Protest Decisions

IN RE: TOM LEEDHAM RANK AND FILE POWER SLATE,
Protest Decision 2001 EAD 415
Issued: July 30, 2001
OEA Case No. PR111502NA

(See also Election Appeals Master decision 01 EAM 86)

The Tom Leedham Rank and File Power slate (the "Leedham slate") filed the above-captioned pre-election protest pursuant to Article XIII, Section 2(b) of the Rules for the 2000-2001 IBT International Union Delegate and Officer Election ("Rules"). It alleges violations of the campaign finance provisions of the Rules in the solicitation and reporting of Hoffa Unity slate legal and accounting fund contributions related to WebGalaxy enterprise vendors to the IBT. Other allegations raised in this protest were the subject of our earlier decision in Leedham Slate, 2001 EAD 302 (April 12, 2001).

Election Administrator representatives Bruce Dubinsky and William W. Thompson II investigated the protest allegations.

In March 2001, while we were nearing completion of the protest investigation that resulted in our decision in 2001 EAD 302, supra, Michael Schaffer, a principal in WebGalaxy, Inc. ("WG") approached our office with allegations concerning the existence of an arrangement whereby favorable consideration was to be given to WG, which was then attempting to secure a business arrangement with the IBT for the provision of a web portal service, in return for the solicitation of legal and accounting fund contributions to the Hoffa Unity slate (the "Hoffa slate"). In response, we began an investigation focused on this claim, in order to determine whether such a quid pro quo arrangement was agreed to or whether resources of the IBT were used to secure contributions for the Hoffa slate.

During the course of our investigation, our investigators have interviewed a number of witnesses, including General President Hoffa, General Secretary-Treasurer Keegel, IBT General Counsel Patrick Szymanski, various staff members of the IBT, various paid IBT consultants, including Richard Leebove and Greg Tarpinian, individuals involved in the WG enterprise, including John Irvine, Thomas McNutt, Michael Schaffer, Lawrence Schaffer, and other individuals. Our investigation concluded on July 17, 2001 with our interview of attorneys Thomas Boggs and Joseph Passaic of the firm of Patton Boggs LLP.

As we describe below, we have not found facts sufficient to establish that there was an agreement to trade favorable consideration of WG's business efforts for the solicitation of Hoffa slate legal and accounting contributions. However, we do find that there was a misuse of union resources by IBT consultant Richard Leebove who, while dealing with WG agents as an agent of the IBT and concerning union business, endorsed the idea of a legal and accounting fundraiser for the Hoffa slate to be sponsored by those agents. Further, we have found that Leebove and the law firm Baptiste & Wilder have provided uncompensated services to the Hoffa campaign related to that fundraiser, despite their status as employers. We further find below that these actions violated Section 401(g) of the LMRDA, and thus Article XII of the Rules, and were accompanied by violations of the reporting provisions of Article XI of the Rules. Because of these findings, and for the reasons explained below, we have ordered that Leebove be suspended from any work on behalf of the Hoffa slate for 28 days, and have also ordered monetary relief.

Findings of Fact

A. The WebGalaxy enterprise. WG is a publicly held company with stock traded on the over-the-counter market. In early 1999, WG announced that it was in the process of launching a new "affinity" web portal service[1]to the labor movement, in partnership with Affinity Telesystems, Inc. ("ATI"), a closely held corporation. ATI would be the marketing agent to various labor organizations. Thomas R. McNutt and John Irvine, both principals of ATI, were named as directors and executive vice presidents of WG. Irvine had gotten to know McNutt during previous efforts to market other products to various labor unions through ATI. McNutt had been an active United Food and Commercial Workers union official in the Washington, D.C. area until his retirement from that union in 1997, and was brought into ATI by Irvine to help gain access to labor leaders.

Lawrence and Michael Schaffer controlled WG. They had been urged by investors to join forces with ATI. The arrangement that WG and ATI were marketing to labor unions involved payment of a monthly royalty to union partners for each union member purchaser of the web portal service. WG named a labor "Advisory Board" of labor union associated individuals as part of its marketing strategy.

On March 9, 1999, WG issued a press release announcing that it had signed a letter of intent for the provision of union member web portal services with the Laborers International Union and that it had earlier signed a similar letter of intent with three other international unions. The press release announced that WG was "introducing United Labor OnLine (ULOL) in the first half of 1999," which it characterized as "a combination of online services all meant to support and enhance the collective communication, buying, social and political power of Unions and their members." The press release stated that because of the foregoing WG was "positioned to become the leading Internet Service Provider, web site designer, host and web site destination for labor Unions, labor Union members and their families in the United States and Canada."

Beginning in early 1999, WG was also attempting to secure an overall web portal arrangement with the AFL-CIO. It retained what it referred to in a June 1999 letter to AFL-CIO President John Sweeney as a "WebGalaxy team of professional advisors includ[ing] Patton Boggs, Legal Counsel, Thomas Havey Company, Accountants, Concept Foundry and Kamber Group, for Public Relations and media services."

This activity was taking place at a time of a significant run-up in market capitalization and stock prices of internet related firms, and in that environment, reports by an internet company of positive business news often caused significant increases in value of the firm's shares. WebGalaxy's shares grew in value from below $2.00 a share in July 1998 to nearly $8.00 in July 1999. McNutt and Irvine stood to benefit greatly from increases in the value of WG shares, since documents obtained from WG indicate that McNutt and Irvine had received 40,000 and 240,000 shares of WG stock during 1999.

B. The May 1999 IBT-WebGalaxy meetings and the genesis of the Hoffa legal and accounting fundraiser. Part of McNutt's and Irvine's web portal marketing effort focused on the IBT. Tarpinian and Leebove[2] had been engaged by the IBT in April 1999, shortly after the start of the current Hoffa administration, as consultants to the IBT to help in the transition, and to take the lead on certain strategic issues confronting the union. Tarpinian and Leebove have known each other for many years, and have collaborated before. Among the issues they were asked to work on was the effort by the new administration to enhance the IBT's website, and expand opportunities for the union to obtain new sources of revenue not based on dues or membership fees.

According to Leebove, he met McNutt and Irvine as a result of a request by General President James P. Hoffa or General Secretary-Treasurer C. Thomas Keegel that he look into the WG-ATI web portal proposition. The first meeting with WG representatives shown on Leebove's hourly bills for his IBT consulting work is May 12, 1999 in Washington, DC. Tarpinian's bills show a one and one-half hour meeting with WG representatives on that date. A second meeting on both sets of bills is shown for May 20, 2001, lasting for two hours, according to Tarpinian's bill.

During the May 1999 meetings, the participants talked about the web portal concept and the WG-ATI effort in particular. We find that it was during one of these two meetings that the idea of McNutt conducting a Hoffa campaign legal and accounting fundraiser was first raised, an idea that ultimately resulted in such a fundraiser being held on September 21, 1999 in Washington, D.C. A number of witnesses have at least some recollection of the May 1999 meetings. Their respective recollections follow.

1. Irvine. Irvine recalled that the initial contact with the incoming Hoffa transition team was with Barbara Krancer, a niece of Hoffa. Until June 1999 she was assigned to the IBT's communications department with the title of website coordinator. Irvine says he took a call from Krancer, who stated that she had "heard about us," and that the IBT was looking for a web portal provider. Irvine says that he responded by arranging a meeting with Krancer. According to Irvine, when he and McNutt met with her for the first time at the IBT in early 1999, Leebove attended, and at some point Tarpinian joined the group, with all going to lunch at a hotel near the IBT building. Krancer left the luncheon "early" to return to the IBT. The other participants continued their discussion of the web portal idea.

Irvine says that at this meeting Leebove and Tarpinian were very interested in the WG-ATI pitch, and made it clear to McNutt and Irvine that any deal with the IBT would be brokered through them alone, and that without their approval "nothing would happen." Irvine also says that Leebove and Tarpinian expressed their desire to avoid accepting a web portal arrangement that they understood was being developed by the AFL-CIO.

As Irvine recalls, during the meeting McNutt said something to the effect that "we" would "like to help" General President Hoffa. According to Irvine, Leebove and/or Tarpinian replied to the effect that "the legal and accounting fund has a deficit, it would really be helpful if you could help with that."[3]  This conversation continued, according to Irvine, and when he and McNutt left the meeting he claims they thought that providing the web portal for the IBT was "practically a done deal," since Leebove and Tarpinian were the decision makers, and had responded extremely positively.

2. McNutt. In our investigator's initial interview with McNutt, he recalled that some time during summer 1999, Leebove suggested the idea of McNutt's holding a fundraiser for the Hoffa legal and accounting fund. Leebove told him that "Hoffa had debts for legal and accounting expenses and that it would be very helpful if you could help raise money for this." McNutt says he agreed, since he "would have done anything to help Jim." McNutt does not claim that any explicit connection was stated between any fundraising efforts on his part and the enhancement of WG's chance of doing business with the IBT.

In a subsequent interview, McNutt claimed that the idea was raised during a luncheon at a small hotel around the corner from IBT headquarters, at which he recalls the presence of Tarpinian, Leebove, Irvine and Krancer. According to McNutt, after Krancer left Tarpinian and Leebove were discussing the government's oversight of the IBT. He recalls that following this a discussion began of Hoffa's intent to run for re-election and the need for money for that bid. The idea of the fundraiser was his idea to the best of his recollection, but it was an idea that was quickly endorsed by Leebove.

3. Tarpinian. Tarpinian is the President of LRA Consulting and Executive Director of the Labor Research Association. The IBT hired him on April 29, 1999 to do strategic research and communications work. He described his task as two-fold: help the IBT redo its website and develop new non-dues revenue sources. His contact at the IBT on the web portal issue was Carlow Scalf, rather than Hoffa. He also had some communications with Keegel.

He has no specific recollection of the May 12, 1999 meeting with WebGalaxy representatives, which he described as introductory. He says that someone had directed McNutt and Irvine to meet with him and Leebove. He also has limited recollection of the May 20, 1999 meeting, although it is reflected on his bills. He remembers two lawyers from Patton Boggs being present.

Tarpinian does recall the subject of a Hoffa slate fundraiser coming up at one of these meetings with McNutt and Irvine. His recollection is that McNutt stated that he wanted to do something to help welcome Hoffa to the D.C. area and that he understood that Hoffa had a campaign deficit and would like to help retire it. Tarpinian says that in response Leebove told McNutt that he should contact the campaign's attorneys and may have identified either General Counsel Szymanski or attorney Brad Raymond. Tarpinian says he was scrupulous in avoiding any campaign discussions. He says that he considered the September 21, 1999 fundraiser to be a McNutt fundraiser, not a WebGalaxy fundraiser. He does not, however, dispute that the idea of the fundraiser surfaced during a meeting convened to discuss a business arrangement between WG and the IBT.

4. Leebove. Leebove did not recall the content of the May 12, 1999 meeting. He does recall the events of May 20, 1999, stating that the discussions centered on WebGalaxy's request for a letter of intent for the web portal business from the IBT. Leebove says that he indicated that the IBT would review what WebGalaxy was presenting and go to Szymanski and the General Secretary-Treasurer's office, and that if it met their criteria, it could go forward. He recalls the presence of two lawyers at the meeting, which is consistent with the testimony of WebGalaxy attorney Passaic. Leebove's billing records for May 20, 1999 state "5/20/99 Washington, D.C. Plans to rebuild IBT finances and strike fund (Meeting with Tom McNutt - Web Galaxy; review proposals)." He states that his arrangement with the IBT provided that he would be paid $125 an hour for 8 hours (or $1000 per day) for consulting work in D.C., and that while in D.C., he was the IBT's for the day.

Leebove further says that at the end of the meeting, McNutt said something to the effect that he wanted to help Jim Hoffa and introduce him to the Washington community, since Hoffa had gotten the short end of the stick from the AFL-CIO. Leebove says that McNutt suggested a fundraiser to help retire Hoffa campaign debt or whatever else would be appropriate with funds to be raised. Leebove says he responded by telling McNutt that if he wanted to do something for Hoffa, he should get in touch with his campaign's lawyers, who would know the rules regarding such fundraising. Leebove says that he wanted to make the point with McNutt that what McNutt was proposing was not the normal kind of fundraising, and that there were special rules that had to be followed. He also told us that he was very careful in dealing with this issue with McNutt because of the prior remedy imposed against him by Election Officer Cherkasky. See Carey Slate, supra, PR35, pp. 65-89 (May 15, 1998). Leebove says that he may have mentioned Raymond and given his phone number to McNutt or in the alternative may have mentioned attorney Robert Baptiste's name to him (assuming that McNutt had his phone number). As we will discuss below, Leebove took further actions to facilitate the fundraiser, which was ultimately held four months later, on September 21, 1999.

5. Boggs/Passaic/Curto. According to Boggs and Passaic, the person at Patton Boggs with the most involvement with WG was Passaic, as well as attorney Curto. Patton Boggs was retained by WG in January 1999, and the main client representatives with whom the firm dealt were Irvine and McNutt. The firm's attorneys state that the scope of the representation was limited to general corporate work, largely securities matters. Passaic reported that the firm was not involved in the negotiation of letters of intent with labor unions. However, both Passaic and Boggs admitted that following the commencement of the Hoffa administration they tried to develop a relationship with Hoffa in order to get IBT business.

Passaic confirmed that he and Curto (but not Boggs) were included in what he characterized as a "get acquainted" luncheon with Leebove and Tarpinian near IBT headquarters in mid-May 1999. He says that McNutt, who also attended, arranged the lunch. He did not mention Irvine as an attendee. Passaic recalls some mention of fundraising for Hoffa's "defense fund" during the lunch, but could not recall any specifics. He also recalls that during the same luncheon meeting there was a discussion between the IBT consultants and McNutt concerning the IBT and web portal business, again without recalling any specifics. From Passaic's perspective, the luncheon was mainly a chance for him to get acquainted with IBT consultants Leebove and Tarpinian. He told our investigator that both WG and Patton Boggs stood to gain from developing a relationship with the IBT's new administration.

6. Findings concerning the May discussions. There is insufficient evidence of the existence of an agreement between WG's representatives (McNutt and Irvine) and the IBT's representatives (Leebove and Tarpinian) that WG would gain more favorable consideration from the Hoffa IBT administration in return for McNutt's efforts to raise funds for candidate Hoffa's legal and accounting funds. We thus reject the claim made by Michael Schaffer that such a quid pro quo agreement or understanding was reached. We do so for two reasons. First, Schaffer was not a participant in either of the May 1999 meetings, so his claim is hearsay. Second, none of the attendees at these meetings recalls any such explicit linkage being made between WG's efforts to do business with the IBT and the planning of a fundraiser for the Hoffa campaign.

Instead, we find that several statements related to the Schaffer allegation were made during one of the May 1999 meetings. First, we accept the testimony of Irvine, corroborated by Leebove and Tarpinian, that McNutt told IBT representatives Leebove and Tarpinian that he would like do something to help Hoffa. We also credit Leebove and Tarpinian in their claim that it was McNutt who first raised the idea of McNutt trying to raise funds for Hoffa's campaign, although we find this a close call, given McNutt's shifting position and the recollection of Irvine to the contrary. However, we also find that, as McNutt told our investigator, Leebove readily endorsed the idea of a fundraiser. We also find that it was Leebove, rather than McNutt, who first spoke of the Hoffa campaign having a legal and accounting deficit and suggested that a fundraiser would help with that issue. We do so based on the testimony of McNutt as well as Irvine, who credibly pointed out that neither he or McNutt were in any position in May 1999 to know about the financial status of the Hoffa campaign's legal and accounting fund. We find that Leebove also responded to the suggestion of a fundraiser by telling McNutt to contact either Szymanski or Raymond. Finally, at no time did Leebove tell McNutt or Irvine that WG's chance of doing business with the IBT would not be affected by whatever fundraising they might or might not undertake on behalf of the Hoffa campaign legal and accounting fund, and did not tell McNutt or Irvine that the subject of campaign fundraising was not an appropriate matter for discussion in a meeting convened for the purpose of conducting official IBT business.

Events following the May meetings.

1. The IBT-WG letter of intent. After the May meetings, WebGalaxy's business arrangements with the IBT developed in a positive manner. McNutt was at IBT headquarters, according to its visitor's log, on June 15-17, l999 "to see Leebove and Scalf."[4] A letter of intent was drafted by WG, delivered to the IBT, and edited and approved by IBT General Counsel Szymanski around this time, with final execution by the General Secretary-Treasurer taking place on June 21, 1999. On June 18, 1999, while versions of the letter of intent were still being drafted, a press release was issued by WG stating:

WebGalaxy Director Tom McNutt says, 'The agreement reached with WebGalaxy to provide Internet portal services to Teamster members and their families is another example of the steps President James Hoffa is taking to restore 'Teamster Power'. . . ."

According to Irvine, the press release was reviewed and approved by Leebove before it was issued.[5]

The letter of intent provided that the parties (IBT and WG) "will seek to jointly develop an Internet access program including an Internet Portal Site for the IBT, its affiliates and members." It also set a $14.95 per month cap on member subscription charges for the service and provided that the "IBT will receive a royalty on all subscriptions received by WebGalaxy from all IBT members and affiliates. The royalty will be $1.00 per IBT subscriber per month." It was effective by its terms on June 17, 1999 and provided for its termination by either written agreement by the parties, rejection by the IBT, or the execution of a final agreement by the parties. It required WG to "submit a complete proposal to IBT not later than three (3) months after the Effective Date."[6]

2. Further meetings on the web portal project. On July 27, 1999, a 75-minute meeting took place between Tarpinian and the WG-ATI principals at the IBT. According to Tarpinian, the parties discussed details of the tentative agreement such as what kind of computer would be offered at a discount to IBT members who joined the affinity portal offering, as well as the fact that the WG-ATI website was still not "up." Both Tarpinian and Leebove claim that during this period, they made it clear to McNutt and Irvine that they were only "advance men" regarding this issue, and that there still remained a "due diligence" process facing WG-ATI before any agreement could be made. McNutt and Irvine just as strongly state that the consultants continued to discuss the "details" of an agreement that they maintain had already been reached in principle.

It was not until late summer 1999 that an informal committee was put together to review WG's web portal bid, as well as a bid from a competing group that had not signed a letter of intent with the IBT and that was supported by the AFL-CIO. That committee included attorneys Grossman and Delancey of Dickstein Shapiro, Clare Greenwald of the IBT Communications Department, General Secretary-Treasurer Keegel and his assistant Dick Lyter, Ed Dellinger and Baker Killam of the Information Systems Department, and the two outside consultants: Greg Tarpinian and Rich Leebove. This group met several times in the fall and winter of 1999-2000.

According to Szymanski early in the bidding process the WG bid was viewed much more favorably than the AFL-CIO effort because it was far more lucrative to the IBT, and did not require the IBT to become further enmeshed with the AFL-CIO in its public relations and member communications program. As he explained, as time went on, the technical capabilities and financial backing of the WG group became more and more of a concern.

In addition, Tarpinian accepted an appointment to the WebGalaxy Advisory Board, as described in a confidentiality agreement Tarpinian signed on or about September 9, 1999 along with John Irvine for WG. Tarpinian attended a meeting of the advisory board on September 9, 1999.

3. Arrangements for the fundraiser. During summer 1999, the fundraising effort first discussed in May by McNutt and Leebove was also proceeding apace. Leebove agrees that the fundraiser was "going forward" as of June or July, and says that he was aware of "discussions among the lawyers" about that subject with McNutt. Both Tarpinian and Leebove agree that there were a number of undocumented conversations and phone calls with the WG principals about the web portal deal throughout the period between May 12 and the early fall of 1999. There is, however, also no question that Leebove and McNutt communicated during this period about the fundraiser.

According to McNutt, the coordination and logistics for the fundraiser were handled by Leebove and Baptiste & Wilder, with additional advice from attorney Brad Raymond. McNutt, however, made the initial arrangements with the Washington Court Hotel in Washington, D.C., as the venue for the fundraiser, the date of which was established as September 21, 1999. The first contact with the hotel appears to have been made on August 3, 1999 by McNutt's secretary, according to a booking sheet from the hotel.

Cheryl Olney, McNutt and Irvine's secretary at ATI, worked on the day-to-day details of setting up the fundraiser, but she stated that everything had to be "approved" by Leebove. McNutt also stated that Leebove controlled the coordination and logistics for the fundraiser.

For example, on August 6, 1999 Olney received a fax from Detroit containing an announcement for an earlier legal and accounting fundraiser held in Detroit in April 1999. On August 11, 1999, McNutt faxed Leebove a draft of the fundraiser invitation materials. His note to Leebove on the cover sheet said, "Draft for ok, Tom McNutt." Leebove in turn faxed these materials to Raymond, with a note on the same cover sheet McNutt had used saying, "Brad, please review." Raymond states he is unsure if he spoke with Leebove about this fax. Nevertheless, Raymond states he did review the draft invitation as requested. He states that he deleted reference in the draft to McNutt and another person as chairs of the event, to avoid the appearance of sponsorship of the fundraiser by non-members. He deleted reference to McNutt in the draft RSVP for the same reason. Raymond says that he conveyed his views as reflected in the edits to either Szymanski or McNutt. He recalls no communication about the draft with Leebove. On August 12, 1999, McNutt faxed a draft to DeLancey Printing.

On August 16, 1999, McNutt sent a three-page fax to DeLancey Printing with the message, "Attached is the final invitation for James Hoffa reception. Please fax me typeset copy before printing. Please run 250 invitations/rsvp cards. Matching envelopes, with return address: Baptiste & Wilder, 1150 Connecticut Avenue, NW, Washington, DC 20036." DeLancey faxed proofs to McNutt later that day.

On August 17, 1999, at 1:06 p.m., McNutt sent a five-page fax to Leebove with a note stating, "Please sign off on attached final proof. Please advise immediately, as I'd like to mail invitations ASAP. Thanks, Tom." Within the hour, DeLancey sent McNutt another proof. Another fax was sent to Raymond on August 19, 1999, this time from DeLancey Printing. The instructions on the fax cover sheet say: "please fax back your signature and any changes a.s.a.p." Raymond did as requested, deleting the word "President" in the header "The Friends of President James P. Hoffa" and elsewhere. From the August 11, 1999 version of the invitation materials Raymond had reviewed, other changes had been made. For example, the statement in the earlier draft that "All contributions will be used to retire the Hoffa Legal and Accounting Fund Financial Obligations" had been changed to "All contributions for Hoffa 2001 Legal and Accounting Fund." The RSVP phone number and the address to which contributions were to be sent were those of Baptiste & Wilder (although the firm's name was not used). The statement "Personal or Corporate checks acceptable. No Teamster Employer May Participate or Contribute" also appeared on the final invitation materials (as it had on the earlier draft). The invitations were shipped on August 19, 1999.

According to Raymond, the reference to retirement of Hoffa legal and accounting fund debt was deleted in the final draft invitations since the debt had been settled and a decision was made by the campaign to begin to raise new funds. Raymond says that he had the impression that Szymanski saw the invitation markups and recalls a conversation with Szymanski about using Baptiste & Wilder as the place where contributions could be sent.[7]

Raymond recalls that his initial communication with McNutt occurred sometime in June, July or August 1999. He says he received a call from McNutt, whom he did not know. Raymond states he took the call in his capacity as an attorney for the Hoffa campaign. He does not recall whether he had received an earlier "heads-up" call from Leebove to tell him that McNutt would be calling about the fundraiser. According to Raymond, the initial call took ten to fifteen minutes. McNutt said he had been given Raymond's phone number[8]and said he was interested in helping Hoffa, who he felt had been given a bad deal by the government and had been treated badly by the AFL-CIO. McNutt then asked what rules applied to holding an event to raise contributions for Hoffa. Raymond says that he told McNutt that no rules were in place and that it was not clear how the next election would be dealt with, but that he suggested that McNutt act as if the rerun election rules were in place. He then explained such concepts as interested employers to McNutt, told him of the need for detailed record keeping, and further explained that the costs and expenses of the fundraiser would have to be financed by IBT member contributions. Raymond says that McNutt referred in a general way to his projects with the International regarding computers or the internet. Raymond says that it was his impression that McNutt had an ongoing business relationship with the IBT. He does not recall McNutt mentioning any specific company names and had no indication that McNutt's business was an interested employer. [9]

A further communication between McNutt and Raymond is reflected in Raymond's letter of September 16, 1999 to McNutt, five days before the fundraiser, and after the invitations for it had been sent. Raymond says that around that time, he received a call from McNutt, who wanted to walk through the issues that he and McNutt had discussed in their earlier call. Then, McNutt asked Raymond to put his views in writing, and Raymond did so in his September 16 letter. He says he had no further involvement in the fundraiser.[10]

Finally, several fax transmissions were sent in the days before the fundraiser. Thus, on September 15, 1999, the day before Raymond's letter with written advice on the proper way to conduct the fundraiser, McNutt faxed Leebove a "committed list as of today." On that same day, John Irvine faxed to Larry Schaffer instructions that he "need[ed] 3 checks: 1) $3,000 from Mike Schaffer 2) $2,000 from Larry Schaffer [and] 3) $20,000 from Acubid All payable to 'Hoffa 2001 Legal & Accounting Fund. Complete a form for each ck; overnight all here ASAP! Thanks - John".[11] And, on September 20, 1999, Barbara at Baptiste & Wilder faxed a list to ATI representing the RSVP's for the fundraiser that had been sent to the law firm.[12]

D. The WebGalaxy contributions to the Hoffa legal and accounting fund. At around the time of the September 21, 1999 fundraiser, a number of entities or individuals involved in the WG-ATI enterprise made significant contributions to the Hoffa legal and accounting fund. Most of those contributions were discussed in our earlier decision in 2001 EAD 302, supra. Contributions from those related to WG-ATI enterprise included:

	John Irvine, Affinity Systems, Inc., $25,000 donation on September 15, 1999, $15,000 returned on August 9, 2000, $10,000 returned on April 23, 2001;
	John Irvine, WebGalaxy, Inc., $3,000 donation on September 20, 1999, returned August 9, 2000;
	John Irvine, $5,000 donation on September 15, 1999, returned August 9, 2000;
	Michael A. Schaffer, $1,000 donation on September 15, 1999, returned August 9, 2000;
	Michael Schaffer, Acubid.com, $10,000 donation on September 15, 1999, returned April 23, 2001;
	Thomas R. McNutt, $1,000 donation on September 15, 1999, returned April 23, 2001;
	Donna Ann McNutt (spouse of Tom McNutt), $1,000 donation on September 27, 1999, no record of return to this date;
	Thomas Havey Company, $3,000 donation on September 15, 1999, returned September 15, 2000;
	Vince Kensil, Union Labor Life Ins. Co., $2,000 donation on September 21, 1999, returned December 20, 2000;[13]
	Dennis Walston, Concept Foundry, Inc., $1,000 donation on September 7, 1999, returned December 20, 2000;
	Jason Endicott, Program Direct Affinity Inc., $200 donation on September 27, 1999, escrowed per decision in 2001 EAD 302;
	Victor Kamber, $1,000 donation on September 27, 1999, escrowed per decision in 2001 EAD 302;
	Tom Boggs, $5,000 donation on September 27, 1999, escrowed per decision in 2001 EAD 302;
	Lawrence Schaffer; $1,000 donation on September 27, 1999.

In short, total contributions to the Hoffa slate legal and accounting fund from entities or individuals related to the WG-ATI enterprise totaled $59,200.00.

At the fundraiser itself, according to Szymanski, McNutt made a few laudatory comments about Hoffa, Hoffa then made some comments, but nothing was said to the attendees about the WG-ATI enterprise. Leebove was not present.

E. The Denouement of the WG Bid. The IBT's approach to the WG bid became more negative after the September 21 fundraiser. Irvine characterizes the contacts between himself, McNutt and Leebove/Tarpinian during that period as "going in circles." He says that while he still thought that the IBT was going to go with the WG-ATI bid, he could not seem to make further progress toward the signing of the final contract. He claims that the IBT maintained a favorable attitude towards WG only until after the fundraising event was consummated.

Thus, on September 22, 1999, the day after the fundraiser, Irvine and others visited Tarpinian and others at the IBT headquarters, as revealed by the entrance log for that day. Irvine recalled that he and McNutt were "pushing really hard" at that point to complete the IBT deal. But he was troubled by the "hard questions" that Tarpinian was suddenly asking after the fundraiser, including references to why their bid was better than a rival web portal supported by the AFL-CIO, named "iBelong." Irvine says this was the first time that he had any indication that the IBT had not completely "written off" the AFL-CIO effort. Irvine also says that Tarpinian revealed for the first time that the Dickstein Shapiro law firm was conducting "due diligence" with regard to the proposed contract. McNutt and Irvine obtained a follow up meeting with Tarpinian on September 28, but there was no further progress toward execution of the contract.

Thereafter, on November 10, 1999, Tarpinian wrote WebGalaxy, stating that while he was sitting on the WG Advisory Board as Executive Director of the Labor Research Association (of which Tarpinian is the Executive Director), his work as a consultant to the IBT required him to refrain from attendance at Advisory Board meetings until the IBT selected "an Internet provider."

On November 16, Keegel sent identical letters to WG and its rival bidder requesting that each be prepared to respond to certain inquiries concerning the services being offered. On November 30, 1999, WG-ATI and iBelong each made a formal presentation to the IBT. Present for the IBT were Keegel and the IBT committee. The visitors' log for that day reflects the attendance of Leebove, Tarpinian and attorney Grossman from Dickstein Shapiro for the IBT.

According to Szymanski, the presentation by WG-ATI, which included McNutt, Irvine, and several technical staffers, was so inadequate as to be "embarrassing." Leebove agreed that the presentation was "weak." Even McNutt and Irvine stated that the November 30 presentation went very poorly. Meanwhile, the iBelong operation was already on the web, and its November 30 presentation was much more adept.

Leebove and Tarpinian state that the AFL-CIO's web portal discussions with the IBT began in the fall. By November 8, 1999, Charles McDonald, the President of Union Privilege -- the AFL-CIO's marketing operation -- informed Keegel that its web portal would be "best able to meet the marketing targets." Meanwhile, our investigation indicated that WG was having difficulty raising sufficient capital necessary for its venture to continue.

According to Szymanski and Keegel, the final decision to go with the iBelong proposal was made in January 2000. By then, the WG-ATI site was on the web, but was also not as attractive as the iBelong site. Leebove emphasized that when answers to formal questions came back from WG-ATI, there were troubling issues about their entire operation. While Keegel made the final decision to go with iBelong, members of the committee participated in reaching that result.

Irvine claims that after the November 30 presentation, it became "impossible" for McNutt or him to establish contact with Leebove, Tarpinian, or anybody else at the IBT. Irvine says he finally reached Szymanski at his office late one evening in January 2000. He claims that Szymanski professed to know nothing about the status of the proposal, but would get "someone" to call Irvine back. A call from Keegel to Irvine came not long thereafter. Keegel informed Irvine of the IBT's decision to go with the iBelong bid. Irvine, who suggested that he was "naive" at the time, says he was still "shocked" that the entire arrangement had been rejected.

Once the final choice of provider was made, the IBT continued negotiating the iBelong agreement until the spring of 2000. In April 2000, the AFL-CIO, IBT, iBelong, and Union Privilege executed a formal web portal agreement. General President Hoffa states that he was generally aware that the committee had chosen iBelong over the WebGalaxy bid, but that he cannot recall any specific conversation with anyone in that regard, other than that he "probably" talked to Keegel.

Analysis and Conclusions

1. We first conclude that the WG-ATI enterprise was an IBT vendor within the meaning of the Rules. We make this finding based upon the evidence in the investigatory record indicating that the enterprise was providing something of value to the IBT in a commercial context at the time that the contributions were made. Thus, although IBT was not bound to purchase the enterprise's services and product as a result of the June 21, 1999 letter of intent, WebGalaxy was seeking to enter into such a relationship, and actively engaged in designing and providing an IBT-oriented web portal service to IBT in order to encourage it to contract with the enterprise.

As we understand it, among the purposes of the Rules provisions precluding vendor contributions to a candidate's or slate's legal and accounting fund is to prevent even the appearance of a trade-off of valued business with the IBT or its affiliates for support for IBT candidates, especially for those that may control or influence the union's decision to do business with a vendor. Given that purpose, it is entirely consistent to confer vendor status on a party that is in the process of attempting to obtain a valuable contract with the IBT by providing it with product design and marketing plans. In such a situation, there is a real danger that campaign contributions by the enterprise will have the appearance, and perhaps the effect, of swaying the union's decision to do business with the enterprise. We conclude that it is the intent of Article XI, Section 1(b)(5) of the Rules to prohibit legal and accounting fund contributions by such entities. Accordingly, we conclude that the WG-ATI enterprise was an IBT vendor at the time of the September 1999 contributions to the Hoffa legal and accounting fund.

2. We next restate our analysis in 2001 EAD 302, supra, where we recognized that prior to the adoption of the Rules there was no prohibition against contributions by IBT vendors as such to candidates, but further held that once the Rules came into effect, the Hoffa slate had a duty to return all vendor contributions. At the time we issued 2001 EAD 302, supra, however, the vendor status of a number of the persons or entities related to the WebGalaxy enterprise remained under investigation.[14] We now conclude that the contributions from Irvine, the McNutts, the Schaffers, and Jason Endicott of ATI affiliate Program Direct Affinity Inc. are also vendor contributions. That finding is based upon their status as representatives and/or investors in the WG-ATI enterprise. Simply put, given their positions with the enterprise, their contributions are the equivalent of contributions from the enterprise itself.[15] Accordingly, since these contributions are the equivalent of contributions from the vendor enterprise itself, their retention by the Hoffa slate after the effective date of the Rules prohibition against vendor contributions violates that prohibition. On that basis, we GRANT the unresolved protest allegations against the Hoffa slate concerning those contributions.[16]

3. The most serious concern here is whether there was a trade of campaign contributions by WG-ATI enterprise participants for what they believed would be favorable consideration by the IBT for their web portal project. Those most actively involved on the IBT side of these dealings, such as Leebove, deny this, and those on the other side of the dealings (McNutt and Irvine) acknowledge the absence of an explicit agreement or understanding that such a trade was to occur. Given the unanimity of these witnesses on this point, we cannot conclude, as suggested by Michael Schaffer in his March 2001 meeting with the Election Administrator, that such a quid pro quo was agreed to.

That, however, does not end the matter. For the facts here establish that during at least one pivotal luncheon conversation including Tarpinian, Leebove, McNutt, and Irvine, Leebove endorsed the concept of a Hoffa slate legal and accounting fundraiser during a meeting about official IBT business. That luncheon meeting spawned the Irvine-McNutt fundraising effort, and was followed within one month by the execution of a letter of intent between the IBT and WG that was highly valued by WG's principals.

Specifically, as stated above in our findings of fact, we have concluded that several statements related to the allegation were made during one of the May 1999 meetings. First, we have found that during these meetings on IBT business, McNutt told IBT representatives Leebove and Tarpinian that he would like to do something to help Hoffa. Second, we have found that McNutt, rather than Leebove, first raised the idea of McNutt trying to raise funds for Hoffa's campaign. Third, we have found that during the same meeting Leebove endorsed the idea of such a fundraiser and that during that same meeting Leebove, rather than McNutt, first spoke of the Hoffa campaign having a legal and accounting deficit and suggested that a fundraiser would help with that issue. Fourth, we have found that Leebove also responded to the fundraiser suggestion by telling McNutt to contact either Szymanski or Raymond. Finally, at no time did Leebove tell McNutt or Irvine that WG's chance of doing business with the IBT would not be affected by whatever fundraising they might or might not undertake on behalf of the Hoffa campaign legal and accounting fund, and did not tell McNutt or Irvine that the subject of campaign fundraising was not an appropriate matter for discussion in a meeting convened to conduct official IBT business.

We find that Leebove's conduct during one of the two May 1999 meetings violated Section 401(g) of the LMRDA, 29 U.S.C. §481(g), which precludes the use of "moneys received by a labor organization by way of dues, assessments, or similar levy … to promote the candidacy of any person in any election subject to this subchapter." Accordingly, Leebove's conduct also violates Article XII of the Rules, which incorporates the statutory provision, and is properly the subject of a protest pursuant to Article XIII, Section 2(a) of the Rules as a reach-back protest.[17]

Simply put, Leebove was faced with a suggestion about helping an IBT candidate by a suitor seeking a valuable business arrangement with the IBT. Rather than telling that suitor that such a matter was not an appropriate subject for discussion and had no relationship with the union business at hand, Leebove discussed the matter with the suitor and, as we have found, endorsed the idea during the course of a meeting for which he was being paid by the IBT to conduct IBT business. Such conduct constitutes an impermissible use of union resources even though there was no express promise of benefit to the business suitor.

Moreover, such conduct has the foreseeable effect of suggesting to the business suitor that the endorsed fundraising efforts would at a minimum put them in a good light with the IBT, especially where, as here, it appears that the union representative who has endorsed fundraising for an incumbent candidate has what appears to the suitor to be significant influence over the success of the suitor's business bid. Thus, it is not surprising that Irvine and his associates contributed significant sums to the candidate that Leebove made it clear he supported. Individual business suitors on the receiving end of such an endorsement by an IBT representative will inevitably gravitate towards the same belief about other IBT operatives with whom they deal, thus potentially poisoning the relationship of the suitor even with other operatives who are scrupulous in observing the line between campaign work and IBT work. Conduct such as that engaged in by Leebove here is thus damaging to the union itself and to those in the employ of the union who legitimately support -- on their own time -- the reelection of General President Hoffa.

Nor is Leebove's conduct during one of the May meetings protected under the rubric of conduct "incidental" to union business, since that exception is an incident to the right of union members to campaign for the candidate of their choice.[18] That principle offers no protection to a non-member independent contractor such as Leebove. And that exception seeks to protect discourse with members, not with non-member potential vendors. Hoffa, P865 (August 26,1996), aff'd, 96 EAM 232 (September 6, 1996). And even if the exception were applicable here, we would not find Leebove's conduct to be incidental, since it did not have an incidental effect. Instead, Leebove's conduct at one of the May meetings resulted in substantial contributions being made to the Hoffa legal and accounting fund because his conduct had the foreseeable effect of creating the impression that such support would aid in WebGalaxy's business efforts, and had the further foreseeable effect of generating large contributions from those with an interest in the success of WebGalaxy's business with the Teamsters.

At the same time, we find insufficient evidence to conclude that the IBT itself -- as opposed to Leebove -- intended this result. Nor do we find, as Michael Schaffer suggested, that the IBT led WebGalaxy down the proverbial primrose path, letting it believe that its bid to the IBT would be accepted, at least until the fundraiser was held and the money for candidate Hoffa received. Rather, we find that while WebGalaxy was at first favored it fell from grace for legitimate business reasons, primarily the inadequacy of its program as compared to iBelong. That being said, however, we add that Leebove's misconduct and the post-fundraiser timing of the failure of the WebGalaxy bid understandably could create the impression suggested by Schaffer. That is one of the problems with misconduct such as Leebove's: it puts all further actions on the part of the institution under a cloud of suspicion, so that it may appear that actions are being taken for political rather than business reasons. Leebove's action was a disservice both to the institution he was paid to serve and the candidate he supports.

For these reasons, we GRANT the protest on this point as to Leebove and the Hoffa slate. To remedy this violation, we order Leebove and the Hoffa slate to cease and desist from any further such Rules violations. We also order Leebove to refrain from performing any services for the Hoffa slate or receiving any compensation from the slate for the fourteen day period from August 6 to August 19, 2001, and to repay to the IBT by August 6, 2001 the $1,000 in compensation he received for the day in May 1999 when this violation occurred. In assessing this remedial order, we find that Leebove's action was a serious violation of the Rules. We have also relied upon the fact that this is not his first such violation. Carey Slate, supra. On the other hand, we have not ordered a more severe remedy because Leebove cooperated with our investigation and because we believe his conduct as to this finding was more a matter of carelessness than willfulness. Further, given that the improperly solicited funds raised in connection with the September 21, 1999 fundraiser either have been or will be returned, there is no need to consider further leveling the playing field. There is, however, a need to communicate the seriousness of this violation and to deter any such conduct.

4. In addition to his endorsement of the Hoffa slate fundraiser on IBT time at one of the May meetings, Leebove further improperly assisted the Hoffa campaign on his own time with respect to the September 21, 1999 fundraiser. Thus, as detailed in our findings of fact, Leebove to at least some degree aided in the development of the invitations for the fundraiser, and received a list of the attendees from McNutt. As held in Carey Slate, supra, Leebove and his firm are employers within the meaning of the Rules.[19]Further, given his testimony and our findings in 2001 EAD 355, supra, we conclude that Leebove received no pay from the Hoffa campaign for these services. Nor did the Hoffa slate report them on its initial CCER. Leebove's provision of these uncompensated services is an improper employer contribution in violation of Section 401(g) of the LMRDA, and thus improper under Article XII of the Rules. The failure of the Hoffa slate to report Leebove's contribution of services violates the reporting provisions of Article XI of the Rules.[20]

The same is true for the services performed by Baptiste & Wilder with respect to the fundraiser. The firm, at its partner Szymanski's request, served as the contact point for the fundraiser, i.e., a place where rsvps and contributions could be mailed and where calls regarding the fundraiser could be received. These services, provided by a law firm that is an employer, are also an employer contribution in violation of Section 401(g) of the LMRDA, and thus Article XII of the Rules. And the services provided were not reported on the Hoffa slate's initial CCER, in violation of the reporting provisions of Article XI of the Rules.

For these reasons, we GRANT the protest on this point as to Leebove, Baptiste & Wilder and the Hoffa slate.

To remedy these violations, we order Leebove, Baptiste & Wilder and the Hoffa slate to cease and desist from any further such Rules violations. For this violation, we also order Leebove to refrain from performing any services for the Hoffa slate or receiving any compensation from the slate for the fourteen-day period from August 20 to September 2, 2001.[21] Given the Hoffa slate's prior receipt of improper employer contributions from Leebove, see Carey Slate, supra, we further order the Hoffa slate to pay a $1,000 fine to the IBT by August 6, 2001.

The orders of the Election Administrator contained herein take immediate effect unless otherwise stayed. Lopez, 96 EAM 73 (February 13, 1996).

Any interested party not satisfied with this determination may request a hearing before the Election Appeals Master within two (2) working days of receipt of this decision. The parties are reminded that, absent extraordinary circumstances, no party may rely upon evidence that was not presented to the Office of the Election Administrator in any such appeal. Requests for a hearing shall be made in writing, shall specify the basis for the appeal, and shall be served upon:

Kenneth Conboy

Election Appeals Master

Latham & Watkins

Suite 1000

885 Third Avenue

New York, New York 10022

Fax: 212-751-4864

Copies of the request for hearing must be served upon all other parties, as well as upon the Election Administrator for the International Brotherhood of Teamsters, 727 15^th Street NW, Tenth Floor, Washington, DC 20005 (facsimile: 202-454-1501), all within the time prescribed above. A copy of the protest must accompany the request for hearing.

William A. Wertheimer, Jr.

William A. Wertheimer, Jr.

Election Administrator

cc: Kenneth Conboy

2001 EAD 415

DISTRIBUTION LIST VIA UPS NEXT DAY AIR:

Patrick Szymanski

IBT General Counsel

25 Louisiana Ave. NW

Washington, DC 20001

Bradley T. Raymond

Finkel, Whitefield, Selik,

Raymond, Ferrara & Feldman

32300 Northwestern Highway

Suite 200

Farmington Hills, MI 48334

J. Douglas Korney

Korney & Heldt

30700 Telegraph Road

Suite 1551

Bingham Farms, MI 48025

Barbara Harvey

Penobscot Building

Suite 1800

645 Griswold

Detroit, MI 48226

Betty Grdina

Yablonski, Both & Edelman

Suite 800

1140 Connecticut Ave. NW

Washington, D.C. 20036

Tom Leedham c/o Stefan Ostrach

110 Mayfair

Eugene, OR 97404

Bruce Dubinsky

Klausner, Dubinsky & Associates

4520 East West Highway

Suite 640

Bethesda, MD 20814

 

Bruce Maffeo

Seiff Kretz & Maffeo

645 Madison Avenue

New York, NY 10022

Richard Leebove

RL Communications

18600 West Ten Mile Road

Southfield, MI 48075

Greg Tarpinian

Labor Research Association

330 West 42d Street

13^th Floor

New York, NY 10001

Kushner, Chupak, Kippelman &

Taub, PC

30400 Telegraph Road

Suite 314

Bingham Farms, MI 48025-4540

Thomas Boggs

Patton Boggs LLP

2550 M St. NW

Washington, DC 20037

Merle Delancey

Delancey Printing

4307 Mission Ct.

Alexandria, VA 22310

Jason Endicott

Program Direct Affinity Inc.

6407 Ronson Ct.

Alexandria, VA 22310-3035

Thomas Havey LLP

900 17th Street, NW

Suite 800

Washington, DC 20006

 

John Irvine

Affinity Telesystems, Inc.

Suite 106

4301 Garden City Drive

Landover, MD 20785

John Irvine

WebGalaxy, Inc.

8601 Georgia Ave.

Silver Springs, MD 20910

John S. Irvine

905 Mallard Circle

Arnold, MD 21012

Vince Kensil

Union Labor Life Insurance Co.

111 Massachusetts Ave. NW

Washington, DC 20001

Thomas R. & Donna McNutt

Pelican Lake Motor Coach Resort

Lot 48

4555 Southern Breeze Dr.

Naples, FL 34114

Lawrence C. Schaffer

524 F. 3T

Apt. 32

San Diego, CA 92101

Michael Schaffer

Acubid.com, Inc.

Suite 102

1947 Camino Vida Roble

Carlsbad, CA 92009

Michael A. Schaffer

7690 El Camino

Carlsbad, CA 92009

Dennis Walston

Concept Foundry, Inc.

4731 Elm Street

Bethesda, MD 20814

 

Victor Kamber

The Kamber Group

1920 L Street, NW

Washington, D.C. 20036

Baptiste & Wilder, P.C.

Suite 500

1150 Connecticut Ave. NW

Washington, DC 20036

William W. Thompson II

11424 Frances Green Drive

North Potomac, MD 20878