Posted on 02/20/2003 4:11:04 PM PST by Remedy
Officials charged with diverting $5 million in member dues
Just before Christmas last year, federal officials raided the homes and offices of former officials of the Washington Teachers' Union (WTU) in search of goods allegedly purchased with more than $5 million in union funds.
The items listed in an FBI affidavit include $500,000 in custom-made clothing, a 288-piece antique Tiffany sterling silver set, a $6,800 ice bucket, furs, alligator shoes, jewelry, artwork, wine, wigs, a 50" plasma television, and computer equipment. Agents were investigating expenditures on a Bahamas vacation and bar and nightclub tabs.
Police also found a double-barrel shotgun in the home of former WTU President Barbara Bullock, a firearm for which she had no permit. Washington City Paper reporter David Morton wrote the booty seized "reads like the manifest of a pirate ship."
The investigation, conducted by the FBI, the IRS, the Department of Labor, and the District of Columbia inspector general, began last Fall following union member complaints about being overcharged for dues. Subsequently, Bullock, Treasurer James Baxter, and Bullock's assistant, Gwendolyn Hemphill, all resigned or were dismissed when an American Federation of Teachers (AFT) audit discovered "financial improprieties."
A month later, the parent AFT filed a racketeering lawsuit against the former officials, charging an illegal diversion of at least $5 million in member dues. Then, just before a board meeting to consider a rank-and-file proposal to dissolve the WTU executive board, the AFT's Executive Council appointed an administrator over the local union. This action effectively dissolved WTU's governing bodies, placing day-to-day operations in the hands of AFT Northeast Regional Director George C. Springer, former president of AFT's Connecticut state affiliate.
"Breathtaking" Misappropriation
The extent of the multi-million dollar misappropriation is striking when considered against the union’s annual budget of $4.2 million. "How could such an allegedly massive misappropriation of union funds occur over such a long period of time and under the noses of so many people, including the union's board of directors, the union's members, and the American Federation of Teachers, which is the parent organization?" asked the editors of The Washington Post, calling the $5 million misappropriation "breathtaking."
But everyone, from the AFT to the WTU vice president to the executive board and staff, all claim to have had no knowledge of the massive spending. Over the same period, health care premiums on behalf of retirees went unpaid, staff pension fund contributions went unpaid, rent and utilities went unpaid, dues reimbursements to site reps never happened, payroll taxes were paid late, and WTU failed to pay its national dues to AFT for more than a year.
AFT claims it threatened to disaffiliate WTU in February 2002 if it did not pay its national dues, but members were not told anything about this at the time.
The FBI reviewed scores of union documents and discovered that meetings minutes, tax returns, and Labor Department disclosure forms contained no mention of the profligate spending. The WTU treasurer and the outside accountant falsified the IRS and Labor Department reports they prepared.
"It's a culture that is just unbelievable--of financial secrecy, of manipulation of information," was how union activist George Parker described the atmosphere at WTU headquarters to The Washington Post. "The problem is that everybody just let it happen," he added.
AFT Audit
In support of its racketeering lawsuit, the AFT released the report of forensic investigators hired to follow the WTU money trail. The audit revealed details unmentioned even in the FBI affidavit:
The auditors also confirmed the obvious: The union's LM-2 report to the U.S. Department of Labor "does not accurately depict the true nature and amount of the transactions that we discovered during our investigation." Also, the accountant who helped prepare and file the reports did so knowing they "were not accurate and, at a minimum, were grossly misleading." The auditors could locate only one LM-2, although they are supposed to be filed annually.
The U.S. Department of Labor has a proposal that would create new reporting requirements for union finances. Not only will unions be required to provide more detailed accounting of their spending, but, for the first time, they also will have to disclose details of the financial trusts they operate. (See sidebar: "Unions to Face Increased Federal Regulation.")
Whatever the outcome for Bullock, Baxter, and Hemphill, AFT members will be footing the bill for their misdeeds. The WTU's fidelity bond covers losses only up to $100,000.
I don't understand this part:
Also, the accountant who helped prepare and file the reports did so knowing they "were not accurate and, at a minimum, were grossly misleading." The auditors could locate only one LM-2, although they are supposed to be filed annually.
Are they referring to an outside accountant? If so, in what capacity was the accountant functioning-- auditing, rendering bookkeeping services, or something else? Why doesn't the article name the accountant?
The casual reference to her chauffeur is enough to raise my eyebrows.
Are there any pics of the perps available?
{snip} In violation of federal election law, Bullock also contributed $9,000 to the Dem. Natl. Cmte. and $2,000 to Hillary Clinton's senate campaign in 2000.
By charging those contributions to the WTU's American Express card, Bullock violated the Fed. Elect. Campaign Act by making a contribution to a fed. candidate directly from the union, instead of its pol. action cmte.
Bullock also wrote checks for her personal benefit of at least $381,000. {snip}
Why do you think it took so long for their malfeasance to be discovered?
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