement fund. In 1994 Security Programs was named in a class action lawsuit brought by non-IBT Local 707 against its trustees for misappropriation of funds. Security Programs allegedly submitted false reports to conceal the theft. The suit was ultimately dismissed for jurisdictional reasons, according to the local’s attorney, Anthony Pinelli � a member of IBT Local 786. The Local 743 Severance and Retirement Plan Form 5500 for 2002 listed Security Programs, Inc., as its sole contract administrator earning $85,127.00 in fees and commissions for 2002. In addition, the Havey firm is identified as its former accountant, and the form itself, was prepared by Havey’s successor, Legacy Professionals.66 III. SUMMARY Investigation of the issues raised by the Local 743 field study has heightened the level of concern regarding possible corruption within the local. While contradictory information has been received, witnesses continue to state that Walston and other current officers have allowed Peters and Simpson to have influence over Local 743. Additional investigation has further supported the claim that Walston executed collective bargaining agreements under circumstances indicating that the contracts are a sham and that the 22 sham employers may have ties to organized crime, narcotics trafficking, and money laundering. Despite Walston’s prior statement to the contrary, recent information also confirms that Walston continues to operate a video poker machine business, while law enforcement authorities are currently reporting an expansion of mob-control over video gambling. At least one of the restaurants that housed Walston’s machines is known by law enforcement to be frequented by major Mexican drug traffickers. Finally, although at the time of the field study it appeared that Local 743 had severed its relationship with its former insurance contract administrator, David Dorfman and his company, Group Administrators, Ltd., documentary evidence obtained in 2004 indicates that payments were made by Local 743 to GA between 2002 and 2003. A personal representative will facilitate the process of interviewing and taking sworn statements from witnesses and obtaining relevant business records and other documentary evidence needed to resolve these serious issues. 23 ISSUES RELATING TO LOCAL 781 I. BACKGROUND Local 781, located at 200 Howard Avenue, Des Plaines, Illinois, represents a variety of employees. Joseph L. Bernstein is its president and principal officer and is also vice president of Joint Council 25. Local 781 was not included in the Project RISE field study. As discussed below, issues concerning this local arose from investigative activity involving William T. Hogan Jr. The following issues require further investigation: � Whether Local 781 President and Principal Officer Joseph L. Bernstein, who is also the vice president of Joint Council 25, has engaged in a prohibited association with William T. Hogan Jr., a barred member, and � Whether Local 781 is engaged in a business relationship with Group Administrators, Ltd., a benefit funds service provider, that is detrimental to the union. II . CURRENT ISSUES Recently raised issues suggest that the local may be vulnerable to corrupting influences, including the continued influence of William Hogan Jr. (see Appendix, Tab 8). Appointment of a personal representative by the general president is sought to facilitate a thorough investigation of these issues. A. Whether Local 781 President and Principal Officer and Joint Council 25 Vice President Joseph L. Bernstein Has Engaged in a Prohibited Association with William T. Hogan Jr., a Barred Member William Hogan Jr., former president of Joint Council 25 and principal officer of Local 714, was permanently barred by the IRB in 2002 for colluding with Richard Simon, a labor broker with ties to organized crime, and former IBT Representative Dane Passo (barred along with Hogan) to cause Local 631 to enter into a substandard contract. The IRB’s 1
findings with respect to Hogan’s involvement in this scheme are set forth in a memorandum concerning Hogan’s continuing influence over Chicago-area Teamsters (Appendix, Tab 8). On May 29, 2002, the lRB ordered that Hogan be permanently barred “from holding membership in or any position with the IBT or any IBT-affiliated entity [and] may not hereafter obtain employment, consulting or other work, directly or indirectly, with the IBT or any IBT-affiliated entity.”1 By memorandum dated May 31, 2002, General Counsel Patrick J. Szymanski and Human Resources Director Lynda Sist notified all IBT employees that [t]he Consent Decree prohibits any Teamster member or officer from “knowingly associating” with anyone who is permanently barred from the Union pursuant to an IRB decision. This prohibition applies to Mr. Hogan … and not only prohibits contact that concerns Union affairs, but also prohibits purposeful social contact with Mr. Hogan … even though that contact is completely unrelated to Union affairs. Teamster members have themselves been barred from the Union for having purposeful contact with individuals who have been barred from the Union.2 Investigation has revealed that Bernstein has had contact with Hogan since his debarment. A personal representative will assist in determining the nature, extent, and circumstances of the contact or contacts. On October 28, 2003, Bernstein and Hogan met at the Black Ram Steakhouse, Des Plaines, Illinois. The following observations were made. At approximately 12:05 p.m., Hogan, traveling alone, was observed parking a vehicle registered to him, license plate number WTH 1, in the parking lot of the Black Ram Steakhouse and entering the restaurant. At that time, a vehicle with license plate number IL-JLB 17 was parked in the lot. Illinois Secretary of State Motor Vehicle Division records show license plate number 2 IL-JLB 17 is registered to Misc. Warehouseman Local 781. Hogan and an individual later identified as Bernstein were observed sitting alone in a corner booth of the restaurant from at least 1:40 p.m. to at least 2:04 p.m. At approximately 2:50 p.m., Hogan and the individual later identified as Bernstein were observed exiting the restaurant, talking briefly, and hugging. Hogan departed in the vehicle bearing the WTH 1 license plate and the individual later identified as Bernstein departed in the vehicle bearing the IL-JLB 17 license plate.3 On October 30, 2003, the vehicle bearing license plate number IL-JLB 17 was observed in the parking lot at the offices of Local 781 at 200 Howard Avenue, Des Plaines, Illinois. The individual observed with Hogan on October 28 was seen exiting the local’s offices and entering the vehicle. This observation was videotaped. An IBT member was shown digital images of the videotape and unequivocally identified the person as Bernstein.4 Based upon the time the Hogan and Bernstein vehicles were first observed together in the parking lot of the Black Ram Steakhouse and the time Hogan and Bernstein were observed departing, it is believed that they met for approximately 2 hours and 45 minutes. A personal representative will facilitate obtaining records, conducting interviews, and taking sworn statements to verify the contact between Bernstein and Hogan on October 28 and to determine whether there were other contacts between the two on other dates and whether the contacts were prohibited. 3 B. Whether Local 781 Is Engaged in a Relationship with a Service Provider, Group Administrators, Ltd., that Is Detrimental to the Union Group Administrators, Ltd. (GA) is the health insurance contract administrator for a number of Teamster locals in the Chicago area. Attention first focused on GA in or about 1995 when an independent audit of Local 743’s health and welfare fund revealed excessive payments being made to GA and its owner, David Dorfman. Local 743 terminated its relationship with Dorfman and GA. David Dorfman has historic ties to organized crime through his father, Allen Dorfman. GA’s relationship to Chicago-area locals and the ties of both Dorfmans to organized crime are discussed in memoranda concerning Local 743, Local 714, and IBT service providers in the Appendix, Tabs 3, 6, and 9, respectively. GA was also the contract administrator for Local 714. The local was informed during the field study that GA had charged excessive fees to Local 743’s health and welfare fund. No action was taken by Local 714 officials to determine whether GA was also charging excessive fees to Local 714’s fund, and a Local 714 official falsely stated that Local 714 had obtained bids for the service and GA offered the best rates, when, in fact, no bids had been obtained. Even though Local 743’s health and welfare fund had apparently terminated its relationship with GA, recent information indicates that this fund made payments to GA in 2002. (For a discussion of Local 743 issues see Appendix, Tab 3.) An examination of Local 781’s Health and Welfare Fund Forms 5500 for the years 1993 through 2002 reveal substantial payments to GA every year. The amounts generally 4 increased each year beginning with approximately $190,000.00 in 1993 and reaching a high of approximately $245,000.00 in 1998 and 2000.5 Given GA’s history of ties to organized crime and the existence of recent issues concerning GA at two other locals in Joint Council 25, Local 781’s substantial payments to this firm over an extended period of time warrant further examination. A personal representative will facilitate the process of interviewing and taking sworn statements from witnesses and obtaining relevant business records and other documentary evidence necessary to thoroughly investigate these issues. III. CONCLUSION For the reasons discussed above, a personal representative should be assigned by the general president to investigate (1) whether Principal Officer Bernstein has engaged in a prohibited association with barred Teamster Hogan Jr. and (2) whether Local 781 is engaged in an improper business relationship with benefit funds service provider Group Administrators. 5 ISSUES RELATING TO LOCAL 786 An interim report on the investigation of Local 786 that proposed the filing of charges against three 786 members was presented to the IBT in June 2003, but to date no charges have been filed. The remaining 786 investigation was severely limited in scope on December 12, 2003, and then halted at the direction of the general president on February 24, 2004. As noted in the main report, the termination of this investigation is part of a larger pattern of shutting down IBT’s anti-racketeering investigative efforts in Chicago. Significant issues regarding Local 786, however, remain unresolved. Accordingly, this investigation should be reopened and the general president’s personal representative should be reappointed so that the following issues can be addressed: � Whether the charges proposed in the June 2003 interim report should be filed against: (1) the 786 benefit funds administrator, a Teamster, for knowingly associating with an organized crime member who is a barred Teamster and for providing false information; (2) the benefit funds collections manager, also a Teamster, for providing false information and receiving full-time compensation for less than full-time work; and (3) the Local 786 benefit funds assistant administrator, also a Teamster, for refusing to appear for her sworn statement; � Whether and to what extent organized crime � including barred Teamster and Outfit member James Cozzo and Local 786 employer and organized crime member Kenneth Bratko � continues to control or influence the affairs of Local 786; � Whether Local 786 Principal Officer Lou Mazzei and other members of the local’s executive board abused their fiduciary duties by misappropriating in excess of $8,000.00 of local union funds for their personal benefit in violation of IBT written policy; and � Whether and to what extent Local 786 employers who are associated with or controlled by organized crime failed to make proper contributions to the 1 Local 786-affiliated benefit funds because of corrupt or illegal schemes and practices. II BACKGROUND A. Basis for Inclusion in Project Rise Field Study Local 786 was selected for inclusion in the Project Rise field study because of several organized crime-related charges made by the Investigations Officer/Independent Review Board (IO/IRB) against local members and employees. The most significant of these was in 1990 when charges were upheld that Local 786 official James V. Cozzo was an organized crime member and associated with Chicago Outfit lieutenant Joseph Lombardo which resulted in Cozzo being permanently barred from the IBT1 Earlier, on December 4, 1996, the IRB had proposed charges against Local 786 President and Principal Officer Walter Hoff for failing to answer questions during his sworn examination before the IRB. On March 4, 1997, the local executive board permanently expelled Hoff from the IBT following questions relating to a criminal investigation involving him. The criminal probe, called “Operation Silver Shovel,” was a wide-ranging federal probe which targeted local politicians, union officials, and mobsters. Hoff was indicted for illegally accepting money ($16,000.00) from a corrupt contractor who was acting as an FBI informant. The informant, who owned excavation companies, paid the money to avoid paying thousands of dollars in health and welfare funds. In December 1996, Hoff had resigned from the union and subsequently pleaded guilty to two of the nine counts in the indictment. In August 2000, he received a sentence of five months of home confinement 2 and five months in jail, which the court stayed due to Hoff’s terminal cancer, and was ordered to pay restitution.2 After completion of the field study, additional concerns were raised regarding personal expense payments, benefit contributions paid under collective bargaining agreements, a benefit funds and Local 786 employee’s no-show employment, allegations of organized crime influence in the local and affiliated benefit funds, and other matters. As a result of these new concerns, on March 1, 2002, the IBT initiated an investigation into these matters. William A. Moore was appointed the IBT general president’s personal representative to Local 786. Stier Anderson and several IBT field representatives assisted Moore in conducting the investigation.3 B. Field Study Results In October 2002, Local 786 was placed in Category C � for locals requiring immediate attention � because of the active IBT investigation into personal expense payments, alleged organized crime influence, and benefit contribution schemes initiated in March 2002. II. REPORT OF INVESTIGATION INTO ALLEGATIONS OF PROHIBITED ASSOCIATION WITH ORGANIZED CRIME FIGURE AND FAILURE TO COOPERATE In June 2003, Stier Anderson issued an interim investigative report in which charges were recommended against three Teamster members. (This report is attached as Exhibit A.) The charges relate to discrete aspects of the Local 786 investigation, namely (1) prohibited associations between Teamster member and administrator of the Local 786-affiliated benefit funds Jeffrey Hoff (son of former Principal Officer Walter Hoff) and 3 organized crime lieutenant and barred Teamster James Cozzo; (2) benefit funds collection manager James Vrankovich’s no-show employment at the benefit funds and Hoff’s misrepresentations to the investigation about Vrankovich; and (3) the refusal of Cozzo’s daughter Rosanne Pierce, who is a Teamster on withdrawal status, to be interviewed for this investigation. To date, charges recommended in the report have not been filed. A. Charges Recommended against Jeffrey Hoff 1. Background Jeffrey Hoff has been a Local 786 member since approximately 1983 and is the administrator of seven pension and other benefit funds associated with the local.’ Hoff was appointed to these positions as administrator by his father and former Local 786 Principal Officer Walter Hoff, who was permanently barred from the Teamsters in 1997. Jeff Hoff became a member of Local 786 because the employees’ trust fund required the administrator to be a member of the local.5 In the early 1990s, Walter Hoff recommended to his son that Vrankovich be hired as a collections manager for the benefit funds.’ In his capacity as administrator of the benefit funds, Hoff is Vrankovich’s immediate supervisor and has been in a position to know whether Vrankovich shows up for work on a full-time basis as is required of him. Hoff’s total compensation for his work as administrator for the seven funds was approximately $184,000.00 in 2000.’ 2. Report Findings The June 2003 interim report concluded that Hoff brought reproach upon the union by knowingly associating with organized crime member James Cozzo who was 4 permanently barred from Teamsters in 1990. Cozzo was charged with being a member of organized crime and associating with members of organized crime, including Chicago Outfit capo Joseph Lombardo, and of being designated as Lombardo’s successor while the latter was in prison. Cozzo had served as “executive coordinator” for Local 786 until he took a withdrawal card in July 1989.8 In 1997, the Chicago Crime Commission listed Cozzo as a lieutenant in the Outfit in the Northside/Elmwood Park/Lake County area. Lombardo was also listed as an adviser to Outfit boss John (“No Nose”) DiFronzo.’ Hoff had contact with Cozzo on more than five-to-six occasions at Cozzo’s residence, which is a complex that takes up a neighborhood block with two residences, including Rosanne Pierce’s, and several businesses. During the six years preceding the June 2003 interim report, Hoff’s contacts with Cozzo at the complex have included: attending a 2002 graduation party for Cozzo’s granddaughter; assisting Cozzo’s daughter and granddaughter with various activities; eating meals with Cozzo and certain family members; and attending Fourth of July parties. Other contacts included attending two Cozzo family wakes during the year prior to his sworn statement.10 To determine whether Hoff’s contacts with Cozzo were prohibited, one element to consider is whether the association was “`purposeful and not incidental or fleeting.““11 Hoff’s contacts with Cozzo were the product of what the IRB has labeled “`conscious choices”‘ to place oneself in situations where one knows prohibited contact with an organized crime member would result.12 Having placed himself in such a situation with James Cozzo, Hoff engaged in purposeful prohibited contact.13 5 The interim report also concluded that Jeffrey Hoff failed to cooperate with this investigation by intentionally providing false and misleading testimony during his sworn statement regarding Vrankovich’s full-time performance of his fund duties. Although surveillance established that Vrankovich did not leave his home on Tuesday, February 11 and Friday, February 14, 2003, Hoff testified that Vrankovich was present at the benefit fund offices on February 14, and that they conducted business. B. Charges Recommended against James Vrankovich 1. Background Vrankovich was a member of IBT Local 703 in Chicago from approximately 1972 to 1979. During Vrankovich’s tenure at Local 703, he worked as an organizer and towards the end of his tenure was appointed as vice president to fill a vacancy.14 In late 1979 or early 1980, Vrankovich joined IBT Local 710 where he remained until he joined Local 786 in March 1982. That fall, Vrankovich, along with James Cozzo, supported the Local 786 opposition slate on which Wally Hoff ran. After a successful election, Vrankovich became an organizer for Local 786.15 In 1987 he left Local 786 but returned in 1993.16 Since 1993 he has also been employed as a collections manager for three benefit funds affiliated with Local 786: Building Material Pension Fund, Building Material Welfare Fund, and Severance Trust Fund.17 Vrankovich’s compensation for his work at the Local 786 funds was approximately $67,500.00 in 2000 and he earned an undisclosed amount from the Severance Trust Fund.18 In addition to being a member of Local 786, Vrankovich was employed on a part-time basis by the local since June 1994. 6 2. Report Findings In June 2003, Stier Anderson reported that Vrankovich failed to cooperate with the investigation by providing false and misleading testimony during his sworn statement regarding his work at the Local 786-affiliated benefit funds. During his sworn statement, Vrankovich claimed to have worked three days in his job as the collections manager for the benefit funds during the week of February 10, 2003 (while taking the other days off as vacation). Surveillance of Vrankovich, however, established that he failed to work on two of the three days that he claimed to have worked. This surveillance corroborated the testimony of several witnesses who stated that Vrankovich was rarely present at work at the benefit fund offices from approximately 1992 through April 2000 and did not perform his collection responsibilities. Although Vrankovich failed to perform full-time work for the funds, he was paid as if he had. By accepting full-time compensation, Vrankovich brought reproach upon the union. The extent of this pattern of less than full-time work for full-time pay could not be established because of an ongoing refusal of the 786-affiliated benefit funds’ administrator and trustees to provide this investigation access to necessary documentation, discussed in below. Also examined in this report are allegations that Vrankovich is an organized crime associate. C. Charges Recommended against Rosanne Pierce 1. Background Rosanne Pierce is the assistant administrator for the same three Local 786-affiliated benefit funds for which Vrankovich is employed as collections manager. She also reports 7 to Jeffrey Hoff.19 Her father, James Cozzo, as noted, was permanently barred from the Teamsters for being an organized crime member and for associating with organized crime members. When first requested to appear for a sworn statement, the request was referred to the Funds trustees because, according to Mazzei, Pierce was “neither an employee nor a member of Local 786.“20 Subsequently, it was determined that Pierce is on a withdrawal card from Local 786 and the general president’s personal representative requested Pierce to appear for a sworn statement.21 She failed to appear. Pierce’s total compensation in 2000 was at least $59,260.00.22 2. Report Findings Charges were recommended against Pierce, who is on withdrawal status from the union, for failing to cooperate with this investigation by refusing to appear for her duly noticed sworn statement on April 29, 2003. Ample precedent exists for the filing of charges against members on withdrawal status.23 D. Summary As the June 2003 report demonstrates, Local 786 members have abused their positions � by associating with a notorious organized crime member, by not showing up for work, and by failing to follow the directives of the general president’s personal representative to cooperate in this investigation. No clear explanation has been given for the failure of the IBT, to date, to file charges based on the evidence of misconduct uncovered during the IBT investigation. Because the misconduct is significant and the evidence sufficient to support charges, the IBT should reconsider its decision not to file the proposed charges � if such a decision has been made � and should begin processing 8 the charges promptly. Purposefully associating with known members of organized crime is conduct that lies at the heart of the prohibited conduct in the 1989 Consent Decree and should not be downplayed, nor should lying to an IBT investigation or refusing to appear for a sworn statement. Indeed, failure to bring charges against members for refusing to appear for a sworn statement directly undermines the general president’s authority to conduct anti-racketeering investigations, and, thus, cannot be ignored. These proposed charges against three members of Local 786 are especially significant in light of the numerous other credible allegations involving organized crime influence in the local and in other Chicago locals, as described in this appendix. III. CURRENT ISSUES A. Organized Crime’s Continued Influence or Control of Local 786 1. Local 786’s History of Organized Crime Involvement a. Hoff’s Election in 1982 In order to best understand the nature of these allegations, they must be viewed in their historical context. Allegations about organized crime influence in Local 786 date back to Walter Hoff’s 1982 election campaign which culminated in his defeating Steven Krisic Jr. and hiring James V. Cozzo, a lieutenant in the Outfit, as an “executive coordinator” for Local 786, a position he held until he resigned. Cozzo was subsequently barred in 1990. One member of Hoff’s winning 1982 slate, LeRoy Santoro, who died in 2002, explained that James Cozzo was intimately involved in putting together their slate; he “got [the] slate to run for office [and] organized and explained to [the candidates] how to go about going against the people who were in office.“24 Santoro explained that Cozzo had 9 reached out to him to be part of the slate through Santoro’s wife’s uncle, Stanley Jason, who grew up with Cozzo. Cozzo told Jason that his associates were “interested in putting a slate together to gain control of 786.” One of these “associates” was John A. Oremus of Prairie Material Sales, Inc., who paid for the slate’s campaign literature.25 A former Local 786 official confirmed that Oremus “put up the money” for the slate Cozzo organized. Cozzo and alleged organized crime member Kenneth Bratko (discussed below) on behalf of the Outfit, and Oremus (and later his grandson Alan) on behalf of Prairie, have been controlling the local ever since.26 John Oremus’ son John W. (Jack) was also a Prairie Material official until his death in 1997.27 A 786 former member and a present one also reported that Oremus was heavily involved in the 1982 election of Hoff. One described it as “`786 is the union that Jack built.-28 While having no apparent ties to Local 786 at the time, James Vrankovich was also actively involved in the 1982 election, stating that he campaigned for Hoff’s slate while he was a member of Local 710 because Hoff asked him to. 21 Santoro described Vrankovich as “an advisor” in the campaign.30 Once elected, Wally Hoff became Cozzo’s “front man” and Cozzo controlled the local.31 Bratko, who Santoro believed was Cozzo’s Outfit “‘boss’ and superior in rank to Cozzo,” also participated in running Local 786 through Hoff.32 While he tried to isolate himself from the Outfit, Santoro stated that Bratko demanded meetings “a number of times over the years” and would meet Santoro “at some secluded location” and “give him orders as to what he wanted done.” 33 When Santoro provided the information about Bratko to IBT field representatives, he requested that his identity be kept confidential because he feared 10 for his physical safety. This request would have been honored but is no longer necessary as Santoro is deceased. b. Hoff’s Fall and Mazzei’s Election The influence of organized crime in the affairs of Local 786 continued after Cozzo was barred from the Teamsters. In fact, it continued through Hoff’s fall from power in 1996. During the mid 1990s, an FBI cooperating witness played the central role in a federal racketeering investigation in Chicago called “Operation Silver Shovel” when he wore a wire to gather evidence against politicians and labor officials he was paying off in order to conduct his illegal operations.34 In an incident that undoubtedly reflected organized crime’s role in Local 786, a confidential source stated that the cooperating witness sought and received permission from Outfit member Anthony Centracchio (an in-law) to wear a wire against 786’s Walter Hoff.35 As noted above, the IRB brought charges against Hoff and he was indicted and pleaded guilty to Operation Silver Shovel charges. If the confidential source’s information is true, then the participation of the Outfit in the fall of Hoff certainly raises the question as to whether Mazzei � Hoff’s “hand-picked successor” � is subject to the influence or control of organized crime.” Several former Teamsters including two former officers stated that Mazzei’s rise to principal officer of the local was virtually over night. According to these individuals, Mazzei had no background in the industry, but was chosen because he was Hoff’s neighbor and because his sister was dating James Cozzo’s son (Phil). Santoro claimed that Cozzo directed Hoff to promote Mazzei to principal officer to continue his control of Local 786.37 Indeed, Mazzei’s alleged meeting with Bratko in 1997 shortly after Mazzei took office, as 11 described below, is consistent with this possibility. Additional evidence of continued Outfit influence in Local 786 was received from a confidential source, known to have Outfit connections and whose information about other issues has been corroborated independently, who stated that if the present Local 786 officers were removed, the Outfit “would run a new slate of members that (high-ranking Outfit member Joe] Andriacchi controls in order to maintain control of Local 786 and its associated funds.”38 2. Kenneth Bratko Kenneth Bratko’s alleged influence in Local 786 matters results from: (1) his organized crime connections; (2) his involvement with the Outfit in taking over Prairie Material Sales, a large 786 employer; (3) his control of other Local 786 employers; and (4) his behind-the-scenes involvement with Mazzei. a. Organized Crime Ties Bratko’s ties to organized crime in Chicago date back to at least 1964 when he and several Outfit members, some of whom later rose to high-level positions in the Outfit, were indicted in the Northern District of Illinois.39 During this trial, Bratko testified that he was in the truck leasing business. He owned the trucks and leased them, along with drivers, to various companies. Bratko was convicted and sentenced to two 25 year consecutive sentences40 While he was incarcerated in the 1970s, law enforcement sources tied Bratko to efforts by “known criminals to take over that portion of the truck hauling industry involved in moving sand and gravel” in the Chicago area.41 The report indicated that Bratko had organized several individuals to participate in his criminal enterprise including James Cozzo, who was identified as the owner of Super Cartage, 607 North Racine, Chicago, 12 Illinois, in 1975. Super Cartage had been CPC Trucking and law enforcement traced ownership of CPC to Bratko.42 Vrankovich believed that Cozzo and Bratko owned a trucking company together. He could not recall its name, but knew it was comprised of three initials. He speculated that it was either CRP, CPP, or CPC.43 Local 786 attorney and member Anthony Pinelli has known Bratko since the late 1970s. They were, as Pinelli described it, “pretty good friends and spent some time socializing, and I would see him on and off until … the middle `90s, then things kind of tailed off, and I haven’t seen him in several years.”44 Pinelli confirmed that Bratko and Cozzo socialized and that he had seen them together in the same restaurant having dinner “at least half a dozen times.” Pinelli thought these occasions occurred before Wally Hoff was elected, placing them in the late 1970s, early 1980s. During this time, Pinelli recalled being part of a group, along with Bratko and Cozzo, at a dinner in a restaurant, but Pinelli could not recall the name of the restaurant.45 Bratko was also identified by Sylvia Cozzo as a “[f]amily friend” whom she knew her “whole life.”46 She believed he owned a trucking company in which his brother Ronnie was involved.47 As of June 2003, she last saw Bratko when he was visiting her father in the hospital about a month earlier. Sylvia characterized the relationship as a 40-year close friendship that included a variety of socializing, including Bratko’s attendance of the famous Fourth of July party hosted by the Cozzos.48 Bratko’s ties to organized crime were corroborated by the FBI cooperating witness, who reported to IBT field representatives that he knew Bratko very well and that Bratko is an associate of Lombardo’s Grand Avenue Crew. He also confirmed that, as noted below, Bratko and the Outfit became involved with Prairie Material Sales, a Local 786 employer.49 13 Confidential sources also identified Bratko as a member of the Grand Avenue Crew and as “extremely close” to organized crime member Tony Spilotro.50 A review of records from several of Bratko’s businesses suggested that, when Joseph Lombardo was sent to prison in the mid 1980s, his wife Marion was paid a total of $206,884.96.51 b. Bratko and Prairie Material Sales. In Prairie Material Sales, Inc., was incorporated in 1957 with John A. Oremus as the president and treasurer. Oremus was the Mayor of Bridgeview at the time, a position he had, excluding 1963-1967, until 1999, when he declined his 11th term citing health reasons. Today, Prairie Material is one of the largest ready mix manufacturers in the Midwest and continues to be a Local 786 employer. It is run by Dorothy Oremus and one of her sons, as her brother Jack and father John are both deceased.52 Prairie Material’s success was considered by some to have happened virtually overnight. Confidential sources attributed this meteoric rise to an arrangement made between Oremus and the Outfit. In exchange for funds and muscle to make the business a success, the Outfit gained control of this construction business in Northern Illinois.53 The FBI cooperating witness identified Bratko as a former burglar and truck thief who moved on to better things when he became involved with the Oremus family, who own Prairie Material Sales “on paper.” In fact, according to Christopher, Bratko and the Outfit own Prairie Material and Bratko used the Oremus family to orchestrate the takeover of Local 786 in 1982. The cooperating witness stated that Bratko still controls Local 786 through “his people” who are Local 786 officials.54 A former Prairie Material employee and 40-plus year Local 786 member explained that after Wally Hoff stepped down from Local 14 786 office, Mazzei continued the close relationship with Prairie. He testified that “Prairie Material has a big influence in the union” and the union did not fight to protect the Local 786 members employed there.55 The former Police Chief of Bridgeview, Vladomir lvkovich, worked for Oremus as a driver and bodyguard. He stated that he had cautioned Oremus about associating with Bratko because Bratko had ties to the Outfit. Oremus dismissed Ivkovich’s warnings, claiming Bratko was a friend of the family. He confirmed that Bratko was, in fact, the godfather to one of Oremus’s grandchildren and that when Oremus died, Bratko attended his wake. Ivkovich had worked for 24 years with the Illinois Secretary of State prior to his police chief position and was very familiar with trucking-related matters in the Chicago area. He recalled that Bratko had a financial interest in two trucking companies: Super Cartage and H&S Cartage.56 Local 786 attorney Anthony Pinelli described a close personal relationship between Oremus and Bratko, explaining that Bratko “was very close friends with the Oremus family. I think that Jack Oremus had a child, and [Bratko] might have been the Godfather to it. I think that Kenny was close to the Oremus family ….�57 A former law enforcement source confirmed that Bratko was close to Jack Oremus as well.58 C. Bratko’s Other Businesses Bratko has been linked to approximately 30 businesses in Illinois. Two of these companies are Local 786 employers: L & S Cartage Co., Inc. and SS Transport, Inc. Confidential law enforcement sources identify Bratko as the behind-the-scenes owner of both companies. His brother, Ronnie, is president of L & S Cartage and had been the 15 registered agent for SS Transport. Earl Baum, Bratko’s brother-in-law, was the president of SS Transport. He died in January 2002.59 (Baum was a trustee of the Local 786 Severance Fund.) Annual reports filed by SS Transport in 1996, 1999, 2000, and 2002 identified Kenneth Bratko as a SS Transport Director.60 L & S Cartage and SS Transport are located at 7575 West 79th Street, Bridgeview, Illinois. This property had been owned by the John A. Oremus Trust. The Oremus Trust grant deeded the property on March 27, 1997, to Bratko, and on the same day, Bratko quit claim deeded the property to 79th Street Venture, LLC. Prairie Material’s headquarters is adjacent to the L & S and SS Transport offices at this address.61 In addition, Bratko owns property that houses a nightclub called “City Pool Hall” owned by James Cozzo’s daughters, Sylvia Cozzo and Rosanne Pierce. Cozzo’s son, Phil, is the manager. Lou Mazzei’s sister was a hostess at City Pool Hall from when it opened in about August 1999, when she was dating Phil Cozzo, until they broke up in the summer of 2000 or 2001.62 It has been alleged that Bratko provides financial backing for City Pool Hall.63 d. Bratko and Mazzei After Cozzo’s tenure at Local 786 ended in 1990 and Walter Hoff resigned in 1996, it was alleged that Bratko’s influence continued, this time over 786 Principal Officer Mazzei.64 Mazzei, however, in his sworn statement not only denied knowing Kenneth Bratko, but he also contended that he did not even know that Local 786 employer Ronald Bratko of L & S Cartage and SS Transport had a brother named Kenneth.65 Several witnesses and sources, however, contradict Mazzei’s claim. Indeed, these witnesses claim 16 that Mazzei has known Bratko for many years and that early in Mazzei’s tenure as principal officer, Bratko reached out to control Mazzei. One former Teamster official described a close relationship between Mazzei and Bratko, claiming to have seen Bratko at Mazzei’s home during a Fourth of July party Mazzei hosted in 1996, when Mazzei was still a trustee on the local’s executive board. This witness specifically recalled standing on the porch talking about the excavation work in Mazzei’s yard being done by Luise Trucking for the installation of a swimming pool. The witness believed Bratko was associated with Luise, but no evidence to corroborate this has been uncovered.66 According to the witness, Bratko attended the party along with James Cozzo’s son, Phil, and Mazzei’s sister, whom Phil was dating. The witness was confident that Bratko was at the party because he recalled his wife recognizing Bratko, having seen him in Curacao pushing Jack Oremus of Prairie Material Sales, in a wheelchair67 Confidential sources also link Bratko to Cozzo in another business venture. They indicated that Bratko was a “substantial investor” in Cozzo‘s hotel and casino ventures in Curacao.68 Bratko’s children are also identified as investors in Cozzo’s casinos.69 Although the credibility of the former Teamster official who linked Mazzei and Bratko is subject to question, his assertion that Mazzei knew Bratko is corroborated by a confidential source, with Outfit connections and a previous record of reliability, who reported that Bratko had exerted pressure on Mazzei during the first six months after he was elected principal officer in 1996. This confidential source recalled that Bratko telephoned Mazzei and “ordered Mazzei to meet him,” but could not recall where the 17 meeting took place. The source recounted that “Mazzei was scared to death,” took his gun with him to the meeting, and requested that the police be notified if he failed to call into the office every hour. After this meeting, Mazzei’s “whole attitude had changed,” and he treated employees in a very negative manner.70 This same confidential source with known Outfit connections and personal knowledge of Bratko identified Bratko as both an Outfit member and someone who currently has substantial influence at Local 786.71 Santoro independently observed a drastic change in Mazzei’s personality during the early part of his tenure. Santoro recalled that, for the first two or three months he was in office, Mazzei “tried to run the office legitimately [but] must have been called in by `them people’ (the mob), because his attitude completely changed.” Santoro stated that Mazzei then cut him out of all decision-making at the local and Santoro found the situation unbearable and eventually resigned.72 Former lumber fund employee Margo Baffa likewise observed a “180-degree change in [Mazzei’s] personality,” from a nice person to “a monster,” about six months into his first term as principal officer. She did not know, however, what triggered the change.73 In addition to denying that he knew Bratko, Mazzei denied ever telling anyone he was meeting with Bratko.74 3. Vrankovich a. Organized Crime Ties In addition to the no-show nature of his Local 786 affiliated benefit funds manager position, allegations arose that Vrankovich had ties to organized crime and was the liaison through which the Outfit exerted control over the local and its officers, including Mazzei. Vrankovich held a part-time position at the local and was required to work approximately 18 8 to 10 hours weekly. According to the testimony of Vrankovich and other witnesses, he performed sporadic work for the local, including assisting in election campaigns and grievances, collecting delinquent local dues, and participating in picketing employers. 75 Although we cannot conclude on the basis of the current record that Vrankovich is an organized crime associate, there is sufficient intelligence information about his Outfit ties to require further investigation. The FBI cooperating witness knew Vrankovich as a collector for Local 786 and as a small time burglar and Outfit associate. He stated Vrankovich was a burglar with the Ronnie Jarret crew. Jarret is a deceased Outfit member. The witness recalled that Vrankovich came from Local 703 and was very close to Dominic Senese, the former president and principal officer of Local 703 and an Outfit member himself.76 b. Influence in Local 786 Matters One former Local 786 official testified that he grew up in the same neighborhood as Vrankovich, who had a history of illicit activities including burglary. He also recalled that Vrankovich exercised a lot of influence at the local beginning with Wally Hoff s, tenure. That influence continued into the 1996 election, when Vrankovich was involved in Mazzei’s campaign meetings and, according to this witness played the role of intimidator during the campaign.77 Another retired Local 786 member also believed that Vrankovich exerted influence over the local, starting with Walter Hoff’s term. For example, he recalled an incident when Vrankovich told Hoff, “`Your kid is so F’ing stupid,”‘ and “really put [Hoff’s son Jeff] down.” This member could not believe how Vrankovich was treating his boss, principal officer of 19 Local 786. Another time, Vrankovich directed Hoff to “keep [his] mouth shut” when Hoff was giving the witness a hard time over an election-related question that arose during a ballot check. Hoff followed Vrankovich’s directions. This former member testified that Vrankovich still “has a lot of say-so of what goes on at Local 786,” even under Mazzei’s tenure. This included his own encounter with Vrankovich who was trying to convince the witness to abstain from running for local union office against Mazzei. Vrankovich intimidated the 786 member by recounting how “they missed [killing Dominic Senese], but . blew up the kid’s car,” referring to Senese, former principal officer at Local 703, having been shot in the head 78 Vrankovich, however, denied criticizing Hoff’s son, telling Hoff to shut-up, or trying to discourage anyone from running for election in any way.79‘ B. Misappropriation of Local Union Funds by Mazzei and Other Members of the Local 786 Executive Board Allegations were received from several sources that Mazzei and other members of the Local 786 executive board abused their fiduciary duties by appropriating local union funds for their own benefit. Immediately prior to Stier Anderson initiating its investigation, the IBT requested that the internal audit department address some of the allegations that had come to its attention. Because the 786 investigation was halted on February 24, 2004, as noted, Stier Anderson has not completed its examination of the alleged abuses of the local’s funds. Specifically, Mazzei’s sworn statement on these matters has not been taken nor have follow-up interviews of executive board members been conducted. As a result, we discuss the allegations that have been made and address some of the conclusions reached by the internal auditor, but are unable to draw final conclusions at this time. 20 1. Allegations In January 2000, a woman claiming to be Mazzei’s former girlfriend from Phoenix, Arizona, wrote a letter informing the IBT that Mazzei regularly used local union property for his personal benefit during their two-and-a-half year relationship and that he arranged for meetings to be held in Phoenix that were never held in order to have Local 786 pay for his trips to Phoenix to see her.80 A confidential informant who had worked in the 786 offices during Mazzei’s tenure also alleged that Mazzei improperly used local funds, claiming he “stole or embezzled in excess of $100,000 in money, phone calls, trips, and illegal purchases during [the informant’s] time at Local 786, and that at least one meeting scheduled in Arizona was cancelled before Mazzei made the trip .81 LeRoy Santoro, the Local 786 secretary-treasurer during the early part of Mazzei’s tenure as principal officer, recalled Mazzei making at least three trips to Arizona for personal reasons � to see his girlfriend � and Local 786 paid for them. Santoro questioned Mazzei about these expenses and Mazzei claimed in response that he was trying to organize a company there, but refused to provide the name of the company.82 2. The IBT Internal Audit Following questions about misconduct by Local 786 officials being raised at the IBT, IBT Auditor James J. Schoessling was asked to examine the propriety of several trips and other charges to the local. a. The Transport Driver Trio to Phoenix Schoessling found that Mazzei went to Phoenix from San Diego � where he attended a benefit funds meeting � in order to meet with an employer, Transport Drivers, 21 Inc., of Bensenville. Illinois, which he found to be a legitimate expenditure. However, in her sworn statement taken during this investigation a former 786 employee testified that, while a meeting had been scheduled to take place in Arizona on August 22, 1997, between Mazzei and Dennis A. Duffy, executive vice president of Transport Drivers, the meeting was then cancelled. The employee stated that Duffy sent written confirmation of the cancellation, but it was not received by the local until after Mazzei left. (This written cancellation has not been located.) According to the employee, Mazzei apparently knew before his departure of the cancellation, yet told the employee that he was nonetheless going to Arizona. The employee explained that Mazzei attempted to cover up the cancelled meeting by drafting correspondence on August 26, 1997, referring to an August 22 “discussion” that did not occur. The employee typed the August 26 letter for Mazzei even though she knew it was not accurate because she was scared of being fired.83 The employee’s allegations were generally consistent with testimony of Mazzei’s former girlfriend who stated that she thought that certain meetings Mazzei scheduled in Phoenix were cancelled before the meeting date, but Mazzei still had the local pay his travel costs to Phoenix so he could visit her. She could not specifically recall the timing of such meetings, but they would have occurred between April 1997 and December 1999.84 To determine whether the meeting with Transport Drivers, Inc. took place on August 22, 1997, as scheduled, an IBT field representative interviewed Executive Vice President Duffy on June 2, 2003. Duffy recalled the planned August 1997 meeting in Phoenix because it was so unusual to have to negotiate a Chicago contract in Arizona. Duffy stated that the meeting location of Phoenix was Mazzei’s suggestion because of Mazzei’s heavy 22 own busy travel schedule. Duffy added in his interview that the contract that was the topic of the meeting covered only three drivers that Transport Drivers supplied to a local manufacturing company. Confirming the employee’s testimony, Duffy stated that before the meeting, the manufacturing company terminated its relationship with Transport Drivers and, therefore, Duffy contacted Mazzei to inform him that there was no need for them to meet. Duffy further asserted that the meeting scheduled for Phoenix with Mazzei in August 1997 never took place.85 Attempts to take a sworn statement from Duffy on this topic have been stalled because of his unavailability due to his wife’s health-related problems. Review of Mazzei’s expense report for this August 1997 trip to Phoenix allegedly to meet with Duffy revealed that Mazzei incurred almost $900.00 in expenses that the local paid. This included expenses for: $125.00 in airfare (which was a prorated amount based on a multi-city trip); $215.00 in hotel; and $550.00 in expenses paid in cash, primarily made up of $252.50 in cabs and limousine fees and $274.05 in meal charges. None of the receipts reflect meals with Duffy or anyone else, even though some of the receipts appear to reflect meals or beverages for two people.86 As noted above, Stier Anderson’s investigation was halted before Mazzei could be confronted with the allegations that (1) he never met Duffy or any other Transport Drivers official on a trip to Phoenix in August 1997; (2) he knew that the meeting scheduled for Phoenix had been cancelled before the meeting took place; (3) he wrote a letter dated August 20, 1997 to Duffy that he knew was false; and (4) improperly billed the local nearly $900.00 for his personal benefit. 23 b. Improper Telephone Charges Schoessling was asked to determine whether Mazzei frequently used the local’s cell phones and office phones to call his girlfriend.87 The improper billing of telephone calls was addressed in the April 2002 audit report which covered the period between December 1, 1996, and October 31, 2001. At Schoessling’s direction, the executive board self-identified nearly $8,000.00 of long distance telephone charges for purely personal calls, all of which had been paid for with local union funds.88 Mazzei alone self-identified nearly $4,000.00 of that amount as personal calls. Moreover, there were nine months during the selected period for which no telephone bills were available. If the personal telephone call charges identified are extrapolated for the missing nine months, then an additional $1,200.00 of improper charges would result, for a total of approximately $9,200.00. Even though the only action taken or recommended by IBT Internal Auditing was to direct the Local 786 officers to reimburse the local approximately $8,000.00 in misappropriated funds, it is clear that the executive board’s misuse of these local assets to pay for personal expenses violated written IBT policy, of which Mazzei and other executive board members were aware, and constituted a breach of the board’s fiduciary duties. Schoessling also stated in response to a specific internal inquiry that he had reviewed the local’s “phone billings,” but “was unable to determine that Mazzei was calling the woman in Phoenix.”89 Our review of Mazzei’s phone calls, however, revealed that Mazzei had made hundreds of telephone calls to “the woman in Phoenix” at her home and to her office over just a 16-month period. For example, during only one month in 1998, Mazzei made at least 72 personal long distance phone calls to Phoenix costing 24 approximately $200.00. As such, any claim that Mazzei’s $4,000.00 of improperly billed calls were few in number, low in cost, or not an intentional violation of IBT policy is simply undermined by the facts.90 The IBT auditor also noted that “Mazzei began to pay for his personal portion of the local’s phone bills in about July 1998,” which appears consistent with the records and the testimony of his former girlfriend.91 However, it raises the issue of why Mazzei decided then to begin paying for his personal calls to Arizona and why he did not repay the local of his own accord the thousands of dollars he had already incurred in improper personal phone calls in 1998 and before, instead of being directed to do so by the IBT auditor in 2002. When confronted with his personal charges of about $2,500.00 which had been paid by the local, Vice President McCartney claimed that, when he was trained by former Secretary-Treasurer Leroy Santoro (deceased), he was told that business agents “could use the phone for whatever [they] want,” which McCartney interpreted to include telephone calls to his relatives in Arizona, Pennsylvania, and California. McCartney claimed that this was his understanding until the IBT auditor informed him differently in April 2002 when the audit results were presented.92 McCartney’s claim, however, is contradicted by other executive board members. For example, Michael Yauger, who was the recording secretary in 1996 and became secretary-treasurer in August 1999, knew that personal expenses should never be charged to or run through the local’s books. When asked why Local 786 officials had the local bear the expenses of their personal telephone calls despite his understanding of the illegality of such behavior, Yauger had no explanation.93 Trustee Donald Broccardo stated that he always paid for his own telephone calls because it is 25 required pursuant to the General Secretary-Treasurer’s Manual.94 Indeed, Yauger’s and Broccardo’s views are consistent with written assertions made much earlier by Mazzei. On October 22, 1997, in response to a 1996 audit, Mazzei informed then General Secretary-Treasurer Tom Sever that “[t]he executive board has taken steps to review all reimbursed expenses and to require appropriate documentation for any expense. The Board does not allow for any personal expenses to be reimbursed by the local union.”95 Mazzei’s letter about personal expenses was reflective of a May 30, 1997 memorandum from the general president addressed to all members of local union executive boards which specifically noted that personal expenses were prohibited from being charged to the local. The memorandum reminded officers of their obligation under Section 501(a) of the Labor Management Reporting and Disclosure Act (LMRDA) that officials “must hold the money and property of a Local solely for the benefit of the organization and its members .”96 The memorandum then quoted from Section 4.1 of the Manual for Local Union Secretary-Treasurers from the late 1970s which prohibited charging any personal expenses to the local: “Under no circumstances should personal expenses be charged to and/or run through the Local Union books.”97 In light of Mazzei‘s written commitments in 1997, the understanding of the local’s secretary-treasurer, and the IBT’s May 1997 memorandum, the practice by the Local 786 executive board of allowing $8,000.00 of long distance personal telephone calls to be paid for by the local appear to be an intentional abuse of IBT policy and a clear violation of the board’s fiduciary duties. Before the Local 786 investigation was halted on February 24, 2004, we had intended to ask Mazzei to explain his decision to allow the local to pay for 26 these personal benefits to the executive board members which were not available to other members. Unless Mazzei can offer an explanation, it appears that the Local 786 executive board violated IBT policy by misappropriating the local’s funds for their personal use, thereby breaching their fiduciary duties and raising the issue of whether a criminal offense has likewise occurred c. Cash Disbursement Issues Schoessling also reported on the weakness of the local union officers’ recordkeeping for cash disbursements and other expenses. He reviewed “proper procedures” with the officers to resolve the weakness.98 However, according to the employee, Mazzei would use blank receipts to account for his trip expenses.99 The employee recalled telling an international representative about the expense abuse, but no one else outside the local.100 Mazzei’s former girlfriend corroborated the employee’s assertion that Mazzei falsified records, recalling that on at least one occasion in November 1997 Mazzei asked her to go to a small cafe in Palm Springs, California, near the hotel where they were staying and collect blank restaurant receipts so he could submit them for his expenses. She collected 10-12 blank, generic-style green receipts from the cafe.101 Mazzei’s former girlfriend testified that she had met Mazzei in Palm Springs and that he was there for a Teamster-related business trip along with other Local 786 officers, including Eddie Rizzo and Gene McCartney. 102 Mazzei has not yet been questioned on the allegation that he falsified expense reports utilizing blank receipts that his former girlfriend collected for him. 27 3. Questions To Be Addressed As described above, the investigation into Mazzei’s financial misconduct was halted prior to its completion.. Further examination is required of documentary evidence and Mazzei needs to be given the opportunity to respond to the allegations and the evidence regarding: (a) whether the business trip with Duffy to Phoenix costing $900.00 ever occurred and whether Mazzei knew it was cancelled prior to the trip; (b) whether there exists an explanation for the misappropriation of $8,000.00 in local funds for the personal long distance telephone calls made by the executive board; and (c) whether receipts for meals were routinely falsified by Mazzei by acquiring and using multiple blank receipts. C. Employer Schemes To Defraud Local 786 and Its Affiliated Benefit Funds 1. Allegations During the course of this investigation, we received allegations that various employers were receiving preferential treatment from Mazzei and Hoff, especially with respect to contributions to the Local786-affiliated benefit funds. As discussed in Appendix, Tab 9, the history of the Outfit’s exploitation of the Teamsters and information from numerous intelligence sources during this investigation confirm that schemes regarding the pension and health and welfare funds remain a target of organized crime and other criminal enterprises, Indeed, Principal Officer Wally Hoff was forced to resign when he was caught in Operation Silver Shovel accepting bribes from a Local 786 employer in exchange for allowing the employer to forego its contributions to the benefit funds, thereby reducing the value of the fund to the detriment of the members. Because of this history of misuse 28 of benefit funds and from intelligence gathered during the investigation, we compiled a list of employers who were alleged to have organized crime connections. Among these employers were Prairie Material Sales, which, as discussed above, has been allegedly linked to organized crime. Prairie Material is in turn associated with four other companies that are Local 786 employers which have therefore been included in the list. Also, as discussed in previous sections, SS Transport and L & S Cartage have ties to Kenneth Bratko and were therefore included. One 786 employer, D and P Construction, was connected to Outfit boss John DiFronzo and is run by DiFronzo’s brother Peter, who resigned from the Teamsters after having been charged in 1998 by the IRB with being a member of organized crime and knowingly associating with other such members.103 Earth, Inc., was run by organized crime associate Chris Spina who was its president.104 (For a discussion of Spina’s alleged organized crime connections, see Appendix, Tab 11.) An additional five employers were also included on the list because reliable confidential sources alleged possible ties between them and organized crime. Additionally, allegations were received that seven other employers, not linked to organized crime, also received favored treatment. A former Local 786 member who has continually provided reliable information throughout this investigation explained that one of this member’s duties at Local 786 was to make “sure the employers were putting all their drivers in the Union and collecting dues which Local 786 was entitled to.” Mazzei, however, ordered this witness to stop contacting certain employers regarding overdue payments.105 The former member identified the employers as: JLG Trucking, Luise Trucking, Ganna Trucking, and Tonyan Brothers.106 29 Another scheme related to defrauding the local was described by a former international representative who claimed that Local 786 participated in a 2-for-1 scheme. He explained the scenario by giving the following example: There is a company with 150 drivers, 50 of them are signed up as members and the company will pay dues and benefits for them. The remaining 100 drivers are not unionized, thus saving the employer substantial expense. In exchange, a fee was charged per nonunion member paid in cash to the IBT official handling the local.107 A former Chicago-area Teamster stated that he knew this scheme occurred because an employer had tried it with him, leaving him an envelope containing $6,000.00 in his car. He reported that the employer told him the money was his “`weekly payment for the 2 for 1, just like we do with Locals 786 and 731.“‘108 He identified three companies (JLG, Luise, and Prairie) that he suspected participated in this scheme. He stated that any company hauling material to Prairie should be examined as well.109 Former Lumber Fund employee Baffa stated that Luise Trucking was considered one of the companies favored by Mazzei. She explained that Mazzei “had the agents turning their heads” to the fact that Luise was using nonunion workers. He failed to have the business agents pursuing these potential members.110 Baffa also recalled that around the time Mazzei became principal officer, one of the local’s employees was working hard to get delinquent employers, especially Luise and Jack Gray, to pay dues. The employee was calling Luise frequently, but Mazzei “put an end to” the calls. He also told the employee to stop trying to collect from Jack Gray, stating, ‘”[t]hat’s not part of your job description. I’ll do it.”111 Thus, Mazzei had the employee stop contacting any delinquent 30 companies.112 Attempts to uncover documents to corroborate this allegation were unsuccessful. Confronting Mazzei with Baffa’s allegation was an anticipated topic for his final sworn statement which has not been scheduled because of the February 24 directive that all investigative activity in Chicago cease. 2. Analysis of Benefit Fund Contributions by Companies with Alleged Organized Crime Connections Our examination of the contracts of the employers with alleged organized crime connections, as described above, produced the following results. a. Severance Fund Versus Pension Fund Contributions Four of the employers that were suspected of organized crime connections contributed to the Local 786 Severance Fund rather than the typically more costly Local 786 Building Material Pension Fund during the 1995-2001 period. For example, the weekly contribution per member for the Severance Fund employers in 1995 or 1996 was typically only $25.00 whereas the contribution into the pension fund in the same years for the other eleven employers was typically $63.00, a very significant difference.113 As of May 2000, three of the four companies with alleged organized crime connections that contributed to the severance fund were required to make only a $44.00 weekly payment per member. 114 For purposes of comparison, a non-suspect Local 786 employer, Wondaal Brick, contributed to the severance fund in 2000 at a weekly rate of $75.00 per member, a difference of $31.00 per week.115 To determine how many “non-suspect” employers contributed to the severance fund and whether any pattern could be ascertained to distinguish severance fund contributors from the pension plan contributors, 31 we had requested from the fund trustees and Jeff Hoff a list of all severance trust fund employers for the benefit funds. As noted below, that request was never satisfied. Additionally, Baffa testified that she thought there were two contribution levels for the severance fund. One level was roughly a $73.00 weekly contribution and a “baby severance fund … in the $40 [contribution] range.” She thought this practice started under Hoff and recalled that one employer “ha[d] the baby severance fund in her contract for … her employees.”116 Examination of its contracts showed that, for the year 2000, a lower contribution of only $44.00 weekly per member versus the $79.00 weekly contribution per member paid by another employer.117 Another suspect company, L & S Cartage Co., controlled by Kenneth Bratko, had no provision for contributing to either the severance fund or pension plan over the course of two collective bargaining agreements covering the period of May 1, 1995, through April 30, 2001.18 During this period, only one other company out of several dozen companies whose collective bargaining agreements were examined had no provisions for a contribution to either the severance fund or the pension plan. Moreover, the L & S contracts were the only ones of the reviewed contracts that did not have a provision requiring contributions to the Local 786 health and welfare fund, but rather provided its own health insurance for employees without any specification of its terms.119 b. Business Agents’ Explanation for Varing Contribution Provisions Although nothing in the contracts themselves explain the differences that were identified, there are numerous factors � such as the history of earlier contracts, number 32 of employees, bargaining strengths � that can affect the negotiation of a collective bargaining agreement, including the provisions covering benefit fund contributions. At a minimum, however, the analysis described above suggests that preferential treatment may have occurred and raises the issue of why certain companies received such treatment. We questioned Local 786 business agents � in preparation for taking Mazzei’s sworn statement � about what appeared to be preferential treatment to certain employers that contributed to the severance fund. For example, during his sworn statement, Vice President McCartney reviewed contracts between Local 786 and both L & S Cartage and SS Transport; he was the business agent assigned to both employers. With respect to the L & S Cartage contract, effective May 1, 1998, McCartney confirmed that it contained no provisions with respect to benefits, while the SS Transport contract, effective the same day and negotiated, he thought, by the same parties � Lou Mazzei and Ronnie Bratko � provides for contributions to the severance fund and the Heath and Welfare Fund. When asked why the L & S contract had no benefit provisions, McCartney claimed it was a contract “left” by Walter Hoff and L & S provided the employees 401(K) benefits and a medical plan on its own. McCartney claimed that he and Mazzei talked about benefit provisions in a post-Hoff contract, but he could not recall if Mazzei attempted to negotiate for it. When pressed as to why L & S and SS Transport contracts did not provide like benefits today, McCartney claimed it was because that is how the older contracts were. McCartney added that, with respect to contributing to a health and welfare fund for L & S drivers, Ronnie Bratko claimed he would rather “sell the trucks” rather than do so. With respect to the SS Transport drivers’ participation in the severance fund, Pinelli explained 33 during McCartney’s sworn statement that the drivers; who he characterized as owner/operators, paid their own contributions to the plan.120 Another business agent, Broccardo, testified that, while there could be reasons why a contract failed to require any provisions for contribution or required only contributions to severance funds, one would have to know why the original contracts were negotiated that way, which he did not.121 Secretary-Treasurer and Business Agent Yauger did not believe the lack of contribution from L & S was “unusual,” but could not offer an explanation as to why L & S or another employer did not have to contribute.122 Yauger also testified that historically there was a different contribution rate between the severance fund and the pension plans, but he did not know why except that the provisions are “there when [he] came on board.” McCartney confirmed that Mazzei negotiated these contract provisions. As noted, Mazzei’s sworn statement has not been scheduled as a result of the February 24 directive. C. Benefit Funds Administrator According to Funds Administrator Hoff, the collective bargaining agreement determines which funds an employer makes contributions to and is therefore “based on negotiations.” But he claimed that “typically severance fund employers are employers with owner operators or brokers, not your typical employees.” Hoff claimed there were only two employers whose entire workforce that participate in the severance fund: Prairie Materials and Jack Gray. He explained that their agreements are “remnants from an old contract when they first started the severance fund, where employees were allowed to select which fund they wanted to go in.” 34 Hoff confirmed that historically different contribution rates existed, but claimed that the discrepancy existed because newer employers would not agree to pay the higher rate at the beginning of the contract term, but that the contributions increased in a “stepped up process,” so by the end of the contract term the rates would be the same. Hoff claimed that, as of March 11, 2003, all employers contributing to the severance fund did so in the same amount, an allegation that we could not confirm because of the refusal of Hoff to identify these employers.123 In sum, the investigation into the benefit funds-related allegations has to date met with resistance from the funds’ trustees and Hoff, especially with respect to the provision of requested documents, such as information concerning contributions to the pension and severance trust funds, that are necessary to examine these matters. V. CONCLUSION Because of the outstanding unresolved issues, the investigation of Local 786 should be allowed to proceed. These issues include: (1) the extent of organized crime control in the local; (2) the misappropriation in excess of $8,000.00 of local union funds by 786 executive board members; and (3) whether and to what extent improper schemes participated in by 786 officers and benefit fund managers exist to defraud the 786-affiliated benefit funds. In addition, the IBT should file charges as recommended in Stier Anderson’s interim report of June 2003 and in particular the charges against Teamster and 786 benefit fund administrator Jeffrey Hoff for prohibited association during the past six years LI I organized crime member and barred Teamster James Cozzo. 35 Exhibit A
REPORT OF INVESTIGATION INTO
ALLEGATIONS OF PROHIBITED ASSOCIATION
WITH ORGANIZED CRIME FIGURE
AND FAILURE TO COOPERATE Local 786 Chicago, Illinois Submitted By: Stier, Anderson & Malone, LLC June 2003 TABLE OFCONTENTS I. INTRODUCTION This report summarizes the interim results of an ongoing investigation conducted on behalf of the International Brotherhood of Teamsters (IBT) by Stier, Anderson & Malone and several IBT Special Representatives, under the direction of William A. Moore who was appointed Personal Representative to Local 786 by General President James P. Hoffa on March 1, 2002.1 The on-going investigation centers on matters relating to the personal expenses of officers of Local 786, employer contributions to benefit funds, and allegations of organized crime influence in the local and affiliated benefit funds. This interim report addresses several specific issues that arose related to the failure of a Local 786 member, who is also the collections manager for three affiliated benefit funds, to perform his full-time job responsibilities and whether this collections manager and his supervisor provided false and misleading information to this investigation. In addition, the supervisor’s association with a known organized crime member and barred Teamster was also examined. Finally, a third Teamster on a withdrawal card who is also the assistant administrator of several benefit funds refused to appear for her sworn statement 2 A full report addressing all of the remaining issues raised in this matter will be issued at the conclusion of the investigation. A. Background Local 786’s membership consists primarily of members working in construction, some of whom are seasonal employees. As a result, Local 786’s membership fluctuates between 2,400 and 2,800 members. Its offices, along with the offices of its affiliated benefit funds; are located at 300 South Ashland Avenue, Chicago, Illinois, in a building called “Teamsters City“ because it houses several other local unions and Joint Council 25. Local 786’s previous principal officer, Walter J. Hoff, was permanently barred from the Teamsters in 1997 for his failure to answer questions during his sworn examination before the Independent Review Board (IRB). The questions related to a federal criminal probe into whether he accepted bribes from an employer in exchange for the employer’s not making contributions to the Local 786 benefit funds.3 Hoff’s son, Jeffrey, who was hired by his father as administrator of the Local 786-affiliated benefit funds, continues in that role today.4 In 1990, James Cozzo, Local 786 executive coordinator, was permanently barred from the Teamsters for being a member of organized crime and for associating with other members of organized crime.5 According to at least one witness, Cozzo had picked Walter Hoff to run as president on an opposition slate for the Local 786 election in 1982. After his election, Hoff brought Cozzo into the local as executive coordinator. Luigi (Lou) Mazzei was elected to the position of president and principal officer in 1996 following the ouster of Walter Hoff.6 Beginning in the fall of 2000, Local 786 was the subject of a Project RISE field study as part of the national organized crime study review of the IBT.7 The allegations that triggered this investigation were raised after the completion of the field study. B. Issues Addressed This report addresses whether Local 786 member and benefit funds collections manager James E. Vrankovich failed to cooperate with this investigation by providing false and misleading testimony during his sworn statement regarding his work at the benefit funds and whether he improperly accepted a full-time salary for less than full-time work. This report also addresses whether his supervisor, Jeffrey W. Hoff, failed to cooperate with this investigation by providing false and misleading testimony during his sworn statement 2 regarding Vrankovich’s work at Local 786-affiliated benefit funds; whether he intentionally provided a full-time salary to Vrankovich for less than full-time work; and whether he knowingly associated with organized crime member and barred Teamster James Cozzo. Also addressed is whether Rosanne T. Pierce, Cozzo’s daughter, failed to cooperate with this investigation when she refused to appear for her sworn statement. Il. SUMMARY OF CONCLUSIONS A. James E. Vrankovich The evidence considered in its entirety supports the conclusion that James Vrankovich failed to cooperate with this investigation by providing false and misleading testimony during his sworn statement regarding his work at the Local 786-affiliated benefit funds. During his sworn statement, Vrankovich claimed to have worked three days in his job as the collections manager for the benefit funds during the week of February 10, 2003 (while taking the other days off as vacation). Surveillance of Vrankovich, however, established that he failed to work on two of these three days. This surveillance corroborated the testimony of several witnesses who stated that Vrankovich rarely was -present at work at the benefit fund offices from approximately 1992 through April 2000 and did not perform his collection responsibilities. The evidence further supports the conclusion that Vrankovich brought reproach upon the union by accepting compensation for full-time work when he provided less than full-time services. The extent of this pattern of less than full-time work could not be established because of a continuing refusal of the affiliated benefit funds’ administrator and trustees to provide this investigation access to necessary documentation. 3 B. Jeffrey W. Hoff The evidence considered in its entirety supports the conclusion that Jeffrey Hoff failed to cooperate with this investigation by intentionally providing false and misleading testimony during his sworn statement regarding Vrankovich’s full-time performance of his fund duties. Although surveillance established that Vrankovich did not leave his home on Friday, February 14, 2003, Hoff testified that Vrankovich was present at the benefit fund offices and that they conducted business. The evidence also supports the conclusion that Hoff brought reproach upon the union by intentionally permitting the benefit funds to compensate Vrankovich for work he did not perform. As noted, surveillance established that Vrankovich did not work on two of three scheduled work days during the week of February 10, 2003, and indicated that he may not have performed his duties as collections manager on other days in the fall of 2002. Again, the funds’ refusal to provide documentation frustrated efforts to identify the extent of Vrankovich’s absences. The evidence further supports the conclusion that Hoff brought reproach upon the union by knowingly associating with permanently barred Teamster and organized crime member James Cozzo. Hoff had contact with Cozzo on more than five-to-six occasions at Cozzo’s residence during the past six years, including attending a 2002 graduation party for Cozzo’s granddaughter, assisting Cozzo’s daughter and granddaughter with various activities, eating meals with Cozzo and certain family members, attending Fourth of July parties, and, in addition, attending two Cozzo family wakes during the year prior to his sworn statement. These contacts with Cozzo were the product of Hoff’s “conscious choice” to place himself in situations where he knew prohibited contact with Cozzo would result. 4 C. Rosanne T. Pierce The evidence supports the conclusion that Pierce, who is on withdrawal status from the union, failed to cooperate with this investigation by refusing to appear for her duly noticed sworn statement on April 29, 2003. Ill. OVERVIEW A. Backgrounds of Key Members 1. James E. Vrankovich Vrankovich was a member of IBT Local 703 in Chicago from approximately 1972 t01979. During Vrankovich’s tenure at Local 703, he worked as an organizer and towards the end of his tenure was appointed to the vice president’s position to fill a vacancy.8 Toward late 1979 or early 1980, Vrankovich joined IBT Local 710 where he remained until he joined Local 786 in March 1982. That fall, Vrankovich, along with James Cozzo, supported the Local. 786 opposition slate on which Wally Hoff ran. After the election, Vrankovich became an organizer for the local.9 In 1987 he left Local 786 but returned in 1993.10 Since 1993 he has also been employed as a collections manager for three funds affiliated with Local 786: the Building Material Chauffeurs, Teamsters & Helpers Welfare Fund of Chicago, the Local 786 Building Material Pension Fund, and the Local 786 I.B. of T. Severance Trust Fund (referred to collectively as the “Funds”). Vrankovich’s compensation for his work at the Local 786 pension and welfare funds was approximately $67,500 in 2000 and he earned an undisclosed amount from the Severance Trust Fund.11 During his 1982 through 1987 tenure at Local 186, Vrankovich was also a trustee to the benefit funds. 12 5 In addition to being a member of Local 786, Vrankovich has been employed by the local since approximately 1994. Since June 1994, Vrankovich has received $40 a week for his employment with the local, which is part-time and has required him to work approximately 8 to 10 hours per week. According to the testimony of Vrankovich and other witnesses, he performs sporadic work for the local, including assisting in election campaigns and grievances, collecting delinquent local dues, and participating in picketing employers. 13 Other witnesses who have been critical of the local’s leadership, however, have described Vrankovich’s role as being that of an intimidator and “enforcer� whose presence and actions discouraged opposition to the incumbent leadership. 14 Although Vrankovich denied that role, we are still investigating this allegation and whether Vrankovich has associations with organized crime figures in Chicago.15 2. Jeffrey W. Hoff Jeffrey Hoff has been a Local 786 member since approximately 1983 and is the administrator of seven pension and other benefit funds associated with the local.16 Hoff was appointed to these positions as administrator by his father and former Local 786 Principal Officer Walter Hoff, who was permanently barred from the Teamsters in 1997.17 In the early 1990s, Walter Hoff recommended to his son that Vrankovich be hired as a collections manager for the benefit funds.18 In his capacity as administrator of the benefit funds, Hoff is Vrankovich’s immediate supervisor and has been in a position to know whether Vrankovich shows up for work on a full-time basis as he is paid to do. Hoff’s total compensation for his work as administrator for the seven funds was approximately .$184,000 in 2000.19 6 Hoff is also an attorney and has served as counsel to the Building Material benefit funds since 1994.20 In addition, he is a partner with Anthony Pinelli, Local 786 in-house counsel and attorney to the affiliated benefit funds, in a subrogation business called, “Recovery Services, Inc.” According to Hoff and Pinelli, Recovery Services does no business with Local 786-affiliated benefit funds, but Pinelli in his individual capacity as an attorney does perform subrogation services for them.21 Hoff has also engaged in the private practice of law, representing family members and former local official Anthony D’Amico, among others, in several civil matters for which he used Pinelli’s law firm address on his business card that also contained his telephone number at the benefit funds.22 3. Rosanne T. Pierce Rosanne Pierce is the assistant administrator for the same three Local 786-affiliated benefit funds for which Vrankovich is employed as collections manager. She reports to Jeffrey Hoff.23 Her father, James Cozzo, as noted above, was permanently barred from the Teamsters for being an organized crime member and for associating with organized crime members. When first requested. to appear for a sworn statement, the request was referred to the Funds Trustees because, according to Mazzei; Pierce was “neither an employee nor a member of Local 786.24 Subsequently, it was determined that Pierce is on a withdrawal card from Local 786.25 Pierce’s total compensation in 2000 was at least . $59,260.26 7 B. Background of Key Former Union Officials 1. James Cozzo On July 12, 1990, the Independent Administrator (IA) upheld a charge brought by the Investigations Officer (10) against Local 786 official James Cozzo and permanently barred him from the IBT. Cozzo was charged with being a member of organized crime and associating with members of organized crime, including Chicago Outfit capo Joseph Lombardo, and of being designated as Lombardo’s successor while the latter was in prison. Cozzo had served as �executive coordinator” for Local 786 until he took a withdrawal card in July 1989.27 In 1997, the Chicago Crime Commission listed Cozzo as a lieutenant in the Outfit in the Northside/Elmwood Park/Lake County area. Lombardo was listed as an adviser to Outfit boss John DiFronzo.28 2. Walter Hoff On December 4, 1996, the IRB proposed charges against President and Principal Officer Walter Hoff for failing to answer questions during his sworn examination before the IRB. On March 4, 1997, the local executive board permanently expelled Hoff from the IBT following questions relating to a criminal investigation involving him and his refusal to cooperate with the IRB. The criminal probe, called “Operation Silver Shovel,” was a wide-ranging federal probe which targeted local politicians and union officials. Hoff was indicted for illegally accepting money from a corrupt contractor who was acting as an FBI informant. The witness, who owned excavation companies, paid the money to avoid paying thousands of dollars to health and welfare funds. In December 1996, Hoff resigned from the union and subsequently pleaded guilty to two of the nine counts in the indictment. In 8 August 2000, he received a sentence of five months of home confinement and five months in jail, which the court stayed due to Hoff’s terminal cancer. Hoff was also ordered to pay $16,000 in restitution. 29 C. Local 786-Affiliated Benefit Funds Local 786 has seven affiliated benefit plans � three pension, two health and welfare, one severance, and one scholarship. As noted, Jeffrey Hoff is the administrator of all the funds, Pierce is the assistant administrator of the building material pension and welfare funds, as well as the Severance Trust Fund, and Vrankovich is, the collections manager for those same three funds. Local 786’s affiliated pension and health and welfare funds are separated into two main groups of workers, the local’s lumber employees and the local’s building material and other workers. A third pension plan includes participants who had previously been members of IBT Local 761 before its merger into Local 786. As of August 2001, the Local Union 786 Building Material Pension Fund, created in 1961, had 2,772 participants, total assets of $177,466,968, and paid more than $1.8 million per year in administrative expenses. The Lumber Employees Local 786 Retirement Fund, created in 1964, had 563 participants, total assets of $21,127,619, and paid $241,881 in administrative expenses as of August 2001. The Local 761 retirement fund .(recently renamed the “Teamster Local 786 Vending Employees Pension Plan”), created in :1965, had 615 participants, total assets of $18,749,787, and paid $259,878 in administrative expenses as of September 2001.30 There are two Local 786-affiliated health and welfare funds. As of August 2001, the Building Material Welfare Fund of Chicago had approximately 2,010 participants, total 9 assets of $5,566,849, and $625,435 in administrative expenses. The Lumber Employees Local 786 Health and Welfare Fund, created in 1967, had approximately 158 participants, total assets of $3,399,081, and $122,364 in administrative expenses as of the same date. The Local 786 IBT Severance Trust Fund, created in 1984, had as of May 2001 approximately 388 participants or beneficiaries in the plan and total assets of $4,001,837. IV. ANALYSIS OF THE EVIDENCE AND THE LAW This section contains an analysis of the evidence and applicable provisions of the IBT Constitution and relevant case law. A. Authority of General President To Conduct This Investigation On March 1, 2002, General President Hoffa issued a memorandum to all officers, members, and employees, of Local 786 advising them that the IBT was conducting an investigation into certain matters involving Local 786 and that “their full, unqualified support and cooperation in this investigation” was required. The memorandum further advised that any failure of cooperation would be dealt with as a violation of the duties of the officers, members, or employees, which could result in sanctions under the IBT Constitution.31 On the same date, General President Hoffa also issued a letter appointing William Moore as his Personal Representative to Teamsters Local Union 786 for the purpose of investigating various issues concerning personal expense payments made on behalf. of officers and other employees at the Local Union, matters involving benefit contributions paid by employers subject to collective bargaining agreements with the Local Union, and other matters. 32 The letter further stated that Local 786 is required “to provide promptly any records and information” that is requested and “otherwise, to cooperate with [Moore’s] investigation.“33 10 In addition to the specific provision of the IBT Constitution, Article XIX, � 7(b)(12), which requires members to cooperate with the general president’s personal representative, there is an inherent requirement for members to cooperate in investigations authorized by the general president. The broad authority of the general president to conduct investigations and impose discipline under his general duty to supervise the affairs of the union has been recognized by the court supervising the consent decree that resulted from the federal government’s civil RICO lawsuit against the IBT: The IBT Constitution grants the General President extraordinary disciplinary authority to supervise and investigate matters implicating union affairs. Article VI, Section 1(b) of the 1991 IBT Constitution provides that the General President “shall have general supervision over the affairs of the Union.” No provision of the IBT Constitution limits this power. In fact, the IBT Constitution does not enumerate the investigative powers of either the General President or the General-Secretary Treasurer.34 In keeping with his “sweeping investigatory and disciplinary authority,” the general president is empowered to take action against any member who violates his oath to uphold the IBT Constitution 35 B. Whether Vrankovich Failed To Cooperate by Providing False and Misleading Testimony during His February 19, 2003 Sworn Statement 1.Standards of Conduct The power to bring disciplinary charges for failure to cooperate in an investigation initiated by the general president is implicit in the general president’s broad power to conduct investigations in the best interest of the International Union. A necessary part of that power must be the authority to require the cooperation of IBT members in the course of such an investigation, including the authority to require that a member provide truthful 11 testimony, and the power to take disciplinary action when there is a failure to cooperate in such an investigation. By virtue of a June 2001 amendment to the IBT Constitution, “[o]bstructing or interfering with the work of, or unreasonably failing to cooperate in any investigation conducted by a Personal Representative appointed by the General President[]” is an explicit basis for disciplinary action.36 By letter of March 1, 2002, authority was given by General President Hoffa to William Moore to conduct an investigation into issues concerning “personal expense payments made on behalf of officers and other employees at the Local Union … and other matters.37 The investigatory authority of the IRB is “coextensive” with the investigatory authority of the general president. .38 As it is within the IRB’s “investigatory and decisional authority” to discipline members for their “unreasonable failure to cooperate,” so it must be within the general president’s authority to do so.39 The failure to cooperate with an investigation initiated under the authority of the general president is therefore analogous to the failure to cooperate with an IRB-initiated investigation.40 The “giving of intentionally misleading testimony during an iRB sworn examination” constitutes a failure to cooperate.41 In order to violate the iBT Constitution, the false testimony must be given willfully. it is not sufficient to sustain the charge if the testimony was given recklessly or negligently.42 The reasoning of cases addressing the failure to cooperate with tRB investigations similarly applies to IBT investigations. One decision of the IRB which found inadequate the discipline imposed by Joint Council 43 on Local 299 officer Charles E. Henry confirms the seriousness of failing to cooperate with an investigation. “To be able to regulate itself, the 12 IBT must insure respect for its processes.” That Henry was not “‘exclusively responsible’ for his misconduct” and that there may have been other mitigating circumstances does not change the fact that “[t]he act of testifying falsely would appear to be an act for which the individual witness should be held accountable.”43 2. Whether Vrankovich Failed To Perform Work on Days He Claimed He Did So According to Anthony D’Amico, a former Local 786 officer and business agent and a Funds trustee, Vrankovich seldom showed up for work even though he was the full-time collections manager for the Funds. D’Amico stated that he often had to do collections work for the Funds on accounts that Vrankovich, as collections manager, was supposed to collect. D’Amico asserted that Vrankovich generally came in only to pick up his check and occasionally he was on a strike line. D’Amico’s observations about Vrankovich applied to the period from 1992 to 1996 when D’Amico was an officer at Local 786. Following his reelection in 1996, charges were brought against D’Amico by President Mazzei that led to a decision permanently barring D’Amico from the Teamsters. That decision, in which Vrankovich participated, was affirmed by Joint Council 25 and the General Executive Board, but was subsequently overturned by the IBT Convention in June 2001.44 D’Amico’s subsequent lawsuit against Local 786, including Mazzei and Vrankovich among others, raise questions about his credibility. D’Amico’s civil suit was still pending as of the writing of this report.45 D’Amico’s allegations regarding Vrankovich’s work habits; however, were substantially confirmed, by Margo Baffa, the former assistant administrator to the Local 786-affiliated lumber pension and health and welfare funds from May 1992 to April 2000 13 During this time, Baffa reported directly to Jeffrey Hoff, the administrator of these funds. Baffa simultaneously worked directly for Local 786 and was responsible for posting dues payments on the TITAN system, billing requests for dues payments, typing contracts and maintaining a contract database, and typing minutes for the general membership and executive board meetings 46 Local 786 and the affiliated benefit funds share a suite of offices on the fifth floor of Teamsters City. Baffa’s desk was in the lumber fund office, which from 1992 to 1995 was on the benefits side of the suite located between the computer room and the building materials funds office. Then from 1996 to 2000, the lumber fund office was relocated on the union side in an office adjacent to the principal officer’s office.47 Baffa’s office, like the benefits office itself, had glass windows that provided a direct view into both sides of the suite, the benefits-side and the local-side. Vrankovich did not have an assigned desk but would use either a vacant business agent desk, which was located in an office adjacent to Baffa’s, or use a vacant desk in the lumber fund office where Baffa worked.48 Hoff claimed that he and Vrankovich met once a week to discuss delinquent accounts while Vrankovich recalled receiving a weekly delinquent list and meeting with Hoff when necessary.49 According to Baffa, she would see them meeting in Hoff’s office which is located in the comer of the benefit funds office, near the conference room, or in the principal officer’s office, next to her office.50 Based upon the office layout and the fact that she spent several years on the benefits-side and several years on the local-side of the Local 786 suite, Baffa was in a very .good position to observe employees on both sides of the suite, including Vrankovich, who as noted would at times sit at a desk in Baffa’s office. Baffa recalls Vrankovich doing 14 collections work on only one or two occasions for the Lumber Fund, but she recollected that she had the “impression” that he was the full-time collections manager for the building material funds. She testified, however, that during her tenure at the Lumber Fund, Vrankovich appeared for work at the benefit funds offices only “on an average, maybe twice a month,” and then only for “several hours” at a time. “He was never there all day.”51 By “an average,” Baffa stated that she “might see him two days or three days in a row, then you might not see him for a month.” She was unaware of what function Vrankovich actually performed for the funds, “[b]ut whatever it was didn’t entail him being in the office, obviously.” When asked what her response would be if told that Vrankovich was at the offices virtually every day for at least some period of time, she replied that whoever claimed that was “definitely not on the same planet.”52 A second benefit funds employee, Barbara Rodriguez, currently on medical disability, corroborated the testimony regarding Vrankovich’s limited role for the Funds. For more than 10 years ending in April 2003, Rodriguez was a clerk for the Local 786 building and material benefits fund, the fund for which Vrankovich was ostensibly the collections manager. She was responsible for verifying medical invoices and vendors and forwarding claims to the fund’s third party administrator. Her immediate supervisor was Pierce. Rodriguez stated that Vrankovich’s exact title or position was unknown to her. She stated that Vrankovich occasionally requested printouts of employers who were delinquent in their contributions to the Funds, and she assumed he contacted delinquent employers. Rodriguez termed Vrankovich’s attendance at the local as “sporadic,” stating that he was at the Funds offices only about twice a week and usually there early in the morning around 7:00 a.m. She did recall that Vrankovich called the office a lot to talk to Hoff. She stated 15 that Vrankovich had neither a desk nor an office to conduct business; as a result, he used other employees’ desks and telephones.53 We contacted five additional benefit fund staff members, however, all indicated that they would not be interviewed and referred questions to funds attorney Pinelli. Pinelli in turn claimed that these fund staff members, who are not members of the Teamsters, had simply indicated to him that they declined to be interviewed. A sixth staff member is deceased.54 Contrary to the testimony of Baffa and Rodriguez regarding his work attendance, Vrankovich portrayed his typical day as leaving his home around 4:45 to 5:00 a.m., stopping at a convenience store, picking up a cup of coffee and a newspaper, and then going to the office. Hoff stated that normal benefit funds hours were from 7:30 a.m. to 4:00 p.m. Mazzei confirmed that the benefit fund employees leave work by 4:00 or 4:30 p.m., and that he saw Vrankovich “a couple of times a week; two, three times a week.”55 As a result of D’Amico’s allegations, limited surveillance was conducted of Vrankovich during a three-week period, November 8, 2002, through December 4, 2002. In total, surveillance was conducted on 13 days, 10 during weekdays in the early morning or late afternoon. On only two occasions was Vrankovich seen either leaving -his home through his garage or returning to it. Additionally, on December 4, 2002, Vrankovich’s car was observed in the parking lot adjacent to the Funds offices. For the remaining seven days, Vrankovich was not seen leaving or returning to his home during early morning or late afternoon hours.56 Given Vrankovich’s inactivity during this limited surveillance, continual daytime surveillance for the entire week of February 10 through 14, 2003, was undertaken. 57 On only one of the days during which surveillance was conducted was Vrankovich observed 16 leaving his home and seen at the Teamsters City parking lot. This was on Monday, February 10, 2003, when Vrankovich attended a deposition taken in conjunction with the lawsuit filed by D’Amico against Local 786.58 During his sworn statement in this investigation, Vrankovich testified that he had taken two days of vacation during the week of February 10, which he believed to be Wednesday, February 12, and Thursday, February 13.59 For the remaining two days for which surveillance was conducted, Vrankovich was not observed going to work. On Tuesday, February 11, surveillance began at 5:00 a.m. and extended until 6:00 p.m. Vrankovich never left his home. At approximately 5:10 p.m., it was observed that a light was on.60 On Friday, February 14, surveillance was again initiated at 5:00 a.m. Vrankovich was observed leaving his home for the first time at 10:45 a.m., when he threw out trash. Later, at 2:05 p.m., Vrankovich was observed pulling his car out of the garage, but then stopping it almost immediately, remaining just out of the garage for about one minute, and then backing the car into the garage again. Surveillance was terminated at 7:00 p.m., but no additional activity was observed.61 These surveillances establish that, on the two days on which he was supposed to have been working full-time for the Funds, he did not leave his property. On February 19, 2003, Vrankovich appeared for his sworn examination and was asked about the work he had done for the local and for the Funds during the previous week. He testified that he had taken vacation days on two days, which were Wednesday and Thursday of that week, that he had attended the deposition on Monday, and that on Tuesday and Friday he had worked at the Funds office during the business day. 62 Concerning his work on Friday, February 14, Vrankovich estimated that he began work 17 between 7:00 and 8:00 a.m., but he was “not sure” of the exact time. He also stated that his “educated guess� was that he left the Funds office around 1:00 or 1:30 p.m. after lunch. He further stated that he no recollection of what work he performed that day � only five days prior to his sworn examination � although he “might” have made one telephone call to an employer. However, he did remember that his supervisor, Jeffrey Hoff, gave Fannie May chocolates to office employees because it was Valentine’s Day63 As noted, however, the surveillance for February 14 established that Vrankovich did not go anywhere near the Funds offices and only appeared outside his house briefly on two occasions, once in the morning and once in the afternoon. Because Vrankovich’s testimony occurred only five days after February 14 and because he volunteered the details of a Valentine’s Day incident at the office, he has no plausible defense based on a faulty recollection of distant events. Thus, it can be inferred that his false testimony was knowing and intentional and further that it was designed to mislead the investigation concerning the no-show nature of his job at the Funds. Similarly, Vrankovich’s testimony about working for the Funds on Tuesday, February 11, 2003, was also designed to mislead the investigation. While Vrankovich could not recall what he did on February 11, he did recall that he had only two vacation days during the week of February 10 and that he worked on the other days. As noted, visual surveillance conducted by IBT special representatives established that Vrankovich did not leave his home between 5:00 a.m. and 5:00 p.m on February 11, 2003, and thus he did not perform any of his full-time duties that day, as well. Vrankovich also confirmed that he typically did not use the telephone in conjunction with his efforts to collect delinquent .employer contributions. He explained that employers would avoid his calls and stated that 18 “[s]ometime phones don’t work.“64 Thus, any claim that he worked at home, which he did not make, is not plausible. Accordingly, based upon the testimony of three witnesses and the visual surveillance of Vrankovich during the week of February 10, 2003, we recommend the filing of two charges against Vrankovich for failing to cooperate with the IBT investigation by giving false and misleading testimony that he worked at the Funds on February 11 and February 14, 2003. C. Whether Vrankovich Brought Reproach upon the Union by Accepting Compensation for Work He Did Not Perform 1. Standards of Conduct In determining whether a Teamster member has engaged in embezzlement, the member’s conduct has been examined to determine whether he acted with “fraudulent intent” to deprive the union of its funds.65 For example, an lBT representative who applied for and received per diem travel expenses when he did not travel was found to have embezzled union assets.66 The Southern District of New York federal court specifically recognized that “knowingly and intentionally accept[ing] payments to which [one knew one] was not entitled” evidences a dear instance of fraudulent intent, which can be established by circumstantial evidence.67 Union assets, however, are not the only items of value the embezzlement of which has resulted in disciplinary charges. Local union members have been removed from the union for misconduct relating to the benefit funds. In one case involving a Local 810 member and a former member of Local 875 who were welfare fund co-administrators, the IRB proposed charges based on their embezzling more than $100,000..00 from the funds for their personal use. Both individuals had admitted to 19 the details of the embezzlement from the funds during their plea hearings and Local 810’s executive board subsequently barred them.68 Embezzlement charges do not always have to involve diverting money. The IRB proposed charges against Local 1205 Secretary-Treasurer Theodore J. Brovarski for bringing reproach upon the union and embezzlement for accepting compensation from the local as a full-time employee when he was not working full-time.69 During the hearing, Brovarski claimed that he worked at the local two days a week and was “on the road” conducting business the remainder of the week. However, Brovarski “could not remember a single contract that he had actively serviced in the last five years” nor could he “remember the name of a single shop that he had visited in the last five years.” He admitted that he “had not visited any job sites” in the six months preceding the hearing and he could not “provide the name of a single company he had organized, or the name of any employer with whom he had negotiated a contract, within the last five years.”70 The hearing panel relied upon his “inability to provide any specifics about the work he allegedly did for the Local in the last five years” and concluded that it “establishes that he was not discharging his duties as a local official on a full-time basis.”71 2. Vrankovich’s Conduct As described above, Vrankovich failed to go to work for the Funds during the week of February 10, 2003, excluding Monday the 10th. Two of the days he was on vacation, but for the remaining two, Vrankovich lied about his whereabouts, claiming to have worked. However, he could not provide any details regarding what work he performed only four and seven days earlier, respectively. When discussing Tuesday, February 11, he claimed to have been in the office. but said that he “could have went out of the office to make a 20 collection. I’m not sure. I don’t actually remember.”72 When asked about Tuesday again, he responded: “Weil, I’m sure I came in. If 1 didn’t come in, I don’t know if I was with one of the agents Tuesday. I’m not sure.”73 Similarly, Vrankovich claimed to have specifically recalled being in the office on Friday the 14th, but he had no idea what work he performed that day, stating: “it could be almost anything. I just don’t know.” He added that he may have made some telephone calls to employers that were delinquent in remitting contributions to the Funds, but he could only guess as to which company he contacted, testifying that “I’ve been chasing Speedy Ready Mix, so … [i]f anything, that’s one of the companies….” he “might have” telephoned.74 Vrankovich’s inability to recall any work he performed for the Funds during the previous week resembles Brovarski’s inability to recall any of his job activities for Local 1205, as described above. Such “inability to provide specifics about the work” he performed “establishes that he was not discharging his duties … on a full-time basis.“75 Furthermore, Hoff s refusal to provide attendance documents and weekly delinquent contribution lists that he allegedly used to discuss collections with Vrankovich made it impossible to determine the extent of work, if any, that Vrankovich actually did perform at the Funds.76 3. Whether Vrankovich’s Non-Performance of Work Was Part of a Larger Pattern of No-Show Employment Attempts were made to obtain documents relating to Vrankovich’s attendance at work and his weekly collections activity, but they were frustrated by Jeffrey Hoff’s refusal to provide any documentation relating to Vrankovich’s work schedule. This refusal, according to Hoff, was based upon the 4-to-4 deadlock vote on a motion .before the 21 building material pension and welfare funds trustees to provide documentation relevant to the Funds which had been requested several months earlier. 77 However, none of the documents requested at that time related to Vrankovich’s attendance. 78 Accordingly, the basis for Hoff’s refusal to produce requested documents and information was unclear, but it in any event frustrated efforts to establish whether Vrankovich’s failure to work on two out of three scheduled work days during the week of February 10 was part of a longer term pattern of no-show employment. The evidence that this investigation did gather, including the recent surveillances of Vrankovich and the testimony of several witnesses, however, supports the conclusion that Vrankovich for some period of time has been compensated for a full-time job with the Funds when he did not work on a full-time basis. We recommend the filing of a charge against Vrankovich based upon embezzling from the Funds by taking money as a full-time employee when he in fact performed less than full-time work for an undetermined period of time. D. Whether Jeffrey Hoff Failed To Cooperate by Providing False and Misleading Information during His February 20, 2003 Sworn Statement 1. Standards of Conduct The standards of conduct regarding the failure to cooperate with an IBT investigation by providing false and misleading testimony are summarized in Section IV(B)(1), above. 2. Hoff’s Testimony in This Case Hoff, Vrankovich’s supervisor, could not provide any details about whether Vrankovich attended work on Tuesday, February 11, other than to claim that he was 22 certain Vrankovich had worked. However, his testimony did support Vrankovich’s statements concerning his attendance at work at the Funds offices on Friday, February 14, including echoing Vrankovich’s recollection about Hoff giving chocolates to the staff. Hoff testified that he specifically recalled Vrankovich being in the Funds offices on Friday, February 14, because Hoff had brought Fannie May chocolates in for the women who worked in the office for Valentine’s Day and Vrankovich teased him, saying, “`What a good boss you are.'” With respect to work, Hoff recalled that they “sat down and talked about a couple of delinquent companies” and prepared for a meeting to be held the following week. He claimed they discussed Speedy Ready Mix, Cowhey Material, and three companies Hoff intended to sue: Bridgette’s Inc., Vanek, Inc., and NF Demolition.79 Hoff also claimed that Vrankovich was in the offices on the 14th because that is the day a letter from Personal Representative Moore scheduling Vrankovich’s sworn statement was faxed to the Funds offices.80 The surveillances described above demonstrate that Vrankovich did not show up for work at the Funds on February 14, 2003, and that Hoff s testimony in support of Vrankovich � which included the specific recollection that Vrankovich was in the Funds offices on February 14 � was intentionally false. Hoff cannot plausibly claim that his false testimony was the result of faulty memory because his testimony, like Vrankovich’s, occurred less than a week after February 14 and Hoff, like Vrankovich, stated that he specifically recalled Vrankovich being present on February 14 because of an incident centering around Valentine’s Day chocolates. In fact, the evidence established that the local’s (and Funds’) attorney, Anthony Pinelli, had briefed Hoff about Vrankovich’s testimony prior to Hoff’s own testimony and that Hoff had also spoken directly with 23 Vrankovich about his testimony.81 Accordingly, we are recommending the filing of a charge :against Hoff based upon his false statements concerning Vrankovich’s attendance at work at the Funds on February 1.4, 2003. Because Hoff was equivocal about whether or not Vrankovich was present on February 11, we have not recommended that a second charge be brought against him for contending that Vrankovich was present on that date.82 E. Whether Jeffrey Hoff Brought Reproach upon the Union by Allowing the Local 786-Affiliated Benefits Funds To Compensate Vrankovich for Days on Which He Did Not Work As discussed above, Vrankovich received a full-time salary despite the fact that he failed to provide full-time services to the Funds. As Vrankovich’s supervisor, Hoff participated in these unlawful payments by failing to put a stop to them, or in the alternative, assuring that Vrankovich earned the compensation. To establish an embezzlement charge, the preponderance of the evidence must demonstrate that Hoff acted with fraudulent intent to deprive the Funds � and ultimately the Funds participants � of their assets.83 The courts, as well as the union, do not require “personal gain” to establish embezzlement.84 For example, in an embezzlement case decided by the IA, two local union officers, John T. Burke and Harry Wolchok, decided to provide Burke with a retroactive salary increase designed to make up for Burke’s repayment of a loan to the local. They claimed the retroactive increase and the reasons for it were disclosed to the . local’s executive board, but the IA rejected this contention. Wolchok’s role in providing the payment to Burke was evidence of Wolchok’s fraudulent intent to deprive the union of its funds even though Burke was the recipient of the ill-gotten gains.85 In looking at who was responsible for authorizing payments that constituted acts of embezzlement, the position of the member authorizing the payment was considered relevant. In two cases, the fact 24 . that payments were authorized by individuals who were obliged to know the details surrounding the payments was evidence that supported the fraudulent intent necessary to establish embezzlement.86 Hoff as funds administrator and Vrankovich’s boss was obliged to know the details of fund disbursements. Hoff maintained that Vrankovich worked a full five day week as collections manager for the Funds, even though Vrankovich was not in the office every day and Hoff could not explain when Vrankovich performed his part-time duties for the local given that he was working full-time for the Funds 87 It is clear that Hoff presented false and misleading testimony about the work Vrankovich performed there, particularly during the week of February 10, 2003, and that his statements about Vrankovich’s full-time work are contradicted by other local and benefit fund witnesses, discussed above. Thus, the evidence supports the inference that Hoff, as Vrankovich’s supervisor, permitted the Funds to compensate him despite his knowledge that he did not perform full-time services for full-time compensation. Moreover, because Hoff was Vrankovich’s immediate supervisor, he had to at least be on notice if not complicit in any long-term no-show job held by Vrankovich. Accordingly, we recommend the filing of a charge based upon Hoff’s permitting the Funds to pay Vrankovich for full-time work when, as he knew, Vrankovich did not perform full-time services for the Funds. F. Whether Jeffrey Hoff Knowingly Associated with Barred Teamster and Organized Crime Member James Cozzo 1. Knowing Association Standard The prohibition against knowingly associating with an organized crime member or -associate has three elements: (1) whether the individual alleged to be an organized crime 25 figure is in fact “linked” to organized crime; (2) whether the association between the accused IBT member and the organized crime figure was “`purposeful and not incidental or fleeting;”‘ and (3) whether during the time period of the purposeful association the accused IBT member “knew of the organized crime ties of his associates.”88 With respect to what constitutes purposeful associations with organized crime members, the IRB recognized that such contacts can be “in either a business or social context,” but had to be purposeful to be prohibited. For example, accidental meetings at a restaurant or incidental contacts at wakes or weddings were typically not considered prohibited contacts by the IRB.89 To be prohibited, “associations need merely be `calculated’ or ‘conscious choices.”‘90 2. Hoff’s Prohibited Association with Cozzo In this case, the first and third elements of a prohibited association are established by Hoff s, own admissions. Hoff testified that he knew James Cozzo, the organized crime lieutenant, had “worked for the union,” but was permanently barred in or around 1990 because he was considered to be a member of organized crime. Also, Hoff’s contacts with Cozzo took place after Cozzo’s removal from the Teamsters in 1990. Indeed, according to Hoff, they occurred since Cozzo returned to the country from Curacao in the Caribbean, which, as discussed below, was in mid 1997.91 The remaining element, whether Hoff’s association with Cozzo was “purposeful and not incidental or fleeting” must be considered in light of the testimony about Hoff’s contacts with Cozzo and decisions of the IA and IRB about such prohibited associations. Hoff described his contact with Cozzo over the years as incidental to his social relationship with Pierce, which he emphatically denied was a dating relationship. Pierce 26 was only “a friend” and subordinate.92 Hoff stated that he saw Cozzo at two wakes for Cozzo relatives and gave Cozzo his condolences.93 Based upon IRB decisions, Hoff’s contacts with Cozzo only at two wakes, which occurred within the last year, when viewed in isolation could not be characterized as “purposeful” and thus do not run afoul of the prohibitions in the Consent Decree.94 However, since 1990, when Cozzo was permanently barred from the Teamsters, Hoff estimated that, on “[m]ore than a dozen [and] less than a hundred” occasions, he had been to the “Cozzo complex,” which is a neighborhood block with two residences, including Rosanne Pierce’s, and several businesses.95 This complex is bordered by Racine Avenue on the east, Ogden Avenue on the. west, and Race Avenue (one block north of Grand Avenue) on the south, and is located in the Grand Avenue neighborhood. It occupies a small block that is partially walled off and contains several residential condominiums and two businesses on the North Racine and Ogden sides.96 James Cozzo’s address has been listed as 530 North Racine, which is located on this block, since at least 1980.97 According to IBT records, both Pierce and Sylvia Cozzo also list their father’s home at 530 North Racine as their home address.98 As of 2000, this address, according to an electronic public records database, was associated with six members of the Cozzo family including: James, Sylvia, Rosanne, Phillip, Theresa, and Catherine Cozzo.99 In addition, several Cozzos, including Rosanne, Phillip, and Sylvia, also have used 1208 West Race as an address, which is a second residential entrance to the complex.100 Sylvia Cozzo confirmed that for at least 40 years the Cozzo block has been and is a shared residence of the Cozzo family, including barred Teamster and organized .crime member James Cozzo, her father. Sylvia stated that at present she shares the residence 27 at 530 North Racine, which occupies the two upper floors of the building, with both her parents. Her sister Rosanne Pierce presently lives at 1208 Race St., a -residence that is contiguous and “abuts 530 North Racine. Also living at 1208 West Race are Nina, Rosanne‘s daughter, and Phillip, Rosanne’s brother. At an earlier time, Rosanne had lived at 530 North Racine as well, which apparently explains why IBT records reflect that address as her home. Sylvia stated that the way she enters Rosanne’s residence is by going down the stairs in her parents’ house into a closed alley where there is a sliding door, with the entrance to Rosanne’s home six feet beyond. When visitors come to Rosanne’s home, they can go the same way � through Sylvia’s residence, down the stairs, through the sliding door to Rosanne’s entrance. Sylvia also indicated that there is an entrance at the end of the block into the yard that then leads to a glass-enclosed common “sitting area” which also leads to Rosanne’s entrance through the same sliding glass door. She confirmed that their residences are surrounded by a brick wall and that they all share the same yard where a swimming pool is located. 101 A third address connected with the Cozzo block is 543 North Ogden, the location of a former business.102 The Cozzo complex-is notorious as the headquarters of Cozzo, a prominent Outfit member. The 1990 IA opinion on charges against Cozzo described him “‘as a made member of the Chicago Outfit, a long-time friend of Capo Joseph Lombardo,'” who Cozzo succeeded as capo while Lombardo was in jail. 103 In the late 1970s and early 1980s, the Cozzo complex was the scene of numerous organized crime activities and arrests. For example, in 1977, the “gangland-type assassination” of Patrick J. Marusarz occurred at 543 North Ogden; in 1980, Cook County filed a criminal complaint for gambling against James Cozzo for running a gambling operation at 530 North Racine; and also in 1980, Joey 28 Lombardo, Chicago Outfit capo, and a second organized crime member were arrested after fleeing the Cozzo complex where they had been surveilling the police who were conducting a search at the complex. Most recently in 2002, Phillip Cozzo was arrested for racketeering and gambling and identified his home address as 530 North Racine.104 Hoff admitted going to the Cozzo complex, for example, to drop Pierce off after work if she did not have a car, to give her a ride there after a medical procedure, to drop off a carpet shampooer, and to give her daughter a graduation present. Hoff admitted to being there on weekdays and weekends. He stated that the last time he was at Pierce’s home was only about three weeks prior to his March 11, 2003 sworn statement when he gave her a ride home following the medical procedure.105 During his numerous visits to the Cozzo complex, Hoff acknowledged seeing and speaking with James Cozzo. For example, in addition to speaking with Cozzo at two recent family wakes, Hoff testified that he attended Cozzo’s granddaughter’s graduation party held in Pierce’s home in about June 2002 and spoke with Cozzo who also attended the party. Hoff also spoke to Cozzo “a couple of times when [he] dropped [Pierce] off from work.” In total, Hoff estimated: “its probably five times I’ve seen him, six times.” Hoff claimed, however, that the substance of his conversations with Cozzo on these occasions related only to greetings and questions about Cozzo’s health and he had. never discussed union or benefit fund business with Cozzo.106 Because Pierce, as discussed below, refused to cooperate with this investigation, we could not question her about Hoff s visits to the Cozzo complex and Hoff’s contacts with her father, but her sister Sylvia was interviewed. Sylvia, who described herself and her sister Rosanne as “very good friends” of Hoff, also recalled Hoff being at the Cozzo complex and talking to her father on occasions different than those 29 acknowledged by Hoff. For example, Sylvia recalled Hoff walking through the yard shared by Pierce and her father when her father was sitting in the yard and Hoff exchanging greetings with him. She stated that these encounters occurred possibly when Hoff was setting up a basketball hoop he had bought for Pierce’s daughter or helping her with her bicycle. Sylvia also stated that Hoff was inside the Cozzos’ residence roughly “three, four times,” and was at her sister’s residence much more when her father James was out of the country.107 In defending his contacts with Cozzo, Hoff denied ever having had dinner with any organized crime figure.108 Sylvia Cozzo lent support to Hoff’s denial, claiming that her father never would have had dinner with Hoff because he disapproved of Hoff, a married man, visiting his daughter, though Sylvia recalls that she had meals and snacks with Hoff in her sister’s house.109 Sylvia’s credibility is suspect, however, because she acknowledged she is “very good” friends with Hoff and, thus, would be inclined to protect Hoff and her father with whom she shares a residence and whom she feels has been mistreated by the press.110 Sylvia presented other testimony that likewise was protective of Hoff or her family, but which was not accurate. For example, she stated that Hoff had not been in the Cozzos’ residences in the last four or so years and thus had not seen her father, yet, as noted, Hoff acknowledged seeing James Cozzo five or six times in the last five years or so, including in June 2002 at Pierce’s house at a graduation party. Also, she stated that her brother Phil Cozzo, indicted in 2002 for racketeering and gambling, never socialized with Lou Mazzei, principal officer of Local 786, even though Phil dated Mazzei’s sister because Mazzei wanted to distance himself from the Cozzos because of her father James.111 To 30 the contrary, Mazzei testified that he did socialize with Phil Cozzo on at least several occasions at Mazzei’s home and at his parents’ home.112 More credible is the testimony of Margo Baffa, the former Lumber Fund employee, who for eight years reported to Hoff. She flatly contradicts the conclusion that Hoff never had dinner with James Cozzo. Baffa stated that she heard both Pierce and Hoff talking about Hoff eating dinners at the Cozzo complex. Specifically, Baffa stated that she had heard Pierce talking about Hoff having dinner, possibly Sunday dinner, with her and her parents at her parents’ residence (which as indicated is also Sylvia’s residence). Baffa even recalled hearing that Pierce’s “mother did the cooking.” Baffa heard Pierce talking about these dinners on “three or more” occasions which likely occurred during the first half of Baffa’s tenure, from 1992 to about 1996.113 Baffa got the impression that Hoff was at the Cozzo home “quite often” for a while; it varied over the years. Baffa also recalled that Hoff talked about having such meals for a while, but then he stopped talking about them. She did not know if Hoff stopped going to the Cozzos for meals or if he just stopped talking about it. Baffa had heard generally that Hoff socialized with James Cozzo and the Cozzos.114 Baffa’s testimony on this subject is credible because of her position at the ‘funds for eight years; her interactions with Hoff, her supervisor, and Pierce, Hoff’s assistant; and her lack of a motive to fabricate information about Hoff. Indeed, Baffa stated that when she was terminated by Mazzei, Hoff had tried to help her keep her job, and she left on good terms with Hoff.115 Baffa also stated that she understood that James Cozzo usually held a large Fourth of July party at his residence, a fact confirmed by Sylvia Cozzo who stated that hundreds of people would attend.116 Although Sylvia claimed the Fourth of July parties ended in the 31 early 1990s, Baffa indicated otherwise. Specifically, Baffa testified that on more than one occasion she overheard Pierce and Hoff both talking about “what a big bash” the Fourth of July party was and the fact that they both attended along with her parents. 117 Because .Baffa did not begin working for the Lumber Fund until 1992, these overheard conversations about Hoff visiting the Cozzos’ home, eating dinners, and attending parties there had to have occurred after Cozzo was barred from the Teamsters in 1990. When asked during his second sworn examination whether his numerous visits to the Cozzo complex may give the appearance of an improper relationship with Cozzo, Hoff replied, “no, because all but maybe five or six of those visits he wasn’t even there. He was out of the country. And there’s a separate entrance to Rosanne’s house.””118 He also stated that “everybody knows why � if i go there, it’s because of my friendship with Rosanne or Toni [Sylvia Cozzo].119 Hoff also explained his understanding of the obligation to avoid contacts with organized crime figures: “My understanding is not to discuss union .business.. .”with them. Hoff admitted that it was “probably” a “requirement” that members avoid places where organized crime figures are known to be and that it “would make sense” to do so,. but that this did not apply to his 12 to 100 -visits to the Cozzo complex because “Cozzo was not in the country for eight or nine years, and that’s a majority of those times I was there.”120 :Public information indicates that Cozzo had opened a casino on the island of Curacao in the late 1980s and spent time traveling between home and the casino throughout the mid 1990s. Records also indicate, however, that in 1997 the Curacao casino went bankrupt and Cozzo was detained by government officials in Curacao for a short period of time when he attempted to leave the island.121 Cozzo has been in Chicago from about 1997 to the present � a period according to Sylvia during which he had 32 been ill � which encompasses about half of the 13-year period when Hoff visited the complex 12 to 100 times. 122 In addition, Hoff also revealed a familiarity with details concerning James Cozzo’s health, travel to Curacao, family deaths, and other personal matters, and as noted attended two Cozzo family wakes in the last year. 123 Contrary to Hoff s assertion, the IRB has recognized that the prohibition against associating with organized crime members does not pertain just to union matters, but rather can arise solely in a social context. For example, in 1999 proposed charges against Local 851 member Dina Fattizzi, the IRB cited to two events that evidenced improper contacts: Fattizzi’s Christmas Eve visit to the home of Anthony Razza, a barred Teamster and organized crime member, and attendance at Razza’s son’s christening.124 These facts were deemed sufficient by the IO to bring charges against Fattizzi for a prohibited association and Fattizzi resigned to resolve them. 125 Similarly, the IRB charged Local 807 member Michael Porta, Jr., with knowingly associating with organized crime associate Anthony Ciccone based upon Porta’s acknowledgment that he had seen Ciccone about 10 times and had attended two Ciccone family weddings. Porta had also seen Ciccone on the street and exchanged greetings. In addition, Porta continued going to a “social club” when invited and knew that Ciccone’s nickname was “Sonny.” Based on these facts, the IRB in its 1995 decision rejected Porta’s contention that these contacts were “‘innocent” and not for “‘improper purposes,'” finding that “[t]he associations need merely be `calculated’ or ‘conscious choices’ to violate the ‘knowing association’ proscription.” The IRB also found that Porta’s familiarity with a social club and his visits to it “speak volumes as to continuing his associations with LCN members.126 On appeal, Porta argued that his contacts “were frequently serendipitous” and “had a lack of impact” on the local. The 33 federal district court for the Southern District of New York found these arguments meritless.127 The circumstances of Hoff’s visits to the Cozzo complex where he had contact with Cozzo more than five or six times satisfy the “calculated” or “conscious choice” criteria articulated by the IRS in Fattizzi and Porta Hoff’s decision to visit the Cozzo complex from between 12 to 100 times from 1990 to the present, to attend Cozzo’s granddaughter’s graduation party, to help Pierce and her daughter with various activities, to have meals with Cozzo and other family members, and to attend Fourth of July celebrations demonstrate a “conscious choice” to place himself in a situation at a private residence where he knew James Cozzo lived, and, therefore, association with Cozzo was not only likely, but probable. The fact that he did so as a byproduct of his friendship with Cozzo’s daughters is of no weight nor is the fact that union business allegedly was not discussed. Indeed, Hoff’s characterization of the subject matters discussed with Cozzo �greetings and his health — is subject to question given Hoff s false testimony regarding the work attendance of his subordinate, James Vrankovich. Further, Hoff placed himself in these circumstances even though he knew it “would make sense” and was “probably” required for a Teamster to avoid places where organized crime members are known to be. According to Baffa’s testimony, Hoff freely spoke about his visits to the Cozzo complex for Fourth of July parties and dinner with the Cozzo family after Cozzo had been barred from the Teamsters. Such open and notorious conduct cannot be characterized as “fleeting or incidental,” but rather is further evidence of purposeful contact with Cozzo. Indeed, his social contacts with Cozzo, including his attendance at two Cozzo family wakes, exceed those ascribed to Fattizzi and parallel those of Porta. Porta’s frequenting of a “social club” is quite similar in 34 character to Hoff’s frequenting the Cozzo complex because both are known places where organized crime figures can be found. Fattizzi resigned to resolve knowing association charges while Porta was found to have knowingly associated with an organized crime member. In sum, Hoff’s “calculated” and “conscious choices” to place himself repeatedly at a residence under the control of a high-ranking organized crime member and barred Teamster and, thus, in circumstances where he knew contact with that person would result run afoul of the prohibited association mandate of the Consent Decree. Therefore, we are recommending the filing of a charge against Hoff for knowingly associating with James Cozzo, an organized crime member and barred Teamster. G. Whether Rosanne Pierce Failed To Cooperate with This Investigation by Refusing To Appear for Her Sworn Statement 1. Standards of Conduct As discussed above, the general president is empowered to “appoint and designate a member of the Union as a Personal Representative who shall act on behalf of the General President as the General President may determine, including the right to attend meetings, interview members, and review the records of any subordinate body of the International Union.”128 It is a violation of the IBT Constitution to obstruct or interfere “with the work of, or unreasonably fail[] to cooperate in any investigation conducted by a Personal Representative appointed by the General President.”129 In addition to the specific provision of Article XIX, section 7(b)(12) that requires members to cooperate with a personal representative, there is an inherent requirement for members to cooperate in investigations authorized by the general president. This recently enacted amendment to 35 Article XIX did not remove any powers from the general president, but simply replaced the requirement that members cooperate in investigations conducted by the Ethical Practices Committee with investigations conducted by “a Personal Representative appointed by the General President.“130 Part and parcel of the general president’s investigatory power must be the authority to require cooperation of IBT members in such an investigation, including the authority to require a member to appear and provide truthful testimony, and the power to take disciplinary action when there is a failure to cooperate in such an investigation. 131 The union’s authority to investigate wrongdoing and expect cooperation from its members even extends to investigations initiated at the local level. In Appeal of Brother Michael Paventi from the Decision of Joint Council 41, the general executive board upheld a finding by the joint council that a member breached his oath of office and violated Article XIX, section 7(b)(5) when he refused to cooperate and submit to questioning by an independent investigator retained by the local to investigate certain allegations of misconduct by that member. Article XIX, section 7(b)(5) states in relevant part that a member can be charged when he engages in “[c]onduct which is disruptive of, interferes with, or induces others to disrupt or interfere with, the performance of any union’s legal or contractual obligations.“132 2. Pierce’s Failure To Attend Her Sworn Statement By letter dated April 8, 2003, Personal Representative Moore directed Pierce to attend an in-person sworn statement on April 29, 2003. In that letter, Moore identified the following four topics that would be covered during the examination: 1. Allegations concerning your association and business relationships with alleged members or associates of organized crime. 36 2. Your short-term active membership in Local 786 in 1993. 3. Your involvement in the 2002 Local 786 election process in the fall of 2002. 4. Your knowledge concerning the employment of James Vrankovich by Local 786-affiliated benefit funds for which you are the assistant administrator.133 As noted above, Pierce had taken a withdrawal card from Local 786 and, as Moore explained in his letter, was therefore still subject to the IBT’s jurisdiction.134 Pierce responded to Moore, stating that she had retained counsel and that counsel should be contacted. As a courtesy, Stier, Anderson and Malone attorney Paul F. Colarulli wrote Pierce’s attorney, Mary Patricia Burns of Burke, Bums & Pinelli, Ltd., enclosing Moore’s April 8 letter to inform her of the date of the sworn statement.135 Burns advised Colarulli by telephone that Pierce would not appear for a sworn statement and confirmed it by letter dated April 25, 2003, stating that “Ms. Pierce is not currently and never was a `member’ of Teamster Local 786.” She further indicated that if dues had been paid to Local 786 for Pierce’s membership they were “paid in error” and Pierce “was unaware of that error until recently.“136 On April 29, 2003, Pierce failed to appear for her sworn examination, even though she was interviewed during the Project RISE field study.137 Despite representations that she is not a member of Local 786, present IBT-TITAN records demonstrate that Pierce is on honorable withdrawal status having received a withdrawal card from Local 786 on November 24, 1993. The TITAN records also reveal that she paid dues twice during November 1993, on November 8 and 17. Those same records indicate that she transferred into Local 786 from IBT Local 743 that same month.138 Earlier TITAN records reflect that Pierce was a member of Local 743 for almost five years, 37 from November 1979 to August 1984. Her status with Local 743, however, is unclear from September 1984 until her transfer to Local 786.139 Accordingly, it is recommended that, as permitted by the IBT Constitution, Pierce be charged with failing to cooperate with this investigation for failing to appear for her sworn statement. 38 ENDNOTES 1. Ex. 1, Letter from James P. Hoffa to William A. Moore (Mar. 1, 2002). The broader investigation is being conducted with the assistance of IBT Special Representatives Richard W. Houston, Steven M. Simon, Victor Switski, and Ernie Luera. 2. The Investigations Officer brought charges against Teamsters who have taken withdrawal cards. For example, the charges against Local 786 member James V. Cozzo, described herein were brought after Cozzo had taken a withdrawal card. Opinion of the Independent Administrator, Investigations Officer v. Senese, Talerico, and Cozzo (July 12, 1990), 4. 3. IRB Proposed Charges Against Local 786 Officer Walter Hoff (Dec. 4, 1996), 1-3; IRB Report XXXII To All Members of the International Brotherhood of Teamsters (Jan. 24, 1997), reprinted in Teamster, May/June 1997, 23; Executive Board of Teamsters Local 786, Re Decision of Charges Against Walter Hoff, Mar. 4, 1997; Matt O’Conner, “Teamster Indicted in Silver Shovel: Ex-Union leader Took Payoffs, US Charges,” Chicago Tribune, 18 Sept. 1998, Sec. Metro Chicago, 3; “Former Teamsters leader pleads guilty in corruption case,” AP Newswires, 21 Dec. 1999; Mickey Ciokajlo, “Union Exec Sentenced in Silver Shovel Probe; Jail Term Deferred for Cancer Victim,” Chicago Tribune, 11 Aug. 2000, Sec. Metro Chicago, 3. 4. Ex. 2, Sworn Statement of Jeffrey Hoff, In re IBT Local 786 (Feb. 20, 2003), 5-8. 5. IA Opinion, Investigations Officer v. Cozzo (July 12, 1990), 4, 40-41. 6. Ex. 3, Sworn Statement of James V. Polich, In re IBT Local 786 (Nov. 6, 2002), 46-50; Ex. 4, Sworn Statement of Luigi P. Mazzei, In re IBT Local 786 (Mar. 11, 2003), 12, 114. Another witness stated that he understood “the boys”. or “organized crime” also had put together a slate with Hoff as president for the 1982 election. Ex. 5, Sworn Statement of George Yacko, In re IBT Local 786 (Nov. 6, 2002), 9-10. 7. Local 786 was selected to be part of the field study because the Independent Administrator had brought charges against Local 786 member Cozzo. See Stier, Anderson & Malone, The Teamsters: Perception and Reality, An Investigative Study of Organized Crime Influence in the Union (2002), 426 (prepared for the International Brotherhood of Teamsters). 8. Ex. 6, Sworn Statement of James Vrankovich, In re IBT Local 786 (Feb. 19, 2003), 47-48. 9. Id., at 43-44, 92-95. 10. Id., at 5-9. 39 11. See endnote 30 below. Vrankovich’s salary from the Severance Trust Fund is not reflected on the Form 5500s filed by the severance trust and Hoff testified that all of Vrankovich’s compensation from the severance trust is withheld and applied for taxes. Ex. 2 at 76-77. 12. Ex. 6 at 161-162. 13. Id., at 8-20; Ex. 4 at 60-68. 14. See, e.g., Ex. 3 at 35-37; Ex. 5 at 59; Ex. 7, Sworn Statement of Anthony J. D’Amico, In re IBT Local 786 (Dec. 3, 2002), 61-66. Issues regarding Vrankovich’s public association with organized crime and allegations regarding intimidation of opposition candidates will be addressed in a subsequent report. 15. Ex. 6 at 96-107. 16. Ex. 2 at 5-6. These funds are: Building Material Chauffeurs, Teamsters & Helpers Welfare Fund of Chicago; Local Union 786 Building Material Pension Fund; Local 786 I.B. of T. Severance Trust Fund; Lumber Employees Local 786 Health and Welfare Fund; Lumber Employees Local 786 Retirement Fund; Teamsters Local 786 Vending Employees Pension Plan; and the Local 786 Employees Trust Fund. 17. Ex. 2 at 8-9; IRB Proposed Charges Hoff (Dec. 4, 1996), 1-3; Local 786 Executive Board Amended Decision, Hoff (Mar. 4, 1997). 18. Ex. 2 at 43-45. 19. Ex. 8, Sworn Statement of Jeffrey Hoff, In re IBT Local 786 (Mar. 11, 2003), 77-79. 20. Id., at 102-104.
21. Id.,-at 89-92; Ex. 9, Sworn Statement of Anthony Pinelli, In re IBT Local 786 (Mar. 12, 2003), 47-58. 22. Ex. 8 at 101-111. 23. Ex. 2 at 7. 24. Ex. 10, Letter from Lou Mazzei to William A. Moore (Feb. 19, 2003). 25. Ex. 11, IBT TITAN, Report for Rosanne Pierce (provided by IBT Investigator Tom Schatz). 26. This total is based upon review of Form 5500s for Calendar Plan Year 2000, for the Building Material pension and welfare funds, but does not include compensation for the Severance Trust Fund because that fund’s Form 5500 does not detail Pierce’s compensation 40 . 27. IA Opinion, Cozzo, 4, 40. The 1983 LM-2 for Local 786, however, lists Cozzo as an office manager with a salary of $20,800.00. Ex. 12, Form LM-2, Local 786 (filed Mar. 16, 1984), 4. 28. Chicago Crime Commission, The New Faces of Organized Crime, 1997, Pullout Chart, 9-10. The Chicago Crime Commission refers to James Cozzo as “Vincent J. Cozzo.” 29. See endnote 3, supra; Ex. 13, Letter from Sherman Carmell to John J. Cronin, Jr. (Dec_ 9, 1996), 1. 30. All fund data discussed herein was derived from Form 5500s, Calendar Plan Year 2000, filed by each respective benefit fund on March 29, 2002, with the exception of the Form 5500 for the Severance Trust Fund which was dated March 15, 2002. 31. Ex. 14, Memorandum from James P. Hoffa to All Officers, Members, and Employees of Local 786 (Mar. 1, 2002). 32. Ex. 1. 33. Id. The general president is empowered to “appoint and designate a member of the Union as a Personal Representative who shall act on behalf of the General President as the General President may determine, including the right to attend meetings, interview members, and review the records of any subordinate body of the International Union.” IBT Constitution, Art. VI, � 1(f). This provision was amended at the June 2001 IBT convention and explicitly expanded the personal representative’s authority to interview members and review records. See IBT Constitution adopted June 24-28, 1991, Art. VI, � 1(f). 34. United States v. International Brotherhood of Teamsters (Rules Decision), 803 F. Supp. 761, 791-792 (S.D.N.Y. 1992) (citation omitted), aff‘d in part, rev’d in part, 998 F.2d 1101 (2d Cir. 1993). The court discussed the investigatory authority of the general president in the context of analyzing the scope of authority of the IRS because the Consent Decree and the 1991 Constitution gave the IRB “the authority to exercise any investigative authority vested in the General President or General Secretary-Treasurer.” IBT Constitution, Article XIX, � 14(b)(3). 35. Rules Decision, 803 F. Supp. at 792; United States v. International Brotherhood of Teamsters (Simpson), 931 F. Supp. 1074, 1103 (S.D.N.Y. 1996), aff’d, 120 F.3d 341 (2d Cir. 1997). 36. IBT Constitution, Art. XIX, � 7(b)(12). 37. Ex. 1. 41
38. United States v. International Brotherhood of Teamsters, 842 F. Supp. 1550, 1551 (S.D.N.Y. 1994). 39. See Rules Decision, 803 F. Supp. at 791-793, 805. This includes all powers specifically enumerated by rule as well as general constitutional provisions. The lRB rules of operation fall within the scope of the 1991 IBT Constitution. 40. Charges have been brought under the following provisions of the IBT Constitution for failure to cooperate with the IRB by giving false or misleading testimony: Art. II Section (2)(a). [A] member . . . pledges his honor; to faithfully observe the Constitution and laws of the International Brotherhood of Teamsters, and the Bylaws and laws of his Local Union; _ to faithfully perform all duties assigned to him … [and] to conduct himself or herself at all times in such a manner as not to bring reproach upon the Union. Art. XIX � 7(b). The basis for charges … shall consist of, but not be limited to, the following: (1) Violation of any specific provision of the Constitution [or] Local Union Bylaws … or failure to perform any of the duties specified thereunder. Art. XIX, � 14(i). All officers [and] members . . . shall cooperate fully with the Independent Review Board in the course of any investigation. . . Unreasonable failure to cooperate with the Independent Review Board shall be deemed to be conduct which brings reproach upon the Union… . 41. Opinion and Decision of the IRB, In the Matter of Michael C. Bane, United States v. International Brotherhood of Teamsters (July 17, 2001), 15; IBT Constitution, Art. XIX, � (14)(i). 42. United States v. International Brotherhood of Teamsters (Reardon), 803 F. Supp. 734, 736 n.1 (S.D.N.Y. 1992). In Reardon the false testimony was given in a criminal trial of Local 563’s then secretary-treasurer. 43. Ex. 15, Letter from John J. Cronin, Jr., IRB Administrator to Joint Council 43 Executive Board, Re Local 299, Charles E. Henry (Apr. 15, 2000), 1-2. 44. Ex. 7 at 36-39, 42-43; Ex. 6 at 109-110 and exhibit 5; Composite Ex. 16, Decision of Joint Council 25 Executive Board, On Appeals of Anthony Andrich and Anthony D’Amico From the Decisions of the Local 786 Executive Board Trial Body (Mar. 11, 42 1997); Letter from C. Thomas Keegel to Anthony Andrich and Anthony D’Amico (July 18, 2001), attaching Decision of the 26th International Convention, Appeal of Anthony Andrich and Anthony D’Amico (June 28, 2001). 45. Civil Docket, D’Amico v. Local 786, International Brotherhood of Teamsters, No. 02-CV-120 (N.D. Ill) (filed Jan. 4, 2002). 46. Ex. 17, Sworn Statement of Margo Baffa, In re IBT Local 786 (Nov, 5, 2002), 4-8; Ex. 18, Sworn Statement of Margo Baffa, In re IBT Local 786 (Apr. 30, 2003), 4-6. 47. Ex. 18 at 6-9 and exhibit 1. 48. Ex. 4 at 27-34 and exhibit 3; Ex. 18 at 10-13 and exhibit 1. 49. Ex. 2 at 42-43; Ex. 6 at 20-21, 26-27. 50. Ex. 18 at 8-9, 12-13. 51. Id., 6-15. 52. Id., 15-16. 53. Ex. 19, Interview of Barbara Rodriguez, In re IBT Local 786 (June 13, 2003); Ex. 20, Telephone Interview of Barbara Rodriguez, In re IBT Local 786 (May: 28, 2003); Form 5500 for Calendar Plan Year 1998, Local 786 Building Material Benefit Funds. 54. Ex. 21, Memorandum from Richard W. Houston to Paul F. Colarulli (June, 7, 2003); Ex. 22, Letter from Anthony Pinelli to Paul F. Colarulli (June 5, 2003). Additionally, the only other individual who was both a Teamster and a fund employee, Steven Fisher, was only in the benefit funds office during the last two years of the 1992-2000 period described by Baffa. Fisher, however, could not recall when he began working for the funds nor could he recall how often Vrankovich was at work at the office, stating that Vrankovich could have been present from one to five days per week and he had no business dealings with Vrankovich. Ex. 23, Sworn Statement of Steven Fisher (June 11, 2003), 28-31; Ex. 24, Information Regarding Steven Fisher (provided to Stier, Anderson and Malone on June 10, 2003). 55. Ex. 6 at 34; Ex. 4 at 48, 88; Ex. 2 at 27. 56. Ex. 25, Affidavit of Jeff Hall at � 11, In re IBT Local 786 (June 19, 2003). 57. Jeff Hall, an experienced private investigator with more than 27 years of law enforcement experience, including conducting and supervising surveillances for the U.S. Drug Enforcement Administration, was the lead investigator surveilling Vrankovich. Hall affirmed the following: 43 Based upon my analysis of Vrankovich’s residence and the area surrounding it as well as previous observations I had made of Vrankovich, I developed an operational protocol for subsequent observations to be made to document the activities of Vrankovich. The protocol called for two (2) field agents to be utilized in separate vehicles. Considering the layout of the area surrounding the residence, I determined that individuals accessing the property could be observed from four (4) positions in the immediate vicinity. Each of these positions were designated with letters as follows: Position A: Located at the T intersection of West 31st Street and the alley to which Vrankovich’s garage has access. From this position, ail vehicles and persons entering and exiting the property to the alley could be directly observed; Position B: Located on West 30th Street just east of South Lowe Avenue. From this position, all persons entering and exiting the front of the property could be directly observed; Position C: Located on South Lowe Avenue just south of West 30′ Street. From this position, all persons entering and exiting the front of the property could be directly observed; Position D: Located on West 29th Street just east of South Lowe Avenue. From this position, all persons entering and exiting the front of the property could be directly observed. During the course of observations made at Vrankovich’s residence during the week of February 10-14, 2003, I maintained Position A where I could directly observe all activity in the alley area of Vrankovich’s garage, when not engaged in mobile surveillance. The second field agent assigned to the operation, Alex Parra, with whom I had previously worked on multiple such operations and deem a competent and effective surveillance investigator, rotated Positions B, C, and D and effectively maintained constant observation of the front of Vrankovich’s residence from these positions, when not engaged in mobile surveillance. During the week of February 10-14, 2003, constant surveillance was maintained during times specified below on 44 both the front and rear of the residence from these identified positions, when not engaged in mobile surveillance. At no time was any individual other than James M. Vrankovich observed to enter or exit the residence. At no time was Vrankovich’s vehicle observed to be parked in any location other than his garage. Id., �� 1-2, 13-15. 58. Id., � 16; Ex. 6 at 29; Ex. Z at 40. 59. Vrankovich had some doubt as to whether he had taken Tuesday or Wednesday as the first vacation day. Ex. 6 at 27-32. While refusing to provide requested documents during his sworn statement, Hoff testified that he reviewed Vrankovich’s vacation schedule and that he had taken off Wednesday the 12th and Thursday the 13th. Ex. 2 at 36-38. 60. Ex. 25 at 117. 61. Id., � 22. 62. Ex. 6 at 27-32. 63. Id., 33-36, 39-40. 64. Id., 22-23, 27-31.
65. Georgopoulos v. International Brotherhood of Teamsters, 942 F. Supp. 883, 898-899 (S.D.N.Y. 1996) (internal quotations and citations omitted), aff’d,116 F.3d 1472 (S.D.N.Y. 1997) (unpublished decision). 66. United States v. International Brotherhood of Teamsters (Nunes), 1991 WL 243268 *2-3 (S.D.N.Y. Nov. 8, 1991). 67. United States v. International Brotherhood of Teamsters (Giacumbo), 951 F. Supp. 113, 1133-1134 (S.D.N.Y. 1997); vacated and remanded on other grounds, 170 F.3d 136 (2d Cir.), 1999 WL 169635 (S.D.N.Y. Mar. 26, 1999), aff’d, 225 F.3d 647 (2d Cir. 2000), cert.denied, 122 S. Ct. 152 (2001); Georgopoulos, 942 F. Supp. at 888-899. 68. IRB Proposed Charges against Local 810 Member Armando Ponce and former Local 875 member Joseph Girlando (Feb. 16, 1999), 1, 5-8; Decision of the Local 810 Executive Board Regarding Union Charges against Former Local 875 Member Armando Ponce and Joseph Girlando (June 3, 1999), 1. 45 69. See Findings and Recommendations of Hearing Panel, IRB Charges Referred To, and Internal Union Charges Filed By, the Temporary Trustee of Local 1205, IBT Patrick DeFelice v. Thomas J. Brovarski and Theodore M. Brovarski (June 24, 1996),1-2. 70. Hearing Panel Recommendation, Brovarski, 24-25. 71. Id., 26. 72. Ex. 6 at 28-29. 73. Id., 30-31. 74. /d.,’34-36., 75. Hearing Panel Recommendation, Brovarski, 26. 76. See Ex. 2 at 36-37; Ex. 8 at 113-115. 77. Ex. 2 at 36-37; Ex. 26, Letter from Anthony Pinelli to Patrick J. Szymanski. (Oct. 3, 2002), 1. As of March 12, 2003, Anthony Pinelli advised that no umpire had yet been selected by the trustees to resolve the deadlock. Ex. 9 at 35-36. 78. See Ex. 27, Letter from William A. Moore to Lou Mazzei (June 21, 2002) (attachment). 79. Ex. 2 at 34-36. 80. Id., 51-52. 81. Id., 18-27, 47-50. 82. Id., 38-39. 83. Georgopoulos, 942 F. Supp, at 898-899. 84. See Georgopoulos, 942 F. Supp. at 899. 85. United States v. International Brotherhood of Teamsters (Burke and Wolchok), 817 F. Supp 337, 346 (S.D.N.Y. 1993), aff’d, 14 F.3d 183 (2d Cir. 1994). 86. See Georgopoulos, 942 F. Supp. at 889. 87. Ex. 2 at 40-43. 88. Decision of the Independent Administrator, Investigations Officer v. DiGirlamo (Jan. 20, 1993), 8, 12, 16 (citation omitted).’ 46 89. Opinion of Independent Administrator, Investigations Officer v. Cozza (Feb. 22, 1991), appendix to United States v. International Brotherhood of Teamsters (Cozza), 764 F. Supp. 797, 812-813 (S.D.N.Y. 1991). 90. Opinion and Decision of the IRB In the Matter of the Hearing on Charges Against Michael Porta, Jr. (Sept. 29, 1995), 18. 91. Ex. 8 at 120-123, 126-127. 92. Id., 124-125. 93. ld., 121-122. According to Hoff, one wake was for the father of Jimmy Cozzo, Jr., former Titan operator for Local 786. The second wake was for James Cozzo’s father-in-law, who was also Pierce’s grandfather. 94. 1d., 121. 95. Id., 125. 96. Attached as Exhibit 28 is a schematic of the Cozzo complex block and pictures of the walled-off part of the block developed by the IBT Special Representatives assigned to this investigation. 97. Manuel Galvan, “2 top mob figures arrested,” Chicago Tribune, 26 Oct. 1980, Sec. 3, 6; Ex. 29, Criminal Complaint, Illinois v. James Cozzo, No. 801 907726-01 (Oct. 30, 1980). 98. Ex. 11; Ex. 30, IBT TITAN Report for Sylvia Cozzo (provided by IBT Investigator Tom Schatz). 99. Ex. 11; Ex. 31, ChoicePoint, Auto Track XP at http:/www.autotrack.com (last visited 5/28/03). According to Auto Track, it contains over 13 billion public records compiled from hundreds of sources. 100. Ex. 31; Ex. 28. 101. Ex. 32, Sworn Statement of Sylvia T. Cozzo, In re IBT Local 786 (June 10, 2003), 6-15. 102. Ex. 31. Flash Messenger Service was located at 543 North Ogden and was the scene of a gangland-style murder. Art Petacque and Jim Casey, “Mob suspected in slaying of card player at bet service,” Chicago Sun-Times, 5 Mar. 1977, 4. According to a newspaper account, Phil Cozzo was among those playing cards with the murder victim. Art Petacque and Jim Casey, “Find slain man in car; probe bet service tie,” Chicago Sun-Times, 16 Mar. 1977, 3. 47 103. IA Opinion Cozzo, 40 (footnote omitted). 104. Petacque and Casey, “Mob suspected in slaying of card player at bet service,” 4; Ex. 29; Galvan, “2 top mob figures arrested,” 6; Ex. 40, Notice of Arraignment and Plea, United States v. Phillip J. Cozzo, No. 02 CR 400 (Apr. 26, 2002), Matt O’Connor and Ray Gibson, “$3.2 million bingo hall scheme alleged,” Chicago Tribune, 26 Apr. 2002, Sec. Metro, 1. 105. Ex. 8 at 122-126, 129-132. 106. Id., 122-127, 146. 107. Ex. 32 at 85-90, 93-94, 102. 108. Ex. 8 at 144-145. 109. Ex. 32 at 88-92. 110. See id., 117 111. Id., 73-76, 78. 112. Ex. 4 at 100-104 113. Ex. 33, Sworn Statement of Margo Baffa, In re IBT Local 786 (June 10, 2003), 6-8. 114. Ex. 18 at 24-25. 115. Ex. 33 at 17-18. 116. Id., 12-14, Ex. 32 at 58-59. 117. Ex. 18 at 4, 25-26; Ex.33 at 13-15. 118. Ex. 8 at 148. 119. Id.,147. 120. Id., 1.25, 144-145. 121. Andrew Martin and Steve Mills, “Money Trail Scrutinized At Failed Curacao Casino From Mob Figures to Politicians, Project Drew The City’s Big Names As Investors,” Chicago Tribune, 7 Jan. 1998, Sec. Metro Chicago, 1. 122. Ex. 32 at 60-64 and exhibit 3. 123. Ex. 8 at 121-122, 124, 145-146. 48 124. IRB Proposed Charges Concerning Local 851 Member Dina Fattizzi, June 3, 1999, 9, 12-14 & n.9. In a footnote to its charges, the IRB added that the barred member also worked for Fattizzi’s father and Fattizzi would see him in her home with her father. Occasionally, they may have had dinner together. But neither of these observations apparently formed the basis of the proposed charges. 125. Id., 13-17; IRB Report LI To All Members of the International Brotherhood of Teamsters reprinted in Teamster, June 2000, 30. 126. IRB Opinion, Porta, Jr., 1, 10-12, 18. 127. United States v. International Brotherhood of Teamsters (Porta), 908 F. Supp. 139, 142-143 (S.D.N.Y. 1995). 128. 2001 IBT Constitution, Art. VI, � 1(f). 129. 2001 IBT Constitution, Art. XIX, � 7(b)(12). 130. Compare 2001 IBT Constitution, Art. XIX, � 7(b)(12) with 1991 IBT Constitution, Art. XIX, � 7(b)(12). 131. See Rules Decision, 803 F.. Supp. at 791-792. 132. Letter from General Secretary-Treasurer Tom Sever to Michael Paventi attaching Decision of the General Executive Board, Appeal of Brother Michael Paventi from the Decision of Joint Council 41 (Feb. 8, 1993). 133. Ex. 34, Letter from lBT Personal Representative William A. Moore to Roseanne T. Pierce (Apr. 8, 2003), 1-2. . 134. Id.; IBT Constitution Article XIX, � 1(g), states “charges maybe preferred against . an inactive member who has been issued a withdrawal card.” 135. Ex. 35, Letter from Rosanne T. Pierce to William A. Moore (Apr. 7, 2003); Ex. 36, Letter from Paul F. Colarulli to Mary Patricia Burns (Apr. 10, 2003). 136. Ex. 37, Letter from Mary Patricia Burns to Paul F. Colarulli (Apr. 25, 2003), 1. 137. . Project RISE Interview of Rosanne T. Pierce, 9 Feb. 2001. Pierce’s non‑ appearance is reflected in the transcript as recorded by the court reporter on April 29, 2003. Ex. 38, Transcript of Non-Appearance by Rosanne T. Pierce, In re lBT Local 786 (Apr. 29, 2003), 1-2. 138. Ex. 11. 49 139. Ex. 39, IBT TITAN Report for Rosanne Pierce (provided by IBT Investigator Tom Schatz). Sylvia Cozzo, Pierce’s sister, indicated that Pierce had returned to work at Local 786 one year or so after having a baby in September 1984, when she began working for Jeff Hoff, which is not reflected in the TITAN. Ex. 32 at 46-51. 50 ISSUES RELATING TO LOCAL 330 Issues related to organized crime association by officers of Local 330, Elgin, Illinois, are presently being addressed by the Independent Review Board (IRB). This report reviews the background of such issues at Local 330 and summarizes the IBT’s initial investigation during the summer of 2003 prior to the matter being referred to the IRB. I BACKGROUND Following the resignation of Principal Officer Mike Hruby due to poor health in approximately January 2000, Joseph N. Degand became president and principal officer of Local 330 and Dominic Romanazzi moved from recording secretary to secretary-treasurer.1 In late January 2000, James D. Shales, a Local 330 business agent, filed a federal lawsuit against Local 330, its officers, and two employers, alleging, in part, that he was wrongfully terminated from his job which “was part of a pattern of intimidation by the Union defendants intended to suppress dissent within the union.” At the time of his termination, Shales was running against the former principal officer in the local’s executive board election.2 In June 2002, an IBT field representative received a report from a confidential source that Romanazzi may be “involved with” the Outfit’s Grand Avenue Street Crew, but no further details were provided.3 No other information on this matter was received until February 2003 when Shales told IBT field representatives that Romanazzi was affiliated with the Grand Avenue crew and had been “bragging” about his organized crime connections. This information was then corroborated by a former federal law enforcement officer who likewise asserted that Romanazzi was tied to the Grand Avenue crew and involved in gambling.4 Following receipt of this information, IBT field representatives began a more active inquiry into Romanazzi’s possible organized crime connections. In a series of interviews with a former Local 330 employee, allegations were received that Romanazzi had numerous contacts with organized crime members and associates. Specifically, the former employee stated that Outfit members repeatedly called the local’s office in the late 1990s, asking to speak to Romanazzi. The employee also stated that the employee and a friend were at a social club on the Northwest side of Chicago in February 2003 when they saw Local 714 Secretary-Treasurer Robert Hogan, barred Teamster Dane Passo, Romanazzi, and several individuals the witness believed to be organized crime associates having a meeting at the club. The employee also witnessed Hogan and Romanazzi “in the company of another organized crime associate” in late May or early June 2003. The employee confirmed that Romanazzi was “always bragging” about the Outfit members that he knew.5 II IBT APPOINTS A REPRESENTATIVE TO MONITOR LOCAL 330 On June 10, 2003, a verdict in favor of Shales was handed down in his federal lawsuit against Local 330. Shales was awarded a judgment of more than $300,000.00 against the local and an additional $118,000.00 against the individual defendants.6 William A. Moore was then assigned as the general president’s personal representative to the local to oversee activities relating to this judgment. Upon initially contacting Local 330, Moore was immediately told of Romanazzi’s organized crime associations by Degand. On July 15, 2003, Degand provided Moore with a list of more than a dozen individuals he suspected to be organized crime associates of Romanazzi. The list was based on telephone messages for Romanazzi and statements made by Romanazzi. Degand 2 subsequently provided Moore several additional names, bringing the total to 17.7 By the end of July, Moore learned from Degand that he had been in contact with an investigator from the IRB regarding Degand’s allegation that Romanazzi was associating with organized crime. Degand had also provided to the IRB a list of individuals who were familiar with the alleged organized crime associates of Romanazzi.‘ Ill. INFORMATION PROVIDED TO THE IRB Shortly thereafter, the IBT directed that information collected by the IBT investigative team relating to organized crime issues at Local 330 be turned over to the IRB. On September 5, 2003, a memorandum summarizing the IBT investigative team’s preliminary analysis of the 17 individuals identified by Degand was provided to the IRB. In summary, of the 17 individuals investigated, we identified: 4 organized crime members or associates; 5 who had possible organized crime associations; and 7 individuals about whom we had insufficient information to establish an organized crime connection. Significantly, all four of the organized crime members or associates have had involvement in labor union matters (see Confidential Appendix, Tab 12). Since that time, IBT field representatives on an unsolicited basis continued to receive information relating to Romanazzi’s possible organized crime associations9 In December 2003, Romanazzi was elected president and principal officer defeating slates led by Degand and Shales. Field representatives have also received confidential information that an individual recently hired as a steward by Romanazzi may have ties to organized crime.10 3 ISSUES RELATING TO THE USE OF NONUNION LABOR
AND ITS CONNECTION TO ORGANIZED CRIME Investigations of IBT locals in the Chicago area since the completion of the Project RISE field study revealed labor practices having serious implications for the Teamsters. These practices, though diverse in their details, have three common components. In each case: the practices take jobs away from Teamster members or decreases Teamster wages and benefits; a financial benefit runs to a relative, friend, or associate of a Teamster official; and the practice can be traced, directly or indirectly, to a company with ties to organized crime. Union officials facilitated these practices by failing to enforce contracts, acceding to substandard contracts, or failing to organize. In combination, these components threaten the integrity of the IBT at the local and international level. As discussed below, the result of these practices is that Teamster employers use a workforce that is partially or entirely made up of nonunion workers earning wages substantially below union scale. The nonunion workforce may be hired directly by the employer or supplied by companies engaged in the business of providing temporary laborers. In some cases, these arrangements exist in violation of a collective bargaining agreement. In other cases, they exist apparently without violating the terms of the agreement�jobs that might otherwise be covered by a collective bargaining agreement are excluded from bargaining units (by definition or practice), or provisions in the collective bargaining agreement allow the employer to legally circumvent the union and use nonunion labor. Regardless of the wage rate at which the employer pays the nonunion laborers the employer still bills at a set rate. I BACKGROUND The practices discussed in this memorandum are not new to the Teamsters. Local 326, headquartered in New Castle, Delaware, was plagued by a corrupt labor leasing scheme in the 1970s when businessman Eugene Boffa used sham companIes to put Teamster employees in one of his companies out of work while using nonunion employees in another of his companies to perform the same work. Boffa’s scheme was facilitated by the local’s principal officer, Francis Sheeran, who was heavily involved in organized crime and was ultimately convicted for his role in the scheme.1 A labor leasing scheme designed to decrease wages paid to Local 560 members was prosecuted in New Jersey in the 1980s. Walsh Trucking Company and its owner, Frank Walsh, had mob ties that included organized crime figure Michael Sciarra, who was a Local 560 officer and was ultimately barred from the union as a result of IRB charges. Walsh acted as middleman in the labor leasing scheme. His company employed warehouse workers � members of Local 560 � and leased them to a retail distributor. A corrupt labor official, the infamous Tony Provenzano, agreed to a 25 percent reduction in Teamster wages in return for payoffs from Walsh. Both Walsh and Provenzano were ultimately convicted of crimes. Walsh attempted to perpetrate a similar scheme in Philadelphia in 2001 involving an IBT vice president who resigned to settle charges filed in connection with this scheme. A confidential source advised that, at the behest of MIchael Sciarra, Walsh attempted to arrange a labor leasing deal with a Philadelphia retail distributor, but the scheme collapsed before it could be executed.2 Efforts to force Las Vegas Local 631 into a contract that would result in the loss of Teamster jobs to nonunion laborers was thwarted with the debarment in 2002 of William T. Hogan Jr. and Dane Passo. Hogan and Passo colluded with mob-linked Richard Simon, owner of a temporary labor company, United Services, in an effort to cause Local 631 to enter into a substandard contract with Simon. For a discussion of the details of this scheme, see Appendix, Tab 8. II. CURRENT PROBLEMS The substitution of nonunion labor for union labor and the execution of substandard collective bargaining agreements is an ongoing and, by some witness accounts, a growing problem. These conditions present a significant threat to the IBT, for several reasons, not simply because of the loss of union jobs and wages. In each of the situations discussed below, mob-controlled companies are earning profits at the expense of Teamsters. A. Displacement of Teamsters by Organized Crime-Tied Temporary Labor Companies Consistent with the pattern described above, preliminary investigation of Local 714 has revealed the use of nonunion labor supplied by companies with ties to organized crime. Moreover, investigation of Local 714 has established connections to the same companies involved in the corrupt scheme Hogan and Passo attempted to perpetrate on Local 631. Although the IRB is currently investigating issues relating to Local 714, the nonunion labor issues described below are discussed here because intelligence sources indicate that the practices extend beyond Local 714. Additionally, as discussed in another appendix to 3 this report (Appendix, Tab 8), Hogan, Local 714’s former principal officer, apparently continues to have influence throughout Joint Council 25. 1. Rosemont Exposition Center Local 714 maintained collective bargaining agreements with trade show contractors handling trade shows at Rosemont Exposition Center and McCormick Place in Chicago. Rosemont Exposition Center has agreements with Rosemont Exposition Services (RES), a private trade show contractor, which covers a range of jobs at the trade show center. According to RES’s 2000 collective bargaining agreement covering several different categories of workers, when the union was unable to fill a request for employees covered by the agreement (Referral Employees), the employer could hire workers not covered by the agreement. In addition, RES was free to hire “casual employees” on an “irregular and temporary basis,” however, RES was required to “endeavor . . . to insure” that the casual employees did not perform the work of the Referral Employees.3 According to an RES agreement that covered drivers, when RES needed additional men, it had to “give the Union equal opportunity with all sources to provide suitable applicants, but shall not be required to hire those referred by the Union.”4 Although job descriptions were not explicit in the RES contract, it was generally understood that the job of moving furniture during the set up and break down of exhibits was covered by the agreement. When interviewed, several union members reported that RES used a company known as “Surestaff to provide temporary nonunion workers for this job even when Teamsters were available. Surestaff’s temporary workers were paid a rate substantially below union scale, approximately $5.00 to $6.00 per hour, allowing the 4 owners of Surestaff to make a substantial profit even while charging RES less than the approximately $21.00 per hour plus benefit payments required in the RES contract with 714. The union members stated that Teamsters received only about one-third of the jobs at Rosemont that should have been performed by Teamsters.5 Another Local 714 member estimated “that two-thirds of the workers doing Teamster work at Rosemont [were) temporaries hired through an agency.”6 The willingness of Local 714 officials to allow RES to circumvent the collective bargaining agreement at the expense of their members can be directly traced to Michael P. Hogan, brother of William Hogan Jr. This is the same Hogan brother who held a financial interest in United Service Companies with Richard Simon in the case against Hogan and Passo involving Local 631. (See Appendix, Tab 8.) Michael P. Hogan Sr. was originally an owner of record of RES. Beginning in 1985, a series of complicated changes were undertaken by RES, including several changes in its corporate name and ownership, as well as the incorporation of new entities that ultimately resulted in a company named “Rosemont” that continued to do the same work as RES. For simplicity sake, we continue to refer to the company here as RES. Michael P. Hogan retained a 20 percent interest in the new firm; the remainder of the corporate interests were retained by several investors, including Mark Stephens, son of Rosemont Mayor Donald Stephens. Stephens � who was listed as an officer of RES � was also an owner of Bomark Cleaning Services, Inc., in partnership with Nick Boscarino, a former Local 714 member and chief steward who is believed to have ties to organized crime (see discussion below regarding Boscarino).7 5 Under the arrangement described by Local 714 members, RES and its principals – who may still include Michael Hogan Sr. and Stephens � increased their profits and Surestaff, the labor supplier, grew its business. In keeping with the pattern, Surestaff had direct ties to organized crime through its founder Louis A. Morelli who died in 1998. Morelli’s sons now own the company: Louis J. became the registered agent and Raymond S., its owner/operator. Beginning in the late 1980s, Louis A., the founder, had associations with Chicago Outfit members. He was observed leaving the Elmwood Park Social Club with Outfit member Marco D’Amico and on another occasion, “driving D’Amico around in Morelli’s Rolls Royce.” Morelli sold a health club he owned, which was frequented by Outfit Lieutenant Joseph (the Clown) Lombardo and other Outfit members, to Lombardo’s brother, also an Outfit figure. Morelli and his sons purchased property in a complex in which other organized crime members and associates owned property, including William and Salvatore Galioto.8 In 2003 Raymond Morelli was frequently observed in the company of Chicago Outfit associates, including Chris Spina, at places frequented by organized crime figures. For example, he was observed picking up Spina in his car after following him from his home to a location where one car was dropped off. On another occasion, he had breakfast with Spina at a caf� where a confidential source observed them together three days in a row.9 (For a discussion of Spina’s organized crime ties, see Appendix, Tab 11.) 6 2. McCormick Place As at Rosemont, Local 714 had collective bargaining agreements with trade show contractors operating at McCormick Place. Unlike the situation at Rosemont, no one general contractor had exclusive control over trade shows at McCormick Place. Freeman Decorating was a major trade show contractor operating at McCormick Place. Local 714’s contract with Freeman is believed to have encompassed furniture moving jobs. Witnesses have stated that at McCormick Place, as at Rosemont, nonunion labor is used to perform this work even when Teamsters were available, notwithstanding Teamsters’ contractual entitlement. For example, “if Freeman needed 10-15 freight handlers, only one or two would be Teamsters,” the others were low paid temporary or part-time labor.10 A primary supplier of nonunion labor to Freeman appeared to be Minute Man Temporary Services, owned by Samuel G. Lucarcelli Jr. who reputedly has been associated with organized crime in Cleveland. Lucarcelli pleaded guilty to criminal RICO charges in the late 1980s. The former chief investigator for the Chicago Crime Commission stated that Lucarcelli continues to associate with mob figures in Cleveland and Chicago.11 GES, the trade show contractor involved in Hogan’s and Passo’s scheme to circumvent Local 631 and use nonunion labor in Las Vegas, was also a primary trade show contractor at McCormick Place.12 The involvement of GES in the trade show industry in Las Vegas and Chicago highlighted the fact that corrupt labor schemes transcend local union boundaries. 7 The IRB’s report in the Hogan and Passo case indicated that, during the period Hogan and Passo were attempting to force Local 631 into a contract with United, Hogan met with two of GES’s Las Vegas area representatives. The meeting took place in January 2001 at a restaurant in Chicago. Present at the meeting were Hogan, the GES representatives, and Robert Hogan, principal officer of Local 714. According to Hogan (as described in the IRB’s report), the GES representatives requesting the meeting traveled from Las Vegas to Chicago to complain to Hogan (who, along with his son Robert, had no jurisdiction in, or authority over, Local 631) about the grievances Local 631 had filed concerning GES’s use of United’s nonunion employees. GES purportedly complained that Local 631 was unable to supply enough workers and sought Hogan’s advice. In response, Hogan claimed he stated: “`I don’t have a clue. You figure that out on your own.”‘ According to the IRB report, “Passo knew that GES used United employees at `scab rates’ and told Hogan about this.” Yet, they made no effort to stop it. Instead, Hogan and Passo lobbied the other major trade show contractor to use United at its lower rates.13 How much of this Robert Hogan was aware of, given GES’s major role in the Chicago trade show industry, is to be determined. A Local 714 member stated that Local 714 officers had done nothing to prevent Local 714 employer Jorgenson Steel Company from “hiring part time employees ‘off the street’ while full time members of Local 714 were being laid off.” In addition, he reported Local 714 members were no longer given maintenance work they had previously performed on an overtime basis; instead, that was given to a maintenance company formed by a former company employee.14 8 Two other Local 714 member/employees of Jorgenson also stated that work they previously performed for Jorgenson, cleaning machines on overtime, is now being performed by a temporary labor company, Elite Staffing. Jorgenson management indicated they want to out source all maintenance work. These members voiced their concerns to their business agent, who said he would look into it, but, according to the members, will do nothing.15 Investigation uncovered another labor-related problem at Local 714 � exclusion of certain jobs from collective bargaining agreements. The IRB’s 1996 trusteeship report concerning Local 714 touched upon this issue. For example, Local 714’s collective bargaining agreement with trade show contractors, like Freeman, GES, and RES, “exclude[d] from coverage the workers who handled the moving and storing of the empty crates.” These unclassified employees were not unionized. Bomark Cleaning Service was one company that provided nonunion “workers to handle empty crates at the Rosemont Exposition Center.” Bomark was owned by Nick Boscarino who, before he resigned from the union, was chief steward at Rosemont, and Stephens, who, as explained above, was also an owner of RES. Boscarino has had along and close relationship with members of the Hogan family, Michael P. Hogan, Sr. in particular. 16 True to the pattern, since at least 1996, Boscarino has been linked to organized crime. In a 1996 New York Daily News article, Boscarino was characterized as “a former Chicago Teamster official with reputed mob ties,” and stated that one of Boscarino’s companies, Eastern Rentals, had been thrown out of New York’s Jacob Javits Convention Center. In 2001, articles in Chicago 9 newspapers linking Boscarino to organized crime resulted in the revocation of a license issued to a group of investors, including Boscarino, to build a casino in Rosemont.17 Boscarino has a close relationship with William Daddano Jr. and his family, Boscarino and William Daddano Jr. were owners and officers in American Trade Shows. Boscarino was also an owner (along with his then minor daughter) and president of OG Services, a forklift and scooter rental company. OG Services employed Bee Consulting, and Boscarino testified he dealt with William Daddano Jr., who had been linked, since the early 1960s, to the Chicago Outfit. One newspaper article reported that William Daddano, Jr., a known Chicago Outfit figure, was a director of OG Services.18 Empties, Inc. provided nonunion workers to trade show contractors for the movement of empty crates at McCormick Place. Empties was owned in part by Ronald Maxwell Jr., nephew of William Hogan Jr. and cousin of Robert Hogan, who was listed as president and officer of Empties. Empties obtained its workers from temporary labor service companies, including Readymen and Labor World, Inc. These workers received minimum wage.19 Illinois corporate records revealed that Louis A. Morelli founded Labor World, Inc. in 1974.20 Morelli’s organized crime ties are described above. Michael Hogan Jr. testified to the IRB that “United Maintenance arranged for … Readymen [] to provide [temporary] workers to handle the empty crates at McCormick Place.” United Maintenance was a subsidiary of United Service Companies, which was at the center of the corrupt scheme with Hogan and Passo to take work away from Local 631 members in Las Vegas. Michael Hogan Jr. also testified that his father worked for United Maintenance.21 As previously noted, Michael Hogan Sr. had a financial interest in 10 United Service and Richard Simon, manager and chairman of United Service Companies, has ties to organized crime (see Appendix, Tab 8). During the course of the investigation leading up to the trusteeship, Local 714 officials were asked why workers who handle empty crates at Rosemont and McCormick were not within the jurisdiction of Local 714. Robert Hogan, then trade show business agent, and James M. Hogan, then president, responded that they did not know why these workers were nonunion, but they “`always” were. William Hogan Jr. testified that the industry is “‘extremely competitive’ and “`[i]f you build too much cost in they will take their shows to other cities. So to have that work done by all Teamsters would be extremely expensive and probably chase the work away.” Robert Hogan testified they “never sought to represent these workers.”22: B. Hired Truck Program Organized crime figures were involved in replacing Local 726 members with nonunion labor. Local 726 represents approximately 5,000 public employees in the Chicago area. The local is party to multiple contracts with the City of Chicago covering various collective bargaining units. The City of Chicago employed career (permanent) and seasonal employees � Local 726 members � who drove trucks and operated machines for various municipal departments. As a supplement to its career and seasonal drivers and its city-owned truck fleet, the City created the “Hired Truck Program” (HTP), which allowed the Departments of Transportation (DOT), Water Management, and Streets and Sanitation “to hire trucking services on an as-needed basis to supplement construction projects and daily operations.” The program has been administered through the City’s budget 11 department. 23 Angelo Torres headed HTP from 1998 until 2003, when he was transferred and subsequently fired following a major scandal revealed by the Chicago Sun-Times investigative expose referenced below.24 Each department participating in the program had its own contact person. Until he retired in June 2002, DOT’s contact person was Nick Lococo, who determined which trucking companies would receive DOT’s business. A former Local 726 member, Lococo has been linked to organized crime. He had two arrests for gambling-related activity in 1979 and 1986, neither of which resulted in convictions. A 1987 Chicago Tribune article reported that Lococo was shot while demanding payment on a “‘mob juice loan.”‘ A mob attorney-turned-informant reported that top echelon mob figure Angelo LePietra, now deceased, had arranged for him to represent Lococo in a gambling case. Current intelligence information reveals that Lococo is a well known member of Chicago’s 26th Street Crew, engaging in mob loan collections and bookmaking.25 In court filings relative to a federal criminal case in the Northern District of Illinois, United States v. LaMantia, Lococo was identified as a person who, along with other organized crime figures, used the Old Neighborhood Italian American Social Club to transact illegal business. Electronic surveillance of the telephones at the revealed calls to Lococo .26 Prior to his retirement from Local 726, Lococo held the position of general foreman of motor truck drivers for DOT and was responsible for assigning truck drivers within the department. When Lococo retired, Charles Scalise replaced Lococo as the contact person for the HTP. As of April 2004, Scalise was not a Teamster.27 Members of Local 726 stated that the City had increasingly utilized private trucking firms with nonunion drivers to perform work traditionally carried out by truck drivers employed by the City. When the HTP began, the City’s use of private trucking was minimal, however, the program expanded rapidly over the past few years and has had a significant impact on Local 726. Members claimed that they were often sent home from a job or laid off while private companies and their nonunion drivers continued to work. The companies were charging the City union rates for drivers, but the drivers were only being paid. $10.00 per hour.28 A contract for the July 1999 through June 2003 time period between the City of Chicago and Local 726 that covered truck drivers and related job functions contained two provisions relevant to the City’s use of nonunion truck drivers. Article 14 provided that, with certain exceptions, “[a]ny work which has been traditionally performed by employees who are represented by the Union shall continue to be performed by said employees.” Article 2 of the contract, however, recognized that certain “rights … are exclusively vested in the Employer, except as they may be subject to specific and express obligation of this Agreement,” including “the right to contract out or subcontract; [and] the right to determine the number of employees and how they shall be employed.“ 29 Assuming that the work performed under the HTP falls within the scope of work traditionally performed by Local 726 members, under Article 2 the City retained the right to contract out such work without limitation. According to at least one Local 726 member, under the HTP, the City paid the contractors rates commensurate with union scale even though the contractors were not 13 obligated to hire union members. Private trucking companies operating under this program billed the City at union rates, having paid their nonunion drivers well below union scale.30 A current Local 726 official, however, estimated that Local 726 members lose 130 jobs per day to nonunion drivers operating under the HTP. He further stated that, because Local 726 was a municipal local, it did not have jurisdiction to organize nonmunicipal employees. According to this official, the matter was referred to IBT Locals 731 and 786. He was under the impression that Local 731 had begun to organize, with a few cards signed, but nothing ever came of it.31 However, Local 726 Principal Officer Thomas Clair implied that it was possible that no organizing had occurred. He asserted that former Local 726 secretary-treasurer Daniel E. Stefanski talked to a Teamster official, most likely from Local 731, about organizing the HTP drivers. Following Stefanski’s contact, Clair made arrangements to meet with a Local 731 business agent or organizer to discuss organizing these nonunion drivers, but the Local 731 representative never showed up for the meeting and he did not pursue it.32 In addition, a confidential source whose credibility has not been determined reported in August 2003 that Marina Cartage, the highest-paid participant of the HTP, was making payments to a Chicago local union officer not to organized Marina Cartage’s employees.” The Illinois Prevailing Wage Act (IPWA) reflects Illinois’s policy that requires that all individuals employed by or on behalf of any public body engaged in public works be “paid no less than the general prevailing hourly rate” for similar work.34 Members of Local 731 filed a complaint against the Illinois Department of Labor (IDOL) for failing to require that companies hired under the HTP pay their employee drivers prevailing wage rates, as is 14 required by the IPWA.35 The IDOL refused to enforce the IPWA against the companies working under the HTP stating that it was “[i]n keeping with former [IDOL] Director Healey’s promise that no trucking company would be bankrupted from participation in this program.”36 The court dismissed the complaint, finding that the IDOL has the discretion to decide whether to file charges under the IPWA. An appeal of the dismissal was filed on May 30, 2003.37 Local 726 Principal Officer Clair was questioned about Nick Lococo. Clair testified that, after he took over as principal officer of Local 726, Lococo telephoned to congratulate him and suggested they have lunch together. Clair had heard that Lococo was involved with organized crime. To avoid meeting with Lococo, he said he was “`too busy.”‘ According to Clair, he stated he has since received telephone calls from Lococo but has not returned them. Before his retirement, Stefanski told Clair “`you’ve got to learn to deal with these people,”‘ which Clair understood to mean “the mob.”38 With respect to the HTP, a Local 726 member stated he had heard that that trucking companies paid kickbacks to Lococo in return for being awarded work under the program. Although this member had no personal knowledge regarding Lococo’s handling of the HTP, his personal knowledge of Lococo regarding a separate but similar corrupt scheme lends credence to the allegation. He testified that Lococo, while general foreman of the truck drivers for the DOT, solicited “Christmas gifts” from Local 726 members in return for making sure those members were assigned overtime hours. This member testified that he gave Lococo $500.00 each year for eight or nine years until Lococo retired. These gifts 15 to Lococo were openly discussed among the members � “Everybody did it.”39 This and related corrupt schemes concerning Local 726 are discussed in the Appendix, Tab 1. This member further stated that after he was laid off in April 2003, he contacted a steward who he characterized as a personal friend, to find out why he was laid off. He noted that other people with less time on the job were still working. The steward told him that the member “`didn’t do the right thing’ at Christmas time 2002,” which he understood to mean that he did not make a payment to Lococo’s replacement, Senese.40 A confidential source stated that he heard from a Teamster on leave of absence that a Coalition for Better Government leader had acted as a “bagman” for Lococo (see Appendix, Tab 1).41 Beyond the organized crime connections of Lococo and Senese, preliminary investigation of certain trucking companies doing business under the HTP has revealed an alarming number of connections to organized crime. Marina Cartage was the number one company participating in the HTP in terms of gross revenue.42 Michael Tadin was the president and owner of Marina Cartage and was a close personal friend and “longtime political supporter” of Chicago Mayor Richard M. Daley; they grew up together in the Bridgeport neighborhood of Chicago, an area also known as 26th Street and recognized as the center of operations for the Outfit’s 26th Street Crew. Tadin reportedly had ties to Chicago Outfit figures. Attorney Charles Schneider was the registered agent for Marina Cartage and other companies owned by Michael Tadin. Schneider was convicted for his involvement in a widely reported corruption trial involving the Chicago Outfit and the Town of Circero.43 Barbara Trucking has also been identified as a major trucking company operating under the HTP. Barbara Trucking is owned by Fred B. Barbara, an individual identified since at least 1983 as a member of the 26th Street Crew. Barbara and Tadin are believed to be partners in two other trucking firms, CMT Enterprises and T & B, Ltd. A Local 726 official stated that Marina Cartage and Barbara Trucking supply most of the nonunion trucks and drivers hired by the City. Barbara is believed to be “the nephew of the late Alderman Fred Roti, a made member of the Chicago mob.“44 Lori LaMantia worked for the City’s budget office which runs the HTP. She was married to convicted felon Rocco (Rocky) LaMantia and was the daughter-in-law of Joseph (Shorty) LaMantia, a member of the 26th Street Crew. Joseph LaMantia was one of the defendants in the criminal RICO case in which Nick Lococo was identified as a person engaging in illegal business at the 26th Street Social Club (see discussion above). Rocky LaMantia “helped create Dialex Trucking,” an HTP company that earned over $420,000.00 from the program in 2002.45 According to electronic database sources, Lori LaMantia had two reported addresses in the 26th Street neighborhood. One was the address of Anthony Pacella, brother of William Pacella who owned Pacella Trucking, an HTP company. William Pacella was believed to be partners in a trucking company with Fred Barbara, owner of Barbara Trucking and 26th Street Crew member. Reliable sources indicated that Barbara was a close associate of Joseph LaMantia. Lori LaMantia was also linked to a second address, which was the reported address of Anthony J. Serritella, who was identified by sources as a member or associate of the 26th Street Crew.46 17 According to the Chicago Sun-Times investigation, James Inendino was a principal in JMS Trucking Co., a firm that had been operating in the HTP. Inendino was convicted in March 2002 with “the reputed mob boss of Cicero at the time, Michael Spano” (see discussion of the Spanos in Appendix, Tab 9), and the former Cicero police chief for having �laundered bribe money from a Cicero kickback scheme.” JMS remained in the program until it was suspended in January 2003. JMS shared a garage and one employee with Ana Orona, who identified herself as the president of Builder’s Trucking Co., which also participated in the HTP. Orona had “personal and business ties to convicted loan shark and reputed mobster James Inendino., “47 The Sun-Times investigation also identified Chica Trucking, Inc. as a participant in the program. Chica Trucking is owned by Patricia Cortez, sister-in-law of Chris Spina, “a former city worker once fired for chauffeuring reputed mob boss Joseph `the Clown’ Lombardo on City time.”48 Dispatch Services, Inc. also participated in the HTP, having received over $1.3 million from the City between 1993 and 1997. These payments were evidence in the trial in which John LaGiglio, president of Dispatch Services, was convicted along with Cicero town president Betty Loren-Maltese and reputed Cicero mob boss Spano, Sr. of racketeering for swindling Cicero out of millions of dollars.49 Schadt’s, Inc. was also among the companies doing business under the HTP. Schadt’s was owned by Carmen Schadt Gurgone, sister-in-law of Michael A. Gurgone, who had been identified as being affiliated with the 26th Street Crew of the Chicago Outfit. Michael Gurgone had been a driver for Chicago’s Department of Streets and Sanitation. 18 Gurgone was sentenced to seven years in jail for attempted burglary of $600,000.00 in 1983. When he got out, Gurgone was hired by Tadin of Marina Cartage as a driver. In 2004, Gurgone stated that he still worked for Tadin. Schadt’s, Inc. leased between 8-to-12 trucks from Tadin, and paid Tadin 80 to 88 percent of its gross revenues. Gurgone and Tadin claimed these trucks were not used in the program. STR Enterprise, Inc. also participated in the HTP. STR is owned by Rhonda Vasquez, who was reportedly married to Samuel M. Gurgone, brother of Michael.50 Schadt’s earned $396,562.00 in the first 10 months of 2003 through the HTP. STR earned $132,875.00 in the same time period. At least three participants in the HTP were identified as Local 786 employers. Bridget’s Trucking, Inc., Harmon’s. Motor Service, Inc., and Josh Transport, Inc. Although each was listed as a Local 786 employer, no Local 786 members working for these companies were identified.51 The January 2004 indictment of Torres, former head of the City’s HTP, and the Chicago Sun-Times expose referenced above revealed that the HTP was corrupt at every level. Torres was charged with attempted extortion for accepting “$3,800 in a series of separate payments” from a HTP trucking company in return for which “Torres agreed to steer at least $50,000 in city business” to the company.52 Torres, a former member of a “`Mexican street gang[]”‘ known as the, “Two Six,” was accused in the Sun-Times series of allowing his father-in-law and mob-connected individuals to participate in the HTP.53 The Sun-Times investigation revealed that “bribes were passed to reserve a spot in the program; some contractors had ties to organized crime; [and] 25 percent of all Hired Truck money had been spent on firms operating out of the 11th Ward, Daley’s political power 19 base. A 1998 audit of the program by Ernst & Young found that there were “`few controls over the program to prevent bribery.” In addition, Mayor Daley’s brother sold insurance to some of the Hired Trick Program’s biggest beneficiaries, including Marina Cartage and MAT Leasing, both owned by Tadin, and Fred Barbara and his wife’s trucking company, Karen’s Cartage.56 Companies routinely were paid to have “trucks do little or no work” at the job site57 The Sun-Times investigative series confirmed our preliminary investigative findings and supported two points significant to Teamsters: companies benefitting from the $40 million per year HTP “pay their drivers much less than the city pays its union drivers” and many of the companies involved in the program (one in ten according to the Sun-Times) was “either owned by alleged mobsters or Outfit associates or by family members, often women, of reputed mob figures.�58 According to a confidential source, there was concern among rank-and-file Teamsters over the mob-related corruption of the HTP. This source claimed that he and other city employees represented by the same Chicago-area local had information to provide to the City of Chicago’s Inspector General’s office regarding the HTP, but they all feared some sort of retaliation if they did.59 III. SUMMARY Preliminary investigations of various Chicago-area locals have uncovered evidence of schemes including: corrupt labor practices that are taking jobs away from Teamsters; union officials whose family, friends and associates are benefitting from these corrupt practices; and organized crime figures linked to companies replacing union members with 20
nonunion workers. The apparent pervasiveness of this pattern across locals requires a broad investigative approach. A personal representative is necessary to conduct the broad-based comprehensive investigation that is required to confront this problem. 21 ISSUES RELATING TO WILLIAM T. HOGAN JR.’S
CONTINUING INFLUENCE OVER CHICAGO-AREA TEAMSTERS Allegations made and information received during the course of various investigations conducted following the Project RISE field study indicate that William T. Hogan Jr. (Hogan), despite his permanently barred status, continues to have influence over Teamster affairs in the Chicago area. Hogan’s continuing influence poses a threat to the union. Investigation is necessary to determine whether and to what extent Hogan continues to have ties to and influence over Teamsters and, concurrently, whether and to what extent he has ties to organized crime. Appointment of a personal representative is necessary to facilitate investigation of these matters, more particularly, to determine: � Whether Hogan is participating in efforts to shut down the IBT’s anti-racketeering program; � Whether Hogan has engaged in prohibited associations with Teamster members; � Whether Hogan continues to have influence over Teamsters in the Chicago area and whether he has contacts with associates of organized crime; � Whether Hogan is involved with Teamsters in the receipt of kickbacks or other corrupt deals; and � Whether Hogan is involved in facilitating contracts that replace Teamsters with nonunion labor. I. BACKGROUND Local 714 has operated under the control of the Hogan family since it was first chartered in approximately 1939. William Hogan Sr. served as secretary-treasurer and principal officer from 1940 through 1990. Upon William Hogan Sr.’s retirement, his son, William T. Hogan Jr., was appointed to replace him. In 1993 Hogan was selected as president of Joint Council 25 to replace Daniel Ligurotis who had been barred by the IRB for misconduct and was viewed as one of the most powerful Teamsters in Chicago. On August 5, 1996, the IRB recommended Local 714 be placed in trusteeship and an emergency trusteeship was imposed three days later based on the IRB’s findings that, particularly in the trade show and movie division, nepotism, favoritism, and conflicts of interests among Hogan and his family members were rampant. Hogan’s relatives owned businesses that were dependent for profits on Local 714 employers, and these business interests were not disclosed to members. Sham collective bargaining agreements allowed non-employees to become Teamsters. The IRB concluded that Local 714 was run for the benefit of Hogan; his brother, Local 714 President James M. Hogan; his son, the recording secretary, Robert A. Hogan; and their family and friends. Upon imposition of the trusteeship, Hogan was suspended from office. In June 1998, elections were held and Hogan’s son, Robert A., was elected president. In July the trusteeship was lifted. President Robert A. Hogan appointed his uncle, James M. Hogan, to the newly created position of administrative director and later appointed his father organizing and government relations director of Local 714. In March 2000, Hogan was again appointed president of Joint Council 25. Disciplinary charges were brought in 2001 against Hogan and former International Representative Dane Passo for participating in a scheme detrimental to Local 631. The charges resulted in a May 29, 2002 IRB order permanently barring Hogan and Passo from the lBT. The IRB found that Hogan and Passo colluded with Richard Simon, chairman and manager of United Service Companies, to cause Local 631 to enter into a substandard contract with United. United has three subsidiaries, one of which, United Maintenance, is 2 discussed below. As noted elsewhere in this appendix (see Tab 7), United is in the business of providing nonunion labor to trade show contractors operating in Las Vegas, Chicago, and other locations. Hogan’s brother, Michael P. Hogan, is vice president of United.1 The standard contract between Local 631 and trade show contractors required that all workers dispatched from Local 631, including nonunion workers, be paid union scale. The contract Hogan and Passo attempted to force on Local 631 would have allowed trade show contractors to avoid the union and go directly to United as a source of nonunion labor that would be paid substantially below union scale. Show Biz USA was among the trade show contractors operating in Las Vegas. Michael P. Hogan was CEO of Show Biz USA, as well as vice president of United. Through United and Show Biz, Simon and Michael Hogan would benefit, to the detriment of Local 631 members.2 Richard Simon has ties to organized crime and is a longstanding business friend of Hogan. Simon is the registered agent and manager of National Facilities Maintenance, LLC. Also listed as manager of this company is William Daddano Jr., who was identified by law enforcement as being affiliated with the Outfit since at least the early 1960s and was identified as such as recently as 2001.3 In addition to being in business with Simon, Daddano had connections to Chicago-area Teamsters through Local 714, including former Local 714 chief steward Nick Boscarino. Daddano and Boscarino were involved in a company known as “O.G. Services,” which did business with Local 714 employers.4 Simon was a close associate of deceased Outfit figure Ben Stein, founder of United, who pleaded guilty to bribing a labor official in the 1960s and was reported to have ties to Outfit member and barred Teamster Dominic Senese. Simon worked closely with Stein Simon was a close associate of deceased Outfit figure Ben Stein, founder of United, who pleaded guilty to bribing a labor official in the 1960s and was reported to have ties to Outfit member and barred Teamster Dominic Senese. Simon worked closely with Stein 3 for 30 years. As of 2003, the IRB stated that Stein’s daughter Carol owned the company, but Simon claimed he is a co-owner.5 The arrangement that Hogan, Passo, and Simon attempted to force on Local 631 was similar to the schemes Stein had been involved in previously. Local 714 was among the locals included in the Project RISE field study because organized crime-related charges had been brought against a member. It was categorized as a C local � for locals being investigated or requiring an investigation � at the conclusion of the study because of (1) possible improprieties between the local’s bank and Hogan, other Local 714 officials, and Hogan’s relatives, and (2) possible organized crime associations involving Robert A. Hogan and other Local 714 members. Investigation subsequent to the field study uncovered additional issues of concern involving Local 714, Including other possible organized crime connections. Those issues were referred by the IBT to the IRB for further investigation. II. CURRENT ISSUES Investigations involving various IBT locals in the Chicago area following the completion of the field study have revealed broad issues of concern to Teamsters throughout the Chicago area. One such concern is the nature and extent of William Hogan Jr.’s continuing influence over Teamster affairs. A. Whether William Hogan Jr. Is Participating in Efforts To Shut Down the Anti-Racketeering Program As recently as February 2004, a former member of Joint Council 25’s executive board stated that he believes that Hogan still runs the joint council, although John Coll is “technically the head of it.”6 4 In 2003 a former Local 786 official stated that a current 743 official informed him that the Chicago Outfit was using Hogan and John Coll to get the executive assistant to the president, Carlow Scalf to shut down the investigation of Local 786 On another occasion. this former official stated that all IBT officials in Chicago are puppets for the ‘Outfit’ and do as they are told,” including Hogan and Coll. He also claimed that “the ‘Outfit’ is extremely upset by ‘Project RISE’ and has ordered it stopped.7 B. Whether Hogan Has Engaged in Prohibited Associations with Teamster Members The Consent Decree prohibited IBT members from “knowingly associating with any person . . . enjoined from participating in union affairs.8 By memorandum dated May 31, 2003, General Counsel Patrick Szymanski and Human Resources Director Lynda Sist notified “All IBT Employees” that [t]he Consent Decree prohibits any Teamster member or officer from ‘knowingly associating’ with anyone who is permanently barred from the Union pursuant to an IRB decision. This prohibition applies to Mr. Hogan and Mr. Passo and not only prohibits contact that concerns Union affairs, but also prohibits purposeful social contact with Mr. Hogan and Ann Passo even though that contact is completely unrelated to Union affairs. Teamster members have themselves been barred from the Union for having purposeful contact with individuals who have been barred from the Union.9‘ On October 28, 2003, Hogan was observed meeting with Local 781 President and Principal Officer Joseph L. Bernstein. The two met alone at the Black Ram Steakhouse in Des Plaines, Illinois, on a Tuesday sometime between 12:05 p.m. and 2:50 p.m. The details of this observation are set forth in a report relating to Local 781 (see Appendix, Tab 4).10 5 Hogan was also observed in the company of Teamsters at the Navy Pier on September 23, 2003. A Local 714 member employed at the Navy Pier stated that, at approximately 10:30 to 11:00 a.m., while working in a traffic position on the ramp leading to the Navy Pier dock, another IBT member contacted him, stating “`guess who is coming.'” As a result, he inferred Hogan would be arriving and should be permitted to park in a reserved space in the dock area. The ramp provided the only access to the dock area and is closed to the public. 11 Approximately 30 minutes later, Hogan arrived with Richard Simon who, as discussed above, has ties to organized crime and the Hogan family. Hogan drove up the ramp and parked in a reserved spot. Local 714 chief steward Dale Torii came out and greeted them and the three entered the facility, with Hogan stopping to shake hands with IBT members along the way. They walked toward the Riva Restaurant.12 This Local 714 member went to the Riva Restaurant and observed Hogan and Simon meeting with approximately 20 other individuals in a meeting room area. A waiter told another 714 member who witnessed the meeting that it was for the Chicago Convention and Tourism Bureau. Simon was chairman of the Bureau in 2003. After approximately one hour, the meeting broke up and Hogan and Simon moved to the restaurant area to eat lunch with approximately 10 of the other attendees of the meeting. Later in the afternoon, while working on the dock, the 714 member observed Torii and Hogan walking from the inner Navy Pier area to Hogan’s car. After engaging in brief conversation with Torii, Hogan departed. Other Local 714 members provided similar details from their own observations of Hogan at the Navy Pier on September 23, 2003.13 6 A member of decorators local 17 who knew Hogan, saw him at the Riva Restaurant meeting at the Navy Pier on the same day. This non-Teamster stated that he was “`afraid” of Hogan because in approximately 1996-1997 Hogan was promoting a bill that would have been devastating to all labor locals involved in the trade show industry. The bill would have gotten rid of all the unions,’ placing all the employees into one labor pool that would have been run by Hogan. If this bill passed, Hogan would have had full control of this non-Teamster’s family’s well-being, which, from his observation of Hogan’s handling of Teamster issues, could have extremely negative consequences. 14 In early September 2003, a former IBT employee observed Hogan, Robert Hogan, and barred member Dane Passo together at the bar of a restaurant with a fourth person who was later identified as John Coli, the current Joint Council 25 president. The four were observed having drinks, then going to a table and having dinner.15 On September 17, 2002, Hogan was observed leaving a fund-raiser for Scott Fawell, convicted former head of Chicago’s Metropolitan Pier and Exposition Authority (McPier) and chief of staff for Governor George Ryan, in a car registered to Local 714. An unidentified male was driving.16 A retired IBT member stated that in March 2003, Hogan attended a St. Patrick’s Day event at Plumbers’ Hall that was attended by most of Joint Council 25 and Hogan talked to IBT members.17 In November 2002, a fund-raiser was held for Hogan to raise money to fight his IRB-imposed debarment. Despite being specifically advised by the IBT general counsel that attendance at this function would violate the Consent Decree, Local 714 attorney Marvin Sacks, Richard Simon, and Local 714 members and Rosemont Exposition Center Chief 7 Steward Mike Hansen (stepbrother of Nick Boscarino, discussed above), movie captain Armand Paoletti, and James A. Hogan, attended this fund-raiser. Sacks was also observed with Hogan on two subsequent occasions 18 Investigation is necessary to determine whether Hogan’s association with any Teamster member, or as in the case of Marvin Sacks, Teamster representative, is of a prohibited nature and demonstrates continued influence over 714 members. C. Whether Hogan Continues To Have Influence Over Teamsters in the Chicago Area and Whether He Has Contacts with Associates of Organized Crime Because Hogan is perceived by many to have influence over Chicago-area Teamsters, his alleged connections to associates of organized crime remain a concern. As noted above, in October 2003, a former Local 786 official stated that IBT officials in Chicago are puppets for the Outfit and do as they are told, including Hogan and Coli. In July and October 2003, a retired IBT member claimed that Hogan was the intermediary for the IBT and the Chicago Outfit. He stated that while they were at a restaurant, Hogan went to talk with the Caruso brothers, former LIUNA officials known to be organized crime members. After Hogan’s conversation with the Carusos, he told the now retired member, “‘[w]e didn’t see those guys today,” evidencing his awareness of their organized crime affiliation.19 In November 2003, a Local 714 member reported that there was a lot of talk in the trade show industry regarding Hogan and Richard Simon (whose organized crime ties are described above), There was a fear that Hogan and Simon were using their influence in 8 the Chicago Convention and Tourism Bureau “to alter the structure of labor at trade show facilities: In December 2003, the principal officer of a Chicago-area local stated that it is “hard to measure“ whether Hogan is still running Joint Council 25, but he knows, without specifying how he knew, that a deal was struck with Joint Council 25 President Coll “to elevate Bobby Hogan to [recording secretary of] Joint Council 25.”21 At a golf outing in July 2002, Hogan was observed and photographed with Boscarino, a former Local 714 member and old friend of the Hogan family, as members of the same foursome. Boscarino has been identified as having ties to organized crime.22 A former Chicago police officer and 714 member reported that approximately two years ago he saw Hogan and his brother James M. having breakfast with Rosemont Mayor Donald Stephens and John Serpico. Serpico has been identified as a member of the Chicago Outfit and was ousted from LIUNA because of his alleged organized crime ties. In July 2001, he was convicted of a kickback scheme that involved using his influence with the Central States Joint Board.23 Las Vegas law enforcement authorities disclosed that on June 27, 2001, Rick Rizzolo, a Las Vegas strip club owner with ties to the Chicago Outfit, held a private party attended by Hogan. Rocco Lombardo, a Chicago Outfit member and the brother of Outfit leader Joseph A. Lombardo, was also in attendance.24 In March 2003, one of Hogan’s relatives who is also a Local 714 member believed that Hogan is still “‘pulling all of the strings’ and running Local 714 through his son Robert and brother James m.25 9 D.: Whether Hogan Is Involved with Teamsters in the Receipt of Kickbacks or Other Corrupt Deals In November 2002, a retired IBT member familiar with Joint Council 25 stated that the Hogan and Coli families are close and that Hogan wanted Coli to be the Joint Council 25 president so that Hogan would keep getting his share of kickbacks. This retired member further stated that he was ordered by Hogan to assist a salesperson who was selling legal insurance to members. This salesperson told the retired member that “`Hogan’s getting 5%, you will have to get yours from him.’ The retired member stated that Hogan had his son Robert assigned responsibility for the Joint Council 25 political action committee to insure that Hogan would continue to receive kickbacks.26 This retired member further stated that Remke Printing, a printing company that has provided printing services to Joint Council 25, is owned by members of the Hogan and Coli families. Hogan and his brother James M. were alleged to have a hidden interest in this business. The witness stated that, when the joint council began to request bids for printing work, Hogan ordered him to get the bids, which Hogan would review, and then told him to telephone the Coli family member who ran Remke to advise him of the low bid. According to the witness, James Coli, who was barred from Local 727, operated Remke. Remke’s owner was identified as either Coli’s sister or sister-in-law. This witness, however, believed that Remke no longer is performing printing work for the Joint Council, but that has not been confirmed.27 This former member’s information was corroborated in part by public records. Records of the Illinois Secretary of State identified Karen L. Coli as the president of Remke Printing. Remke Printing also did business as JIKA, Inc. and James Coli was identified as 10 the previous secretary for JIKA. The corporate status is listed as, “inactive-dissolved.”28 Additionally, in November 2003, a Meeting Masters Championship Golf Tournament was held in Las Vegas, Nevada. Hogan was listed as a participant in the event, representing Remke Printing.29 A high-level Chicago law enforcement officer advised that in February 2004 he received information that Hogan and his brother James M. were involved in an investment management company, National Investment Services (NIS), and each received in excess of $500,000.00 in consulting fees from NIS in return for getting business for NIS. This law enforcement source further stated that, since the agreement was made, NIS’s managed assets increased from $20 million to $4 billion .3″ A review of Form 5500s for Local 727’s health and welfare and pension plans listed NIS as an “investment manager” for the years 1998 through 2001 and 1998 through 2002, respectively. Over these time periods, the health and welfare plan paid NIS $59,013.00 and the pension plan paid $425,475.00. A review of other Form 5500s revealed that NIS was also a provider for pension funds affiliated with IBT Locals 703, 710, 744, and 738.31 Information obtained in February 2004 raised questions about the propriety of a 2002 sale of a tractor-trailer by Movies In Motion or another of the companies owned by William Hogan III to Joint Council 25, at a time when Hogan was the joint council president. Salvatore Galioto, former Local 714 member, also has an ownership interest in Movies In Motion. (Galioto’s mother Ann held the interest for a time, then transferred it back to Galioto.) Galioto acknowledged having been publicly reported to associate with the Chicago Outfit and has close ties with the Hogan family. Hogan family members were partners with Galioto in Movies In Motion, including Robert Hogan who was originally a 11 partner in the business and sold his interest to his brothers, James A. Hogan and William Hogan Ill, who are believed to be current owners of Movies in Motion. Hogan family friend Dennis Collucci transferred his interest in the business to the children of James M. Hogan.32 This source stated that Joint Council 25 overpaid Movies In Motion for a tractor-trailer in poor condition. He estimated that the Joint Council paid about $100,000.00 for the tractor-trailer and paid an additional $100,000.00 toward its repair.33 Form LM-2 for 2000 filed by Joint Council 25 documented its purchase of a truck for $106,400.00 (the seller is not identified). That same year the Joint Council recorded a truck expense of $17,047.00 (the specific truck is not identified). In 2001, truck expenses were recorded as $42,389.00 with the explanation that: The Joint council owns a semi trailer truck which displays the Teamsters logo. The truck is used primarily for advertising and Teamster promotion. The truck is not assigned to any individual. Expenses for maintenance and operation are not allocated to any individual and are reported on Schedule 15 as truck expenses. In 2002, the LM-2 reflected truck expenses as $25,299.00 with the same explanation as given the previous year.34 Investigation is necessary to determine whether the semi was sold to Joint Council 25 by a business owned by a Hogan family member or friend and whether the price paid for the truck was fair market value. 12 E. Whether Hogan Is Involved in Facilitating Contracts that Replace Teamsters with Nonunion Labor Consistent with the conduct revealed in the IRB’s May 29, 2003 decision barring Hogan from the union, there is reason to believe that Hogan is directly or indirectly involved in facilitating contracts that result in Chicago-area Teamsters being displaced by nonunion labor for the benefit of Hogan’s family, friends, and business associates. These arrangements are described in a report on the displacement of Teamsters by nonunion labor and substandard contracts (see Appendix, Tab 7). To summarize briefly, investigation of the use of nonunion labor in the Chicago area has revealed connections between Hogan, his family and friends, temporary labor suppliers, and organized crime. These connections included the following: � work performed at McCormick Place by United Maintenance, owned by Richard Simon, who has ties to organized crime, and Hogan’s brother Michael Hogan, an officer of United; � work performed at McCormick Place for a trade show contractor by Minute Man, a temporary labor supplier owned by Sam Lucarelli Jr., who pleaded guilty to federal RICO charges in the 1980s and is believed to be associated with mob figures; � work performed at Rosemont Exposition Center for trade show contractor RES, believed to be partially owned by Michael P. Hogan and Surestaff, a temporary labor supplier, owned and operated by Raymond Morelli, who confidential sources observed associating with Outfit figures; � work performed at McCormick Place for trade show contractors by Empties, Inc., a company that moves empty crates, owned by Hogan’s nephew Ronald Maxwell Jr., and Labor World, Inc., a temporary labor company founded by Louis A. Morelli, an individual known to associate with the Chicago Outfit; and � work performed at McCormick Place for trade show contractors by Bomark Cleaning Service, a company that moves empty crates, owned by former Teamster Chief Steward Boscarino, an individual with close ties to the Hogan 13 family, who is reported to have ties to organized crime figures, and who was convicted in February 2004 of laundering thousands of dollars in connection with an insurance fraud scheme.35 Ill. SUMMARY Considering the observations of witnesses placing Hogan with Teamsters (and a Teamster representative) since his disbarment; statements that Hogan continues to be involved in Teamster affairs; Hogan’s connections to the displacement of Teamsters by labor suppliers with organized crime ties; his ongoing relationships with Richard Simon and Nick Boscarino who are known to have ties to organized crime in Chicago; his brother Michael Hogan’s business partnership with Simon in a business that profits from the use of nonunion labor; his alleged involvement in the receipt of kickbacks; and keeping in mind Hogan’s past misconduct as revealed in the IRB’s May 29, 2002 decision barring him from the union, a personal representative is necessary to conduct a comprehensive investigation of the extent of Hogan’s continuing influence over the union. 14 ISSUES RELATING TO LOCAL AND BENEFIT
FUND SERVICE PROVIDERS Numerous intelligence sources have indicated that one of the Chicago Outfit’s principal reasons for maintaining connections with Teamster entities is to profit from schemes related to pension and health and welfare funds. According to sources, Outfit-associated individuals and entities also seek to profit from expenditures by the locals and the joint council. Service providers to Teamster locals and affiliated benefit funds are often the vehicles by which organized crime-influenced schemes are executed. This recent intelligence gathered in the Chicago area is consistent with historic patterns of organized crime exploitation of the union. As described in the IBT Organized Crime Report released in October 2002, gaining access to the billions of dollars in Teamster-affiliated funds was one of the most important reasons organized crime figures were motivated to infiltrate the Teamsters Union.1 Despite great progress in keeping the funds safe from organized crime influences and corruption since the apex of mob infiltration in the 1970s, the 2002 report noted recent concerns about certain service providers and warned that “Teamster-affiliated funds now constitute the most likely targets for racketeers seeking to emulate the successes of their predecessors.” 2 The vast amounts of money collected in Teamster-affiliated benefit funds, which provided organized crime a major incentive to infiltrate the union years past, have increased and now approach $85 billion. While most of these funds are being managed responsibly and have appropriate safeguards to make organized crime penetration improbable, their sheer aggregate volume makes them a potential target for modern racketeers. The Project RISE field study discovered enough instances of attempts to mismanage funds for personal gain and other forms of misconduct to make the potential threat to the funds more than a remote possibility.3 1 In Chicago, the evidence gathered to date indicates that exploitation and mismanagement of funds is occurring with sufficient regularity to warrant serious concern. As noted in the main report, the Chicago area, more than anywhere else where Teamster entities are concentrated, continues to furnish the conditions that historically have made the union vulnerable to organized crime infiltration and systemic corruption: an organized crime family that still has considerable strength, a corrupt business and political environment, and resistance to anti-racketeering reform efforts by key Teamster leaders. The matters described below are by no means exhaustive of the fund/service provider issues that have emerged in the Chicago area, many of which have been discussed elsewhere in connection with individual locals. They are, however, illustrative and warrant overt steps to ensure that union leaders and fund trustees are carrying out their fiduciary responsibilities in the context of Outfit attempts to infiltrate and exploit Teamster entities in the area. I. LONGSTANDING SERVICE PROVIDERS Some of the service providers in the Chicago area have longstanding relationships with the joint council and locals that date to the 1950s through 1970s era, when organized crime penetration of the Teamsters Union became a public scandal in which the Chicago Outfit’s control over the Central States Pension Fund and other Teamster entities played a prominent role. By themselves, the longstanding ties between certain Teamster entities and their service providers are not improper. When such historically close ties are coupled with recent evidence of organized crime connections, criminal misconduct, or less than arm’s-length dealing, however, there is reason to make inquiries to ensure that historic patterns are not reestablishing themselves. This is especially true when, as with the three examples, discussed below, the service providers played key roles in administering or auditing Teamster entities that are known targets for organized crime exploitation. A.. Group Administrators 1. Background According to public documents, Group Administrators, Ltd. is run by David Dorfman, Allen M. Dorfman’s son, and William Webbe. Both David Dorfman and Webbe were employees in Allen Dorfman’s companies and Webbe’s office was used for private meetings between Allen Dorfman, Don Peters, and organized crime member Joseph Lombardo. At the time, Joseph Lombardo was a capo in the Chicago Outfit and served as its contact to the Teamsters. He was also a named defendant in the 1988 civil RICO case brought against the IBT. Currently, he is out of jail and based on information from law enforcement sources is the boss of the Chicago Outfit and once again active. During the “PENDORF” investigation, court-authorized wiretaps and bugs were placed on the phones and in the offices of Allen Dorfman’s insurance company and conversations involving David Dorfman, Webbe, and Lombardo were recorded. In four separate conversations, Webbe and Lombardo were the only participants. Webbe was in an additional nine conversations with Lombardo and others. David Dorfman was taped in four separate conversations with Lombardo and others, some without David’s father. One notable conversation included Webbe, David Dorfman, Lombardo, and Anthony Spilotro, who before his murder, was a capo in the Chicago Outfit and served as liaison to the Chicago Outfit’s interests in Las Vegas. 3 In 1981 Allen Dorfman, Lombardo, former IBT General President Roy Williams, and others were indicted and later convicted in the PENDORF case for their attempt to bribe U.S. Senator Howard Canon with assets from the Central States Pension Fund. Webbe was named in the indictment as an unindicted co-conspirator. Moreover, in the government‘s response to a defense motion for a bill of particulars, the government identified David Dorfman and others as “co-conspirators and co-schemers with the defendants and William E. Webbe.”4 Local 714’s continued use of Group Administrators, Ltd. (GA) was an issue that surfaced during the Project RISE field study of that local. Then Vice President James M. Hogan stated in his Project RISE interview that David Dorfman and GA have been involved with the fund as a third party administrator for “as long as I can remember.” He stated that Allen Dorfman was the fund’s previous administrator, and David Dorfman was “grandfathered-in” after his father was indicted for fiduciary violations involving the Central States Pension Fund. Similarly, William Hogan, Jr., former Principal Officer of Local 714, stated in his Project RISE interview that David Dorfman was a “carryover” from the fund’s business relationship with his father and the insurance company he owned, Amalgamated Insurance Co., but claimed not to know Webbe, Hogan, Jr. did not express any concern about doing business with Dorfman or his company. Employee Trustee Joseph Martucci was unable to provide any specifics regarding the administrative services or fees associated with Dorfman’s company and did not know the average cost to process a claim5 4 During the field study, it was pointed out to the Hogan leadership, Martucci, and Marvin Sacks, the local’s counsel, that the same service provider, GA, was found to have charged excessive fees at Local 743’s health and welfare fund. (For a discussion of issues related to Local 743, see Appendix, Tab 3.) Local 714 officials and Sacks claimed to be unaware of the matter. During the Local 714 field study, requests were made to Martucci and the fund’s counsel for documentation, such as Dorfman’s contract with the funds, to determine if some of the same arrangements that existed at Local 743 also existed at Local 714. These requests, however, were not honored. The Local 743 health and welfare fund had used Group Administrators, Ltd. as its third party administrator until it was discovered in 1995, during an IBT trusteeship of the local, that Dorfman’s company was charging excessive fees � three times the industry standard for a fund of a similar size. In 1995 the IBT trustee brought a class action suit against the employer and past union trustees. In May 2000 the lawsuit was settled when the trustees agreed to reimburse the fund. As in the case of Local 714, David Dorfman had replaced his father at the Local 743 health and welfare fund following his father’s conviction in the PENDORF case.6 Follow-up interviews were conducted several months later at Local 714 to determine what, if any, action was taken in response to the information the local had been provided concerning Dorfman’s excessive billing at Local 743. As of that time, no audit or other action had been taken by the fund fiduciaries or the local’s leadership in response to this information. Even more troubling, fund fiduciaries responded with misinformation and 5 refused to cooperate further during the Project RISE field study.7 In the case of Local 714, the GA issue, along with others, has been turned over to the IRB for investigation. 8. 2 Current Issues As discussed elsewhere (Appendix, Tab 3), in addition to Local 714, Local 743 has apparently started once again to use Group Administrators, and Local 781 has continued its longstanding relationship with the firm. (For a discussion of issues related to Local 781, see Appendix, Tab 4.) In both cases, as in the case of Local 714, there are other current issues affecting the locals that underscore the need to inquire into their relationship with GA. B. Leahy & Associates 1. Background The relationship between Leahy & Associates and Chicago area IBT locals is almost as longstanding as the Chicago locals’ and associated funds’ relationship with the Dorfman family. Both Paul (Red) Dorfman and his son, Allen, were closely associated with Jack Leahy, the father of the firm’s current principal figure, John J. Leahy. At about the same time that Allen Dorfman was being set up to process claims for the Central States Health and Welfare fund in the 1950s, the Leahy firm, through its close association with the Dorfmans, was establishing a parallel relationship to provide services for health and welfare funds not affiliated with the Central States Fund. The relationship between the Leahy firm and Joint Council 25 and its constituent locals became so close that for many years the Leahy firm occupied offices on the same floor as Joint Council 25 in Chicago’s Teamster City, located at 300 South Ashland Avenue.9 6 In 1998 a group of extras who worked in Local 714’s Movie/Trade Show Division filed a lawsuit against, among others, trustees of a Local 714 benefit fund, alleging that employer contributions were being made into the fund on their behalf, but that they were never told they were eligible for benefits. The lawsuit, which was eventually settled with a payment to the plaintiffs of more than one million dollars, alleged that Leahy & Associates had played a role in keeping the plaintiffs in the dark about their benefits.”10 The settlement agreement ending the lawsuit included a “Settlement Funding Agreement,” which recited that the insurance carrier for the fund “believes that some or all of the claims against Local 714… arose as a proximate result of the acts, errors or omissions of Leahy & Associates” and required Leahy & Associates to pay a substantial portion of the settlement.11 Recent public filings by the Local 714 Health and Welfare Fund indicate that it continues to employ Leahy & Associates.12 As of 2002, according to public filings by funds associated with Chicago area Teamster locals, Leahy & Associates was serving as a broker/agent for at least 10 Teamster affiliated benefit funds in the Chicago area.13 Confidential sources familiar with Chicago-area Teamster affairs, including the relationships between Teamster-affiliated funds and their service providers, have indicated that Leahy & Associates was known for bestowing gifts and lavish entertainment on Teamster clients, and that a number of high ranking Teamster officials in the Chicago area have compromised themselves in their relations with the Leahy firm. 7 2. Current Issues On September 25, 2003, an indictment was filed in the U.S. District Court for the Northern District of Illinois naming John J. Leahy, the president of Leahy & Associates, Inc., as a defendant along with six others, including another Leahy officer and members of the Duff family. The Duffs were considered by law enforcement authorities in the Chicago area to be linked to organized crime and have been publicly reported as such.14 The indictment’s first count charged the Duffs under the Racketeer Influenced and Corrupt Organizations Act (RICO), accusing them of operating a racketeering enterprise referred to in the indictment as the Duff Family Business Enterprise,” which consisted of a number of “inter-related entities [that] were owned, operated and controlled, in whole or in part, directly or indirectly by male members of the Duff family.”15 One of the Duff family business entities was Windy City Labor Service, Inc., which, according to the indictment, “was in the business of supplying unskilled temporary day laborers on an as needed basis principally to wholesale liquor warehouses and refuse transfer and sorting facilities.“16 Leahy and Edward Wisniewski, the other Leahy & Associates officer, were charged in counts 16 through 23 of the indictment with mail and wire fraud in furtherance of a scheme to defraud a State of Illinois agency and various insurance entities of more than “$3 million in unpaid workers’ compensation insurance premiums.” The scheme involved, among other things, falsely classifying Windy City Labor’s employees � who were in reality “temporary day laborers engaged solely in unskilled, manual labor as warehouse workers and driver’s helpers” � as “‘Clerical” or “`Labor Union” employees, which carried a lower job risk classification and consequently an insurance premium rate more than 20 times 8 lower than their actual jobs would have. The scheme also involved frustrating the efforts of insurance carriers to determine the true nature and full scope of the business activities Windy City Labor and thereby discovering the fraud. This was accomplished in part by refusing to provide auditors with complete access to financial and payroll records, accurate client lists, and other pertinent information.17 Leahy and Wisniewski, who was the vice-president of commercial insurance sales of Leahy & Associates and who served as a “representative and agent of Windy City Labor,” were charged with participating in the scheme along with James M. Duff, whose companies benefitted from it. As part of the scheme, Leahy and Wisniewski, along with Duff, were charged with submitting false applications for insurance coverage to private insurance companies, including ULICO Casualty Corporation, a subsidiary of a union‑owned company. Most of the specific acts in furtherance of the fraudulent scheme charged against Leahy and Wisniewski occurred between 1989 and 2001.18 3. Summary The recent indictment of John J. Leahy and another officer of Leahy & Associates did not involve charges stemming from the Leahy firm’s work for Teamster entities. However, the nature of the misconduct alleged in the indictment � taking part in a racketeering scheme to benefit a group that has been publicly linked to organized crime is precisely the kind of misconduct the IBT’s anti-racketeering reform program is designed to guard against. Indeed, one of the charges made in the indictment was that the Leahy officers helped defraud a union-owned insurance company. As noted above, a group of Local 714 members alleged in a civil suit that Leahy & Associates had been 9 complicit in wrongfully denying members’ benefits, and there is intelligence information to the effect that Teamster leaders in the Chicago area have entered into compromising relationships with the firm or its principals. This, coupled with the number of Teamster-related benefit funds Leahy & Associates has provided services to, and the number of unresolved issues surrounding such funds, indicates the need for a review of the Leahy firm’s relationship with Chicago-area Teamster entities to ensure that they are arm’s-length and consistent with the union’s fiduciary responsibilities. C. Thomas Havey, LLP/Legacy Professionals, Inc. Thomas Havey, LLP was the dominant accounting firm for labor unions.19 It has served numerous Teamster entities in various parts of the country, and as of 2002 was serving as the accountant for at least one dozen Teamster-affiliated benefit funds in Joint Council 25.20 In 2002 two members of the firm, one partner and one accountant, “pleaded guilty to federal criminal charges of `aiding a conspiracy’ to defraud the United States by helping union officials hide on government disclosure forms how they spent more than $1.5 million in union dues.”21 The accounting firm helped the vice-president of the ironworkers union hide his daughter’s embezzlement of over $100,000.00 from an ironworkers benefit fund. Havey’s accountant and partner hid the expenditures and failed to disclose the thefts to the fund trustees.22 In their 2002 Form 5500 filings, Chicago-area Teamster entities that had used the Havey firm reported that it had been terminated because it was no longer engaged in public accounting.23 The same locals reported as their new accounting firm Legacy 10 Professionals, Inc., a newly created firm that appears to consist of former Havey accountants from the firm’s Midwest office.24 The Havey firm has served a wide variety of clients in various parts of the country and there is no evidence to suggest that the recently exposed misconduct of certain Havey managers, which did not involve Teamster clients, was characteristic of the firm’s services generally or with respect to any particular Teamster entity that it served. The number of unresolved issues relating to Teamster entities in the Chicago area, however, and the numerous labor organization clients for which the Havey Firm (and apparently its successor) perform services point to the need for a review of the process used by Chicago Teamster entities to select auditors and accountants and why they have not surfaced some of the issues described in this report and its appendices. II OTHER SERVICE PROVIDER ISSUES A. Vendors with Possible Connections to Barred Member William Hogan Jr. Among the many allegations and issues surrounding the Teamster career of William Hogan Jr., former Joint Council 25 president and principal officer of Local 714, was that he, his family members, and close associates had interests in, or were employed by, businesses that provided goods and services to Teamster entities as well as to employers organized by Teamster locals. The scheme for which the IRB barred Hogan from the union, for example, involved attempts to favor the firm of a Hogan crony that also employed a Hogan relative. (For a discussion of Hogan’s continuing influence, see Appendix, Tab 8.) 11 Some of the firms allegedly connected to Hogan are, or in the recent past have been, service providers to Teamster entities. These include Remke Printing, which according to a confidential source, obtained Joint Council 25 business through bid-rigging when Hogan was president, and National Investment Services (NIS), which has been an investment advisor to a number of Teamster benefit funds (For a discussion of NIS, see Appendix, Tab 2, which addresses issues relating to Local 727). Because of Hogan’s barred status, ties to organized crime figures, and apparent continued influence over Chicago Teamsters, information about his ties to Teamster vendors should be pursued, including through overt investigation when appropriate. B. Spano/Life Insurance Marketing The 2002 IBT Organized Crime Report identified a benefit-related issue involving marketing efforts by a life insurance company. On June 6, 2000, the IRB advised the IBT that it had discovered an improper marketing scheme by American Income Life Insurance (AILI) that offered each local executive board member, and sometimes other local employees, $10,000.00 in free term life insurance in return for the officers’ implicit agreement to use the local’s letterhead to promote AILI to the members without disclosing the free coverage to the officers. In response to the information provided by the IRB, the IBT advised local officers of the problem and notified AILI executives.25 Investigations and intelligence-gathering activities in the Chicago area have to date produced no evidence of any repetition of the conduct that prompted the IRB’s notification in 2000, which was predicated upon undisclosed benefits offered to officers that were not offered on equal terms to members. In the Chicago area, however, another concern has 12 arisen in connection with AILI insurance marketing efforts: the role played by members of the Spano family in marketing AILI insurance products. Rona Spano, an AILI representative, has marketed insurance products to Chicago-area locals and has associated with various Teamsters in that area.26 Because of restrictions placed upon overt investigations in Chicago, we have been unable to ascertain the exact scope and nature of the services marketed to Teamster entities by Rona Spano or the nature of her other associations with Chicago Teamsters. Inquires into this subject should be made, however, because of Rona Spano’s relationship to persons with organized crime backgrounds, and because of indications that she and her husband may be under investigation by federal authorities. Rona Spano’s husband, Mark Spano, is the current president of the Central States Joint Board, an umbrella organization for certain small AFL-CIO non-Teamster locals in Chicago.27 Mark Spano’s predecessor as president of this organization was John Serpico, an associate of the Chicago Outfit who was in prison as of February 2003.28 Mark Spano’s father, Paul Spano, is a prominent member of the Chicago Outfit who, according to a published Chicago Crime Commission Chart, specialized in labor unions.29 In February 1990, Paul Spano was indicted with 20 others for conspiracy to conduct an illegal gambling business. Spano eventually pleaded guilty to the charges.30 Paul Spano’s brother, Michael A. Spano, Sr., and his son were convicted in August 2002 in a racketeering , indictment along with the Cicero town president in connection with an insurance fraud scheme.31 13 A law enforcement investigator has recently made inquiries concerning the activities of Mark and Rona Spano in connection with an apparent federal investigation. Additionally, IBT investigators have obtained information and documentation concerning an allegation about an insurance marketing scheme promoted by Mark Spano to Central States Joint Board union members, in which he advised them to contact his wife for further details. The allegation, which was apparently made by a member of one of the Central States Joint Board unions, is that Mark Spano’s promotion of his wife’s insurance products is part of a scheme designed to enrich organized crime-related businesses.29 Because of the extensive organized crime connections of members of the Spano family, their involvement of labor racketeering schemes, and current allegations centering around insurance schemes promoted by the Spanos, overt inquiries should be made concerning relationships between Teamster entities or individuals and any of the Spanos to determine whether the Spanos are involved in the Chicago Outfit’s infiltration of the Teamsters Union. III SUMMARY Issues relating to service providers usually arise in connection with specific locals and their benefit funds. Because racketeers have historically used service providers to carry out their schemes � and are continuing to do so according to intelligence sources – careful attention should also be paid to service provider relationships that involve ,multiple Teamster entities such as those described above. 14 ISSUES RELATING TO INTERNATIONAL ORGANIZER NICK M. PETRECCA Nicholas M. Petrecca, also known as Nick M. Petrecca, is a 38-year member of Teamster Local 705. He currently serves as an IBT international organizer.1 This report addresses the following issue: � Whether Nick M. Petrecca, IBT international organizer, is an organized crime associate. I. BACKGROUND Except for a two-to-three month suspension in the mid 1990s, Petrecca’s membership in the Teamsters has been continuous since approximately 1965. Petrecca was hired as an international organizer on August 1, 1999.2 In his 2001 sworn statement before the IRB, Petrecca stated barred Teamster Dane Passo spoke to the former head of organizing, International Vice President John Murphy, on Petrecca’s behalf about getting him the international organizer position. Petrecca first met Passo when Passo was a steward and Petrecca his representative at Carolina Motor Freight. Petrecca currently reports to John Farmer, director of organizing.3 Before becoming an international organizer, Petrecca was a business representative appointed by former Local 705 Principal Officer and Secretary-Treasurer Daniel Ligurotis, who was permanently barred by the IRB for embezzlement and hiring convicted felons. Local 705 was placed in trusteeship in 1993. Petrecca was terminated on December 31, 1993, by the then IBT trustee of the local.’ Petrecca returned to driving a truck, this time for Marina Trucking, but after one-to-two years could not work because of an injury. Petrecca retired in August 1998. The injury was from an altercation with former Local 705 Principal Officer Gerald Zero, who, as a result of the altercation, was eventually charged 1 by the IRB and suspended from office for one year after the IRB rejected the IBT’s three-suspension.5 II WHETHER NICK M. PETRECCA IS AN ORGANIZED CRIME ASSOCIATE A Law Enforcement Organized Crime Listings In one published law enforcement report and in numerous unpublished reports, petrecca is identified as an organized crime associate. Confidential informants provided corroboration that Petrecca is a low level associate of the Outfit. Additional investigative efforts are needed to determine whether Petrecca’s organized crime status continues today, In 1994, the Illinois Police and Sheriffs News, a publication designed to “‘educate the public on the activities of organized crime and organized crime figures,'” listed Petrecca as an associate of the 26th Street Group which at that time was headed by organized crime member James La Pietra.6 At approximately the same time, the Chicago Crime Commission developed an internal Outfit chart that was never published that also identified Petrecca as an associate of the 26th Street Group. A second unpublished Chicago Crime Commission chart developed in the mid-to-late 1990s likewise identified Petrecca.7 Independent of the Chicago Crime Commission, local law enforcement maintained charts of alleged organized crime figures. As late as January 1999, four separate charts identified Nick Petrecca as an associate of the 26th Street Crew, and two of these charts indicated that Petrecca was involved in gambling operations.’ 2 B 1984 Racketeering Indictment In 1984, Petrecca along with several known members or associates of the Chicago Outfit, including John L. Manzella, Robert Salerno, and David O’Malley, were indicted by federal government for their involvement in a RICO enterprise aimed at extorting “street tax’ payments from legal and illegal businesses in Illinois and Indiana. Petrecca was indicted for being a participant in the enterprise and specifically for an act of extortion � obtaining money the through the use of actual and threatened force and violence � that furthered the pattern of racketeering activity.9 According to the Chicago Sun-Times, vestigators labeled the defendants “middle-echelon underworld figures.”10 In a proffer of evidence by the federal government, a witness testified that “Little Nicky” picked up the “Street tax” a couple of times.11 Petrecca, however, was found not guilty while Manzella, O’Malley, and Salerno were all found guilty.12 C. Law Enforcement Sources A retired Chicago policeman with 32 years of service � the last 17 of which he spent assigned to the FBI-Chicago Police Department (CPD) Organized Crime Task Force in a sworn affidavit stated that he had received information from three confidential sources in the 1980s that Petrecca was an associate of organized crime in Chicago. These sources were corroborated by physical surveillance and various intelligence reports. Each of the sources independently stated that during the 1980s Petrecca was an “enforcer” – used by the Outfit to intimidate and inflict bodily harm on individuals who did not cooperate with their demands � “affiliated with the 26th Street/Chinatown faction of the 3 Chicago Outfit,” This law enforcement officer stated that one source added that Petrecca was involved in collecting “street taxes” with organized crime figure Robert Salerno.13 .In the late 1980s, law enforcement sources reported that Petrecca worked for a longtime collector of “street tax” for the Chicago Outfit named John Manzella. Manzella reported to Outfit associates Gerald Scarpelli and William Petrocelli. Petrecca was also described as a collector of street taxes who subsequently stopped collecting.14 One source a longtime member of the Outfit � stated that in the late 1970s through the early 1980s he was “closely affiliated” with Petrecca and numerous other Outfit members.15 Another source, described as being responsible for running street operations for the Ferriola Crew �including collecting street tax, juice payments, gambling payments and more�advised that he used Petrecca, who he described as one of “his `own people,’ as a collector.16 Scarpelli called for a meeting with this source, Petrecca, and others at which Scarpelli announced he was taking control on behalf of Ferriola. Scarpelli demoted Petrecca and the source so they would no longer be collecting.17 When deposed by the IRB in February 2001, Petrecca acknowledged that Manzella was convicted and went to prison in connection with the racketeering case in which Petrecca was indicted.18 He also explained his most recent encounters with Manzella. Petrecca testified that “we live not far from one another. So occasionally I see him, and he is coming or I’m going, or we have a cup of coffee at this one restaurant.” Petrecca had been frequenting this restaurant, previously called the “Skyview” and now called the “Midway,” located at 63rd and Cicero, for 20 years. Petrecca thought he last “ran into” Manzella at the restaurant approximately four months prior to his testimony. Petrecca 4 stated that he was walking into the restaurant and Manzella was walking out and they exchanged greetings. Their conversation lasted one-to-two minutes.19 Petrecca testified that he stopped frequenting the restaurant about four or five months before his IRB testimony because he did not “want to jeopardize [his] job for any reason.” He knew that he should not go there; the restaurant was named in the racketeering indictment in which he had been charged. He further stated, however, that nothing triggered this change. Rather, his schedule changed so he “didn’t really have the time” to go there.” All tolled, he thought he saw Manzella between 5 and 10 times in ,2000.2′ Petrecca indicated he started going to the restaurant when he was driving a truck, but went there less frequently after he stopped driving.22 In the late 1970s and early 1980s, he went to the restaurant a lot more often and saw Manzella there.23 During 2000, ;Petrecca thought he was at the restaurant about five times, saw Manzella there two or three times, and had coffee with him “a couple of times.” The same ratio existed from 1999.24 Petrecca characterized their conversations at the restaurant as “normal, everyday” exchanges like: “‘How’s your wife?’ The house. You know, stuff like that.”25 He did not tell Manzella that he worked for the IBT.26 In addition to the restaurant, Petrecca described seeing Manzella in Manzella’s garage which is located near a gas station Petrecca uses. An alley runs from the gas station to Manzella’s garage; the garage is visible from the station. Petrecca thought he saw Manzella and went down the alley to speak with him approximately three-to-five months before his IRB testimony.27 Petrecca acknowledged being inside Manzella’s home “a handful … maybe five” times, but denied being there in the year preceding his IRB 5 testimony. Petrecca’s last visit, at least a few years earlier, was for the purpose of helping Manzella carry something into his home from the garage; on prior occasions the purpose was, to see woodworking projects Manzella had undertaken. Fifteen-to-twenty years earlier, Manzella had done some woodworking on a project in Petrecca’s basement.28 Petrecca visited Manzella in the hospital when he had heart surgery in approximately 1993,29 Petrecca attended Manzella’s son’s wedding in approximately 1981 and thought his wife had invited Manzella to their daughter’s wedding, which was sometime in the early to mid 1980s.30 During this same time frame, Petrecca and Manzella attended boxing matches together.31 An FBI cooperating witness who played a central role in “Operation Silver Shovel,” a federal investigation that targeted politicians and labor officials in bribe schemes, also stated he knew Petrecca. In a 2002 interview, the informant characterized Petrecca as a “low-level Chicago `Outfit’ member.”32 A present Teamster confidentially stated that in the mid-to-late 1990s he saw Petrecca hugging Kenneth Bratko, an alleged high-level Outfit associate, in a restaurant.33 A former law enforcement source was told by a business agent that Petrecca and Dane Passo were “involved with a South Side organized crime guy named Paul Spano [and]. . . supposedly Passo and Petrecca answered to Spano.”34 In his February 2001 IRB statement, Petrecca acknowledged knowing Paul Spano, claiming the Spano family had a grocery in his old neighborhood.35 He stated that he wasn’t sure if he ever “met” Spano, but knew him from seeing him in the store. To the best of his knowledge, Petrecca never met or spoke to Spano.36 6 III. CONCLUSION Information gathered to date suggests that Petrecca may be an organized crime investigative efforts were underway to collect additional, more recent evidence support this conclusion and several recent leads have not yet been investigated. These efforts were halted on February 24, 2004, by the shutdown directive issued on that date. `Giventhe,strength of the existing evidence, we recommend that a personal representative be appointed to continue the investigation of Petrecca’s affiliation and association with the Chicago Outfit 7 ISSUES RELATING TO TEAMSTER MEMBER SYLVIA COZZO Local 743 member Sylvia Tonina Cozzo, daughter of organized crime member and barred Teamster James V. Cozzo, works at the Central States health and welfare fund. During the time of the investigation into Local 786, an issue surfaced that Sylvia Cozzo was having contacts with Chris Spina, an alleged organized crime associate and former City of Chicago employee. This report addresses only the issues that arise from contacts between Cozzo and Spina, while other issues involving Local 743 are discussed in Appendix, Tab 3. Specifically, this report focuses on: � Whether there is sufficient evidence to conclude that Chris Spina is an associate of the Chicago Outfit; and � Whether Local 743 member Sylvia Cozzo was engaged in prohibited associations with alleged organized crime associate Chris Spina. I. BACKGROUND A. Sylvia Cozzo Sylvia Cozzo has been a Local 743 member for 25 years and is the daughter of James Cozzo, who was barred from the Teamsters in 1990 for being a member of the Chicago Outfit and for associating with other organized crime members as described in Appendix, Tab 5.1 She has been a claims processor for the Central States health and welfare fund for 24 years, a position in which she is responsible for entering data relating to medical bills into the Central States’ automated payment system. Cozzo has limited authority with respect to whether a claim is paid or denied because she enters a service code along with the codes that reflect the diagnosis, lab work, and treatment. For example, if the diagnosis is a “‘[s]prained ankle,”‘ and the lab work is listed as “[p]ap 1 smear,“ then she will enter a denial of payment service code because the treatment is unrelated to the service. She testified that she cannot affect the payment made to the provider once a claim is approved.‘ Al Nelson, Central States Benefits Services Director and Sylvia Cozzo’s boss, confirmed that she had very little to no discretion in her job and must pay claims as they are brought to her. The payment is determined by the data entered into the computer about the claim.3 Cozzo was first hired by Amalgamated Insurance Agency which was headed by Allen M. Dorfman, who had close ties to the Chicago Outfit and was murdered in 1983.4 For a discussion of Allen Dorfman’s organized crime ties, see Appendix, Tab 3. Cozzo testified that she has had no contact with Allen Dorfman’s son David or her other two bosses when Amalgamated ran the business, Jimmy Dorfman and Bill Webbe, since Central States took over Amalgamated’s function.5‘ B.: Chris Spina Until May 19, 2003, Chris Spina worked in various City of Chicago departments. At one time, he was a member of Local 726 working for the Department of Streets and Sanitation. In July 2002, Spina was made a Department of Transportation supervisor. Spina was identified as a close associate of two ex-felons, Dominic Longo and John Boyle, of the Coalition for Better Government, a political action committee, discussed in Appendix, Tab 1.6 Spina’s organized crime ties are discussed below. 2 C, James Cozzo James Cozzo’s organized crime ties were well documented by the IRB in 1990. His Sylvia, however, claimed that her father was forced to leave the Teamsters for only associating with members of organized crime, with “friends or people that he knew.” She denied knowing he was removed for being an organized crime member, which she asserted was not true, and was unaware of the Teamster’s entry into the 1989 Consent Decree relating to organized crime matters.7 D. Jeff Hoff Sylvia Cozzo knows Jeff Hoff, who she characterized as “[v]ery good friends” with her sister, Rosanne, and herself.8 Jeff Hoff’s prohibited association with Cozzo’s father, James Cozzo, is also described in the appendix, Tab 5, and detailed in the June 2003 interim report (see Appendix, Tab 5, Exhibit A). II CHRIS SPINA’S ALLEGED ORGANIZED CRIME TIES A. What Constitutes an Organized Crime “Associate” In determining whether an individual is an organized crime associate, the IRB has relied upon the standard articulated by FBI Supervisory Special Agent Brian F. Taylor in his sworn statement before the IRB. Special Agent Taylor explained the standard as follows: “[Made’ members” rely on “other individuals who, though not formally inducted into the La Cosa Nostra family, assist La Cosa Nostra members in a variety of ways concerning criminal activities.” This individual is an “associate.”9 According to Agent Taylor: 3 [an] individual can become an associate of a “made” member of La Cosa Nostra in various ways. For example, an individual can become an associate through his involvement in money-making criminal activities that come to the attention of a “made“ member. An individual can also become an associate by doing a favor for a “made” member, or by havinq a favor done for him by a “made” member thereby establishing a relationship with the “made” member. Some associates have risen to positions of great influence with organized crime families because of their importance in family money-making activities. Some associates have become associated with more than one organized crime family. Only the most trusted associates are permitted to be present when “made” members of organized crime families meet10 In examining organized crime in Chicago, the Chicago Crime Commission characterized an ‘associate“ somewhat broader, noting that an associate is “any individual who does business, share profits, facilitates organized crime activities, or is made privy to intimate information regarding the activities of organized crime in Chicago.”11 B. Evidence of Spina’s Association with Organized Crime Figures Chris Spina has been identified by various sources as having ties to organized crime. Law enforcement records dating to 1992 identify Spina’s “criminal activity” as “driving for Joseph Lombardo,” who law enforcement considered to be the head of the Outfit at that time. On Sunday, April 18, 1993, law enforcement agents observed Spina driving Lombardo, who was the subject of a surveillance designed to “identify & update associates.” Spina was stopped by Chicago police officers and identified himself as working at the time for the City of Chicago Department of Streets and Sanitation. Other law enforcement sources confirm that Spina is an associate of Lombardo and has been privately identified as part of the Outfit’s Grand Ave./North Side Crew.12 4 Later, in 1993, Spina was accused of driving Lombardo while he was on “city time” and receiving overtime for it.13 Spina was fired from his Streets and Sanitation job for drivong Lombardo, but he successfully appealed his termination. One article noted that like other men with alleged links to organized-crime figures, knows how to work the system.” Spina claimed he was ‘taking a break during his work day” to drive Lombardo.14 A 1999 newspaper article reported that Spina is considered a “spy of the Clown,” referring to– Lombardo. Quoting an unnamed source, the article reported that Spina was “`always running around, sniffin’ so he could run back to the old man’ and he frequently referred to Lombardo in conversation, calling him “`the guy” or “the Clown,” trying to show that he was a ‘real insider.“15 On November 1, 2002, a political website identified Spina as “a ‘rising star’ of the Chicago Outfit’s Grand Avenue Street crew, a close confidante of ‘organized crime kingpins Joseph “The Clown” Lombardo and Joseph Andriacchi.”16 As recently as February 18, 2004, Spina was identified as an Outfit associate on local Chicago television. In an expose broadcast on Chicago’s CBS news, Spina was referred to as “the mob-connected ex-boss” of a city worker who had falsified his time sheets.17 Observations by IBT field representatives in 2003 revealed that Spina met with two organized crime members: Joseph (the Builder) Andriacchi and Albie Vena, who was identified as an associate of the North Side Crew in the Chicago Crime Commission’s 1997 chart. Andriacchi was identified on the same chart as the area boss of the North Side Crew. Today, he is considered by some to be the boss of the Chicago Outfit. A third individual � Phil Cozzo � who is the son of organized crime lieutenant James Cozzo and under indictment for racketeering and conspiracy was also present.18 5 In July 2003, Spina was observed with Northside associate Albie Vena at the Caf� Cappucino located at 1123 West Grand Avenue. Vena and Spina stood outside the restaurant until two unidentified males arrived. Vena walked around the side of the building with one of the unidentified males and engaged in conversation, after which they returned, to the front of the building and all four went inside the restaurant and occupied a rear table with other unidentified males. The Caf� Cappucino is across the street from the Grand and May Social Club, a known organized crime “operating location.” On six occasions, Spina was observed outside this social club, where numerous known organized crime members and associates frequent, including Andriacchi, Lombardo, Bratko, and Vena. 19. In September 2003, Spina met Vena outside the Grand and May Social Club and the two departed on a motorcycle with Vena driving. Spina and Vena traveled to the ‘Rosebud Cafe, 1500 West Taylor Street, where they joined Joseph Andriacchi at an outdoor table and talked for approximately one hour.20 According to a confidential source, Outfit members Lombardo and Andriacchi have hidden ownership interests in the Rosebud Caf�. Andriacchi “held court” every Friday night at the original Rosebud. On one occasion the source overheard Andriacchi berating the owner of record of the Rosebud for his expenditure of Rosebud funds.21 Spina was also observed in June 2003 entering a vehicle with Andriacchi while carrying two or three manilla envelopes, and in September 2003 eating at a sidewalk caf� with Andriacchi.22 In addition to Spina’s personal ties to Lombardo discussed above, several business connections between Lombardo and Spina were identified. Lombardo is alleged to have 6 used his local political influence to assist Spina in being hired for a project for a France-based company building decorative bus shelters throughout the city. 23 A former law enforcement officer very familiar with the Grand Avenue neighborhood reported that Spina was “an attractive investment front and operator for . . . Lombardo [and] Andriacchi because he has no arrest and/or criminal conviction history.” He claimed that Lombardo used Spina to invest in property in the Grand Avenue neighborhood that is worth millions of dollars, which Spina never could have afforded on a City salary.24 C. Conclusion Based on the foregoing, Spina satisfies the standard relied upon by the IRB for determining whether an individual is an organized crime associate. Ill. WHETHER SYLVIA COZZO KNOWINGLY ASSOCIATED WITH ORGANIZED CRIME ASSOCIATE CHRIS SPINA Given the conclusion that Spina is an organized crime associate, we now turn to whether Sylvia Cozzo engaged in prohibited association with Spina. The prohibition against knowingly associating with an organized crime member or associate has three elements: (1) whether the individual alleged to be an organized crime figure is in fact “linked” to organized crime; (2) whether the association between the accused IBT member and the organized crime figure was “`purposeful and not incidental or fleeting;’“ and (3) whether during the time period of the purposeful association the accused IBT member “knew of the organized crime ties of his associates.”25 With respect to what constitutes purposeful associations with an organized crime associate, the IRB recognized that such contacts can be “in either a business or social 7 context,” but had to be purposeful to be prohibited. For example, accidental meetings at a restaurant or incidental contacts at wakes or weddings were typically not considered prohibited contacts by the IRB.” To be prohibited, “associations need merely be `calculated‘ or `conscious choices.“27 A. Cozzo’s Contacts with Spina Sylvia Cozzo described Chris Spina as “probably one of my closest male friends,” explaining that she has “know[n] him her whole life.”28 Until he was retired from the City of Chicago in May 2003, she frequently saw him in the morning at La Roc’s restaurant where she went every morning before work.29 Cozzo stated that she has been out to dinner with Spina, been to his home, he has been to her home for dinner and to visit, they have socialized at La Roc’s frequently, and Cozzo is very good friends with Spina’s wife. Cozzo explained that they have socialized for “[m]any years” and that “there’s a lot of history there,” as their “families . . . go back years and years.“30 Spina was accused of falsifying his city pay records claiming overtime for time he had spent chauffeuring Outfit boss Joseph Lombardo.31 Cozzo was aware of the charge, but denied Spina was Lombardo’s driver. Instead, she claimed Spina had driven Lombardo around because he was a neighbor and a friend and that Spina grew up in a large, poor family and “Joe” helped Spina out over the years.32 She testified that Spina was “friends with,” not “[w]orking for” the Outfit.33 8 B. Cozzo’s Prohibited Association with Spina 1 Spina’s Link to Organized Crime The first element under the IRB test that the individual alleged to be an organized crime figure be linked to organized crime is established by the evidence presented above demonstrating Spina’s frequent contact with organized crime members, including Lombardo and Andriacchi and his driving for Lombardo. Spina’s ties to other organized crime members and associates also support this conclusion. 2. Purposeful Association The second element, that their contact be purposeful, is established by Sylvia Cozzo’s own testimony describing her close relationship with Spina and their frequent contacts spanning the last 40 years, reflecting a “conscious choice” by Cozzo to have regular contact with Spina after the 1989 Consent Decree and as recently as 2003. 3. Cozzo’s Knowledge of Spina’s Organized Crime Association With respect to the third element, whether Sylvia Cozzo knew of Spina’s status, the evidence supports the conclusion that she had in her possession all the information necessary to conclude that he was in fact an organized crime associate. Sylvia Cozzo was aware of many news stories that linked Spina with organized crime, but did not believe them.34 When questioned why, she explained that “I’ve seen stories of my father in the newspaper, and I live with my dad. And I could tell you they’re not true. That’s why I don’t believe what the newspapers tell me.“35 Media about Spina was so prevalent that Cozzo and her friends would tease Spina to “ruffle his nerves,” telling him that they knew the headlines for the next day’s newspaper and claim that Spina’s “‘name is all over it.36 9 In addressing a case when a Teamster officer claimed not to know of his friend’s organized crime status despite media coverage about it, IA Lacey stated that, “‘[i]n the absence of direct evidence of knowledge of the organized ties of an associate, . . such knowledge may be inferred from the duration and quality of the association.“’37 In that case, the evidence demonstrated that IBT official Theodore R. “Cozza and [organized crime associate] LaRocca were frequent companions and would visit each other regularly.”‘ Sylvia Cozzo’s contacts with Spina, which she candidly acknowledged, are likewise frequent, regular, and purposeful. They consisted of sometimes daily interactions and social contacts that span 40 years. When asked if she had heard of the Consent Decree, she responded that she had not. When asked if she had heard that Teamsters were prohibited from associating with members of organized crime, she responded, “No. I was not aware of that,” but next added, “[w]ell, maybe I never really paid attention to it is, I guess, what I’m going to say.” Cozzo went on to explain: ” I grew up for 40 years … to tell me, ‘You cannot talk to him no more,’ I find that a little crazy. A lot of these papers claim that the people are associated with organized crime. . . . [T]o cut a friendship that I’ve had with people for 40 years, my family, I find that a little difficult. I mean, if that’s what you’re expecting from me.”39 IV. SUMMARY In light of the foregoing, we recommend the filing of charges against Local 743 member Sylvia Cozzo for violating the IBT Constitution’s prohibition against knowingly associating with an organized crime associate. 10 Illinois Police and Sheriff’s News � 1999-2005 All Rights reserved Not for web publication on the internet without specific written permission.
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