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U.S. v. INTERNATIONAL BROTH. OF TEAMSTERS

April 18, 1991

UNITED STATES OF AMERICA, PLAINTIFF,
v.
INTERNATIONAL BROTHERHOOD OF TEAMSTERS, CHAUFFEURS, WAREHOUSEMEN AND HELPERS OF AMERICA, AFL-CIO, ET AL., DEFENDANTS. IN RE APPLICATION XV OF THE INDEPENDENT ADMINISTRATOR.



The opinion of the court was delivered by: Edelstein, District Judge:

OPINION AND ORDER

This opinion emanates from the voluntary settlement in the action commenced by the plaintiffs United States of America (the "Government") against the defendants International Brotherhood of Teamsters (the "IBT") and the IBT's General Executive Board (the "GEB") embodied in the voluntary consent order entered March 14, 1989 (the "Consent Decree"). The Consent Decree provided for three Court-appointed officials, the Independent Administrator to oversee the remedial provisions, an Investigations Officer to bring charges against corrupt IBT members, and an Election Officer to oversee the electoral process leading up to and including the 1991 election for International Officers (collectively, the "Court Officers"). The goal of the Consent Decree is to rid the IBT of the hideous influence of organized crime through the election and prosecution provisions.

The instant matter, Application XV of the Independent Administrator, presents for this Court's review the Independent Administrator's letter-decision (the "veto decision," annexed hereto as the Appendix) vetoing the appointment of IBT member Jack B. Yager to the GEB as an International Vice president, and as director of the 700,000 member Central Conference of Teamsters (the "appointments"). The Independent Administrator determined that appointing Yager to these positions would (i) further an act of racketeering activity within the definition of Title 18 U.S.C. § 1961, and (ii) contribute directly or indirectly to the association of the IBT or any of its members with La Cosa Nostra. As a result, the Independent Administrator exercised his power to veto such appointments pursuant to his authority at ¶ F.12.(B)(iii) of the Consent Decree.

Because the Independent Administrator's decision to veto the Yager appointment is not arbitrary or capricious and fully supported by the evidence, the veto decision is hereby affirmed in all respects.

I.  The Independent Administrator's Findings

The Independent Administrator considered an exhaustive factual record in making his determination to veto the appointments of Yager. In his decision, the Independent Administrator considered (i) the deposition testimony of Yager; (ii) the deposition testimony of 15 members of the GEB, including General-President McCarthy; (iii) an investigator's report on Yager, (iv) the declaration of FBI Special Agent Peter J. Wacks, which included extensive information compiled by the FBI regarding the IBT and La Cosa Nostra; (v) extensive information relating to former IBT General President and convicted felon Roy L. Williams, including discovery from this case; and (vi) certain other materials from discovery from the instant case taken before the signing of the Consent Decree.*fn1

In vetoing the appointments of Yager, the Independent Administrator relied on two separate grounds under ¶ F.12.(B)(iii) of the Consent Decree, set out below.*fn2 First, he determined that the appointment of Yager would further an act of racketeering — the aiding and abetting of the extortion of the IBT members rights to union democracy. The Independent Administrator found that former IBT General President Roy L. Williams had extorted IBT members rights to a democratic union, and that as Williams' close confidant and assistant, Yager had aided and abetted Williams in that extortion. Second, he found that the appointment would directly and indirectly further and contribute to the association of the La Cosa Nostra with the IBT.

A.  The Act of Racketeering

The IBT concedes that the Independent Administrator conducted "a massive factual investigation" (Br. at 12) and does not challenge any aspect of the facts supporting this determination. Yager had been an IBT officer for many years. Since 1981, he served as a member of the Policy Committee of the Central Conference of Teamsters, and as Administrative Assistant to Roy Williams. Prior to 1981, Yager had served as a business agent for IBT local 41, and as an organizer for the Central Conference of Teamsters, Freight Chairman, and Freight Division director.

The Independent Administrator found numerous facts concerning Roy L. Williams' ties to organized crime, notably Kansas City La Cosa Nostra boss Nick Civella, Williams' approval of the Central States Pension Fund loans to organized crime controlled entities, and Williams' conviction for conspiring to bribe former United States Senator Howard Cannon at the expense of the Central States Pension Fund. These facts, the Independent Administrator concluded, provided reasonable belief that Williams had committed the act of racketeering of extorting the IBT rank and file's rights under the Labor-Management Reporting and Disclosure Act ("LMRDA"), 29 U.S.C. § 411, in violation of the Hobbs Act, 18 U.S.C. § 1951.

In the context of this case, it has previously been found that extortion of rights by IBT officials may constitute a violation of the Hobbs Act. March 6, 1989 Opinion & Order, 708 F. Supp. 1388, 1397-1401 (S.D. N.Y.1989); see United States v. Local 560, International Brotherhood of Teamsters, 780 F.2d 267, 281-82 (3d Cir.1985), and that aiding and abetting that extortion may constitute an act of racketeering. March 6, 1989 Opinion & Order, supra, 708 F. Supp. at 1399.

More importantly, the Independent Administrator found that Yager aided and abetted this extortion, through action, and inaction. The Independent Administrator specifically found that Yager developed a special relationship with Roy Williams, since Yager "rose through the ranks [of the IBT] on Williams' coattails." Once in a position of fiduciary responsibility to the IBT membership, Yager took no action with respect to the undeniable fact that Williams was controlled by organized crime. At his deposition, Yager admitted that he was aware of the charges that Roy Williams was controlled by the Kansas City La Cosa Nostra. The extent of Yager's breach of his responsibility to the membership is reflected by his voting to re-elect Williams as chairman of the Central Conference of Teamsters Policy Committee after Williams had both been convicted of conspiring to bribe United States Senator Cannon, and cited by the Senate for his ties to organized crime, and after Yager himself had concluded that Williams was unfit to lead that segment of the IBT.

The Independent Administrator stated that Yager's failure to act under those circumstances "amount[ed] to an egregious breach of his responsibility as an officer of the IBT." The Independent Administrator concluded that "rewarding Mr. Yager with appointments to the powerful General Executive Board and as the Director of the Central Conference of Teamsters would only serve to further the very extortion of the members' rights which was initiated by Mr. Williams and fostered by Yager's silence and incomprehensible passivity." (Veto-decision at 30).

The Independent Administrator further found that the appointment of Yager would have an extortionate effect on the members' rights by the failure of the IBT General President and GEB to conduct any inquiry into Yager's fitness for these offices. The Independent Administrator concluded that the absence of such an inquiry would send a message that "the General President and General Executive Board [were] simply not concerned with ridding the IBT of the type of corruption that was epitomized by Williams himself." (Veto-decision at 35).

B.  Contributing to the Association of La Cosa Nostra

The Independent Administrator found as an independent ground for vetoing the Yager appointment that it would contribute to the association between the IBT and La Cosa Nostra. The Independent Administrator noted that the IBT is susceptible to infiltration by La Cosa Nostra as demonstrated in the extensive materials that form the record. The facts show that Yager was seen with members of La Cosa Nostra, including Civella, and members of the Chicago La Cosa Nostra. Further, the evidence indicates that Yager could not have been so closely affiliated with Williams without Yager having received La Cosa Nostra approval. At the very least, Yager, having longstanding knowledge of this infiltration, took no steps to impede it. (Veto-decision at 36-37).

II. Standard of Review

The IBT argues that this Court may only affirm the decision of the Independent Administrator if it is supported by "substantial evidence." But this argument mistakes the well-settled standard of review that this Court and the Court of Appeals have given to determinations of the Independent Administrator.

Paragraph K.16 of the Consent Decree provides that this Court shall review the actions of the Independent Administrator using the "same standard applicable to review of final federal agency action under the Administrative Procedure Act." Consent Decree at 25. It is beyond dispute that under the Consent Decree, the decisions of the Independent Administrator are "entitled to great deference." United States v. International Brotherhood of Teamsters, 905 F.2d 610, 616 (2d Cir.1990), aff'g March 13, 1990 Opinion & Order, 743 F. Supp. 155 (S.D.N.Y.1990).

In their submission, the IBT argues that the evidence relied upon by the Independent Administrator amounts to "guilt by association" and would be insufficient to find that Yager criminally aided and abetted the violation of any law. But whether Yager could be convicted of a crime is not relevant. The authority and findings that must be made by the Independent Administrator in this matter are determined by the Consent Decree, which specifically enumerated the two grounds upon which the Independent Administrator can veto an appointment, and what standard that veto must meet. Consent Decree at F.12.(B)(iii). The Independent Administrator must only "reasonably believe" that an appointment would further an act of racketeering or contribute to the association of the IBT with organized crime. Id. Further, that finding is then given the deference this Court and the Court of Appeals must give determinations of the Independent Administrator.

Accordingly, the findings of the Independent Administrator in his veto decision will be reviewed, as always, under the standard set out by the parties in the Consent Decree.

III. The IBT's Challenges

The IBT challenges the veto decision of the Independent Administrator on the grounds that the facts demonstrate that Yager acted honestly and ethically throughout his career, and that the evidence does not establish that Yager either (i) committed the act of racketeering, or (ii) contributed to the IBT's association with organized crime. These challenges are without merit, and must be dismissed.

A.  Yager Aided and Abetted an Act of Racketeering

The IBT argues that the Independent Administrator erred by finding that Yager committed an act of racketeering by aiding and abetting Roy Williams' extortion of IBT members rights to a democratic union. The IBT contends that Yager's inaction rather than action cannot constitute aiding and abetting. This argument is contrary to the established law.

As this Court has already held in the context of this case, the IBT rank and file's rights under the LMRDA, 29 U.S.C. § 411(a), are extortable property under the Hobbs Act, and the extortion of those rights may constitute an act of racketeering under the RICO statute, 18 U.S.C. § 1961(1). March 6, 1989 Opinion & Order, supra, 708 F. Supp. at 1399; see also United States v. Local 560, supra, 780 F.2d at 281-82.

This Court also directly held that failure by officers of the IBT to redress wrongdoing within the IBT could support liability for aiding and abetting the extortion of the IBT members' rights.

  "Each defendant officer is a fiduciary with
  respect to the union members. They have a duty to
  disclose and remedy wrongdoing by the IBT. . . .
  [Such action may mean the GEB] aided and abetted
  other by failing to act when they had such a
  duty."

March 6, 1989 Opinion & Order, supra, 708 F. Supp. at 1401. As a result, when a union fiduciary such as Yager fails to act to remedy wrongdoing within the union, that constitutes aiding and abetting the extortion of IBT members' rights to democracy and free speech. Importantly, this Court has also noted that in the context of this case, the inaction of an IBT officer to redress corruption could only be through "conscious avoidance" given the scope of that corruption. Id. The Third Circuit has also held that the failure of an IBT officer to act when he had an affirmative duty to do so constituted aiding and abetting the extortion of the IBT members' rights. United States v. Local 560, supra, 780 F.2d at 284.

Further, aiding and abetting the extortion of members' rights to union democracy through failure to take action in the face of corruption is an act of racketeering, and thus formed part of the parties' background understanding as to what acts of racketeering would subject IBT appointments to veto pursuant to ¶ F.12.(B)(iii) of the Consent Decree. Indeed, the Court of Appeals has explicitly stated that "we deem the Consent Decree to incorporate prevailing legal standards," United States v. International Brotherhood of Teamsters, 931 F.2d 177, 189 (2d Cir.1991), and there can be no doubt that aiding and abetting the extortion of members' rights formed part of the background to this very case. Union officers owe an enhanced duty of care to their membership. Id. The IBT's argument that inaction in the face of union corruption could not constitute aiding and abetting is without merit.

The IBT further argues that the evidence is insufficient to find that Yager aided and abetted Roy Williams in extorting the IBT rank and file's rights to a democratic union. This argument is also without merit. The IBT does not dispute the corruption of Roy Williams, rather, it claims that Yager is the victim of "1950's vintage" guilt by association. Indeed, the IBT does not dispute any of the evidence relied upon by the Independent Administrator. Rather, they argue that Yager was low-level IBT official who was in no position to take any affirmative action with respect to the corruption he saw around him.

But this argument misses the fundamental point that as an IBT officer, Yager owed the membership the utmost duty to stop corrupt elements from extorting the memberships' rights. In 1983, Yager voted to re-elect Williams, a convicted felon with known and undisputed mob ties, to the chair of the Central Conference of Teamsters Policy Committee when Yager had determined that Williams was not fit for that office. Further, when himself a member of the Central Conference Policy Committee, Yager voted to expend IBT funds for Williams' defense in the Cannon bribery prosecution. Such action is improper "prior to a full determination on the merits." Morrissey v. Segal, 526 F.2d 121, 127 (2d Cir.1975). Yager co-chaired Williams' legal defense fund and solicited contributions for those fees.

Finally, the report by FBI Special Agent Wacks stated that Yager had associated with known organized crime figures, including Chicago La Cosa Nostra members Alan Dorfman, James Cozzo, and associates Amos Massa and Thomas O'Malley, Kansas City La Cosa Nostra members Paul Varsolona, Nick Civella, Carl Civella, Phil Simone, Sam Ancona, and Frank Todaro, and Detroit La Cosa Nostra member Anthony LaPiana. The open association of IBT leaders with figures involved with La Cosa Nostra results in the membership "surrender[ing] their right to democratic participation in the affairs of the union." United States v. Local 560, supra, 780 F.2d at 286.

Accordingly, considering all of the evidence relied upon by the Independent Administrator, his findings are sufficient to "reasonably believe" that the appointments of Yager would further the act of racketeering of aiding and abetting the extortion of the IBT members' rights to union democracy. At the very least, Yager's record of association with known organized crime figures would satisfy the second criteria relied upon by the Independent Administrator, that the appointment of Yager would directly or indirectly further the association of La Cosa Nostra with the IBT.

Further, the Independent Administrator's finding that the IBT's failure to conduct any background check on Yager before General-President McCarthy submitted Yager's name for approval by the GEB constitutes additional grounds for his veto is also supported by the evidence. The facts demonstrate that the General President McCarthy and the GEB failed to make any inquiry into Yager's fitness for office. General President ("G-P") McCarthy admitted so at his deposition.

JUDGE LACEY: Did you, yourself, conduct any interview of Mr.
  Yager before putting his name before the board?
G-P MCCARTHY: No, but I knew he was a good man and especially
  since the executive board voted unanimously and all hugged
  him and kissed him and so forth after it was over. I then
  knew definitely he was a good man.
JUDGE LACEY: . . . [D]id you conduct any investigation of any
  kind into Mr. Yager's background before he was named?

G-P MCCARTHY: I said no.

(Deposition of William McCarthy, October 23, 1990, at 17-18).

The explicit purpose, spirit and intent of the Consent Decree is to rid the IBT of the hideous influence of organized crime. Considering the serious questions about the fitness of Mr. Yager for office raised by his association with Roy Williams, which association was known to General President McCarthy and the members of the GEB, this failure to conduct any background investigation into Yager is egregious.

As a result, the IBT's challenges to the Independent Administrator's determination that the Yager appointments would further the act of racketeering are without merit and denied.

  B.  Furthering the Direct or Indirect Association with La
      Cosa Nostra

The Independent Administrator determined as a full independent ground for his veto that the Yager appointments would further the direct or indirect association of the IBT with La Cosa Nostra. The extensive evidence linking Yager with organized crime associates demonstrates that this determination was neither arbitrary nor capricious.

The evidence relied upon by the Independent Administrator focused on the history of La Cosa Nostra influence on the IBT, particularly on the Central States Pension Fund, of which Yager was an officer. La Cosa Nostra engaged in a scheme to bribe former United States Senator Cannon by selling Pension Fund real estate to an investor group headed by Cannon at below market rates. The Independent Administrator concluded that such actions show how vulnerable the IBT is to the influence of La Cosa Nostra. The Independent Administrator found that Yager, having knowledge of this influence, did nothing to "prevent or impede it." As a result, the Independent Administrator concluded that the appointment of Yager would (i) signal that the IBT was still open to La Cosa Nostra infiltration by appointing the former protegee of Williams to the GEB, and (ii) send the message to the membership that the leadership has no intention to rid itself of the type of corruption typified by Roy Williams, and thus must be vetoed.

In its opposition to the veto, the IBT argues that (i) the evidence does not support that Yager himself has associated with organized crime figures, and (ii) the Independent Administrator's conclusion that appointing Yager would further IBT association with La Cosa Nostra was unsupported speculation. Neither challenge has merit.

First, as previously discussed, the factual record is replete with evidence linking Yager with organized crime figures. The IBT does not even discuss that evidence. Second, considering the evidence linking Yager with convicted felon Roy Williams, and the extent of Yager's contact with organized crime, the IBT has in no way rebutted the reasonable finding that the appointment of Yager would further the association of the IBT with La Cosa Nostra is arbitrary or capricious.

Accordingly, the IBT's challenges to the veto decision of the Independent Administrator on the grounds that it did not establish that such appointments would further the association of the IBT with La Cosa Nostra is without merit and must be dismissed.

IV. Conclusion

For the reasons stated above, the challenges to the veto decision of the Independent Administrator are without merit and must be denied.

IT IS HEREBY ORDERED that Application XV of the Independent Administrator is affirmed in all respects.

So Ordered.

APPENDIX

OFFICE OF THE INDEPENDENT ADMINISTRATOR

c o LeBOEUF, LAMB, LEIBY & MacRAE

Gateway Center I, Suite 603 Newark, NJ 07102-5311 (201)643-8000 Fax (201)622-6693

November 28, 1990

Frederick B. Lacey Independent Administrator

VIA FEDERAL EXPRESS

James T. Grady, Esq. International Brotherhood of Teamsters 25 Louisiana Avenue, N.W. Washington, D.C. 20001

Re: Jack B. Yager

Dear Mr. Grady:

I have completed my review of the appointments of Mr. Yager as an International Vice President and as the Director of the Central Conference of Teamsters. In reviewing these two appointments, I have considered the following:

1.  In-person sworn examination testimony of Jack B. Yager
    taken on October 24-25, 1990.[fn1a]
2.  In-person sworn examination testimony of General President
    William McCarthy taken October 23, 1990.
3.  Testimony of IBT Vice President Arnold Weinmeister taken by
    telephone deposition on August 30, 1990.
4.  Testimony of IBT Vice President Edward Lawson taken by
    telephone deposition on August 30, 1990.
5.  Testimony of IBT Vice President Joseph Trerotola taken by
    telephone deposition on September 19, 1990.
6.  Testimony of IBT Secretary-Treasurer Weldon Mathis taken by
    telephone deposition on August 16, 1990.
7.  Testimony of IBT Vice President Jack Cox taken by telephone
    deposition on September 11, 1990.
8.  Testimony of IBT Vice President Don West taken by telephone
    deposition ...

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