Protest Decisions

              August 21, 1997

VIA UPS OVERNIGHT

James P. Hoffa Slate, et. al.

August 21, 1997

Page 1

James P. Hoffa Slate

c/o Patrick J. Szymanski

Baptiste & Wilder

1150 Connecticut Avenue, NW

Washington, DC 20036

Ron Carey Campaign

c/o Susan Davis

Cohen, Weiss and Simon

330 W. 42nd Street

New York, NY  10036

Ron Carey, General President

International Brotherhood of Teamsters

25 Louisiana Avenue, NW

Washington, DC  20001

Robert D. Lenhard, Esq.

AFSCME

1101 17th Street, NW, Suite 1210

Washington, DC 20036

1199 Communications Center

c/o Mitra Behroozi

Levy, Ratner & Behroozi, P.C.

80 Eighth Avenue

New York, NY XXX-XX-XXXX

Lorelei Anderson

Teamsters Local Union 705

1645 W. Jackson Boulevard

Chicago, IL  60612

Lon E. Fields, Sr.

7088 Brunterstown Road

Shelbyville, KY  40065

Richard Nelson

705 N. Sweetgum Avenue

Oklahoma City, OK  73127

Diana Kilmury

2612 E. 47th Avenue

Vancouver, BC  V5S 1C1

CANADA

David Kozak

Teamsters Local Union 464

1475 Lawson Avenue

W. Vancouver, BC  V7P 2E9

CANADA

Charles Thibault

1194 Matheson Boulevard

Mississauga, ON  L4W 1Y2

CANADA

James P. Hoffa Slate, et. al.

August 21, 1997

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James P. Hoffa Slate, et. al.

August 21, 1997

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James P. Hoffa Slate, et. al.

August 21, 1997

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George Cashman

15 Willow Street

Woburn, MA  01801

Bill Urman

10600 W. Higgins Road, Suite 724

Rosemont, IL  60018

Eddie Kornegay

Teamsters Local Union 922

2120 Bladensburg Road, NE

Washington, DC  20018

James P. Hoffa

2593 Hounds Chase

Troy, MI  48098

Dane Passo

6811 W. Roosevelt Road

Berwyn, IL  60402

James P. Hoffa Slate, et. al.

August 21, 1997

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Re: Election Office Case Nos.              Post-45-EOH

Post-46-EOH

Post-47-EOH

Post-48-EOH

Gentlepersons:

Post-election protests were filed pursuant to Article XIV, Section 3(a) of the Rules for the 1995-1996 IBT International Union Delegate and Officer Election (“Rules”) by the Hoffa Slate alleging violations of the Rules based upon based upon review of Campaign Contribution and Expenditure Reports (“CCERs”) for the Carey Campaign and the Teamsters for a Corruption Free Union (Post-45) and individual candidates on the Carey Slate (Post-46) for the period ending March 28, 1997.  A post-election protest was filed by the Carey Slate alleging violations of the Rules based upon based upon review of CCERs for the Hoffa Slate and individual candidates on the Hoffa Slate (Post-47).  A post-election protest was filed by Dane Passo, a member of Local Union 705, alleging violations of the Rules based upon based upon review of CCERs for the Carey Slate and individual candidates on the Carey Slate (Post-48). Because of the similar nature of the claims, the Election Officer has consolidated these protests in this decision.

The protests were investigated by Protest Chief Benetta Mansfield, Coordinator of Campaign Finance and Reporting Kathryn Naylor and New York City Protest Coordinator Barbara C. Deinhardt.

I.  Allegations in Post-45

James P. Hoffa Slate, et. al.

August 21, 1997

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Certain claims in Post-45 allege violations which, if found, could be asserted to have affected the outcome of the election.  Because these issues are properly treated as post-election protests, they are addressed below:

A.  Illegal Contributions/Loans Relating to Telephone Banking Services.

The protester asserts that the listing of the debts for the American Federation of State County and Municipal Employees (“AFSCME”) and 1199 Communications Center (“Center”) phone banks are in violation of the Rules because (1) the Carey campaign had failed to include these expenditures in its previous reports; (2) there is no indication that these services were equally available to other candidates; (3) there is no indication that these services were provided on any commercially reasonable basis; and (4) there are no explicit terms for repayment.

The investigation demonstrates that the Carey Campaign conducted extensive phone baking as part of its get-out-the-vote efforts during November, 1996.  For most of these efforts, the Campaign hired the services of two phone banks run by other unions: AFSCME and the 1199 Communications Center. 

AFSCME sent a bill in the amount of $129,735 to the Carey Campaign on January 27, 1997.  The investigation revealed that the Campaign received two invoices from the Center in December, 1996, the first dated December 7, 1996, for $33,813 and the second dated December 10, 1996, for $26,039 (identified as the “December ‘96 Final Bill.)”    The report of a debt to the Center first appeared on the  CCER for the period of December 21 through March 28, but due to a reporting error, only the amount of the second bill was reported. The Campaign acknowledges that the total amount owed for the Center phone banking was $59,852.

The Election Officer has previously ruled that expenditures may be reported at the time bills are received and paid, so long as bills more than 30 days old are reported as debt.    See Steger, P-827-IBT-EOH (September 3, 1996).   Based on the investigation, the reporting of these debts on the CCER for the period December 21 through March 28 does not violate the Rules.

  With respect to the contention that the telephone bank services were not equally available to other candidates, the Election Officer has previously considered such a claim with respect to a non-Teamster labor organization providing phone banking service.  In Cook, P-337-LU705-CHI, et seq. (May 8, 1996), aff’d, 96 - Elec. App. - 191 (May 17, 1996) (KC), the Election Officer concluded that a non-Teamster labor organization is not obligated to provide equal services to all candidates.  Rather, these unions are in the same position as other vendors who can select their customers.

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August 21, 1997

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The Rules do require that any vendor must provide services on a commercially reasonable basis.  Any discounting of services must be available to other customers in a similarly situated position.  In this case, the investigation disclosed that in November 1996, the Campaign entered into an oral contract with AFSCME and a written agreement with the Center.  Neither the Center nor AFSCME require prepayment from its customers.  The rate charged by each of these organizations was the rate normally charged other clients of the phone banks and therefore the Election Officer finds these rates commercially reasonable. See Hoffa, P-1321-LU1199-NYC (February 8, 1997). 

Even an initially valid transaction can become a contribution if the creditor fails to collect the amount due in a commercially reasonable manner.  Article XII, Section 1(b)(7).  The Election Officer has, therefore,  investigated the manner in which these debts have been handled. 

When the Carey Campaign failed to pay its invoice, on January 17, 1997, the Center sent a 30-day notice letter.  A second collection letter was sent on March 12, and a third and final letter regarding payment on April 16, 1997.  After receiving a payment of $5,000 from the Carey Campaign on May 19, the Center was not satisfied that it would be paid for the services it rendered, and referred the matter to its attorney to initiate a collection action.  The attorney retained a collection agent, Dun and Bradstreet (“D & B”), and thereafter negotiations commenced between D & B and the Carey Campaign to try to settle the debt.  D & B, representing the Center, and the Carey Campaign have now agreed to a 25% reduction on the debt if all payments are made by October, 1997.  The agreement also has a provision for full payment immediately if the Campaign fails to abide by the agreement.  D & B has advised the Center that a 20% to 30% reduction for payment of a debt in return for payment within a year is the commercially reasonable rate for settlement, and that D & B does not seek a confession of judgment in pre-litigation settlements. The Election Officer finds that such an arrangement is commercially reasonable under the facts presented here. 

AFSCME sent a bill to Jere Nash on January 27, 1997.  When it did not receive payment AFSCME personnel began telephoning the campaign regarding payment.   AFSCME received a check for $5,000 in April.  On May 6, 1997, AFSCME sent another bill for the balance due and owing in the amount of $124,735.    Shortly thereafter, the administrator of the phone bank turned the matter over to an AFSCME attorney.  The campaign has now reached an agreement with AFSCME to make seven monthly payments to retire the debt.  The Election Officer finds such an arrangement, where AFSCME receives payment in full over a reasonable time period, with a provision for full payment within ten days if the campaign fails to make any payment, to be commercially reasonable.

B.  Return of Additional Contributions

The Hoffa Slate states that CCER No. 8 reflects that the Carey campaign returned more than $12,000 in contributions apart from the TCFU contributions.  The protester asserts that these contributions were illegal and “apparently returned as a result of a previously filed protest.”

James P. Hoffa Slate, et. al.

August 21, 1997

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This aspect of the protest is untimely.  The contributions in question were part of the CCER inspected by the protester in January of 1997.  At that time, the protester challenged the TCFU contributions, but not any additional contributions reported by the Carey campaign.

The protest must be denied on its merits as well.   The contributions at issue were the subject of  inquiries made as a part of the Election Officer’s regular monitoring of CCER reports.  Based upon those inquiries, the Carey campaign decided to return certain contributions without any admission that they were received from prohibited contributors.  The Election Officer did not make any findings with respect to the status of these contributors, and treated the matter as resolved on the basis of the return of the contributions.  This practice has been followed consistently with respect to all candidates during the course of the Election Officer’s monitoring.   of contributions and is within the broad discretion of the Election Officer.   Rockstroh, P-764-IBT-EOH (July 11, 1996); Gilmartin, et al., P-1337-IBT-EOH, et seq., (February 14, 1997).  It was also approved as a practice in Cheatem, Post-27-EOH issued today.

C.  “Suspicious” Contributions

The Hoffa slate noted three very large contributions by individuals reported on the CCER  for the period ending March 28, 1997, and questioned how the individuals involved would have had the financial resources to make these contributions themselves.  Because of the size of the contributions, the Election Officer took statements and reviewed financial records from these individuals.  Based on this investigation, the Election Officer did not find evidence that the contributions were from prohibited sources.

D.  Legal and Accounting Fund Transactions

The Hoffa slate alleges that the Carey Campaign violated the Rules by using $11,166 from its Legal and Accounting Fund for general campaign purposes during the critical last stages of the campaign.

The investigation revealed that for the period September 1995 through November 1996, the Carey Campaign reported that it spent $15,739.34 of its general campaign funds to pay Cohen, Weiss and Simon for legal fees and expenses.  On November 8, 1996, the Carey Campaign raised $30,250 of funds earmarked for legal and accounting purposes, the first such funds to be raised by the Campaign.  At that time, the Campaign did not establish a separate bank account for the earmarked funds.  Rather, those funds were deposited into a general campaign fund bank account. The Carey Campaign then used $15,739 of those earmarked funds on campaign expenses.

James P. Hoffa Slate, et. al.

August 21, 1997

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The Campaign stated that it was justified in using the $15,739 in earmarked funds for general campaign purposes because it was in essence reimbursing the general campaign account for the legal fees and costs previously paid by the Campaign. In February 1997, in response to inquiries made by the Election Office regarding the Campaign’s handling of its earmarked funds,  the Campaign set up a separate legal and accounting bank account.  In mid-March, Cohen, Weiss and Simon determined that only $4,532 of the $15,739 that had been previously paid to the law firm from general campaign funds was attributable to election rule compliance work.  The balance of $11,207 was for fees and costs incurred for other work and, therefore, was not properly payable with funds earmarked for  legal and accounting purposes.[1]  On March 26, 1997, the Campaign transferred $11,362 of general campaign funds to its legal and accounting fund.

The Carey Campaign asserts that the use of $15,739 in general campaign funds to pay Cohen, Weiss and Simon for legal services from September 1995 through November 1996 constituted an advance or loan to its legal and accounting fund later to be established.  It recognizes that $11,207 of this amount was not properly payable from earmarked funds for legal and accounting purposes, but asserts that it corrected this error by transferring the amount back to the general campaign fund account.

The Rules  provide for a limited exception to the prohibition on employer and union contributions by permitting candidates to accept “financial support or services” from disinterested employers and non-IBT labor organizations to pay for “fees for legal or accounting services performed in assuring compliance with applicable election laws, rules or other requirements or in securing, defending, or clarifying the legal rights of candidates.”  Article XII, Section (1)(b)(2).  The Election Officer’s Advisory on Campaign Contributions and Disclosure (December 14, 1995) (“Advisory”) emphasizes that contributions to the legal and accounting fund from these otherwise prohibited sources must be utilized “solely and specifically for these purposes.”

The Rules and Advisory require segregation of these funds to ensure that they are not treated as interchangeable with unrestricted campaign monies.  Segregated funds require, at a minimum, separate bank accounts so that funds for two separate purposes are not commingled. Hence, the failure to have a separate bank account solely for earmarked funds violated the Rules, even if the Campaign could account for the earmarked funds.  Use of earmarked funds to “reimburse” the expenditure of the general campaign funds for prior payments of legal services for election rule compliance violates the requirement of restricted and segregated funds. 

James P. Hoffa Slate, et. al.

August 21, 1997

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Accordingly, the Election Officer concludes that the failure to have separate bank accounts and the reimbursement arrangement at issue here violate the Rules.  In ruling on Cheatem, the Election Officer determined that violations by the Carey Campaign may have affected the outcome of the election and ordered that a rerun be conducted.  It is not necessary, therefore, to determine whether the violation found here with respect to the handling of  legal and accounting  funds affected the outcome of the election.

  In order to remedy this violation, the Election Officer  orders that, within five (5) days of this decision,  the Carey Campaign transfer $4,532 from its general campaign funds to its legal and accounting fund and that hereafter separate accounts be maintained at all times.  The Election Officer further orders the Carey Campaign to pay interest at the prime rate in the amount of $2,507.57 from its general campaign fund to the legal and accounting fund for its handling and use of the total amount of $30,250.[2]  Within three (3) days of making this payment, the Campaign shall file an affidavit of compliance, along with documentation of these transactions.

D.  Remaining Allegations

The remaining allegations in Post-45 involve assertions of inaccurate or incomplete reporting.[3]  Such claims are not properly considered as post-election protests, as there is no assertion or proof that violations, if any, may have affected the outcome of the election.   The Election Officer has taken these assertions into account in her ongoing monitoring of  CCERs.  The Election Officer will continue to make inquiries of candidates, as appropriate,  and require the filing of  amended CCERs where necessary.  The amended CCERs will be available for inspection.

Based on the foregoing, Post-45 is GRANTED as to the transfers from the legal and accounting fund and DENIED in all other respects. 

II.  Allegations in Post-46

James P. Hoffa Slate, et. al.

August 21, 1997

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Post-46 is an enumeration of allegations of incomplete or inaccurate reporting for individual candidates on the Carey slate.  To the extent that the Election Officer believed further review was necessary, such information was requested as part of the Election Officer’s monitoring function and, in certain cases, amended CCERs were filed.[4]  These amended CCERs are available for inspection.

Based upon the foregoing, Post-46 is DENIED. 

James P. Hoffa Slate, et. al.

August 21, 1997

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III.  Allegations in Post-47

On May 16, 1997, the Carey campaign filed a protest against Mr. Hoffa and members of his slate alleging violations based on a review of the Hoffa candidates CCERs.  Specifically, the protest relates to questions concerning the “non-reporting, under-reporting, or mis-reporting of contributions and expenditures on the CCERs filed by the Hoffa slate and its members.”  In recent weeks, the protester submitted press reports of a grand jury investigation in Detroit, Michigan, investigating allegations of financial improprieties at Local 337, noting that the principal officer of this local has been a chief supporter of Mr. Hoffa.  The protester urges the Election Officer to investigate these alleged improprieties arguing that funds from this local union may have been diverted to Mr. Hoffa’s campaign efforts.

With the exception of the candidates for Central Region Vice President, Mr. Hoffa and his slate were unsuccessful in their campaign for International office. The Rules require that a post-election protest regarding the conduct of the election will only be considered “if the alleged violation may have affected the outcome.”  Article XIV, Section 3(b).  Insofar as the Hoffa slate candidates were not successful, the receipt of improper campaign contributions, if any, did not effect the results of the election.  See Durham, Post-75 (January 10, 1992), pp. 33-34. While the Central Region Vice Presidents on the Hoffa slate were successful, no timely post-election protest was filed following announcement of them as the winners of the Central Region positions.  The current protest, filed more than four months after that announcement, does not claim that the alleged violations affected their election.

Even if the protester had asserted an effect on the outcome, and if the allegations of financial improprieties connected to the Hoffa slate campaign could be proven, it would not alter the Election Officer’s determination that the election cannot be certified.  Under the circumstances of this case, she would still conclude that the outcome of the election may have been affected by the Rules violations.  See Cheatem.

The protester urges that the Election Officer conduct an investigation to preserve the integrity of financial disclosure practices and hold the Hoffa campaign responsible for full compliance with the Rules.  However, both the timing and the nature of this protest lead the Election Officer to reject this request.

James P. Hoffa Slate, et. al.

August 21, 1997

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Most of the claims alleging reporting violations could have been raised following earlier reviews of the CCERs.  To the extent these claims arise from earlier CCER reviews, a preelection protest had to be filed within two working days of the day “when the protestor becomes aware or reasonably should have been aware of the action protested or such protests shall be waived.” These claims are therefore untimely. Furthermore, the Election Officer notes that this protest does not present evidence of contributions that violate the Rules or known expenditures that were not reported.  Rather, the protest rests largely on the protester’s suspicions about excluded contributions or expenditures.

While not treating this matter as a protest, the Election Officer has taken the information presented into account in her ongoing monitoring of CCERs.  To the extent that Election Officer believes that further information was necessary, such information has been requested as part of this monitoring function.  In this regard, the Election Officer notes that Mr. Hoffa has filed an amended CCER which includes previously unreported expenses noted by the protester.  The amended CCER is available for inspection.  

Based upon the foregoing, Post-47 is DENIED.

IV.  Allegations in Post-48

In Post-48, the protester makes allegations regarding alleged nonreporting or under reporting of campaign contributions from Carey Campaign-supported vendors. Most of the claims alleging reporting violations could have been raised following earlier reviews of the CCERs.  As stated above, to the extent these claims arise from earlier CCER reviews, a preelection protest had to be filed within two working days of the day “when the protestor becomes aware or reasonably should have been aware of the action protested or such protests shall be waived.” These claims are therefore untimely.

Other issues raised by the protester relate to the protests decided in Cheatem, Post-27-EOH issued today and the contentions in Post-45 and Post-46 addressed above in Sections I. and II. of this decision.  Moreover, the Election Officer notes that this protest does not present evidence of contributions that violate the Rules or known expenditures that were not reported.  Rather, the protest rests largely on the protester’s suspicions about excluded contributions and expenditures.

For these reasons, Post-48 is DENIED.

Any interested party not satisfied with this determination may request a hearing before the Election Appeals Master within three (3) days of receipt of this letter.  The parties are reminded that, absent extraordinary circumstances, no party may rely upon evidence that was not presented to the Office of the Election Officer in any such appeal.  Requests for a hearing shall be made in writing and shall be served on:

Kenneth Conboy, Esq.

Latham & Watkins

885 Third Avenue, Suite 1000

New York, NY 10022

James P. Hoffa Slate, et. al.

August 21, 1997

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Fax (212) 751-4864

Copies of the request for hearing must be served on the parties listed above as well as upon the Election Officer, 400 N. Capitol Street, Suite 855, Washington, D.C. 20001, Facsimile

(202) 624-3525.  A copy of the protest must accompany the request for a hearing.

Sincerely,

Barbara Zack Quindel

Election Officer

cc:              Kenneth Conboy, Election Appeals Master

Barbara C. Deinhardt, New York City Protest Coordinator