United States Enters into Agreement with Local 1 of the International Union of Elevator Constructors, Which Will Result in the Appointment of an Independent Examiner and Numerous Reforms
ROSLYNN R. MAUSKOPF, United States Attorney for the Eastern District of New York, MARK J. MERSHON, Assistant Director-in-Charge, Federal Bureau of Investigation in New York, and RALPH GERCHAK, District Director, United States Department of Labor, Office of Labor-Management Standards in New York, announced that Local 1 of the International Union of Elevator Constructors will be placed under the supervision of an independent federal examiner and has agreed to implement critical reforms in its hiring list procedures, disciplinary procedures, and election procedures. In return, if Local 1 complies with all of the terms of the agreement for the next three years, the United States has agreed not to prosecute the union for its part in an extensive no-show jobs scheme that spanned decades and resulted in more than three dozen convictions of Local 1 members and officers who victimized construction sites throughout the greater New York City area.
Local 1 represented both elevator mechanics, who build and maintain elevators in New York City, as well as operators of temporary elevator cars used for the purpose of lifting personnel at construction sites in the New York City area who were covered by Local 1's collective bargaining agreements ("CBAs") with various building contractors. Between approximately 1989 and 2002, the time period charged in various indictments and informations previously filed in this district, Local 1's operators were paid approximately $ 35 per hour for regular time and $ 70 per hour for overtime, defined as night and weekend time. Operators were required to be hired according to a hiring list maintained by union officials.
The No-Show Jobs Scheme
The facts of the no-show jobs scheme are set forth in Exhibit A of the agreement announced today, and were documented in the trial of Local 1 Business Agent Charles Novak, who is currently serving a nine-year prison term for racketeering, unlawful labor payments, and mail fraud following his January 2004 conviction after a trial held before Judge David G. Trager. Novak and other Local 1 officials often delegated their responsibilities at various construction sites to Local 1 members who functioned as unelected, de facto representatives of Local 1. Rather than actually staffing the temporary elevator cars fully as required by contract, certain Local 1 officials and de facto representatives instead doled out hundreds of "no-show" jobs, with union officials and representatives pocketing large portions of the proceeds, totaling many millions of dollars over the life of the scheme. Among the approximately three dozen people convicted for their participation in this scheme are business agents Novak and Robert Shannon, and de facto representatives Matthew Joseph Downey, Anthony DeGennaro, and William Barthold.
When jobs became available at a construction site, a corrupt Local 1 official or representative would supply contractors with the names of the operators to hire for these jobs without regard to the requirements of the hiring list. The corrupt officials and representatives ensured that only operators who allowed them to receive a portion of the operators' wages would be hired. Once hired, these operators would either not work at all, or work a fraction of the time for which they were being paid. As described in the agreement announced today and proven at the Novak trial, a number of the "operators" in whose name no-show hours were paid were not in fact elevator mechanics, and had become members of Local 1 through the corrupt activities of Local 1 representatives and officers. These bogus operators, who did not in fact operate elevator cars, often had other full-time jobs, among them a tax accountant, a New York City fire inspector, and a full-time employee of a major university in Queens, New York. Others, although legitimate members of Local 1, would either work at other construction sites for other contractors at the same time they were claiming hours for no-show jobs, or provide contractor-financed chauffeur services for Local 1's corrupt officers and representatives.
The corrupt officials received a portion of the wages in two different ways. Sometimes, one of them would obtain an operator's paycheck from an employee of the contractor, falsify the operator's signature on the back of the paycheck, cash it, and keep the lion's share of the cash for himself and/or for distribution to other corrupt officials or representatives. Other times, a corrupt official or representative would direct the operator to cash the entire paycheck himself and to kick back to the corrupt official or representative a prearranged portion of the cash. At some construction sites, the corrupt officers and representatives, in order to induce the contractors into paying wages for no-show hours, bribed employees of the contractors in exchange for their approval of false time sheets.
In entering into today's agreement, Local 1 has accepted and acknowledged responsibility for aiding and abetting the scheme outlined above, and thereby admitted its complicity in violations of the Taft-Hartley Act, 29 U.S.C. §§ 186(b)(1) and 186(d)(2), and the mail fraud statute, 18 U.S.C. §§ 1341 and 1346. Should Local 1 violate the agreement, the government would then be able to file charges against Local 1 and seek its conviction for these criminal offenses.
The agreement provides that the United States Attorney will, within 60 days of the agreement, appoint an Independent Examiner, who will review and monitor Local 1's operations, including its hiring list procedures, its disciplinary procedures, and its election procedures. In addition, Local 1 will continue to cooperate fully with the government, and either has or will implement the following reforms:
. A procedure to effectively monitor the assignments and hours worked of elevator operators, to ensure that operators are only paid for hours for which they work or are entitled to vacation or holiday pay.
. A procedure to ensure that the operator hiring list is maintained in a fair and impartial manner, and that elevator operators are only hired from the operator hiring list.
. A procedure to computerize and make available to all members the current and historical operator hiring lists, including job assignments.
. A procedure to ensure that Local 1's elections are conducted in a fair, nondiscriminatory, open and democratic manner, and that no candidate or member be intimidated in any way in connection with an election.
. A ban on any practice or procedure that would allow any Local 1 member or other person who is not an officer or employee of Local 1, or an officially designated shop steward or organizer, to act on behalf of Local 1 or its members in any way connected to Local 1 business.
. Supporting a change in existing CBAs, which currently call for two operators to be paid at the same time - one from Local 1 and one from a local of another union - when elevator cars are designated to carry both personnel and materials. Local 1 has agreed to share jurisdiction over all elevator cars with the other local, in an effort to avoid any car's being double-staffed in the future.
The Independent Examiner will be paid by Local 1, but will report to the United States Attorney's office. At the discretion of the United States Attorney's office, the Independent Examiner may be supervised by the Department of Labor, Office of Labor Management Standards.
"The series of prosecutions that led to today's agreement demonstrate the determination of our office and our law enforcement partners to rid labor unions of corruption and bring to justice union officials who profit illegally by selling out union members they are duty-bound to represent," stated United States Attorney MAUSKOPF. "Today's agreement imposes much-needed reforms that will return Local 1 to the control of the rank-and-file and ensure equity in job placement." Ms. MAUSKOPF thanked the Internal Revenue Service-Criminal Investigation (New York) and the Department of Labor - Employee Benefits Security Administration for their assistance in the investigation.
FBI Assistant Director-in-Charge MERSHON stated, "One of the supposed benefits of membership in Local 1 was the maintenance of a hiring list to ensure that opportunities to work were doled out equitably. The corrupt Local 1 officials and their co-conspirators feathered their own nests by ignoring the hiring list to prop up a scheme of no-show jobs. Local 1 officials cheated the very people they were supposed to be representing. The FBI will continue to work to ensure that labor unions serve the legitimate interests of their rank-and-file members."
Department of Labor District Director GERCHAK stated, "These actions will facilitate the restoration of union democracy and eradicate the corrupt practices that have permeated this organization in the past. We look forward to assisting the United States Attorney and her appointed independent examiner in accomplishing those goals."
The government's case was handled by Assistant United States Attorneys Daniel R. Alonso and Charles S. Kleinberg.
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