BY Eugene H. Methvin
IN LAS VEGAS, a member of the Hotel Employees
and Restaurant Employees International Union (HERE) found himself
in excruciating pain from an abscessed tooth. When he visited
the dentist provided under HERE's mandatory-and costly-health
plan, he was told he had to pay $92 for Novocain. The man had
to borrow the money from fellow workers before the dentist would
end his agony. A U.S. Department of Labor investigator later found
the anesthetic cost the dentist about $6-and that much of the
money from the union's dental plan was being siphoned off by the
In Los Angeles, retired construction worker,
Walter Brown, 70, and his wife squeaked by on a $488 monthly Social
Security check. Had it not been for church charity, they would
not have eaten regularly. Brown had worked toward his Laborers
International Union pension for more than 14 years, but he received
Then in 1987 a federal court ruled that Brown
and some 2000 other former LIU members were entitled to $20 million
in pension payments. Evidence showed the Laborers fund trustees
had so rigged the rules that only one union member in 20 received
anything for his retirement.
These scandals reflect Uncle Sam's tragic failure to adequately
police the nation's 900,000 pension funds and 4.5 million welfare
plans. Together, they hold $1.8 trillion in trust for 76 million
American workers, who contribute some $200 billion more every
Federal audits and criminal investigations
demonstrate that most plans are honestly run. But an alarming
minority, according to the Labor Department's acting Inspector
General Raymond Maria, are under assault by "racketeers disguised
as attorneys, accountants, bankers, investment advisers, and such
service providers as doctors and dentists." One rank-and-file
Laborer put it this way: "The mobsters don't kill to steal
anymore. They do it with lawyers-and we don't find out for years
that we've been robbed."
The funds attract sharks great and small.
Buddy Leroy Watson, a real-estate broker, was prosecuted by the
Justice Department and sentenced for embezzling $60,000 from a
profit-sharing plan he administered for five ice-cream-parlor
employees. And last year Mario Renda, president of a major brokerage
firm, First United Fund, was sentenced to four years for helping
bilk $14 million from Teamster and Sheet Metal Worker pension
By far, the worst piracy occurs among the
funds run by the "Bad Four"-AFL-CIO unions dominated
by the Mafia (the Teamsters, Laborers, Longshoremen, Hotel and
Restaurant Employees). These internationals control about a third
of the assets of the nation's 7200 multi-employer funds-collectively
bargained plans funded by multiple companies and managed by a
Jimmy Fratianno, a Mafia chieftain who specialized in labor racketeering,
held a Capitol Hill committee rapt as he described the Mob's techniques:
"You find out who controls the money. Then you see if you
can make a deal. If that doesn't work, you try threats. And if
all else fails, you break the guy's leg-or worse."
For sheer grandiosity, nothing equals the
Chicago Mafia's grab for nationwide control of both the Laborers
and the Hotel and Restaurant Employees trust funds. In February
1977, Al Bramlet, corrupt boss of HERE's Las Vegas Local 226,
was murdered; his killers confessed to a contract slaying. Bramlet
had resisted Mob orders to merge his local's welfare fund with
the syndicate-controlled national fund. Bramlet's successor went
ahead and carried out the merger.
Then, three years later, the Labor Department's
Office of Labor Racketeering uncovered a nationwide pattern of
plunder in HERE's dental plans, stretching back to the Chicago
Mob. For its big locals in Las Vegas and Atlantic City, HERE sponsored
dental plans with exorbitant administrative costs, amounting to
about 45 cents out of every dollar. Said one expert, "When
administrative costs get above ten percent, you ought to give
them a mask and a gun." In Las Vegas, Labor Department attorneys
found that $3.3 million in HERE funds had been misappropriated.
Actual dental care was scandalous, as well.
Plan operators hired dentists at meager salaries, thus attracting
many inexperienced practitioners. Costs were routinely inflated.
And often the work was so shoddy that, although union members
were forced to buy the insurance, only a fourth used plan dentists,
leaving the administrators to split huge profits with Mafia middlemen.
The Labor Department successfully sued HERE officers and contractors from both locals to recover $3.85 million and to ban them from handling the trust funds.
The curtain of silence parted more easily
on the Mob's Laborers Union piracy. In sworn testimony Daniel
Milano, an executive for a company providing dental and eye care
to the union's Chicago and Miami locals, detailed years of kickbacks
to Mob and union figures. Then a Miami jury convicted four men,
including the son of Laborers president Angelo Fosco, of conspiracy
to steal more than $2 million from the union.
Problems even arose at some of the country's largest and most
respected investment firms. In 1981 John Giura, a partner of Chicago's
Stein Roe & Farnham, was awarded a contract to manage $310
million in assets for the upstate New York Teamster pension and
retirement funds. He invested the money through George and John
Inserra, brokers in the Utica, N.Y., office of Shearson Lehman
Brothers, Inc., who were friends of Teamster boss Rocco DePerno.
The Inserras collected $6.2 million in commissions
on Teamster investments. To pay off their allies, they set up
a secret account for stocks: those that lost value were bucketed
into the Teamster pension fund, while quick profit-makers were
kept for the insiders. Other payoffs were channeled through phony
Additional payola was tracked to the son
of Long Island Teamster boss and Mafia associate John Cody. Another
recipient was Anthony Bentro, a longtime Teamster henchman whom
the FBI recorded conferring with Mafia bosses on how to split
union kickbacks. (Giura was dismissed by Stein Roe.)
In 1974, Congress passed the Employee Retirement Income Security
Act (ERISA), creating safeguards for virtually all employee trust
funds, union and nonunion alike. It assigned the Labor Department
to be the "cop on the corner," with help from the Justice
Department and Internal Revenue Service. Yet the Labor Department
has fewer than 300 investigators-one for every 3000 pension plans
and 15,000 welfare plans. While President Bush has asked Congress
to provide 100 more investigators, these watchdogs lack adequate
training in finance, accounting and the law.
Congress bears major responsibility for this
fiasco. For years, neither the Senate nor House labor management
subcommittee has seriously probed the looting of employee trust
funds. They have also failed to bolster Uncle Sam's pitiful enforcement
Since government efforts have been ineffective
so far, workers will have to rely more on themselves to protect
their trust funds. And under ERISA they can. The act gives pension-fund
participants the right to obtain copies of their trust plan and
its annual report (Form 5500) filed with the Labor Department.
They also may appeal decisions on benefit amounts or eligibility
to fund trustees, whose rulings can themselves be appealed to
the federal courts.
To learn more about your pension rights,
contact the Pension Rights Center (918 16th St., N.W., Dept. RD,
Washington, D.C. 20006) and/or the Pension and Welfare Benefits
Administration (U.S. Labor Department, Room N5658, 200 Constitution
Ave., N.W., Washington, D.C. 20210). If you suspect fund piracy
or mismanagement, gather the evidence and present your case to
your regional Of fice of Enforcement, Pension and Welfare Benefits
Administration, U.S. Labor Department.
Some have done so with great success. In
Fairbanks, Alaska, Laborers local members Sam Goodman and Chris
White spent weeks studying ERISA and investigating their union's
$74,300,000 retirement fund. The National Bank of Alaska, they
discovered, was paid to manage the money and loaned some of it
to companies owned in part by two of its directors, including
future governor William Sheffield. Such "self-dealing"
is prohibited by ERISA, and the two union members petitioned the
Labor Department to stop the bankers "from treating our pension
funds as their private money machines."
Washington filed suit. The bank quickly agreed
to buy back the loans, and the beneficiaries were assessed penalties.
Along the Eastern Seaboard and West Coast, members of the International
Organization of Masters, Mates and Pilots, part of the Mob-dominated
International Longshoremen's Association, worried because their
pension funds were going into shaky investments. In 1984 the reformers
elected John Hayes a vice president.
Hayes, who holds a business degree, discovered
that the value of assets worth approximately $30 million in November
1984 had dropped to about $9.5 million by early 1986. Money had
been poured into businesses in which fund managers had hidden
interests. Other investments included such follies as a pornographic
cable-TV channel and a burned-out vessel to be transformed into
a cruise ship. In mid-1986 Hayes and a rank-and-file group sued
the trustees and the investment company for violating ERISA; several
months later, the Labor Department joined the suit.
In Baltimore, Teamster Local 557 member Clifton MacDonald was killed in a trucking accident just months before he would have retired on an $800-a-month pension.
His son, Cliff, also a Teamster, was disturbed
that his mother got only $160 a month. He joined Hermann Myers,
a Teamster veteran, to study other Baltimore union pensions. Their
own local, they discovered, paid retirees far less than did other
locals in the area.
In November 1986 MacDonald and Myers led
a ten-man slate challenging the local's officers. Shortly before
the election, Myers recalls, the trustees announced a 50 percent
raise in the death benefit and an increase of 30 percent in future
pension contributions. Nevertheless, MacDonald and Myers, along
with five of their fellow reformers, were elected.
Says Myers, a Teamster for 41 years, "You
can't just pay your union dues and expect things to run themselves.
You have to keep on top of what's happening."
If every union member followed that advice,
racketeers and chiselers would be out of the pension and health
plan business for keeps.