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THE INTERNATIONAL BROTHERHOOD OF TEAMSTERS v. CAREY

January 29, 2004.

THE INTERNATIONAL BROTHERHOOD OF TEAMSTERS, Plaintiff, -against- RON CAREY, WILLIAM HAMILTON, JERE NASH, THE NOVEMBER GROUP, INC., MARTIN DAVIS, THE SHARE GROUP, INC., MICHAEL ANSARA, BARBARA ARNOLD. CITIZEN ACTION MANAGEMENT FUND. IRA ARLOOK, CHARLES BLITZ, ROCHELLE DAVIS, COHEN, WEISS AND SIMON, and NATHANIEL CHARNY, Defendants


The opinion of the court was delivered by: LAURA TAYLOR SWAIN, District Judge Page 3

OPINION AND ORDER

Plaintiff, the International Brotherhood of Teamsters ("IBT"), brings this action pursuant to the Racketeering Influenced and Corrupt Organizations Act ("RICO"), alleging that Defendants defrauded the IBT of funds which were used improperly to promote Defendant Ron Carey's ("Carey") 1996 candidacy for re-election as the IBT's General President. Following the issuance of the Court's October 1, 2001. Opinion and Order granting in part, and denying in part a motion to dismiss the complaint in this case. Plaintiff filed an amended complaint (the "Amended Complaint"). Defendants Ron Carey, William Hamilton, Michael Ansara, Barbara Arnold, Ira Arlook, Charles Blitz, Rochelle Davis, Nathaniel Charny, Martin Davis. The Share Group, Inc., Cohen & Weiss have moved pursuant to Federal Rules of Civil Procedure 12(b)(6) to dismiss the Amended Complaint. Subsequent to the service of Defendants' motion to dismiss, the case was dismissed consensually as against Defendants Martin Davis, Barbara Arnold, Michael Ansara, the Share Group, Cohen Weiss and Simon ("Cohen Weiss") and Nathaniel Charny.*fn1 The Court has jurisdiction of this action pursuant to 28 U.S.C. § 1331 and 1367.

  For the reasons set forth below, the motions of Defendants Carey, Hamilton, Ira Arlook, Rochelle Davis, Charles Blitz are granted with respect to Plaintiff's federal claims; Plaintiff's state common law claims will be dismissed without prejudice. Page 4

  BACKGROUND*fn2

  In 1988, the Government filed a civil RICO action against the IBT and its leadership. In connection with the 1988 lawsuit against the IBT the Government sought, among other relief, to establish Government supervision of the election of IBT officials. Amended Complaint, ¶ 27. In March 1989, the Government and the IBT entered into a consent decree settling the Government's claims against IBT. The consent decree provided, among other things, for direct, secret ballot, elections of IBT officers and further provided that the court would appoint an election officer (the "Election Officer") to supervise the election in 1991 for IBT national officers and, if the Government so requested, the 1996 election. Id. ¶ 28. The consent decree also authorized court-appointed officers to investigate and sanction IBT members and officers for violations of the IBT constitution and federal law. Id. Beginning in 1992, pursuant to the terms of the consent decree, an Independent Review Board ("IRB") assumed responsibility for determining whether members or officers had violated the IBT Constitution and federal law. Id.

  The Government exercised its right to have the 1996 IBT election supervised pursuant to the consent decree. Id. ¶ 30. The court gave the Election Officer authority to supervise the 1996 election and approved rules governing the conduct of the 1996 election. The election rules prohibited the use of IBT funds to promote the candidacy of any individual and barred employers from contributing to the election campaign or soliciting contributions for any candidate date. Id. ¶ 31. Page 5

  Defendant Carey and James P. Hoffa campaigned in the 1996 election for IBT General President. Carey was declared the winner in a close and hotly contested election. Id. ¶ 32.

  On August 21, 1997, the Election Officer invalidated the 1996 election on several grounds, one of which was that the Carey re-election campaign had engaged in improper fund-raising that involved the use of IBT funds to promote Carey's candidacy. The Election Officer ordered a rerun election. Id. ¶ 33. In July 1998, the IRB permanently barred Carey from IBT membership after finding that Carey had violated his fiduciary duties and knowingly derived personal benefit from improper election campaign contributions in connection with the 1996 election. Id. ¶ 37. The IRB also permanently barred Defendant Hamilton from holding any office or having any employment relationship with the IBT upon finding that Hamilton had embezzled IBT funds and had brought reproach on the IBT. Id. ¶ 38.

  In late 1998, a rerun election was held and Hoffa was elected IBT General President. IBT expended approximately $2.2 million in costs associated with the supervision of the 1998 rerun election. IBT also incurred costs for attorneys' fees in connection with the Government's investigation into the 1996 election. Id. ¶ 39.

  Defendants Hamilton, Nash, Martin Davis, Ansara, Blitz and Charny were thereafter prosecuted on federal criminal charges. Defendant Martin Davis pleaded guilty to conspiracy and making false statements to the Election Officer. Defendant Ansara pleaded guilty to conspiring to embezzle union funds, to commit mail fraud, and to making false statements to the Election Officer, and Defendant Blitz pleaded guilty to making false statements to the Election Officer. Id. ¶ 41. Defendant Hamilton was convicted after trial of conspiracy, embezzlement, Page 6 mail and wire fraud, making false statements. Id. ¶ 43. Defendants Arlook and Rochelle Davis entered into non-prosecution agreements with the Government in which they agreed to cooperate in the Government's investigation of the conduct that is the subject matter of the Amended Complaint. Id. ¶ 44.

  In connection with the 1996 election, Defendants devised and executed certain schemes to defraud the IBT and embezzle funds from it. Id. ¶ 47. Defendants needed to raise funds for Defendant Carey because the race with Hoffa was very close and the Hoffa election campaign was raising more funds than the Carey election campaign. Defendants were aware that, if Defendant Carey lost the election, Defendants would lose their positions and their relationships with the IBT. Id. ¶ 48.

  In or about July 1996, Defendant Nash, Martin Davis and Ansara devised a scheme to defraud the IBT by causing the IBT to contribute funds to designated organizations in exchange for contributions by wealthy individuals to the Carey election campaign. Id. ¶ 49. In connection with this scheme, Cohen Weiss and Charny established a fund-raising committee. Teamsters for a Corruption Free Union ("TCFU"), to accept donations to the Carey campaign. Id.

  ¶ 51. TCFU established a separate bank account for donations to Carey's campaign. Id. Defendants Martin Davis, Ansara and Blitz agreed to solicit donors for Carey's re-election campaign. Id. ¶ 52. The Defendants induced donors to make contributions by promising that the IBT would make contributions, in amounts larger than the amounts the donors contributed to the Carey's campaign to certain political organizations or advocacy groups designated by the donors. Id. ¶ 53.

  In or about October 1996, Arsara and Blitz met numerous times in Santa Monica. Page 7 California. They and Martin Davis agreed that Charles Blitz would send the donors' checks to Michael Ansara, who would hold the checks pending confirmation that a reciprocal IBT contribution had been made. Id. ¶ 55. Michael Ansara agreed that, once the IBT approved the reciprocal contribution, he would forward the donors' checks to the TCFU in New York. Id. ¶ 56. At the direction of Martin Davis, Defendant Nash contacted Defendant Hamilton, who agreed to seek Carey's approval of the scheme. Id. ¶¶ 60-61. The IBT could not make the contributions without Carey's approval. Id. ¶ 62.

  In or about October 1996, Blitz asked Defendant Rochelle Davis, the Financial and Administrative Director of Citizen Action, a lobbying organization concerned with federal, state and local issues, to request a $225.000 contribution from the IBT. Id. ¶ 63. On or about October 14, 1996, Arlook and Rochelle Davis directed a Citizen Action employee to send a written request for $225.000 to Hamilton with a copy to Michael Ansara. On or about October 23, 1996, Arlook and Rochelle Davis, at Blitz's direction, sent a request to Hamilton seeking a second contribution in the amount of $250.000. The total amount requested by Citizen Action was $475.000. Id. ¶¶ 64-65.

  Martin Davis thereafter asked Nash to ask Hamilton to recommend to Carey that the IBT make the contributions to Citizen Action. Nash met with Carey's executive secretary in mid-October 1996 in order to explain the scheme. Then, on or about October 16, 1996, Nash spoke with Carey by telephone and explained that the IBT contributions to Citizen Action would benefit Carey's re-election campaign. Carey told Nash that he would approve the contribution to Citizen Action. Id. ¶¶ 66-69. On or about October 23, 1996, Hamilton sent Carey a memo recommending approval of the Citizen Action contributions. On or about October 24, 1996. Page 8 Carey approved the check request for Citizen Action. Id. ¶¶ 70-71. In or about October 1996, the IBT contributed $475,000 in IBT General Treasury funds to Citizen Action. Id. ¶ 72.

  In or about October 1996, Nash asked Hamilton to recommend an IBT contribution to Project Vote, an organization whose goal was to mobilize low income and minority voters. On or about October 17, 1996, Hamilton sent a memo to Carey seeking approval of a $75,000 contribution to Project Vote. Id. ¶ 74. On or about October 17, 1996, Carey's executive secretary telephoned Carey and Carey approved the request. Shortly thereafter, Hamilton caused the IBT to donate $75,000 to Project Vote. Id. ¶¶ 75-76. On or about October 23, 1996, Hamilton sent a second memo to Carey asking for another contribution of $100,000 for Project Vote. Carey's ...


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