Eighth Interim Report 6.3.14

Case l:90-cv-05722-RMB-THK Document l534 Filed 06/04/l4 Page l of l
UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK
-----------------------------------------------------------X
UNITED STATES OF AMERICA,
PlaintiII,
90 Civ. 5722 (RMB)
-against-
DISTRICT COUNCIL OF NEW YORK CITY
AND VICINITY OF THE UNITED
BROTHERHOOD OF CARPENTERS AND
JOINERS OF AMERICA, et al.,
DeIendants.
-------------------------------------------------------------X
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Dennis M. Walsh
Review OIIicer
The Law OIIice oI Dennis M. Walsh
415 Madison Avenue, 11
th
Floor
New York, New York 10017
646.553.1357
dwalshdennismwalsh.com
Case l:90-cv-05722-RMB-THK Document l534-l Filed 06/04/l4 Page l of 37
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INTRODUCTION...........................................................................................................................1
I. THE DISTRICT COUNCIL................................................................................................2
A. The Election oI Joseph Geiger as Executive Secretary-Treasurer...........................2
B. Organized Crime......................................................................................................3
C. The District Council Fails to EnIorce the CBA at a Key Job Site...........................5
D. Electronic Reporting, Data Sharing and Paper Reports...........................................8
E. Working Dues Check-OII System.........................................................................10
F. The Necessity oI Strict Compliance with the Bylaws and UBC
Constitution............................................................................................................12
G. Man Hours .............................................................................................................13
H. The Electronic Dispatching oI Business Representatives......................................13
I. The Progress oI the IT Request Ior Proposals .......................................................14
J. Inappropriate Conduct at Delegate Meetings ........................................................14
K. Journeymen and OWL Statistics............................................................................16
L. Resolution oI the MWA Arbitration and Related Matters.....................................17
M. The Relationship Between the District Council and the BeneIit Funds ................18
N. Compensation oI Employees at the BeneIit Funds ................................................19
II. THE BENEFIT FUNDS ....................................................................................................20
A. The Executive Director ..........................................................................................20
B. Human Resources ..................................................................................................22
C. The ChieI Compliance OIIicer...............................................................................23
D. IT InIrastructure.....................................................................................................25
E. Overall Condition oI the Funds..............................................................................27
1. The Pension Fund ......................................................................................27
2. The WelIare Fund ......................................................................................28
a. Condition oI the Fund.......................................................................28
b. Litigation Initiated By Retirees.........................................................29
F. Collections .............................................................................................................29
1. Collection oI Delinquent Contributions.....................................................29
2. SpeciIic Litigation/Settlement Matters ......................................................31
a. Civil RICO Case against Former EST Michael Forde and Others ...31
b. Lawsuit against O`Dwyer & Bernstein.............................................31
G. 395 Hudson............................................................................................................32
1. The Renovation Project..............................................................................32
2. Resolution oI Parking Space Issue.............................................................32
H. Labor Technical College........................................................................................32
CONCLUSION..............................................................................................................................33
Case l:90-cv-05722-RMB-THK Document l534-l Filed 06/04/l4 Page 2 of 37
Men make historv and not the other wav around. In periods when there is no leadership,
societv stands still. Progress occurs when courageous, skillful leaders sei:e the opportunitv to
change things for the better.
Harrv S. Truman
*****
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This is my Eighth Interim Report as Review OIIicer in this matter. It endeavors to inIorm
the Court and the parties oI the scope and substance oI my activities Ior the past six months and
to convey my impressions oI certain aspects oI the undertaking.
As oI this writing, the Court has been asked by the District Council, BeneIit Funds and
the government to approve a new stipulation and order designed to give the District Council and
the BeneIit Funds increased control over their aIIairs while being subject to the authority oI a
new oIIicial, reIerred to as the 'Independent Monitor, with less authority than the Review
OIIicer (as set Iorth in the Stipulation and Order entered in this matter on June 3, 2010). The
document was negotiated and draIted by the parties aIter I inIormed them that I would not serve
as Review OIIicer aIter the conclusion oI this year. The government`s letter to the Court, the
joint memorandum oI the parties and the proposed stipulation and order are attached hereto as
Exhibit 1. An interim Order preserving the status quo aIter June 3, 2014, until such time as the
Court is able to consider the request oI the parties has been issued by the Court and is attached
hereto as Exhibit 2 and a related endorsement by the Court on a letter submitted by members is
attached hereto as Exhibit 3.
I support the request oI the parties and the goals oI the proposed stipulation and order as
set Iorth in the joint memorandum. I do so Ior the reasons set Iorth by the parties, but also
particularly because oI inIormation developed by investigations conducted by my oIIice
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indicating that the District Council and BeneIit Funds still Iace risks presented by (1) racketeers
and the handIul oI relationships I have reason to believe exist between them and a very slight
number oI union members (some oI whom I suspect will seek high oIIice within the District
Council) and District Council oIIicials; (2) the continued poor state oI the democratic process at
the District Council; (3) the gross negligence and possibly willIul omissions oI certain key
oIIicials oI the District Council in enIorcing a collective bargaining agreement at a major job site
and scapegoating oI a business representative; (4) the extended period (at best ending over two
years Irom now) needed by the District Council to satisIy the government and, most importantly,
the Court that its inIormation technology inIrastructure and programs and business practices will
be suIIiciently improved to obviate the motion I Iiled in this regard on September 16, 2013; (5)
the election oI District Council oIIicers this Iall -- which must be Iree oI Iraud and intimidation --
and the need Ior vetting oI candidates by applying standardized and objective criteria; and (6) the
risk presented by oIIicers oI the District Council involving themselves to an excessive degree in
the administration oI the BeneIit Funds (even in circumstances when they are motivated by the
best oI intentions) and thereby disrupting the much improved business practices oI the BeneIit
Funds under its current Executive Director.
A summary oI certain events occurring over the last six months is below.
$8
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A. The Election oI Joseph Geiger as Executive Secretary-Treasurer
A special interim election Ior Executive Secretary-Treasurer ('EST) supervised by my
oIIice was conducted according to Court-approved interim election rules over a period oI months
beginning late last year. I declined to approve the candidacies oI three members. The results oI
3
the mail ballot voting were tallied by the American Arbitration Association on January 24, 2014.
Approximately 27 percent oI the eligible members voted. Joseph Geiger deIeated Greg Kelty by
a vote oI 3,127 to 1,488. The tally sheet is attached as Exhibit 4. Mr. Geiger was installed at the
Executive Committee meeting held on February 12, 2014.
Since his installation, Mr. Geiger has impressed me with his leadership skills, energy,
attention to detail and seriousness oI purpose. He is mindIul oI the beneIit oI collegiality and the
necessity oI consultation with colleagues and proIessionals to avoid compliance issues. Most
importantly, he strikes me as a man oI integrity who recognizes that the District Council cannot
rest on the progress it has made over the last Iour years, but must constantly improve and
document its practices and procedures and cultivate the abundance oI talented oIIicers and
employees who have every right to expect that they will be allowed to Ilourish in a corruption
Iree and !"#$"%&&'(% environment. Mr. Geiger and I meet each week to discuss matters oI
importance and to discuss our views on improving the District Council. With very limited
exception, Mr. Geiger has expressed great conIidence in the skills oI his staII and the employees
at the District Council and he has regular staII meetings to insure that the two-way
communication needed to eIIectively administer the District Council occurs. I implore him to
remain strong, vigilant and committed to reIorm and believe that he is capable oI shepherding the
District Council to greener pastures.
B. Organized Crime
Over the last Iour years, my oIIice has dedicated appreciable resources to investigating
suspicions oI racketeers contacting and attempting to inIluence persons associated with the
District Council, whether employees, delegates or oIIicers. Such investigation (which has
garnered inIormation gained by subpoena, interviews, Iield observation, inIormants, review oI
4
documents and the cooperation and assistance oI law enIorcement oIIices) indicates that persons
Iormerly aIIiliated with the 'Westies (a notorious conIederacy oI mostly Irish-American
gangsters Iormerly concentrated on the west side oI Manhattan) have attempted and will
continue to attempt to exert inIluence over a small number oI members oI Local Union 157 who
either hold or aspire to hold District Council oIIice or gain or retain employment with the District
Council. My investigators and I know the names oI at least three persons aIIiliated with the
'Westies, two oI whom were convicted in Iederal racketeering cases and who served lengthy
prison sentences some years ago, who have sought to meet and inIluence (or have met and
attempted to inIluence) delegates or oIIicers oI the District Council. The investigation oI these
matters continues. Though I am constrained to say nothing more on this subject, certain
members oI Local 157 have been interviewed or deposed in this regard and untrue and
obstructive statements have been made to me and my staII. All evidence oI criminal obstruction,
lying and perjury has been or will be reIerred to the Justice Department Ior prosecution.
My staII and I have also gained considerable inIormation regarding the interest oI the
Genovese Iamily in matters relating to the District Council Irom our investigation oI incidents
involving the attempted inIluencing oI District Council delegates or employees and purposeIul
contact between such persons. We have gained substantial evidence in this regard through Iield
observation and the cooperation oI certain persons Iamiliar with these events. The identities and
activities oI these persons and the names oI at least Iour persons aIIiliated with the Genovese
Iamily who retain membership in local unions aIIiliated with the District Council have been
given to law enIorcement oIIices. None oI the Iour are oIIicers or employees oI a local union or
the District Council. A IiIth person in this category is an important employee in the trade show
industry. Active and broad investigation by my staII and law enIorcement continues.
5
My oIIice also continues to investigate the possible involvement oI a person employed by
the District Council in a matter involving a maker oI concrete Iorms whom we have reason to
believe sought to pay money to a person aIIiliated with the Genovese Iamily to gain advantage
Irom the District Council. At the time, the contractor was working within the jurisdiction oI the
District Council. Investigation has revealed that there was in Iact contact between the contractor
in question and persons employed by the District Council in which normal and appropriate
business practices were not employed by the District Council employees. We also learned that
the contractor was never signed to any collective bargaining agreement with the District Council.
C. The District Council Fails to EnIorce the CBA at a Key Job Site
In June 2013, a contractor signed an 'independent agreement with the District Council
Ior the work that it would be selI-perIorming at a large scale, mixed-use project being developed
in Manhattan. Year Iour oI the project will provide over one million man hours oI employment
to District Council carpenters. The independent agreement strictly required that each carpenter
selected to be employed by the contractor be matched by a carpenter dispatched Irom the District
Council Out-oI-Work List (the 'OWL). Such a requirement is oIten reIerred to as a '50/50
match or ratio. The agreement was at all times on Iile with the District Council, was linked to an
account number Ior the job (standard practice at the District Council) and could have been easily
obtained Irom the Agreements Department by any business representative and reviewed with the
Agreements Department Manager.
Investigation conducted by my oIIice (including by interviews, document review, phone
record analysis and depositions) reveals that a District Council shop steward was dispatched to
the project on July 2, 2013. Also that day, a meeting was held at the District Council between an
oIIicial oI the District Council and an executive vice president oI the contractor and others. The
6
District Council oIIicial and the contractor`s vice president have related divergent and
inconsistent accounts oI the purpose oI the meeting -- including regarding who requested it. The
District Council oIIicial said that the contractor asked Ior it to discuss CBA options; the
contractor`s vice president said that the District Council asked Ior it to Iind out how the job
would be run by the contractor. What all parties agree on and all concerned should Iind deeply
troubling is that Irom July 2
nd
Iorward the 50/50 match provision was not enIorced by the
District Council.
II various accounts Irom responsible persons are to be believed (and some are simply not
credible), the steward and the Iirst responsible District Council Business Representative ('BR-
1) regarded the job as a 'Iull mobility job. AIter many weeks oI negligent supervision oI the
job, in September 2013, BR-1 purportedly requested a transIer to the Queens Business Center oI
the District Council. In or about the middle oI September, the steward asked another District
Council Business Representative ('BR-2) Ior a tablet in order to log the man hours on the job
electronically (as required on Iull mobility CBAs approved by the Court). BR-2 correctly
ascertained in short order that the applicable CBA Ior the job was an independent agreement
requiring a strict 50/50 ratio. BR-2 has stated that s/he inIormed the steward that the steward
could not obtain a tablet Ior this reason, and importantly, that s/he verbally notiIied two
Executive Business Representatives ('EBR-1 and 'EBR-2) that the contractor`s job had an
independent agreement with a 50/50 ratio. I note that both EBR-1 and EBR-2 testiIied that they
could not recall BR-2 inIorming them oI this.
The egregious mismatching -- in most periods oII by a Iactor oI 8 or 9 to 1 -- continued.
A new business representative ('BR-3) was assigned to the project and eventually disciplined in
connection with it. According to a memorandum authored by EBR-1 and EBR-2 in March 2014
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recommending that BR-3 be disciplined Ior Iailing to address the mismatch, BR-3 'Iailed to
respond to a direct request by |EBR-2| to correct CBA violations pertaining to a 50/50
provision and 'Iailed to Iamiliarize himselI with the contractor`s CBA as well as the PLA Ior
that job site. The District Council Inspector General ('IG) accepted and quoted the EBRs`
conclusion regarding what they perceived as BR-3`s Iailure to Iollow orders Irom EBR-2 (and
though the IG also cited BR-1`s Iailure to Iamiliarize himselI with the applicable CBA, he
recommended that only BR-3 be disciplined). The redacted memorandum oI the EBRs and the
report oI the Inspector General are attached hereto as Exhibits 5 and 6, respectively.
However, the record developed shows that BR-3 did make eIIorts to address the
mismatch and made repeated contact with the vice president Irom the contractor. The
undertaking was likely beyond BR-3`s capacity to resolve as the contractor apparently declined
to engage in mass terminations to allow members to be reIerred Irom the OWL. The egg had
been scrambled and instructions to place it back in the shell were at best illusory, constituted Iar
less action than what the problem required and transIerred responsibility away Irom senior
managers and executives. Though a grievance was Iiled by the District Council in late January,
the mismatch continues to this day. On January 24
th
, BR-3 was questioned by EBR-1 (having
sent BR-3 a text saying, incredibly, 'is there a problem at |the site|?) and a testy in-person
exchange occurred between the men (diIIerent accounts were given) in which EBR-1 interpreted
remarks made by BR-3 as implying that there was a 'handshake agreement to ignore the
mismatch or as expressly stating that BR-3 thought there was a handshake agreement to ignore
the mismatch.
Though the matter remains under investigation and at least one more deposition will be
taken (the District Council oIIicial, EBR-1 and EBR-2 have been deposed and others
8
interviewed), in my view, the matter reIlects -- at best -- an egregious Iailure oI the District
Council to insure that core business requirements on a very important job were met. II their
accounts are to be credited at all, the steward, and particularly BR-1 and BR-3, were grossly
negligent in Iailing to clearly ascertain at the start oI the job which CBA was to be enIorced,
instead oI 'assuming that a CBA with Iull mobility applied. Even iI they believed that, the
absence oI standard electronic Ieeds received by representatives and job hour data available to
them should have caused them to realize that electronic reporting was not occurring on a large,
important job. More importantly, EBR-1 and EBR-2 did nothing in reaction to being told by
BR-2 in September that the contractor had an independent agreement with a 50/50 match. One
wonders what would have been the point oI a subordinate so inIorming them. Further, by
Christmas, the magnitude oI the mismatch was undeniable, though responsibility Ior Iixing it
was given to a line representative, and no responsible person sought to ascertain how or why it
happened. For all anyone knew, the mismatch could have been expressly the result oI a corrupt
bargain, yet no one sought to inquire and no one notiIied the IG until on or about January 24
th
,
2014. Moreover, the investigation conducted by the IG did not probe deeply enough and too
readily assumed that the conclusions oI EBR-1 and EBR-2 were accurate. The report issued on
March 3, 2014 also insuIIiciently documented the methods employed in the investigation and the
basis Ior its Iindings.
D. Electronic Reporting, Data Sharing and Paper Reports
My oIIice has continuously pushed Ior the goal oI having District Council man hour data
entered by stewards into the District Council electronic reporting database directly Ied to BeneIit
Funds` computers. Such a program will reduce the time needed Ior the current method employed
by the BeneIit Funds to discover delinquencies Irom approximately 60 days to less than a week.
Case l:90-cv-05722-RMB-THK Document l534-l Filed 06/04/l4 Page l0 of 37
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(The Funds are currently relying on the sorting and scanning oI paper steward reports and
comparing hours Irom the reports with hours reported to the Funds by employers when paying
associated Iringe beneIit contributions). The vendors Ior the District Council and the BeneIit
Funds (Standard Data Corp. and ISSI, respectively) have been cooperating to realize this goal oI
a direct Ieed. A test has been successIully conducted. The success oI the program will also
enable the District Council to end the use oI paper steward reports. The District Council
currently plans to begin phasing out paper steward reports (and the associated delivery oI such
reports by stewards to the District Council on Wednesday and Thursday mornings) on or about
July 1, 2014.
The District Council is also making some progress on implementing electronic reporting
Ior jobs where the CBA does not require electronic reporting. As an interim step, the District
Council is planning a system Ior Dockbuilder stewards and timekeepers to report their time by
telephone to operators at the District Council who will immediately enter the time into the
District Council database. I have suggested that the District Council Iind and employ a system
that will record such calls as a means to check the accuracy oI the hours entered and as a
compliance measure. Progress in this regard is much needed, as the District Council does not
have the ability to audit whether Dockbuilder stewards and timekeepers are submitting their
reports at all, let alone on a timely basis.
I note also that the District Council has Iiled over 80 grievances against Iull mobility
employers to settle disputes over time worked. It has also draIted procedures to be used by
business representatives to settle disagreements over the time reported by stewards, which it
hopes to Iinalize and implement by July 1, 2014.
Case l:90-cv-05722-RMB-THK Document l534-l Filed 06/04/l4 Page ll of 37
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As shown by the latest Thirty-Day Report submitted by the District Council to the Court,
over 11 per cent oI the employers who have been permitted to selI-report hours worked on one
and two person jobs have Iailed to report on a timely basis. That Iailure rate is obviously
problematic. II employers cannot report in an accurate and compliant manner, the District
Council will have to reassert its right to appoint a timekeeper on such jobs.
E. Working Dues Check-OII System
The District Council has implemented a system whereby members oI its aIIiliated local
unions may Iile authorization cards with the District Council (notice oI which is provided to
employers) to enable employers to deduct and electronically remit dues and assessments owed
by the members to the District Council.
By way oI background, each member is required to pay working dues assessments
('WDA) and political action committee assessments ('PACA) to the District Council based on
the number oI hours worked by the member. On December 4, 2013, the District Council began
collecting WDA and PACA through a dues check-oII system. In order to participate, members
must sign authorization cards allowing employers to deduct the WDA and PACA.
1
AIter
deducting the WDA and PACA Irom a member`s pay, the employer remits the deducted amount
to the District Council through the BeneIit Funds` i-Remit system. The monies remitted by
employers are directed to a District Council bank account.
The District Council bills between 14,000 and 15,000 members each quarter Ior WDA
and PACA. Approximately 5,600 authorization cards Ior WDA deductions and 4,100
authorization cards Ior PACA deductions have been signed to date. Because a modest
percentage oI members have signed authorization cards, the District Council is still collecting a
1
Members can sign both WDA and PACA authorization cards, only one oI the cards or neither oI the cards.
A member who does not authorize an employer to deduct the WDA and PACA must pay the assessments directly to
the District Council.
11
large number oI WDA and PACA directly Irom each member. Collecting WDA and PACA
directly Irom members is much more labor intensive than through the i-Remit system. More
should be done by the District Council to collect as many authorization cards as possible to ease
the burden on its staII and resources.
The District Council does not currently have and must urgently develop some means to
audit the accuracy oI the amounts remitted on behalI oI members (by employers via the BeneIit
Funds) who choose this system (rather than having to write a check or make a credit card
payment aIter an invoice is received Irom the District Council). Further, the District Council and
the BeneIit Funds need to work together to establish a method to easily separate and Iorward to
the Council the dues withheld and remitted as a lump sum with contribution payments. A
member who has chosen this method should not have to receive a notice/invoice Irom the
District Council that the money is owed and call the Council to say that it should have been
Iorwarded by the employer and that there must be a problem with the employer or the system
employed by the Council with the Funds. Further, the employers must be made to understand
that the Council has an accurate audit method to insure that proper amounts are remitted.
The District Council has done remarkably well in collecting a large percentage oI WDA
and PACA billed, through the assistance oI the BeneIit Funds. (OI course, any administrative
service perIormed by the BeneIit Funds must be paid Ior by the District Council). From the Iirst
quarter oI 2012 through the Iourth quarter oI 2013, the District Council has billed members
$47,937,108. It has collected $45,065,040, which is 94 oI the total billed. The progress oI the
collection oI dues and assessments on a quarterly basis is tracked by the District Council
accounting department. A summary oI the District Council`s WDA and PACA billings and
collections is attached as Exhibit 7.
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F. The Necessity oI Strict Compliance with the Bylaws and UBC Constitution
Should the Court approve the Stipulation and Order proposed by the parties in this matter
it will in my view be imperative that the District Council`s ChieI Compliance OIIicer ('CCO)
and IG take greater responsibility Ior the Union and its oIIicials and employees strictly
complying with orders oI the Court, applicable law, the District Council Bylaws and the UBC
Constitution. Without the power oI veto, the Independent Monitor will be Iorced to bring
disciplinary charges (to be heard by the three attorney judges oI the Trial Committee) or seek
redress with the Court should Union leadership and the delegate body decline or Iail to
adequately cure breaches oI the Stipulation and Order. That will be an expensive proposition Ior
the Union, both monetarily and by the erosion oI the government`s perception that reIorm is
sustainable at the District Council. The CCO and IG must in any event work strenuously to
mitigate the risk oI noncompliance and must be prepared to act strongly and deIinitively in
reaction to any and all transgressions. The IG in particular must be prepared to Iile disciplinary
charges against even the most senior oIIicers oI the District Council and insure that related
investigations are well planned, thorough and documented; that detailed, proIessional reports are
written; and that charges are meticulously prepared, evidence gathered and cases careIully and
eIIectively presented to the Trial Committee. The CCO and IG must always act with vigor and
conIidence (neither oIIicial can be dismissed without the consent oI the United States Attorney)
and be careIul to maintain the independence Irom management and oIIicers necessary to perIorm
their important duties eIIectively. When they do, they will materially assist the Union in
demonstrating to the government that the Council is a compliant institution and that reIorm has
Iinally taken hold. The members, the government and the Court have every right to expect that
this will be so.
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G. Man Hours
According to data received Irom the BeneIit Funds, the net total number oI hours
reported to the WelIare Fund Ior the Iirst nine months oI Iiscal year 2014 is 12.75 million hours.
Some 12.14 million were reported Ior the same period in Iiscal year 2013. The projected hours
Ior Iiscal year 2014 are just under 17 million, versus 16.43 million Ior Iiscal year 2013. See
Exhibit 8.
This only slight increase in man hours is not just disappointing but is also problematic.
With reports oI corruption at an all-time low and collection eIIorts by the BeneIit Funds at an all-
time high, the numbers appear to show the Council`s inability to gain market share and stem the
tide oI non-union work within the jurisdiction oI the District Council. Stagnant income to the
BeneIit Funds will make the restoration oI dental and optical coverage by the WelIare Fund a
more diIIicult proposition and will eventually strain the Pension Fund.
H. The Electronic Dispatching oI Business Representatives
I am pleased that the District Council has enthusiastically moved beyond the pilot
program instituted some months ago whereby a small number oI business representatives were
selected to test the eIIicacy oI representatives receiving their work assignments and reporting on
their site visits and activities electronically. All representatives are receiving their routine
assignments in this manner, which has eliminated the need Ior morning brieIings and the
preparation and handoII oI paper Iiles, as well as the need to have representatives return to the
Council Ior aIternoon 'debrieIs. The method also importantly places the reports and other
inIormation relating to jobs and employers and the activities oI business representatives into a
searchable database and allows managers to track the daily business oI District Council
representatives.
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I. The Progress oI the IT Request Ior Proposals
The progress oI draIting and issuing the request Ior proposals ('RFP) Irom technology
vendors to reconstruct the inIormation technology systems oI the District Council was delayed
by approximately two months due to the submission oI a Iirst draIt that did not demonstrate
adequate knowledge oI District Council operations or needs going Iorward, which may have
been due in part to insuIIicient timely cooperation by the District Counsel. I was advised that the
RFP would be distributed to Iive vendors on June 2, 2014. (The Iinal RFP was not available in
time to be included in production oI this report). The acquisition and implementation oI a
reconstituted IT system at the Council will not be accomplished until at least two years Irom
now.
The District Council has hired an IT Manager, who began work on May 28, 2014.
Though it is expected that he will be involved in the IT upgrade project, he will not be expected
to Iunction as a project manager. It seems to me that his precise duties will take some time to
develop as the IT vendor that provides support services is given less to do.
J. Inappropriate Conduct at Delegate Meetings
The parliamentary rules "%)*'"%+ to be used at delegate meetings are stated in the
Constitution oI the United Brotherhood oI Carpenters and Joiners oI America on pages 88 91
and are attached as Exhibit 9. They are expressly derived Irom classic rules oI order (Rule 5
states that all questions oI a parliamentary nature not provided Ior in the Rules shall be decided
by Roberts Manual) and delegates have every right to expect that they be strictly enIorced and
that proceedings will be serious, deliberative and collegial. Rule 13 states that 'each member,
when speaking, shall conIine his or her remarks to the question under debate and avoid all
personal, indecorous or sarcastic language. Rule 14 requires that 'no member shall interrupt
15
another while speaking, except to a point oI order, and shall deIinitely state the point, and the
Chair shall decide the same without debate. Rule 15 states that 'iI a member while speaking be
called to order, he or she shall take his or her seat until the point oI order is decided, when, iI
decided in order, he or she may proceed. This is no laughing matter. These rules must be
strictly enIorced iI the goal oI the Consent Decree to create a sustainable and democratic
institution is to be achieved.
An appalling incident occurred at the delegate meeting on April 9, 2014, in which
delegate Paul Capurso (who is a senior executive oI the District Council) became very angry at
remarks being made by delegate Greg Kelty (the Iormer candidate Ior EST) inquiring about the
District Council`s handling oI a project and the suspension oI a business representative.
Tempers Ilared, Mr. Capurso and other delegates rose out oI their seats, proIanity was shouted
and people stepped between Messrs. Capurso and Kelty to prevent their contact. Mr. Capurso
was ejected Irom the meeting. The aIIair was a dismal step back to the old days, which I
witnessed Iirst-hand assisting the Investigations and Review OIIicer in the 1990`s, when opinion
and honest inquiry Irom the Iloor oI a union meeting was met with intimidation, the threat oI
violence or actual violence, rather than a thoughtIul and honest response. No action was taken
by anyone at the District Council to address the aIIair. Mr. Capurso later issued a letter
apologizing Ior his conduct. Exhibit 10.
Finally on this subject, I note that Rule 19 states that 'the presiding oIIicer shall not
speak on any subject unless he or she retires Irom the Chair, except on points oI order and
appeals Irom the decision oI the Chair, and in case oI a tie shall have the deciding vote. The
Rule has never been respected or enIorced at any delegate meeting I have attended or heard via
recording. In these situations, the response oI the Chair Irom the Chair to a question or opinion
16
uttered Irom the Iloor violates the Rule, provides speech time to the Chair to which he is not
entitled, prolongs meetings, and serves to distract and bore delegates who, rather than Iocusing
and participating, begin to yearn Ior the meeting to end.
K. Journeymen and OWL Statistics
The Iollowing summarizes recent membership, OWL and dispatch trends:
Journeymen in good standing 4/30/14: 13,411
Journeymen in good standing 10/31/13: 13,226
Increase in journeymen: 185
Reduction since 12/3/10: 1,883
Members in arrears: 827
Numbers oI persons on the OWL on 5/29/14:
Local 157 4,413
Local 2287 281
Local 1556 ScaIIolding 171
Local 1556 Dockbuilders 281
Local 740 154
Local 2790 80
Total 5,380 (compared to 5,500 in 12/10)
Dispatch Statistics
April 2014 October 2013 April 2013
Apprentices 283 320 483
Requests 3 19 182
Shapes 389 307 346
Denied Requests 0 10 46
Pure Dispatches 1,004 1,075 1,308
Totals 1,679 1,731 2,365
The April 2014 dispatch Iigures include 37 trade show dispatches.
Total activity Irom December 2013 through March 2014 Iollows:
December 2013: 1,304
January 2014: 1,556
February 2014: 1,433
March 2014: 1,739
17
L. Resolution oI the MWA Arbitration and Related Matters
As previously reported, an arbitrator issued a Merits Award and a Remedy Award with
respect to a claim brought by the ManuIacturing Woodworkers Association oI Greater New York
('MWA) against the District Council, alleging that a trade show contractor, Gilbert Displays
('Gilbert), was a competitor oI the MWA employers and that the MWA employers were
entitled to the more Iavorable contract rate given to Gilbert. See, e.g., Seventh Interim Report at
24-25. The Merits Award, issued in May 2012, Iound in the MWA`s Iavor, and the Remedy
Award, issued in January 2013, was Ior approximately $8.03 million in damages to the MWA.
The Remedy Award did not address beneIit contributions, which the MWA had unilaterally
begun paying at the Gilbert rate, but to the BeneIit Funds rather than the Hollow Metal Fund,
Iollowing the Merits Award.
In January 2014, the District Council, MWA, and BeneIit Funds reached a global
settlement, and the District Council and MWA entered a Memorandum oI Understanding, to
resolve all issues and potential issues between and among them. See Exhibit 11 (without
redundant signature pages). On January 31, 2014, the Honorable Louis L. Stanton entered an
order conIirming the arbitrator`s Merits and Remedy Awards, entering a judgment oI
$8,030,481.46 against the District Council. See Exhibit 12. The BeneIit Funds are in the process
oI being made whole, through additional payments by the contractors iI necessary (subject to
arbitration) and by the District Council, Ior the welIare shortIall created by the MWA employers
paying beneIit contributions at the lower Gilbert rate; most oI the employers have made an initial
payment and the Funds and the employers are currently in the audit stage to determine what iI
any additional monies must be paid. Importantly, the aIIected members are now receiving their
health beneIits.
18
M. The Relationship Between the District Council and the BeneIit Funds
The District Council and the various BeneIit Funds are oI course legally separate entities
with distinct purposes and means oI administration. The District Council is an intermediate
labor organization as deIined by Iederal law and its aIIairs must be conducted in compliance with
applicable law and its Bylaws. The various BeneIit Funds were established by trust agreements
that set Iorth the purpose and scope oI each trust Iund and are administered pursuant to the
strictures oI the TaIt-Hartley law and ERISA by a board oI trustees (comprising six employer
trustees and six union trustees) who each have a Iiduciary duty to prudently manage the assets oI
each trust Iund (allowing Ior reasonable expenses oI administering the plan) Ior the exclusive
beneIit oI its participants and their beneIiciaries. The Board delegates certain oI its authority to
an Executive Director to manage the very complex business aIIairs oI the BeneIit Funds and to
supervise over 80 employees in Iunctions ranging Irom IT, to member services to collection oI
delinquent contributions.
Though there are many ways that the District Council and the BeneIit Funds can (indeed
must) cooperate to beneIit their respective operations (e.g., via the systematic and regular sharing
oI man hour and delinquency data and joint action to eIIectively and eIIiciently take action
against employers who violate collective bargaining agreements), the relationship between them
must be Iormal and business must be conducted pursuant to agreed-upon protocols. There has
been a historical problem with the District Council Iailing to respect the boundaries between it
and the BeneIit Funds, whether by attempting to control the business oI the BeneIit Funds by
pressuring the Executive Director or by direct interIace between oIIicers and employees oI the
District Council and employees oI the BeneIit Funds outside oI protocols. Recently, I became
aware oI a developing situation in which District Council oIIicers attempted to respond to
19
member complaints about service received Irom the BeneIit Funds by dealing directly with the
issue. AIter discussing the problem with the EST and the Executive Director, the principals
agreed to establish and adhere to a communication and record-keeping protocol so that any
BeneIit Funds-related issue brought to the attention oI the District Council can be appropriately
logged, addressed and charted by designated employees.
In my view, the District Council and BeneIit Funds must constantly strive to insure that
proper interaction and protocols should be in place Ior all such circumstances. I recommend that
the Compliance OIIicers oI the District Council and BeneIit Funds seek and obtain direction
Irom their respective organizations and work together to insure that protocols be put in place and
strictly Iollowed.
N. Compensation oI Employees at the BeneIit Funds
I have detected at various times a lingering resentment on the part oI various District
Council oIIicers that certain BeneIit Funds employees are handsomely compensated. I am
concerned about this. In my view, the BeneIit Funds is being well-managed and is greatly
beneIiting Irom the talent and eIIort oI certain employees who could easily make as much or
more money working Ior some other employer. The market Ior talented people determines what
they must be paid and cannot be compared to inapposite criteria. II the Funds cannot attract, hire
and retain talented people, its operations will suIIer and the goal oI eIIicient and compliant
operations that beneIit the membership will not be reached.
Case l:90-cv-05722-RMB-THK Document l534-l Filed 06/04/l4 Page 2l of 37
20
$$8
!"# 0#&#+$! +7&62
A. The Executive Director
During his Iirst year as Executive Director, Ryk Tierney has been a tremendous asset to
the BeneIit Funds. He has managed the BeneIit Funds in a highly proIessional manner,
improving operational eIIiciency oI the Funds` oIIice, service to its members, and staII morale.
Importantly, Mr. Tierney has worked tirelessly to build a strong leadership team that is
not only highly skilled but collaborative. He has done this by being a strong and collaborative
leader himselI, and by hiring talented managers, holding regular team meetings, and taking his
team to appropriate conIerences. Additionally, Funds` employees are receiving training that
should enable them to do their jobs better. Regular staII meetings and periodic awards appear to
make the employees Ieel engaged and appreciated. This is a striking improvement over the
organization I described in my First Interim Report oI December 2010.
Mr. Tierney has enhanced numerous core Iunctions oI the Funds` oIIice, some oI which
are discussed in separate sections below. In brieI, highlights Irom the last six months include the
roll-out oI the new computer system ('URBAN), as well as a BeneIit Funds` website, in
February 2014; the transition to in-house perIormance oI certain Iunctions previously done at
considerable expense by third-party service providers; the routinization oI certain administrative
procedures, including Ior records retention and subpoena response; review oI various Funds`
departments in preparation Ior the development oI department-speciIic standard operating
procedures ('SOPs); Iine-tuning oI the Compliance and Ethics Program ('CEP), together with
related employee training; and completion oI an oIIice renovation project designed to Iacilitate
21
greater employee productivity and enhance morale, while Ireeing up space to be leased by and
create revenue Ior the Pension Fund.
One particularly diIIicult task that Mr. Tierney has prioritized is revamping the 'Call
Center that is responsible Ior handling inquiries by Funds` members and beneIiciaries.
Ensuring that these Funds` participants receive accurate inIormation in a proIessional and timely
Iashion has understandably been a high priority oI the Funds` trustees. Historically, the Call
Center has Iallen short oI meeting the trustees` expectations. The perIormance oI the Call Center
during the URBAN roll-out highlighted the short-comings. With the URBAN roll-out
completed, Mr. Tierney tapped its Project Manager, JenniIer Gordon, to be the Director oI
Member Services, overseeing, among other things, the Call Center.
2/
The Call Center is
undergoing a restructuring with a new manager in place, supported by a deputy manager and an
administrative assistant dedicated to perIorming all administrative Iunctions so that line Call
Center personnel will not be diverted Irom answering callers and meeting with walk-ins. There
have been some lay-oIIs, as well as hiring, oI Call Center personnel. Scheduling is being
adjusted to enable a better response during high volume call times; Ior example, Call Center
personnel will not be taking lunch during the members` lunch hour and a pilot program is
underway whereby the Call Center is open later on Mondays, until 6:30 p.m. Training is taking
place and protocols are being established with the goal oI enhancing Call Center perIormance by
having those answering the phones doing so accurately and courteously within a designated time
period; quickly identiIying calls requiring Iurther research, so advising the callers and getting
back to them with answers in a timely Iashion; and escalating calls to management iI necessary.
2/
The other areas Ialling within Ms. Gordon`s purview as Director oI Member Services are the Pension
Department and the WelIare Department. The Funds have recently hired a new Pension Manager and are seeking to
hire a new WelIare Manager.
22
Mr. Tierney has also worked to Iind eIIiciencies (and eliminate waste) that contribute to
the Iinancial health oI the Funds. He is attuned both to areas oI escalating costs and
opportunities to decrease costs. For example, he encouraged participation in a pilot program to
detect Iraud, waste and abuse with respect to pharmaceuticals. While the Iindings have been
modest, and committing to the program will involve a Iee, continued participation in the program
will likely deter abuse and result in some savings.
In my view, in his Iirst year as Executive Director, Mr. Tierney has greatly enhanced the
BeneIit Funds as an organization. He has done so by creating a modern organization, with Iirst-
class leadership hired and promoted based on merit; implementing best business practices and
procedures, as well as a modern technological inIrastructure; and setting the tone Ior an ethical
culture.
B. Human Resources
Since the last interim report, HR has overseen the perIormance evaluation process, on a
schedule designed to Iacilitate annual salary increases in April 2014. At the March 17, 2014
Administrative Committee meeting, Mr. Tierney presented on his request Ior annual salary
increases, including raises and bonuses. The next day, he provided the trustees with materials
they requested, such as an organizational chart and the salary bands. On March 20, he made his
request to the Iull Board oI Trustees, with no resolution. On April 28, at smaller meeting with
co-chairs and counsel, the topic was Iurther discussed. By the time oI the May 27 Board oI
Trustees meeting, trustees had met on these issues and reached agreement. The Executive
Director announced salary increases on June 2.
I commend Mr. Tierney and the new HR Director Ior regularizing this process. I believe
this delay was borne oI the lingering resentment on the part oI the District Council to the
23
compensation oI certain BeneIit Funds` employees that I Ilagged earlier in this report. It is my
hope that we have seen the last vestige oI this resentment given the damage it could cause to Mr.
Tierney`s ability to hire and retain qualiIied personnel and thus best-serve the members.
C. The ChieI Compliance OIIicer
In January 2014, the BeneIit Funds renewed the contract oI its outside compliance
proIessional, Julie Block. As ChieI Compliance OIIicer ('CCO), Ms. Block has continued to
shepherd the Funds` compliance eIIorts in an eIIective and eIIicient manner. This has involved a
continuing review oI the Funds` operations, internal controls and policies and procedures.
During the last several months, Ms. Block has Iocused on draIting internal controls Ior
the accounting department. This has included policies and procedures Ior disbursement oI
employer contributions Irom remittance through bank deposit; disbursements to the Funds`
members; processing oI reciprocal monies and hours to and Irom other jurisdictions; adjustment
oI remittances; transIers to and Irom investment accounts; and processing and payment oI vendor
invoices.
Ms. Block also worked with the Funds` Executive Director and Controller to address
audit Iindings. One particular issue with the accounting department was identiIied by the outside
auditor Schultheis & Panettieri ('S&P). Preliminarily, I note that this was not a material
Iinding. However, it serves as a good example oI how the compliance Iunction works with
Funds` staII and their proIessional services providers to identiIy deIiciencies in practices and
procedures and implement best practices. SpeciIically, S&P identiIied certain variances, which
Ms. Block Iollowed up on with S&P and the Funds` controller. The issue, broadly stated, was
that there were variances in bank reconciliations due to some activities not being consistently
journalized in the general ledgers Ior check issuing accounts. In response, Ms. Block, S&P and
24
the controller have developed a go-Iorward approach that includes utilizing a computer program
that will not complete a bank reconciliation unless the bank records and general ledger match
(with allowance Ior a variance below a speciIied amount); developing standard operating
procedures Ior bank reconciliations; and conducting a quarterly audit to ensure that the
procedures are beings Iollowed by accounting department staII.
As part oI the initiative to develop standard operating procedures Ior all Funds`
departments, Ms. Block developed and distributed selI-audit Iorms to the Pension, WelIare, Call
Center, Payroll, Human Resources, IT and Employer Services departments, tasking each with
identiIying speciIic enhancements that could be made to its internal controls and with creating
SOPs. The departments have begun writing the SOPs, with completion expected by year-end.
On a parallel track, Ms. Block is conducting her own review oI various departments.
Together with the Executive Director and the HR Director, Ms. Block reviewed and
revised the Compliance and Ethics Program ('CEP) originally adopted in April 2012. The
Board oI Trustees approved the revised CEP and it was distributed to all Funds` staII at the
comprehensive Compliance and Ethics training sessions conducted in April 2014.
3/
Training
topics included policies on employee conduct, anti-harassment and discrimination,
conIidentiality, HIPAA requirements, document retention and computer usage. Similar training
will be provided to the Labor Technical College this month.
Ms. Block also conducted the annual employee survey required by the Compliance and
Ethics Program. In early April 2014, she distributed it to employees and they have since
completed it. It is my understanding that the survey reIlects a better working environment, more
engaged employees and higher employee satisIaction. Employees particularly appreciated the
3/
An additional revision was adopted at the Board`s May 27, 2014 meeting, requiring the posting oI all job
openings internally beIore they are posted externally and requiring approval by the Board Ior the Executive Director
to act outside the hiring guidelines.
25
institution oI regular staII meetings, 'star awards and the holiday party; most employees also
appreciated the perIormance evaluation process. Employees additionally reported adequate
staIIing, more equal work distribution, appropriate coordination among departments and good
communication Irom the Executive Director down. Employees also identiIied areas needing
continuing improvement, such as communication between managers and their departments, the
need Ior cross-training within departments (which has started) and the desire Ior additional
training, particularly with respect to computers (which is expected to begin in July 2014).
There have been some employee complaints regarding the URBAN computer system that
went live in February 2014. This is not surprising given the many years the Funds used its
legacy system, the degree to which tasks were outsourced and the natural discomIort that comes
with change. Overall, as discussed below, the transition to URBAN has been very successIul
and I expect that continued trouble-shooting and reIinements will occur.
D. IT InIrastructure
The BeneIit Funds have now Iully implemented a state-oI-the-art IT system, which is
expected to provide increased productivity, eIIiciency and transparency, as well as to reduce
costs, by bringing in-house many tasks previously handled by third-party service providers. On
February 3, 2014, the Funds successIully rolled-out URBAN, which is the overarching computer
system. The URBAN roll-out Iollowed the successIul transition Irom ADP to i-Remit, Ior
collecting employer beneIit contributions.
Project Manager JenniIer Gordon oversaw the IT upgrade with a small, dedicated team,
in partnership with the Funds` IT Director Charles Jackson and his department (sometimes
reIerred to as the 'URBAN team). In late 2011, the Funds hired Ms. Gordon to oversee the
upgrade, which had long been stalled. In January 2012, the Funds entered an agreement with
26
vendor ISSI to accomplish the upgrade. It was estimated that the upgrade would take 18 to 24
months and it was accomplished in close proximity to the 24-month estimate.
As noted, the employee survey included some complaints regarding the URBAN system.
Ms. Gordon and other staII handling the URBAN implementation have been Iully committed to
addressing any issues with the system that arise. As indicated in one oI my prior interim reports,
in interviews conducted oI Funds` employees by my staII in late Winter/early Spring 2013,
employees expressed concern that there were no charts depicting work processes and Ilows. See
Sixth Interim Report oI the Review OIIicer at 31. The URBAN team created work Ilow charts,
vetted by the various departments, which are available in the 'Go Live application on each
employee`s desk top computer. Additionally, as mentioned earlier in this report, SOPs are being
developed by each department in coordination with the CCO and should Iurther enhance
Iunctionality. Shorter processes are now available through URBAN and employees will be
encouraged to eliminate the now unnecessary steps in some oI their processes. I understand that
there are weekly conIerence calls on how each module oI the system is Iunctioning, which is a
means to continue identiIying any problems and Iurther reIining the system iI need be. I also
understand that the number oI daily incident reports has steadily decreased.
While the roll-out oI URBAN has been completed, I note a number oI additionally
contemplated phases. I understand that a presentation on URBAN will be made to the smaller
Hollow Metal Funds ('HMF) during its June 2014 Board oI Trustees` meeting. Should HMF
choose to proceed with implementing URBAN, it will include a recent upgrade to the
technology, which will thereaIter be implemented in the 'big Funds` system. With respect to i-
Remit, a Iunction will be added allowing those employers who remit beneIit contributions
monthly or quarterly to remit electronically, which is expected to reduce the number oI
27
remaining manual remitters. Next, a Iunction will be added allowing employers to pay
delinquencies through i-Remit. Employers are also expected to be able to satisIy payment plans
using i-Remit.
Importantly, the BeneIit Funds` IT upgrade involved more than simply getting a new
soItware program, which alone would have been a huge endeavor Ior the Funds. The Funds use
URBAN to help accomplish a number oI tasks that had previously been outsourced at
considerable expense. For example, the Funds now print pension checks and vacation checks,
rather than using Standard Data Corporation ('SDC). (Empire processes health claims Ior the
Funds and cuts those checks Irom WelIare Fund monies). Additionally, the Funds are internally
handling mailings to participants, such as the annual pension mailing that goes to approximately
12,000 individuals, rather than using SDC. Over the Iirst Iew years, there will be expenses such
as purchasing the equipment needed by the mail room to accomplish these tasks. Additionally,
over the course oI a year, the Funds will pay a monthly Iee to SDC to ensure access to data the
Funds may need.
4/
Over the longer term, the Funds are expected to reduce expenses signiIicantly
by doing these tasks in-house.
E. Overall Condition oI the Funds
Below is a snapshot oI the current condition oI the Pension and WelIare Funds.
1. The Pension Fund
According to the report oI its investment advisor at the January 23, 2014 BeneIit Funds
Board oI Trustees` meeting, as oI December 31, 2013, the assets oI the Pension Fund had a
market value oI approximately $2.49 billion. By comparison, as oI December 31, 2012, the
assets oI the Pension Fund had a market value oI approximately $2.13 billion, so the value oI the
4/
I note that Standard Data Corporation v. New York Citv District Council of Carpenters Pension Fund, et
al., Docket No.. HUD-L-1783-13, discussed in prior interim reports, was dismissed on jurisdictional grounds. The
Funds and SDC recently agreed to a global settlement.
28
Iund`s assets continues to increase. Some additional indicia oI how the Fund is perIorming
include that: PerIormance Ior January 1, 2013 through December 31, 2013 was up 18.54
compared to the policy index oI 16.21; perIormance Ior July 1, 2013 through December 31,
2013 (the Iirst halI oI the Funds` current Iiscal year) was 8.63, compared to the policy index oI
9.93.
As reported at the May 27, 2014 Board oI Trustees` meeting, the Funds` consultant
expects to certiIy the Pension Fund as being in the Green Zone Ior the Iiscal year beginning July
1, 2014.
2. The WelIare Fund
a. Condition oI the Fund
According to the report oI its investment advisor at the January 23, 2014 BeneIit Funds
Board oI Trustees` meeting, as oI December 31, 2013, the assets oI the WelIare Fund had a
market value oI approximately $225 million. Looking at the most recent comparable period as a
Iurther source oI comparison, as oI December 31, 2012, the assets oI the WelIare Fund had a
market value oI approximately $199 million. Additionally, perIormance Ior January 1, 2013
through December 31, 2013 was up 4.20 compared to the policy index oI 3.35; perIormance
Ior July 1, 2013 through December 31, 2013 (the Iirst halI oI the Funds` current Iiscal year) was
up 3.93 compared to 3.17 Ior the policy index.
Clearly, the investment returns have been heartening. As noted earlier in this report,
however, man hours Ior this Iiscal year are projected to be just under 17 million, representing
only a small improvement.
29
b. Litigation Initiated By Retirees
As discussed in prior interim reports, on May 25, 2012, a number oI retirees sued the
WelIare Fund in the Southern District oI New York, bringing claims with respect to the
imposition oI a retiree premium and with respect to the Funds not being compensated by the
District Council Ior handling dues remittance (the now-discontinued 'blue card program). See
Patrick Enright, et al. v. New York Citv District of Carpenters Welfare Fund, 12 CV 4181 (JPO).
On July 10, 2013, the Court (J. Oetken) ruled on the parties` motions Ior summary judgment.
The Funds prevailed in deIending the retiree premium requirement. With respect to the blue card
program, Judge Oetken Iound that there had been a prohibited transaction under ERISA; the only
remaining issue is whether the $1.7 million in administration Iees paid by the District Council to
the WelIare Fund as reimbursement is suIIicient. Since the last interim report, discovery on this
issue has continued. The parties are to advise Judge Oetken oI the case status by June 27.
F. Collections
As I stated in an early interim report, 'There is little more important to the long-term
health oI the BeneIit Funds than the collection Irom employers oI the total amount oI beneIit
payments due and owing Irom them on behalI oI union members. Second Interim Report oI the
Review OIIicer at 26. The Board oI Trustees, and the Delinquency Committee in particular, has
been diligent in its oversight oI collections matters and should be commended. The BeneIit
Funds has continued its eIIorts to maximize collection oI employer contributions and other
monies owed, as detailed below.
1. Collection oI Delinquent Contributions
Virginia & Ambinder ('V&A) has now been collections counsel Ior the Funds Ior
approximately three years. As discussed in prior reports, upon becoming collections counsel,
Case l:90-cv-05722-RMB-THK Document l534-l Filed 06/04/l4 Page 3l of 37
30
V&A immediately undertook a comprehensive review oI the Funds` collections matters, with the
dual purpose to develop and institute best practices going Iorward and to maximize recoveries oI
existing, oIten long pending, matters, as well as oI new matters, in the most economically viable
way. See, e.g., Third Interim Report oI the Review OIIicer at 39. V&A continues to make
overarching improvements to the collections process, such as with the recently approved revised
collections policy, and to handle a very heavy collections workload, including 36 active
litigations, 151 arbitration matters, 19 bankruptcies, 39 matters without pending legal
proceedings, 234 judgment enIorcement matters and 42 audit reIerrals, as oI the monthly status
report that V&A provided to the trustees on May 2, 2014. V&A also supports other pending
litigation by the Funds, such as the Civil RICO action and the lawsuit against O`Dwyer &
Bernstein, discussed below.
V&A continues to make substantial recoveries in a cost-eIIective manner. As oI the
Delinquency Committee meeting held on April 21, 2014, V&A`s eIIorts have resulted in total
recoveries oI $13,426,835, with associated legal Iees oI approximately $2,008,506 and costs oI
approximately $204,302. Taking into account audit Iees oI $1,716,953, that is a net positive oI
$9,497,073.
I previously stated that, with collections being handled in such a capable way by V&A (in
coordination with the Director oI Employer Services Luke Powers), it would be worthwhile to
explore how delinquencies could be avoided in the Iirst place, or detected earlier, beIore they
grow large, stale and less likely to be collected. See Seventh Interim Report oI the Review
OIIicer at 46-47. As we continue to see, an employer can very quickly and without detection go
into arrears on contribution remittances Ior hundreds oI thousands oI dollars. I understand that
the Funds have an internal delinquency department that works with the District Council, and
31
perIorms a weekly review oI the man hours Ior the top 20 largest District Council jobs and has
other, more Irequent, collaborative eIIorts. Modernization oI the District Council`s IT system
would make these eIIorts even more eIIective, in that timely communication by the Union to the
Funds regarding all delinquencies will maximize the Funds` ability to collect.
2. SpeciIic Litigation/Settlement Matters
a. Civil RICO Case against Former EST Michael Forde and Others
As noted in prior reports, the BeneIit Funds brought a civil RICO action against a Iormer
EST oI the District Council, Michael Forde, and others 'to recover millions oI dollars embezzled
Irom the Funds by the deIendants, who conspired and engaged in a scheme to enrich themselves
at the expense oI the rank-and-Iile union members and thousands oI other beneIiciaries oI the
Funds. Third Interim Report oI the Review OIIicer at 51 (quoting Ex. 44 to that report at 2), see
also Sixth Interim Report oI the Review OIIicer at 38. Following the denial in March 2013 oI
motions to dismiss by some oI the deIendants, even though there has not yet been a
determination oI liability, the case has been in the asset discovery phase. V&A has taken the
asset depositions oI Mr. Forde and several others. We understand that no schedule has been set
Ior motions or trial.
b. Lawsuit against O`Dwyer & Bernstein
As noted in prior reports, in January 2013, the BeneIit Funds brought a legal malpractice
case against O`Dwyer & Bernstein ('ODB) in connection with ODB`s handling oI collections
matters. See, e.g., Seventh Interim Report oI the Review OIIicer at 47. Following the Funds`
Request Ior Judicial Intervention, in January 2014, a judge (Justice Lawrence Knipel, Kings
County) has been assigned. A status conIerence was held on May 19, 2014. Discovery is
continuing, with depositions to be completed by March 31, 2015.
32
G. 395 Hudson
1. The Renovation Project
The renovation oI the ninth Iloor has been completed and BeneIit Funds` employees are
now all located on that Iloor (as are District Council employees). Funds` employees have
entirely vacated the eighth Iloor and demolition work on the eighth Iloor has been completed.
The eighth Iloor will be built out in accordance with tenant speciIications once the space is
leased. This is currently on hold pending reaching agreement with a QPAM.
As previously discussed, some consideration has been given to renovating the 10
th
Iloor
to be leased as conIerence space. Given the revenue that could be generated by such a use, this
should be acted upon with alacrity.
2. Resolution oI Parking Space Issue
As discussed in an earlier interim report, Ior many years, the District Council used
parking spaces located in the loading dock oI 395 Hudson, without compensating the Funds Ior
use oI the spaces. See Sixth Interim Report oI the Review OIIicer at 12-13. I understand that
this issue has been resolved by amending the lease between the Pension Fund and the District
Council to lease Iour bays in the loading dock Ior speciIied rents and by the District Council`s
payment oI $165,294 to the Pension and Apprenticeship Funds Ior past use oI the loading dock.
H. Labor Technical College
The Labor Technical College ('LTC or the 'school) is the entity that trains apprentices
and journeymen in the craIts within the jurisdiction oI the District Council. A detailed
discussion oI the LTC at about the time it was transitioning to its current Director oI Training
appears in the Third Interim Report oI the Review OIIicer at 21-23, and Iollow-up on the LTC`s
eIIorts regarding hiring instructors, implementing curriculum changes and addressing Iinancial
33
and record-keeping issues have appeared in subsequent reports, see Fourth Interim Report oI the
Review OIIicer at 63-64. A critical issue Iacing the LTC is how to matriculate more apprentices
into the training program. The BeneIit Funds` trustees recognize and grapple with this issue. As
has been repeatedly discussed, both the District Council and the Employers seek to increase man
hours in the industry. A suIIicient number oI applicants who can successIully complete the
apprenticeship program oIIered by the LTC is crucial to staIIing the jobs. Attention has been
Iocused on how to increase the applicant pool. The trustees have Iormed a subcommittee to
discuss modiIications to the recruitment process.
***
In a war, there are manv moments for compassion and tender action. There are manv
moments for ruthless action, for what is often called ruthless, what mav in manv circumstances
be onlv claritv, seeing clearlv what there is to be done and doing it directlv, quicklv, aware.
From 'Apocalvpse Now`
.*&.172$*&
For some time, I have displayed on the walls oI the oIIice at the District Council used by
me and my staII pictures oI two Iamous leaders: John F. Kennedy and William Tecumseh
Sherman. The picture oI President Kennedy delivering his stirring inaugural address is Iamiliar
to most everyone who sees it. It always reminds me oI the power oI ideas; it serves as an
exhortation to participate in events great and small to change how things are and as an
aIIirmation that prudent action requires courage, wisdom and restraint. The picture oI General
Sherman is another matter. The man unknown to almost all who see it, the picture shows a stern,
hard man with penetrating eyes. It is a depiction oI a man called upon to do what had to be done
when words Iailed and prudent action required strength and a singular Iocus on perIorming one`s
34
duty. It has been proIoundly satisIying to eIIect change through exhortation. There has been no
joy in accomplishing change through other methods.
The choice in the methodology used by my oIIice over the last Iour years has always
depended on circumstances. I have done what needed to be done. I am encouraged that some at
the District Council have Iinally accepted that one can only lead by example, that Iighting to
insulate the Union Irom change is a Iailure oI leadership and that there are new and better ways
to build and protect a great institution. I am grateIul that so many recognize that this Union -- Ior
the sake oI its very Iuture -- cannot tolerate another corrupt act and that there is a solemn, shared
responsibility to snuII out such pernicious conduct once and Ior all.
I remember how bad things were back in 1994 when I was Iirst involved with the Union.
Violence and intimidation vitiated Union meetings. GraIt was rampant. Gangsters called the
shots. The Union`s coIIers were treated like a cookie jar. The little guy with a heart oI gold did
not stand a chance oI improving things and could only dream oI better days. I know how good
things are now and certainly wish the journey had not taken twenty years.
I do not see that there is any need Ior Iuture conIlict. The new District Council has
urgent business to do in the construction industry, it must increase man-hours and reclaim market
share, it must protect and grow its Iringe beneIit Iunds and impress upon people the importance
oI organized labor and the rights oI workers. Importantly, it can do these things with the
knowledge that it truly does now have the ability to conduct its aIIairs lawIully, prudently and
solely in the best interests oI its members. It usually does so, but ,-- oI its people must decide to
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