Senate bill introduced to combat union corruption

August 12, 2014

Carl Horowitz Carl Horowitz

Dr. Carl Horowitz is director of the National Legal and Policy Center’s Organized Labor Accountability Project.

WASHINGTON, D.C. – If sunshine is the best antidote to corruption, then Senator John Thune, R-S.D., must be opening a lot of windows.

ThuneLast Wednesday, July 30, Sen. Thune (pictured right) unveiled the Union Transparency and Accountability Act (S. 2688), a measure that would require greater transparency in the information labor organizations report to the Department of Labor. The bill would improve detection of misuse of funds, especially by union officials and benefit fund trustees. Thune explained his discontent over President Obama’s approach: “I hope my colleagues join me in supporting my bill to put an end to the administration’s political favoritism and restore transparency to union finances. Union members deserve to know how their dues are being spent.” The legislation effectively would restore three finalized rules shelved by the DOL in 2009.

To understand how this proposal came about, it is necessary to go back to the early months of the Obama administration. Then-Labor Secretary Hilda Solis, a former four-term Democratic U.S. representative from Southern California, was cut from a different cloth than her Bush-era predecessor, Elaine Chao. Solis was and remains an unabashed union partisan. She had been a co-sponsor of the misnamed and never-passed Employee Free Choice Act, which would have forced private-sector employers to recognize a union as a collective bargaining agent if that union had generated a majority of pledge card signatures indicating a willingness to join. This mandatory “card check” feature would have rendered the secret ballot election virtually irrelevant. AFL-CIO President John Sweeney, knowing an ally when he saw one, commented upon her nomination: “We’re confident that she will return to the Labor Department one of its core missions – to defend workers’ rights in our nation’s workplaces…She’s voted with working men and women 97 percent of the time.” Unions were more than talk when it came to supporting her runs for Congress. According to the Center for Responsive Politics, labor organizations had donated a combined more than $900,000.

Her nomination approved by the Senate, Secretary Solis proceeded to hire heavily from organized labor for top DOL positions. Her deputy solicitor, Deborah Greenfield, for example, had been an attorney for the AFL-CIO. T. Michael Kerr, the new assistant secretary for administration and management, had headed financial operations at the Service Employees International Union. And DOL Senior Counselor Irasema Garza had been director of women’s rights for the American Federation of State, County and Municipal Employees (AFSCME). Unions knew they had a friend. And from Solis’ standpoint, it was never too early to deliver. Shortly after taking office, Solis and her staff pulled back on three finalized Bush-era rule changes that would have enabled the department to identify union corruption more easily. First, the department rescinded a revised Form LM-30 to require union officials and business agents to disclose more information about possible conflicts of interest. Second, it rescinded a somewhat expanded Form LM-2, the standard reporting form used by large unions. And third, it cancelled Form T-1, which was designed to uncover abuses of union trusts, such as health plans, retirement plans and training funds.

These decisions may have contributed to various union scandals in the ensuing years. The rollback was a political IOU to unions as a whole and International Union of Operating Engineers Local 12 in particular; a civil RICO suit filed this January by union dissenters alleges that the bosses of that Southern California union provided Solis with free air travel to and from her Senate confirmation hearings. Federal law requires all members of Congress – Hilda Solis was still a member at the time – to disclose such gratuities. The case underscores the pitfalls of a labor secretary getting cozy with union benefactors. The best that can be said of Solis, who left office in January 2013, is that she appears as a beacon of impartiality and wisdom compared to current Labor Secretary Thomas Perez. More than ever, the shelved Labor Department transparency rules appear in need of revival.

Senator John Thune, as much as anyone on Capitol Hill, believes such a reversal is overdue. His bill, the Union Transparency and Accountability Act, which has attracted Senator Lamar Alexander, R-Tenn., as a co-sponsor, would require union officials to furnish more detail in their annual financial statements to the Labor Department’s Office of Labor-Management Standards. In his press release, Thune declared:

In 1959, Congress passed the Labor-Management Reporting and Disclosure Act (LMRDA) in response to union corruption. Despite the LMRDA, union continued to use trust funds to grant loans on generous terms to union officers, pay salaries to union officers’ family members, and hide spending on political and promotional activities from members. To combat union leader corruption, the Labor Department finalized three rules requiring unions to report financial information. Unfortunately, upon taking office, the Obama Labor Department rolled back these reporting requirements, once again opening up union trusts as mechanisms to hide corrupt financial transactions.

Thune noted the irony of the regulatory rollback given that President Obama had vowed early on to create “the most transparent administration in history.” The repeal of these three provisions, he argued, were acts of political gamesmanship rather than of concern for rank and file union members.

One likely consequence of the current administration’s 2009 cancellation of the rules has been the proliferation of so-called ‘worker centers.’ These nonunion organizations, which mimic the behavior of unions without having to abide by federal labor laws, serve as useful union fronts, especially for picketing and organizing. That’s why unions have been busy establishing and funding them. And the money is hardly insubstantial, notes Ryan Williams, senior adviser to the Washington, D.C.-based Worker Center Watch. “Since the Obama administration repealed financial disclosure requirements,” he observes, “tens, if not hundreds, of millions of dollars have been funneled into worker centers and union front groups across the country.”

The U.S. Department of Labor is a bureaucracy. Like all bureaucracies, its job is to establish and enforce rules. While mandating transparency has its inherent limits, union corruption remains very real and pervasive in this country. It is true that the ties between labor officials and the criminal underworld have lessened markedly, the result of diligent investigations and prosecutions. Yet officials, office employees and business agents across a wide range of unions continue to divert sizable sums of money to their personal use. They are accomplishing this because they have been able to fly under the oversight radar. Restoring finalized Bush-era transparency rules will cost union officials a little extra in their legal and accounting bills. But the cost of inaction would be a lot higher, not only in dollars, but in lost credibility for labor unions as an institution. Senator Thune’s bill, at once tough-minded and averse to overkill, is the right approach to a situation that didn’t have to occur.

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