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Latest News - September 2011

September 8, 2011
Strip-Club Bills Paid With Union Cash as Corruption Cases Rise
Source: Bloomberg
By: Stephaine Armour

Shawn Clark, a New Jersey carpenters’ union officer, used his local’s credit card to run up $50,000 in bills over seven years at Double D’s, a Morristown strip club, according to an indictment. Now he’s in prison for 28 months.

Clark, 46, is among an increasing number of U.S. union officials and members accused of stealing from organized labor to feed gambling habits, buy jewelry and show horses or pay personal bills, a review of U.S. Labor Department reports by Bloomberg Government found. Convictions of union leaders and staff on embezzlement and related criminal charges in fiscal 2010 were the most since 2006, the review showed.

The department’s investigations led to convictions of 130 union members and staff in the year that ended Sept. 30, up from 121 in 2009 and the highest since 133 in 2006, according to agency data on federal and state prosecutions. The government won cases against 1,608 union members from fiscal 1998 through last year, an annual average of 123.

“Corruption and misuse of union funds has been a significant issue for labor,” Harley Shaiken, a labor-relations professor at the University of California at Berkeley, said in an interview. “It has a big impact because it’s corrosive to the confidence people have. Unions don’t want to be tarred by that.”

The money stolen was as much as $500,000 in an extortion case involving the pension-fund administrator of a New York City bus drivers’ union who was its former president and more than $400,000 embezzled by the president of a union in Puerto Rico, according to a Labor Department report this year. The average for the 128 cases reviewed by Bloomberg Government was about $53,000.

Casinos, Laptops

Union funds were spent at casinos and strip clubs, used to buy home-entertainment systems or laptop computers and pay personal bills, prosecutors said in federal court records.

Convictions for embezzlement and related criminal violations led to about $105 million in restitution in the past 10 years, the Labor Department reported last year. Since fiscal 2007, union officials and staff have been ordered to pay about $30 million for financial crimes.

“We’re talking about lots and lots of money they can play hanky-panky with” from union dues, Representative Phil Roe, a Tennessee Republican and chairman of a House Education and the Workforce Committee panel on health, employment, labor and pensions, said in an interview. “More oversight needs to be done, absolutely. Without oversight, the temptation to misuse funds is there.”

Legislation may be needed to strengthen financial reporting requirements for unions, Roe said, without providing specifics.

Pales Against Madoff

Union organizations such as the AFL-CIO, the nation’s largest labor federation, say embezzlement isn’t rampant and new laws aren’t necessary. Financial crimes by union leaders are a fraction of the fraud by Bernard L. Madoff, said Josh Goldstein, a spokesman for the Washington-based AFL-CIO. Madoff, 73, is serving a 150-year sentence for defrauding investors of an estimated $19 billion.

“Unions are diligent in protecting these things from happening,” Goldstein said in an interview. “Look at embezzlement cases like Bernie Madoff. The percentage for unions, if you compare to Wall Street, pales in comparison.”

Union officials and employees sentenced to detention for financial crimes spent an average of more than 12 months in prison or home confinement, according to the review of 128 cases from January 2010 through last month in which they pleaded guilty or were sentenced for crimes such as embezzlement and theft. Other sentences ordered probation and restitution.

Presidents, Treasurers

About eight in 10 of those convicted were presidents of locals or treasurers with responsibility to safeguard union funds. Union members pleaded guilty or were convicted of crimes involving more than $6.5 million in the cases reviewed.

Financial corruption has bedeviled unions for decades, culminating in the 1967 jailing of Jimmy Hoffa, president of the 2.5 million-member International Brotherhood of Teamsters, who was convicted of fraud and bribery. After his release, Hoffa disappeared in 1975 near Detroit. Under Hoffa, the union’s Central States Pension Fund made loans to Las Vegas casinos with ties to organized crime, prosecutors said.

The Teamsters pension fund has been under a 1982 consent decree that requires it to be monitored by the Labor Department, according to the agency.

Corruption remains a public-relations challenge for unions, Shaiken said. Its persistence may make it difficult for unions to fight efforts by Republican governors to rein in the collective-bargaining power of public workers, he said.

Gambling Debts

Among recent cases, James Drury, a secretary-treasurer of Communications Workers of America, Local 3121, in Hialeah, Florida, embezzled more than $300,000, according to U.S. District Court records. He was sentenced in March to two years in prison.

Thomas Pokrywczynski, who pleaded guilty to embezzling from a union of bus drivers in Buffalo, New York, spent more than $200,000 on gambling, according to court records. He was sentenced in August 2010 to two years in prison.

Melissa King, a benefits-fund administrator hired by a New York City union of workers who dig tunnels, was charged in 2010 with embezzling more than $40 million from 2002 through 2008, according to an indictment filed by the U.S. Attorney for the Southern District of New York. She pleaded not guilty.

A company she controlled, King Care LLC, managed the benefits program for the 1,000-member Laborers’ International Union of North America, Local 147, known as the Sandhogs, according to the indictment. Prosecutors said she transferred millions of dollars to her company in seven years.

Jewelry, Clothing

She spent $300,000 at Neiman Marcus on women’s clothes, $1 million for jewelry and watches at a Newport Beach, California, store, $5 million on show horses and $7 million for American Express bills, according to the indictment.

Her federal trial is scheduled for Nov. 9 in New York, Carly Sullivan, a spokeswoman for the U.S. Attorney’s office in the Southern District of New York, said in an interview. Michael Handwerker, a lawyer representing King, didn’t return a call seeking comment.

Clark was business manager for the International Brotherhood of Carpenters and Joiners, Local 455, in Somerville, New Jersey. He used the group’s American Express Co. credit card from 2000 through 2007 to bill charges at 14 strip clubs, the government said. A federal jury convicted Clark in 2010 for embezzling about $85,000 in union funds.



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