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U.S. v. IBT

June 18, 1991


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


This opinion emanates from the voluntary settlement in the action commenced by the plaintiff United States of America (the "Government") against 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 remedial provisions in the Consent Decree provided for three Court-appointed officials, the Independent Administrator to oversee the remedial provisions, the Investigations Officer to bring charges against corrupt IBT members, and the 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.

Application XX presents for this Court's review the Independent Administrator's report to the Court on the Windsor Graphics matter. In Application XX, the Independent Administrator investigated the circumstances of the IBT General President McCarthy and Director of Communications F.Z. "Duke" Zeller's award of the contract to print its monthly magazine, The International Teamster, to Windsor Graphics, Inc. The Independent Administrator found that the expenditure of funds to Windsor Graphics would further an act of racketeering recognized under the RICO statute, 18 U.S.C. § 1961(1), the aiding and abetting the extortion of the IBT membership's rights to union democracy and self-governance under the Labor-Management Reporting and Disclosure Act of 1959 ("LMRDA"), 29 U.S.C. § 411, in violation of the Hobbs Act, 18 U.S.C. § 1951. The Independent Administrator directed that the IBT rebid the contract.

The IBT has agreed to rebid The International Teamster printing contract in a process approved by the Independent Administrator. The only issue on appeal to this Court is the Independent Administrator's finding that McCarthy and Zeller's actions furthered an act of racketeering. Further, Zeller moved this Court to intervene in this matter.

Nonetheless, the Government argues that the decision and directives of the Independent Administrator should be affirmed in all respects, notwithstanding the IBT's willingness to rebid The International Teamster printing contract. The Government contends that the Independent Administrator's finding that McCarthy and Zeller aided and abetted the extortion of the members' LMRDA rights is fully supported by the evidence and is neither arbitrary nor capricious.

Considering the deference accorded the Independent Administrator and the standard set out in ¶ F.12.(B) of the Consent Decree for a veto of funds, his findings in this matter are fully supported by the evidence. His conclusions are neither arbitrary nor capricious. Accordingly, the finding of the Independent Administrator appealed by the IBT is affirmed.

I. The Independent Administrator's Findings

The Independent Administrator's veto was made as a result of an investigation conducted by his staff into the IBT's 1989 award of a contract to print International Teamster to Windsor Graphics, Inc. The Report to this Court that concluded with the veto set forth the results of that investigation (the "Report"). The relevant factual findings are summarized.

On March 1, 1989, IBT General President William McCarthy awarded the contract to print The International Teamster to Windsor Graphics. The International Teamster is the IBT monthly magazine, with a circulation of 1.8 million. Windsor Graphics is a closely held printing firm that had been recently founded by General President McCarthy's daughter and son-in-law, Thomas J. Treacy. Windsor Graphics is now owned by Mr. Treacy alone. Windsor Graphics had no printing capacity of its own, and was operated out of Treacy's home.

The contract was awarded by the following bidding process. McCarthy ordered Zeller to accept bids from only three bidders, and that Windsor Graphics be one. Good Impressions, the previous printer was not invited to bid. No bid specifications or deadlines were issued to the bidders. As a result, the bids were nonuniform in format and required subjective analysis by the IBT for comparison. After IBT analysis, the three bids (in dollars per month) as evaluated were (i) Windsor, $305,071 ("plus labels"); (ii) Affiliated Graphics, $305,573 ("plus labels"); (iii) Delancy Printing, $336,400 ("plus color separations"). Further, these same bidders were asked to submit alternative proposals for their bids, but these alternatives were not considered.

The investigation revealed that while the IBT followed a competitive bidding process, secret preferential treatment was given to Windsor Graphics in its bid. Since Windsor Graphics lacked established credit, the IBT guaranteed a Boston paper supplier that it would make Windsor's payment if the paper invoice went unpaid for 30 days. The IBT made a similar guarantee to a Boston area printing concern for the printing work. These guarantees were obtained from the IBT during the bidding process, and were not extended to the other two bidders.

The IBT further agreed to advance Windsor Graphics a monthly sum of money equivalent to one months cost of paper for The International Teamster for Windsor to keep on account. In the period May 5, 1989 until November 2, 1989, the IBT advanced the total sum of $1,344,422 to Windsor Graphics in this paper account. The IBT kept large sums on deposit with Windsor Graphics at any given time, ranging from approximately $140,000 to approximately $247,000. The lost interest to the IBT of this interest-free loan was over $18,000 for the period of May, 1989 until August, 1991. The intangible cost of the guarantees, or the actual cost of the imputed interest were not included in the subjective consideration of the three bids. (Report at 7-14).

Based on this evidence, the Independent Administrator found the bidding process "seriously flawed" since no bid specifications were prepared, only three firms were invited to bid, the existing printer of The International Teamster was not considered, sealed bids were not required, and the evaluation of the bids was imprecisely performed. (Report at 19-24). The IBT gave Windsor Graphics a significant competitive advantage by agreeing to guarantee payment to Windsor Graphics' paper supplier and printer, and to advance money to Windsor Graphics to pay its paper supplier. The IBT did not take into account the value of these guarantees, and the lost interest cost of keeping hundreds of thousands of dollars on account with Windsor Graphics.

After considering all of these facts and circumstances, the Independent Administrator found that McCarthy and Zeller engineered the award of The International Teamster printing contract to Windsor Graphics "by secretly conferring advantages and benefits upon Windsor that enabled it to present what, on its face, was ...

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