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UNITED STATES v. INTERNATIONAL BHD. OF TEAMSTERS

February 9, 1993

UNITED STATES OF AMERICA, Plaintiff,
v.
INTERNATIONAL BROTHERHOOD OF TEAMSTER, CHAUFFEURS, WAREHOUSEMEN AND HELPERS OF AMERICA, AFL-CIO, et al., Defendants. IN RE: APPLICATION CIII OF THE INDEPENDENT ADMINISTRATOR


Edelstein


The opinion of the court was delivered by: DAVID N. EDELSTEIN

EDELSTEIN, District Judge:

 Application CIII presents for this Court's review the decision of the Independent Administrator regarding disciplinary charges brought by the Investigations Officer against Daniel C. Ligurotis ("respondent"), the Secretary-Treasurer of IBT Local Union 705, which is located in Chicago, Illinois. The Independent Administrator found that Mr. Ligurotis brought reproach upon the IBT by obtaining an interest-free loan from Local 705, embezzling and unlawfully converting Local 705 funds, and engaging in a pattern of conduct that allowed corruption and unlawful activity to flourish in the Local. For these violations of the IBT Constitution, the Independent Administrator permanently barred Mr. Ligurotis from the IBT and prohibited him from receiving compensation from any IBT-affiliated entity. In order to offset the funds Mr. Ligurotis unlawfully converted, the Independent Administrator also prohibited IBT-affiliated entities from paying respondent his severance. Furthermore, the Independent Administrator precluded IBT-affiliated entities from making contributions on respondent's behalf to employment benefit plans, although the Independent Administrator did not alienate his vested benefits. Finally, the Independent Administrator prohibited any IBT-affiliated entity from paying Mr. Ligurotis' legal expenses. The Independent Administrator stayed imposition of his penalty pending this Court's decision.

 Mr. Ligurotis argues that the Independent Administrator should have disqualified himself from this matter because of his role as Independent Counsel in connection with the Banca Nazionale del Lavoro ("BNL") matter. Respondent also argues that the decision of the Independent Administrator is not supported by substantial evidence and, as a result, is arbitrary and capricious. This Court finds that respondent's arguments are without merit and that the decision of the Independent Administrator is fully supported by the evidence. Accordingly, for the reasons stated below, the decision of the Independent Administrator is affirmed.

 I. BACKGROUND

 The Investigations Officer charged that Mr. Ligurotis' conduct brought reproach upon the IBT in violation of Article II, Section 2(a) and Article XIX, Sections 6(b)(1), (2), (3), and (5) of the IBT Constitution. *fn1" Article II, Section 2(a) is the IBT membership oath, which provides in relevant part that every IBT member shall "conduct himself or herself in a manner so as not to bring reproach upon the Union." Article XIX, Section 6(b) is a non-exhaustive list of disciplinary charges that may be filed against IBT members. Four such charges are: (1) violating the IBT Constitution, a Local Union Bylaw or other Union rule; (2) violating the IBT membership oath; (3) embezzling or converting union funds or property; and (4) disrupting or interfering with the performance of any of the Union's legal or contractual obligations. See Article XIX, §§ 6(b)(1)-(3), (5).

 A. Mr. Ligurotis' Financial Dealings with Local 705

 Four sets of financial transactions involving Mr. Ligurotis and Local 705 are relevant to this Application. The first involves Mr. Ligurotis' compensation as administrator of Local 705's Pension Fund and its Health and Welfare Fund (the "Funds"). Specifically, the Independent Administrator found that for the period between October 1986 and October 1987, Mr. Ligurotis received $ 120,000 for serving as administrator of the funds. This compensation became an area of focus in an investigation by various Government agencies into administration of the Funds. On March 13, 1987, and again on May 18 and May 26, 1987, the United States Department of Labor ("DOL") interviewed the Funds' attorney, Mr. Sherman Carmell . *fn2" Part of this interview focused on respondent's compensation as administrator of the Funds. On May 27, 1987, DOL questioned Mr. Andrew Schumi, the pension plan's accountant, about respondent's salary as administrator. As a result of this investigation, in October 1988, the Secretary of DOL filed a complaint in the United States District Court for the Northern District of Illinois against respondent and other Funds' trustees seeking restitution of assets transferred to Mr. Ligurotis. *fn3" On October 18, 1988, the Illinois court entered a consent order (the "Agreement") which provided that on or before April 20, 1989, "the [Funds'] trustees shall pay, or cause[] to be paid, the sum of $ 80,000 to the Pension Fund and the sum of 40,000 to the Welfare Fund."

 A second financial transaction involving Mr. Ligurotis occurred in mid-February 1988. The Independent Administrator found that on February 16, 1988, Mr. Ligurotis granted himself a $ 77,000 salary increase for his service as Secretary-Treasurer without Executive Board approval. Mr. Ligurotis made this increase retroactive to October 1, 1987, and it caused his annual salary to rise to $ 225,000. The Independent Administrator noted that the minutes of the February 26, 1988 Board meeting contain no mention of respondent's pay raise. Although the minutes of a Local 705 Executive Board meeting on April 20, 1989 -- over one year later -- assert that the Executive Board did approve the February 1988 pay raise, the Independent Administrator did not credit this evidence. He declined to find that the Executive Board granted contemporaneous approval of the pay raise.

 A third financial transaction involved Mr. Ligurotis' decision, in August 1988, to repay the $ 120,000 to the Funds. The Independent Administrator found that to effectuate this repayment, respondent instructed Mr. Schumi to reduce his gross monthly pay as Secretary-Treasurer by $ 8,750 per month. These salary reductions were to be credited by the Local to the Funds in repayment of the $ 120,000 improper compensation. These reductions continued until December 1988, when without explanation Mr. Ligurotis began to receive his full salary. In December 1988, the reductions amounted to $ 43,750. In May 1989, salary reductions once again commenced. In January 1990, the reductions reached a total of $ 120,000.

 The Independent Administrator concluded that by having Local 705 issue checks to the Funds when respondent's "salary reductions" amounted to only $ 43,750, the Local effectively loaned respondent at least $ 76,250. The Independent Administrator further found that the Executive Board of Local 705 did not authorize this loan at the time it was made, in violation of the Local's Bylaws and Section 503 of the Labor Management Reporting Disclosure Act ("LMRDA"), 29 U.S.C. § 401 et seq., which prohibits loans to union officers of over $ 2,000. 29 U.S.C. § 503. The Independent Administrator also found that respondent engaged in another improper financial transaction: By granting himself a $ 77,000 retroactive salary increase, the Independent Administrator reasoned that Mr. Ligurotis embezzled Local 705 funds in violation of Section 501(c) of the LMRDA. The Independent Administrator also concluded, after considering all surrounding circumstances, that respondent acted with the fraudulent intent necessary to sustain an embezzlement charge.

 B. Pattern of Conduct that Fostered Corruption

 As to Charge Two, the Independent Administrator found that respondent engaged in a pattern of conduct that brought reproach upon the Union. Mr. Ligurotis' conduct, as relevant to this Charge, involves three distinct actions. First, the Independent Administrator found that respondent rewarded criminal activity by hiring as Local 705 employees three individuals, Mr. Richard Bravieri, Mr. Richard Green and Mr. Edward Fickett, although respondent knew that they were convicted criminals and despite the fact that the hiring of Mr. Fickett was in violation of federal labor law. Second, the Independent Administrator concluded that Mr. Ligurotis regularly carried a loaded handgun on Local 705 premises, even though respondent was aware that such conduct transgressed Local 705 policy. Finally, the Independent Administrator noted that Mr. Ligurotis intentionally violated the Consent Decree. As discussed in a 1990 decision, this Court found Mr. Ligurotis in contempt of the Consent Decree due to his becoming a named plaintiff in a lawsuit filed in Chicago that was intended to interfere with the work of the Court-Appointed Officers. See December 12, 1989 Memorandum & Order, 726 F. Supp. 943 (S.D.N.Y. 1989). The United States Court of Appeals for the Second Circuit affirmed this decision in relevant part. See United States v. IBT, 899 F.2d 143 (2d Cir. 1990).

 II. DISCUSSION

 Mr. Ligurotis argues that the Independent Administrator -- Judge Frederick B. Lacey -- should have disqualified himself from hearing this matter due to his now-completed service as Independent Counsel in the BNL matter. In addition, respondent contends that the Independent Administrator's decision is arbitrary and capricious. For the reasons stated below, these arguments are without merit.

 A. Disqualification of the Independent Administrator

 Mr. Ligurotis argues that the disqualification of Judge Lacey is governed by Title 28, United States Code, Section 455, and that he must be disqualified under this Section. Respondent also avers that Judge Lacey should be disqualified under Section 10 of the United States Arbitration Act. It is apparent, however, that there is no basis for disqualifying Judge Lacey.

 1. Standard of Review

 By its terms, Section 455 controls the disqualification of justices, judges and magistrates. It provides that "any justice, judge, or magistrate of the United states shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned." 28 U.S.C. § 455(a). The Second Circuit has expressed skepticism as to whether other individuals operating in an adjudicative capacity, such as special masters, are subject to Section 455(a). In Rios v. Enterprise Ass'n of Steamfitters Local 638, 860 F.2d 1168 (2d Cir. 1988), the court noted that "the terms of the statute do not cover special masters." Id. at 1173. But see In re Joint E. & S. Dist. Asbestos Litig., 737 F. Supp. 735, 739-40 (E. & S.D.N.Y. 1990) (section 455 governs disqualification of special masters). The Rios court also recognized that the valuable expertise brought to a dispute by adjudicators such as special masters derives from a career in the relevant industry -- thus creating a tension with the rigid requirements of Section 455(a). See Rios, 860 F.2d at 1174.

 Judge Lacey is not a judge, justice or magistrate. Thus, Section 455 is not facially applicable to him. In addition, even if Section 455 controls the disqualification of adjudicators such as special masters, Judge Lacey's role is not equivalent to that of a special master. A special master is largely under the direction of the court, see Fed. R. Civ. P. 53(a), while Judge Lacey is charged with an adjudicatory function pursuant to a private agreement between the Government and the IBT. Indeed, the Second Circuit has held that the Independent Administrator is not a state actor because he "acts pursuant to the IBT Constitution -- a private agreement -- and not pursuant to a 'right or privilege created by the State.'" United States v. IBT, 941 F.2d 1292, 1296 (2d Cir.), cert. denied, 112 S. Ct. 1161, 117 L. Ed. 2d 408 (1991). The court added that "the position is under the control of the IBT, and remains a private, not a governmental role." Id.; see also United States v. IBT, 954 F.2d 801, 806 (2d Cir.), cert. denied, 112 S. Ct. 2993, 120 L. Ed. 2d 870 (1992). Accordingly, Section 455 does not control the disqualification of Judge Lacey.

 Respondent contends that if Section 455 does not govern Judge Lacey's disqualification, then the issue of his recusal should be assessed under the United States Arbitration Act (the "Act"), 9 U.S.C. § 1 et seq. Section 10 of this Act provides for the vacatur of an award "where there was evident partiality or corruption in the arbitrators, or either of them." 9 U.S.C. § 10(b). Yet another alternative standard recognizes that the Independent Administrator is an analog to the GEB and the IBT General President in the disciplinary sphere. In this vein, the Independent Administrator enjoys the same disciplinary powers as the GEB and the IBT General President. See Consent Decree, § F.12(A). The standards governing disqualification of these entities could also apply to the disqualification of the Independent Administrator: "In no event shall any involved officer serve on a hearing panel." IBT Const., Art. XIX, § 1(a). Thus, recusal of the Independent Administrator would be appropriate under such a standard only if he is "involved" in a dispute. As reasoned below, however, disqualification of Judge Lacey is not appropriate in this case under any of the above standards.

 2. Analysis Under Section 455(a)

 a. Waiver

 Even if Section 455(a) governs the disqualification of Judge Lacey, Mr. Ligurotis has forfeited this claim by failing to raise it before the Independent Administrator upon learning of the facts allegedly supporting recusal. "While § 455 does not explicitly contain a timeliness requirement for the filing of a recusal claim, timeliness has been read into this section." Polizzi v. United States, 926 F.2d 1311, 1321 (2d Cir. 1991) (citing In re IBM Corp., 618 F.2d 923, 932 (2d Cir. 1980)); Apple v. Jewish Hosp. & Medical Center, 829 F.2d 326, 333 (2d Cir. 1987). Cf. Hardy v. United States, 878 F.2d 94, 97 (2d Cir. 1989) (Section 455(a) claim "may be raised on collateral attack only if asserted promptly upon learning the facts alleged to warrant recusal and may not be raised collaterally if the opportunity to do so existed at a time when direct review was available"). Whether respondent raised the recusal issue in a timely fashion "presents a serious threshold question." Apple, 829 F.2d at 333.

 In addressing this point, courts must consider the extent of respondent's participation in trial or pretrial proceedings, whether granting the motion would result in wasting judicial resources, whether the motion was made after entry of judgment and whether the movant can demonstrate good cause for the delay. See id. at 334. The Second Circuit added that two concerns prompted enactment of this rule: "First, judicial resources should not be wasted; and, second, a movant may not hold back and wait, hedging its bets against the eventual outcome." Id.; see United States v. Yonkers Bd. of Educ., 946 F.2d 180, 183 (2d Cir. 1991).

 In Apple, the Second Circuit rejected a recusal motion as untimely because it had been made two months after learning of the facts giving rise to a recusal basis. See Apple, 829 F.2d at 334. The court denied the motion based solely on the two-month delay, noting that such a time lag outweighed the facts that granting the motion would not waste judicial resources and that the movant did not wait until the outcome of the litigation before bringing the motion. See id. at 334; see also United States v. Durrani, 835 F.2d 410, 427 (2d Cir. 1987) (rejecting motion to disqualify as untimely given that movant filed the motion four months after the events supposedly giving rise to bias, and because the filing of the motion on the eve of trial suggested an intent to delay the proceedings). Similarly, in United States v. Yonkers Board of Education, 946 F.2d 180 (2d Cir. 1991), the court found a recusal motion untimely because the movant had at least two prior opportunities to make the motion and the movant failed to demonstrate good cause for seeking recusal at a later date. See id. at 183.

 Mr. Ligurotis' recusal request is untimely. He has premised his argument for recusal on Judge Lacey's service as Independent Counsel. Judge Lacey was appointed Independent Counsel on October 16, 1992, and, as the Government notes, news of this appointment appeared on the front page of virtually every major newspaper in the country. See Letter from Steven C. Bennett, Assistant United States Attorney, to Judge David N. Edelstein, at 2 n.2 (Dec. 29, 1992) (on file in the Southern District of New York). Mr. Ligurotis acknowledges the press coverage of this appointment in his memorandum of law, which contains citations to New York Times and Associated Press stories that appeared on October 17 and October 20. Mr. Ligurotis makes no attempt to explain his failure to raise the recusal issue in October 1992. Respondent's assertion that he only recently learned of this Court's November 2, 1992 Opinion & Order -- which addressed whether Judge Lacey could serve both as Independent Counsel and as a member of the Independent Review Board of the International Brotherhood of Teamsters (the "IRB") -- is a non-sequitur. This Court's Opinion did not give rise to a basis for recusal; instead, respondent's argument is based on Judge Lacey's October 16, 1992 appointment, a fact about which Mr. Ligurotis had contemporaneous knowledge. Mr. Ligurotis' failure to raise this issue for another two months renders his argument untimely. Such a finding is strengthened by the fact ...


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