UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

X
UNITED STATES OF AMERICA,
Plaintiff,

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.,
Defendants.
X

THE FINAL REPORT OF THE REVIEW OFFICER

Dennis M. Walsh
Review Officer
The Law Office of Dennis M. Walsh
415 Madison Avenue, 11th Floor
New York, New York 10017
646.553.1357
dwalsh@dennismwalsh.com

TABLE OF CONTENTS
Page
I.

II.

THE DISTRICT COUNCIL

A.

The Progress of Reform at the District Council

B.

The Sustainability of Reforms

C.

Recommendations

D.

Other Notable Matters

13

1.

Investigations of Persons of Interest

13

2.

Continuing Investigation Involving Hudson Yards

14

3.

Investigation of a District Council Executive Committee Member

15

4.

Local Unions

15

5.

The District Council Technology Upgrade Project

16

6.

Investigative Guidelines for the IG's Office

17

7.

The Election for District Council President

19

8.

Dockbuilder Steward Appointments

19

9.

The Trial Committee

20

10.

Journeymen and OWL Statistics

20

11.

Provisional Members

21

12.

Delegate Vacancies

22

13.

Termination of Bill O'Flaherty and Tim Thatcher

23

THE BENEFIT FUNDS

23

A.

Overview

23

B.

Organizational Restructuring

26

C.

Executive Director and Leadership Team

27

D.

Human Resources

28

E.

Compliance

31

F.

Outside Counsel

33

G.

IT

34

H.

Overall Condition of the Funds

35

1.

Pension Fund

35

2.

Welfare Fund

36

I.

Collections

37

1.

Shop Steward Variance Reporting

38

2.

Collection of Delinquent Contributions

41

3.

Special Funds Litigation and Arbitrations

42

J.

395 Hudson: The Renovation Project

43

K.

The Hollow Metal Fund

44
45

CONCLUSION

ii

"Labor to keep alive in your breast that little spark ofcelestialfire called conscience."
George Washington
This is my ninth and final report as Review Officer. It discusses certain important
aspects of my tenure over the last seven months and, as contemplated by the terms of the
Stipulation and Order entered in this matter on November 19, 2014 (see docket number 1595), it
includes my assessment of(1)the progress of the District Council's reform,(2)the sustainability
ofthe reforms that have been implemented and (3) my recommendations going forward.
I.
A.

THE DISTRICT COUNCIL

The Progress of Reform at the District Council

The Supplemental RICO Complaint filed in this case in 1991 is attached hereto as Exhibit

1. It is an astonishing catalogue of violence and graft. It is an appropriate starting point to chart

the progress of reform.
Consider the day in 1976 when a business agent of a local union of the District Council
looked up from the papers on his desk and with his last breath saw the barrel of a gun fire bullets
that ripped his body apart. His mistake had been to oppose the head of the District Council, a
confederate of the Genovese family. Reflect on the day in 1978 when a local union president
was assassinated for his dissident actions; or the day in 1982 when the head of the District
Council "went missing" because a powerful member of the Genovese family suspected that he
was going to betray their criminal conspiracy and cooperate with the government. Consider the
stark brutality of a professional service provider to the Benefit Funds being told in the coffee
shop at the Waldorf - as an ice pick was placed to his ear - that he had better pay a piece of his
earnings from the Benefit Funds to the Genovese family.

Consider the former "stamps

investigations team" at the Funds (responsible for collecting delinquent contributions from
contractors) who were nothing more than associates of La Cosa Nostra selling protection

packages to contractors (and who were revealed and incarcerated). Consider the former heads of
the District Council who met directly with capos in the Genovese and Colombo families and
took their instructions from them. Consider the countless beatings, knifings, threats, thefts,
payoffs, riotous union meetings, arrests and frauds from the 1970s through 2009 that enabled the
Genovese family (sometimes in concert with other families) to control the District Council (and
helped La Cosa Nostra to control the construction industry). Then consider the District Council
today.
Since my first report was filed in December 2010, the District Council and Benefit Funds
have been steadily transformed into institutions that could only have been imagined when I was
appointed in June of that year. My first report revealed even more corruption, but published the
blueprint that I felt could be used to construct a compliant and productive Council and Funds.
The transformation that has followed has been achieved through struggle, persuasion and the
dedication of right-thinking men and women. Even more felicitous observations can be related
about the progress of the Funds.I/ As all who have followed this saga know, new Bylaws with
unprecedented provisions were crafted for the Council and new policies and offices were created
and others refined (ranging from HR, to IT to Compliance) for the Council and the Funds.
Further, from 2010 to now, the cast of players on both stages has seen many changes. See
Exhibit 2. Though there are many employed at the Council and Funds who inspire confidence,
there are a slight few, particularly at the Council, who still do not. That proposition will be
discussed, infra.
My eight previous reports have catalogued in detail the progress of reform and also
sought to illustrate how the District Council and the Benefit Funds must continually refine
reform measures that have greatly strengthened each institution. That process has broadly taken
I/

The Benefit Funds are discussed in detail in Part II of this report.

hold at the Funds (where the employer trustees of the board have been and continue to be a
salutary presence and the Executive Director has set a new standard for excellence in
performance on a national scale). The Council has in key functions exhibited adherence to this
method, but still faces political challenges and outdated views that tend to inhibit adherence to a
method of implementing institutional improvements objectively, based on rigorous selfexamination and critical thinking. The Council also has at least one vital office, that of the
Inspector General, that must be improved before it is ready for self-monitoring.
Still, great credit must be given when great credit is due. Obviously, both institutions are
light years removed from the horrors catalogued in the government's 1991 RICO complaint,
indictments, media coverage and the reports filed in this matter since 1994 by the Investigations
and Review Officer, Independent Investigators and my office. Both the District Council and the
Benefit Funds are strictly law abiding and forward thinking (with the Funds leading the way in
this regard) and though the process of removing noncompliant or unsuitable personnel (including
service providers) and substituting them with others with appropriate credentials, zeal and skill
has taken some time, it is largely complete.
B.

The Sustainability of Reforms

The reforms implemented at the District Council - codified in well-tailored Bylaws, Out-

of-Work List Rules and various policies and procedures - have been in place for over three years
and have served the Council well.

Discussing the sustainability of these reforms must

necessarily be complicated by consideration of possible future events and identification of risks.

Many things can happen beyond the control of the District Council in response to which
it must continue to react appropriately. Though I believe that racketeers who have exploited the
construction industry and who historically reaped illicit profits - through control of unions,

contractors, and supplies of key materials such as concrete - have adapted their business models
and have focused on exploitation of non-union workers and coercion of contractors (recognizing
the reforms within the Council and that they have not been able in the last four years to corrupt
its agents through coercion or bribery), the Council may have to face a return by opportunistic
racketeers to the old business model (requiring the corruption of Council agents to succeed).
What indeed will be the reaction of a top fiduciary at the Council or the Funds to a threat of
violence? If a business representative accepted a bribe to help a racketeer cheat the Union, what
could he actually do without being detected to assist a plan to commit fraud? If a shop steward
learned that a member of the Union had a no-show job or was extorting a contractor, would he or
she report such suspicions and, if he or she did, what would the Council's Inspector General
do?
In my view, the racketeer who attempts to gain advantage through positive or negative
inducement of District Council or Benefit Funds officials will be revealed as a fool, as one who
has not studied and who thus does not comprehend the necessarily redundant safeguards in place
at the Council and the Funds. In the classic field scheme, a contractor pays off a shop steward
(and usually a business representative) to be allowed to keep all or some portion of carpenters'
work at a site off of the books or paid at a rate less than required by the collective bargaining
agreement. The same nefarious goal in past years has also been achieved through coercion.
Safeguards implemented at the Council greatly increase the risk of such schemes being detected
(through electronic reporting of man-hours by stewards and of daily rounds by business
representatives, as well as through member oversight via Operation Watchdog). It has also
historically been possible for contractors to defraud the Funds by not remitting payment for
fringe benefits (and, in former days, facing a lawsuit that lead only to an unenforceable judgment

after assets were secreted or dissipated). In the absence of methods to promptly detect such
delinquencies, debts can grow into the hundreds of thousands of dollars in a matter of a few short
weeks (depending on the size of a job). As a result of programs now being used by the Funds
such as the Shop Steward Variance Reporting program that identifies disparities between time
logged by the Union and time reported by employers, thus revealing contractor debts within
three weeks of work being performed, rather than the two-plus months formerly involved, see
infra as well as timely and aggressive collection efforts - such schemes will also be difficult if
not impossible to accomplish.
There are also dangerous internal risks that, if unchecked, will erode the compliant
business practices of the District Council and the Benefit Funds, for example:(i) the termination
or replacement of compliant and effective employees with cronies and patsies who will yield to
the will of others; (ii) willful and inappropriate tinkering with the Bylaws, Out-of-Work List
Rules and policies in place at the Council;(iii) failing to continue to develop and use technology
in every aspect of operations; (iv) failing to adequately fund and staff key functions at the
Council such as Compliance, the IG's office, Accounting and the Audit Committee and, at the
Benefit Funds, such as the Executive Director's office and key executives (and failing to pay
market-based salaries to all personnel and merit bonuses to top achievers); (v) replacing able,
honest and conflict-free counsel and accountants (and other service providers) with unsuitable
persons and firms selected for subjective reasons; (vi) failing to develop, publish and follow
clear and complete standard operating procedures for all functions based on best practices; (vii)
failing to support and enhance democracy through informative, safe and well-run meetings (and
using modem audio-visual aids) and failing to fully and timely disseminate all information and
news to delegates and members who have a right to know such things; (viii) failing to work

closely with law enforcement to address suspected corruption;(ix) failing to include appropriate
economic solutions to market share challenges based on fair compromise at the collective
bargaining table and in negotiating with non-union employers;(x) failing to appropriately invest
the considerable assets of the District Council (in excess of $50 million) in keeping business
systems and practices modern and compliant and the Council adequately staffed; and (xi) failing
to always be able to justify all business and fiduciary decisions based on clear facts and objective
reasoning consistent with best practices and the needs and rights of the membership.
C.

Recommendations

Bylaws and Policies

There are obviously some updates that need to be made to the Bylaws. Outdated
references to the Review Officer, the former Trial Committee and its rules and other provisions
that have been superseded by Review Officer action, court orders or the adoption of formal
recommendations comprise the bulk of considerations in this category.
Material changes to the Bylaws and policies and procedures required by the Bylaws are
another matter. They must be considered, constructed and adopted with great care and precision.
As such proposals arise, each proposed change must be subjected to strict scrutiny to insure that
the proposed change (i) comports with the strictures and goals of applicable law, the Consent
Decree and Stipulation and Order; (ii) materially improves the business operations and
governance of the District Council;(iii) clearly benefits the organization and its members;(iv) is
clearly written and unambiguous; (v) is the product of the process contemplated by the United
Brotherhood of Carpenters and Joiners of America("UBC") Constitution and the Stipulation and
Order; and (vi) is approved in writing by the Independent Monitor ("IM") and the United States
Attorney's Office ("USAO"). Further, the process of seeking any change should include a well-

supported submission by the Council to the IM and USAO, delineating why the proposed change
is consistent with the foregoing considerations and articulating why the provision to be replaced
is no longer suitable.
Out-of-Work List Rules
I do not believe that any material change to the Out-of-Work List Rules("OWL Rules")
is necessary. Skills have been periodically added; they will continue to be. Pragmatic solutions
to certain industry-generated problems that may arise (such as weekend work performed in the
floor covering industry that common sense indicated should be covered by a separate OWL)may
arise and require similar reasonable and benign solutions. Any proposed change to the "threedispatch rule," which has been highly effective in eliminating skill puffing and the premature
quitting ofjobs, should be rejected. Any attempt to return to the so-called "25-day rule" would
be politically motivated and would extensively damage the Union and the industry through the
return of inadequately qualified persons to jobs.
District Council Inspector General
The Office of the District Council Inspector General is subject to "Investigative
Guidelines" adopted in December 2011. They are attached as Exhibit 3 and are discussed infra.
The Guidelines are meticulously detailed and based on best practices for such offices. Based on
discussions with the Inspector General ("IG") and his staff, review of his reports and other
information, the Guidelines appear, at best, to be loosely and randomly applied. The Chief
Compliance Officer ("CCO") should - at least annually - perform an in-depth audit of the IG's
office to assess adherence to the Guidelines.

To insure some appropriate measure of

accountability, the CCO should report his findings in this regard to the Executive Committee.

Documented, serial failure to materially adhere to the Guidelines would present reasonable
grounds for dismissal ofthe IG.
Further, in order to insure that the use of department assets in sensitive matters is
appropriate and well-considered, the IG should confidentially report to the CCO his intention to
use certain investigative methods (e.g., surveillance, location monitoring) when investigating
elected Union officials and articulate the basis for a reasonable suspicion of illicit conduct and
how the investigative method will gain relevant evidence). The CCO should discuss with the IG
any perceived deficiency in the plan and, if necessary, inform the IG in writing of any concern.
Additional and Specialist Personnel; Executive Continuity
The District Council is in no way over-staffed. The Council could easily add suitably
skilled and educated professionals to its staff to bolster the Compliance Department, the IG's
office, the accounting department, the Director of Operations' office, the business representative
centers, and the asset-deficient Audit Committee (which should be developed with proper
attention and financing into a true internal audit unit).
Multiple functions and departments face continuity risks; if certain department heads
were to leave District Council employment or become unavailable, the integrity of Council
operations would be imperiled. Any department that depends on the service of one particular
person to conduct its business presents an easily avoidable risk to Council operations. This risk
can be addressed only through a concerted effort to create deputy positions filled by highly
qualified persons.
100% Electronic Time Entry
With shop stewards entering their time electronically, it became unnecessary to use paper
steward reports. Nonetheless, the practice lingered, and was not officially ended until December

1st. All time, particularly time for work in the trade show industry and especially at the Javits
Center, should be reported electronically by the end of the first quarter of 2015. The prospect of
the District Council being given electronic time records by the Javits Center has been discussed
for some two years now and the Council needs to insist that a strict implementation date be
given.
Using Technology to Improve Efficiency, Accountability and Compliance
The Stipulation and Order expressly recognizes the importance of the Information
Technology upgrade project underway at the District Council and the need of the IM to pay close
attention to and report on the project's progress. In the meantime, particularly now that the
Council has an IT Department with three employees, every effort should be made to use existing
capabilities (such as was done by the business representative department) to maximize use of
technology in daily business. For instance, the IG's office still relies on paper files (kept in the
exclusive custody of the IG himself) to track and conduct its business, but should be making
every effort to manage cases electronically, from the opening of a matter, through investigation
and reporting to closeout, thereby growing a searchable database (an important investigative
tool) and realizing efficient use of time and space.
I note that the accounting department under the leadership of its chief, Judy Montreuil (a
valuable District Council employee), is diligently working to upgrade the Council accounting
system and is close to selecting a vendor to achieve this goal.
Establishing (and Refining) Liaison Protocols with the Benefit Funds
With the history of blatant and willful interference in the affairs of the Benefit Funds by
certain past leaders of the District Council, it is imperative that formal protocols be followed in
every situation where communication between the Council and the Funds is necessary or

appropriate. Ranging from a member call received by the Council that should have been placed
to the Funds(when the Council necessarily refers the member to the Funds, appropriately noting
the member's name and the nature of the inquiry and later follows up with the Funds to insure
that the member's inquiry has been answered), to regular meetings between persons from
departments at the Council and the Funds with common objectives, standardized communication
will benefit each organization. Issues that the Council's Executive Secretary-Treasurer ("EST")
may wish to address with the Funds' Executive Director should be addressed as a matter of
record, for example, by email copied to the employer co-chair of the Funds' Board of Trustees or
by scheduled calls or meetings that include the employer co-chair. I have also encouraged the
respective co-chairs of the Board of Trustees (Joseph Geiger and David Meberg) to have regular
meetings to discuss any propositions or issues that may arise.
Communication and Transparency
The District Council and Benefit Funds web sites have recently made excellent progress
in creating and refining useful web sites. The fiduciaries of both organizations must insure that
web sites and other methods of timely and detailed communication are continually assessed and
refined to best serve the members. I have exhorted the Council for years to obtain email
addresses from each member who has one (and one would think that most do) in order to
continually and efficiently inform the members of news and other matters. Every effort should
be made to perfect that process in 2015.
The District Council Audit Committee
The Audit Committee, as provided for in Section 5(B)(17) of the District Council Bylaws
(see Exhibit 4), plays an important role, at least in theory, in insuring that the Council adheres to
compliant business practices. In practice, it has suffered from the insufficient interest of a

10

succession of its delegate members (selected by the delegate body), and has been too dependent
upon the suggestions of my office as to how to achieve its required objectives. The committee
should never wonder about what it needs to be doing and how it should be doing it. It should
focus on continuously reviewing the business practices and finances of the Council and reporting
its findings to the delegate body.

The committee would benefit from the addition of a

professional with audit training and experience who could materially assist it in accomplishing
internal audit functions in a professional manner (and who could also assist the CCO, chief
accountant and IG). The committee could draft rigorous audit tests with the assistance of such a
person and the outside CPA who advises the committee but who may not be sufficiently
compensated to provide more in-depth assistance, use the audit tests in reviewing key functions,
issue draft findings, incorporate the responses of the functions and then issue final reports to the
delegate body.
The Grievance Department
As I have previously discussed, see Second Interim Report at 50-51, the District Council
has made progress in improving and refining the work of the grievance department, which
receives, dockets and pursues claims by local union members, business representatives and the
IG's office against employers for violations of collective bargaining agreements. Since the
beginning of 2014, the grievance department has collected $854,727.21 in satisfaction of these
matters, as reflected in records supplied to me by the District Council. However, at any time,
there may be as many as 2,000 pending matters and the backlog prevents their timely pursuit and
disposition. Importantly, some grievances are not adequately documented (for instance, with a
sworn and detailed statement of facts submitted by the person filing the grievance identifying
witnesses, supporting documentation and other evidence) and the department must perform

11

additional work to assess and pursue a matter. In my view, the duty of fair representation of its
members requires the Council to insure that the department has the resources and personnel
necessary to process and pursue (or decline based on lack of merit) each grievance in a zealous
and timely manner.
The Imbalance in the Composition ofLocal Unions
There is an imbalance in the composition of the District Council's local unions (and thus
the delegate body) that presents a risk to democratic governance of the Council. Further, with
centralization of business, collective bargaining and representative functions at the Council,
abysmally low turnout at meetings of general construction locals and a high degree of member
apathy, the original geographic rationale for general construction locals should be reconsidered
by the District Council's parent organization, the UBC, as the rationale no longer appears wellsuited to best serving the membership's interests.
Consider the following membership ratios of general construction locals. (Calculations
are based on 20,000 members and the percentage of District Council members and seats in the
Council delegate body are also shown):
Local 20(3%):
Local 45(8%):
Local 157(46%):
Local 926(8%):

600
1,600
9,200
1,600

Category Total:

13,000

Thus, Local 157 constitutes approximately 71% of the category.

The membership ratios of specialty locals are as follows:
Local 740(2%):
Local 1556(14%):
Local 2287(5%):
Local 2790(14%):

400
2,800
1,000
2,800

Category Total:

7,000

12

A neutral, business model-based methodology could be utilized to appropriately balance

the general construction local unions; consideration should be given to creating two new general
construction locals, one for interior systems and one for concrete that together would have as an
initial target approximately 4,000 to 5,000 members. No member would be reassigned from any
current local union and transfer would be entirely voluntary. A reduced dues structure could be
implemented and a modern, more enlightened approach to local union meetings could be
implemented with one of the principal reasons to attend such meetings being that fulsome
information about where a member might find work would be disseminated and discussed. If
there were a sufficient number of transfers, the UBC could then consider the merits of retaining
or dissolving any particular general construction local union.
D.

Other Notable Matters

1.

Investigations of Persons of Interest

Though the governance and administration of the District Council, eight affiliated local

unions and the Benefit Funds is free of the influence of organized criminal groups, investigations
conducted by my office involving surveillance, informant information and other methods reveal
that there are two suspected members of the Genovese family who have been and remain
employed by signatory contractors. Neither has ever had any position of authority or agency in
the Union. Both have what one might charitably call "light duty" jobs, but what others might
call "nonproductive"jobs with their employers, whom I suspect are not free actors in the matter
of their respective employment. My office has deposed both men, who each apparently lied
under oath, based on the investigative record compiled by my staff. One of the men - who has
previously been arrested and who is suspected of running a gambling operation among other
ventures - testified that he was engaged at the Hudson Yards site to make "plan tables." A third

13

man, who is a reputed associate of the Colombo family (and who, among other things, buried
victims of the infamous Colombo family war) obtained employment at Hudson Yards within a
month of his release from federal prison for racketeering conspiracy in May 2014. He stopped
working at the site after he received a notice of deposition, which was taken on December 2,
2014, and in which he was alternately incredible and evasive.
My office also recently took the deposition of a man believed to be a soldier in the
Genovese family, who was responsible for representing the family in certain of its interests in the
construction and trade show industry and who was suspected of attempting to exercise influence
over members of the carpenters' union, including a long-time shop steward in the trade show
industry. He invoked the Fifth Amendment in response to virtually all questions posed. He is a
former member of the Union.
Particulars regarding the foregoing persons, as well as members of another criminal
group (formerly referred to as "The Westies") suspected of passing purposeful messages to
Union members, have been shared with the IM as part of the transition process.
2.

Continuing Investigation Involving Hudson Yards

In addition to the circumstances surrounding the hiring of the above-mentioned associate

of the Colombo family, and the previously reported situation where the 50/50 hiring ratio
required by the Independent Agreement between the District Council and a contractor was not
enforced - at a minimum - through the gross negligence of Union representatives (see Eighth
Interim Report at 5-8), my office investigated another situation involving the Hudson Yards site.
This involved the hiring for a light duty job of an inexperienced member who is the son of a
former business manager of one of the general construction locals (and a former District Council
trustee). Depositions of two of the contractor's employees believed to be involved in hiring and

14

executive decision-making at the site were taken in December. Their recall of certain details of
issues of interest was not of particular assistance to the investigation.
3.

Investigation of a District Council Executive Committee Member

Investigation has revealed that a member of the District Council Executive Committee

has violated the Taft-Hartley Law, 29 U.S.C. 186 (a) and (b), and the District Council Steward
Ethics Policy. On multiple occasions in 2014, John Daly of Local 157 was off his job for Regal
U.S.A. Construction, Inc., while simultaneously receiving pay from Regal (sometimes at
overtime rates) and stipends from the District Council for engaging in Executive Committee
business. On December 23, 2014, I served him and the District Council with the notice required
pursuant to Section 5.b.iii (1) of the Stipulation and Order relating to actionable violations of the
Consent Decree and the Stipulation and Order, and asked that he be immediately removed from
the Executive Committee and that his status as steward be stripped. The Notice of Action and
supporting declaration is attached as Exhibit 5.
4.

Local Unions
The respective officers and office staffs competently handle the business responsibilities

of the eight local unions affiliated with the District Council. The finances of each are sound,
though the reserves of each are quite varied (ranging from two to 25 months).
The fundamental problems of most local unions remain unchanged: (1) members do not
attend local union meetings (in many cases, finding no reason to travel significant distances and
incur expenses to attend meetings where nothing of import is learned, discussed or accomplished
and local union delegates to the District Council are not even required to be in attendance); and
(2) other than to collect dues from members (which are in significant part transferred to the
Council and UBC in the form of per capita taxes), the raison d'etre for local unions is entirely

15

anachronistic and their function may be so banal as to defy justification. With the necessary and
proper centralization of authority and business functions at the Council, locals do not represent
their members at the bargaining table; they do not employ business representatives; they do not
refer members to work. Happily, they have in some cases created or continued programs to
provide supplemental benefits to members such as dental coverage (during the period when it
was not offered by the Benefit Funds), sick donations (which should always be properly
documented and carefully scrutinized upon standardized criteria), and life insurance.
On average, based on statistics provided by the locals, the monthly meeting of a general
construction local is attended by about one to three percent of its members. Many have
discussed the problem, but, as matters currently stand, I do not believe they will find a solution.
The purpose and configuration of locals is in need of a radical new philosophy and new
approaches.
5.

The District Council Technology Upgrade Project

It is too early in the District Council technology upgrade project to report any truly

material developments. The vendor, Data Research Group, and the District Council have
executed a contract and the Council contemplates material performance and implementation by
Fall 2015. As discussed in prior interim reports, this is a vital project and must be pushed hard
by the Council, but due to the extended schedule, assessment of and detailed reporting on the
performance of all concerned in this effort must be left to the IM. I presently have no reason to
believe that this project will not be implemented within its specifications, relatively on time and
close to budget.

16

6.

Investigative Guidelines for the IG's Office

One of the purposes of the IG office's Investigative Guidelines, memorialized in

December 2011, is "to ensure [that investigations] are conducted competently, consistently, and
in compliance with all applicable laws, regulations and [] high ethical standards...." Exhibit 3 at
1. Unfortunately, the IG's office does not uniformly follow the Guidelines and thus fails to
operate as intended or as effectively and efficiently as possible. Below is a discussion of the
areas where the IG's office is falling short.
As a general matter, the Guidelines assume that the IG's office is organized roughly as a
pyramid. The IG is at the top of the pyramid, with the deputy IG below him and then the
investigators and staff below the deputy IG. Under the Guidelines, the investigators are to be
assigned cases to work, a lead investigator is to be responsible for each case and the IG and the
deputy IG are to manage the cases.
From discussions with the IG and members of his office, and based on my office's
experience with the IG's office, the IG's office does not handle cases in this manner. Most
times, the IG and the deputy IG are the ones who conduct investigations, with little or no input
from investigators. Indeed, investigators are typically not assigned cases and asked to work
them; rather, they are assigned tasks to perform by the IG and the deputy IG, with scant
explanation as to why any particular task needs to be completed.
One result of this approach is that important investigative protocols that the Guidelines
require are not being followed. Some tasks that are not regularly performed are:
Preparing notes proposing that formal investigations be commenced (Guideline
Section 4.2.1);
Developing investigative work plans (Section 4.3.1); and
Completing investigations within 60 days (Section 4.3.2).

17

Following these protocols would result in more effective investigations and more efficient use of
investigative resources. There is no reasonable basis for not following these protocols.
The Guidelines also require the IG's office to maintain an "effective case management
system for the purposes of recording allegations and complaints received and tracking their
handling and resolution." Guidelines Section 3. Based upon interviews with the IG and
members of his office, the case management system is not strictly followed. While the IG's
office does maintain a case file system, based on my discussions with the IG, there is no regular
review of the files to determine the status of investigations and what action to take in a particular
investigation.

Moreover, the IG's office does not strictly adhere to the requirement of

designating cases in one of three categories - open, closed and closed exceptional. See
Guidelines Section 4.3.2. Members of the IG's office have advised that they do not know of any
open cases having been closed.
Section Five of the Guidelines requires that an investigative case file be maintained for
each investigation, including an investigative plan, chronology of events, copies of reports,
photos, correspondence, electronic evidence, lists of physical evidence, case closing memoranda,
UBC charges, grievances, audit reports and any other information.

While the IG's office

maintains case files, the files are incomplete.

On occasion, the IG's office has performed physical surveillance. Section Six of the
Guidelines requires that the IG approve a surveillance plan submitted by his investigators prior to
surveillance being conducted. The plan should consider the following:

The subject of the surveillance

The need for the surveillance
The surveillance techniques to be employees
The human and other resources required for the surveillance
The time period during which the surveillance will be conducted
Whether there are any less intrusive techniques available

18

We have not seen any written surveillance plans and have found that the IG's office does not
consider these areas, but instead performs surveillance at the sole discretion of the IG. Quite
simply, this is unacceptable and it makes the surveillance process ripe for abuse.
The Guidelines also require the lead investigator assigned to a case to prepare a final
report at the end of an investigation. See Guidelines Section 8. As noted, many cases remain
open far too long and are never closed. If a case were to be closed, however, there is no one with
the responsibility of writing the final report, as the IG does not assign anyone as lead
investigator.
If the District Council is to ever self-monitor, it must first have an effective, efficient and
transparent IG's office, which is above ethical reproach. The first step in that direction is for the
IG's office to adhere to the Guidelines that have already been developed and formalized.
7.

The Election for District Council President

The 2014 District Council election (for EST, President, Vice-President, Warden,

Conductor and three Trustees) yielded only one contest, that for the office of President (in which
Local 926 President Salvatore Tagliaferro unsuccessfully challenged the incumbent, Stephen
McInnis). All others were uncontested. Mr. Geiger, Mr. McInnis, Michael Cavanaugh (and their
fellow slate members) will take the oath for their next terms as EST, President and VicePresident, respectively, on January 14, 2015. The certified results, special campaign edition of
The Carpenter, candidate essays and campaign literature, and my decisions in two election
protests filed by Mr. Tagliaferro under the Council election rules, are attached as Exhibit 6.
8.

Dockbuilder Steward Appointments

Though I have generally been satisfied with the process used by the District Council to

appoint dockbuilder, timbermen and millwright stewards (generally via a business representative

19

visiting the job site in question as close to the start date of a job as possible), I have too
frequently scrutinized the appointment forms and been disappointed that representatives have
taken longer than one week to make such appointments, most often in the dockbuilder category
(and I have had to direct questions to supervisors to explain such situations). It seems to me that
if the representative responsible for the site cannot make the trip in a timely manner, his
supervisor should be so informed and another representative immediately dispatched to the site
to make the appointment.
9.

The Trial Committee

The current incarnation of the District Council Trial Committee is extremely cost

efficient, with average monthly costs in the range of $4,000 to $6,000. I have not received
complaints from anyone about its fairness. I would suggest, however, that the Council work with
the IM and Trial Committee Chairpersons to examine and implement ways to decrease the length
of time between the filing of some charges and their disposition, which I have on occasion
observed can be many months.
10.

Journeymen and OWL Statistics

The following summarizes recent membership, OWL and dispatch trends:
11,371
13,411
2,040
3,923

Journeymen in good standing on 11/30/14:

Journeymen in good standing on 4/30/14:
Decrease in journeymen:
Reduction since 12/3/10:

1,780

Members in arrears:
Numbers of persons on the OWL on 12/18/14:

4,466
282
175
348
157

Local 157
Local 2287
Local 1556 Scaffolding
Local 1556 Dockbuilders
Local 740

20

84
5,512(compared to 5,500 as of 12/2010)

Local 2790
Total
Dispatch Statistics:

Apprentices
Requests
Shapes
Denied Requests
Pure Dispatches
Totals

October 2014
248
0
354
0
1,145
1,707

April 2014
283
3
389
0
1,004
1,679

October 2013
320
19
307
10
1,075
1,731

The October 2014 dispatch figures include some 40 trade show dispatches.
Total activity from July 2014 through September 2014 follows:
July 2014
August 2014
September 2014
11.

2,028
2,000
1,706

Provisional Members
On December 10, 2014, the delegate body approved a market recovery amendment to the

collective bargaining agreement with the Cement League that established a "provisional rate" for
wages and benefits totaling some $57 per hour (less than 2/3 of the standard package) for work
currently performed on certain hospitality and residential sites (defined by location and size) by
non-union contractors who pay inferior wages to their workers (many of whom are immigrants).
Every such provisional member will have to be matched by a journey person at the full rate.
Provisional members will join local unions, and receive health coverage and proportional
pension credits; they will pay standard dues and assessments; but they will have to waive their
right to sign OWLs that refer journey persons to work and be restricted to a provisional category
OWL.
The District Council will need to take care that the proper ratio of journey persons to
provisional members is strictly enforced.

21

12.

Delegate Vacancies
On December 10, 2014, the delegate body approved the following formal Review Officer

recommendation (as presented to EST Geiger on October 13th):

As we have discussed, I have viewed Paragraph 4.B of the District
Council Bylaws as one of the special provisions of the Bylaws which supersedes
related provisions of the Constitution of the UBC. The unique circumstances of
governance in New York (where corruption and outside influence have greatly
harmed the Union) and the pendency of the Consent Decree since 1994 have
made these special provisions necessary.
Since the Bylaws were implemented in August 2011, I have strictly
construed the requirement that delegates be elected "by the rank and file members
of the United Brotherhood of each affiliated Local Union," as superseding Section
32.B of the Constitution, which authorizes local union presidents to appoint
delegates pro tem when a vacancy occurs "until such time as an election is held to
fill the vacancy." Based on the imperative of the Consent Decree's direction that
the District Council and its local unions be run "democratically," I have found my
interpretation of Paragraph 4.B (barring appointments) to be a highly effective
means to prevent unlawful manipulation and degradation of the delegate body
(through pressure being applied on lawfully-elected delegates to resign, and being
replaced by appointed cronies of local union officials and sometimes by persons
loyal to racketeers). Further, without a clear teaching from the UBC Constitution
regarding when an election must be held, the excessive passage of time after an
appointment of a delegate without a special election further contravenes the
Consent Decree's requirement that the affairs of the Union be conducted
democratically. To date, the District Council and its eight affiliated local unions
have abided by my interpretation of Paragraph 4.B.
However, I also recognize that vacancies may sometimes occur for
legitimate reasons and without warning and that as a result, an affected local
union is under such circumstances deprived of full representation in the delegate
body even when it exigently notices and holds a special election to fill the
vacancy. Thus, I formally recommend that in order for the strict terms of the
Consent Decree to be met - while maintaining the representation to which local
unions are entitled - the District Council accept the credentials of a delegate pro
tem for the first two meetings of the delegate body after the seat in question
becomes vacant. Such a method will serve to more closely harmonize Paragraph
4.B and Section 32.B and ensure that local unions are fully and effectively
represented (provided that able delegates pro tem are appointed) and will allow
sufficient time for the necessary special election to be noticed and held.
Note that I have considered the argument made by some members that a
longer time in which to hold a special election is necessary because elections are
"expensive" and other vacancies might occur in the same time. Such thinking is

22

insupportable. Elections do cost money, but that is part of the inescapable price of
the democracy required by the Consent Decree. Even if this were not the case,
there is no way to know when or indeed whether any subsequent vacancy in the
delegate body relating to the particular local union might occur.
Please let me know within the next 30 days whether the foregoing
recommendation has been adopted or rejected.
13.

Termination of Bill O'Flaherty and Tim Thatcher

It was agreed at the beginning of my tenure as Review Officer that, rather than having to

pay two of my investigators as private consultants, they would be employees of the District
Council IG's office assigned to my office for exclusive and confidential use. This saved the
District Council considerable money over the investigators' more than four years of impeccable
service. We all understood that the District Council reserved the right to end the investigators'
employment at the end of my tenure. Though I had hoped that the Union would recognize the
benefit of keeping two such talented, dedicated and experienced men on staff after I completed
my tenure, on December 17, 2014, they were served with notices of termination (effective
December 31, 2014). It is a shame, since retaining them would have been so easy to do and
would have significantly improved the caliber of the IG's office.
To Bill and Tim: I am deeply grateful for your singular contributions and your dedication
to truth and duty. You are good and honorable men.
II.
A.

THE BENEFIT FUNDS

Overview
Pursuant to the Stipulation and Order dated June 3, 2010, I was entrusted with review and

oversight of not only the District Council, but its Taft-Hartley fringe benefit funds, i.e., pension,
annuity, welfare (or health benefits) and training funds. It was the first time the Benefit Funds
had been included within the scope of a monitor's duties, but it was prudent to do so, given the

23

opportunity they present for corruption as evidenced by the September 2009 indictment of the
Council's then EST, Michael Forde, who was also a trustee ofthe Funds.
My initial undertakings with respect to the Benefit Funds included interviewing Funds'
employees and observing how the Funds operated. What I found was an organization that was
ripe for improvement. Power was centralized in the long-time Executive Director, outside
collections counsel and a few Funds' staff members who were close to them. There was a
sprawling administrative staff with ill-defined duties and responsibilities. Basic policies and
procedures were lacking. Entering payment plans with employers who were behind in their
benefits contributions seemed to be an end in and of itself, with little regard to collectability.
See, e.g., First Interim Report at 46-52.
At that time, I reported that the Benefit Funds had to make the following fundamental
organizational changes, to serve as hedges against corruption:
A Human Resources manager should be hired, through a competitive process;
A standard protocol should be developed for advertising job opportunities,
conducting interviews and evaluating potential employees;
A new organizational structure should be developed, combining functions that
logically belong together in a single department with an appropriate manager;
No one should be a manager or supervisor of more than one department;
There should be a written document listing specific positions, the basic duties
and responsibilities involved and the pay, which should be commensurate
with the nature and volume of work done;
Performance evaluations of all employees by the manager and supervisor who
actually supervises that employee should be done on a yearly basis with a
written record;
Basic policies, including anti-discrimination and sexual harassment, should be
formally rolled out and training given;
Training on all policies should be conducted on a yearly basis;
A Compliance chief should be hired and the agreed to Compliance program
developed.
Id. at 52.

24

In the last four and a half years, the Benefit Funds have accomplished these initial
objectives and much more. The Funds began making progress following the installation of the
first new Executive Director in many years, in July 2011. See Third Interim Report at 28-29.
The Funds reviewed and started to develop an organizational structure centralizing key functions
in senior staff and otherwise streamlining operations. Some of the more glaring deficiencies,
such as the lack of discrimination and harassment training, were immediately addressed. The
Funds first-ever HR Director was hired in the second half of 2011. The head of HR has changed
twice since the role was initially established. The role of CCO was ultimately filled by an
outside compliance professional. The process has been a healthy one, resulting in what appear to
be solid and sustainable programs. The ongoing work of the current HR Director and CCO are
discussed in more detail below.
At the outset, I also urged two reforms to strengthen the collection of benefits
contributions: (1) using objective criteria to hire able and efficient collections counsel; and (2)
"working with the District Council to acquire and utilize available hardware and technology to
capture time worked each day at job sites electronically, so that the data can be sent each day to
the District Council, the Funds, the employers and their payroll departments or payroll service
providers (obviating disputes and much of the collections infrastructure which is cumbersome
expensive and vulnerable to fraud)." Id. at 6-7.
As to the first of these reforms, in May 2011, the Benefit Funds retained Virginia &
Ambinder to serve as collections counsel through a competitive process and they have greatly
enhanced collections through the policy and procedures they have spear-headed and their diligent
work litigating and arbitrating collections matters. As to the second of these reforms, there has
been a multi-faceted approach, involving both the District Council and the Funds and utilizing

25

technology not only for electronic reporting at job sites but to more quickly identify delinquent
contributions so that they can be acted on before they grow too steep or too stale. This too is
discussed in greater detail below.
Guided by the Board of Trustees, the current Executive Director and his hard-working
staff are expanding upon these core improvements to create a first-rate organization. Below I
discuss the evolution of the Benefit Funds, discussing additional progress that has been made in
the last six months, the sustainability of reforms and the risk of erosion.
B.

Organizational Restructuring
In my initial interim reports, I wrote of the sprawling, sometimes overlapping, disjointed

and ultimately inefficient organizational structure at the Benefit Funds' office. See First Interim
Report at 48-50; see also Second Interim Report at 20.
The Benefit Funds began focusing attention on the organizational structure of its
administrative office upon the arrival of a new Executive Director in July 2011. Within that first
year, the Funds "trimmed down a bloated organization that was staffed in part with friends and
relatives of former senior staff and outside collections counsel, in the process achieving quality
and efficiencies as well as...savings." Fourth Interim Report at 53.
The current Executive Director, Ryk Tierney, has restructured the Benefit Funds' office
since beginning his tenure on April 29, 2013. He has created a three-tiered structure of executive
leadership, management and staff, dedicated to the core functions of collecting benefit
contributions from employers and ensuring receipt of benefits by members and their
beneficiaries.

The structure also includes the critical support functions of Accounting,

Information Technology, Human Resources, and Compliance.

26

In short, the Benefit Funds have undergone an organizational transformation that

provides a strong foundation for increased productivity and sustainable reform. That foundation
is being augmented in numerous ways, as discussed below.
C.

Executive Director and Leadership Team

For the first year of my tenure, the long-time Executive Director remained in place,

retiring in the Summer of 2011. The hiring of a new Executive Director was promising and,
indeed, he made progress in improving the Benefit Funds' operations. See Fifth Interim Report
at 2. However, in the Summer of 2012, he was dismissed for cause, forestalling additional
improvements. The Interim Executive Director advanced some important initiatives, but interim
leadership is always at a disadvantage in pushing forward and implementing an ambitious
agenda.
In April 2013, having been chosen through a nationwide competitive search, Mr. Tierney
began as Executive Director. In the ensuing 20 months, he has been instrumental to enhancing
operations and creating sustainable reforms at the Funds' office.

Some of his key

accomplishments were highlighted in my Eighth Interim Report at 20-22 and are further
reflected in his declaration to the Court in May and his remarks at the most recent Court
conference in November. Additionally, the accomplishments discussed in the sections below
were facilitated by his leadership.
Based on the record of accomplishments to date, Mr. Tierney is a model Executive
Director: a strong leader, with deep knowledge of benefits administration, who makes informed
decisions grounded in best practices, continues to learn and adapt, communicates well (whether
it be with the trustees or staff), and sets the proper tone.

27

Mr. Tierney has built a strong leadership team and facilitated staff development, through
a culture of training and communication. Learning whether about the nuts and bolts of benefits
administration or computer skills - is encouraged and embraced.

Meetings facilitate

communication. Collaboration appears to have taken hold as a routine practice. The Funds'
office is no longer dysfunctional, but capable of carrying out improvements and building upon
them.
There is one training program of which I would like to take particular note. This Fall,
with the approval and full support of the trustees, Mr. Tierney began providing CEBS training to
interested staff. (CEBS stands for Certified Employee Benefits Specialist). Thirty-six staff
members are participating in the training program, which has eight courses and will span three
years. Staff members attend training sessions on Tuesday evenings from 5:00 p.m. to 8:00 p.m.
They must also commit time to studying and take examinations to be certified. The end result
will be a more deeply knowledgeable staff. Especially laudable is the staff's interest and
dedication to the program.
What has been created both in terms of the Benefit Funds' organizational structure and
the leadership teams developed to run Funds' operations makes sense and works well in practice,
which bodes well for the sustainability of reform.
D.

Human Resources
As noted, the Benefit Funds did not have a Human Resources component, let alone an

HR director or personnel policies and procedures, when I began my tenure as Review Officer.
The first HR Director was hired in 2011 and there has been an interim director and two other
directors since then. The current HR Director came on board in Fall 2014 and, by all accounts, is
performing well.

28

The Benefit Funds have made significant advances in developing policies and
procedures; hiring, firing and promoting staff; conducting performance evaluations; providing
training; and fostering an overall healthy work environment.

Moreover, the Funds have

continually focused attention on how this component is performing and what changes or
refinements are merited, and they have implemented these improvements.
The Employee Handbook is a noteworthy example. Prior to April 26, 2012, there was no
such handbook. That date, the trustees approved a comprehensive handbook developed by
Funds' staff with the assistance of outside counsel from Kauff McGuire & Margolis LLP
("KMM"). The Funds provided the handbook to all employees and provided comprehensive
training. Now, several months in advance of the original employee handbook's three-year
anniversary, Funds' staff are reviewing and updating the handbook, which they expect to present
to the trustees for approval in January 2015. They have undertaken this project because they
believe it is a best practice, not because of any prompting by me.
Later in 2012, the Interim Executive and HR Directors developed an HR plan, including a
standard job description template covering purpose, essential job functions, additional job
functions, education and experience, as well as other skills, for each of the Funds'job positions,
and a corresponding management template, with the goal of fairly and consistently handling the
review process. The interim directors also worked on a complementary salary band, which
became mired in discussions among the trustees. See Fifth Interim Report at 29-30. Just prior to
Mr. Tierney's arrival in late April 2013, the trustees authorized the Interim Executive and HR
Directors to proceed with conducting performance evaluations and awarding modest, and fairly
uniform, salary increases. See Sixth Interim Report at 25-26.

29

In Spring 2014, the Benefit Funds went through its first performance evaluation and
compensation cycle during Mr. Tierney's tenure. See Eighth Interim Report at 22-23. As
discussed therein, the Funds regularized the process so that performance evaluations were
completed on a schedule designed to facilitate annual salary increases in April. However, the
trustees' discussions about raises and bonuses again dragged on. In late May, the trustees
approved an incremental raise, but did not approve the bonuses Mr. Tierney sought to award. In
my report, I noted the "lingering resentment on the part of the District Council to the
compensation of certain Benefit Funds' employees" and expressed my hope that we had seen
"the last vestige of this resentment given the damage it could cause to Mr. Tierney's ability to
hire and retain qualified personnel and thus best-serve the members." Id.
At the November 4, 2014 Administrative Committee meeting, the discussion regarding
awarding holiday bonuses to Benefit Funds' employees was not particularly encouraging.
Executive Director Tierney requested authorization to award holiday bonuses to staff, and
directors. The District Council trustees opposed the request, expressing the sentiment that their
Union members do not get bonuses.
The discussion regarding awarding bonuses continued into December. The District
Council trustees expressed willingness to give $500 bonuses to staff members, but remained
opposed to awarding any bonuses to managers and directors. The employer trustees asked the
Council trustees to reconsider, noting among other things that the Funds had performed well
financially, the directors, managers and staff members had shown dedication and provided a
better level of service to members, and many of the employees were participating in the CEBS
program on their own time. The employer trustees stated that in their professional judgment,
"the Union proposal to simply award $500 to each staff member (excluding managers and

30

directors) is short sighted as it does not reward the highest performing members of the Benefit
Fund Office. This is not the signal we want to send them." Exhibit 7. I view the point as well
stated and supported.
The Benefit Funds are now preparing for the next performance evaluation and
compensation cycle. The HR plan is also being revised. By year-end, managers are to complete
job descriptions for all of their staff. Renewed attention to the salary band will follow. I
understand from Funds' staff that performance evaluations will be conducted early next year and
that compensation issues will likely be framed for the trustees by March. In my view, the
trustees should develop a policy framework affording the Executive Director and HR discretion
to award salary increases, including bonuses, within a certain budget. Annual salary increases
are an opportunity to enhance performance and boost morale, if properly managed. The trustees
should not micromanage the process in an unpredictable fashion.
E.

Compliance
One of my earliest formal recommendations to the Benefits Funds was to hire a

compliance officer and develop a compliance and ethics program in accordance with Chapter 8
of the U.S. Sentencing Guidelines. See First Interim Report at 6, 53. Initially, the Funds made
no serious progress towards implementing a true compliance program. Eventually, in April
2012, the Funds' initial Compliance and Ethics Program ("CEP") was finalized and approved by
the Board of Trustees and Funds' employees were assigned compliance roles, the HR Director as
Chief Compliance Officer and the Benefits Director as Deputy Chief Compliance officer. When
the Executive Director and HR Director were dismissed later that year, however, the Benefits
Director became Interim Executive Director and it was not possible for her to act effectively as
Chief Compliance Officer. See Fifth Interim Report at 27.

31

The Benefit Funds trustees came to believe that their needs would be best-served by an
outside compliance professional.

In January 2013, they retained Julie Block as Chief

Compliance Officer. See Sixth Interim Report at 24. Ms. Block is on site at the Funds two days
a week and otherwise available by phone and email to the Funds' trustees, leadership and staff.
She regularly works with the Executive Director and she reports to the trustees at their Board
meetings. She has a direct reporting line to the trustees and may communicate with them at other
times if she sees fit. Ms. Block has also directly addressed the Court on a number of occasions,
including most recently at the November conference.
In her two years as CCO, with the support of the trustees and the Executive Director, Ms.
Block has developed a robust compliance program that is well-integrated into Funds' operations.
Consistent with best practices, she is reviewing the CEP to identify what changes or
enhancements can and should be made. She conducts compliance training annually, and trains
staff on specific issues as needed. She has developed and implemented various policies and
procedures, established internal controls, performed audits and conducted internal investigations.
See Sixth Interim Report at 24-25, Seventh Interim Report at 39-40; Eight Interim Report at 2325.
Since my last report, Ms. Block has focused on developing and completing Standard
Operating Procedures ("SOPs") for all Benefit Funds' departments. She involved management
and staff in the process, having them conduct self-audits and write initial drafts. She is now
editing the SOPs, which will be finalized by year-end. In 2015, Ms. Block will audit each
Benefit Funds department, with staff testing the SOPs.
SOPs are very important to the sustainability of reforms. They are designed to reflect
best practices for all significant Funds' operations. They will be available on the Funds' intranet,

32

creating transparency and fostering consistent application.

(Some information will be

confidential to specific departments). Having participated in creating the SOPs, I suspect that
staff will be particularly well-versed in them and, one would expect, compliant.
I understand that, in addition to the continuing work on SOPs, the Benefit Funds have
established a number of other compliance priorities for 2015. For example, Ms. Block will work
with the Executive Director and staff to monitor service provider contracts and deliverables. Ms.
Block will also focus attention on compliance and records retention at the Labor Technical
College. The thought and careful attention that has gone into developing compliance priorities is
encouraging.
I am pleased that the trustees and Executive Director are setting the proper tone from the
top, the CCO is embedding compliance policies and procedures into the Funds' daily operations
and staff are conducting business accordingly. This, in my view, is the formula for sustaining
compliant operations at the Benefit Funds. With the recent renewal of Ms. Block's contract, and
the plans for 2015, the Funds appear committed to reform. It is especially important that this
commitment persist, because erosion of the compliance function would destabilize the overall
progress that has been made.
F.

Outside Counsel
In December 2010, KMM was retained as counsel for the Benefit Funds and it continues

to serve in that capacity. KMM has provided steady, practical guidance over the course of the
last four years, which has been particularly beneficial as the Funds dealt with changes in
leadership, including at the Executive Director level.

KMM, together with Virginia &

Ambinder, has helped build and preserve the foundation for the Funds to flourish.

33

G.

IT
In Fall 2011, the Benefit Funds hired a project manager to oversee upgrading its woefully

inadequate IT program. See Third Interim Report at 32-33. By January 2012, the Funds
executed a hardware purchase and software license agreement with ISSI and efforts to develop a
21st century program began in earnest. See Fourth Interim Report at 48. The plan had to be
modified at times, due to external causes such as ADP's opting out of providing benefit
remittance services, which forced acceleration of the schedule for transitioning to i-Remit, and to
address internal feedback regarding staff needs, which increased the time and costs for the
overall project. But, at the end of the day, this iterative process, overseen by the IT Director,
Charles Jackson, and Project Manager Jennifer Gordon, resulted in the successful
implementation of i-Remit by June 2013 and of URBAN (the overarching ISSI program) by
February 2014. See Seventh Interim Report at 41-42.
The Benefit Funds are fully utilizing URBAN and it is functioning well, albeit with the
periodic minor issues one would expect with such a transition. As anticipated, it has streamlined
the Benefit Funds' operations, resulting in efficiencies and cost savings. As reported at the
September 2, 2014 Administrative Committee meeting, cost-savings from using ISSI rather than
the prior vendor, calculated for a five-year period, are expected to be $2.765 million (compared
with the $3.1 million initially projected in 2011). The savings are obviously significant.
Regardless of savings, the transition to URBAN was essential in order to modernize the
Benefit Funds' operations. Funds valued in the aggregate of around $5 billion could not be
properly administered with an antiquated computer benefits administration program. The new
program fosters the professional handling of all aspects of Funds operations and transparency in
those operations. Importantly, URBAN now receives shop steward time data from the District

34

Council, facilitating more timely identification of delinquent employer benefit contributions as

discussed infra. This improvement to the Funds' infrastructure was critical to effecting reform
and the Funds must stay technologically current if reform is to be sustained.
H.

Overall Condition of the Funds

Over the past four years, the condition of the various Benefit Funds has steadily

improved. At the November 20, 2014 meeting of the Board of Trustees, the Executive Director
reported net assets of $5.1 billion for all Funds. This is attributable to the recent increase in man
hours (with the most recent data showing a trend towards 20 million hours annually), a healthy
investment return and conscientious oversight involving difficult decision-making by the
trustees. A snapshot of the health of the Pension Fund and Welfare Fund follows.
1.

Pension Fund
The Pension Fund is in good health. In September 2014, the Fund's consultant prepared

its annual actuarial status certification for the preceding fiscal year of July 1, 2013 through June
30, 2014, finding it 91.2 percent funded and once again certifying it as being in the "Green
Zone." The Court will recall that on the heels of the financial crisis, the Green Zone certification
was achieved by special measures, specifically "an extended amortization of the investment
losses incurred in the plan years ending June 30, 2009 and June 30, 2010 and an extended asset
smoothing period of 10 years for the investment losses in the plan years ending June 30, 2009
and June 30, 2010, as permitted under the Preservation of Access to Care for Medicare
Beneficiaries and Pension Relief Act of 2010." Otherwise, the Pension Fund would have been in
the Yellow Zone. The most recent Green Zone certification is the fourth in a row achieved
without using special measures. Moreover, the funding percentage is significantly higher than it
has been the last few years.

35

As reported at the November 20, 2014 Board of Trustees meeting, the Pension Fund has
total available assets of $2.76 billion. Man hours are trending up, with 5 million man hours
reported for the first quarter of the current fiscal year. See Exhibit 8. Investments are doing
well, with a return of 15.08 percent for the last four years. See November 18 transcript at 39.
While the numbers are not yet available to compare asset value at the end of this calendar year to
the end of the last one, all indicators reflect the steadily increasing value of the Pension Fund.
2.

Welfare Fund
The Board of Trustees has been acutely attentive to the Welfare Fund since a meeting in

May 2011 when its consultant advised of a potential problem with the Fund's long-term
viability. At that time, 15 million man hours were projected for the fiscal year ending June 30,
2011, and, disregarding investment income and losses, the Fund risked being depleted in 2013.
See Second Interim Report at 29.

The trustees immediately began meeting to consider

alternative design plans with cost-saving measures. See id. at 29-30; Third Interim Report at 4748.
In January 2012, with the Union trustees (at that time, UBC supervisor Frank Spencer
and his appointees) declining to accept certain benefit modifications proposed by the employer
trustees that were designed to achieve savings of $5.85 per hour, a deadlock arbitrator directed a
series of cost savings, concluding that "benefit modifications sufficient to reduce Fund expenses
by [$3.00] per hour should be implemented...." See Fourth Interim Report at 58. The specific
benefit modifications included adding retiree premiums and discontinuing dental and vision
coverage. See id.
Numerous factors have coalesced to improve the health of the Welfare Fund. On June 1,
2012, the Funds' office implemented the noted benefit modifications. Id. at 59. Starting in

36

Spring 2013, the District Council and various employer associations reached new collective
bargaining agreements, with an increase of $2.12 per hour of employer contributions to the
Welfare Fund. See Sixth Interim Report at 36. Over the years, man hours steadily increased
from a low of 15 million to 17.5 million, the current working assumption. The trustees are
cautiously optimistic that man hours are continuing to improve, as the Council reported five
million man hours for the first quarter of their current fiscal year, and will log a total of 20
million man hours if this trend continues. Additionally, investment performance has improved.
As reported at the November 20, 2014 Board of Trustees meeting, the Welfare Fund has
total available assets of $371 million. There are 13 months of reserves. As the Welfare Fund's
health has improved, the trustees have worked together to reinstate benefits responsibly. This
Fall, the trustees restored dental benefits and reduced the new retiree premium by half. At the
November trustees' meeting, they voted to restore vision coverage, effective January 1, 2015.
This has required careful attention to constantly evolving facts and circumstances and the
trustees have devoted their time and talents to reinstating benefits prudently.
***

It is worth noting that the administrative cost of managing the Benefit Funds, as a
percentage of total Funds' expenditures, is approximately 6.5 percent. This is below the low end
of the range for Taft Hartley funds.
I.

Collections
As often noted, the Benefit Funds must assiduously collect benefit contributions from

employers in order to remain solvent through both good times and bad. See, e.g., Second Interim
Report at 26. One of my focuses has been the development of electronic systems to maximize
collections. Another has been for the Delinquency Committee, assisted by experienced and

37

diligent collections counsel, to maximize the collection of delinquent contributions. Significant

progress has been made on both fronts.
1.

Shop Steward Variance Reporting

From the outset of my tenure, I encouraged the use of electronic means to report the

hours worked at job sites in an accurate and timely fashion and serve as a hedge against
corruption. See First Interim Report at 6. In June 2012, I reported on the need to use electronic
scanners or some other electronic means to report hours, citing issues with the timeliness and
accuracy of the paper shop steward reports submitted by the Union, which included, among other
things, hours worked by members at job sites; the persistent variances between the hours
reported by the Union and the hours reported by employers, partially as a result of employers
using inaccurate job numbers; and the resulting underpayment of benefit contributions and
expenditure of additional resources to collect them. See Fourth Interim Report at 23-34.
I specifically stated at that time:
The Funds use the information generated from shop steward reports and
compare it to the hours remitted by the employer. The Funds generate a report
called a Shop Steward Variance Report. This report shows the number of hours
that an employer has remitted and those shown on the District Council shop
steward reports. In theory, this number should be the same. Our review has
confirmed that, in practice, this is rarely the case.
Id. at 27. I also expressed concerned about the six- to eight-week delay between the District
Council receiving a shop steward report and the Funds being able to use it effectively. See id. at
29. I was encouraged by, and urged the Funds to make the most of, their planned transition to iRemit for collecting employer contributions. See id. at 33.
As the Court is well aware, the District Council and Benefit Funds both needed to
embrace major technology changes in order to facilitate their operations in an efficient and
corruption-free way; these changes had to occur before the shop steward variance reporting issue

38

could be addressed head on. By June 2013, both the Council and Funds had begun making
progress. With the ratification of the Wall & Ceiling Collective Bargaining Agreement("CBA")
and the Court's approval of full mobility, one contractor association had begun electronically
reporting hours by using tablets, with others anticipated to follow. See Sixth Interim Report at
17-18.

In the ensuing months, the other major employer associations entered new CBAs

providing for full mobility and electronic reporting, as well as other compliance measures. See
Seventh Interim Report at 2-3. The Funds successfully accomplished their transition to the iRemit program for receiving benefits contributions from employers. See Sixth Interim Report at
18, 26-27.
Additionally, by the end of 2013, the District Council and the Benefit Funds agreed on a
temporary protocol whereby each week the Funds would be provided with the record of time
entered by the stewards on the 20 largest jobs by man hours, to facilitate comparison with the
Funds' records on employer remittances. See Seventh Interim Report at 3-4. A system whereby
all District Council hours would be sent automatically to the Funds for cross-checking and
follow-up was not yet technologically feasible. See id.
In Spring 2014, the District Council and Benefit Funds held meetings focused on
bridging this gap. Council and Funds' records were not matching up. While the Council had
begun reporting by job specific numbers, employers were reporting under one number for each
union member (regardless ofjob location). They did not want to modify their payroll systems.
Discussions dragged on into the summer.
On July 2, 2014, I made the following formal recommendation to the Benefit Funds, in an
email to the co-chairmen of the Board of Trustees, Mr. Tierney and others:
...pursuant to the recommendation authority granted to the Review Officer in
Paragraph 5.h of the Stipulation and Order entered on June 3, 2010, I formally

39

recommend that all signatory employers be required by the Benefit Funds to

report man-hours and remit associated contributions by job specific numbers
created and used by the District Council. Such reporting will in my view greatly
facilitate and enhance the accuracy and timeliness of the Benefit Fund process of
comparing the man hours entered into the District Council's electronic reporting
system with the hours reported by employers using the i-Remit system. The use
of job specific numbers will directly show on a job-by-job basis whether
contributions are accurate and timely. This will greatly deter and protect against
delinquent contributions, fraud, and the need to initiate litigation to collect what is
owed to the Funds. Such a system will greatly aid the goal of eradicating
corruption and racketeering, which is the primary purpose of the Stipulation and
Order.
Exhibit 9.
On August 25, 2014, the Benefit Funds presented me with a "proposal for reconciling the
[District Council's] electronic shop steward reporting and the contributions made by
participating employers to the Benefit Funds' Office," in order to identify variances within three
weeks of the end of a pay period and thus facilitate more expeditious action with respect to
delinquent contributions. In order to implement the Shop Steward Variance Reporting (SSVR")
program, the Funds would require additional programming, as well as personnel. See Exhibit 10.
On September 18, 2014, after being advised that the Board of Trustees had approved
going forward with the SSVR program following receipt of a cost estimate from ISSI, I advised:
[t]he course of action you describe satisfies my compromise position that the
Funds quickly and efficiently receive and utilize District Council work hours data
and be able to identify discrepancies between such data and the hours reported to
the Funds by employers within three weeks from the end of a pay period.
Subject to the implementation you describe, there will be no need for me to seek
judicial enforcement of my recommendation that DC job specific numbers be
utilized by the Funds in the reconciliation process.
Exhibit 11.
On December 1, 2014, the Benefit Funds went live with the SSVR program. The Funds
provided a demonstration of the program to me, my counsel and my Chief Investigator on
December 5. The Funds are comparing hours contributed by employers with the District

40

Council's electronic shop steward data, identifying variances and following up with employers addressing delinquencies within three weeks rather than 60 days or more. The mechanics are as
follows: A vendor for the District Council batches daily reports by shop stewards and drops the
data nightly into the Funds' computer system (URBAN).2/ At the beginning of each week, the
Funds run a SSVR program for the week that began three weeks prior. URBAN generates a
spread sheet. Funds' analysts examine the data, eliminating errors and identifying true variances,
e.g., failures by employers to remit contributions or shortfalls in contributions.
The Funds then send a letter notifying each employer who has a confirmed variance,
providing a 14-day window for the employer to pay or dispute it. The employer may log in and
make payment at any point in the process or it can call a hotline to address a dispute with an
analyst. If the variance is not resolved within 14 days, the Funds send a second letter, advising
the employer that it is on the pending shut down list and has until the following Monday to
address the variance. If payment is not received by the employer that Monday, the Funds send a
Notice of Arbitration.
Of course, the SSVR program is a brand new endeavor. But it is well-planned and being
run by dedicated Benefit Funds staff and I have every confidence that it will become an
important collections tool..
2.

Collection of Delinquent Contributions

Virginia & Ambinder ("V&A") has now been collections counsel for the Benefit Funds

for approximately three and a half years. They efficiently continue to handle a very heavy
collections workload, including 39 active litigations, 178 arbitration matters, 17 bankruptcies, 45

2/

While there is still room for human error, with the cessation of paper reporting on
December 1 and the continually improving accuracy of electronic report, this data should be
more reliable than any time in our memory.
41

matters without pending legal proceedings, 242 judgment enforcement matters and 46 audit
referrals, as of the monthly status report that V&A provided to the trustees on December 8, 2014.
V&A also handles two specialty matters, specifically, the civil RICO action against former EST
Michael Forde and others and the lawsuit against former collections counsel O'Dwyer &
Bernstein, discussed below.
V&A continues to make substantial recoveries in a cost-effective manner. As of the
Delinquency Committee meeting held on December 2, 2014, V&A's efforts have resulted in
total recoveries of $17,463,927 (or net recoveries of $13,002,341 after subtracting legal fees and
audit costs). Not only have they developed and executed a comprehensive approach to pursuing
each collection matter through appropriate resolution, but they have done so with what appears
to be continually improving efficiency. There has been a steady decrease in the percentage of
recoveries going to legal fees and costs over the years.
3.

Special Funds Litigation and Arbitrations

The lawsuit brought by the Benefit Funds against O'Dwyer & Bernstien, former co-

counsel to the Funds, claiming negligence and malpractice, was settled. As the terms of the
settlement are subject to a confidentiality agreement requested by the defendants, I agreed to the
request of plaintiff's counsel not to generally publish the terms, but to only do so in a sealed
addendum to this report.
The civil RICO suit brought by the Benefit Funds against former fiduciaries, including
former EST Michael Forde, Joseph Olivieri and John Greaney, is still pending. Asset discovery,
including depositions, has been largely completed (with multiple defendants claiming penury),
but the case, presided over in the Southern District of New York by Judge Loretta Preska, is still
some distance away from disposition.

42

The Benefit Funds continues to pursue additional monies it believes to be due and owing
from Manufacturing Woodworkers Association of Greater New York("MWA")employers. See
Eighth Interim Report at 17. Two MWA employers have settled with the Funds and paid the
amounts due. Just this month, five additional employers settled with the Funds; the settlement
amounts will be paid from an escrow account that was established and the employers will be
refunded any money in excess of their settlement amounts. Five additional employers are slated
for expedited arbitration. (I understand that there is no shortfall for which the District Council
will bear responsibility.) It thus appears that the MWA saga may be resolved in the not too
distant future.
J.

395 Hudson: The Renovation Project

As the Court is aware, the Pension Fund is the principal owner of the building located at

395 Hudson Street in the Tribeca neighborhood where the District Council and the Benefit Funds
have their headquarters, the Labor Technical College operates its program and other tenants lease
space. It is a beautiful building in a prime location.
A few years ago, the then-Executive Director of the Benefit Funds and its trustees
evaluated various options to maximize the value of this asset. See Third Interim Report at 52;
Fourth Interim Report at 54-55. The trustees established a Renovation Committee and a plan
developed whereby the Funds would combine all of its operation on the ninth floor of the
building, freeing up the eighth floor to be renovated and leased. It was estimated that leasing the
eighth floor would generate $10 million over 10 years. Another component of the plan was that
the 10th floor would be leased as conference space at premium rates, generating additional
revenue. See Fifth Interim Report at 33.

43

Over the last few years, the Benefit Funds' leadership and trustees have put a
considerable amount of time and effort into the renovation project at 395 Hudson Street. Under
the leadership of Executive Director Tierney and the current trustees, the Funds completed
renovation of the ninth floor in early 2014 and Funds' employees who had worked on the eighth
floor joined their colleagues on the ninth. Additionally, the Funds completed demolition work
on the eighth floor and readied that space to be leased and built out to tenant specifications.
After a period of delay apparently borne of a question regarding who would be
functioning as the Qualified Property Asset Manager, I understand that the eighth floor is now
being actively marketed. I also understand that there is hope for progress with respect to the
tenth floor in Spring 2015, if the Labor Management Corporation moves out of its space there in
the next few months and when the District Council's lease of its space there expires in April.
This is a project that the Executive Director and trustees should prioritize, given the additional
revenue that could be generated.
K.

The Hollow Metal Fund

I previously reviewed and made recommendations regarding the Hollow Metal Fund, a

smaller, separate fund from those discussed at length above. See Fourth Interim Report at 64-67.
The Hollow Metal Fund is also overseen by Executive Director Tierney, although it has a
different board of trustees. Since Spring 2012, Elizabeth O'Leary of KMM has served ably as
outside counsel for the Fund. Additionally, V&A was retained as the Fund's collections counsel.
As previously reported, the Fund's deficient collections practices were a particular source of
concern to me. It is my understanding that the Fund, supported conscientiously and diligently by
counsel, is implementing similar policies and procedures to those implemented by the District
Council. For example, the Fund's trustees have adopted a collections policy and cases are being

44

systematically reported and tracked. Additionally, with respect to IT, the trustees have approved
a contract with ISSI, the vendor utilized by the big funds; the transition to the new system will
begin in early 2015. Other vendor needs will be assessed once the ISSI system is in place.
The pace of reform at the Hollow Metal Fund lags that of the big funds, but important
reforms have been made and I am hopeful they will continue under the direction of current
counsel. One recent event has given me pause. Specifically, earlier this month, it was brought to
my attention that the employer trustees for the Fund have requested that their prior outside
counsel return, at least as co-counsel. I understand that prior counsel recently served as an
advocate for an employee trustee with respect to a matter involving the Fund. This proposition
must be carefully vetted because, on its face, it appears to pose a conflict issue. There may be
others. Erosion of reforms, which can begin with the smallest deviation from best practices,
should be avoided at all costs.
***

CONCLUSION
"There's no going back.
Now you run on home to your mother and tell her ... tell her everything's all right. And there
aren't any more guns in the valley."
From "Shane"
My work has been appropriately concluded. I am largely satisfied with the condition of
the District Council, even more so with that of the Benefit Funds. I have endeavored to assist
both in the pursuit of a prosperous future for their constituents.

That is their solemn

responsibility.
Let the bells ring. Though there is much good news, there are those for whom my
departure is reason enough for celebration. But I hope that there are also those who reflect on

45

what has been wrought, and on the simple question: what now? To those who will continue to
accept the imperative of working hard and meeting the challenges facing the Union with
courage, energy and intellect, but most of all with honor, I will say well done.
The work of my office has formed just another chapter in the epic history of this Union.
Henceforth, my words and deeds will only be relevant to those who find them relevant, and then,
I hope, choose to keep them so. To those members who realize that the bells announce the start
of a new era - and that whether they continue to ring in happy days or recede to a mournful toll is
entirely up to them - I say indeed.
With my deepest gratitude to all who placed their trust in me and gave me the opportunity
to serve the members of this great Union and their families, and thereby accorded me the
privilege of a lifetime - I say a heartfelt thank you. I wish all concerned every success, and bid
you a fond farewell.

Dated:

New York, New York

December 30, 2014
Respe fully su

Dennis M. Walsh
Review Officer

itted,

The Law Office of Dennis M. Walsh

415 Madison Avenue, 11th Floor
New York, New York 10017
646.553.1357
dwalsh@dennismwalsh.com
Bridget M. Rohde,
Of Counsel to the Review Officer
Mintz Levin Cohn Ferris Glovsky and Popeo,PC
666 Third Avenue
New York, New York 10017

46

cc:
AUSAs Benjamin Torrance and Tara LaMorte
U.S. Attorney's Office, Southern District of New York
86 Chambers Street, 3rd Floor
New York, New York 10007
Barbara S. Jones, Esq.
Zuckerman Spaeder LLP
399 Park Avenue, 14th Floor
New York, New York 10017
James M. Murphy, Esq.
Spivak Lipton, LLP
1700 Broadway, Floor 21
New York, New York 10019
Raymond McGuire, Esq.
Kauff McGuire & Margolis LLP
950 Third Avenue, 14th Floor
New York, New York 10022
Glen McGorty, Esq.
Crowell & Moring LLP
590 Madison Avenue, 20th Floor
New York, New York 10022-2544

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