The U.S. Labor Dept. reported the prosecution and convictions of dozens of mostly local and regional union officials and staff in 2017. One of the biggest involved a painting contractor that made illegal payments to a New York State painters’ local trustee of close to three quarters of a million dollars.
Last March, a federal judge sentenced Robert Fabrizio to eight months in prison and ordered him to pay several hundred thousand dollars in restitution. A third party administrator for the welfare fund for a painters’ local on Long Island paid Fabrizio, a trustee for the fund, $743,032 in kickbacks in order to ensure it kept its job, according to federal regulator.
Fabrizio shared the proceeds with Hector Lopez, former president of painters' Local 8A-28A. Lopez had been sentenced to four years in prison back in 2014.
Another union contractor connected with Fabrizio was ordered to pay $400,000 in restitution for a separate kickback scheme involving work on painters' Local 8A-28A’s union hall, according to the U.S. Labor Dept. Office of Labor-Management Standards.
The Long Island case is just one of more than 180 of union-related corruption cases around the country detailed in the recent roundup of 2017 enforcement actions by the labor-management standards office, which oversees union management activity, including the handling of billions of dollars in member welfare, health and pension funds. These funds must be managed and reported according to the Labor-Management Reporting and Disclosure Act and related laws.
Vulnerability at Small Union Locals
While the numbers seem high, smaller organizations, such as nonprofits, unions and small businesses, are particularly vulnerable to theft by insiders in trusted positions, experts note.
“A union local is not very large,” said Peter Henning, a law professor at Wayne State University in Detroit. “The studies have shown embezzlement takes place when you don’t have internal controls, when you don’t have anyone looking over your shoulder. It’s harder to do in large organizations because they impose a lot of paperwork.”
More than three-dozen of the cases pursued by the labor-management office involved unions in the construction trades, with union contractors charged in a few instances as well.
Millions Taken at Laborers Local
One of the largest cases of labor corruption in 2017 terms of money stolen involved a pair of union contractors involved with a laborers’ union local in Washington D.C.
A judge ordered a pair of union contractors last February to pay more than $3.2 million in restitution to laborers Local 657. Gary Cooper was sentenced to more than five years in prison and Christopher Kwegan to three years for embezzlement from the union and other charges.
A court also handed Anthony Frederick, the business manager of 657, a four-year sentence and ordered him to pay $1.6 million in restitution for embezzlement and related charges.
Another big case involved Raymond Ventrone, business manager of the International Brotherhood of Boilermakers Local 154 in Pittsburgh. He pled guilty in September to embezzling union funds “in the approximate amount of $1,499,000,” according to the Labor Dept. Ventrone also pled guilty to one count of tax evasion of $265,343.
The federal government pursued several other union corruption cases involving trade unions last year, with amounts ranging from a few hundred thousand dollars to a few thousand.
Two cases involved office managers stealing hundreds of thousands of dollars form the union locals they kept the books for.
Stephanie DeBoer, a former office manager and bookkeeper for International Brotherhood of Electrical Workers Local 876 in Edmore, Mich., pled guilty in November to embezzling $307,563.
And in Little Rock, Ark., Jeni May Hughes, former office manager for plumbers Local 155, pled guilty for embezzling $428,874 in union funds.
Small Sum By Boilermaker Official
One of the smallest cases involved William Dixon, former Secretary-Treasurer of the International Brotherhood of Boilermakers Local 2014 in Lebanon, Va. Dixon was ordered to pay remaining restitution of $3,408 (he previously paid $930) and sentenced to two years of probation. The court also ordered him into drug treatment and counseling.
Motivations driving people to steal from their union local, or any employer, range widely, from a gambling or drug addiction to resentment over pay and working conditions.
The cases that make it to court are in the small minority, with most settled behind the scenes to avoid embarrassing disclosures and headlines, noted Robert Brown, founder partner of the CPA Solution, a Bangor, Maine-based fraud prevention and detection firm
While it can be difficult for smaller organizations like union locals to protect themselves, there are some common sense measures that can be taken, such as having the bank account balance sent to another person, such as the local president, and not just the bookkeeper, Brown said.
Putting your trust into one person with no system over oversight can be dangerous, he noted.
It’s often “somebody who has been put on a pedestal, a stellar person in the community,” Brown said of the profile of the typical embezzler.
“Because of that, most people won’t ask any questions and the organization gets into the habit of saying we trust the person.”
“Get the person out of it and trust the system,” Brown said.