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September 2000
 
PWBA Field Office Press ReleaseBlue Line

PENSION AND WELFARE BENEFITS ADMINISTRATION   USDL New York 190

CONTACT:
OFFICE:
Sharon Morrissey
(202) 219-8921
FOR RELEASE: IMMEDIATE
September 14, 2000

FORMER TRUSTEES, SERVICE PROVIDERS TO PAY $750,000
TO NEW YORK HOTEL TRADES COUNCILS DENTAL FUND

Under an agreement reached with the U.S. Department of Labor, former trustees of and service providers to the New York Hotel Trades Council and Hotel Association of the New York City, Inc. dental fund agreed to pay the fund $750,000 by Sept. 29. This settlement, reached after the case was tried but before the court issued any decision, resolved the departments lawsuit filed against these trustees and dental service providers for alleged violations of the Employee Retirement Income Security Act (ERISA).

With the settlement agreement, the departments lawsuit was dismissed. In the Sept. 7 settlement agreement, the defendants neither admitted or implied any liability.

The defendants that are former trustees are Jeffrey Flowers, Albert A. Formicola, James OHara, Vito J. Pitta, Eva I. Rodriguez, William T. Welsh and the estate of John Kelly. The dental service provider defendants are PFC Facility of New York, Inc., its owner Dr. Alex Bendersky and Dr. Robert Greenspan.

In the departments lawsuit, the trustee defendants were charged with causing the plan to pay unreasonably high prices for dental services, thus violating fiduciary provisions of ERISA.

The dental service provider defendants (who were not fiduciaries) were parties in interest of the fund under ERISA and were charged with having obtained excessive compensation from the fund under a renewal contract for the dental services. The defendants denied all allegations and defended the litigation vigorously. The department filed this lawsuit in federal district court in Manhattan in January 1989.

The court action and settlement resulted from an investigation by the New York Regional Office of the departments Pension and Welfare Benefits Administration and PWBAs Office of Enforcement.

Herman v. Flowers, et al
Civil Action #89 CIV 0224 (S.D.N.Y.)

 

August 1997

Monitor Airs Hotel Union's Dirty Linen
Published by the Association for Union Democracy

By Carl Biers

Kurt Muellenberg, the court-appointed monitor of the Hotel Employees and Restaurant Employees Union (HERE) has issued a final report on his activities during his three-year term investigating the union for corruption and ties to organized crime. The 90-page report paints a depressing picture of fraud, mismanagement, theft, nepotism, cronyism, and connections to organized crime figures. The report's colorful detail of sordid abuses of the membership by some HERE officers, most notably former General President Edward Hanley, who for 25 years presided over and shared in the theft, waste, and misspending of tens of millions of dollars, is helpful given Muellenberg's previous reluctance to disclose to union members or the public the specifics of his investigations. The report tells - belatedly - of the 18 expulsions and 5 suspensions of officers ordered by the monitor.

In the end, however, the report falls short. It presents a severe account of misdeeds and crimes in the past, but a sanitized view of the present and a futile plan for reform that amounts to little more than tinkering around the edges. Beginning as an indictment, it ends as a feeble assortment of recommendations for more effective bureaucracy.

Here are some, and only some, of the abuses listed by the monitor: maintenance of a ghost local whose appointed trustee was paid $48,000 per year although the local had fewer than 20 members, most of them restaurant owners; allowances of $4,000 to Executive Board members, administrative aides and assistants for attending board meetings and conventions, totaling $478,000 in one year; consultants who receive high salaries, leased vehicles, health insurance and pensions, but are unable to document having performed any work and submitted no bills; exorbitant "charitable donations" with no apparent benefit to the membership" including, among many others, $450,000 to the Irish American Sports Foundation, $95,000 to the Catholic Church in one year, and thousands more to Guide Dogs for the Desert the All-American Collegiate Golf Foundation, and the Headwaters Classic Sled Dog Race in Land O' Lakes, Wisconsin; lack of audits of locals in violation of the HERE constitution; a luxury condominium maintained by union staff in Georgetown for General President Hanley even though "he never spent more than 25 days per year in Washington, DC"; a motor home costing $100,000 for the president's personal use; over 100 organizers on the international payroll, many working without supervision; a General Executive Board that acts as a rubber stamp; "arbitrary and capricious" trusteeships; purchase of a $2.5 million aircraft costing $442,000 per year to operate; and on and on.

One of the most ludicrous: "Paul Burke", a retired actor and neighbor of Mr. Hanley's in Palm Springs, California, has been a consultant since 1980. He was paid $25,000 per year, received health insurance, and a union leased Cadillac Seville." Why? "to provide 'celebrity presence' to General Executive Board Meetings." Spending so much for a no-name actor might not seem so offensive if the union assigned him a task that actually met a particular need, say, for example, impersonating an honest union official.

The monitor expelled 18 officers, suspended 5, and has charges pending against 11 others. Those expelled for "associating with organized crime figures," include Vincent Gallo, president of Local 122, Milwaukee; Robert Tate, vice-president, Local 10, Cleveland, Louis Sanfilippo, president Local 57 Pittsburgh; Frank Riggio Secretary, Local 450; John Agathos, President Local 69, Secaucus; Joseph Marino of Local 450, Chicago, and a few others. The rest of the charges against individuals range from embezzlement to conspiracy to "extort money from a restaurant owner by use of threatened force."

Democracy Ignored

The report reflects the scant attention paid to union democracy by the monitor in this three years. In two skimpy paragraphs Muellenberg tells that he reviewed candidates in union elections for connections to organized crime. That's it: nothing about supervised elections, direct or otherwise, no mailings to the membership encouraging them to exercise their rights to run for office, no monthly updates on the progress of investigations. There's nothing to report here because he did nothing.

Muellenberg confines himself mainly to abuses against union money and property but not against union members. He omits any mention of intimidation during elections, despite the existence of at least one documented case with which he is familiar. In 1996, an insurgent candidate for secretary-treasurer in New York Local 6 was threatened by the incumbent business manager, Peter Ward, and by Ward's father-in-law, Vitto Pitta, the former business manager who had been forced to resign from the General Executive Board, presumably because of organized crime connections. The candidate was trapped in an elevator which Ward and Pitta had stopped between floors to warn her of the consequences if she persisted. Terrified, she withdrew the next day. The threat was the basis of a DOL supervised election rerun. It's not surprising that Muellenberg failed to mention this kind of incident. Why tell of problems for which you offer no solution?

In his conclusion, Muellenberg does pay lip service to democracy: "Mr. Hanley's leadership of the HEREIU was not democratic and not fair to the members . . . Democracy has to be encouraged at the local union level; that is not happening." But nowhere else in the report does Muellenberg mention the lack of democracy as a problem worthy even of one of his pussyfooting recommendations.

Toothless recommendations

And what solutions does Muellenberg propose? To understand his approach, keep in mind that the problem, as he defines it, is a union "that suffered from a management deficit and did not subscribe to generally accepted business practices." He lists 48 recommendations ranging from the woefully inadequate, to the toothless, to the ridiculous. Only one stands out as firm and straightforward: "dispose of the luxury condominium in Washington DC," he declares boldly. The rest are whimpers: prepare budgets; adopt a policy of written evaluations for employees; draw up an organizational chart defining lines of authority; adopt a written procedure for imposing trusteeships and monitoring trusteed locals; pick competent International officers to be trustees; assign responsibility for review of credit card expenditures to designated members of the General Executive Board and ensure that they are familiar with Department of Labor and IRS regulations; have expense forms reviewed by CPAs; train audit staff on current auditing techniques to detect fraud and waste in local unions; etc.,etc. Essentially, what Muellenberg has done is prescribe "generally accepted business practices," as if these are enough to deal with a union that the government contended was under the thumb of racketeers.

Some of Muellenberg's suggestions are downright absurd when considered in context of even his toned down portrayal of the corruption and financial abuse. Seventeen officials were expelled for associating with organized crime figures over the course of the monitorship.

What measures, then, should the union adopt to prevent reinfiltration by racketeers? Muellenberg recommends that it "require all IU officers, local officers, and other persons in positions of trust to certify annually that they have not knowingly associated with members or associates of any organized crime group." This recalls a college student, encountered once by AUD, who researched racketeering in labor by asking union officials if there was any corruption in their unions.

And what of the airplane that cost half half a million per year so that General President Hanley could be flown from one urgent meeting to another? Dispose of it like the luxury condo? Not so fast. Although the monitor lays much of the blame on Hanley himself, he concludes that "it was not possible to address the overall cost effectiveness of the use of a union aircraft. . . because Mr. Hanley - the primary user did not maintain an advance planning calendar and traveled spontaneously or with minimal advance notice." Huh? The monitor identifies Hanley as bearing heavy responsibility for the corrupt system but can't decide whether the union should have been flying him around in a private jet.

The farce of trying to remedy racketeering and financial mismanagement through more efficient bureaucracy is apparent from Muellenberg's own report. At one point, he holds up Chicago Local 1 as a model because it requires BA's to "file weekly reports describing their activities for each day. Such reports make it more difficult for 'no-show' employees to defraud the membership." But elsewhere in his report, that same Local 1 is blasted for fraud and mismanagement (despite receiving $2.5 million from the International, Local 1 is $951,000 in the red due to financial manipulation and embezzlement and "should have been trusteed a long time ago") and Muellenberg notes that weekly reports did not prevent one BA from claiming he worked 70 days in one year organizing a riverboat casino when, in reality, he spent the time gambling at the casino.

Any potential in the report for effective reform is vitiated by its absurd analysis of the causes of corruption and by the trivial quality of its recommendations to assure integrity from now on. H.E.R.E., according to Muellenberg the monitor, is a union whose officers and staff were getting rich stealing and wasting union money by the millions, an officialdom with ties to racketeers. The report attributes these abuses to 11 apparent disregard for cost effective management" and a lack of "understanding of their fiduciary obligations to ensure that the local's funds are spent solely in the best interests of the membership."

From this compassionate understanding of the corrupt system flow a series of 48 innocuous recommendations, prescriptions for evading sloppy management by avoiding lax accounting and ending inadequate supervision of subordinate staff by top officials.

He even proposes what could be a crash course in ethics sensitivity for union officials who presumably were never taught that it's wrong to steal. Union officers, he concludes, need "training about their fiduciary obligations to the local and its membership, including the obligation to oppose salary increases, bonuses, and the like when such expenditures are not in the membership's best interest." Ed Hanley, the former president who presided over the corrupt system, was permitted to retire with honors. His replacement, John Wilhelm, sees no problem with implementing every one of the monitor's gentle proposals.

Classified report; not available to members

After trivializing the problem, Muellenberg, hardly requires much of a solution. This partially explains his refusal, during his term, to inform the members of the results of his investigations, his failure to call for supervised local and international elections, his failure to encourage members to back a reform effort. But Muellenberg's resistance to report to the membership goes much deeper. Despite its flaws, the report could be a powerful weapon in the hands of reformers, yet Muellenberg refuses to distribute copies to members who request it.

He willingly takes $296,000 per year from the union treasury to perform his duties, but says he can not ask the union to incur the added expense (less than $10 per copy) of distributing the report to members who request it, and, inexplicably, he refuses even to sell copies to members at any cost. If even 1000 members requested copies, the $10,000 would be money well spent - a trifling sum compared to the $3 million he's already billed to the union. Muellenberg says he made a deal with Wilhelm to have one copy available at each local, and he will announce this in the union's newsletter, but members must have the courage and time to go to the union hall and read the it under the suspicious gaze of local officials. The report was available on the web, (www.njusao.org) but in a form that is virtually unreadable: 9' pages of text in one block, a single paragraph, with no index or headings.

In its RICO suit, the government charged that corruption was a systemic disease in the Hotel union and buttressed its case by evidence of organized crime infiltration, charges that call for drastic remedies. And the monitor's final report confirms the validity of those charges; there is simply no connection between his finding of facts and his conclusions.

Missed opportunity

Any effective long term reform of a union corrupted by organized crime and betrayed by its officials depends upon its own membership. No government agency, no monitor, can make a gift of decent unionism to union members, but they can encourage members and decent-minded leaders by providing the tools of democracy for them to do the job. No union-wide reform movement has yet made its appearance in the Hotel union and the monitor bears his share of blame for missing the opportunity to encourage honest union activists to come forward, to lay the groundwork for such a reform movement.

Some union members are placing their hopes for a new day in the leadership of General President John Wilhelm, architect of the Las Vegas organizing campaign, who as an International Officer had jurisdiction over the clean HERE locals, like Local 2 in San Francisco and the New Haven locals. But even if Wilhelm is all he's cracked up to be, he will have a difficult time making the needed fundamental changes in the union with no base in the membership for reform. If all he does is implement the monitor's clerical recommendations, little will change.

The union needed, and still needs, elections supervised by an impartial agency, a forum for discussion of elections issues, an effective ethical practices committee, and regular detailed reports on the clean-up process. Now that the monitor ship and its meager powers are terminated, Muellenberg continues as one member of a three-person oversight committee with limited authority. The question is whether he will make it an effective reform institution or a public relations facade. This "final" report does not inspire much hope of a new beginning.

President's Commission on Organized Crime

Report to the President

and the

Attorney General


THE EDGE:

Organized Crime,

Business, and Labor Unions


PRESIDENT'S COMMISSION ON ORGANIZED CRIME
 

HONORABLE IRVING R. KAUFMAN, CHAIRMAN

 
Jesse A. Brewer, Jr.
Manuel J. Reyes
 
 

 

Carol Corrigan
Honorable Peter W. Rodino, Jr.* 
 
Justin J. Dintino
Charles H. Rogovin
 
 

 

William J. Guste
Barbara A. Rowan
 
 
Judith R. Hope
Francis A. Sclafani

 

Philip R. Manuel
Samuel R. Skinner

 

Thomas F.McBride
Honorable Strom Thurmond

 

Eugene H. Methvin
Phyllis T. Wunsche

 

Edwin L. Miller

 

James D. Harmon, Jr.
Executive Director and Chief Counsel
 

* Commissioner Rodino, in view of his position as Chairman of the Committee on the Judiciary of the United States House of Representatives, takes no position concerning the recommendations included in Section Eleven of this Report.

TABLE OF CONTENTS

 

o
Summary of Recommendations 
 
o
Foreword
 
Section One
Overview and Summary of Recommendations 
 
Section Two
A Look at Modern Labor Racketeering: The Methods and Objectives of Corruption 
 
Section Three
International Longshoremen's Association 
 
Section Four
Hotel Employees and Restaurant Employees International Union
 
Section Five
International Brotherhood of Teamsters 
 
Section Six
Laborers International Union of North America 
 
Section Seven
The Independent Unions 
 
Section Eight
Organized Crime and the Meat Industry: A Study in Competition 
 
Section Nine
Organized Crime and the Construction Industry: A Study in Collusion 
 
Section Ten
Current Laws and Strategy 
 
Section Eleven
Recommendations for a National Strategy 
 
Section Twelve
The Labor Management Racketeering Act of 1986

SECTION FOUR:
 

THE HOTEL EMPLOYEES AND RESTAURANT EMPLOYEES INTERNATIONAL UNION (HEREIU)

Someone else owns the international.
-Paul Castellano, former boss
of the Gambino crime family.1


 

 

Aiuppa and Accardo [underboss and boss of the Chicago Outfit, respectively]
continue to exert great influence over the
union and its president
.-Joseph Hauser.2

 

The Hotel Employees and Restaurant Employees International Union (HEREIU) was founded in 1891 as the Waiters and Bartenders Union. It quickly became the union of choice for bartenders, waiters, maids, cooks, porters, busboys, and related service workers in the United States and Canada.3 Almost 100 years later, HEREIU has a documented relationship with the Chicago "Outfit" of La Cosa Nostra at the international level and subject to the influence of the Gambino, Colombo, and Philadelphia La Cosa Nostra families at the local level.

During the union's early years internal conflicts developed between a Chicago faction, headed by W.C. Pomeroy, and the rest of the union, led by Jere Sullivan. At the 1896 convention Sullivan charged Pomeroy with misuse of funds; when Sullivan was elected general secretary-treasurer in 1899 he ousted Pomeroy from control in 1900 and embarked upon a program of reorganization with the support of Samuel Gompers and the AFL. Although the luxury hotel business boomed during the first two

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decades of the 1900's, opening numerous jobs for service employees, HEREIU was not a force in the trade because Sullivan refused to organize the unskilled and foreign born. Moreover, HEREIU lost about one-third of its membership almost immediately following the enactment of Prohibition in 1920.

With Sullivan's death in 1928 and the ascent of the new president Edward Flore, HEREIU fully responded to the demands for organizing the unskilled. By the early 1950's union membership was near its present day figure of 400,000, and key steps had been taken to centralize internal power - primarily by allowing international officers to intervene directly in the affairs of HEREIU locals.

Criminal infiltration, which has consistently plagued HEREIU, was exposed at the union's 1936 national convention, where Harry Koenig of Local 16 in New York City was murdered. Subsequent investigation by the Special Commission on Crime, headed by Thomas Dewey, revealed a flourishing restaurant racketeering business in New York City. In 1937 three officials of the national were convicted of crimes, Local 16 was suspended, and those members associated at the time with criminal activities were expelled.4

In 1958 the McClellan Committee revealed that organized crime had infiltrated the Chicago restaurant industry through its control of three union locals. Business agent John Lardino, who

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was believed to be one of the chief lieutenants to Tony Accardo, the long-time boss of the Chicago Outfit, controlled Local 593. Both Accardo and Lardino appeared before the McClellan Committee and invoked their privilege against self-incrimination. Chicago Outfit representative Louis Romano then controlled Local 278. In 1935 the Outfit extended its power to Chicago's suburbs by obtaining the charter of Local 450. Those who influenced Local 450 were believed to be Frank "The Enforcer" Nitti, Murray "The Camel" Humphreys, and Louis Romano. Joseph Aiuppa, at that time a gunman for Al Capone, was listed as the secretary of Local 450 on the application filed with the international in 1935.5

For 40 years Joseph Aiuppa, now the underboss of the Chicago Outfit, and boss Tony Accardo wielded power in the Chicago area locals and the HEREIU joint executive board. Their actions took on national proportions when Edward Hanley, who began his career in Local 450 as a business agent in 1957, was elected to the HEREIU presidency in 1973.6

HEREIU Today

Joseph Hauser, a convicted defrauder of union benefit funds, appeared before the Senate Permanent Subcommittee on Investigations in April 1983 and testified that Chicago crime boss Tony Accardo hand-picked Edward Hanley for the HEREIU presidency.7 Hauser noted, "Aiuppa and Accardo continue to exert great influence over the union and its president, Ed
 

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Hanley." According to the Senate Report, the reign of Hanley has been surrounded by allegations of organized crime's influence in the choice of international union organizers, operation of benefit funds, and conduct of union affairs.8

Since Hanley took office in 1973, union assets dropped from $21.4 million to less than $14 million in 1982. Nearly $6 million of this money went into three loans executed with private developers, one of whom was Morris Shenker, an associate of the late Kansas City organized crime leader Nicholas Civella. Shenker received the largest single loan from the Teamsters Central States Pension Fund, a portion of which has never been repaid.9

The Subcommittee found that the union's assets have been used to enrich the top officers of HEREIU's hierarchy. Base salaries augmented by expense accounts and "allowances," lifetime employment contracts, and increased expenditures of tangible items have resulted in expenditures for HEREIU officers skyrocketing from $229,051 in fiscal year 1973 to $1,689,370 in fiscal year 1983.10 Former HEREIU general secretary-treasurer John Gibson was found guilty in May 1980 of misusing the union's airplane and of conspiring to embezzle union funds. Gibson received concurrent four-month sentences, which he served in 1983, while receiving his lifetime contract checks from the union. 11 The list of employees and organizers hired after Hanley became HEREIU president includes organized crime

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associates and numerous patronage jobs.12 In addition, one of Hanley's early moves was to hire the current Teamsters president, Jackie Presser, as an international organizer in 1973; Presser was already an officer of a HEREIU Local in Cleveland. He resigned the HEREIU post in September 1976, when he became an IBT international union vice-president.

Most troubling to the Subcommittee was the unprecedented degree to which Hanley has been able to centralize authority within HEREIU and to control local chapters through the use of mergers, trusteeships, and personnel transfers, an action which mocks the goals of local autonomy and members' rights as embodied in the Landrum-Griffin Act. HEREIU's president has almost absolute authority to effect mergers and has done so more than 136 times since 1973. Hanley has also consolidated 16 separate pension funds with total assets of approximately $75 million and 35 separate health and welfare funds into single funds under the control of the international union in Naperville, Illinois.

Hanley's Assertion of the Fifth Amendment

The Permanent Subcommittee on Investigations sought Hanley's perspective on his union's increasing identification with organized crime. He refused to testify.l3 Hanley's refusal to respond to questioning and his assertion of his Fifth Amendment privilege before the Subcommittee deprived the Senate of the opportunity to explore this steady movement of HEREIU money and

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power to Chicago. Hanley declined to answer a series of questions which focused on his understanding of the obligation of trust imposed on union officials. He rejected the opportunity to explain HEREIU's merger policy. Finally, Hanley found no purpose to be served by responding to questions about his relationship with the leadership of the Chicago outfit, murdered racketeer Allen Dorfman, or attorney Sidney Korshak.

Atlantic City

HEREIU Local 54, which is located in the Atlantic City, New Jersey area, came to prominence in 1978 after the opening of Atlantic City casinos and the concomitant rise in the demand for waitresses, waiters, and bartenders. With the increase in potential union members came a struggle for control between factions of the Philadelphia family of La Cosa Nostra. Department of Labor Special Agent Ron Chance testified before the Commission about Local 54 and its influence in Atlantic City:
 

Local 54, in Atlantic City, is a classic case study in organized crime and labor racketeering. Several of the officers of this union and its predecessor unions boast convictions for murder, arson, extortion, drugs, bribes, kickbacks and racketeering. Next to the ownership of the casino itself, the control of Local 54 is the most important prize in the Atlantic City sweepstakes. . . . In 1978, when the casinos opened, Local 54 began to rise in stature and importance. Prior to the casino gambling, they only had about 2,500 members and most of them were employed in seasonal jobs in the hotel and restaurant industry in the seashore. The opening of each casino, though, brought between 1,500 and 2,000 new members into the local, and they now have about 15,000 members.l4


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Indeed, the stakes were high for this "most important prize." Membership increases contributed so substantially to total dues collection that the local's annual income swelled from $269,000 in 1979 to $1,389,000 in 1982, and permitted the local to contribute more than $15 million a year to the international's Health and Welfare Fund.

On December 15, 1980, John McCullough, the president of Philadelphia Roofers Union Local 30, was shot to death at his home by Willard E. Moran, allegedly due to his attempts to organize the Bartenders in Atlantic City away from HEREIU Local 54.15 After his conviction, Moran decided to cooperate with prosecutors and testified that he was recruited, employed, and trained to kill McCullough, an associate of Philadelphia LCN boss Angelo Bruno by former HEREIU Local 54 vice-president Albert Diadone and Raymond "Long John" Martorano, an associate of Atlantic City LCN boss Nicodemo Scarfo. Moran testified that these two actually escorted him to McCullough's home and drove him home after the murder. Both Diadone and Martorano have been convicted and sentenced to life imprisonment.

In 1979 Frank Gerace was appointed president of Local 54 after the previous president, Ralph Natale (another Bruno associate) was convicted and sentenced to 30 years' imprisonment for a variety of offenses, including narcotics trafficking.

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Local 54, under the presidency of Frank Gerace, has been the focus of several investigations by law enforcement agencies, as well as the U.S. Congress. Gerace has been named in Senate testimony as a significant criminal associate of the Scarfo crime family. The investigations have focused on Local 54's benefit funds, mob ties, and corruption of public officials. In 1980 the New Jersey Commission of Investigation reported that Larry Smith, head of Rittenhouse Consulting Enterprises, Inc. in Cherry Hill, New Jersey, profited handsomely from Rittenhouse's consulting work to arrange dental care services for HEREIU Local 33. Ultimately, HEREIU Local 33 was absorbed into Local 54 of Atlantic City. In tracing Rittenhouse's and Local 54's disbursements, New Jersey commission investigators determined that $153,000 in cash from the Local's fund could not be accounted for.

After a three-year inquiry, the Senate Permanent Subcommittee on Investigations said that Smith had controlled Local 54's dental plan almost since its inception, for the benefit of Philadelphia organized crime interests, and that the nature of "consulting" services rendered by Rittenhouse for substantial fees could not be determined.16 Subsequently Larry Smith was one of 41 individuals or entities named in a Department of Labor civil suit. It charges that past and present Local 54 trustees and the corporations formed to administer the $1.2 million dental plan violated the Employee Retirement Income Security Act (ERISA) by failing to solicit bids for a dental plan

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contract in 1980.17 Neither Local 54 itself nor its current officers are named in the suit, which asks that the defendants pay all losses resulting from their alleged actions and that new arrangements be made to provide Local 54 employees with dental care.

Local 54 and Corruption of Public Officials

Frank Lentino, a former business agent for Local 54, recently pled guilty to one count of Hobbs Act conspiracy and one count of obstruction of justice. During that investigation Lentino bragged that he controlled labor for Nicodemo Scarfo, the current head of the LCN faction in Atlantic City and Philadelphia. Lentino also claimed that Local 54 officials helped the Scarfo group exercise a corrupt influence over former Atlantic City Mayor Michael Matthews. Before his election as mayor of Atlantic City, Matthews solicited an illegal campaign contribution of $125,000 cash from Local 54's Frank Gerace, Albert Diadone, and Frank Lentino. Matthews received the cash in several installments with at least one payment being picked up at the union hall. Matthews was ultimately convicted of receiving bribes from a federal undercover agent.

When he was questioned about the $125,000 cash contribution, Matthews admitted that he approached the Local 54 officers to obtain money from the Scarfo La Cosa Nostra group. In return Matthews agreed to assist the Scarfo family obtain a tract of land partially owned by the city, where the Scarfo's group would

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build a casino. Lentino described the meetings and the purchasing of the election in conversations intercepted by the FBI and DEA. Lentino stated:
 
 

[[W]e had Mike Matthews in here, the last time I ate here with Gerace and Al Daidone . . . He [Matthews] had his eyes on that uh, mayor's, mayor's job

...

If he wins it uh, you get favors. Some guys put up a lot of money. . .[a] hundred and twenty five [thousand]... That's a lot of money for an election down here. 18
 

The Efforts of the Casino Control Commission

In 1981 the New Jersey Casino Control Commission and the Division of Gaming Enforcement, state agencies charged with regulating persons and entities began an investigation of Local 54 to determine if the local was fit, under state statute, to represent persons employed by the casinos. A central focus of the state investigation was the allegation that the Scarfo LCN group controlled the union. Based on its finding in 1982 that this control existed, the Casino Control Commission ordered that, in the event Gerace and the two others were not removed from their union posts, Local 54 would be prohibited from collecting dues from any casino employee.

Following this order Local 54 sought a Federal court injunction barring enforcement of the Commission's order. After losing in the District Court, the union successfully argued in
 

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New Jersey Superior Court that federal labor law, specifically the National Labor Relations Act and ERISA, preempted the field of labor relations. The state, however, obtained a reversal in the U.S. Supreme Court, which held that the state had the authority with some limitations to regulate in the area.l9 The Supreme Court noted in its decision that:
 
 

...Congress apparently has concluded that, at least where the States are confronted with the public evils of crime, corruption, and racketeering, more stringent state regulations of the qualifications of union officials is not incompatible with the national labor policy as embodied in 7 (of the National Labor Relations Act).20
Following the Supreme Court's decision, the Casino Control Commission issued a new order, which directed Gerace and the other officials to resign. After Gerace refused to do so, the state sought enforcement of the order and a contempt citation from the state courts. Gerace and the others then resigned their posts. Rather than divorcing himself completely from the union, however, Gerace now holds the post of consultant in non-casino affairs, at an unknown salary.

The Supreme Court found that the casino industry employees' freedom to select Local 54 to represent them in collective bargaining was not affected by the qualification criteria of New Jersey's Act. However, the Court left undecided the issue of whether the dues collection sanction, imposed by New Jersey's Act, will so incapacitate the union as to prevent it from performing its functions as the employees' chosen bargaining

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agent, thus abridging members' rights under the National Labor Relations Act. As a result, the decision does not definitively resolve how to reconcile Federal efforts to define labor rights with state efforts to regulate industries in which labor racketeers flourish.

New York City

The New York HEREIU locals are also influenced by organized crime. New locals have been chartered with due consideration to La Cosa Nostra territorial needs. Until January 1983 (when Local 100 was chartered), the main HEREIU local under LCN control was Local 6. Local 6 retained jurisdiction over those restaurants located in hotels and clubs, while Local 100 has a wide-ranging jurisdiction. Recent indictments have focused on the leaders of HEREIU Locals 6 and 100: international vice president and HEREIU Local 6 officer Vito Pitta, an associate of the Colombo family, and John J. DeRoss, officer of HEREIU Local 6, officer of HEREIU Local 100, and a member of the Colombo family.21 In a conversation intercepted by the FBI at Paul Castellano's home, Anthony Amodeo and John DeRoss complained to Paul Castellano about the failure of Local 6, and Vito Pitta, to abide by the agreed-upon jurisdictional allocation with Local 100:

Amodeo: He's not supposed to go into another. . . In fact, that's a part of their agreement. When they made the merger, from what I understand, they stay in whatever they've been in. They


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have the hotels and restaurants and so forth. Now, 2 months ago, we sat down, Vito [Pitta], me, and Charlie, right? Sat down. He says, How about if I go organize on Long Island? . ; . You stay with yours. Long Island is ours. Hotels, restaurants, whatever.
Castellano: They're supposed to stay.
DeRoss: Right. I know.22
In the same conversation, Castellano subsequently described the limits of his influence over HEREIU. Because the international was controlled by other organized crime groups, Castellano's ability to remedy an apparent encroachment by the Colombo family was not a simple matter:
Castellano: . . . You had the locals and somebody else had the international. . . This is what I was trying to tell Vito of. I said, Vito [Pitta], take it easy. You know, I gotta, I gotta watch, like someone else owns the international. See, I don't like these doing. . . something that they have a right to do. In the meantime, the only reason why they're doing it, because Vito is setting up something in my. . . I don" do that.

. I was happy with the [international union] elections, you know? They were happy about it, but Pitta wasn't . . . I tell you what, what brought them over here. This is with my local, and I don't want anybody to touch it. . . .23

HEREIU Locals 6 and 100 were used to dictate the way in which restaurants could do business in New York. In return for payoffs, restaurant owners could pay reduced wages and pension and welfare fund contributions, or buy a lease on a restaurant

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shut down because it owed money to the union, or hire and fire without regard to grievance procedures, or operate without regard to union work rules. What appeared to be a jurisdictional split between two HEREIU locals was, in fact, a market allocation of New York's entire restaurant business between the Colombo and Gambino crime families.

The IPSSEU Merger: Building A Larger Union

HEREIU used means other than forced merger and the issuance of charters to the Gambino and Colombo crime families to consolidate and expand the existing power of La Cosa Nostra. In one instance HEREIU absorbed an independent union, the International Production Service and Sales Employees Union (IPSSEU), an organization influenced by organized crime.

In the mid-1950's IPSSEU was created by the merger of several independent local unions. By 1978 IPSSEU had organized some 25,000 members in eight locals employed in seasonal work, usually in toy, plastic and candy factories. As Robert Rao, IPSSEU's general president, once explained, the union organizes anyone except the "building trades." At one point Rao testified in court proceedings that between 25 and 40 percent of IPSSEU's members were paid only the minimum wage. During its history IPSSEU turned down merger overtures from several AFL-CIO unions, the United Mine Workers, and the Teamsters Union.

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At present IPSSEU's former secretary-treasurer, Benjamin Ladmer, and Teamster official Anthony Di Lapi are serving ten-year prison sentences for using bribery and threats to obstruct an attempt by nonunion truck drivers in a garment center trucking company to form their own union. Di Lapi explained the conspiracy in these words:
 
 

. . . There's a million truck drivers, a million warehouses. They'll get all new guys, new identity completely, new corporation, new everything. . . Well this is economics. . . There's no violence, there's no nothing. . . but it's like a Family. . .24
IPSSEU, with its ties to the Luchese family, was a prime candidate for merger with HEREIU. The merger occurred with the creation of HEREIU Local 21S in 1983, and Robert Rao's appointment as an international vice president of HEREIU. merger has not harmed Rao. Rao received combined salary, allowances and expenses amounting to $142,380 in 1984 from HEREIU.

Government Action Awaited

During the Commission's investigation it became clear that legitimate trade unionists are aware of the mob ties to HEREIU and await government action to oust the mob from the union.

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FOOTNOTES

1Court authorized electronic surveillance, June 3, 1983.

2Hotel Employees and Restaurant Employees International Union: Hearings before the Permanent Subcommittee on Investigations of the Senate Comm. on Governmental Affairs, 97th Cong., 2nd Sess., Part III, at 34 (1982).

3The union has changed its name several times since its creation, most recently in 1981 at the 39th general convention. For more details on the history of HEREIU, and for a comprehensive analysis of the union and its infiltration by organized crime today, see Hotel Employees and Restaurant Employees International Union, a report by the Permanent Subcommittee on Investigations of the Committee on Governmental Affairs of the U.S. Senate, August 1984 [hereinafter referred to as HEREIU Report.] This section of PCOC's report relies heavily on the excellent work recently completed by that Subcommittee.

4HEREIU Report, supra note 3, at 13.

5Id.. at 14-15.

6See Hotel Employees and Restaurant Employees International Union: Hearings be fore the Permanent Subcommittee on Investigations of the Senate Comm. on Governmental Affairs, 97th Cong., 2nd Sess., Part I, at 6 (1982) [hereinafter cited as HEREIU Hearings].

7Id., Part III, at 34.

8HEREIU Reportsupra note 3, at 17.

9Id. at 25-32.

l0Id at 41.

llId. at 44.

12Id. at 33.

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13These are some of the questions, posed mainly by Senator Roth, which Hanley refused to answer, some in apparent violation of AFL-CIO ethical practices policy:
 
 

Q: Are you president of the International Union of Hotel Workers & Restaurant Employees?

Q: What is your occupation?

Q: Could you explain the international union's basic policy concerning mergers of local unions?

Q: What sort of policy and criteria are used by the International union in hiring?

Q: What do you believe are your fiduciary responsibilities as president of the Hotel Employees & Restaurant Employees International Union, both to the union and its members?

Q: Have you ever told Jeff McColl, the Las Vegas local union leader, you would "pull" the Local 226 charter if he capitulated to demands that the health and welfare funds return to Vegas for local control? [In 1977, the health and welfare funds of Local 226 were returned to Chicago only after the murder of union officer Al Bramlett in Las Vegas. Bramlett was said to oppose moving the fund to Illinois.]

Q: Mr. Hanley, did you, in fact, have a conversation with Sidney Korshak about merging hotel workers locals? [This question was based upon an electronically intercepted conversation between Korshak and Dorfman in which Korshak claims to have discussed with Hanley the merger of two West Coast HEREIU locals.]

Q: Did you know Allen Dorfman before he was murdered?

Q: As you know, Mr. Hanley, we have heard evidence relating to a possible association between yourself and Mr. Anthony Accardo and also Joseph Aiuppa of Chicago. Let me ask you, do you know either of those gentlemen?

HEREIU Hearings, supra note 6, at 23.

14See Organized Crime and Gambling: Hearings before the

President's Commission on Organized Crime, June 1985, at 243-244.

15HEREIU Report, supra note 3, at 65.

16Id. at 110, 111, and 113.

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17 See Brock v. Frank Gerace et al., U.S. District Court, District of New Jersey, Civil Action No. 85-3669.

18 Court authorized electronic surveillances, March, 1982.

19 Brown v. Hotel and Restaurant Employees and Bartenders International Union Local 54, 52 U.S.L.W. 5042 (July 2, 1984).

20 Id.

21 See U.S. v. Persico, 84 Cr. 809 (S.D.N.Y. 1984).

22 Court authorized electronic surveillance, June 3, 1983.

23 Id.

24 Court authorized electronic surveillance, April 24, 1978.

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