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UNITED STATES v. INTERNATIONAL BHD. OF TEAMSTERS

September 15, 1998

UNITED STATES OF AMERICA, Plaintiffs, against INTERNATIONAL BROTHERHOOD OF TEAMSTERS, et al., Defendants.


The opinion of the court was delivered by: EDELEISTEIN

OPINION & ORDER

 EDELSTEIN, District Judge :

 BACKGROUND

 This opinion emanates from the voluntary settlement of an action commenced by the United States of America against, inter alia, the International Brotherhood of Teamsters ("IBT" or "the union") and the IBT's General Executive Board ("GEB"). The settlement is embodied in the voluntary consent order entered March 14, 1989 ("Consent Decree"). The goals of the Consent Decree are to rid the IBT of the hideous influence of organized crime and establish a culture of democracy within the union. The long history of this case has been set forth in this Court's numerous prior opinions. Accordingly, only those facts necessary for resolving the instant application shall be set forth.

 After winning the first IBT general election in which members voted for International officers, Ronald Carey ("Carey") took office in February 1992. In 1996, he sought re-election as General President at the head of a slate of candidates for other International Offices.

 The 1996 IBT Election took place in the final months of 1996. Following Election Officer Barbara Zack Quindel's announcements of the winning candidates, post-election protests were filed. Election Officer Quindel conducted an investigation of the post-election protests and uncovered serious violations of the 1996 Election Rules. On August 21, 1997 she issued her decision addressing certain post-election protests. See In re: Jeraldine Cheatem, et al., Post-27-EOH (BZQ) (Aug. 21, 1997).

 Election Officer Quindel concluded that "the Carey Campaign and each member of the Carey slate violated Article XII, Section 1(b) of the Rules by receiving the use and benefit of [ ] prohibited contributions." Id. at 98. Based on these findings, she determined that these impermissible campaign contributions may have affected the outcome of the races of every member of the Carey slate nationwide. Thus, she issued her decision refusing to certify the results of the 1996 Election and ordering a new election for all positions except for those the Hoffa slate won, and that of the President of Teamsters Canada, an uncontested race. Id. at 114-15.

 Additional evidence surfaced after Election Officer Quindel's decision of August 21, 1997. On September 18, 1997, Jere Nash ("Nash"), Carey's campaign manager; Martin Davis ("Davis"); and Michael Ansara ("Ansara"), each pled guilty in the United States District Court for the Southern District of New York to felonies arising out of their conduct on behalf of the Carey campaign. *fn1" As part of their respective plea agreements, Nash, Davis, and Ansara each agreed to cooperate fully with the United States Attorney's Office.

 Based on this new information, Election Officer Quindel reopened her investigation into whether Carey had knowledge of, or involvement in, the illegal acts these three individuals perpetrated. However, during the course of her inquiry, Election Officer Quindel discovered information that led her to recuse herself from any further investigation. See Letter from Barbara Zack Quindel, Election Officer for IBT, to Honorable David N. Edelstein (Sept. 23, 1997). Thus, by Order dated September 29, 1997, this Court designated Honorable Kenneth Conboy as Election Officer "for the sole purpose of investigating and deciding the issue of disqualification of Ronald Carey from the rerun election." See September 29, 1997 Order at 2.

 After a comprehensive investigation, Election Officer Conboy found that Carey had knowledge of and engaged in extensive violations of the Rules governing the 1996 election. See In re: Jeraldine Cheatem, et al., Post-27-EOH (KC) (Nov. 17, 1997). Based on these findings, Election Officer Conboy disqualified Carey from running as a candidate in the rerun election. Thereafter, Carey took an unpaid leave of absence from the position of General President of the IBT on November 25, 1997. On December 2, 1997 Carey appealed to this Court Election Officer Conboy's decision disqualifying him from running as a candidate in the rerun election. This Court affirmed the decision of Election Officer Conboy on December 30, 1997. See United States v. IBT ("Carey Disqualification"), 988 F. Supp. 759 (S.D.N.Y. 1997). Carey's appeal from this Court's December 30, 1997 decision is currently before the Court of Appeals for the Second Circuit.

 THE IRB DECISION

 In addition to its provisions pertaining to the conduct of free and fair elections, the Consent Decree also established an Independent Review Board ("IRB") to oversee the eradication of corruption in the IBT. See Consent Decree, P G. From October 1992 through June 30, 1998, the IRB has recommended charges against 229 individuals and has recommended to the IBT that trusteeships be imposed on twenty-one local unions and on one joint council. See Statement of the IRB before The Subcommittee on Oversight and Investigations Committee on Education and the Workforce U.S. House of Representatives, July 30, 1998 at 2.

 William Hamilton ("Hamilton"), until his resignation on July 29, 1997, was the Director of the IBT's Government Affairs Department and an IBT member. As head of the Government Affairs Department, Hamilton was responsible for recommending what contributions the IBT should make in connection with legislative and political goals. On October 22, 1997, the IRB issued an Investigative Report to the GEB recommending that Hamilton, be charged with bringing:

 
reproach upon the IBT by causing a thing of value to be given to another in return for your performance of union duties and you embezzled IBT funds by arranging for IBT donations to certain advocacy groups as part of a scheme in which, in return for the IBT's donations, individuals, directly or indirectly, would donate money to benefit the Ron Carey ("Carey") campaign thereby violating Article II, Section 2(a) and Article XIX, Section 7(b)(1), (2) and (3) of the IBT Constitution.

 Decision of IRB In re: Ronald Carey and William Hamilton, July 27, 1998 ("IRB Dec.") at 1. The GEB filed the charge against Hamilton and returned the matter to the IRB for hearing. Id.

 In addition, on November 25, 1997, the IRB issued an Investigative Report recommending that Carey be charged as follows:

 
in breach of your fiduciary obligations, you authorized IBT contributions in October, 1996 to Citizen Action, Project Vote and the National Council of Senior Citizens, totaling $ 735,000, knowing the contributions would result in a personal benefit to you in money to pay expenses for your re-election campaign. You failed both to disclose that benefit and to give it to the IBT, as your fiduciary duties required. You also failed to exercise your fiduciary obligation to inquire into the circumstances surrounding your co-fiduciary's recommendations of those transactions.

 Id. The GEB filed the charge against Carey and returned the matter to the IRB for hearing. Id.

 As previously mentioned, during the 1996 IBT election then-incumbent IBT General President Carey's campaign engaged in a scheme by which IBT funds were manipulated in order to generate contributions to the Carey campaign. In October 1996, the IBT gave $ 735,000 in political contributions from the IBT treasury to three organizations: (1) $ 475,000 to Citizen Action, (2) $ 175,000 to Project Vote, and (3) $ 85,000 to the National Council for Senior Citizens ("NCSC"). These contributions were part of a leveraged contribution scheme whereby individuals would contribute to the Carey campaign in return for IBT contributions to these political advocacy organizations. As a result of this scheme, these political advocacy organizations generated $ 185,000 for the Carey campaign. *fn2" These monies were used to fund the massive, last-minute mailing to IBT members designed to turn out the pro-Carey vote in the election. That mailing and the source of the funds were the basis for the Election Officer's refusal to certify the results of the 1996 election and her call for a rerun election.

 On January 20-22 and March 11, 1998, a consolidated hearing regarding the charges against Hamilton and Carey was held before the IRB in Washington, D.C. After hearing days of testimony, reviewing scores of exhibits, considering numerous written submissions, and reviewing post-hearing memoranda, the IRB issued its decision on July 27, 1998, finding that Hamilton had brought reproach upon the IBT and embezzled IBT funds when he knowingly participated in an illegal fund-raising scheme, and found that Carey breached his fiduciary duty and brought reproach upon the IBT by failing to exercise his duty to inquire before approving sizable political contributions that benefitted his campaign. See IRB Dec. at 33. The IRB expressly found that Carey both knew of and approved the contributions at issue. Id. at 21 ("We can only conclude that at the times in question Carey knew of the proposed contributions and approved them, and we so find."). The IRB concluded that "[a] fair inference to be drawn from all the facts is that Carey closed his eyes because he knew or suspected that those contributions were to generate a personal benefit for him, i.e., benefits to his Campaign." Id. at 33.

 Accordingly, the IRB imposed the following penalties:

 
Hamilton is permanently barred from membership, permanently barred from holding any office or employment relationship with the IBT or its affiliates or otherwise drawing any salary ...

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