("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
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
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
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 the lowest of three bids, but was in actuality
anything but that." (Report at 34).
As a result of this investigation, the Independent
Administrator acted appropriately by exercising his authority
pursuant to ¶ F.12.(B)(i) of the Consent Decree to veto IBT
expenditures to Windsor Graphics. He may do so "whenever the
Administrator reasonably believes" that such expenditures
"constitute[ ] or further[ ] an act of racketeering activity"
as defined in 18 U.S.C. § 1961(1). In this instance, the
Independent Administrator vetoed the IBT's further expenditure
of additional funds to pay Windsor to print The International
Teamster, since he found that the improprieties in the bidding
process amounted to the furtherance of the act of racketeering
of aiding and abetting the extortion of the IBT membership's
right to union democracy and self governance under the LMRDA.
In addition, the Independent Administrator found that Zeller's
"deliberate effort to conceal the truth" in his deposition
testimony about this matter furthered this extortion.
II. Standard of Review
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 Procedures Act." Consent Decree
at 25. 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 order to exercise his veto pursuant to ¶ F.12.(B) of the
Consent Decree, the Independent Administrator must "reasonably
believe" that the action would further an act of racketeering
or contribute to the association of the IBT with organized
crime. April 18, 1991 Opinion, supra, 761 F. Supp. 315 (S.D.N Y
1991). The decision by the Independent Administrator to
exercise his veto is given the same deference that this Court
and the Court of Appeals must give determinations of the
The IBT appeals the Independent Administrator's finding that
McCarthy and Zeller's actions aided and abetted the extortion
of the membership's LMRDA rights. Further, Zeller moves this
Court to intervene.
Zeller moves this Court to intervene in this matter pursuant
to Fed.R.Civ.Pro. 24. Essentially, Zeller moves to intervene in
order to rebut factual findings made regarding Zeller in the
Report of the Independent Administrator which damage his
reputation. Zeller's concern neither implicates any federal
statute, see Fed.R.Civ.Pro. 24(a)(1), nor has he demonstrated
that he has "an interest relating to the property or
transaction which is the subject of [this] action."
Fed.R.Civ.Pro. 24(a)(2). The Independent Administrator's
exercise of his veto power under the Consent Decree is a matter
solely within the purview of the IBT. See April 18, 1991
Opinion & Order, 761 F. Supp. 315 (S.D.N.Y. 1991).
Accordingly, this motion to intervene is denied.
B. The IBT's Challenges
The IBT objects to the finding that McCarthy and Zeller
breached their fiduciary duties, thereby aiding and abetting
the extortion of the members' LMRDA rights. The IBT asserts (i)
that as General President, McCarthy is under no IBT
constitutional obligation to award the printing contract by
competitive bidding, and (ii) McCarthy's award of the contract
to Windsor Graphics saved the IBT a "substantial" amount over
the previous firm that printed The International Teamster.
(Report at 35). Thus, the IBT contends that the Independent
Administrator's conclusions are unreasonable: since McCarthy
saved the IBT a "substantial" amount of money, he did not
breach his fiduciary duty to the membership. Further, the IBT
argues that at the least, such savings could hardly amount to
aiding and abetting the extortion of the members' LMRDA rights.
The Government addresses all of IBT's objections to the
Report of the Independent Administrator and contends that they
are without merit and should be rejected. This Court agrees.
The IBT rank and file's rights to democracy and
self-governance under the LMRDA, 29 U.S.C. § 411(a), are
extortable property under the Hobbs Act, 18 U.S.C. § 1951, and
the extortion of those rights may constitute an act of
racketeering under the RICO statute, 18 U.S.C. § 1961(1). April
18, 1991 Opinion, supra, 761 F. Supp. at 317; March 6, 1989
Opinion & Order. 708 F. Supp. 1388, 1399 (S.D.N.Y. 1989); see
United States v. Local 560, 780 F.2d 267, 281-82 (3d Cir.
1985). The aiding and abetting of the extortion of the members'
rights under the LMRDA can constitute an act of racketeering.
April 18, 1991 Opinion, supra, 761 F. Supp. at 317; March 6,
1989 Opinion, supra, 708 F. Supp. at 1399.
A decision by the Independent Administrator to exercise his
veto power because of an action of the IBT that furthers the
loss of the members' LMRDA rights must be considered in light
of the fact that the membership's LMRDA rights that have been
taken away through decades of institutionalized corruption. The
explicit purpose of the Consent Decree was to eliminate corrupt
IBT practices. To that end, the Consent Decree contains express
admissions of allegations of wrongdoing and corruption in the
IBT. Consent Decree at 2.
The facts fully support the Independent Administrator's
finding that the members' LMRDA rights were extorted by
awarding the printing contract to Windsor Graphics. The IBT
General President was expending funds to Windsor Graphics by
printing The International Teamster with his son-in-law's
printing firm, a firm without its own equipment, credit,
contacts or track record of competence and efficiency as a
concern which was awarded the contract after a rigged scheme.
Payments continued monthly after the signing and implementation
of the Consent Decree that was intended to end such blatant
corruption. The IBT General President had engineered an
obviously self-dealing scheme. The Independent Administrator
noted that such nepotistic practices were commonplace in the
IBT, stating "[r]regrettably, pervasive nepotism is to be found
at every level of the IBT and its affiliates." (Report at 16).
It was in this unfortunate context of pervasive corruption that
the Independent Administrator found that this obvious ripoff of
IBT funds only furthered the longstanding denial of the
membership's LMRDA rights through extortionate acts of their
leadership. (Report at 34).
The actions of McCarthy and Zeller aided and abetted this
extortion of the members' LMRDA rights. The Independent
Administrator found that McCarthy and Zeller aided and abetted
this extortion of the membership's rights by violating their
fiduciary duty to use the IBT's money for the sole benefit of
the membership. 29 U.S.C. § 501(a). This fiduciary duty is
heightened for a union official, especially when the union
official is the General President or Communications Director of
the nation's largest labor union. See April 18, 1991 Opinion,
supra, 761 F. Supp. at 320. For the IBT to argue that the
General President should be free to award a lucrative contract
to his son-in-law by means of a rigged bidding process because
there is no specific IBT constitutional provision requiring
that he act otherwise is absurd.
The IBT argues that McCarthy's awarding of The International
Teamster printing contract to his son-in-law's firm saved the
IBT a significant amount over the prior printing contract and
was thus not violative of his fiduciary duty to the membership.
This is sheer sophistry. The IBT argument that because prior
General Presidents had awarded the printing contracts in the
past in even more corrupt ways does not sanitize McCarthy's
Whether McCarthy and Zeller breached their fiduciary duties
to the membership is to be weighed by whether the IBT could
have saved money by awarding the printing contract to a firm
with established capabilities. To ask the question is to answer
In consequence, the Independent Administrator found that the
behavior of McCarthy and Zeller, in light of all the relevant
circumstances of their conduct, aided and abetted the extortion
of the members LMRDA rights. Their actions were not in the best
interests of the membership or the public. The record made by
the Independent Administrator is sufficient to "reasonably
believe" that the awarding of the printing contract to Windsor
Graphics furthered an act of racketeering. The IBT has not
demonstrated that conclusion was arbitrary or capricious.
Accordingly, the finding of the Independent Administrator is
For the reasons discussed, the conclusion of the Independent
Administrator that he reasonably believed that the awarding of
the printing contract for The International Teamster to Windsor
Graphics, Inc. furthered an act of racketeering is affirmed.
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