Chao v. Local 1357 Intern. Broth. of Elec. Workers

• Decision Date: 22 October 2002
• Docket Number: Civ. No. 01-00367 SOM/BMK.
• Citation: 232 F.Supp.2d 1119
• Court: U.S. District Court — District of Hawaii
• Parties: Elaine L. CHAO, Secretary of Labor, United States Department of Labor, Plaintiff, v. LOCAL 1357, INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, AFL-CIO, Defendant.

232 F.Supp.2d 1119

Elaine L. CHAO, Secretary of Labor, United States Department of Labor, Plaintiff, v. LOCAL 1357, INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, AFL-CIO, Defendant.

Civ. No. 01-00367 SOM/BMK.

United States District Court, D. Hawai`i.

October 22, 2002.

Theodore G. Meeker, Asst. U.S. Atty. (Second Chair), Honolulu, HI, Barbara A. Matthews (Lead Counsel), U.S. Dept. of Labor, Office of Regional Sol., San Francisco, CA, for Plaintiff.

Rebecca L. Covert, Takahashi Masui & Vasconcellos, Honolulu, HI, for Defendant.

FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER

MOLLWAY, District Judge.

I. INTRODUCTION.

Plaintiff Secretary of Labor (the "Secretary") has filed this suit under Title IV of the Labor-Management Reporting and Disclosure Act of 1959, 29 U.S.C. § § 481-83 (the "LMRDA"). The Secretary claims that Local 1357, International Brotherhood of Electrical Workers, AFL-CIO ("Local 1357") violated Title IV of the LMRDA by disqualifying George Waialeale ("Waialeale"), a member in good standing, from running for the position of Local 1357's Business Manager-Financial Secretary in its February 2001 election. The election judge removed Waialeale's name from the ballot after learning in December 2000 that the International Brotherhood of Electrical Workers (the "IBEW") had deemed Waialeale ineligible to run for office.

In 1999, the IBEW had found Waialeale, who had been Business Manager-Financial Secretary of Local 1357 from 1989 to 1998, guilty of spending $80,499.92 without proper documentation and approval during his term as Business Manager-Financial Secretary, in violation of the IBEW Constitution, Local 1357 Bylaws, and Local 1357 rules and policies. The IBEW barred Waialeale from holding office for five years and ordered him to make restitution of $80,499.92 to Local 1357 or face expulsion from the IBEW.

The Secretary claims that the IBEW's discipline of Waialeale violated Title I of the LMRDA because Waialeale had not been served with specific written charges and, consequently, had not had a reasonable time to prepare his defense and had not had a full and fair hearing. 29 U.S.C. § 411(a)(5). Arguing that Local 1357 violated Title IV of the LMRDA by disqualifying Waialeale as a candidate in the February 2001 election, the Secretary asks the court to order Local 1357 to hold a new election under the Secretary's supervision pursuant to Title IV of the LMRDA.

The court held a four-day bench trial from October 8, 2002, to October 11, 2002. Based on the evidence presented at the trial, the court finds that the Secretary has not shown that Local 1357 violated Title IV of the LMRDA by disqualifying Waialeale in the February 2001 election.

II. FINDINGS OF FACT.

Whenever, in the following discussion, this court has mistakenly designated as conclusions of law what are really findings of fact, and vice versa, the court's statements shall have the effect they would have had if properly designated.

This bench trial was conducted in accordance with this court's trial procedures for civil nonjury trials, which are reproduced, in substantially the same form followed here, in Appendix A to this court's decision in Kuntz v. Sea Eagle Diving Adventures Corp., 199 F.R.D. 665 (D.Haw.2001). Direct testimony was presented primarily in writing, with witnesses then subject to live cross-examination and redirect examination unless waived. Three witnesses (Harold Dias, Jr., Timothy Dixon, and Michael Mowrey) supplemented their written direct testimony with oral direct testimony. The Secretary presented fifteen witnesses (Carin Lim, Pearl Moenahele, Gerald Miura, Henry Okazaki, Maile Harris, Roy Amano, Bernadette Tomas, Koji Minami, Lorraine Pa, Kenneth Matsumiya, George Stender, Jr., Harold Dias, Jr., Karenann Wedge-Lewis, Timothy Dixon, and Michael Mowrey). Local 1357 presented five witnesses (Timothy Dixon, Harold Dias, Jr., Michael Mowrey, Jeremiah Genovia, and William Eads).

For ease of reference by the parties and the court, the following findings are presented in numbered paragraphs.

1. Local 1357 is a labor organization engaged in an industry affecting commerce within the meaning of the LMRDA, 29 U.S.C. § 402(i). Defendant Local 1357's principal office is located at 2305 South Beretania Street, Honolulu, Hawaii 96826. Dias Decl. ¶ 4.

2. Waialeale held the position of Business Manager-Financial Secretary of Local 1357 from March 1989 through February 1998. The Financial Secretary keeps the books and records of Local 1357. The Business Manager is the principal officer of Local 1357 and is responsible for "results in organizing his jurisdiction, for establishing friendly relations with employers, and for protecting the jurisdiction of the IBEW." IBEW Constitution Art. 16 Sec. 2, Art. 17 Sec. 8 (Ex. 1). These two positions may be combined, and the Business Manager-Financial Secretary is the only full-time officer of Local 1357. In an election in February 1998, Waialeale was defeated by Harold Dias, Jr. ("Dias"). Dias assumed the office of Business Manager-Financial Secretary the next month. Dias Decl. ¶¶ 7-9.

3. Koji Minami ("Minami") was the President of Local 1357 from March 1992 through February 1998. Minami ran for re-election in February 1998 and was defeated by George Stender, Jr., who took office in March 1998. Minami Decl. ¶ 3; Dias Decl. ¶ 15; Stender Decl. ¶ 7. The President, like Local 1357's other officers (other than the Business Manager-Financial Secretary), receives only nominal compensation for performing official duties.

4. Shortly after Dias became Business Manager-Financial Secretary, he asked Minami to examine Local 1357's finances. Minami spent approximately four days doing so. Minami Decl. ¶¶ 17, 19; Dias Decl. ¶¶ 11-12.

5. Minami testified that new business managers routinely conduct audits of the financial records of outgoing business managers. Trial Test. of Minami (10/9/02).

The Miura Report

6. As part of his investigation into Local 1357's finances, Dias also hired Gerald Miura ("Miura"), a Certified Public Accountant, to review Local 1357's finances. Miura Decl. ¶ 8. Dias first asked Miura to perform a "cash audit," in which Miura reviewed Local 1357's bank accounts and outstanding checks to confirm the account balances and to reconcile the accounts with the financial statements. Miura concluded that the bank accounts "appeared to be correct" and that there were no financial irregularities. Miura Decl. ¶¶ 8-11.

7. Dias then asked Miura to examine some of Local 1357's expenditures. On or about June 22, 1998, Miura submitted his report on that subject (the "Miura report") to Dias. Miura Decl. ¶¶ 12, 15; Miura Report (Ex. 8).

8. The Miura report reviewed financial transactions that had occurred from October 1, 1994, through March 15, 1998. The Miura report was an "Agreed Upon Procedures Report," which is a term used by the American Institute of Certified Public Accountants ("AICPA") to describe the undertaking of accounting services based on agreed-upon procedures between the client and the accountant. Miura Decl. ¶¶ 14, 17; Miura Report (Ex. 8).

9. In preparing the Miura report, Miura reviewed the IBEW Constitution, the Bylaws of Local 1357, the Financial Code of Local 1357, and Local 1357's Authorization and Approval of Local Union Salaries and Expenditures. The Miura report concluded that certain expenditures made during the reviewed time period had not complied with the provisions of those documents. Miura Decl. ¶¶ 20, 22-23; Miura Report (Ex. 8).

10. The Miura report listed the dates, payees or vendors, check numbers if applicable, and amounts of the cash disbursements and credit card charges that appeared to violate the relevant rules and procedures governing Local 1357 expenditures. Each transaction was placed in one or more of four categories: (1) Transactions made without Executive Board Approval; (2) Transactions appearing to lack sufficient detail and information; (3) Transactions appearing to lack supporting documents; and (4) Transactions appearing to be proper or "status not determined." Miura Report (Ex. 8).

11. The introduction to the Miura report also listed the specific provisions of Local 1357 Bylaws and rules and policies that were apparently violated by the listed expenditures. Introduction to Miura Report (Ex. 8).

The Charges

12. In August 1998, copies of the Miura report were prepared for Local Union Representatives to take to Local 1357's August unit meetings. Jeremiah C. Genovia ("Genovia"), Local 1357's Assistant Business Manager, took a copy of the Miura report to the Unit 9 meeting in Leeward Oahu and informed those in attendance that he had a copy of the Miura report available for review if anyone was interested. Other Local Union Representatives attended other unit meetings of Local 1357. Genovia Decl. ¶ 3.

13. Minami looked at the Miura report at a unit meeting in August 1998. Minami testified that there was "heated discussion" among the union members about the report. At the meeting, Minami announced that he would be filing charges based on the Miura report and asked if anyone wanted to join him. A number of members raised their hands. Trial Test. of Minami (10/9/02). On September 15, 1998, Minami and five other members of Local 1357 filed charges against Waialeale with Michael Mowrey ("Mowrey"), the International Vice President of IBEW for the Ninth District, based on the Miura report. The Ninth District includes Hawaii. Letter to Mowrey from Minami et al. of Sept. 15, 1998 (Ex. 9) (the "Charging Letter"); Mowrey Decl. ¶ 1.

14. The Charging Letter stated that it was based on "the recent audit conducted by the independent auditor." The reference to "the recent audit" was a reference to the Miura report. The Charging Letter alleged that Waialeale had made "very disturbing disbursements ... in that he did not go through the proper approval procedures, and there is also some very questionable expenditures [sic] of a personal...