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65–361 PDF 2011

THE FUTURE OF UNION TRANSPARENCY 

AND ACCOUNTABILITY 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH, 

EMPLOYMENT, LABOR AND PENSIONS 

COMMITTEE ON EDUCATION 

AND THE WORKFORCE 

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

HEARING HELD IN WASHINGTON, DC, MARCH 31, 2011 

Serial No. 112–15 

Printed for the use of the Committee on Education and the Workforce 

( 

Available via the World Wide Web: 

www.gpo.gov/fdsys/browse/committee.action?chamber=house&committee=education 

or 

Committee address: http://edworkforce.house.gov 
(II) 

COMMITTEE ON EDUCATION AND THE WORKFORCE 

JOHN KLINE, Minnesota, Chairman 

Thomas E. Petri, Wisconsin 

Howard P. ‘‘Buck’’ McKeon, California 

Judy Biggert, Illinois 

Todd Russell Platts, Pennsylvania 

Joe Wilson, South Carolina 

Virginia Foxx, North Carolina 

Duncan Hunter, California 

David P. Roe, Tennessee 

Glenn Thompson, Pennsylvania 

Tim Walberg, Michigan 

Scott DesJarlais, Tennessee 

Richard L. Hanna, New York 

Todd Rokita, Indiana 

Larry Bucshon, Indiana 

Trey Gowdy, South Carolina 

Lou Barletta, Pennsylvania 

Kristi L. Noem, South Dakota 

Martha Roby, Alabama 

Joseph J. Heck, Nevada 

Dennis A. Ross, Florida 

Mike Kelly, Pennsylvania 

[Vacant] 

George Miller, California, 

Senior Democratic Member 

Dale E. Kildee, Michigan 

Donald M. Payne, New Jersey 

Robert E. Andrews, New Jersey 

Robert C. ‘‘Bobby’’ Scott, Virginia 

Lynn C. Woolsey, California 

Rube ́n Hinojosa, Texas 

Carolyn McCarthy, New York 

John F. Tierney, Massachusetts 

Dennis J. Kucinich, Ohio 

David Wu, Oregon 

Rush D. Holt, New Jersey 

Susan A. Davis, California 

Rau ́l M. Grijalva, Arizona 

Timothy H. Bishop, New York 

David Loebsack, Iowa 

Mazie K. Hirono, Hawaii 

Barrett Karr, Staff Director 

Jody Calemine, Minority Staff Director 

SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR AND PENSIONS 

DAVID P. ROE, Tennessee, Chairman 

Joe Wilson, South Carolina 

Glenn Thompson, Pennsylvania 

Tim Walberg, Michigan 

Scott DesJarlais, Tennessee 

Richard L. Hanna, New York 

Todd Rokita, Indiana 

Larry Bucshon, Indiana 

Lou Barletta, Pennsylvania 

Kristi L. Noem, South Dakota 

Martha Roby, Alabama 

Joseph J. Heck, Nevada 

Dennis A. Ross, Florida 

Robert E. Andrews, New Jersey 

Ranking Minority Member 

Dennis J. Kucinich, Ohio 

David Loebsack, Iowa 

Dale E. Kildee, Michigan 

Rube ́n Hinojosa, Texas 

Carolyn McCarthy, New York 

John F. Tierney, Massachusetts 

David Wu, Oregon 

Rush D. Holt, New Jersey 

Robert C. ‘‘Bobby’’ Scott, Virginia 
(III) 

C O N T E N T S 

Page 

Hearing held on March 31, 2011 ............................................................................ 1 

Statement of Members: 

Andrews, Hon. Robert E., ranking minority member, Subcommittee on 

Health, Employment, Labor and Pensions ................................................. 4 

Roe, Hon. David P., Chairman, Subcommittee on Health, Employment, 

Labor and Pensions ...................................................................................... 1 

Prepared statement of ............................................................................... 3 

Statement of Witnesses: 

Fox, Arthur L., on behalf of the Association for Union Democracy ............. 23 

Prepared statement of ............................................................................... 25 

Furchtgott-Roth, Diana, senior fellow, Hudson Institute .............................. 10 

Prepared statement of ............................................................................... 12 

Logan, John, professor and director of labor and employment studies, 

San Francisco State University ................................................................... 15 

Prepared statement of ............................................................................... 16 

Mehrens, Nathan Paul, counsel, Americans for Limited Government Research Foundation ........................................................................................ 7 

Prepared statement of ............................................................................... 8 

Additional Submissions: 

Mr. Andrews: 

Questions submitted for the record ......................................................... 49 

Ms. Furchtgott-Roth: 

Response to questions submitted ............................................................. 50 

Holt, Hon. Rush D., a Representative in Congress from the State of 

New Jersey: 

Questions submitted for the record ......................................................... 49 

(1) 

THE FUTURE OF UNION 

TRANSPARENCY AND ACCOUNTABILITY 

Thursday, March 31, 2011 

U.S. House of Representatives 

Subcommittee on Health, Employment, Labor and Pensions 

Committee on Education and the Workforce 

Washington, DC 

The subcommittee met, pursuant to call, at 10:04 a.m., in room 

2175, Rayburn House Office Building, Hon. David P. Roe [chairman 

of the subcommittee] presiding. 

Present: Representatives Roe, Walberg, DesJarlais, Rokita, 

Bucshon, Barletta, Heck, Andrews, Loebsack, Kildee, Hinojosa, 

McCarthy, Tierney, Wu, Holt, and Scott. 

Staff present: Katherine Bathgate, Press Assistant/New Media 

Coordinator; Kirk Boyle, General Counsel; Casey Buboltz, Coalitions and Member Services Coordinator; Ed Gilroy, Director of 

Workforce Policy; Marvin Kaplan, Professional Staff Member; Barrett Karr, Staff Director; Ryan Kearney, Legislative Assistant; Donald McIntosh, Professional Staff Member; Molly McLaughlin Salmi, 

Deputy Director of Workforce Policy; Ken Serafin, Workforce Policy 

Counsel; Alex Sollberger, Communications Director; Linda Stevens, 

Chief Clerk/Assistant to the General Counsel; Alissa Strawcutter, 

Deputy Clerk; Aaron Albright, Communications Director for Labor; 

Tylease Alli, Hearing Clerk; Daniel Brown, Staff Assistant; Jody 

Calemine, Staff Director; Brian Levin, New Media Press Assistant; 

Jerrica Mathis, Legislative Fellow, Labor; Megan O’Reilly, General 

Counsel; and Michele Varnhagen, Chief Policy Advisor and Labor 

Policy Director. 

Chairman ROE [presiding]. A quorum being present, the subcommittee will come to order. 

Good morning, everyone. 

Welcome to our witnesses, and thank you for joining us today. 

We appreciate your views and expertise on how we can best ensure 

union transparency and accountability. 

It has been almost 2 years since the recession that struck our 

economy in late 2007 officially ended. However, as we are reminded 

with the release of virtually every set of updated economic data, 

many Americans continue to struggle. 

More than 13 million workers are unemployed, and food and energy prices continue to rise. Budgets are stretched thin as families 

try to make ends meet. 
2 

On payday, at the grocery store and at the gas pump, Americans 

recognize the value of every hour worked and every dollar earned. 

Whether it is their tax dollars or union dues, workers deserve to 

know how their hard-earned money is being spent. 

Joining a union is a right reserved by law for the American 

worker. Today, 6.9 percent of private sector workers have decided 

to obtain union representation. Congress has a longstanding responsibility to shine a bright light on how the dues of union workers are being spent. 

In 2009, unions reported collecting more than $8 billion in workers’ dues. This figure alone highlights the importance of union 

transparency. 

In an effort to improve transparency, the Labor Management Reporting and Disclosure Act was enacted in 1959. The act guarantees basic standards of democracy and fiscal responsibility in 

unions representing private sector workers. Among its protections 

the act sets out standards for union officer elections and administrative practices, and requires the disclosure of certain financial 

transactions and the balance of union funds and assets. 

The Office of Labor Management Standards, located within the 

Department of Labor, is charged with enforcing the law. In recent 

years, important progress has been made in strengthening the 

law’s protections. Starting in 2003, OLMS reformed the enforcement process to better reflect the needs of a 21st century workforce. 

More than 40 years after the law’s enactment, transparency and 

accountability were finally enhanced on behalf of union workers. 

Unfortunately, this progress is now under assault by the culture 

of union favoritism that dominates the workforce policies of the 

current administration. Under President Obama’s watch, the Department of Labor has rolled back many of these enhanced protections to benefit bosses at the expense of workers. 

One clear example of this trend can be seen in the administration’s recent decision to rescind the Form T-1 reporting requirements. After years of work and legal review, the Department of 

Labor finalized the T-1 form to provide greater transparency of the 

finances of trusts controlled by union officials. 

For the first time, workers would have had access to detailed information about receipts, disbursements and officer compensation 

for thousands of trusts that receive union dues, such as strike 

funds and job targeting funds. 

Yet, before a single report could be filed, the administration revoked the T-1 requirement. The administration’s position is this information is valuable to workers only if the trust is wholly owned 

by a single union. However, union workers’ dues are deposited in 

a trust controlled by more than one entity are not allowed the same 

degree of transparency. 

Greater protections for some and not for others is a disservice to 

all workers. 

The administration has also weakened reporting requirements on 

the Form LM-2 and proposed weakening the LM-30 reporting requirements that once provided unprecedented information to union 

workers. Enhanced reporting of LM-2 would have amounted to just 
3 

15 hours of additional administrative work for union officials annually. 

The administration has also significantly reduced the number of 

union audits, undermining a once robust audit program that identified numerous violations of the law. 

For more than 7 million private sector union members, the majority of whom are forced to pay union dues in non-right-to-work 

states, these reporting requirements are the only way to see how 

their union dues are spent and judge the action of their union officials. Workers should be empowered with the knowledge of how 

their hard-earned dollars are being spent during the times of both 

economic turmoil and prosperity. 

Today’s hearing will help determine whether workers have the 

tools they need to do just that. 

I now yield to Mr. Andrews, the subcommittee’s senior Democratic member, for his opening remarks. 

[The statement of Dr. Roe follows:] 

Prepared Statement of Hon. David P. Roe, Chairman, 

Subcommittee on Health, Employment, Labor and Pensions 

Good morning everyone. Welcome to our witnesses; thank you for joining us today. 

We appreciate your views and expertise on how we can best ensure union transparency and accountability. 

It has been almost two years since the recession that struck our economy in late 

2007 officially ended. However, as we are reminded with the release of virtually 

every set of updated economic data, many Americans continue to struggle. More 

than 13 million workers are unemployed, and food and energy prices continue to 

rise. Budgets are stretched thin as families try to make ends meet. 

On pay day, at the grocery store, and at the gas pump, Americans recognize the 

value of every hour worked and every dollar earned. Whether it is their tax dollars 

or union dues, workers deserve to know how their hard-earned money is being 

spent. 

Joining a union is a right reserved by law for American workers. Today, 6.9 percent of private-sector workers have decided to obtain union representation. Congress 

has a long-standing responsibility to shine a bright light on how the dues of union 

workers’ are being spent. In 2009, unions reported collecting more than $8 billion 

in workers’ dues. This figure alone highlights the importance of union transparency. 

In an effort to improve transparency, the Labor-Management Reporting and Disclosure Act was enacted in 1959. The act guarantees basic standards of democracy 

and fiscal responsibility in unions representing private sector workers. Among its 

protections, the act sets out standards for union officer election and administrative 

practices and requires the disclosure of certain financial transactions and the balance of union funds and assets. 

The Office of Labor-Management Standards, located within the Department of 

Labor, is charged with enforcing the law. In recent years, important progress has 

been made in strengthening the law’s protections. Starting in 2003, OLMS reformed 

the enforcement process to better reflect the needs of a 21st century workforce. More 

than 40 years after the law’s enactment, transparency and accountability were finally enhanced on behalf of union workers. 

Unfortunately, this progress is now under assault by a culture of union favoritism 

that dominates the workforce policies of the current administration. Under President’s Obama watch, the Department of Labor has rolled back many of these enhanced protections to benefit union bosses at the expense of workers. 

One clear example of this trend can been seen in the administration’s most recent 

decision to rescind the form T-1 reporting requirements. After years of work and 

legal review, the Department of Labor finalized the T-1 form to provide greater 

transparency of the finances of trusts controlled by union officials. For the first 

time, workers would have had access to detailed information about receipts, disbursements, and officer compensation for thousands of trusts that receive union 

dues, such as strike funds and job targeting funds. 

Yet before a single report could be filed, the administration revoked the T-1 requirement. The administration’s position is this information is valuable to workers 

only if the trust is wholly owned by a single union. However, workers whose dues 
4 

are deposited in a trust controlled by more than one entity are not allowed the same 

degree of transparency. Greater protections for some and not for others do a disservice to all workers. 

The administration has also weakened reporting requirements on the form LM2 and proposed weakening the form LM-30, reporting requirements that once provided unprecedented information to union workers. Enhanced reporting of the LM2 would have amounted to just 15 hours of additional administrative work for union 

officials annually. The administration has also significantly reduced the number of 

union audits, undermining a once robust audit program that identified numerous 

violations of the law. 

For more than seven million private sector union members, the majority of whom 

are forced to pay union dues in non-right-to-work states, these reporting requirements are the only way to see how their union dues are spent and judge the actions 

of their union officials. 

Workers should be empowered with the knowledge of how their hard-earned dollars are being spent, during times of both economic turmoil and prosperity. Today’s 

hearing will help determine whether workers have the tools they need to do just 

that. I would like to now yield to Mr. Andrews, the subcommittee’s senior Democrat 

member, for his opening remarks. 

Mr. ANDREWS. Senior? That sounds so foreboding. 

Thank you, Mr. Chairman, for your courtesy and professionalism, 

and that of your staff. 

We are happy to have the witnesses with us here this morning. 

We look forward to your testimony and appreciate your participation. 

I think the beginning of the chairman’s remarks were right on 

point. We have more than 13 million Americans unemployed as we 

meet this morning. It is actually about 15 million. 

And everywhere I go in my district and, frankly, around the 

country, what I am hearing is that those Americans and their 

neighbors want us to find a way to work together to create an environment in which entrepreneurs and small businesses can create 

jobs in our country. I think that ought to be the principal focus of 

the Congress’ agenda. 

Our committee could be finding ways to help make pension assets more available more readily for workers who are late in their 

careers and cannot find another job. But we are not doing that. 

Our committee could be working together to try to find ways to 

more quickly restrain health care costs for employers and employees to make the business climate more favorable. We are not doing 

that. 

Our committee could be working together to try to find ways to 

most effectively engage in job training, so people who lost a job or 

a career in a diminishing industry could find a way to shift to a 

growing industry. But we are not doing that. 

Instead what we are doing is engaging in what I believe is a political exercise to highlight what the chairman referred to as a ‘‘culture of union favoritism’’ at the OLMS. 

Let us examine the factual basis for that claim. 

If there were a culture of union favoritism, one would expect that 

three results would obtain. First, one would expect that there 

would be fewer indictments or actions initiated against improper 

union conduct than there had been previously. 

So, in other words, there would be a drop in the number of indictments from the Bush administration compared to the Obama 

administration. 
5 

In fact, the opposite is the case. The average number of indictments by the OLMS in the Bush years was 122. The average number of indictments in the Obama years has been 126. 

The next that that you would assume would obtain, if there was 

in fact a culture of union favoritism is that the number of convictions for wrongful conduct would have dropped from the Bush 

years to the Obama years. 

In fact, the opposite is true. In the years that the Bush Labor 

Department was running this operation, the average convictions 

were 113 per year. The average number of convictions in the 

Obama administration has been 125 convictions per year. 

And then the third claim that one might make is that the administration is not giving the OLMS the resources that it needs to do 

its job, whether it is conducting audits, filing indictments or winning convictions. 

Well, it is interesting to see that, in 1985, the OLMS was spending about $4.01 per worker covered by the OLMS protections in inflation-adjusted dollars. In other words, in 2010 dollars, we are 

spending $4 per worker covered by this law in America. 

You would think, that if there is a culture of union favoritism, 

that that resource number would have dropped. In fact, in 2010, we 

are spending $5.82 per covered worker in 2010 dollars. 

So, the hypothesis here—because I know the chairman likes the 

scientific method as a good scientist, and so do I—the hypothesis 

is there is a culture of union favoritism under this administration 

at the OLMS. 

The fact is that the number of indictments has gone up, not 

down. The fact is that the number of convictions has gone up, not 

down. And the fact is, the dollars expended per worker to enforce 

these protections has gone up, not down. 

So, what we expect to engage in with these very fine, competent 

witnesses today, is their explanation as to why it is, if, given these 

facts, that in fact there is a culture of union favoritism. 

We look forward to the discussion, and I thank the chairman for 

the time. 

Chairman ROE. I thank the ranking member for yielding back. 

Pursuant to rule 7c, all members will be permitted to submit 

written statements to be included in the permanent hearing record. 

And without objection, the hearing record will remain open for 

14 days to allow questions for the record, statements and extraneous material referenced during the hearing, to be submitted for 

the official hearing record. 

Now, I would like to take this opportunity to thank our witnesses 

for being here and introduce them. It is my pleasure to introduce 

our distinguished panel. 

Mr. Nathan Mehrens is currently the counsel for Americans for 

Limited Government. From February 2006 to January 2010, Mr. 

Mehrens served as a special assistant to the deputy secretary of 

labor for labor management programs. While at OLMS, he assisted 

in the drafting of the Form T-1 and the Form LM-2. Mr. Mehrens 

received his J.D. from Oak Brook College of Law and Government 

Policy. 

And Ms. Diana Furchtgott-Roth is a senior fellow and director of 

the Center for Employment Policy at the Hudson Institute. Prior 
6 

to joining the Hudson Institute, Ms. Furchtgott-Roth was chief 

economist of the U.S. Department of Labor. 

From 2001 to 2002, she served as chief of staff of the President’s 

Council of Economic Advisers under then-President George W. 

Bush, and also served as deputy executive director of the Domestic 

Policy Council and associate director of the Office of Policy Planning in the White House from 1991 to 1993. She received her B.A. 

in economics from Swarthmore College and her master’s in philosophy in economics from Oxford University. 

Dr. John Logan is associate professor and director of labor studies at San Francisco State University and a senior labor policy specialist with U.C.-Berkeley’s Labor Center. Dr. Logan is an expert 

in U.S. labor law and law policy labor management relations and 

comparisons between U.S. and other countries’ labor law, corporate 

social responsibility and the union avoidance industry in the 

United States. Dr. Logan received his Ph.D. in U.S. labor history 

from the University of California-Davis. 

Mr. Arthur Fox is counsel for the Association for Union Democracy. Mr. Fox specializes in labor relations with an emphasis on 

the internal affairs of unions, the democratic rights of members 

and the union duty of fair representation. 

He has represented numerous victims of union political repression and served as an outside general counsel for the National 

Postal Mail Handlers Union and the National Association of Air 

Traffic Specialists and the Fraternal Order of the Police Corrections Unit. Mr. Fox received his B.A. and LL.B. from the University of Virginia. 

Mr. Fox will be testifying on behalf of the Association of Union 

Democracy, the only national pro-labor and non-profit organization 

dedicated solely to advancing the principles and practices of democratic trade unionism in the North American labor movement. 

Now, for the witness testimony. Before I recognize each of you 

for your testimony, let me briefly explain the lighting system. 

Many of you have done this before, but you will have 5 minutes 

to present your testimony. And when you begin, the light in front 

of you will turn green, as it will for us. And when 1 minute is left, 

the light will turn yellow, and when your time has expired, the 

light will turn red, at which point I would ask you to wrap up your 

remarks as best you can. 

After everyone has testified, each member will have 5 minutes to 

ask questions of the panel. And the chairman will also gavel himself down at 5 minutes. 

Before we start, I would like to ask if any of you have any of 

your Final Four picks correctly. I do not. I am an ‘‘oh-fer’’ in all 

that. If anybody up here got any of the Final Four picks right—— 

Mr. ANDREWS. Shockingly, I had Bucknell going to the Final 

Four, and they were upset by Connecticut in the first round. 

Chairman ROE. Well, if you did, you do not know anything about 

basketball, if you picked any of them right. 

So, thank you. 

With that, let us have your opening remarks. 

Mr. Mehrens? 
7 

STATEMENT OF NATHAN PAUL MEHRENS, COUNSEL, AMERICANS FOR LIMITED GOVERNMENT RESEARCH FOUNDATION 

Mr. MEHRENS. Mr. Chairman, Mr. Ranking Member and members of the committee, thank you for the invitation to testify today. 

I would like to touch on a few key areas where I believe that the 

actions of the U.S. Department of Labor and its Office of Labor 

Management Standards over the last 2 years have damaged the 

ability of that office to enforce the Labor Management Reporting 

and Disclosure Act of 1959. 

The act, among other things, provides for labor organization financial transparency, and OLMS has been delegated enforcement 

responsibilities for most of the act’s provisions. Pursuant to the act, 

OLMS has promulgated a number of financial report forms, which 

are filed by labor organizations, their officers and employees, as 

well as consultants and outside employers. 

Prior to 2001, the main financial report form used by labor organizations—the largest labor organizations—to report their finances, 

the Form LM-2, was just a very basic form. It only reported the 

basic information. 

However, that changed during the tenure of the previous administration. Under the leadership of Secretary Elaine L. Chao, the 

Form LM-2 was overhauled. The new Form LM-2 required, among 

other things, the reporting of functional disbursements in categories such as representational activities, political activities and 

lobbying, and contributions, gifts and grants. 

Labor organizations were no longer able to report millions of dollars on a single line item. But now, individual disbursements in the 

functional categories were required to be disclosed if they were 

$5,000 or more. 

Part of the overhaul was the creation of a new form, Form T-1, 

on which unions were to report the finances of trusts in which they 

are interested. These are trusts such as building funds, strike 

funds and training funds. They generally have a lower level of disclosure and, in some cases, act like offshore accounts. 

In addition, the department also made a few select enhancements to the Form LM-2 in a final rule that was published on January 21, 2009. These enhancements would have required, among 

other things, the reporting of the full dollar value of the compensation packages paid to officers and employees of labor organizations. 

The old Form LM-2 did not adequately disclose this information. 

And research by the department found that significant amounts of 

money were disbursed to these officers and employees, but that 

money was not attributed to them on the form, due to that form’s 

structure. That changed under the January 21, 2009, final rule. 

However, even before the Obama administration was sworn in, 

there were signs that the new administration would work aggressively to reduce the staff and resources of OLMS, as well as to roll 

back the improvements in transparency that were promulgated 

during the previous administration. 

During the presidential transition period, the AFL-CIO provided 

a document to the transition team that was a road map that 

showed how to roll back a lot of the transparency. 

After assuming office, the Obama administration first froze the 

effective date of the January 21, 2009, enhancements to the final 
8 

1 NATIONAL LABOR REL. BD., LEGISLATIVE HISTORY OF THE LABOR-MANAGEMENT 

REPORTING AND DISCLOSURE ACT OF 1959, 1738, 9 (1985). See also Id., at 1453. 2See Michael J. Nelson, Slowing Union Corruption: Reforming the Landrum-Griffin Act to 

Better Combat Union Embezzlement, 8 GEO MASON L. REV. 527, 33 (2000). 

rule and then rescinded that rule altogether. The administration 

also did the same to the Form T-1. It is now gone. 

Additionally, the department has slashed the budget of OLMS. 

In fiscal year 2006, OLMS had a full-time equivalent allocation of 

384. For fiscal year 2012, the department’s budget request is for 

249. 

This represents a 35 percent reduction in staff from the fiscal 

year 2006 level, and it is only a matter of time before these staff 

cuts turn into reduced enforcement activities. And indeed, the department’s own budget justification numbers bear this out. 

As part of its staff reduction, OLMS completely disbanded the 

Division of International Union Audits, a division that had responsibility for auditing the largest labor organizations in the country, 

some of which have assets that are huge, have received disbursements of over $600 million in some cases. 

On page 21 of its budget justification, OLMS flatly states that it 

plans to conduct quote,—‘‘zero I-CAP audits in FY 2012,’’—end 

quote. 

So, imagine for a moment the outrage that would occur if the Securities and Exchange Commission publicly announced that it was 

disbanding the only division within it that audited the largest organizations that it had jurisdiction over, and then publicly announced 

that it would conduct no audits of them in the coming year. 

In the same vein of reducing transparency, OLMS enforcement 

data is notably missing from what is supposed to be a departmentwide, online enforcement database. While this database discloses a 

lot of data from a bunch of different organizations within the department such as OSHA, MSHA, EBSA, OFCCP and the Wage and 

Hour Division, there is no data from OLMS. 

These actions and others, taken together, demonstrate that the 

administration is working very hard to roll back the clock at least 

10 years and to provide less transparency for labor organization 

members and the public. 

Thank you, and happy to answer any questions you may have. 

[The statement of Mr. Mehrens follows:] 

Prepared Statement of Nathan Paul Mehrens, Counsel, 

Americans for Limited Government Research Foundation 

Mr. Chairman, Mr. Ranking Member, and Members of the Committee, thank you 

for the invitation to testify today. 

I would like to briefly touch on a few key areas where I believe the actions of 

the 

U.S. Department of Labor and its Office of Labor-Management Standards (OLMS) 

during the last two years have significantly damaged the ability of OLMS to enforce 

the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA). 

As you know the LMRDA was passed with wide bi-partisan support. In the Senate the bill passed with 95 votes and the House passed it with 352 votes.1 Before 

the Act was passed Congress held hearings over a two year period on 270 days and 

called over 1,500 witnesses.2 The Act among other things provides for labor organization financial transparency and OLMS has been delegated the responsibility for 

enforcing most of the Act’s provisions. The Act is an important piece of legislation 

and requires serious, dedicated attention from OLMS in order work effectively. Pursuant to the Act OLMS has promulgated several financial reports that are required 
9 

3LMRDA Sec. 208, 29 U.S.C. § 438. 

4Office of Labor-Management Standards, Forms-All Others, undated. Available online at: 

http://www.dol.gov/olms/regs/compliance/GPEA—Forms/blanklmforms.htm#FLM30 (accessed 

March 25, 2011). 5FY 2012 Congressional Budget Justification, Office of Labor-Management Standards, at 12. 

6 Id. 

to be filed by labor pieces of major legislation, the LMRDA is only as good as the 

Secretary who enforces it. 

Prior to 2001 the annual financial form used by the largest labor organizations 

to report their finances, the Form LM-2, reported only basic information. 

During Secretary Elaine L. Chao’s tenure the Form LM-2 was overhauled. The 

new Form LM-2 required among other things the reporting of disbursements in 

functional expense categories such as ‘‘Representational Activities,’’ ‘‘Political Activities and Lobbying,’’ and ‘‘Contributions, Gifts & Grants.’’ Labor organizations were 

no longer able to report $42 million as a single line item, but now individual disbursements of $5,000 or more in categories such as these were required to be separately disclosed. 

Part of that overhaul was the creation of a Form T-1 on which unions would report the finances of ‘‘trusts in which a labor organization is interested.’’ These are 

trusts such as building funds, strike funds, and training funds. These generally 

have a lower level of disclosure and in some cases act like ‘‘offshore accounts’’ for 

labor organizations. 

In addition to the major overhaul of the Form LM-2 the Department also made 

a few select enhancements to the form in a final rule that was published on January 

21, 2009. These enhancements would have required among other things the reporting of the full dollar value of compensation packages that labor organizations pay 

to their officers and most employees. The old Form LM-2 did not adequately disclose 

this were disbursed to labor organization officers and employees and on their behalf, 

money that was not attributed to them due to the structure of the form. That 

changed under the January 21, 2009 final rule. 

However, even before President Obama was sworn in there were signs that the 

new Administration would work aggressively to reduce the staff and resources of 

OLMS as well as to rollback the improvements in transparency that were promulgated under President George W. Bush and Secretary Elaine L. Chao. During the 

presidential transition period, the AFL-CIO provided the Department with a roadmap of changes to reduce labor organization transparency. It appears that the Department has been using this roadmap as their guide. 

After the Obama Administration assumed office OLMS first froze the effective 

date of the enhancements to the Form LM-2 and then rescinded the January 21, 

2009 final rule altogether. The Department also did the same to the Form T-1. Additionally the regulation which set the procedure by which a labor organization would 

lose the privilege of filing a simplified report, the Form LM-3, pursuant to Sec. 208 

of the LMRDA was rescinded as well. The LM-3 regulation was wholly discretionary 

because Sec. 208 of the LMRDA states in relevant part, ‘‘but the Secretary may revoke such provision for simplified forms of any labor organization or employer if he 

determines, after such investigation as he deems proper and due notice and opportunity for a hearing, that the purposes of this section would be served thereby.’’ 3

As such, if the Secretary believes that the privilege of filing a Form LM-3 should 

not be revoked for an individual labor organization then that privilege remains intact. Therefore rescinding this regulation was completely unnecessary. 

The Administration also refused to enforce the current regulation which requires 

labor organization officers and employees to report conflicts of interest on the Form 

LM-30. A ‘‘non-enforcement policy’’ was publicly issued regarding the current regulation so long as officers and employees comply ‘‘in some manner.’’ On that point 

OLMS stated on its website: 

Accordingly, OLMS will refrain from initiating enforcement actions against union 

officers and union employees based solely on the failure to file the report required 

by section 202, using the new, 2007 form, as long as individuals meet their statutorily-required filing obligation in some manner. OLMS will accept either the old 

Form LM-30 or the new one for purposes of this non-enforcement policy.4

Additionally the Department has aggressively slashed the staff of OLMS. In Fiscal Year 2006 OLMS had a full time equivalent allocation (FTE) of 384.5 For Fiscal 

Year 2012 the Department’s request is for 249 FTE.6 This is a 35% reduction in 

staff from the Fiscal Year 2006 level. It is thus only a matter of time before these 

staff cuts turn into reduced enforcement activities. Indeed, the Department’s Fiscal 
10 

7FY 2012 Congressional Budget Justification, Office of Labor-Management Standards, at 20. 

8 Id. 

9 Id. 

10FY 2011 Congressional Budget Justification, Office of Labor-Management Standards, at 22. 11See for instance the Form LM-2 filed by the Electrical Workers IBEW AFL-CIO on September 24, 2010. Available online at www.unionreports.gov, under OLMS File 000-016 (accessed 

March 25, 2011). 

Year 2012 investigations, up from its target of 354.7 For Fiscal Year 2011 OLMS 

sets a target of only 300 criminal investigations, and the same is true for Fiscal 

Year 2012.8 This is a 15% reduction for this target. For Fiscal Year 2012 OLMS sets 

a target of 200 compliance audits, down from the estimate of 300 for Fiscal Year 

2010 and the 541 audits actually conducted that year.9 Even though the Fiscal Year 

2010 target for compliance audits was only 200 the actual result was more than 

double the target. Further, this target is much lower than the results in Fiscal Year 

2009 where OLMS conducted 746 audits, up from its target of 650.10 Comparing the 

746 audits conducted in Fiscal Year 2009 with the Department’s desired result of 

200 for Fiscal Year 2012, it is clear that the Department is harming the ability of 

OLMS to do its job. 

As part of its reduction in the staff of OLMS, the Department completely disbanded the Division of International Union Audits, a division that had the responsibility of auditing the largest labor organizations in the country, some with receipts 

and disbursements exceeding $600 million.11 On page 21 of its Fiscal Year 2012 

budget justifications OLMS flatly states that it plans to conduct ‘‘zero I-CAP audits 

in FY 2012.’’ The ‘‘I-CAP audits’’ are audits of the national and international labor 

organizations. This means no audits of the largest labor organizations will occur in 

Fiscal Year 2012. Imagine the outrage that would occur if the Securities and Exchange Commission disbanded a division with responsibility for overseeing the largest organizations under its jurisdiction and publicly announced that it would perform no audits of them in the coming year. 

In the same vein of reducing transparency, the OLMS enforcement data is notably 

missing from what is supposed to be a Department wide online enforcement database. While this database discloses enforcement data from OSHA, MSHA, EBSA, 

OFCCP, and the Wage and Hour Division, there is no data from OLMS. Also, OLMS 

was almost a year late in publishing its Fiscal Year 2009 annual report and only 

made that report public after my office filed a Freedom of Information Act request 

for it. 

All of these actions and others demonstrate the Obama Administration is working 

hard to roll the clock back at least ten years and provide less transparency for labor 

organization members and the public. 

Thank you. I’d be happy to answer any questions you may have. 

Chairman ROE. Thank you. 

Ms. Furchtgott-Roth? 

STATEMENT OF DIANA FURCHTGOTT–ROTH, SENIOR FELLOW, 

HUDSON INSTITUTE 

Ms. FURCHTGOTT-ROTH. Mr. Chairman, ladies and gentlemen, 

thank you very much for giving me the privilege of testifying today. 

I was asked to talk about the compliance burden of these regulations, because one of the arguments is that unions face too high a 

compliance burden when filling out the LM-2, the LM-30, T-1 

forms. 

So, I was chief economist at the U.S. Department of Labor while 

these rules were going into place. And I want to testify that we offered unions free software, free advice, call-in lines to help with the 

compliance costs, and that any union that had problems filling out 

the forms could call on us for assistance, which was provided free 

of charge. 

The LM-30 forms were filed on paper. They were not filed electronically, so there was not any free software for that. 
11 

But there was compliance assistance in the assistant secretary 

for policy’s office, not just for the union forms, but other compliance 

areas. There was a big focus on how to make regulations easier to 

comply with, both in terms of electronic methods and in terms of 

call-in centers. And this was because we were focused on making 

it easier for employers to hire workers and lowering the unemployment rate. 

I would like to address the issue, the fundamental issue of fairness in this, as well as the compliance burden, because union workers, union members have a right to know where their money goes. 

Just as candidates running for election, all of you distinguished 

members up here have had to comply with federal election laws— 

minute laws that say where you can put a billboard, how much you 

can raise, who you can raise money from. So, it is fair for union 

members to be able to know where officers are spending the money. 

And that is one reason that the LM-2 forms had clearly how 

much money was spent on political activity, how much on representation, how much on gifts and lobbying, how much for administrative costs. So, any rank-and-file union member could go to the 

website and figure this out. 

Now, in the Federal Register, Tuesday, October 13th, an 

unnamed international union was quoted as saying, ‘‘detailed reporting requirements are unnecessary because union members are 

sophisticated enough to seek information about union financial 

matters from their unions, as well as seek publicly available information, such as that provided by the IRS.’’ 

But if the information is not even required to be collected, then 

there is no way that even the most sophisticated union member can 

access it on the Internet. And rolling back these regulations that 

were put in place by Secretary Chao would mean that some of this 

information is not available to anyone, not even the most sophisticated union member. 

There are many states are right-to-work states, where workers 

do not have to join a union as a condition of employment. But 

many other states do not have that. They are forced unionization 

states where workers have to be a member of the union. 

So, on the one hand, if they have to be a member of the union, 

then it makes sense that they have the right to know where their 

dues are going. They are forced to be a member of the union. They 

should also have this information at their fingertips. 

And that is as important, I would say, as looking at pensions, 

health care and job training, because these are people who do not 

have the choice as to where their money goes. 

Furthermore, with the Supreme Court Beck decision, union 

members have the right to demand back any portion of their dues 

used for political activity. If the information on what is available 

for—used for political activity is not even available to them, how 

can they request the amount back in their dues? 

So, with that, I would like to thank you for giving me the privilege of testifying before you, and to say that this is a matter of fairness to the rank-and-file union member, and that he should have 

the same rights as any shareholder who is allowed to go over corporation’s books. 

Thank you. 
12 

1Daniel Yager and Phillip B. Wilson ‘‘Comments on Notice of Proposed Rulemaking Labor Organization Annual Financial Reports,’’ Labor Policy Association, January 24, 2003. Available at: 

http://www.hrpolicy.org/memoranda/2003/03-09_LMRDA_Comments.pdf 2 Ibid, 2. 

3 Robert Kennedy, The Enemy Within (1960) 30-31. 

4 Yager and Wilson, 4. 

5See Thomas v. Grand Lodge, International Association of Machinists & Aerospace Workers, 

201 F.3d 517 (4th Cir. 2000) 

[The statement of Ms. Furchtgott-Roth follows:] 

Prepared Statement of Diana Furchtgott-Roth, 

Senior Fellow, Hudson Institute 

Mr. Chairman, members of the Committee, I am honored to be invited to testify 

before you today on the subject of union transparency and accountability. I have followed and written about this and related issues for many years. Currently I am a 

senior fellow at the Hudson Institute. From 2003 until April 2005 I was chief economist at the U.S. Department of Labor. From 2001 until 2002 I served at the Council 

of Economic Advisers as chief of staff. Previously, I was a resident fellow at the 

American Enterprise Institute. I have served as Deputy Executive Secretary of the 

Domestic Policy Council under President George H.W. Bush and as an economist 

on the staff of President Reagan’s Council of Economic Advisers. 

Introduction 

Financial transparency has assumed a prominent role in most sectors of the economy. Corporations are required by Sarbanes-Oxley to provide extensive disclosure 

of their financial activities. Candidates for political office have to adhere to Federal 

Election Commission regulations. The Internal Revenue Service collects taxes from 

citizens and ensures compliance through audits. 

The union sector, however, with assets of over $10 billion, was, until 2005, mostly 

exempt from any regulation that required detailed financial disclosure. 

The first major piece of legislation designed to compel union financial disclosure 

was the Labor Management Reporting and Disclosure Act, better known as the 

Landrum-Griffin Act (LMRDA). The law was passed in 1959 and followed more than 

two years of Senate investigations into widespread corruption in the organized labor 

movement, particularly in major unions such as the International Brotherhood of 

Teamsters, United Mine Workers, and International Longshoremen Workers Union. 

Organized labor’s behavior at the time was so egregious that the bill gained overwhelming bipartisan support, passing the Senate by a vote of 95-2 and the House 

of Representatives by a 352-52 margin. Few pieces of labor law reform since 

Landrum-Griffin have received this level of approval.1

Title II of the LMRDA was written with the intention of requiring greater union 

transparency. While labor unions were compelled to file financial reports before the 

Act’s passage, these reports were not made public and were of virtually no help in 

holding unions accountable to their members.2 Even Robert Kennedy, who was involved in the Senate investigations of organized labor, acknowledged that the union 

financial forms then in place were ineffective.3

The first substantive regulations on union financial reporting requirements were 

issued by Secretary of Labor James Mitchell in 1960. These required unions with 

$20,000 or more in total annual receipts to submit to the Department of Labor their 

financial information on a ‘‘Form LM-2.’’ The filing threshold was gradually raised 

until it reached $200,000 in 1994. 

The great hope at the time of LMRDA’s passage was that the new financial disclosures would empower rank and file union members and ensure that unions were 

more accountable to their membership, and, as a result, less corrupt overall. 

Unfortunately, the type of reforms that LMRDA envisioned never fully materialized.4 There were several reasons for this failure. 

First, some unions attempted to make sure that the financial information contained in the forms was never disclosed to the rank and file, much less widely disseminated to members. Some even took steps to ensure that their dues-paying members did not have proper notification about the existence of the LM-2 data. For example, the International Association of Machinists was involved in litigation for 

years over this issue. The union claimed that a one-time notification issued in 1959 

was sufficient to comply with the LMRDA’s notification requirements. The Fourth 

Circuit Court of Appeals eventually disagreed with this reasoning, but these types 

of roadblocks were commonplace in the years after LMRDA’s passage.5
13 

6For a general idea of the financial complexity of today’s unions, see Marick F. Masters 

Unions at the Crossroads: Strategic Membership, Financial, and Political Perspectives (1997) 

Westport, CT: Quorum. 7http://pacer.cadc.uscourts.gov/docs/common/opinions/200505/04-5057a.pdf, pg 15. 8See legal case. 

Furthermore, the old regulations and LM-2 forms did not require detailed information that properly reflected the complex financial world of today’s labor unions.6

Large amounts of funds—in the millions of dollars—were reported by unions on the 

forms as ‘‘other,’’ ‘‘expenses,’’ or ‘‘miscellaneous.’’ Information was deliberately vague 

and could be grouped into broad categories, allowing labor unions to escape the type 

of scrutiny faced by corporate and other non-profit entities. 

Secretary of Labor Elaine Chao argued for more detailed LM-2 forms saying that: 

‘‘The forms no longer serve their underlying purpose because they fail to 

provide union members with sufficient information to reasonably disclose to 

them the financial condition and operation[s] of labor organizations * * *. 

[I]t is impossible for union members to evaluate in any meaningful way the 

operations or management of their unions when the financial disclosure reports filed * * * simply report large expenditures for broad, general categories. The large dollar amount and vague description of such entries 

make it essentially impossible for anyone to determine with any degree of 

specificity what union operations their dues are spent on, without which 

the purposes of the LMRDA are not met.’’ 7

In order to solve this problem, the Department of Labor proposed new rules to 

update the Form LM-2, including a requirement that all unions with receipts in excess of $200,000 file their disclosure forms electronically. 

Additionally, the new rules required eligible unions to disclose detailed membership status information on the form’s Schedule 13. Historically, unions would report 

inconsistent numbers for their membership totals and not differentiate between the 

many different classes of union members such as active, associate, retired, agencyfee payers, etc. The new class system mandated by Schedule 13 allowed the rank 

and file to discern the exact composition of their union. 

Arguably the most important addition to the new LM-2 forms was the requirement that unions detail specific expenditures in more narrow categories than before 

on Schedules 14-19 of the LM-2 forms. Schedules 14-19 demand itemized expenses 

for all expenditures over $5,000 in these schedules and categories. Specifically, other 

receipts were detailed in Schedule 14, representational activities in Schedule 15, political activities and lobbying in Schedule 16, contributions, gifts and grants in 

Schedule 17, general overhead in Schedule 18, and union administration in Schedule 19. These new forms were displayed on the Department of Labor website, thus 

allowing any rank and file union member instant access to the data in the new 

forms and compelling union leaders to list both their salaries and the percentage 

of time spent on various union-related activities. 

Union officers are required to complete the LM-30 form, which requires union officials to disclose conflicts of interest. If officials received things value for any reason 

other than in the course of their regular duties, then they would likely need to disclose the transaction and its reason. 

Under 2007 reform of the Form LM-30, stewards receiving leave from an employer to work on union matters—known as ‘‘union leave’’ or ‘‘no docking’’ policy— 

was reportable if it exceeded 250 hours a year. 

The AFL-CIO protested every change, publicly claiming that the LM-2 reforms 

would impose an impossible burden on the unions. Amongst these burdens, the 

AFL-CIO cited the supposedly high cost of accounting that would be associated with 

tracking expenditures as well as an inability to comply with the Department’s requested time frame for the new forms. In their legal pleadings against the new 

rules, the federation also disputed Secretary Chao’s authority to issue the broad new 

regulations that she proposed.8

The labor federation won a minor court battle in January 2004 when U.S. District 

Court Judge Gladys Kessler ruled that the Department of Labor had to give unions 

more time to comply with the new rules. But Judge Kessler, a Clinton appointee 

to the bench, eventually said that the new rules themselves were appropriate and 

legal. The AFL-CIO was still not satisfied and appealed Judge Kessler’s decision. 

In May 2005, the Federal Circuit Court in the District of Columbia upheld the new 

rules in a 2-1 decision. 

In 2009, in an attempt to make it easier for union members to identify corrupt 

behavior, the Labor Department issued revised and expanded LM-2 forms. Additional information included verification that sales and purchases of assets were per-
14 

formed without conflicts of interest; the value of benefits and travel reimbursements 

paid to union officers and employees; and additional details on funds received. 

These expenses are listed on Internal Revenue Service tax forms, but not on financial disclosure forms filed with the Labor Department. IRS documents are laborious to find, whereas Labor Department disclosure forms are available electronically. 

In addition to the LM-2 form, unions were required for the first time to file a disclosure form, known as T-1, about the finances of union-managed trusts, such as 

credit unions, strike funds, pension and welfare plans, and building funds. This is 

because any unions had created networks of trusts that allowed them to shield massive financial transactions from their members, analogous to the recent abuses involving ‘‘off-the-books’’ accounting by some corporations. 

All these regulations were of great value to union members. Just as shareholders 

can see how corporations spend their money, so union members could see how their 

union dues were being spent. 

But now the Labor Department is rolling back the financial disclosure rules. It 

does not want unions to file the enhanced LM-2 forms, the new LM-30 forms, and 

the T-1 form. In the Federal Register of October 13, 2009, the Department states 

that ‘‘comments received indicate that the Department may have underestimated 

the increased burden that the rule would place on reporting organizations.’’ 

It also cited an unnamed union: ‘‘The union also asserted that detailed reporting 

requirements are unnecessary because union members are sophisticated enough to 

seek information about union financial matters from their unions, as well as seek 

publicly available information, such as that provided by the IRS.’’ 

The whole point is that if unions are misusing workers’ dues, the union is going 

to disguise this, and not tell rank-and-file members. Furthermore, the IRS data to 

which the union refers, the Form 990s, come out with a 2-year delay, are not readily 

accessible, and disclose payroll and benefits information for only a very limited 

number of union officials. 

Throughout the LM-2 process, the Labor Department provided unions with free 

software and free training to complete the forms. The only reason that completing 

the forms would be too burdensome is that the organizations do not want to keep 

track of the expenses. But it is their duty to tell union members where their hardearned dues are going. 

For comparison’s sake, it is worth highlighting the costs of compliance for corporations to comply with one section of the Sarbanes-Oxley Act of 2002. Section 404 of 

the act requires public companies to issue a management report on the effectiveness 

of companies’ internal controls, and an independent audit report. In 2005, Charles 

Rivers Associates, an economic consulting firm, estimated that compliance costs 

averaged $7.8 million in 2004 for the Fortune 1000 companies. Smaller companies 

had to spend hundreds of thousands of dollars. 

If these companies had complained that the compliance costs were too high, and 

that the SEC should rescind the rules, they would have been mocked in the media 

and the public eye. Yet unions, who were offered free help and software to fill out 

the forms, receive a sympathetic hearing. 

Conclusion 

The criticism of the LM-2, T-1, and LM-30 forms suggests that union financial activity is now an open book. But this is not so. Political activity is not always disclosed. Payments to third parties, often put down as charitable contributions, are 

in turn used for political activity. Some of this can be observed from the forms, but 

other activity is still hidden. Some payments are directed to third parties who have 

conflict of interest with union officials. 

Just as Sarbanes-Oxley sets standards for corporate disclosure so that shareholders have full information, the same protection should be extended to union assets and activity so that union members know that their contributions are being 

wisely used. 

Chairman ROE. Thank you. 

Dr. Logan? 
15 

STATEMENT OF JOHN LOGAN, PH.D., DIRECTOR OF LABOR 

STUDIES, SAN FRANCISCO STATE UNIVERSITY 

Mr. LOGAN. Thank you very much, Chairman Roe and Ranking 

Member Andrews, members of the committee. It is a great pleasure 

to come here and testify before you today. 

I want to say four very brief things from my testimony, all of 

which I talk about in much greater length in the written testimony. 

And as you know, academics tend to be fairly long-winded, so I will 

start off by telling you what I am going to say, and then try to say 

it. 

First and most important, I want to say that the current OLMS 

is actually doing a very good job when it comes to enforcement of 

the LMRDA, that it is enforcing the law and enforcing the law 

robustly, that its record is, as Ranking Member Andrews said, 

very, very good in this area. 

Second, the revisions introduced by the Bush Department of 

Labor, which I talk about at length in the written testimony, actually do not achieve their objectives. They do not, and would not, uncover cases of union corruption. And they do not provide greater accountability to ordinary union members and provide them with valuable information in a useable form. 

Third, to the extent that anyone has benefited from these revisions, it has actually been self-styled union watchdog groups that 

report on unions who like to bark on ideological grounds; and to 

private, so-called union avoidance consultants that charge employers large amounts of money for the information that is taken selectively from these very detailed LM-2 forms. 

And finally, the regulations themselves have imposed a significant burden on unions. And the people who have paid for this burden have been the ordinary union members whose dues money 

have had to pay for the new accounting systems, for the new staff, 

for the outside expertise that has been needed to comply with these 

rules. And this has actually taken away from the core functions of 

the union in providing effective representation. 

So, as I said, the most important point that I want to emphasize 

is that the current Office of Labor Management Standards has an 

excellent record in this area. 

John Lund, the director of OLMS, is someone I have known in 

a professional capacity for a number of years. When I was a professor at London School of Economics, I knew Professor Lund, who 

was then at the University of Wisconsin. He is an internationally 

recognized expert in the area of union transparency and accountability. 

He has tremendous experience in this area, has spent most of his 

professional working life working with local and national union officers, teaching them how to improve their financial accountability 

and transparency. 

And he has brought that expertise with him to OLMS, as one 

would expect. That he has brought a degree of professionalism and 

balance to the rules on union accounting and union financial transparency to the office, that ought to be welcomed. 

And we can see this in his written publications too, that he repeatedly states that strong enforcement is desirable, strong enforcement is necessary. 
16 

Of course, actions do speak louder than words. And when we look 

at the actions of the current OLMS in this area, it also reinforces 

the point that enforcement of the law has been robust. 

And again, as Chairman Andrews said, the record, when it comes 

to investigations, indictments and convictions compares extremely 

favorably to the last administration, to the Bush administration, 

and actually suggests that the current OLMS is doing a better job 

in terms of targeting of scarce resources in a way that actually 

gives the greatest bang for the buck, so to speak. In terms of indictments and convictions, the number is actually up. 

And finally, in terms of providing ordinary union members with 

the type of information they are most likely to want in a usable 

form, the current OLMS also has an excellent record. And if you 

go to the website, if you look at the information that is available 

to ordinary union members, and if you look at the form that the 

information is being presented in, I think that reinforces the point 

that the current OLMS is doing an excellent job in this area. 

So, I would like to sum up simply by saying that under the current OLMS, enforcement of the law in this area has been robust 

and has been very professional. It is living up to its obligations 

under the law. 

The previous revisions did not bring about their stated purpose. 

And the people who were most likely to be hurt by the previous revisions, the revisions of the previous administration, are ordinary 

union members themselves. 

And thank you for your time. 

[The statement of Mr. Logan follows:] 

Prepared Statement of John Logan, Professor and Director of 

Labor and Employment Studies, San Francisco State University 

In the testimony that follows, I will stress four main points: First, the Bush DoL 

revisions have failed to promote the goals of greater financial transparency and disclosure, and have failed to provide any real benefit to ordinary union members. Second, if anyone has benefited from these revisions it has been not been rank-andfile union members, the public or the government, but external organizations hostile 

to unions and collective bargaining on ideological grounds. Third, while they have 

failed to advance accountability and transparency, the Bush revisions have imposed 

a significant compliance burdens on unions, and ordinary union members have 

borne the financial and administrative costs of those burdens. Fourth, by any significant measure, the current OLMS is fully committed to and has effectively enforced the goals of the LMRDA, and has provided ordinary union members with 

more useful information in a more useable form than did its predecessor. 

1. Have the Bush-era revisions improved transparency and accountability? 

There is no evidence of increased transparency and accountability. A brief examination of the rule changes introduced by the Bush DoL makes clear the absence 

of any evidence of real benefit to ordinary union members, the public or the government. • 2003 LM-2 Revisions: The 2003 revisions—which have not been rescinded by 

the current OLMS—made the LM-2 form considerably longer and more complex. 

But, as discussed below, these more detailed LM-2s have neither exposed or deterred corrupt practices nor provided ordinary union members with greater transparency and accountability. 

• 2009 LM-2 revisions: The substantial last-minute 2009 revisions to the LM-2s 

significantly increased the reporting burden over the already complex 2003 revisions 

with no attempt to determine if there would be any benefit to ordinary union members, the government or the public. The stated rationale, to expose cases of embezzlement, has not been achieved by the 2003 LM-2 revisions and would not have 

been achieved by these even more extreme revisions. 

• 2009 LM-3 revisions revoking authorization for reasons of untimely or deficient 

compliance: The 2009 proposal to make small organizations that had trouble filing 
17 

the more simple and straightforward LM-3 forms on time, often due to a lack or 

resources, lack or expertise or lack of experience, file the more complicated and onerous LM-2 forms simply makes no sense—the Bush DoL itself stated that the rule 

‘‘may appear counterintuitive’’—unless of course the true purpose behind this new 

rule is to force small organizations into criminal refusals to file. That is certainly 

likely to be the most common outcome of this revision, as it would be virtually impossible for most small organizations to comply with the complex LM-2 requirements if they are unable to comply with the simpler LM-3 requirements. Indeed, 

prior to the enactment of the LMRDA, Congress recognized that smaller organizations might face difficulty meeting the financial reporting requirements of the law. 

If transparency and accountability were really the goals of the revision, the logical 

solution to untimely or deficient compliance would not be to impose more onerous 

reporting requirements, but for OLMS to increase its compliance assistance for officers of small organizations. Rather than chose this logical option, the Bush DoL 

opted to take arbitrary and punitive measures that would cripple the ability of these 

organizations to represent effectively ordinary union members. 

• T-1 Revision on reporting for union trust funds: The Bush DoL T-1 report was, 

from the very beginning, a failure. The courts have twice struck down this revision—the D.C. Court of Appeals struck down the 2003 T-1 rule in 2005, and the 

D.C. District Court struck down the revised 2006 T-1 rule in 2007. The Courts 

would almost certainly have struck down the Bush DoL’s final 2008 iteration of the 

T-1 rule also, if only because it requires reporting on trust funds that unions do not 

finance or control. If the Bush T-1 had ever gone into effect, moreover, it would have 

covered subsidiary organizations, but not in as much detail as the LM-2 amendment 

adopted by the current OLMS. The OLMS has incorporated this reporting requirement into the LM-2 reports. The agency has reduced the threshold of gross annual 

receipts from $250,000 to $200,000, and requires disclosure of expenditures of 

$5,000 or more, where the Bush T-1 had a reporting threshold of $10,000. Thus, in 

several respects, the current OLMS has actually extended and improved reporting 

in this area compared with that proposed by the Bush DoL. 

• LM-30 2009 Revision: The Bush rule—which, in a sweeping departure from 40 

years of past practice, introduced longer and more complex LM-30 forms—may as 

well have been designed to discourage rank-and-file participation in unions. The 

Bush rule extends reporting requirements to a variety of workplace positions not on 

the union payroll—such as shop stewards and safety committee members—thereby 

greatly expanding the number of ordinary union members required to report personal financial information. This revision would affect at least 100,000 ordinary 

union members. The Bush LM-30 would require union members who are neither officers nor paid employees of the union to report, because it treats shop stewards and 

safety committee members as union employees if their employers do not dock their 

pay for time spent on grievances or safety matters. The Bush LM-30 also expands 

the reportable financial interests to require these union members to report on personal financial information, such as loans at commercial rates from a union-affiliated credit union or mortgages and other personal loans at commercial rates from 

any bank that did any business with the union or a union benefit fund or substantial business with any unionized employer. The potential filer must inquire of any 

lender how much business it does with unionized employers and keep records of the 

response in order to avoid criminal prosecution for willful failure to file. 

• Additional and Unnecessary Complexity in Revised LM-30: The Bush LM-30 is 

vastly more complicated than the form that had been used successfully for the first 

four-and-a-half decades of the LMRDA. The old LM-30 was a clear and straightforward two-page form, while the revised Bush LM-30 is a complex and confusing 

nine-page form. The Bush DOL quickly acknowledged the extent of the confusion 

caused by its revised form. After releasing the revised LM-30, the Bush OLMS immediately issued 83 FAQs to explain the new form—which works out at almost 10 

questions per page!—and then had to follow those FAQs with numerous additional 

clarifications. This revision is obviously contrary to sound and clear accounting 

standards, and has likely discouraged, not encouraged, rank-and-file participation in 

the effective governance of unions. 

• Overall impact of revisions: It is clear from OLMS annual reports that all of 

the additional reporting requirements implemented throughout the Bush-era DoL— 

and still mandated by the current DoL—has resulted in only a minor increase in 

enforcement actions. The number of union audits increased greatly under the Bush 

DoL, but the number of enforcement actions barely increased, suggesting that the 

2003 revisions had not assisted OLMS in enforcing the law more effectively. In sum, 

these revisions have not furthered the OLMS mission of protecting the interests of 

ordinary union members through greater transparency and accountability, and have 
18 

1 Even one of the harshest critics of unions who runs a business advising employers on how 

to remain union free and who has twice testified in Congress about the need for greater union 

financial accountability, Philip Wilson, concedes that the detailed financial reporting required 

by Bush DoL rules may have exceeded what Congress had intended when it passed the LMRDA. 

‘‘If you dig around in the congressional history,’’ Wilson writes, ‘‘there is certainly some question 

as to the amount of detail some members of congress thought was appropriate.’’ http:// 

lrionline.com/lm-2-reform-appeal 2 Newt Gingrich (Republican Whip), letter to Lynn Martin (Secretary of Labor) and Clayton 

Yeutter, February 19, 1992. 

most likely achieved exactly the opposite—less transparency, less accountability, 

and unions less able to serve the best interests of their ordinary members. 

Has more detail and complex financial reporting under the revised LM-2s resulted 

in greater transparency and accountability? Not only does the answer to this appear 

to be ‘‘no,’’ but it seems more likely that they have resulted in less transparency 

and accountability in union financial affairs than existed before. Nor does the legislative history suggest that Congress had ever intended this level of detailed and 

burdensome scrutiny, even though it enacted the 1959 Labor Management Reporting and Disclosure Act (LMRDA) at a time when union corruption and embezzlement was a far more significant and newsworthy issue than it is today.1 The Bush 

DoL failed to demonstrate a significant need in this area. There is no evidence of 

more cases of union embezzlement and corruption being exposed as a result of the 

far more detailed reporting required by the Bush DoL rules. Indeed, it is highly improbable that significant cases of embezzlement would be exposed because of more 

detailed, complex and sometimes trivial information on the revised LM-2s. Crooks 

are unlikely to self-report their own embezzlement, and while some ordinary union 

members may believe that they would be able to uncover cases of corruption with 

detailed and complex information, this is highly unlikely. Significant cases of embezzlement are likely to be highly complex cases that will not be uncovered by these 

reporting revisions. 

So what is the most effective way to uncover corruption, if not through complex 

and burdensome financial reporting requirements? OLMS conducts union audits, as 

it has always done, and if it finds something irregular, these may result in criminal 

cases. Moreover, the intelligence that forms the basis of union corruption cases often 

comes from the national union itself, as no one has a greater interest in dealing 

with cases of local corruption and embezzlement than the leadership of national 

unions. Many national unions now have detailed codes of conduct that cover not 

only the ethics of union officials but also financial misdeeds, and extensive internal 

controls to prevent and detect embezzlement. These kinds of controls, not more detailed but less transparent LM-2s, are most likely to deter and expose cases of fraud 

and theft. 

If the more detailed financial information and complex reporting requirements imposed by the Bush DoL have been ineffective when it comes to exposing cases of 

union corruption, one has to ask, what is the true motivation behind these rules? 

If the answer is really to go after the ‘‘bad apples’’ among union officials, then the 

current OLMS is doing this and doing it vigorously. If not, then it appears that, instead of finding a ‘‘significant need,’’ the Bush DoL imposed more burdensome and 

confusing reporting requirements for purely partisan political reasons—in order to 

misuse LM-2s to, in the words of then Republican Whip Newt Gingrich, ‘‘weaken 

our opponents and encourage our allies.’’ 2

More Detailed Information and Greater Complexity is Not the Same Thing as Increased Transparency: These revisions greatly increased the length and complexity 

of the LM-2 forms that large unions are required to submit. But the OLMS annual 

reports from 2005-2009 provide no evidence of any real benefit to union members 

produced by the 2003 revisions. Providing rank-and-file members with more detailed 

information in a more complex form is not the same thing as providing them with 

greater transparency and accountability. As a result of the Bush DoL 2003 revisions, LM-2s have increased enormously in size—forms can now be several hundred 

pages in length—and are not organized in an easily understandable form. Few ordinary union members have the time to read such long reports and make sense of 

them. Fewer still would know what is important and what is not, or know how to 

act upon on this detailed information. The 2003 revisions requirements for itemized 

disbursements—which had never existed previously—has likely made the reports 

much less easy for union members to understand and use. In instances such as this, 

less information, restricted to what is most important and presented in an accessible 

and useable form, really is more. 

The 2009 revisions introduce even greater complexity in LM-2s. The 2003 and 

2009 LM-2 revisions do not improve standards of financial accounting and reporting. 

Indeed, they do the opposite—they will produce greater confusion and obfuscation, 
19 

3http://lrionline.com/union—avoidance/operating—engineers.htm. Another major union 

avoidance firm—Adam, Nash, Haskell & Sheridan—charges employers for each LM-2 financial 

report and recommends them for use in fighting union organizing campaigns. 4LRI, ‘‘Union Free: 5 Keys To Winning Your Union Election,’’ http://www.slideshare.net/ 

pbwilson/5-keys-to-winning-your-union-election 5http://proemployer.net/FAQ.aspx 

6See, for example, the union avoidance seminar, ‘‘Not Your Father’s Union Movement,’’ at 

http://www.japantypeset.com/scope—newsletter/pdf/union-campaign-seminar.pdf 7See http://www.unionfreesc.org/mx/hm.asp?id=home 

not greater clarity. The more detailed reporting requirements under the Bush DoL 

have failed to provide ordinary union members with the kind of information they 

are likely to want, and has failed to provide information in a form they can easily 

make use of. One has to question whether the intention of the Bush reporting requirements was to assist and inform ordinary union members, or a politically motivated attempt to impose burdensome reporting requirements on unions and make 

available detailed union financial information that could then be used, including in 

misleading ways, by outside groups hostile to unions and their members. 

What kind of financial transparency and accountability do ordinary union members want? We have a dearth of empirical data when it comes to the financial literacy of union members, but based on the academic literature and my experience 

of running a university-based Labor and Employment Studies program that has connections with the practitioner community, I believe that they are interested in information in the following order of importance: first and foremost, they want access 

to salary information for officers in their local and national unions. Second, they 

want to know whether or not their union’s revenues are greater than its expenditures. Third, they want information, in a general and understandable form, on 

where the union’s money is coming from and where it goes. This financial information is currently available to union members, and was available prior to the Bush 

revisions. This information is most likely to be of interest during internal union 

election campaigns, and that is the way this information has always been used. 

2. Who Has Really Benefited from the Bush DoL Revisions? 

If not ordinary union members, then who has benefitted most from the detailed 

and complex financial information on the revised LM-2s? While we have little or no 

evidence of ordinary union members requesting or using this more detailed financial 

information, we have many examples of so-called ‘‘union avoidance consultants’’ 

using the information, charging employers for it, and encouraging them to use it to 

discourage employees from exercising their right to form a union. Like Newt Gingrich, they encourage the use of detailed LM-2s ‘‘to weaken our enemies and encourage our allies.’’ A large number of union avoidance consultants and law firms have 

promoted the use of information on Bush LM-2s in this way. Below I cite only a 

few such examples. 

One of the largest union avoidance firms in the nation, Labor Relations Institute, 

Inc. (LRI), tells employers that, ‘‘Facts drawn from these documents (LM-2s) * * * 

will help convince your employees to vote ’No’ on election day.’’ 3 In its publication, 

‘‘Union Free: 5 Keys To Winning Your Union Election,’’ LRI tells employers that revised LM-2s ‘‘contain a lot of valuable—and surprising—evidence to use against the 

union’s arguments during a campaign.’’ 4 The firm customizes it counter-organizing 

campaigns to oppose specific unions, and advertises LM-2s as a key component of, 

for example, the ‘‘Complete ’Operating Engineers Exposed’ Package,’’ which costs 

employers $2,300. Another important union avoidance firm, Labor Relations Services, which provides ‘‘Union Free Solutions for Employers,’’ states that when faced 

with an organizing campaign, employers must ‘‘use high grade union avoidance materials such as videos, LM-2 reports,’’ in order to defeat the union.5 Several other 

union avoidance firms—often large and sophisticated operations—charge employers 

for (publicly available) LM-2s, advising them that the information in these forms is 

an essential part of the tool kit they require to remain union-free. Highly-price 

union avoidance seminars, which promise to teach employers the tactics needed to 

defeating organizing campaigns, frequently include discussions of how to use the information in the more detailed LM-2s to oppose employee efforts to form unions.6

And the revised Bush LM-2 reports are also widely used by a several organizations 

dedicated to opposing all unions and collective bargaining on ideological grounds. 

For example, Union Free South Carolina, which is committed to keeping unions out 

of the Palmetto state, has a link to ‘‘Union LM-2 Information’’ from its homepage.7

The Opposite of What Congress Intended when enacting the LMRDA: These union 

avoidance firms, and their clients who are determined to operate union free, have 

benefitted more from the detailed and readily available financial information contained in the revised LM-2s than have ordinary union members. When Congress en-
20 

8On this point, see John Logan, ‘‘Lifting the Veiling on Anti-Union Activities: Employer and 

Consultant Reporting Under the LMRDA, 1959-2001,’’ Advances in Industrial and Labor Relations, Vol. 15 (2007), pp. 295-332. 9Professor Paul Clark, Penn State University, Professor Lois Gray, Cornell University, and 

Professor Paul Whitehead, Penn State University, ‘‘Survey of Administrative Practices in American Unions,’’ Fall 2010 

acted the LMRDA, it intended to ensure not only transparency in internal union affairs, but also transparency when employers hire outside consultants for the purpose of dissuading their employees from supporting unionization. However, this critical part of the law is rarely enforced, and as a result employees and other stakeholders usually have no idea how much money employers are spending on efforts 

to defeat organizing campaigns, and whom they are paying for this service. Indeed, 

this is perhaps a more pressing topic for a congressional hearing than the one under 

consideration today. Thus, not only does the multi-million dollar industry of union 

avoidance consultants and lawyers benefit from the Bush LM-2s, it also benefits 

from the one-sided enforcement of the LMRDA in general.8

3. The Burdens of Compliance: Who Pays? 

Have the Bush DoL rules imposed an onerous burden on unions? According to research conduct by three of the nation’s pre-eminent employment relations scholars 

at Cornell and Penn State Universities,9 the answer appears to be ‘‘yes.’’ These 

scholars have conducted the most extensive and credible survey to date of the actual 

impact of these new rules on unions’ financial and administration resources. Their 

results are based on empirical evidence, not on unsubstantiated or anecdotal statements or speculation. It is important to note that prior to the 2009 revisions, the 

Bush DoL made no real effort to assess the impact of the 2003 revisions on the actual experience of union officers, despite having had the opportunity to study four 

years of compliance with the new LM-2s. These scholars have investigated what the 

Bush DoL chose to ignore, and their findings demonstrate that the Bush DOL underestimated the burden of compliance. Based on a detailed survey of the administrative practices of 62 national unions, these academics concluded the following: • 83% of unions responding reported that existing staff were required to spend 

more time on LM-2 compliance and less time on other duties to comply with the 

new LM-2 requirements • 38% of unions responding reported that they had to significantly change their 

accounting practices in order to comply with the new LM-2 requirements • 29% of unions responding reported that the union had to hire consultants to 

comply with the new LM-2 requirements • 9% of unions responding reported hiring additional staff to comply with the new 

LM-2 requirements 

This striking evidence of a significantly increased recordkeeping and reporting 

burden—in terms of increased administrative time and effort to comply with the revised LM-2s—is based on an academic survey of national unions. One would expect 

to find an even greater impact on the recordkeeping and accounting practices of 

smaller unions with fewer resources and less expertise and experience in financial 

compliance. Thus, there is no doubt the Bush LM-2 revisions have had a significant 

impact on union resources and finances. Even if these new requirements had improved union transparency and accountability, one would need to weigh the financial and administrative costs of complying with the new rules. Part of the job of 

OLMS is to balance its mission of promoting transparency with the burden of compliance. Those who have had to pay for the greater investment in time, money and 

administrative resources to meet the new, complex reporting requirements are ordinary union members. Their membership fees that pay for the hiring of additional 

staff and external consultants, new recordkeeping and accounting systems, and existing staff time devoted to compliance with detailed, itemized financial reports. 

However, absent any evidence of real benefits to ordinary union members—as is the 

case here—the excessive burden of complying with these new rules seems completely unjustified. 

4. Has the OLMS Backed Off From Its Enforcement Duties? 

Strong Record on and Commitment to Enforcement: In the area of internal union 

transparency and accountability, the OLMS is currently doing exactly what it is 

supposed to do—providing an invaluable service to rank-and-file union members, 

the general public and the government. Not only has the agency not retreated for 

its historic enforcement mission, but there is considerable evidence that it is now 

carrying out the mission more effectively—that it is achieving ‘‘more with less,’’ 

which in this tough budgetary environment is something we commend. The current 

director of the OLMS, Dr. John Lund, recently stated his belief that, ‘‘strong en-
21 

10On Lund’s publications in this area, see, for example, John Lund and John McLuckie, 

‘‘Labor Organization Financial Transparency and Accountability: A Comparative Analysis,’’ 

Labor Law Journal, 58:4 (Winter 2007), pp. 251-266; John Lund, ‘‘Financial Reporting and Disclosure Requirements for Trade Unions: A Comparison of UK and US Public Policy,’’ Industrial 

Relations Journal, 40:2 (March 2009), pp. 122-139. 11On Don Todd’s extensive background in Republican Party politics, see Scot Lily, Beyond 

Justice: Bush Administration’s Labor Department Abuses Labor Union Regulatory Authorities 

(Center for American Progress, December 2007), pp. 4-6. 12Daily Labor Report, ‘‘OLMS Rethinks and Rescinds Bush-Era Rules but Retains Enforcement Role,’’ January 19, 2010. 13Daily Labor Report, ‘‘OLMS Rethinks and Rescinds Bush-Era Rules but Retains Enforcement Role,’’ January 19, 2010. 

forcement [of the LMRDA] is necessary.’’ Having spent much of professional career 

teaching local and national union officers how to improve the management of their 

financial affairs, Lund has impeccable credentials to fulfill this role. Lund is the 

country’s leading scholarly and practitioner expert in this area—indeed, he is an 

internationally-recognized expert who has advised on union transparency and accountability throughout the world—and has published several articles on union financial transparency and accountability in leading peer-reviewed academic journals. 

His publications have consistently stressed the need for strong rules and effective 

enforcement on union transparency and accountability.10 In contrast, the head of 

the Bush-era OLMS had no background and no qualifications in an area that requires both a knowledge of labor-management relations and technical expertise in 

financial reporting and transparency for non-profit organizations. Indeed, it appears 

that the background of the Director of the Bush OLMS, Don Todd, was largely in 

the area of campaigning against political ‘‘adversaries’’ of the Republican Party.11

In sum, it appears that both Todd and Lund were chosen to carry out their assigned 

roles—one to use the agency for political purposes, the other to bring professional 

expertise and balance to union financial reporting rules. 

Actions speak louder than words, of course, and a direct comparison of OLMS activities in fiscal years 2008 and 2009 also demonstrates the commitment of the current OLMS to vigorous enforcement of the law. In the area of internal union elections, the record is stable. In 2009 the agency investigated 129 complaints about 

union elections, compared with 130 in 2008; it supervised 32 rerun union elections 

in 2009, compared with 35 rerun elections in 2008; and it filed 32 voluntary compliance election agreements or suits in 2009, compared with 35 in 2009.12 The current 

OLMS also has a strong record in the area of investigations, indictments, and convictions. OLMS has increased slightly the number of criminal investigations—404 

in 2009 versus 393 in 2008; it won 122 indictments in 2009 versus 131 in 2008; and 

it increased slightly the number of convictions—120 in 2009 versus 103 in 2008. Finally, it completed 754 compliance audits in 2009, compared with 798 in 2008.13

Thus, convictions (Figure A) and indictments (Figure B)—important measures of 

OLMS activity, though not the only ones—have increased or held steady in number 

compared with the rate under the latter years of the previous administration, while 

compliance audits (Figure C) are down slightly only because the fall-out rate has 

increased. In short, the current OLMS has both a strong commitment to and good 

record on enforcement, and has promoted greater, not less, transparency and accountability in union affairs more generally. 

Is OLMS currently providing ordinary union members with useful information? 

An examination of the OLMS website illustrates that the agency is producing more 

useful information in a more usable form than during previous administrations. The 

current OLMS site has, for example, uploaded and made available audit letters, internal union election information, union trusteeship information, and historical conviction and indictment information dating back to the late 1990s. Improving on past 

practice, moreover, the website now defines clearly the terminology on indictments 

and convictions, making it much more understandable and usable for ordinary 

union members. Much of this information is now available in an accessible form to 

ordinary union members for the first time. Thus, it appears that the record of the 

current OLMS when it comes to promoting real accountability and transparency is 

better than that of its predecessor. 

Conclusion: Who Benefits and Who is Hurt? 

When analyzing the impact of the Bush financial reporting requirements, one 

should ask the question: who has benefited from the revisions and whom have they 

hurt? As mentioned above, there is no reliable evidence that the new reporting requirements have benefited ordinary union members, either by exposing or discouraging corrupt practices, or by making union officials more accountable to their membership. But certain people have profited from the Bush DoL’s significant departure 
22 

from previous long-standing and well-functioning union financial reporting rules— 

just not the ones intended by those who passed the legislation. Perhaps the most 

obvious beneficiaries of the Bush rules have been external financial experts hired 

by unions seeking to comply with the complex new reporting requirements—between one quarter and one third of international unions have hired external experts—and the ‘‘union avoidance’’ consultants who have charged employers seeking 

to oppose employee organizing efforts thousands of dollars for the LM-2 reports, repackaging the information in these public reports as sophisticated anti-union ammunition. 

Those hurt by the Bush DoL revisions have not been corrupt union officials or 

those seeking to hide information from their membership. Rather, those most damaged by the rules are the ordinary union members themselves. Their money has 

paid for the increased costs of compliance and they most likely have experienced 

worse representation at work. Instead of providing their members with effective 

services, union officers have spent time and resources on reporting rules that provide no discernable benefit to their members. To restate the survey findings of the 

scholars from Cornell and Penn State: under the Bush DoL reporting requirements, 

82% of national unions reported that existing staff were required to spend more 

time on LM-2 compliance and less time on ‘‘other duties.’’ The impact on local 

unions is likely even greater. These other duties include contract negotiations, grievance handling, and a variety of other essential union activities. In sum, the Bush 

DOL reporting revisions have hurt the very people whom the LMRDA is intended 

to protect. 
23 

Chairman ROE. Thank you, Dr. Logan. 

Mr. Fox? 

STATEMENT OF ARTHUR L. FOX, II, OF COUNSEL, LOBEL, 

NOVINS & LAMONT, LLP, ON BEHALF OF THE ASSOCIATION 

FOR UNION DEMOCRACY 

Mr. FOX. Chairman Roe and members of the committee, I want 

to thank you for inviting me to testify today on behalf of the Asso-
24 

ciation for Union Democracy, which I will refer to as AUD, short 

form. 

By way of background, AUD is a non-political organization that 

seeks to promote democracy in unions as a means of strengthening 

the union movement among workers and the public. AUD believes 

that a strong labor movement is an essential element in American 

democracy. 

AUD has been over the past 50 years in touch with tens of thousands of rank-and-file unionists, reform caucuses, a number of 

which have been engaged in battles against corruption and 

authoritarianism in their unions, and have become targets or even 

victims of unlawful and undemocratic repressive tactics by their 

union officers. 

It is on the basis of this experience that AUD has participated 

over the years in a dialogue with Congress over the extent to which 

the LMRDA has succeeded in promoting Congress’ objectives when 

enacting the law in 1959, and how it has fallen short and is in need 

of being strengthened. 

Personally, I have devoted nearly my entire professional career 

to representing underdogs, be they subordinate union entities, 

union reform caucuses or individual union members in their struggles with higher-ups in the union hierarchies bent on suppressing 

their rights under our labor laws—principally, the LMRDA. And I 

have served on AUD’s board of directors for many years. 

The overriding objective of the LMRDA was to rid the union 

movement of corruption and tyranny. Congress chose to achieve 

this objective by giving union members the means to clean up their 

own unions from within by bestowing on union members a host of 

democratic rights, including the right to elect local union officers. 

Of course, the cornerstone of any democracy is information, without which the right to vote is pretty meaningless—a ‘‘naked right.’’ 

We recognized this axiom as we watched symbolic elections behind 

the Iron Curtain during the Cold War. And today we are observing 

as the Internet has allowed populations in North Africa and the 

Middle East to come alive and seek, as we say in union parlance, 

to throw the bums out. 

Accordingly, when enacting the LMRDA, Congress charged the 

DOL with responsibility for requiring unions to become financially 

transparent. With information, members would be able to detect 

conflicts of interest and financial abuse by their elected officers, 

whom they could then vote to remove from office—and perhaps 

even to sue for breach of fiduciary in very, very serious cases. 

Sadly, this informational cornerstone of the LMRDA has yet to 

be fully realized. A few years ago, the OLMS did take steps to improve the union financial reporting requirements. 

While some of the changes to the reporting requirements promulgated by OLMS would arguably have been unduly burdensome on 

unions and of little value to members, many other of the provisions 

of the reformed reporting requirements would have been of great 

value to union members, enabling them more accurately to understand how their dues are being spent, as well as to detect conflicts 

of interest by their elected officers. 

Not only would the more detailed information have enabled 

union members to hold miscreant officers accountable for their mis-
25 

deeds, in all likelihood, they would have had an important—the revised rules would have had an important prophylactic effect by discouraging elicit behavior in the first place. 

Unfortunately, rather than fine tuning these new reporting requirements after the change of administrations, OLMS rescinded 

wholesale the prior administration’s more detailed reporting requirements. I am submitting for the record the written comments 

that were submitted by AUD in response to OLMS’s regulatory proposals. 

So be it for my remarks about the main topic of this hearing. 

However, this problem pales by comparison to the many, many 

even more serious weaknesses in the LMRDA itself. And over the 

years, AUD has participated in a number of hearings which have 

produced a very solid record in support of statutory reforms—a 

number of bills but, unfortunately, no legislative relief. 

And I would like to encourage this committee to look at the written statement that I submitted, which catalogues the various hearings that have been conducted over the years, and urge the committee to breathe new life into the LMRDA by enacting some very 

well needed amendments that would enable achievement of the objectives of the 86th Congress when enacting the LMRDA a halfcentury ago. 

Thank you. 

[The statement of Mr. Fox follows:] 

Prepared Statement of Arthur L. Fox, on Behalf of the 

Association for Union Democracy 

Thank you for inviting the Association for Union Democracy to testify today. By 

way of background, the Association (‘‘AUD’’) is a non-political organization that 

seeks to promote democracy in unions as a means of strengthening the union movement among workers and the public. AUD believes that a strong labor movement 

is an essential element in American democracy. It seeks to educate members concerning their rights under the Labor Management Reporting and Disclosure Act 

(‘‘LMRDA’’) and to defend members, regardless of their politics, against abuses by 

their union officials. Its Board of Directors includes persons who are eminent in the 

field of union democracy law and related issues. Until his demise some months ago, 

law Professor Clyde Summers, a cofounder with Herman Benson and the draftsman 

of LMRDA’s Title I, served on the Board along with labor law Professors Michael 

Goldberg and Alan Hyde. Experienced public interest litigators Paul Alan Levy, 

Barbara Harvey and myself, who have devoted much of their professional careers 

to representing individual union members and caucuses seeking to reform unions, 

also sit on the Board. Another distinguished Board member is James McNamara, 

former consultant on labor racketeering to the Manhattan District Attorney’s office. 

Founded shortly after enactment of the LMRDA, AUD has been, over the past 50 

years, in touch with tens of thousands of unionists, individual rank and filers, organized caucuses, elected officers in most major unions in our country, and members 

who have been engaged in battles against corruption or authoritarianism in their 

unions, a number of whom have become targets, or victims, of unlawful and undemocratic repressive tactics by their union officials. It is on the basis of this experience that AUD has participated over the years in a dialogue with Congress over the 

extent to which the LMRDA has succeeded in promoting Congressional objectives, 

and how it has fallen short and is in need of being strengthened. 

The overriding objective of the LMRDA was to rid the union movement of corruption and tyranny. Congress chose to achieve this objective by giving union members 

the means to clean up their unions from within by bestowing on members a host 

of democratic rights. Of course, and as many LMRDA scholars as well as a number 

of courts have noted, the cornerstone of any democracy is information without which 

the right to vote is meaningless—a ‘‘naked right.’’ Accordingly, when enacting Title 

II, Congress charged the DOL with responsibility for promulgating rules requiring 

unions to become financially transparent entities such that their members would be 

able to detect, inter alia, conflicts of interest and financial abuse by their elected 
26 

†The documents may be accessed at the following Internet address: 

http://www.gpo.gov/fdsys/pkg/CPRT-112HPRT68422/pdf/CPRT-112HPRT68422.pdf 

officials whom they could then vote to remove from office, and perhaps even sue for 

breach of fiduciary duty under Title V. Or, as set forth in S. Rep. No. 187 on S. 

1555 at 9, Vol. 1, NLRB Legis. Hist. of the LMRDA 405, this Title was intended 

to ‘‘insure[] that union members [would] have all the vital information necessary for 

them to take effective action * * * [such] that union members armed with adequate 

information and having the benefit of secret elections * * * would rid themselves 

of untrustworthy or corrupt officers.’’ See also March 17, 1999 Testimony of Professor Clyde Summers before the Committee on Education and the Workforce, Report No. 106-11 at p. 8 (Addendum H,† attached hereto). 

Sadly, this informational cornerstone has yet to be fully realized. A few years ago, 

the Labor Department’s Office of Labor-Management Standards (‘‘OLMS’’) did take 

steps to improve union financial reporting requirements. While some of the proposed 

changes to the LM-2 and T-1 reporting requirements under the LMRDA’s Title II 

would arguably have been unduly burdensome for unions and of little value to members, many others would have been of great value to members, enabling them more 

accurately to understand how their dues are being spent, as well as to detect conflicts of interest by their elected officers that could lead to, or already had resulted 

in, political, contractual, or financial abuse. Not only would the more detailed reporting requirements have enabled union members to hold miscreant union officers 

accountable for their misdeeds, in all likelihood they would have had an important 

prophylactic effect by discouraging illicit behavior in the first place. 

Unfortunately, rather than fine-tuning these new reporting requirements, after 

the change of administrations in January of 2009, OLMS rescinded wholesale the 

prior administration’s more detailed reporting requirements. I am attaching for the 

record, as Addenda A-C,† the comments AUD has filed over the past two years on 

this and related OLMS agenda items. 

Needed LMRDA reforms 

The OLMS political tightrope 

Indeed, while OLMS’ critical role in developing and enforcing democratic standards under the LMRDA has generally improved over the past half century, the Office suffers from an endemic political problem. Residing as it does within the Department of Labor, which serves as every administrations’ liaison to the incumbents 

within the institutional labor movement, OLMS suffers from an institutional conflict 

of interest. While many union officers have learned to live with the LMRDA and 

the political vicissitudes that are the hallmark of any democracy, very few union officials genuinely support the law and most would be thrilled to see it weakened if 

not repealed outright. As a consequence, as AUD has pointed out on numerous occasions over the years, the Labor Department is simply not an ideal home for OLMS 

given its responsibility for promoting Congress’ objectives embodied in the LMRDA 

and enforcing many of its provisions against unions and their incumbent officials. 

This fundamental problem has been identified on a significant number of occasions 

in the past by AUD. See, e.g., October, 1994 memorandum, originally prepared for 

the Dunlop Commission, entitled ‘‘Proposals of AUD for Strengthening The Rights 

of Union Members,’’ p. 15, submitted to Congressman Ford (Addendum D,† attached 

hereto); Herman Benson June 25, 1998 testimony before House Committee on Education and the Workforce, Report No. 105-125, at pp. 8-9 (Addendum E,† attached 

hereto), and his accompanying Statement at 4 (Addendum F,† attached hereto); 

March 17, 1999, Hearing Report No. 106—11 of the Committee on Education and 

the Workforce, Benson Testimony at p. 18, Professor Clyde Summers Testimony at 

p. 28, Chairman Boehner concluding remarks at p. 29: ‘‘I am one who believes that 

the best disinfectant is sunlight. And having reviewed some LM2s * * * over at the 

Department of Labor, I would agree that they are almost useless.’’ (Addendum H,† 

attached hereto). As mentioned, while OLMS did subsequently promulgate regulations modifying the LM-2 and T-1 forms to require unions to report more useful detail, those regulations have now been rescinded, most likely as a consequence of the 

sort of political pressure that conflicts with OLMS’ statutory mission. 

Quite apart from the adequacy of the content of financial reports mandated by 

the LMRDA and promulgated by OLMS, there exists a serious problem with respect 

to their preparation and submission by unions to OLMS that was the subject of 

hearings before the Committee on Education and the Workforce in 2002 and 2003. 

In a June 24, 2003 Statement submitted by OLMS’ Deputy Director (Addendum J,† 

attached hereto), ‘‘a significant number of unions consistently fail to comply with the 

statutory requirements that they timely file annual reports with the DOL. * * * In 
27 

†The documents may be accessed at the following Internet address: 

http://www.gpo.gov/fdsys/pkg/CPRT-112HPRT68422/pdf/CPRT-112HPRT68422.pdf 

report year 2002, over 43 percent [of unions] either were late or have failed to file 

* * * for that year.’’ He went on to explain that OLMS’ only recourse was to ask 

the Department of Justice to sue the non-reporting unions for injunctive relief, a 

very time-consuming activity for DOJ to undertake—indeed, a task that has rarely, 

if ever, been undertaken. As a consequence, a Bill was introduced to give OLMS the 

authority to impose civil fines on non-reporting unions (Addendum K,† attached 

hereto) which, unfortunately, was never enacted. 

While AUD has, over the years, identified a number of weaknesses in the basic 

provisions of the LMRDA, unions have also been creative in finding ways to circumvent them that AUD has brought to Congress’ attention. Thus, for example, 

while the statute requires all local unions to have periodic, secret-ballot elections 

directly among their members, it permits the indirect election of intermediate and 

national union officers by convention delegates rather than by members. See 29 

U.S.C. § 481. Similarly, while the statute gives members a secret-ballot right to vote 

for dues increases, it permits delegates at intermediate and national union conventions to approve dues increases under the watchful eyes of the unions’ top officers, 

individuals who will have the power of the purse strings and the ability to visit various forms of reprisal, political and/or financial, on subordinate ‘‘delegates’’ who fail 

to ‘‘vote the ‘one-party’ line.’’ See Summers, ‘‘Democracy in a One-Party State: Perspectives from Landrum Griffin,’’ 43 Maryland L. Rev. 93 (1984). See also Addendum E,† Benson Testimony at 34-35. 

UBC eviscerates members’ democratic rights via district councils 

In the 1990’s, the United Brotherhood of Carpenters (‘‘UBC’’) devised a mechanism which has been successful in eviscerating its members’ democratic rights 

under the LMRDA by creating and then transferring to ‘‘intermediate’’ District 

Councils 95 percent of the authority previously exercised by local unions, including 

the right to negotiate and enforce collective bargaining agreements and to raise 

dues. And after creating these new District Councils, and ordering a bunch of locals 

within various defined geographic areas to affiliate with them, the UBC president 

appoints the Councils’ all-powerful CEO who then hires as business agents those 

local union Council ‘‘delegates’’ who demonstrate their fealty to him—a classic ‘‘I 

scratch your back, and you scratch my back by electing me several years after my 

initial appointment to continue as the Council CEO.’’ For all intents and purposes, 

the rank and file in the UBC have been written out of the democratic process and 

their local unions have been reduced to social clubs which are even prohibited from 

hiring any elected officers or staff other than a single secretary to accept members’ 

dues. 

This undemocratic ‘‘business model,’’ conceived and implemented by the UBC, a 

model other unions particularly in the construction trades had begun to adopt, was 

the subject of the 2008 and 2009 hearings before the Committee on Education and 

the Workforce. See, e.g., Addendum E,† Hearing Report at pp. 23, 40; Addendum 

F,† Statement of Herman Benson at 3; Addendum G,† Statement of Clyde Summers; 

Addendum I† at p. 2. And while AUD proposed, and Bills were introduced to give 

union members (particularly including Carpenters) the direct right to vote in secretballot elections for the officers responsible for negotiating and/or administering their 

collective bargaining agreements, whether holding office in a local or a regional or 

District council, i.e., a ‘‘intermediate’’ union entity as defined in 29 U.S.C. § 402, 

remedial legislation has yet to be enacted. See, e.g., Addendum N,† attached hereto, 

and discussion infra at p. 8. Indeed, as recently as by letter from Herman Benson 

to Speaker Boehner, dated March 27, 2011, AUD stressed the urgency of Congress’ 

enacting relief from the UBC’s ‘‘autocratic mold.’’ 

Political restructuring via mergers and acquisitions 

Politically re-engineering union structures through mergers and acquisitions is by 

no means unique to the UBC. In recent years, unions have consolidated at both the 

national and local levels via affiliations and mergers at the national level, and the 

mergers of locals which have, in most instances, resulted in substantial alterations 

in both the structure and governance of the affected unions. In every instance, the 

changes have been either negotiated or engineered by officers with little or no input 

from affected members whose ability to participate in the democratic governance of 

their unions is, as a consequence, often diluted or otherwise eroded substantially by 

the merger/affiliation agreements and/or new, or substantially modified constitutions. 
28 

†The documents may be accessed at the following Internet address: 

http://www.gpo.gov/fdsys/pkg/CPRT-112HPRT68422/pdf/CPRT-112HPRT68422.pdf 

So also has there been a movement within a number of unions, particularly including the Service Employees International Union (‘‘SEIU’’), to consolidate ‘‘subordinate’’ locals. Indeed, some national union officers have largely abandoned the use 

of trusteeships as a device for retaliating against dissident local officials and manipulating the political landscape, opting instead to utilize their constitutional authority unilaterally to redefine the jurisdiction of subordinate union entities to reward 

loyal local officials with more members, a stronger financial base, and greater authority, while shrinking the authority, membership, and finances of dissident locals 

and their democratically elected officers. In a number of cases, national union officials have revoked local charters altogether, issued new local charters, and transferred members into newly created locals whose officers were appointed by the national, rather than elected by the locals’ members. See generally Steve Early, Civil 

Wars in U.S. Labor (Haymarket Books 2011); Addendum D,† Dunlop Memo at p. 

9. While some of these consolidations have been necessitated by economic considerations, often they have been utilized to retaliate against dissident locals and their 

democratically elected officers. 

To curb such abuses as well as to promote the underlying democratic objectives 

of the LMRDA, members affected by significant structural changes of their unions 

caused by mergers, affiliations, or jurisdictional changes should be given the right 

to ratify them by secret ballot vote on either a union-by-union, or local-by-local 

basis. 

Members need the right to ratify collective bargaining agreements 

Of great importance to all workers are the wages, and other terms and conditions 

of their employment. While some union constitutions grant their members the right 

to ratify collective bargaining agreements, many more do not. The LMRDA is silent 

on the subject and should be amended to guarantee to all union members a right 

to ratify the collective bargaining agreements under which they work. See, e.g., Addendum D,† Dunlop Memo at p. 3. 

Members’ right under Title I to vote on dues and fees has disappeared 

Section 101(a)(3) currently provides that members have the right to vote by secret 

ballot on proposed local dues increases while per capita taxes and/or dues collected 

by intermediate and national unions are allowed to be raised by other means. As 

a consequence, over the years unions have amended their constitutions to withhold 

authority from local and their members to establish and raise dues and placed it 

in the hands of intermediate and national executive boards and conventions that are 

not directly accountable to members. To restore to members the right to determine 

how much of their money they are willing to pay in union dues, section 101(a)(3), 

29 U.S.C. § 411a)(3), should be amended to read: 

‘‘All dues and initiation fees payable by members of any labor organization in effect on the date of enactment of this Act shall not be increased, and no general or 

special assessments shall be levied upon such members, except by majority vote by 

secret ballot of the members in good standing.’’ 

Abusive trusteeships need to be curbed 

Over the years, AUD has called Congress’ attention to the ease with which national, parent unions have been able to get around the intended restraints of 

LMRDA’s Title III when imposing trusteeships on politically recalcitrant locals. See, 

e.g., Addendum D,† Dunlop Memo at pp. 10-11; Addendum E, testimony of Herman 

Benson at p. 9; Addendum I,† Statement of Herman Benson at p. 2; Addendum N,† 

Bill to Amend Title III of the LMRDA. 

While this Title was enacted to curb politically abusive trusteeships by national 

union officers, the presumption of validity accorded by it to trusteeships for a period 

of 18 months has operated to make it extraordinarily difficult as a practical matter 

to challenge abusive trusteeships. While AUD supports outright elimination of this 

presumption, if any presumption of legitimacy is to remain in the statute, it should 

be shortened to 6 months. Whatever the problem that may arguably have necessitated imposition of a trusteeship, it can invariably be remedied within that shorter 

time frame, after which the trusteeship should be presumed to be unlawful and the 

burden of proof shifted from those challenging trusteeships to those imposing them 

to demonstrate by a preponderance of the evidence that the trusteeship was, and 

its continuance is, necessary for a purpose sanctioned by the statute. See proposed 

language in Section 4 of Addendum N,† attached hereto. 
29 

†The documents may be accessed at the following Internet address: 

http://www.gpo.gov/fdsys/pkg/CPRT-112HPRT68422/pdf/CPRT-112HPRT68422.pdf 

However, even these changes would be meaningless if local members are effectively deprived of the financial means judicially to challenge trusteeships. By seizing 

control of the local treasury when imposing trusteeships, the parent union can deprive members of access to their own dues without which they may be unable to 

retain legal counsel to preserve their democratic rights and their local’s autonomy. 

Hence, Title III should be amended specifically to grant courts to authority to order 

trustees to provide plaintiff members sufficient funds to retain legal counsel on a 

preliminary showing of good cause that the trusteeship may be unlawful. Thereafter, if and whenever the court should become satisfied that the trusteeship is lawful, the court would be authorized to withhold further funding of plaintiff-members’ 

legal expenses. 

Title IV—Officer elections 

AUD has long been championing amendment of LMRDA’s Title IV which confers 

exclusive authority on OLMS to enforce the statute’s officer election requirements. 

See, e.g., Addendum D,† Dunlop Memo at 12-15; Addendum E, Testimony of Herman Benson at 9. 

To assure that union officers are democratically accountable to those members 

whose lives and welfare they are empowered to impact via the collective bargaining 

process, the following provision should be added to Title IV, 29 U.S.C. § 481: 

‘‘In the event that officers of any intermediate union body, are responsible, in 

whole or in part, for the negotiation, administration or enforcement of collective bargaining agreements, or who exercise control over the finances or other major functions of local unions, such officers shall be directly elected by secret ballot among 

all members in good standing of all local unions affiliated with the intermediate 

union body, such as general committees, system or joint boards, district or joint 

councils, in which they hold office. Officers of other intermediate bodies may be 

elected by representatives of such local members who have been elected by secret 

ballot.’’ 

This amendment would, for example, restore democracy to the UBC. 

Further, section 402(c)(2), 29 U.S.C. § 482(c)(2), should be amended by striking 

‘‘affected the outcome of an election’’ and inserting ‘‘substantially understated or 

overstated the support of one of the candidates for office such that the democratic 

process was undermined.’’ The ‘‘affected the outcome’’ language has been construed 

over the years to impose on OLMS a burden of mathematical proof to demonstrate 

that the outcome of a given election would very likely have been different but/for 

a specific violation of Title IV. Given the difficulty of meeting this burden, only a 

small percent of Title IV violations get remedied and the overwhelming majority are 

effectively pushed under the rug, thereby giving encouragement to incumbent union 

officers to improve their odds of getting re-elected by violating Title IV. 

See also Addendum N,† Section 5. 

The duty to inform members of their rights under the LMRDA 

The last area of concern at AUD that I will highlight in this Statement is the 

failure of unions to inform their members about the rights conferred upon them by 

the LMRDA, as mandated by Section 105 of the Act, 29 U.S.C. § 415. The EmployerEmployee Subcommittee of the Committee on Education and the Workforce conducted an exhaustive hearing, Report No. 108-22, on this problem and reported out 

of Subcommittee two remedial Bills (H.R. 5373 and 5374) which, like so many other 

Bills to remedy deficiencies in the LMRDA also died on the legislative vine. See, 

e.g., Addenda H and L,† attached hereto. While AUD has done its best over the past 

half century, through its publications, website, conferences, letters and telephone 

conversations, to inform union members of their LMRDA rights, the only way to get 

this job done is to have unions, themselves, undertake this task as Congress mandated in the statute. Why is it that after more than a half century since enactment 

of the LMRDA compliance by unions with this statutory mandate is only occasional 

and sporadic? An enforcement mechanism clearly needs to be built into the statute. 

Chairman ROE. Thank you, Mr. Fox. 

I will now yield to Mr. Andrews. 

Mr. ANDREWS. Thank you, Mr. Chairman. 

I thank the witnesses for their testimony and their preparation. 

We appreciate your contribution. 
30 

To those of you who are returning, thank you, and to those newcomers, thank you. 

I would ask if any of the witnesses would contradict the facts in 

my opening statement about the number of indictments or prosecutions, or the amount spent per worker. Do you have any data which 

would conflict with any of those points? 

Ms. FURCHTGOTT-ROTH. The amount spent per worker is accurate, but it is caused by the decline in the number of unionized 

workers. Right now, 6.9 percent of private sector workers belong to 

unions. 

Mr. ANDREWS. That is right. 

Ms. FURCHTGOTT-ROTH. The percentage was a lot higher in—— 

Mr. ANDREWS. No, I completely agree. So, if you are trying to 

protect a certain class of people, if there are fewer people in the 

class, it seems you would spend less money. We are actually spending more per worker. 

So, Mr. Mehrens—— 

Ms. FURCHTGOTT-ROTH. But it is economies of scale. 

Mr. ANDREWS [continuing]. Do you have any data that would 

contradict what I said earlier, Mr. Mehrens? 

Mr. MEHRENS. No, Mr. Ranking Member. 

Mr. ANDREWS. I wanted to ask, Mr. Mehrens, your comments 

about the LM-2 form. Let us say that we have a union leader who 

is stealing from the members of his union. And what I want to 

know is if there is anything that the proposed changes to the LM2 rule add that would help members identify that theft, that cannot 

be found in the existing LM-2 form or the Form 5500 filed with the 

IRS. 

So, I am a union member. I suspect that my union leader is 

stealing from me. Is there anything I would find out from the proposed enhancements of the LM-2 that I could not find out from the 

old LM-2 or the 5500? 

Mr. MEHRENS. There were four different areas that were in—the 

January 21, 2009, final rule had four different areas where enhancements were made to the LM-2. 

Mr. ANDREWS. Right. 

Mr. MEHRENS. These were sales of investment, fixed assets. 

There was an additional disclosure made there. So, that—— 

Mr. ANDREWS. But if a fund sells a fixed asset, isn’t that reported 

in either its 5500 or its LM-2 now? 

Mr. MEHRENS. If a fixed asset is sold, the sale is reported on the 

LM-2 if it is from the union’s general treasury fund—— 

Mr. ANDREWS. Okay. 

Mr. MEHRENS [continuing]. Or in the name of the party—— 

Mr. ANDREWS. So, what new information would this enhancement add? 

Mr. MEHRENS. The name of the party transacting with the labor 

organization, either the purchaser or the seller of that fixed or investment asset. 

Mr. ANDREWS. Okay. And that is not disclosed presently in the 

LM-2 or the 5500? 

Mr. MEHRENS. It is certainly not disclosed on the LM-2 and—— 

Mr. ANDREWS. Do you know about the 5500? 

Mr. MEHRENS. I do not believe it is. 
31 

Mr. ANDREWS. But you are not sure. 

Mr. MEHRENS. I am not sure. 

Mr. ANDREWS. Okay. What is the second change? 

Mr. MEHRENS. Well, the two are closely related. The first two are 

closely related. The sales of investments and fixed assets—— 

Mr. ANDREWS. Right. 

Mr. MEHRENS [continuing]. The purchase of investments with 

fixed assets. 

Mr. ANDREWS. Okay. 

Mr. MEHRENS. There was an additional disclosure requirement 

there. I—— 

Mr. ANDREWS. I would ask the same question. Is there anything 

about the purchase of a fixed asset or investment that one could 

not find from the 5500 or the LM-2 without the enhancements? 

Mr. MEHRENS. The 5500 generally covers a different universe of 

filers. Most labor organizations would not be filing a 5500 for their 

own general—— 

Mr. ANDREWS. I understand that. But is there anything about 

the purchase of an asset that would be an additional disclosure in 

the enhanced LM-2? 

Mr. MEHRENS. You would have the name of the party 

transacting. 

Mr. ANDREWS. You sure that is not in a 5500? 

Mr. MEHRENS. If it is, I am not sure. 

Mr. ANDREWS. Okay. 

What is the third change? 

Mr. MEHRENS. The third change was the itemization of additional categories of receipts. 

Mr. ANDREWS. What does that mean? 

Mr. MEHRENS. What this does is it enables the union members 

and the public to say we will look at the incoming receipts of a 

labor organization. And there is a bunch of different categories of 

them. 

Let us say that you are a national labor organization, and you 

receive per capita due payments from various locals under your jurisdiction. Those payments would be itemized by the local, so that 

a member of that local could determine whether or not—— 

Mr. ANDREWS. How does that itemization differ from the existing 

LM-2? 

Mr. MEHRENS. Most categories of receipts on the LM-2 are not 

itemized. 

Mr. ANDREWS. But some of them are. 

Mr. MEHRENS. There is a category called ‘‘other receipts.’’ 

Mr. ANDREWS. Right. 

Mr. MEHRENS. Those are itemized, but most of them are not 

itemized. 

Mr. ANDREWS. Which are the ones that are not itemized? 

Mr. MEHRENS. I do not have that list in front of me. 

Mr. ANDREWS. Okay. My time is short, but I would also want to 

ask this quickly about the additional regulations. Let us say you 

have a shop steward who has nothing to do with the operation of 

a pension fund. And her husband gets a mortgage for a business 

he operates from a bank that the pension fund does business with. 
32 

Under the proposed enhancements to the LM-30, would she have 

to disclose her husband’s mortgage loan for his business? Anybody 

know? 

Mr. MEHRENS. The vendor to that entity, yes—— 

Mr. ANDREWS. Even though she, as a shop steward, has no control over the fund. 

Mr. MEHRENS. Yes. 

Mr. ANDREWS. Thank you. 

I yield back. 

Chairman ROE. Thank you, Mr. Andrews. 

Mr. Walberg? 

Mr. WALBERG. Thank you, Mr. Chairman, and thank you to the 

panelists for being here today, and giving your testimony. 

As a former member of the Steelworkers Union myself and working at U.S. Steel Southworks, south side of Chicago, as well as a 

short-time member of the Michigan Education Association, I have 

an appreciation for much of what the union is purported to and attempting to do, and some of the good things that they have done. 

Great concern, though, about our topic today. 

And in lieu of Ranking Member Andrews’ figures, and those 

being what they are, if they are that, let me ask Mr. Mehrens, you 

know, in your testimony, you discussed how staffing levels at 

OLMS are decreasing—approximately 135 people, a 35 percent reduction from 2010 to 2012. 

We know that in fiscal year 2010, OLMS conducted 356 criminal 

investigations, slightly up from the goal of 355. But for fiscal year 

2011, the agency set a target of only 300 criminal investigations, 

a 15 percent reduction, for whatever reason that might be. The 

agency set a goal of 200 compliance audits for fiscal year 2012, 

down again from 300 in fiscal 2010. 

We could go on and on with figures that point to these type of 

reductions. But I am bothered that the enforcement goals seem to 

be lessening. 

In the subcommittee which I chair, Workforce Protections, we 

have seen the administration engage in many efforts to increase 

enforcement to protect worker safety—as it ought. Yet when protecting the worker’s right to know and right to transparency on 

how their money is being spent, we see cutbacks. 

Why do you believe this is the case? 

Mr. MEHRENS. I think you have to look at certain comments that 

were submitted to the Obama-Biden transition team. You know, 

some of those talked about in my testimony. 

The AFL-CIO put together a list of things that they would like 

to see done during the transition time, were filtered around that 

the appropriate size of OLMS that the transition team would like 

was approximately the level that it was at in 2001, I think in the 

Clinton administration after the budget and staff had been slashed 

for a number of years. 

So, I think what you are seeing now in terms of the appropriations request and the FTE request reflects the administration’s priority in this area. 

I think it is also noteworthy to point out that the last time I 

looked, the OLMS budget was approximately nine one-hundredths 
33 

of 1 percent of the department’s budget. So, we are talking about 

a very small agency. 

And the department has asked for tremendous appropriations increases in other agencies. And it apparently had money to spend 

there, but deciding not to spend it here. So, I think that is a reflection of the administration’s priorities. 

Mr. WALBERG. Mr. Fox, excluding LMRDA reporting forms, 

where can union members find financial information on their union 

or their union trusts? 

Mr. FOX. Excluding the reports? 

Mr. WALBERG. Excluding. Excluding their report forms. 

Mr. FOX. They cannot. 

Mr. WALBERG. So, none at all. 

Mr. FOX. Correct. 

Mr. WALBERG. No place to go. 

Mr. FOX. Well, some unions do voluntarily have at their monthly 

meetings, the financial secretary will give some sort of a report. 

Some unions will publish in their newspapers some sort of a financial report. 

But it is an overview of finances, and it typically is not sufficiently detailed to enable the union members really to look closely 

at and understand where there might have been conflicts in finances, et cetera. 

Mr. WALBERG. Ms. Furchtgott, how do union reporting requirements compare to private sector reporting requirements? 

Ms. FURCHTGOTT-ROTH. I think it depends on whether the private sector is a corporation or the private sector is a small business. The reporting requirements for publicly traded corporations 

are very substantive. And these forms—these forms are not—the 

compliance burden is not as high as for publicly traded corporations. 

The compliance burden is probably higher than for small businesses in certain areas, although small businesses also have to provide a lot of details as to their expenses for tax purposes. 

I would also like to say, with response to the stealing, is it possible from the new LM-2 form to see if someone is stealing. The answer to that is, yes, because what is needed is verification that 

sales and purchases of assets were performed without conflicts of 

interest. 

And if I could give you an example. If, for example, a tractor is 

sold to a friend of someone in the union at a lower price, that is 

in essence stealing, because this piece of machinery is going out at 

a lower price. And so, that is in essence an incorrect valuation of 

the asset. 

So, what the new LM-2, what the regulations that were brought 

out in January 2009 were supposed to do, was make sure that the 

transactions were at arm’s length as the case may be. And that 

prevents that kind of stealing. 

Chairman ROE. Complete your—we are a little over time. 

Mr. WALBERG. Thank you for your latitude, Mr. Chairman. 

Chairman ROE. Mr. Kildee? 

Mr. KILDEE. Thank you, Mr. Chairman. 
34 

Mr. Chairman, I really will not be profound or cogent, or maybe 

even relevant in my remarks, so I apologize for that. But I just 

want to get them on the record. 

This weekend, I will attend four union meetings, as is my custom 

when I go home, make my rounds in my four counties. If I were 

announced at one of those, any of those meetings that I have a very 

important announcement to make, that we had a hearing of the 

Education and Labor Committee on the union transparency and accountability, they would be sitting there. 

But if I were to say, by the way, as co-chair of the Automotive 

Caucus in the Congress, I have been working with General Motors 

and the UAW, and we are going to add a third shift to the truck 

plant, I would get hosannas in the highest. I would probably be 

carried out, you know, with shouts. 

The jobs are so—people are so desperate for a job. They really 

are concerned about jobs. 

Oh, I am not saying we should not be concerned about what we 

are doing here today. But we are spending so much time on things 

that really are relatively not touching the lives of most of the workers in Flint, Michigan. 

Most of the workers in Flint, Michigan, are not being hurt by a 

lack of transparency or accountability on union leadership. But 

they are being hurt by a lack of jobs. 

So, I know my workers. I would like to do both. I would like to 

make sure that—and we certainly agree that there should be honesty everywhere—honesty in the Congress, honesty in unions, honesty wherever people gather together. 

But my priority right now—and this committee does not seem to 

spend much time on that—is jobs. In Flint, Michigan, we used to 

have 80,000 General Motors employees. Now we have about 8,000. 

The house I was born in has been torn down, as all the houses 

in the whole block are being torn down. The house I was raised in 

is being torn down, as are all the houses in that whole block are 

being torn down. 

I am not demeaning what we are talking about today. But I do 

wish that we would emphasize the need to help in some way, 

shape, manner or form, bringing all the sources of power together 

in this country to create jobs. 

Because if I were to tell them what our hearing was today, there 

would be a big yawn. If I were to tell them that, by the way, there 

is going to be a third shift at the truck plant, then there will be 

hosannas in the highest on that. 

Thank you very much, Mr. Chairman. 

Chairman ROE. Thank you. 

Dr. Heck? 

Mr. HECK. Thank you. Thank you, Mr. Chairman. 

Mr. Mehrens, we heard testimony that there was an increased 

burden on the unions in trying to comply with these new forms. 

And in some of the written testimony, that seems to be based upon 

an academic study of self-reported information from the unions 

themselves, which would call into question the validity of the 

study. 

Do you know how OLMS calculated the burdens associated with 

the individual reporting forms in arriving at their decision that the 
35 

burden was too great, that they would need to suspend those 

forms? 

Mr. MEHRENS. Congressman, it depends on which of the rules 

you are referring to. 

If you are referring to the most recent rule, the way that worked 

is, the department first built a spreadsheet of tasks that had to be 

accomplished in order to file the reports. You would break the reporting burden down by specific categories. You would figure out 

how many line items would exist in that particular category. 

You would assign a dollar value to the amount of time that was 

spent based on the type of personnel that would be doing that particular task. And then you would aggregate that number together 

to come to a final burden number that would meet the requirements of the analysis necessary under the Paperwork Reduction 

Act. 

Mr. HECK. And so, in your opinion, was that analysis, as it was 

conducted, a valid analysis, and such that the findings would justify suspending the final rule, or not using the forms? 

Mr. MEHRENS. Well, I would say this. The department’s numbers 

in the 2009 final rule were supposedly part of the basis for the department now proposing, and then finally rescinding, those enhancements. 

However, if you look at the Paperwork Reduction Act section of 

both, in those rulemaking, as well as the final rule, the current administration adopts wholesale the burden numbers that were used 

in 2009. 

And so, if the current administration had different numbers, or 

believed that that number was too high or too burdensome, it 

would have submitted a new statement as to what it actually believed those numbers were. 

Mr. LOGAN. Mr. Heck, can I also answer that question? 

Mr. HECK. I just want to have a question for Ms. Roth. 

You brought up the right to work, some states in your—— 

Ms. FURCHTGOTT-ROTH. Correct, yes. 

Mr. HECK [continuing]. In your testimony. 

My state, Nevada, is a right-to-work state. And periodically, the 

state legislature is faced with a fair share law, in which non-union 

members would be required to pay a certain amount, not as union 

dues, but for the services of the recognized collective bargaining 

unit. 

Without the forms currently under discussion, would there be 

any place that those individuals who are not union members, but 

may be subjected to a fair share law, be able to ascertain whether 

or not their payments or their assessments were actually being 

used for the purposes of representation versus being used for representational activities, potential lobbying or political activities, or 

contributions, gifts and grants? 

Ms. FURCHTGOTT-ROTH. The original LM-2 form would give them 

some of that information. But the new, enhanced LM-2 form, which 

the Labor Department is trying to roll back, gives far more information. 

There is no way they could find out that information without the 

new LM-2 form that the department is trying to roll back, or the 
36 

T-1 form that shows information about trusts, overseen by the 

unions. That is correct. 

There is no way they could find out that information. There is 

information in these forms that they could not find out otherwise. 

Some information is provided by the 990 IRS forms, but those 

come out with a 2-year delay. 

Mr. HECK. Thank you. Thank you, Ms. Roth. 

I yield back, Mr. Chair. Thank you. 

Chairman ROE. Thank you. 

Mrs. McCarthy? 

Mrs. MCCARTHY. Thank you, Mr. Chairman, and I appreciate 

having this hearing. 

You know, I sit here wondering what kind of witch hunt we are 

on. We have 15 million people unemployed. We have nine million 

people underemployed. 

And I also am on the Financial Services Committee. And for a 

year-and-a-half, we have been working, and we did work, on legislation to have transparency and clarity on what caused the economical crisis that this country has gone through. 

And yet, for the last couple of weeks, all we have been doing is 

tearing that apart and taking away that transparency. And yet, 

here we have a hearing, in my opinion, which I think everybody 

on this committee certainly wants to have transparency, wants to 

have clarity on where our unions are. We do not want any bad 

union bosses, or anything like that. And we have put the regulations there. 

And yet, with H.R. 1, we have seen the large amount of money 

to protect workers taken away. And yet, we have so many people 

killed every year, injured in the job. 

So, instead of not, certainly, working on the clarity, why aren’t 

we doing something to make sure our workers in this country, 

whether they are union or non-union, why aren’t they working? 

Why aren’t we doing stuff to get them back to work, to get the 

economy going? 

But with that being said, Mr. Logan, I wanted to ask you a question, and I saw you kind of like jumping before that. You wanted 

to answer some questions, so I am going to give you time to pick 

any points up that you might have heard from your colleagues that 

you might want to answer. 

In your testimony, you noted that part of the duty of OLMS is 

to balance the mission of promoting transparency with the burden 

of compliance. 

What, if any, considerations do you think were given by either 

the Bush administration for the financial costs, the administration’s time and effort needed by these unions to comply with reporting changes? 

And there is a follow up. In most cases, who footed the bill for 

these new expenses? 

Dr. Logan? 

Mr. LOGAN. Thank you. I think the clear answer is, very little 

examination, very little thought was given to this. When the new 

revisions were introduced in 2009, they were based on estimates 

that were carried out prior to the 2003 revisions. So there was no 
37 

actual study of the actual administrative burdens imposed on 

unions. 

Now, as we said, I mean, this is not a debate about the desirability of transparency and accountability. We all agree that those 

are desirable goals. It is simply about, partly about, the utility of 

the Bush era revisions, and also about the records of the current 

OLMS, which I said, at the least, be very good in this area. 

But Mr. Heck is no longer here, but he cited a study I mentioned 

in my written testimony that was conducted by two scholars at 

Penn State, one at Cornell University, who are among the preeminent scholars of employment relations in the country. They did 

a nationwide survey of union administrative practices. And their 

findings are quite startling about the administrative burden of the 

2003 revisions to the LM-2 form, which are still in place, and they 

are still mandated by the current OLMS. 

And what they found was, 83 percent of unions responding report 

that existing staff were required to spend more time on LM-2 compliance, less time on other duties, to comply with the new LM-2 requirements. 

They go through a number of other areas about new accounting 

practices, about hiring external consultants to comply, about hiring 

new staff to comply. 

And Mr. Heck suggested that, since this is based on union selfreporting, it is discredited. I do not really know what to say, but, 

I mean, even union officials tell the truth sometime. 

But, you know, there is a serious point. I mean, I do research on 

union practices. I do research on company practices. And, of course, 

when doing research on company practices, I survey companies and 

ask them. 

But you do not simply accept what they say at face value. You 

design surveys. And academics have background, you know, they 

have certain skills in these areas to design surveys, to try and uncover some kind of empirical truth. 

And, you know, this is what we want. I mean, we do not have 

predesigned notions of what the results should tell us. We do not 

belong to a think tank of the right or to the left and say we are 

going to design a survey that is going to come up with this particular result. 

These are leading scholars in the field. They design the survey. 

It is something like a process of trust examination, not unlike what 

you are doing here, to come up with a number of questions to make 

sure that the answers are consistent and to try and uncover what 

is really happening in terms of the administrative burdens input. 

And as you said, I mean, the people who are bearing the cost of 

this additional administrative burden, or the union members themselves. 

But the burden would be fine, perhaps. I mean, you always have 

to balance, of course, the goals with the administrative burden involved. The burden would be fine, if there was a very, very clear 

payoff in terms of increased transparency and greater accountability. 

The point is, there is no evidence of that whatsoever with these 

revisions. We do not have any evidence that union members are 

being provided with useful information in a usable form. 
38 

But nonetheless, they have created this enormous new burden on 

unions, which ordinary union members have to pay for, both in 

terms of paying out of their dues money, and in terms of paying 

in—that union staff time is being used to comply with these very 

detailed, very complex forms, rather than contract negotiations, 

rather than dealing with grievances, et cetera. 

So—— 

Chairman ROE. Mr. Logan, could you—— 

Mr. LOGAN. Sorry. 

Chairman ROE [continuing]. Finish? Thank you. 

Mr. LOGAN. Okay. I said academics could be long-winded, so I 

apologize. 

Chairman ROE. So can politicians. 

Mr. LOGAN. I said, I think, you know, you simply cannot say this 

survey does not have credibility because it is based on a national 

survey of union officers. 

The people conducting the survey have impeccable credentials. 

They know what they are doing. They are trying to uncover the 

truth, not come up with some polemical argument concerning the 

impact of these new revisions. 

Chairman ROE. Dr. Bucshon? 

Mr. BUCSHON. Thank you, all the witnesses, for coming. And I 

would also like to say that my major focus in the Congress is job 

creation, and also has been stated on the other side. 

And in that context, I think this hearing is very important, because I believe that the policies that are currently in place and the 

ongoing policy positions, specifically related to regulations that we 

currently have in regards to the administration, are detrimental to 

job creation. 

And in that context, noting that AFSCME was the top outside 

political donor to all political candidates, promoting candidates that 

are putting these policies in place, this is a very important hearing. 

In regards to the fact that—my question is, is the change in reporting going to significantly hamper the ability not only of union 

employees, but everyone else, to determine where political dollars 

are being directed? And if they are being directed from union dues, 

sometimes specifically in contrast to the political views of the people that are forced in many cases to contribute. 

So, my question is, to Ms. Roth, is the current change, or the rescinding of the changes that were put into place for transparency 

reasons, does it—will it hamper the ability of us to determine 

where political donations have been made by union organizations? 

Ms. FURCHTGOTT-ROTH. Absolutely. And it is very much connected with jobs. 

I mean, here Congress spends a lot of time on Sarbanes-Oxley, 

Dodd-Frank. Transparency is fine for shareholders when it comes 

to the man in the street. The union rank-and-file worker, we are 

saying that he does not have the same right to transparency as the 

shareholders. 

He has the right to know where his money is going, because, as 

you mentioned, $90 million, the largest single contributor to the 

2010 electoral campaign was actually SEIU, AFL-CIO. They boast 

about how much they contribute. 
39 

Ninety-nine percent of the funds go to Democratic candidates, 

who are in favor of bills such as the Employee Free Choice Act, the 

Paycheck Fairness Act, the cap-and-trade energy tax, the new 

Obama health care law—all of which reduce jobs in the United 

States. And that is one reason we have had such slow job creation. 

The recovery was started June 2009. We still have 14 million 

Americans out of work. Our unemployment rate is close to 9 percent. 

The link could not be clearer. 

Mr. BUCSHON. Thank you. And I also would like to just say as 

a background, my dad was a United Mineworker for 37 years, so 

I have a great deal of respect for the workers and their ability to 

hold their unions accountable. 

I went through three strikes when I was a kid, and so, again, 

this to me is about the workers and their rights and their ability 

to assess whether or not their union is appropriately using their 

dues. 

And that is, I think, where this hearing, in contrast to what has 

been said, does have a very direct connection to job creation, because the policies that are put in place in the United States government have—the union donations, the political candidates do 

have a major effect on the direction of policies in this government. 

And in my view, it has stymied job creation over the last 2 years. 

So, my main focus also is job creation. And in that context, that 

is where my concern lies in this hearing. 

So, with that I yield back my time. Thank you. 

Chairman ROE. Thank you. 

Mr. Hinojosa? 

Mr. HINOJOSA. Thank you, Mr. Chairman. Thank you for holding 

this hearing. 

And I want to thank each of our witnesses for your participation. 

I want to thank you, Dr. John Logan, for your honesty in saying 

that you are long-winded. I want to ask you to be short, so that 

we can have longer opportunity to dialogue on some questions that 

I want to address. 

I want to talk about the Obama administration’s effectiveness. 

You have heard today from other witnesses that they Obama administration has weakened union financial reporting requirements 

to the detriment of union members. Do you agree with that statement? 

Mr. LOGAN. No, I do not agree with the statement. As I said—— 

Mr. HINOJOSA. Tell me why. 

Mr. LOGAN. I think it is partly to do—the question is not whether 

or not transparency is a desirable goal. It is to do with the utility 

of the previous revisions. And I think if you look at the record of 

the OLMS, it demonstrates that it has not weakened it. 

What we saw under the previous administration was there was 

a great increase in the budget of OLMS, and a great deal of increased audit activity, but very little payoff in terms of increased 

enforcement activity. 

And so, if you look at the record of the department OLMS, in 

terms of criminal investigations and in terms of indictments, the 

record, it stands up. It is in my written testimony. I show it in the 
40 

figures—at the back I have all of the figures comparing 2010 to 

2009. 

I mean, I think the figures do speak for themselves. 

Mr. HINOJOSA. I agree with you that the figures speak for themselves, because if you look at the second term of President Bush 

and his administration, the losses that we had in jobs was the 

greatest that I have ever seen while I have been in Congress 15 

years. 

A good example would be, the last month that he was in office 

we lost 700,000 jobs. And the months before that, it was all in the 

hundreds of thousands of jobs lost. 

And I do not see or hear my friends on the other side of the aisle 

questioning why we did not have more transparency and clarity as 

to see why all of that was occurring. 

Let me ask—or at least make a statement—that in my opinion, 

Secretary of Labor Hilda Solis is focused in protecting all men and 

women in the labor force, and that she is doing a good job. 

So, let me ask you, Dr. Logan, Obama as compared to President 

Bush. In your testimony, you state that the Obama administration 

has strongly enforced the rights of workers under the Labor Management Reporting and Disclosure Act. 

How does the Obama administration’s efforts compare with the 

Bush administration? 

Mr. LOGAN. Well, I think it compares very favorably. It is to do 

with the more efficient use of resources and the better targeting of 

these resources. 

And that is why we find, despite the fact that we are in a period 

of flat budgets—there is no doubt about that all government agencies are having to make do with fewer resources. But now, effectively, the agency is doing more with less. It is targeting its investigations better, and this is having a direct payoff in terms of indictments and convictions. And as I said, the data shows this very, 

very clearly. 

And it is trying to provide union members with the type of information they want in a usable form, and not simply to pass revisions to the existing law that have no clear benefit for ordinary 

union members, the government or the public. 

Now, it has been noted from the very early history of the 

LMRDA that there is a danger of using union accountability, which 

everyone agrees that unions should be accountable—— 

Mr. HINOJOSA. Dr. Logan, I am going to interrupt you, because 

I think you have made your point. 

Let me ask you this last question. In your testimony that I read, 

you cite evidence that the enhanced LM-2 requirement has imposed 

an increased recordkeeping and reporting burden. 

So, when unions spend more time and money complying with 

those requirements, does that mean unions have less time and resources advocating for workers? 

Mr. LOGAN. Yes, I mean, it does mean that. And it also means 

that the money that is used to pay for these new recordkeeping 

procedures, which do not provide any useful information to rankand-file union members—the new software, the new accounting 

procedures, the outside expertise, the new staff that are hired to 

comply with the new revisions—all—members choose money. 
41 

And again, as I said before, if there was some clear payoff for 

this, you know, perhaps one could justify the use of members’ dues 

money for this reason and the administrative burden. 

But in the complete absence of any concrete evidence of any useful information being provided to ordinary union members, I think 

it seems, if not the intention being to impose a greater burden, 

then to tie unions up in these sort of administrative knots, then 

that is clearly being—— 

Mr. HINOJOSA. My time has expired, Dr. Logan. Thank you very 

much. 

Chairman ROE. Thank the gentleman. 

Mr. Barletta? 

Mr. BARLETTA. Thank you, Mr. Chairman. 

Ms. Roth, in your testimony, you said that until 2005 the union 

sector was mostly exempt from any regulation that required detailed financial disclosure. 

Ms. FURCHTGOTT-ROTH. Yes, correct. 

Mr. BARLETTA. Why do you think it took so long for the Department of Labor to get it straight and update these forms? 

Ms. FURCHTGOTT-ROTH. Well, the Labor Department under Secretary Chao started updating the forms as soon as they came in, 

and then the new form was ready in 2003. 

That sounds like a long time, but it takes a couple of years to 

actually get a form ready to go, because you have to have notice 

of proposed rulemaking and comment. You have to allow the public 

to comment. Then you have to deal with the comments. 

So, it was out in 2003. 

Then the department was sued by the AFL-CIO to prevent the 

form going into place. And it was put in place in 2004 after the 

suits were resolved with Judge Kessler. And then it became operative for fiscal years from 2005 onwards. So, that is why. 

Mr. BARLETTA. Are the reporting requirements for unions vastly 

different from the reporting requirements for the private sector 

companies? 

Ms. FURCHTGOTT-ROTH. I would say that they are less stringent 

than the requirements for publicly traded private sector companies. 

The forms, the LM-2 forms before 2005 had vast gaps in them 

with expenses, with millions of dollars, other millions of dollars. So, 

the form existed before 2005. But many of the forms—the LM-30, 

for example—were not enforced. 

Under its current status, I would say the forms are less onerous 

than those filed by publicly traded companies. 

Mr. BARLETTA. In your opinion, is there a way for Congress and 

this committee to work with the current Department of Labor to 

reach some kind of compromise on what the unions must report on 

these forms? 

Ms. FURCHTGOTT-ROTH. I think that it is to the great advantage 

of rank-and-file union members to know what is going into the 

trusts, which is the T-1 form. It is very useful to know if a piece 

of equipment is being sold at its correct price or not, with the difference being absorbed either by the union or by some friend of the 

union. 

So, I would say that Congress has a duty to protect the rankand-file union member, who does not have any power, who is po-
42 

tentially intimidated by union bosses. Therefore, he cannot speak 

for himself. And he deserves the utmost protection. And all this information is something that he deserves to have. 

Mr. BARLETTA. Mr. Mehrens, why do you think it took over four 

decades to stir up this much anger in the labor movement? I mean, 

it is 40 years. 

Mr. MEHRENS. I think, like any piece of major legislation, it really depends on the secretary that is enforcing the act. The sponsor 

of the renewal, after the act was passed, said that the utility of this 

act is going to depend greatly on the secretary of labor. 

If the secretary of labor is engaged and interested in making the 

act effective, then it will be. And if that secretary is not, then the 

act will not be really effective. 

And for a number of years, like you said, Republican and Democratic administrations did not really have a lot of interest in updating the reports. And it took a new administration to come in that 

did have an interest and saw the value of transparency to make 

that happen. 

Mr. BARLETTA. Thank you. 

Ms. FURCHTGOTT-ROTH. It was difficult for Secretary Chao. She 

was threatened. She was sued by the AFL-CIO. It took a really 

tough woman—not a man, a woman—to take this issue on and get 

these forms. 

And also the overtime rule; it just had not been updated for 40 

years, either. But she updated that to have—and that again took 

a great deal of toughness on her part. 

And that is why it had not been done before. No one else was 

tough enough to take it on. 

Mr. BARLETTA. Thank you, Mrs. Roth. I have four daughters. I 

know how tough women can be. [Laughter.] 

I yield back the balance of my time, Mr. Chairman. 

Chairman ROE. I thank the gentleman. 

Mr. Tierney? 

Mr. TIERNEY. Thank you, Mr. Chairman. 

I am moved nearly to tears by the great concern for the labor 

rank-and-file from my Republican colleagues and from some of the 

witnesses down there. It is absolutely touching. 

You know, I look at the Labor Management Reporting and Disclosure Act, and it says, to ensure the basic standards of democracy 

and fiscal responsibility in labor organizations representing employees in private industry. And that is the goal of that act. 

And I can tell you that I do not have people knocking my door 

down, rank-and-file members of a union, saying that this is not 

being done right, and that they feel their rights are not being protected. 

This secretary of labor and others under Democratic administrations, as well, have done investigations. They have done audits. 

They have done good work in making sure that people comply with 

this and with the disclosure. 

So, I was a little bit surprised, but at least I think it is honest 

for Ms. Furchtgott-Roth to come forward and acknowledge that 

there are politics involved here. 

So, let me just state for the record a little bit of history on this 

that has been reported, and then I will go on with it. Former 
43 

Speaker Newt Gingrich was the first person to suggest the use of 

the act as a means to weaken unions. 

Gingrich directed the secretary of labor at the time, Lynn Martin, to use the act to enhance union reporting requirements as a 

means to, open quote,—‘‘weaken our opponents and encourage our 

allies,’’—close quote. 

Grover Norquist has said, open quote,—‘‘every dollar that is 

spent on disclosure and reporting is a dollar that can’t be spent on 

labor union activities,’’—close quote. 

You know, I seem to—back the recession period, 2001 to 2007, 

and there was tremendous loss of jobs on that. I see the fingerprints of weak performance by the SEC and other regulatory 

agents, the deregulation of Wall Street all over that. 

I do not see any fingerprints of labor union activity doing that. 

In fact, during that period, labor had extensive reporting requirements under George W. Bush. So, I do not see a direction of those 

lost jobs from labor action as much as we do from deregulation of 

Wall Street. 

There was a former staff member to Vice President Dan Quayle. 

The fellow’s name was Robert Guttman. He was the assistant secretary of labor for employment standards. And he was the one who 

was charged with running the OLMS, the act. 

He strongly objected to the reporting changes, and argued that 

they were a lot of junk, in quotes. And, quote,—‘‘would produce little useful information, while imposing unconscionable burdens on 

unions,’’—close quote. The department went ahead with the 

changes, and Mr. Guttman resigned. 

The second Bush administration continued where the previous 

one left off. The man that was charged with running OLMS was 

formerly the head of opposition research at the Republican National Committee and did not have extensive experience with labor 

issues. 

And one of his first efforts was to implement changes to the LM2 reporting requirement and greatly increase the volume of what 

unions were mandated to report. It is estimated that the amount 

of information required in the form increased at least 60 percent 

on average. One union reported an increase in the pages of reporting from 125 pages to 800 pages. 

The problem with the enhanced requirements was not just that 

the volume was increased, but also with the lack of usefulness for 

the information. 

Dr. Logan, does that sound like an accurate history of what was 

going on here to you? 

Mr. LOGAN. Yes, it is an accurate history. I think I would say— 

I mean, it would be inappropriate for me to comment on the intentions of the previous administration—say that if the revisions were 

designed to produce greater accountability and transparency, they 

were ill-thought-out and clearly failed in doing so. 

We have not uncovered any cases of corruption that would not 

have come to light otherwise. They have not produced ordinary 

union members with useful information in a useful form. 

And so, since it failed so abysmally in achieving that, I think 

there is a question as to what was the real motivation behind some 

of these revisions, and whether it was really to burden unions with 
44 

all sorts of additional administrative costs and to reduce their effectiveness, and to supply information that could be misused by people who are hostile to unions and to collective bargaining. 

Because as I pointed out in my written testimony, while we do 

not actually have any reliable evidence to suggest that the Bush 

era revisions either have or would have produced additional and 

useful information to ordinary union members, they certainly have 

been used extensively by people who are hostile to unions and to 

collective bargaining on ideological grounds. 

Mr. TIERNEY. And I note that the Obama administration record 

on pursuing them on this act, on investigations and on prosecutions 

is actually more rigorous than that under the previous administration on that. 

And I do not think any of us want to try just ad hoc to ascribe 

motivations to others. We look to their own words. The quotes that 

I gave you from former Speaker Newt Gingrich, from Grover 

Norquist and from Mr. Guttman, I think pretty much speak in 

their own words about the motivation on that. 

Mr. LOGAN. And I would also say that, again, to speak to the 

qualifications of the current head of OLMS under this administration is someone who really is the country’s leading expert in this 

area of union financial transparency and accountability, and an 

internationally recognized expert. I mean, his qualifications really—it would be difficult to find anyone who matches him in terms 

of his experience, his professionalism. And he has brought this to 

the agency. 

And the agency is doing precisely what it is supposed to do under 

the law, and doing it very well. 

Mr. TIERNEY. And that would be in contrast to the head of opposition research for a political party that was previously there. 

I yield back. 

Chairman ROE. Thank you, Mr. Tierney. 

Mr. Wu? 

Mr. WU. I thank you, Mr. Chairman. I have no questions of this 

particular panel of witnesses. Thank you very much. 

Chairman ROE. I thank the gentleman. 

I will ask a few questions, and then we will wrap this up. 

We want to thank you all for being here. 

And I am sorry Mr. Kildee is gone, because I did my part. I 

bought a new Chevrolet Equinox for my wife. Unfortunately, the 

Toyota that I traded in on it, which was made in Georgetown, Kentucky, my Chevrolet was made in Toronto, Canada, I found out. 

But I did do my part there. 

I also take a little bit of issue with one of my colleagues about 

not caring about union workers. My father, too, was a union worker for 40 years. He worked in a factory making shoe heels, and I 

cared very much about him and about the treatment he got and 

where his union dues were spent. 

I want to go a little different direction. What is the purpose of 

the trusts that the unions set up? I know there are—I am very familiar with the 5500 reporting forms in a trust, because of some 

experience I have had as a—in college trusts. 
45 

But my question is, why are these trusts necessary? And why are 

they set up? If it is transparent, those funds ought to be easily followed. It should not be difficult to follow. 

And I would think that the union would want transparency, because there are all these questions swirling around about the activity anyway, and have been for decades. 

So, why wouldn’t you want to have transparency? And why do 

they set up these trusts? 

Ms. FURCHTGOTT-ROTH. Well, some of the trusts are credit 

unions, strike funds, pension and welfare plans and building funds. 

And it is important that the books of these funds be open so that 

rank-and-file members can see how much is in them and what they 

are being used for, and so that parts of them are not siphoned off 

for other purposes. 

Chairman ROE. I did a little quick math in my head. If we have 

6.9 million private sector union workers and $8 billion, that is over 

$1,000 a piece. It is almost $100 a month per union worker. And 

that is a fair amount of money if you are—depending on what wage 

scale—if you are not a six-figure income person, after taxes, that 

is a pretty good chunk of money. 

So, I know that you mentioned in your, Ms. Furchtgott-Roth, 

that you mentioned in your testimony earlier about the reporting 

requirements that were required of us members of Congress here. 

And the comment was made that, if we have to fill out these forms 

in union, this is not time we have to spend on other issues. 

Well, the same thing came be said of us. It is time we do not 

have to spend with our constituents. 

But I think it is important for a person looking at me to be able 

to look to see if I have any conflicts of interest, or what I am doing. 

I have no problem with that whatsoever. I do not like to do it. 

I was in a horrible mood Monday. I did my taxes. So, I get that. 

But why wouldn’t the unions want transparency and make it 

easy to have this information out there? 

Ms. FURCHTGOTT-ROTH. Because they contribute immense 

amounts of money to political campaigns. They brag about it. And 

most of that money goes to Democratic politicians, and they want 

to hide that. 

They also, if it was also open, then union members would not be 

able to take advantage of their rights under Beck to get back the 

portion of their union dues used for political contributions. They 

have the right to do that. But if they do not know what the political contributions are, then they cannot ask for it. 

Chairman ROE. The other one I want to talk about just momentarily are audits. When I was reading the prep material here, it 

said that the OLMS reduced the time between union audits from 

once every 133 years—I doubt that anybody in this room will be 

around for the next set of audits—in 2000, to once every 33 years 

in 2006. 

I found that astonishing when the audits occurred only once 

every 133 years. And to move it to 33 years was considered a burden? 

Any comment about that? Does that seem reasonable? 

Mr. MEHRENS. One thing I would add there is that the department has a goal, I believe, of 14 percent, what they call fall-out 
46 

cases from audits that are conducted. So, as a natural enforcement 

matter, the more audits that are conducted, the more criminal investigations that will occur, as well. 

And I believe in the previous fiscal year, there was actually a 12 

percent actual result where 12 percent of all audits led to fall-out 

criminal cases. 

Chairman ROE. I would like to—my time is about up—but I 

would like to mention also, I would like to know, these indictments 

that occurred in 2009, I do not think you can just get all the investigation done in 2009. I have a feeling that some of that was a 

hold-over from the previous year of 2008. I would almost bet on 

that. 

Ms. FURCHTGOTT-ROTH. Correct. 

Chairman ROE. And we can look at that and find out, because 

I do want to find that information out. I think that the reporting 

requirements of the 5500 form is just a form that you fill out 

through the trust. 

Mr. Mehrens, you were mentioning that. That is what that is. 

Mr. MEHRENS. The 5500 is generally filed by ERISA-covered entities. A lot of the trusts are not ERISA-covered entities. 

Chairman ROE. Well, I want to thank the distinguished panel we 

have had. It has been informative. 

And, Mr. Andrews, do you have any closing comment? 

Mr. ANDREWS. I do. I would also like to thank the panel and the 

chairman, and just note, I think the hearing is remarkable for 

what did not happen and what did happen, and what did not happen. 

What did not happen was anyone putting on the record any facts 

to refute the record that this administration has vigorously prosecuted any wrongdoing. 

What did happen is a refreshingly honest admission by Ms. 

Furchtgott-Roth and others that this is really about politics—the 

majority’s concern that unions are supporting candidates they do 

not like, so they are going to try to stop that. 

I think it is a little ironic, the same majority would fight tooth 

and nail under the Citizens United decision against the DISCLOSE 

Act, that would make corporations disclose their political behavior. 

But what also did not happen was not one word, not one moment, not one idea about the 15 million unemployed people in this 

country we should be helping. 

This was about politics. We are happy you admitted it. 

Chairman ROE. Mr. Holt? 

Mr. HOLT. Thank you, Mr. Chair, for accommodating. 

I apologize for coming in late. I have tried to follow what has 

been going on this morning. And I must admit, I am a little puzzled by what I have heard. 

Let me address this question to you, Ms. Furchtgott-Roth. In response to a previous question, you mentioned that organized labor, 

that unions were kind of misusing the money that had been collected from members for such things as the Paycheck Fairness Act. 

And you explained how a bill to help women fight pay discrimination, that that law is not something that should be advanced by 

unions, it is not something that should be advocated for by unions. 

Did I understand that correctly? 
47 

Ms. FURCHTGOTT-ROTH. What I said was, I listed the Paycheck 

Fairness Act as one of four bills that were the object of lobbying 

activities, favorable lobbying activities by unions. They were using 

their political—they were using money to lobby for four bills: the 

Employee Free Choice Act; the Paycheck Fairness Act; the cap-andtrade energy tax; and the new health care law. 

I said that those bills reduce employment in the United States. 

And that is one reason we have fewer jobs now. 

Mr. HOLT. I see. 

Ms. FURCHTGOTT-ROTH. And the Paycheck Fairness Act—— 

Mr. HOLT. So would you include child labor in that also? 

Ms. FURCHTGOTT-ROTH. There was not a child labor law—— 

Mr. HOLT. I know. But would you—— 

Ms. FURCHTGOTT-ROTH [continuing]. That. 

Mr. HOLTt [continuing]. Is that—would you include that in the 

same category? 

Ms. FURCHTGOTT-ROTH. No. 

With regard to the Paycheck Fairness Act, we have many laws 

that prevent discrimination against women. What the Paycheck 

Fairness Act would have done is require employers to report to the 

government the race, sex and earnings of their workers. 

Mr. HOLT. Yes. 

Ms. FURCHTGOTT-ROTH. So, the government could check that 

groups of men and groups of women were being paid equally, even 

if they were not necessarily in the same job with the same amount 

of work experience and the same tenure. 

Mr. HOLT. Would it be okay if unions spent money on, you know, 

to advocate workplace conditions of fairness that were not enforceable? Is it improper for them to be using union funds to advocate 

enforcement of fairness in the workplace? Is that the distinction? 

I must admit, I am puzzled by what I hear. 

Ms. FURCHTGOTT-ROTH. It is fine to be—we have these forms so 

that people can see what unions lobby for. And it is completely 

legal for them to do that. 

I was mentioning these four bills, because before you came, people were saying, why aren’t we concentrating on job creation? Why 

are we worrying about these small matters and not worrying about 

creating jobs? 

Well, it so happens that the four major bills that the unions completely legally lobbied for would have resulted, have resulted, in a 

decrease in employment. That is one reason why, even though the 

recovery started in January 2009, we still have almost 14 million 

Americans out of work and an unemployment rate of almost 9 percent. 

The Paycheck Fairness Act impeded job creation. The health care 

law, with its mandate that if you employ 51 or more workers, you 

have to pay a penalty of $2,000 per worker per year, that has prevented firms at 48 workers from increasing to 51. It has made 

firms of 55 of 60 workers think, how do I get rid of five or 10 workers, so I get below the 50 limit? 

And I can go through, if there were time, these other bills, the 

cap-and-trade energy bill, how that reduces employment by making 

energy more expensive. 

Mr. ANDREWS. Will the gentleman yield? 
48 

Mr. HOLT. I would be happy to yield to my colleague. 

Mr. ANDREWS. Just wondered if the witness would supplement 

the record with any empirical studies she is aware of that would 

support the point you just made about the firms with 60 workers 

laying people off because of the health care bill. Would you care to 

do that for us? 

Mr. HOLT. If you would, please. That was exactly to be my question, because we have looked for that, because you are not the first 

person to raise this concern. And we just do not find any evidence. 

And as for the energy, the would-be energy legislation that did 

not become law, I think it is very speculative what it would have 

done. On this, you are entitled to your opinion, because you will not 

be able to provide us facts. 

Ms. FURCHTGOTT-ROTH. It is speculative that raising the cost of 

energy in the economy reduces employment? That is speculative? 

Why don’t we make it—why don’t we make gasoline, you know, $20 

a gallon, instead of $4? 

Mr. HOLT. It is speculative that that legislation would have increased the cost of energy at the workplace. 

I mean, certainly, you know, the financial speculation that has 

resulted in increase of gas prices by 50 or 100 percent, you know, 

far more than production—actually, production, domestic production of oil has doubled, and yet the gas prices have gone up in the 

opposite direction of what, you know, the arguments would suggest. 

Ms. FURCHTGOTT-ROTH. But CBO—— 

Mr. HOLT. That kind of speculation we can talk about, because 

there are facts. 

Ms. FURCHTGOTT-ROTH. Okay. 

Mr. HOLT. But the speculation on what the so-called cap-andtrade legislation would have done is purely speculation. 

So, on these other matters—— 

Ms. FURCHTGOTT-ROTH. The CBO estimated—— 

Mr. HOLT [continuing]. On these other matters that you cite, if 

you would provide the committee any hard facts, we would be 

grateful. Thank you. 

Ms. FURCHTGOTT-ROTH. I can provide you with a number of studies that show that raising the cost of labor reduces employment. It 

is a given in the academic labor economics literature. I would be 

happy to supply you with a list. 

Chairman ROE. Okay. I thank the gentleman. 

To summarize, I certainly agree, this has been an important 

event today. I think that jobs are the single most important, but 

also looking after workers with transparency, sunshine and information. The sun needs to shine, so people can see where their resources are going. 

I think it is important—and, Mr. Fox, I would like to meet with 

you later to discuss about how you feel like that the law can be 

changed, the 1959 law can be changed to improve it. 

I would certainly argue, and I would like to with my colleague, 

Mr. Holt, at some point. We have an Eastman Chemical Corporation in Kingsport, Tennessee, that has 9,000 employees and uses 60 

carloads of coal every day. 

If you tax coal and carbon, which is what organic chemists make 

stuff out of, the cost of their business compared to someone else 
49 

that does not have those same regulations, will strangle that business, and 9,000 jobs will be gone from Eastman. And it will be in 

China or India, or someplace else that does not have that. 

AGC Glass, which has a plant that makes solar panels, it uses 

$1 million—their energy bill is $1 million per year—they would be 

gone if energy prices doubled, as we thought this would be. So, I 

would be delighted to have that. 

Now, I am not arguing the benefit of lowering carbon dioxide. I 

am not saying that. I am just saying that this bill would have had 

a catastrophic effect on northeast Tennessee. 

I would like to thank the panelists for being here, and I look forward to carrying on this conversation in the future. 

This meeting is adjourned. 

[Questions submitted for the record and their responses follow:] 
50 

Response by Ms. Furchtgott-Roth to Questions Submitted 

Thanks for inviting me to testify before your committee on March 30, 2011. I am 

writing to respond to your questions for the record. Please excuse my delay in replying. I wanted to wait until I had completed a detailed study of the franchise industry so that I could provide you with complete data. A copy of the study, which will 

be released on Tuesday, is attached. [Editor’s Note: The attachment referred to, 

‘‘The Effects of the Patient Protection and Affordable Care Act on the Franchise Industry,’’ may be accessed at the following Internet address:] 

http://www.hudson.org/files/publications/The%20Effects%20of%20PPACA%20on%20Franchising-%20Final.pdf 

You asked for empirical studies that support the statement that firms with 60 

workers lay off workers because of the health care bill. The attached study, The Effect of the Patient Protection and Affordable Care Act on the Franchise Industry, 

shows that the new law will make it harder for small businesses with 50 or more 

employees to compete with those with fewer than 50 employees. 

Franchisors and franchisees, who often own groups of small businesses, such as 

stores, restaurants, hotels, and service businesses, will be at a comparative disadvantage relative to other businesses with fewer locations and fewer employees. 

This will occur when a franchisor or franchisee employs 50 or more persons at several locations and finds itself competing against independent establishments with 

fewer than 50. 

What’s surprising is the incentive in the Act not to hire additional workers. This 

is illustrated in Table A4 of the attached reoirt. If a business does not offer health 

insurance, then, beginning 2014, it will be subject to a penalty if it employs more 

than 49 workers in all its establishments. For 49 workers, the penalty is 0. For 50 

workers, the penalty is $40,000; for 75 workers, it is $90,000; and for 150 workers, 

the penalty is $240,000. Each time a business adds another employee, the penalty 

rises. 

On the other hand, as is shown in Table A6, businesses can reduce costs by hiring 

part-time workers instead of full-time workers. A firm with 85,000 full-time workers 

and 7,000 part-time workers that does not offer health insurance would pay a penalty of $170 million. By keeping the number of hours worked the same, and gradually reducing full-time workers and increasing part-time workers, until the firm 

reaches 17,000 full-time workers and 92,000 part-time workers, the penalty is reduced to $34 million. If the firm abandons full-time workers altogether, the penalty 

is reduced to zero. 

Many people think that because the Act is fully effective in 2014 then it is not 

affecting current employment. Nothing could be further than the truth. Businesses 

are rational and plan ahead. They see a penalty coming, so they adjust to it now. 

They don’t take on additional workers with the risk of a penalty. 

Second, you asked me to offer evidence that the Employee Free Choice Act, the 

Paycheck Fairness Act, the American Clean Energy and Security Act, and the Patient Protection and Affordable Care Act are one reason we have fewer jobs today. 

The Employee Free Choice Act, the Paycheck Fairness Act, the American Clean 

Energy and Security Act created a climate of uncertainty among employers. If these 

laws had passed—and, with a Democratic Congress and Democratic president, there 

was a strong likelihood of passage—costs on businesses would have risen. This was 

especially true of large, energy-intensive, unionized businesses. As I mentioned 

above, businesses are rational an look ahead. 
51 

One need only look at the illegal violence and destruction wrought in the ports 

of Washington State by the Longshoremen to understand why the Paycheck Fairness Act, which would have removed the rights to secret ballots in elections for 

union representation, would have been so harmful. Workers would have been intimidated into voting for unions, and businesses would have been in danger of work 

stoppages and destruction of private property. 

The Patient Protection and Affordable Care Act passed, and I repeat my answer 

to the first question as evidence. 

[Whereupon, at 11:36 a.m., the subcommittee was adjourned.] 

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