US v. INTERNATIONAL BROTH. OF TEAMSTERS, 88 Civ. 4486 (DNE).

CourtUnited States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
Citation814 F. Supp. 1165
Docket NumberNo. 88 Civ. 4486 (DNE).,88 Civ. 4486 (DNE).
PartiesUNITED STATES of America, Plaintiff, v. INTERNATIONAL BROTHERHOOD OF TEAMSTERS, CHAUFFEURS, WAREHOUSEMEN AND HELPERS OF AMERICA, AFL-CIO, et al., Defendants. In re APPLICATION CIII OF the INDEPENDENT ADMINISTRATOR.
Decision Date09 February 1993

COPYRIGHT MATERIAL OMITTED

Charles M. Carberry, Investigations Officer of Intern. Broth. of Teamsters, New York City (Celia A. Zahner, of counsel).

Roger S. Hayes, U.S. Atty. S.D.N.Y., New York City (Steven C. Bennett, Asst. U.S. Atty., of counsel), for U.S.

Carmell Charone Widmer Mathews & Moss, Chicago, IL (Sherman Carmell, of counsel), for Daniel Ligurotis.

OPINION & ORDER

EDELSTEIN, District Judge:

This opinion emanates from the voluntary settlement in the action commenced by the plaintiff United States of America (the "Government") against the defendants International Brotherhood of Teamsters (the "IBT") and the IBT's General Executive Board (the "GEB") embodied in the voluntary consent order entered March 14, 1989 (the "Consent Decree"). The Consent Decree provides for three Court-appointed officials: the Independent Administrator to oversee the Consent Decree's remedial provisions, the Investigations Officer to bring charges against corrupt IBT members, and the Election Officer, who supervised the electoral process that culminated in the 1991 election for International Officers (collectively, the "Court Officers"). The goal of the Consent Decree is to rid the IBT of the hideous influence of organized crime through the election and disciplinary provisions.

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.1 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 By-law 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).

Pursuant to Section F.12(C) of the Consent Decree, the Independent Administrator must decide disciplinary hearings using a "just cause" standard. The Investigations Officer has the burden of establishing just cause by a preponderance of the evidence. December 27, 1990 Opinion & Order, 754 F.Supp. 333, 337 (S.D.N.Y.1990). After conducting a hearing (the "hearing"), where Mr. Ligurotis was represented by counsel, and receiving a post-hearing brief, the Independent Administrator issued a 34-page decision. The Independent Administrator found that the Investigations Officer satisfied his burden of proving that respondent brought reproach upon the Union by receiving an interest-free loan from Local 705, embezzling the Local's funds, and fostering an atmosphere of lawlessness within the Local. (Decision of the Independent Administrator ("Ind. Admin. Dec.") at 14, 20, 29-30).

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.2 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.3 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.

Finally, a fourth financial transaction between respondent and Local 705 occurred on April 6, 1989. With salary reductions having ceased in December 1988, the Independent Administrator found that Mr. Ligurotis, acting without Executive Board approval, authorized and signed two Local 705 checks, which totalled $120,000 and were payable to the Funds. In connection with this payment, Mr. Schumi wrote a letter, which ultimately went to DOL along with the cancelled checks, stating that "Local Union 705 has authorized the payment of $80,000 to Local 705 Pension Fund and $40,000 to Local 705 Health and Welfare Fund. The source of these monies was salary authorized but not taken by Daniel C. Ligurotis as Secretary Treasurer of the Union." The Independent Administrator, however, found two inaccuracies in this letter, which Mr. Schumi could not explain: the Executive Board did not authorize the payment and only $43,750 of the monies derived from Mr. Ligurotis' salary reductions.

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.,...

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