IN RE: CERTAIN CAMPAIGN CONTRIBUTIONS BY OFFICERS AND EMPLOYEES OF LOCAL UNION 78
Protest Decision 2006 ESD 363
Issued: October 4, 2006
Pursuant to authority granted under Article I, Article XI, Section 2(b)(2), and Article XIII, Section 4, the Election Supervisor conducted an investigation of certain campaign contributions made by officers and employees of Local Union 78.
Election Supervisor forensic accountants Bruce Dubinsky and Keith Neus and representatives Christine Mrak and Maureen Geraghty investigated this matter.
Findings of Fact
1. Introduction
1.a The Rules' Requirement to Disclose the Amount and Source of Each Campaign Contribution.
Every candidate for International office is required to file periodic reports that disclose, among other things, the name, local union number and other identifying information of each person who makes a contribution to that candidate and the amount of each such contribution. Rules, Article XI, § 2(a) and 2(b)(2). Candidate slates are subject to the same reporting requirements as individual candidates. Rules, Article XI, § 2(b)(2). Independent committees that have received or expended more than $1,000 for the purpose of influencing the International officer election must also file contribution and expenditure reports. Rules, Article XI, § 2(a)(3).
The Rules prohibit contributions to the campaign of any candidate or slate of candidates by employers, unions, and non-members. Rules, Article XI, § 1(b). The Rules permit campaign contributions only by members; each member who is not a candidate for International office may contribute no more than $2,000 for use in the International officer election. Rules, Article XI, § 1(b)(12)(A). Only contributions properly solicited, made, accepted and reported under the Rules may be spent or used by candidates for the 2005-2006 International Union Delegate and Officer Election. Rules, Article XI, § 1(b)(1).
1.b The Election Supervisor Investigation of Contributions Reported From Certain Members of Local Union 78.
The Office of the Election Supervisor ("OES") routinely conducts investigations to verify that contributions reported by candidates and slates were actually made by the members to whom the contributions have been attributed. In late June 2006, OES mailed letters to members identified on filed campaign finance reports as having made campaign contributions to one or more candidates. Each letter listed the campaign contribution(s) reported for that member, including the reported contribution date, amount, candidate, and method of payment. The letter requested that the member either affirm or correct the information.
Former Local Union 78 president John Kikes responded to a request to confirm that he had been listed correctly as a contributor on a periodic campaign contribution expenditure report ("CCER") filed by IBT Western Region Vice President candidate Chuck Mack. Kikes informed OES auditors that he did not make any contribution to Mack's campaign.
Additional information received in response to OES audit inquiries caused us to investigate other contributions made by full-time officers and business agents of Local Union 78. The investigation included extensive document requests, interviews and sworn depositions of witnesses.
When OES started this inquiry, Local Union 78 and individual witnesses were informed of the subject matter being investigated. The notices stated that OES was "conducting compliance investigations relating to campaign contributions," and that records were requested "relating to certain contributions that were made to campaign(s) under the Rules." Letter from OES to Local Union 78 President Edward Walling at 1 (July 6, 2006) ("LU 78 Request, July 6, 2006"). In connection with the inquiry into compliance with campaign contribution limitations, OES requested Local Union 78 to produce complete "[p]ayroll records for all employees (i.e. officers, business agents, office staff, etc.) ... and all records relating to bonuses/salary increases issued to any and all employees" during the period from December 1, 2004 through June 30, 2006. LU 78 Request, July 6, 2006 at 1. In addition, the notice of inquiry to Local Union 78 requested production of "[r]ecords relating to any officer/business agent's account, social welfare account, or similar type of unofficial IBT local union account maintained by or for the direct or indirect benefit of the employees of your local for the period from December 1, 2004 through June 30, 2006." LU 78 Request, July 6, 2006 at 1-2.
Inquiry letters to individuals similarly described the subject of the inquiry as particular campaign contributions and requested documents and testimony concerning those contributions and the source of the funds for the contributions. Thus, Steve Mack, Local Union 78's secretary-treasurer, received a notice of inquiry on July 11, 2006 that requested him to attend an inquiry and give testimony under oath "in connection with campaign contributions that you have made to the Hoffa-Mack 2006 Campaign (See attached listing of the contributions that we have on record of you making in the 2005-2006 IBT International Union Delegate and Officer Election)." Letter from OES to Local Union 78 Secretary-Treasurer Steve Mack at 1 (July 11, 2006) ("Mack Request, July 11, 2006"). Mack was asked to bring the following items with him to the inquiry:
• Copies of bank statements for the bank account(s) from which the moneys used to fund your campaign contributions originated
• Copies of all pay stubs in your possession for 2005 and 2006 year-to-date
• Copies of any bonus payments/pay stubs for 2005 and 2006 year-to-date
• Any other information that shows the origin of the money used to make any campaign contribution during 2005 and 2006.
Mack Request, July 11, 2006 at 1-2. A footnote attached to the last bulleted item concerning documents showing the origin of contributed funds specifically requested Steve Mack to bring any and all records relating to the source of contributed funds including of any business agent fund that may have been the source for the campaign contributions that comprised the subject of the inquiry. That footnote stated:
If method of contribution was by cashier's check or money order, bring with you a copy of the bank statement for the month(s) for which the cashier's check or money order contribution was made and which evidences the disbursement of funds used to purchase the cashier's check or money order from your account (i.e. account debit, cash withdrawal, etc.).
If the money is not evidenced on your bank statement, bring with you a detailed statement describing the source of the money, the timing of your receipt of the money and the events or reasons for which you received the money.
If the source of your campaign contribution was from deposits which were made to an officer/business agent account, social welfare account, civic affairs account, or similar type of account, bring with you a copy of the account statement for the month(s) which evidences the disbursement of funds from this account.
Mack Request, July 11, 2006 at 2, n.1.
The inquiry letters, with their requests for documents, informed the witnesses that OES's inquiry encompassed the source of the funds listed as contributions to the specified campaign. The witnesses knew before their examinations started that the Local Union 78 payroll, including bonuses, were a subject of this campaign contribution source inquiry.
Witnesses were asked to give their statements under oath, and all complied with that request. OES made clear that each witness could choose to have counsel present and that counsel could participate in the examination.
2. The "Civic Affairs Fund" account.
2.a. Origin and Purpose of the Civic Affairs Fund.
IBT Local Union 78 maintains offices in Hayward and San Jose, California. Steve Mack is secretary-treasurer of Local Union 78, a position he has held since 1987. Mack is also vice president of Joint Council 7 and director of the Industrial Trades Division of the IBT. Steve Mack is the brother of Chuck Mack, IBT Western Region vice president and former candidate for IBT Western Region Vice President in the 2006 IBT officer elections.
Local Union 78 holds officer elections every 3 years. Business agents who are not local union officers are appointed to their positions by the local union secretary-treasurer, subject to confirmation by the local union executive board. Business agents may be removed from their positions by action of the executive board.
In 1998, Mack opened an account at Bay Cities Credit Union to hold money that would be used to support the election campaigns of incumbent Local Union 78 officers or new candidates aligned with the incumbents. Mack named this account the Civic Affairs Fund ("CAF"). He could not recall whether a similar fund existed prior to 1998, and stated that he knew of no records in existence that would refresh his recollection of that history.
Mack determined the amount and timing of contributions to be made to the CAF in or around December of each year and had the fulltime officers and business agents informed of the required sum. Contributions in amounts ranging from $200.00 to $700.00 were required in each year from 2000 to 2005, with the exception of 2004 when Mack determined that that no contributions were needed. Except for Pete Walling, former Local Union 78 president, no full-time officer or business agent has declined to contribute to the campaign account. Walling refused to contribute in 2000 and 2001 because he thought the CAF had enough money to fund any potential election campaign supporting the incumbent Local Union 78 officers.
Mack and Denice Kransky, the Local Union 78 office manager, are the only authorized signers on the CAF account. Mack makes all the decisions regarding account transactions and Kransky exercises no independent authority in making deposits or withdrawals to the account.
Our investigation found that the CAF receives funds only from full-time elected officers and business agents of the local union. Elected trustees, who are not employed at the local but receive a monthly $200.00 stipend, do not contribute to the CAF. The bulk of funds contributed to the account are in the form of personal check, cash or cashier's check which the contributing business agents and officers deliver either to Denice Kransky or Mack during work hours at the local union office. Neither Kransky nor Mack maintain a record of the source, date or amount of contributions to the account and do not make copies of checks or deposit slips. Business agents who contributed to the account were unable to provide any details about the total amount they had contributed over the years, or their individual balances or the total balance in the account. All withdrawals from the CAF have been made in cash. Thus, there is no record or ledger identifying the individual who made each contribution to CAF, and no record of charges taken against any individual contributor's purported allocated portion of the CAF. The account is maintained as a commingled whole, with no record of division or allocation among the several contributors.
No portion of any money contributed to CAF is returned to business agents or officers at retirement or severance from the local union. Mack does not share with the business agents and officers who contribute to the account any information concerning the amount of funds held in the account or the record of monthly withdrawals and deposits. Over the years, contributors to the account asked Kransky to see the bank statements, and Kransky replied that she was not permitted to show the bank records without Mack's express permission. No fulltime business agent or officer we interviewed had ever seen the bank records or had knowledge of the running balance.
CAF was created to hold money to be used to support the election campaigns of incumbent Local Union 78 officers. In his deposition, Mack stated that CAF money had been contributed to the Hoffa-Mack campaign in 2001. Mack later changed that statement and said that he never used CAF money to contribute directly to candidates on the Hoffa-Mack slate in 2001. One witness, a former officer of Local Union 78, recalled that CAF money was used to purchase fundraising and raffle tickets for Hoffa-Mack campaign events in 2001. All witnesses agreed, however, that the CAF's primary purpose was to accumulate funds to support incumbent officers in the event of a contested election for local union office.
Local Union 78 has not had a contested election since 1993. The next regularly scheduled officer election will occur in the Fall of 2008. Accordingly, officers and full-time business agents have contributed to the CAF since 1998 even though the local has not had a contested officer election in over thirteen years. Local Union 78 has never had a contested delegate election.
2.b. Business Agents' Statements on Requests for CAF Contributions.
Each year, Mack, Local Union 78 president Ken Hill or former president John Kikes advised the other business agents and officers of the contribution amount, as determined by Mack, to be made to the CAF. Some business agents testified they were not asked if the amount was acceptable but were instead just told the amount they were required to contribute. Kikes claimed some agents complained among themselves about using CAF funds to contribute to the Hoffa-Mack campaign when they learned that had occurred but were told by Mack and other officers that contributions were required. Kikes claimed that some agents initially refused to contribute to CAF, asserting that the bonus money they received and turned around into contributions (see § 2.d, below) belonged to them. Kikes stated that Mack told reluctant employees that he would not send them to any IBT conferences or seminars unless they contributed and that such coercion compelled the employees to pay their assigned shares. Pete Walling, former president of Local 78 who retired in 2001, told our investigators that there was pressure on business agents to contribute to CAF. None of the current business agents or officers corroborated this allegation.
Business agent Daniel Varela testified that, in December 2005, Mack informed him and other business agents that he wanted them to contribute $700.00 to the CAF account. Varela stated that Mack asked him if he was okay with that amount and he replied he had no objection.
Walling refused to contribute to the CAF in 2000 and 2001. He told Mack he would not contribute because the CAF was created to fund local union officer campaigns and there was already plenty of money in the account for that purpose. Walling stated that, unlike the appointed business agents and elected officers who were also on the IBT payroll for various assignments, he was not afraid of retaliation because he had served as a popularly elected officer for over 25 years and only worked for the local union.
2.c. Mack's Use of CAF Money for Contributions to the 2005-2006 International Officer Election.
Mack stated that sometime before June 2005, he decided that he and the other officers and business agents would "max out" contributions (that is, contribute the $2,000.00 limit) to Chuck Mack's 2006 campaign for re-election as an IBT International Vice-President. Mack recalled that discussions about this may have occurred during regular Hoffa-Mack campaign meetings that included Chuck Mack's campaign manager, Ron Horner, and some business agents. Mack stated that it was "my intention that we would all max out," that everyone agreed to the idea, and that it was no secret that "it was going to happen." While he stated he may have discussed the idea with some Local Union 78 business agents, he also stated that he did not discuss the idea with all of them. He did not discuss the idea of maxing out contributions with any of the officers and business agents before making any of the particular contributions using the CAF money, nor did he discuss with them the idea of using CAF funds to make contributions and attributing the donation to individuals. Mack has no notes or documents memorializing a collective decision by the CAF contributors to contribute to the 2006 Hoffa-Mack campaign using CAF money.
Current business agents could not remember whether Mack sought and received advance approval from them for this plan. When asked about contributions made in their name to Hoffa-Mack using CAF money, however, they stated affirmed that they would have approved of the contributions.
2.d. The Use of Annual Employee Bonus Payments to Fund the CAF account.
Local Union 78's executive board paid bonuses to business agents and officers on Mack's recommendation in 2000, 2001, 2002, 2003 and 2005. No bonuses were recommended or paid in 2004. In each of the bonus years, the amount was set at either the October or November executive board meeting. After the executive board approved the bonus amount, Mack determined when to issue the bonus checks.
Records of Local Union 78, and bank records for the CAF since 2000, show that CAF contributions followed the award of end-of-year bonuses as follows:
• On December 12, 2000, all full-time officers and business agents were paid a $1,000 bonus as gross wages. Mack set the CAF contribution rate for 2000 at $500.00. $4,500.00 was deposited to the CAF between January 18 and March 9, 2001.
• On December 7, 2001, business agents and officers were each paid a $1,000 bonus as gross wages. Mack set the CAF contribution rate for 2001 at $700.00. On December 13, 2001, $4,900 was deposited to the CAF. On January 17, 2002, $1,400.00 was deposited to the CAF, and on February 15, 2002 another $700.00 was deposited, for a total of $7,000.00.
• On December 13, 2002, all fulltime business agents and officers were paid a $1,000.00 bonus as gross wages. In December 2002, Mack set the CAF contribution rate at $300.00 for the ten full-time business agents and officers. On January 10, 2003, $2,700.00 was deposited to the CAF. On May 5, 2003, an additional $300.00 was deposited into the account.
• On December 10, 2003, the business agents and officers were paid a bonus of $500.00 each as gross wages. In December 2003, Mack set the CAF contribution rate at $200.00. On January 6, 2004, $1,600.00 was deposited to the CAF and another $400.00 was deposited on February 10, 2004.
• Local Union 78 did not pay any bonuses in 2004, and no deposits were made to the CAF account between February 10, 2004 and December 21, 2005. As of February 10, 2004, the balance in the CAF was $15,273.02.
• In October 2005, Local Union 78's executive board, on a motion from Mack, awarded a $1,000.00 bonus as gross wages to all business agents and officers. To date, due to the lack of a quorum at monthly membership meetings, that motion had not been approved by the rank-and-file membership of Local Union 78. During that same time period, Mack decided the CAF contribution amount for 2005 would be $700.00 and so informed all full-time officers and business agents. Bonus checks in the amount of $1,000.00 were issued to all officers and business agents on December 13, 2005. One week later, December 21, 2005, Kransky made a deposit into the CAF account for $6,300.00, representing contributions of $700.00 from nine business agents. At least one business agent, Daniel Varela, gave Mack a cashier's check for his $700.00 contribution on December 13, 2005, the same day the local union issued the $1,000.00 bonus checks. Ron Paredes, another full-time business agent, gave Kransky a check for $700.00 on December 14, 2005, one day after receiving the bonus check.
The investigation found that Mack recommended whether to pay bonuses, the amount to be paid, and when the payment would be made. Mack also decided the amount of the CAF contribution.
We asked Mack whether he directed the bonus payments in order to fund the contributions by business agents and officers to the CAF. Mack denied doing so. He stated that the decision to award the bonuses was based on employee performance. We find Mack's explanation not credible as applied to the year-end bonuses in each year they were granted because those bonuses were granted to all recipients in the same monetary amount. Contrasted with the variable amount bonuses paid at other times in 2002, the uniform amount of the year-end bonuses indicates that they were not performance-based. Local Union 78 has no written criteria for awarding bonuses, and Mack admitted that the practice of awarding bonuses is informal and not based on specific criteria.
Mack also said that the decision to award annual across-the-board bonuses in December each year depended on Local Union 78's financial performance. Mack's statement is not supported by contemporaneous records from his local union. A review of Local Union 78's profit & loss statements shows that, with the exception of calendar year 2005, Local Union 78 took in less money than it spent each year since 2001. Thus, bonuses were awarded in 2001, 2002 and 2003 even though Local Union 78 ran a deficit. Although Local Union 78 reported net income of $6,272.24 in December 2005, the October 2005 executive board minutes refer to an early withdrawal of $50,000.00 from a certificate of deposit in order to pay recently terminated business agent John Kikes for unused vacation pay and prorated auto and phone allowances. These facts undermine Mack's explanation that bonuses were tied to the local union's financial performance.
2.e. CAF Account Activity in 2005 and 2006.
Our investigation examined bank statements for the CAF dating back to October 1998 when Mack established the account. The CAF opened with an initial deposit of $1,228.66. Mack could not recall the source of those funds and has no records showing the source of the money. After the CAF account was opened, it was funded exclusively through contributions from full-time business agents and officers. As of February 10, 2004, the CAF had a balance of $15,273.02. In May 2005, the balance was $17,545.50.
On June 3, 2005, $2,500.00 in cash was withdrawn from the CAF, and Mack gave the money to Horner. Mack told Horner to divide the money up equally and purchase ten fundraiser tickets "for my guys" to attend the June 7, 2005 Hoffa-Mack fundraiser. Mack did not name any specific individuals or give Horner a list of business agent names. Horner then recorded the $2,500.00 contribution to the following individuals, each of whom was then employed as a full-time business agent or officer with Local Union 78.
|
DATE |
NAME |
CONTRIBUTION AMOUNT |
|
6/3/05 |
Michal Amaral |
$250.00 |
|
6/3/05 |
Adolph Felix |
$250.00 |
|
6/3/05 |
Dennis Hart |
$250.00 |
|
6/3/05 |
Ken Hill |
$250.00 |
|
6/3/05 |
Alvern Joaquin, Jr. |
$250.00 |
|
6/3/05 |
John Kikes |
$250.00 |
|
6/3/05 |
Stephen Mack |
$250.00 |
|
6/3/05 |
Ron Paredes |
$250.00 |
|
6/3/05 |
Louis Valletta |
$250.00 |
|
6/3/05 |
Daniel Varela |
$250.00 |
When Mack told Horner to purchase tickets for "my guys," Mack knew that Kikes did not want to contribute to the Hoffa-Mack campaign. Kikes stated he told Mack directly and adamantly that he would not contribute and did not want any of his CAF contributions to go to the Hoffa-Mack campaign. Mack denied that Kikes told him directly that he did not want to contribute. Mack admits, however, that he heard of Kikes' objection to contributing from other agents. Mack stated he advised Horner early in the election process that Kikes did not want to contribute to Hoffa-Mack and specifically told Horner not to attribute any of the contributions to Kikes. Horner gave different testimony on the subject. Horner stated that one day, while he was at Local Union 78 picking up CAF contributions from Mack, Kikes verbally consented to make contributions from the CAF account to the Hoffa-Mack campaign.
On September 8, 2005, Kransky withdrew $6,500.00 cash from the CAF and gave it to Horner. Mack told Horner to apply the cash to the September 24, 2005 Hoffa-Mack fundraiser dinner and September 25, 2005 raffle. Mack told Horner again to divide the money up equally and did not provide any specific names or lists of individuals. Horner then recorded the $6,500.00 contribution to the following individuals.
|
DATE |
NAME |
CONTRIBUTION AMOUNT |
|
8/26/05 |
Michael Amaral |
$150.00 |
|
8/26/05 |
Michael Amaral |
$500.00 |
|
8/26/05 |
Adolph Felix |
$150.00 |
|
8/26/05 |
Adolph Felix |
$500.00 |
|
8/26/05 |
Dennis Hart |
$150.00 |
|
8/26/05 |
Dennis Hart |
$500.00 |
|
8/26/05 |
Ken Hill |
$150.00 |
|
8/26/05 |
Ken Hill |
$500.00 |
|
8/26/05 |
Alvern Joaquin, Jr. |
$150.00 |
|
8/26/05 |
Alvern Joaquin, Jr. |
$500.00 |
|
8/26/05 |
John Kikes |
$150.00 |
|
8/26/05 |
John Kikes |
$500.00 |
|
8/26/05 |
Stephen Mack |
$150.00 |
|
8/26/05 |
Stephen Mack |
$500.00 |
|
8/26/05 |
Ron Paredes |
$150.00 |
|
8/26/05 |
Ron Paredes |
$500.00 |
|
8/26/05 |
Louis Valletta |
$150.00 |
|
8/26/05 |
Louis Valletta |
$500.00 |
|
8/26/05 |
Daniel Varela |
$150.00 |
|
8/26/05 |
Daniel Varela |
$500.00 |
Horner stated that sometime before the September 26, 2005 fundraiser, he received a call from Mack advising him that Kikes had changed his mind and did not want to contribute to the fundraiser or raffle. Horner did not refund any money to Kikes. Instead, Horner's wife scratched Kikes' name off five raffle tickets and substituted Mack's name. Horner stated he decided not to refund any money attributed to Kikes because in his mind Kikes had already decided to contribute and once that decision was made, a donor could not change his mind. As for altering the raffle tickets, Horner stated he asked his wife to remove Kikes' name after hearing in September that Kikes did not want to contribute, and then forgot to tell her when he changed his mind and decided not to refund Kikes' contribution.
On November 4, 2005, Mack withdrew $1,000.00 cash from the CAF and gave it to Kransky to give to Horner at the local union hall. Mack told Horner to apply the cash to the November 19, 2005 Hoffa-Mack fundraiser in Reno, Nevada. Mack instructed Horner again to divide the money up equally and did not provide any specific names or lists of individuals. Horner then recorded the $1,000.00 contribution to the following individuals.
|
DATE |
NAME |
CONTRIBUTION AMOUNT |
|
11/18/05 |
Michael Amaral |
$90.00 |
|
11/18/05 |
Adolph Felix |
$90.00 |
|
11/18/05 |
Dennis Hart |
$90.00 |
|
11/18/05 |
Ken Hill |
$90.00 |
|
11/18/05 |
Alvern Joaquin, Jr. |
$90.00 |
|
11/18/05 |
Stephen Mack |
$10.00 |
|
11/18/05 |
Stephen Mack |
$270.00 |
|
11/18/05 |
Ron Paredes |
$90.00 |
|
11/18/05 |
Louis Valletta |
$90.00 |
|
11/18/05 |
Daniel Varela |
$90.00 |
The $10,000.00 in contributions made with CAF funds in June, August, and November of 2005 drew on money that that had been deposited to the CAF as of February 10, 2004. All of that money had been accumulated in the CAF for use in supporting the incumbent officers of Local Union 78 in campaigns for local union office since 1998. There are no contemporaneous records of balances in the CAF attributable to specific contributors, and there are no records of individual contributions from which such a document could be constructed. The CAF balance as of February 2004, which was drawn on for these 2005 contributions, was comprised of money contributed by former business agents (including at least one former officer) and the opening deposit of unknown origin. A portion of the June 2005 CAF contribution was attributed to Kikes, contrary to his specific direction.
On January 25, 2006, Kransky withdrew $4,000.00 cash from the CAF and gave it to Horner to purchase dinner and raffle tickets to the January 27, 2006 Hoffa-Mack fundraiser in San Jose. Mack told Horner to allocate the contribution equally among his business agents and officers. Horner allocated the contribution as follows:
|
DATE |
NAME |
CONTRIBUTION AMOUNT |
|
1/27/06 |
Michael Amaral |
$350.00 |
|
1/27/06 |
Michael Amaral |
$100.00 |
|
1/27/06 |
Adolph Felix |
$350.00 |
|
1/27/06 |
Adolph Felix |
$100.00 |
|
1/27/06 |
Dennis Hart |
$350.00 |
|
1/27/06 |
Dennis Hart |
$100.00 |
|
1/27/06 |
Ken Hill |
$100.00 |
|
1/27/06 |
Ken Hill |
$350.00 |
|
1/27/06 |
Alvern Joaquin, Jr. |
$350.00 |
|
1/27/06 |
Alvern Joaquin, Jr. |
$100.00 |
|
1/27/06 |
Stephen Mack |
$100.00 |
|
1/27/06 |
Stephen Mack |
$300.00 |
|
1/27/06 |
Ron Paredes |
$100.00 |
|
1/27/06 |
Ron Paredes |
$350.00 |
|
1/27/06 |
Louis Valletta |
$100.00 |
|
1/27/06 |
Louis Valletta |
$350.00 |
|
1/27/06 |
Daniel Varela |
$100.00 |
|
1/27/06 |
Daniel Varela |
$350.00 |
Our investigation identified $14,000.00 in cash contributions from the CAF to the Hoffa-Mack campaign in the current election cycle through July 2006.
2.f. Mack's June 12, 2006 Withdrawal of $5,000.00 Cash.
On June 12, 2006, Mack withdrew $5,000.00 cash from the CAF. He told our investigators that he stored the cash in an envelope at home until he received notice of the OES audit whereupon he re-deposited the cash to the CAF. Mack stated he did not know why he withdrew the cash and did not recall why he stored it at home except that he might need it for "events." Our investigation determined that on June 12, 2006 - the same day as the cash withdrawal - Mack wrote a personal check in the amount of $5,000.00 to the Hoffa-Mack Legal and Accounting fund. The Hoffa-Mack campaign deposited the check on June 23, 2006. We find from this evidence that Mack withdrew the $5,000.00 cash to reimburse himself for the $5,000.00 contribution to the Legal and Accounting fund. Mack's inability to recall why he withdrew the cash and his lack of an explanation for storing the cash at home in an envelope are not credible. Based on this evidence, we find that Mack withdrew the $5,000.00 cash to convert money others had contributed to CAF into his personal contribution.
2.g. Questioning of Chuck Mack.
The Hoffa-Mack CCERs were submitted under the electronic signature of the candidate, Chuck Mack. We questioned him in this investigation concerning his knowledge of CAF and the contributions made to his campaign in cash from that fund. Chuck Mack denied knowing that these contributions had been made from the CAF and not by the individuals named in the report. None of the other witnesses questioned in the investigation provided any evidence that Chuck Mack knew any facts about how these contributions were made and how Horner had decided to record them.
2.h. Local Union Administration of CAF.
The CAF account was administered using local union personnel on union time. Mack directed Kransky to collect the CAF contribution checks from business agents and officers during business hours and Mack made deposits and withdrawals to the account during business hours. Investigation also showed that the address and telephone number listed on the CAF account bank statements are those of Local Union 78 and that bank statements are received at the local union's offices where they are opened by Kransky and then given to Mack.
Analysis
Since the first rank-and-file election of IBT International officers in 1991, the Rules have required disclosure of campaign finances. See United States v. IBT, 742 F. Supp. 94, 105 (S.D.N.Y. 1990), aff'd, 931 F.2d 177 (2d Cir. 1991). The financial disclosure rules changed, and were made more stringent for the International officer rerun election in 1998. See United States v. IBT, 981 F. Supp. 222, 229-230 (S.D.N.Y. 1997). The current Rules require the same level of reporting detail as the 1998 rerun rules. Thus, campaigns must provide the name and local union number of every contributor, the amount of each contribution, and the nature of the contribution. Each candidate's campaign finance records, which are subject to OES audit upon notice (Rules, Article XI, § 2(b)(2)(A)), must reflect the reality of each contribution so that it may be audited back to the contributing source. The stringent disclosure requirements were put in place at the time of the 1998 International officer rerun election so that the source of campaign funds would be known, documented, and provable.
First, all contributions made to Hoffa-Mack from the commingled funds in the CAF fail this test. The $14,000.00 in cash that was donated from the CAF to Hoffa-Mack may be audited back to the CAF, but the trail stops there because the CAF admittedly has no records accounting severally for the money in that account. The CAF balance is comprised of money contributed over the years by various Local Union 78 business agents and officers. The contributors to the initial deposit in 1998 are not known at all, and business agents and officers who contributed in years since then have left Local Union 78 but not received any credit or return of funds from the CAF. "Contributions must be reported in the name of the eligible contributing member and are subject to audit to ensure that funds are not contributed from an improper source and that contribution limits are obeyed. These requirements are not new and are well known to veterans of IBT International Officer elections since at least 1995." Certain Campaign Contributions By Officers and Employees of Local 853, 2006 ESD 341 at 17 (August 23, 2006) Supplemental Decision 2006 ESD 350 (September 15, 2006). Because there is no record of CAF contributors, there is no way to determine whether a contribution of CAF cash made in the 2005-2006 IBT International officer election is properly attributable to a current IBT member eligible under the Rules to contribute.
We note that the current business agents did not disagree with contributions made in their names to Hoffa-Mack. That fact is irrelevant. Nothing prohibits business agents from making contributions with their personal funds (subject to the limits of the Rules). The CAF money, however, was not severally attributable to each current business agent and so was not their money to give in this way.
Second, the CAF money was improperly contributed to Hoffa-Mack because the deposits to that account were not "properly solicited, made, accepted and reported" under the Rules. Rules, Article XI, § 1(b)(1). The primary purpose of the CAF from its inception was to accumulate funds to support campaigns of incumbent Local Union 78 officers in any campaign for local union office. Thus, the $15,273.02 in CAF as of February 2004 was not raised in accordance with the Rules (apart from the fact no records exist to attribute any portion of it to any individual member). The Rules became effective on May 1, 2005 and there were no deposits to CAF between February 2004 and December 2005. Thus, the $10,000.00 in CAF cash contributed to Hoffa-Mack in 2005 came from funds that were not raised within the Rules. See Certain Campaign Contributions By Officers and Employees of Local 853, 2006 ESD 341 (August 23, 2006) Supplemental Decision 2006 ESD 350 (September 15, 2006). Mack testified that there was an understanding as of mid-2005 that CAF money could be directed to the International officer campaign and, arguably, the deposit of $6,300.00 in December 2005 and subsequent withdrawal of $4,000.00 for contributions to Hoffa-Mack in January 2006 could be treated differently than the previously-accumulated funds. We reject that analysis. Mack himself could not recall whether he had spoken to all business agents and obtained agreement on using CAF money for the International officer campaign; the business agents questioned could not remember whether Mack sought or received approval from them for this plan; there is no memorial of such an agreement; there is no evidence that this mid-year agreement was called to anyone's mind months later in December when CAF contributions were actually made; and, most significantly, there is no basis for retroactively applying a "last in, first out" rule to CAF money, and segregating the December 2005 deposits from the previous seven years of accumulated funds, when there is no record of any accounting rules at all being applied to the fund.
Third, Mack violated the Rules when he took $5,000.00 from the CAF to reimburse himself for the contribution he had made to the Hoffa-Mack Legal and Accounting Fund.
Fourth, Horner and Mack violated the Rules when they allocated the CAF cash to the Local Union 78 business agents and reported it as if they had given the money personally out of their own funds. The Rules require the campaign to record "the name and Local Union number of every contributor and the amount of each contribution." Article XI, § 2(b)(2)(A). These contributions were made from the CAF, and not by any individual. Mack did not supply Horner with any list of names and allocated amounts. Horner recorded the contributions that publicly identified the individual members as the actual source of the money: he picked the names and admits he assigned the amounts. That is underscored by the evidence concerning the August 2005 raffle when Horner had originally recorded contributions in Kikes's name and subsequently altered the ticket to show Mack as the purchaser. The source of the money never changed, just the label Horner applied to it. Such conduct ignores the heart of the disclosure requirement that, since the 1998 rerun election, has required auditable accountability for the full amount of every contribution.
Fifth, we find that administration of the CAF account was facilitated by union personnel and facilities, in violation of the Rules. Thus, the account's use of the local union address and phone number, the receipt of bank statements at the local union hall, Mack's traveling to and from the bank to make deposits during business hours and meeting with the Hoffa-Mack campaign manager are examples of use of union facilities and personnel to assist in campaigning. The Rules do not permit such use of resources. Rockstroh, P764 (July 11, 1996); Richards, 2000 EAD 5 (August 1, 2000), aff'd, 00 EAM 1 (August 14, 2000); and Local 20 Business Agents Fund, 2001 EAD 549 (November 8, 2001), aff'd, 01 EAM 105 (November 28, 2001).
Sixth, we find that Horner violated the Rules when he reported cash collected from unknown contributors received at the Elk Grove Crab Feed on February 10, 2006 as his own contribution and thereby knowingly created a false CCER filing for the Hoffa-Mack campaign.
Finally, the evidence shows that the year-end bonuses in 2000, 2001, 2002, 2003, and 2005 were a device Mack used to direct funds from Local Union 78 into the CAF. Each such bonus was followed by a contribution to CAF by the recipient business agents (except for former president Walling in 2000 and 2001); bonuses awarded at other times were not followed by CAF contributions; and in the year when Local Union 78 did not pay a December bonus, there was no CAF contribution. Union funds cannot be used "to assist in campaigning," Rules, Article VII, § 12(c), and a labor organization cannot contribute "anything of value" to a candidate, id., Article XI, §1(b)(3). A pass-through of union funds to a candidate for union office violates the Rules. United States v. IBT, 988 F. Supp, 759, 767-68 (S.D.N.Y. 1997), aff'd, 156 F.3d 354 (2d Cir. 1998); Thompson, P1025 (November 1, 1996), aff'd, 96 EAM 268 (November 12, 1996).
Remedy
When the Election Supervisor determines that the Rules have been violated, he "may take whatever remedial action is deemed appropriate." Article XIII, Section 4. In fashioning the appropriate remedy, the Election Supervisor views the nature and seriousness of the violation as well as its potential for interfering with the election process. In addition, Article XI, Section 1(d) states that "[t]he remedy that may be imposed by the Election Supervisor in resolving any protest concerning a candidate's or campaign's receipt or use of improper contributions will be influenced by the manner in which the contribution was solicited and/or accepted …"
We order the following relief:
1. We refer to the Independent Review Board for whatever action it deems appropriate, including further investigation, all issues that are documented in or arise from this matter. These include the granting and use of the December bonuses by Local Union 78 and Horner's conduct in connection with preparing CCERs.
2. The Hoffa-Mack Campaign must refund to the CAF the $14,000.00 in funds it received as itemized in this ruling. If there are any other funds it received from CAF, it shall account for those funds and disgorge them to CAF.
3. Upon receipt by the CAF account of the disgorged campaign contributions identified in paragraph 1 of this remedy, we order Mack to refund to Local Union 78 the sum of $14,000.00. We further order Local Union 78 to hold the sum of $14,000.00 in escrow until such time as the Independent Review Board completes any proceedings it may undertake in this matter.
4. For the balance of the period the Rules remain in effect, we prohibit the CAF and Mack and all full-time business agents and officers of Local Union 78 from making any campaign contribution or legal and accounting contribution to any candidate for International office or for reimbursing any individual from contributions made to the Hoffa-Mack Legal and Accounting Fund. This is a strictly remedial measure that is necessary to protect the integrity of the electoral process.
5. Hoffa-Mack shall pay to the OES a fine of $8,750.00. In Certain Campaign Contributions By Officers and Employees of Local 853, 2006 ESD 341 (August 23, 2006) Supplemental Decision 2006 ESD 350 (September 15, 2006), we found that Horner recorded specific individuals as the source of $3,500 in contributions to Hoffa-Mack even though he knew the money came from a pooled account and not the individuals he named on the CCER. We ordered the Hoffa-Mack campaign to disgorge those contributions, and others, in the Local Union 853 case. Here, we find a similar case of intentional, improper reporting of a greater total sum, and we have ordered the campaign to disgorge $14,000. Disgorgement in these cases is, however, an insufficient remedy against the Hoffa-Mack campaign and we impose a fine equal to one-half the disgorged sum. As we noted in the Local Union 853 case, the funds Hoffa-Mack received from the improper contributions scheme at that local union "came early in the election cycle and provided money the Hoffa-Mack campaign used to hold fund-raising events that produced substantial campaign contributions. The Hoffa-Mack campaign was able to reap a significant harvest using the improper contributions as "seed." Here, Horner, the designated agent for the campaign, knew the contributions to the campaign were from the Local Union 78 pooled account but, instead, recorded each one as if it had been received from an individual and paid with that individual's own funds. This is not a case where a campaign received contributions about which it had doubts regarding their source. Horner himself was an active participant in the scheme to attribute to individuals contributions he knew came from the pooled account, and he hid the source of money by recording the contributions to Hoffa-Mack not as donations from the CAF, but as multiple donations from a collection of individuals. The fine we assess here is strictly remedial. It is intended to deter improper conduct by the Hoffa-Mack campaign, and by all other campaigns under our Rules, from receiving improper contributions of this nature.
6. We order Mack to post the notice attached to this decision on all union bulletin boards under the local union's jurisdiction for a period of 30 consecutive days. We further order Mack to mail the notice attached to this decision to all Local 78 members via first class mail no later than October 10, 2006. The cost of such mailing, including photocopying or printing expense, postage expense, and mailhouse fees, shall be paid by the CAF. The purpose of the notice is to advise the local union membership that its elected leadership impermissibly used union funds to support candidates for International office and that those funds have been ordered returned to the local union treasury.
All remedies imposed by this decision that require persons to take affirmative steps must be completed within three (3) working days of receipt of this decision. Affidavits of compliance must be forwarded to our office in Washington, D.C. within two (2) working days of compliance.
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 Supervisor 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
885 Third Avenue, Suite 1000
New York, New York 10022
Fax: (212) 751-4864
Copies of the request for hearing must be served upon the parties, as well as upon the Election Supervisor for the International Brotherhood of Teamsters, 1725 K Street, N.W., Suite 1400, Washington, D.C. 20007-5135, all within the time prescribed above. A copy of the protest must accompany the request for hearing.
Richard W. Mark
Election Supervisor
cc: Kenneth Conboy
2006 ESD 363
NOTICE TO ALL MEMBERS OF LOCAL UNION 78
FROM IBT ELECTION SUPERVISOR
RICHARD W. MARK
The Rules for the 2005-2006 IBT International Union Delegate and International Officer Election ("Rules") permit members to make campaign contributions to any candidate for International office. The Rules require candidates to report all contributions in the name of the member that made the contributions, and the Rules prohibit use of union funds, personnel and facilities to support any candidate for International office.
The Election Supervisor has found evidence that Steve Mack and the Executive Board of Local Union 78 engaged in a scheme to contribute local union funds to candidates for International office. The Executive Board, on Mack's motion, approved year-end bonuses in 2000, 2001, 2002, 2003 and 2005 to full-time Local Union officers and business agents and required them to contribute part of the bonus to a local union officer campaign fund. In 2005 and 2006, cash from that account of pooled money was donated to Hoffa-Mack and reported as contributions from individual donors. The Election Supervisor has referred this conduct to the Independent Review Board for further investigation and action, as appropriate. You can read this decision, and the detailed findings at www.ibtvote.org
The Election Supervisor also found that individuals listed as making campaign contributions did not make those contributions. Instead, the money was contributed out of a pooled account that was funded through several years of employee bonus payments. This concealed the true source of the reported contributions and violated the Rules that require campaign contributions to be made for the International officer election exclusively by members.
The Election Supervisor has found that the campaign account into which the bonus payment contributions were deposited was maintained by local union personnel on time paid for by the local union and with equipment owned by the local union.
The Election Supervisor will not tolerate such improper use of union funds, personnel and facilities.
Accordingly, the Election Supervisor has ordered the campaign to pay back $14,000.00 in improper contributions, and imposed an additional fine of $8,750.00.
The Election Supervisor has also ordered this notice to be mailed to all members of Local Union 78, and posted on all union bulletin boards under the local union's jurisdiction for a period through November 14, 2006. This notice will also be sent by IBT TITAN message to each IBT Local Union, or by regular mail to those non-TITAN locals.
__________________________________
Richard W. Mark
IBT Election Supervisor
Dated:
DISTRIBUTION LIST (BY EMAIL UNLESS OTHERWISE SPECIFIED):
Bradley T. Raymond, General Counsel
International Brotherhood of Teamsters
25 Louisiana Avenue, NW
Washington, DC 20001-2198
braymond@teamster.org
David J. Hoffa
Hoffa 2006
30300 Northwestern Highway, Suite 324
Farmington Hills, MI 48834
David@hoffapllc.com
Barbara Harvey
645 Griswold Street
Suite 3060
Detroit, MI 48226
blmharvey@sbcglobal.net
Ken Paff
Teamsters for a Democratic Union
P.O. Box 10128
Detroit, MI 48210
ken@tdu.org
Daniel E. Clifton
Lewis, Clifton & Nikolaidis, P.C.
275 Seventh Avenue, Suite 2300
New York, NY 10001
dclifton@lcnlaw.com
Stephen Ostrach
1863 Pioneer Parkway East, #217
Springfield, OR 97477-3907
saostrach@gmail.com
Duane Beeson
Counsel for Ron Horner
Beeson, Tayer & Bodine
1404 Franklin Street, 5th floor
Oakland, CA 94612
dbeeson@beesontayer.com
Geoff Pillar
Counsel for Various Officers and Business Agents of Local Union 78
Beeson Tayer & Bodine
1404 Franklin Street, Fifth Floor
Oakland, CA 94612-3208
GPillar@beesontayer.com
Hoffa-Mack 2006
3295 Monika Lane
Hayward, California 94541
T70ronh@aol.com
Bruce Dubinsky
Klausner Dubinsky & Associates
4520 East West Hwy, Suite 640
Bethesda, MD 20814
bdubinsky@kd-cpa.com
Keith Neus
Klausner Dubinsky & Associates
4520 East West Hwy, Suite 640
Bethesda, MD 20814
kneus@kd-cpa.com
Christine Mrak
2357 Hobart Avenue, SW
Seattle, WA 98116
cmm@wmblaw.net
Maureen Geraghty
The Geraghty Law Firm
426 Old Salem Road
Winston-Salem, NC 27101
mg@geraghtylawfirm.com
Jeffrey Ellison
510 Highland Avenue, #325
Milford, MI 48381
EllisonEsq@aol.com