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88–090 PDF 2004

S. HRG. 108–313

TEACHERS UNION SCANDALS: CLOSING THE GAPS

IN UNION MEMBER PROTECTION

HEARING

BEFORE THE

COMMITTEE ON HEALTH, EDUCATION,

LABOR, AND PENSIONS

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

ON

EXAMINING TEACHER UNION SCANDALS, FOCUSING ON CLOSING THE

GAPS IN UNION MEMBER PROTECTIONS, THE DEPARTMENT OF LABOR’S ADMINISTRATION AND ENFORCEMENT OF THE LABOR-MANAGEMENT REPORTING AND DISCLOSURE ACT (LANDRUM-GRIFFIN

ACT), AND CERTAIN INVESTIGATIVE MATTERS INVOLVING THE WASHINGTON TEACHERS UNION AND THE UNITED TEACHERS OF DADE

JUNE 19, 2003

Printed for the use of the Committee on Health, Education, Labor, and Pensions

(
COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

JUDD GREGG, New Hampshire, Chairman

BILL FRIST, Tennessee

MICHAEL B. ENZI, Wyoming

LAMAR ALEXANDER, Tennessee

CHRISTOPHER S. BOND, Missouri

MIKE DEWINE, Ohio

PAT ROBERTS, Kansas

JEFF SESSIONS, Alabama

JOHN ENSIGN, Nevada

LINDSEY O. GRAHAM, South Carolina

JOHN W. WARNER, Virginia

EDWARD M. KENNEDY, Massachusetts

CHRISTOPHER J. DODD, Connecticut

TOM HARKIN, Iowa

BARBARA A. MIKULSKI, Maryland

JAMES M. JEFFORDS (I), Vermont

JEFF BINGAMAN, New Mexico

PATTY MURRAY, Washington

JACK REED, Rhode Island

JOHN EDWARDS, North Carolina

HILLARY RODHAM CLINTON, New York

SHARON R. SODERSTROM, Staff Director

J. MICHAEL MYERS, Minority Staff Director and Chief Counsel

(II)
CONTENTS

STATEMENTS

THURSDAY, JUNE 19, 2003

Page

Gregg, Hon. Judd, a U.S. Senator from the State of New Hampshire ................ 1

Kennedy, Hon. Edward M., a U.S. Senator from the State of Massachusetts ... 3

Yud, Lary F., Deputy Director, Office of Labor-Management Standards, Employment Standards Administration, U.S. Department of Labor, Washington, DC .................................................................................................................. 4

Feldman, Sandra, President, American Federation of Teachers, Washington,

DC; Thomas Donahue, senior fellow, Work In America Institute, and former

Secretary-Treasurer, AFL–CIO, Washington, DC; and Damaris Daugherty,

founder, Teachers’ Rights Advocacy Coalition, Miami, FL ............................... 18

ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.:

Lary F. Yud ....................................................................................................... 36

Sandra Feldman ............................................................................................... 38

Tom Donahue .................................................................................................... 41

Damaris Daugherty .......................................................................................... 43

Roland Ashby-Rier and Alfred Hubbard ......................................................... 47

(III)

(1)

TEACHERS UNION SCANDALS: CLOSING THE

GAPS IN UNION MEMBER PROTECTION

THURSDAY, JUNE 19, 2003

U.S. SENATE,

COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS,

Washington, DC.

The committee met, pursuant to notice, at 10:15 a.m., in room

SD–430, Dirksen Senate Office Building, Senator Gregg (chairman

of the committee) presiding.

Present: Senators Gregg, Alexander, Bond, Kennedy, Dodd, and

Clinton.

OPENING STATEMENT OF SENATOR GREGG

The CHAIRMAN. I will open the hearing. I understand Senator

Kennedy may be on his way, and when he gets here, of course, we

will recognize him for an opening statement if he decides to proceed in that manner.

This hearing today is an investigation into two scandals that

have called into question some of our Nation’s basic worker protections. Money earned by thousands of hard-working public school

teachers in Washington, DC and in Miami, FL was squandered and

used to fund extravagant lifestyles for a few officials of the unions

which were supposed to protect those workers. No one knew this

until it was too late.

We first became aware of the problem when the story broke last

fall that an enormous and unauthorized amount of money was

being spent and withdrawn from the paychecks of Washington

teachers, paid union dues, and further investigation showed that

much of that money was being misallocated to benefit a few people

who worked for the Washington union.

Further investigation by the FBI and the United States Department of Labor, with the full cooperation and hard effort of the

American Federation of Teachers, uncovered upward of $5 million

in alleged embezzlement. And now, we have learned that the teachers in Miami may be victims of the same sort of corruption.

These stories of exploitation are inexcusable. We need to find out

the answers and then what we need to do to make sure it does not

happen again.

The witnesses appearing before us today are here to help us understand what happened. I am sorry to say that our pursuit of the

truth is not being welcomed in all quarters. Unfortunately, one individual is not able to come forward today because of legitimate

fears for his safety and the safety of his family.
2

Some of today’s witnesses may come under unfair scrutiny or

have their motives questioned, perhaps as a distraction from the

real scandal before us today. All this is regrettable, but the American people need to know the answers, and I am committed to pursuing those answers.

Our hearing today is intended as a systematic and sober appraisal of these questions: How have public school teachers been affected by the alleged embezzlement of millions of dollars in dues

money, and what do they have to say about it? Why did the United

States Department of Labor not do more to uncover the fraud and

stop it at a much earlier stage? What if any local and national

union safeguards were in place? Did they work? If they did not

work, why didn’t they work? And what changes need to be implemented?

With all the media attention on transparency and accountability

in this post-Enron period, how did these local unions avoid public

scrutiny until it was too late?

Are the scandals in Washington and Miami aberrations, or could

they potentially be the tip of a bigger problem?

And, most important, we here in Congress must ask how are we

going to use the answers to these questions to ensure that such

massive misappropriation of union money never happens again?

I just want to outline some of the things that have been alleged

to have occurred here. In the Washington Teachers Union scandal,

the president of the union is alleged to have spent over $1 million

on goods and services to benefit herself. For example, $500,000 in

custom-made clothing was purchased from a fancy clothier in Baltimore; $150,000 from Neiman Marcus; $57,000 for 288 pieces of Tiffany sterling silver; $50,000 for Snazzy Limited in Orange Park,

FL; $50,000 at Nordstrom; $40,000 at Saks—and the list goes on

and on. That was with the president.

The treasurer of that union is alleged to have charged over $100,000 on the credit card of the union for purchases which were

suspect and primarily personal use.

The chauffeur of the president—which in and of itself seems

strange—is also alleged to have been actively involved in the misappropriation of union funds, with a salary that is believed to be

$150,000 paid through the union but maybe not reported.

There are other union officials who were relatives—for example,

the sister of the president, or assistants to the president—who also

are accused of having misappropriated significant dollars to benefit

themselves, dollars which were obviously supposed to be used to

help the teachers who were represented by that union either with

their health care or with their pensions or with their simple representation in making sure they were adequately protected as they

pursued their jobs.

In the Miami situation, the head of the union, whose salary included $42,000 a year, which was put into an account for which

there appears to be absolutely no accountability, took a number of

vacations which were highly suspect and charged them to the

union. For example, $50,000 was spent on a 3-week vacation, it appears, in California, Australia, and New Zealand, and $20,000 was

spent on a vacation in Biscayne Bay, and all of those charges were

paid for by the Union, including innumerable others.
3

Clearly, there is a problem here. This hearing is about what that

problem is, how it was identified, and what we need to do to make

sure that we have in place safeguards so that this type of misappropriation of union dues does not occur in the future.

I will yield now to Senator Kennedy.

OPENING STATEMENT OF SENATOR KENNEDY

Senator KENNEDY. Thank you, Mr. Chairman.

All of us know the many, many contributions that unions have

made to workers across the countries and the immense difference

that they have made in the lives of working families. They have led

the effort in every major improvement in workers’ lives over the

past century, for higher pay for overtime, for minimum wage, for

safe workplaces, for good health plans and good pension plans.

Janitors have health insurance for their families. Factory workers

who never finished high school send their children to college.

The American Federation of Teachers was indispensable in promoting education reform long before it achieved the momentum it

has today. The AFT has always put children’s learning, high standards, and education reform first, as we know from their leadership

on Head Start, No Child Left Behind and improving teacher education.

The landmark Federal statute that safeguards union members’ rights was enacted by Congress in 1959 with union support. That

act was meant to help unions fulfill their duties, not hobble them.

As the legislative history of the Senate bill clearly stated, a

strong, independent labor movement is a vital part of American institutions. The Senate should be careful neither to undermine selfgovernment within the labor movement nor to weaken unions in

their role as the bargaining representatives of employees.

The vast majority of labor union offices and employees abide by

these laws and use their high office to improve the lives and working conditions of all Americans. Incidents of wrongdoing are very

rare. Twenty thousand labor organizations filed reports with the

Department of Labor. Each of these unions has anywhere from a

few to a few thousand offices and employees. Hundreds of thousands of employees have access to union funds, but financial crimes

are extremely rare.

There is no question that what happened at the Washington

Teachers Union and Union Teachers of Dade was reprehensible,

particularly when it comes at the expense of the education of our

children. The responsible officers betrayed their office and their

trust, and by doing so, they harmed unions, their members, and

the public trust.

The AFT has taken immediate and proactive steps to prevent

abuses in the future, and it is tightening controls throughout their

affiliate structure to ensure direct reporting to individual union

members. But that is far from enough for this anti-union administration.

Last December, the Department of Labor proposed drastic

changes in the financial reports that labor unions filed with the

Federal Government, including the extensive itemization of all payments that meet a threshold amount which the Department proposes to set as low as $2,000 and requires voluminous schedules
4

that could be hundreds of pages long, listing every possible last

transaction.

Union members want and they deserve genuine transparency.

They do not want a blizzard of information that would be a mockery of real reform. It is the same, old anti-union bias. Newt Gingrich called for similar changes in the first Bush Administration. He

even went so far as to send a letter to Secretary of Labor Lynn

Martin calling for these changes, as he put it, ‘‘to weaken our opponents and encourage our allies.’’ Now the administration wants detailed reports of union expenses

for all political activities and for union organizing, too. They want

detailed information about the number of union members in each

category. It is absurd to pretend that these requests are supposed

to benefit union members; the are intended to aid union-breakers.

It fails to protect union members’ money, but it still imposes millions of dollars in new administrative costs on unions. The goal is

to force unions to wallow in red tape instead of providing valuable

services for their members, such as seeking better wages, better

benefits, and better working conditions. It has nothing to do with

helping union members understand how their dues are being spent.

The Department of Labor wants to hold unions to a far higher

and unreasonable standard than the administration’s friends in the

corporate world. In fact, only 10 percent of all corporations have

any government financial disclosure reporting requirements at all,

and these corporations are not being asked to open their corporate

ledgers, to itemize each of their transactions—and this after all of

the scandals that we have seen recently.

The Department is asking unions to reveal their key strategies,

to report when and to whom each payment is made. We would

never ask a corporation to reveal such trade secrets.

It is difficult to believe that even the most anti-worker, antilabor, anti-union Congress or administration would seriously try to

force such blatant change in the law. They would never dream of

imposing such a request on corporations, and they should not try

to impose it on unions, either.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Senator Kennedy.

We are joined as our first witness by Larry Yud, deputy director,

Office of Labor-Management Standards, Employment Standards

Administration, United States Department of Labor.

I notice that Mr. Yud has worked for the Department of Labor

for 36 years. That is very impressive. That means, I think, six different Presidents, or maybe even seven that you have worked

under. That sort of commitment to public service is extraordinary,

and we appreciate it, and we look forward to hearing your thoughts

on this issue.

STATEMENT OF LARY F. YUD, DEPUTY DIRECTOR, OFFICE OF

LABOR-MANAGEMENT STANDARDS, EMPLOYMENT STANDARDS ADMINISTRATION, U.S. DEPARTMENT OF LABOR,

WASHINGTON, DC

Mr. YUD. Thank you, Mr. Chairman.

Mr. Chairman and members of the committee, I am pleased to

appear before the committee today to discuss the Department’s ad-
5

ministration and enforcement of the Labor-Management Reporting

and Disclosure Act, also known as the Landrum-Griffin Act or the

LMRDA.

I understand that the committee is interested in particular in

matters involving the Washington Teachers Union and the United

Teachers of Dade. As the committee is aware, the Washington

Teachers Union is the subject of an investigation under the auspices of the United States Attorney for the District of Columbia,

and my agency, the Office of Labor-Management Standards, is actively involved in this investigation.

In view of the pending investigation, it would be inappropriate

for me to discuss specific issues concerning that case. At this time,

my agency is not involved in any investigation involving the United

Teachers of Dade.

Although I cannot discuss the current case involving the Washington Teachers Union, I can provide a general overview of the

LMRDA, which is centered on two fundamental goals—promoting

union democracy and ensuring union financial integrity.

The rights of union members and important union responsibilities are set forth in five titles of the LMRDA. In my written statement, I summarize each of these five titles, but I will confine my

remarks today to the two titles I think may be most relevant here.

Title II of the LMRDA requires reports from unions, union officers and employees, employers, labor relations consultants, and

surety companies. The Department of Labor has authority to enforce these reporting requirements, and the LMRDA provides for

the public disclosure of those reports.

Over the past year, the Department has taken a number of important steps to improve the administration of the LMRDA reporting requirements. In January of 2002, we began distributing to

labor organizations a free CD-ROM containing a computer software

program that they can use to electronically complete the financial

reports they are required to file. Those reports can now be submitted over the Internet.

In June of 2002, we began making these annual financial reports, and more recently the reports of employers and labor relations consultants, available for public disclosure on the Internet.

Since the activation of the Internet site in June of 2002, there have

been half a million visits to the homepage of that site.

In December of 2002, the Department published a Notice of Proposed Rulemaking to substantially revise the Form LM-2, which is

the annual reporting form used by the largest union, and to revise,

although less significantly, Forms LM-3 and LM-4 which are used

by smaller unions. Approximately 20 percent of all unions are required to file the LM-2 report.

The new forms will provide union members, Congress, and other

interested parties with more information about the financial activities of unions, including information about trusts operated for the

benefit of the members. These reporting improvements will give

union members the information they need to engage in effective

self-governance, and the enhanced detail and disclosure will also

discourage financial mismanagement and embezzlement.

The Department is currently reviewing the comments received on

its Notice of Proposed Rulemaking.
6

Under Title V of the LMRDA, financial safeguards are established for unions. Title V imposes financial responsibilities on labor

union officials. A union officer or employee who embezzles or otherwise misappropriates union funds or assets commits a Federal

crime that is punishable by fine or imprisonment.

Title V establishes bonding requirements for union officers and

employees and prohibits persons convicted of certain crimes from

holding union office or employment for up to 13 years after their

conviction.

In the last 5 fiscal year, our agency has conducted 750 election

investigations and supervised 173 union elections. We have invested 75 trusteeship cases and conducted nearly 2,000 criminal investigations primarily involving embezzlement of union assets and

related reporting violations.

During this period, the Department’s investigative efforts resulted in 72 criminal indictments and 639 convictions, or approximately 11 convictions per month.

In addition to these enforcement activities, OLMS carries out extensive programs of compliance assistance, beginning with offers of

assistance to all officers of newly-formed unions. We publish a wide

variety of compliance assistance materials, and every OLMS field

office has an active program of compliance assistance seminars.

Much of the focus of this compliance assistance is on the statutory

reporting requirements.

Unfortunately, because of the significant decline in staff resources, the agency has had to significantly curtail its discretionary

program to audit local and international unions, and instead, we

have had to focus on mandatory activities such as election investigations and criminal referrals.

The agency implemented a compliance audit program in the

early 1980’s following a recommendation by the General Accounting Office that was critical of the agency for not conducting sufficient onsite reviews directed to enforcement of the LMRDA. However, between 1990 and 2002, the agency’s staff resources have declined nearly 40 percent, leaving us with insufficient resources to

manage an effective audit program.

Mr. Chairman, I can sum up in about a minute, if that is okay.

The CHAIRMAN. Take whatever time you need.

Mr. YUD. Thank you, sir.

I was commenting on the fact that we have not been able to do

the number of audits that we have been able to do in the past. As

an example, the Washington DC district office of our agency, which

is responsible for nearly 1,500 reporting labor organizations in

Maryland, Virginia, and the District of Columbia, is able to conduct

only about three audits a year. The agency’s program to audit

international unions has suffered a similar fate. Over the last 5

years, we have been able to audit on average only one national or

international union a year. The audit program is 20 years old, and

we still have not audited 10 of the 25 largest unions.

When we are able to conduct an audit, our investigators and

auditors perform a number of mandatory and optional steps designed to protect even well-disguised misappropriation of funds. In

the case of one large international union, an OLMS audit uncov-
7

ered an embezzlement of over $350,000 that for many years had

gone undetected by the union’s own external auditor.

On a bright note, the President and Congress have begun to rectify this lack of effective oversight. In the recently-enacted fiscal

year 2003 budget, OLMS was authorized to increase its staff. That

increase will enable us to begin to build back our audit program

as well as to increase the compliance assistance activities that we

carry out to help union officers, employees, and members understand the law and take steps to place themselves into compliance.

Thank you for giving me the opportunity to discuss this important program. I would be pleased to answer your questions subject

only to the constraints by which the Department feels bound in

light of the pending investigation.

[The prepared statement of Mr. Yud may be found in additional

material.]

The CHAIRMAN. Thank you, Mr. Yud.

Picking up where you left off, you said your funding has declined

40 percent. Is that since 1992?

Mr. YUD. I think that is from 1990, sir.

The CHAIRMAN. And what would you need in order to adequately

fund the agency, this function of the agency, over what you are

presently getting?

Mr. YUD. We have in the President’s fiscal year 2004 budget a

request for 75 FTE, and I think that brings us up to a level where

we can reasonably carry out a fairly effective audit program, oversight program.

The CHAIRMAN. So if you got this year’s administration budget

request, you think you could restore your auditing capability considerably?

Mr. YUD. Yes, sir. I do not think that any person involved in enforcement in the Federal Government feels they have enough resources to do the complete job they would like to do. But the President had asked for 75 more positions for us, and I think we believe

that that would allow us to carry out a much more effective audit

program—as well as other related programs.

The CHAIRMAN. You said that there were only three audits done

in the greater Washington are out of those firms which, as I understand it, means the chance of being audited is about once every 500

years, which means we would have to go back to Charlemagne before we got a complete audit; is that correct?

Mr. YUD. I think that is the way those numbers work out, yes,

sir.

The CHAIRMAN. And since the initiation of your program, you

have only been able to audit 10 of the 25 largest unions; is that

correct?

Mr. YUD. No, sir. What I meant to say if I did not was that if

you rank unions by size, 10 of the 25 largest have never been audited by our agency even though the law has been around for over

40 years, and our audit program has been around for 20 years.

The CHAIRMAN. Is that a function of resources?

Mr. YUD. Yes, sir.

The CHAIRMAN. Also, I am wondering—of course, most of your

teachers’ locals are not private unions—they are public sector
8

unions—so they are not subject to your reporting requirements, are

they?

Mr. YUD. That is correct. Teacher unions would only report to us

if they had some private sector members or were somehow covered

Federally.

The CHAIRMAN. So as a practical matter, you would not have

been logically stepping into the Miami teachers union for an audit

even if you had the resources, because they would not be subject

to your jurisdiction?

Mr. YUD. That is correct. I would add one thing. It is a question

of resources and demands. For example, when we get an election

complaint, the statute requires us to investigate it within a specific

time period. So it is a question of do you have the resources and

discretion to use them on a program like an audit program, or are

you required with the resources you have to commit them to mandatory work.

The CHAIRMAN. Now, there has been some representation by

some commentators that the better approach here rather than setting up your reporting requirements system that you have put in

place is to have unions subject to independent financial audits.

What are your thoughts on that—full reporting versus independent

audits or as a complementary exercise to independent audits?

Mr. YUD. Mr. Chairman, I guess I would respond to that by saying first that a major objective of the LMRDA is transparency, is

to give union members the information they need to understand

how their union is being operated and to evaluate how their dues

are being spent.

Audits are a fine thing, but an audit basically tells somebody

that maybe the checkbook is balanced correctly and the amounts

reported in assets and liabilities and so on are properly reported.

It really does not tell you much of anything about how that organization is being operated, particularly when you have very large aggregate amounts, in the millions. It may not tell you that $100,000

is being spent at this restaurant or really how the money is being

used.

So I do not think that an audit in and of itself accomplishes the

goals of—it certainly does not accomplish the goals of disclosure,

and it really does not necessarily provide the transparency that I

think the statute calls for.

The CHAIRMAN. You are sort of the SEC of the—what the SEC

does to stockholders and shareholders and investors, you do for

labor union members; right?

Mr. YUD. I think that is apt.

The CHAIRMAN. What would be your recommendation—obviously,

there are a lot of recommendations out there in the post-Enron climate as to what we should be doing with investors and shareholders—what would you your recommendation that we should do in

light of these instances that we have seen with these two specific

locals having had their funds mismanaged? Do you have specific

recommendations that are either legislative or regulatory—besides

more resources, which is obvious.

Mr. YUD. Well, I think we are actively involved in two efforts

right now. One is our Notice of Proposed Rulemaking, which is to

change the reporting forms to have them provide more information,
9

more detailed information, information which I think is more valuable and useful by union members so they can engage in more effective self-governance so it is much more difficult to misappropriate or misuse funds if you have to account more specifically for

how you spend that money. I mean, if you are going to be spending

money at Neiman Marcus or Snazzy Limited or places like that,

and that has to be disclosed somehow, then it is very likely that

more people will ask questions, rather than if that amount is in an

account which says $5 million was spent on office expenses or

something like that.

So I think it is time to change and improve the reporting forms

so they are more useful for self-governance by the union members

themselves. Obviously, the Department of Labor is responsible for

engaging in oversight. I think that that calls for a certain number

of audits, with the possibility that an audit will be conducted at

some point in time, and I think that is a very important program.

So I would respond in that fashion. As far as other legislative

changes, I did not come here today prepared to talk about those

legislative changes.

The CHAIRMAN. Thank you.

Senator Kennedy?

Senator KENNEDY. Thank you, Mr. Chairman.

Obviously, none of us holds a brief for the kind of corruption that

has been identified in these instances that we have talked about

this morning or in terms of the corporations of this country as well.

And of course, we are all mindful of the fact that at least in the

one case, this matter was all brought up by the members of the

union itself—not in the second case, but certainly in the one case.

And as I mentioned at the opening, it is even more horrific when

you think that they are diverting funds from training teachers or

from trying to improve the quality of education in this country.

I am interested in your views about the reporting standards. You

mentioned that you can do about one out of 140 audits. I guess that

is about the same that you have in terms of inspections on OSHA

for health and safety as well. It may be slightly different, but not

greatly different.

So certainly, whatever we are going to do here, we want to make

sure that we are trying to do what needs to be done in terms of

both the problems of the accountability and reporting as well as,

it seems to me, the protection of workers.

But let me ask you on the question of the reporting—first of all,

I want to pay tribute to you, Mr. Yud. You have had a remarkable

career, and we want to thank you so much for your service.

Mr. YUD. Thank you.

Senator KENNEDY. We really appreciate it. I think all of us are

mindful of your long and distinguished career.

The CHAIRMAN. You are catching up with Senator Kennedy.

Senator KENNEDY. You cannot resist, can you? [Laughter.] Now,

getting past that—and I have just used up half my time—you testified that the Department of Labor is substantially revising the LM

Form, but in the previous years before a House Committee, you

said that ‘‘The LM-2 report sets forth in proper detail a reflection

of the financial status of the union.’’ In fact, you said that three

times in response to direct questioning by Congressman Hoekstra,
10

that you believed that the form set forth a clear picture of the financial conditions of labor unions. And you stated before a congressional committee that ‘‘The existing reporting form provides an actual reflection of a union’s financial status,’’ yet today you have a

different view.

Can you tell us what changed your mind?

Mr. YUD. Thank you, Senator, and thank you for your kind comment.

I think that the form itself is an aggregate statement. Principally, what the form has on it now are aggregate statements

about totals—total assets, total liabilities, and so on. And insofar

as that is more or less like a balance statement, I think the form

probably adequately does that.

What the form does not do is give people the detail that they

really need to get behind those figures, to understand, all right, if

this many million was spent in a particular area, some detail about

how that money was used.

Senator KENNEDY. You are talking about millions, but of course,

in the recommendation of the regulations, it is down to $2,000, and

there has been the observation that you may very well find out

that there is such a massive amount of incidental information that

it is not going to provide the kind of transparency, and that what

you really need, as I imagine and as we have seen with the Sarbanes bill, is appropriate accountability—for corporations, in terms

of how they are dealing with the trust that they have, as well as

for unions and the trust that they have.

Wouldn’t you agree that that is not an unreasonable position?

Are you bothered at all by the kind of minutiae and detail as I understand that these current regulatory proposals provide? What

you have just outlined here seems to me to make some sense, but

in just a preliminary review of those rules and regulations, they

seem to be quite a bit different.

Mr. YUD. Well, we are in the middle of Notice of Proposed Rulemaking. We did receive nearly 36,000 comments. We are reviewing

those. A lot of them go to issues of burden and relative burden on

smaller organizations as opposed to large organizations, and we are

very actively reviewing those comments, and we have to make

some critical decisions in those areas.

I do think there has been a little bit—maybe a lot—of exaggeration about what the impact of some of these requirements really is.

It is possible that the smaller unions in the LM-2 category—which

I think you are referring to—if you have $200,000 a year in disbursements, and you only itemize over $2,000 or $5,000, which is

the range we have been looking at, the likelihood is that there will

be very few items that will have to be itemized in that detail; especially if you pull out a couple of salaries that are $50,000 or so, you

are just not going to be left with that many items.

Senator KENNEDY. What I am hearing from you is that there

ought to be an effective auditing process that makes available information to members so that there can be an effort toward selfpolicing as well as the protection of the funds in a reasonable way

for the union members. As I understand it, that is different from

what has been proposed in these other kinds of forms.
11

Finally, in response to Congressman Hoekstra, I believe 2 years

ago, when you were asked about the various forms, you said, ‘‘Well,

you are partially correct, yes. The Department at the time does not

have any proposed changes to make. We think that those reports

set forth in proper detail a reflection of the financial status of the

union.’’ That is why I was asking the question. You said that ‘‘these report set forth in proper detail a reflection of the financial status of

the union,’’ and today, you are talking about a rather dramatic alteration—or maybe it is not so dramatic. I am just trying to understand exactly why this had ‘‘in proper detail a reflection of the financial status,’’ and you now think that so much more information

is necessary.

Mr. YUD. Well, again, as I said, I think when you talk about the

status—which is generally are you in the black or are you in the

red, what is the size of your assets—those forms can do that.

Whether that is enough to tell you how the union is really being

operated and where the moneys are really going, I do not think the

current forms do that.

Senator KENNEDY. Finally, the Department’s proposed regulations may require unions to itemize expenses that may be as low

as $2,000 across a broad range of categories, including core tasks

that unions perform for their members such as organizing, lobbying, and political activities.

Publicly-traded corporations are not required to list every expense over $2,000. They are not required to itemize expenses that

reveal the workings of their core operations. I say what is sauce for

the goose is sauce for the gander. Shouldn’t we be asking the corporations to do the same thing?

Mr. YUD. Senator Kennedy, we are dealing with different laws

here. We are dealing in one case with union members, with their

dues going to the union, and in the other case, we are dealing with

corporations and stockholder investments and what-have-you.

Senator KENNEDY. Retirement accounts, life savings.

Mr. YUD. Yes, sir. But I think they are subject to somewhat different considerations and certainly different laws. From my point

of view, corporations—and I am not an expert; I do not understand

the SEC—but I believe that corporations have very extensive reporting responsibilities. They have to report not only annually— many have to report quarterly; they have to provide not only quantitative material information, but they have to provide qualitative

information. And it seems to me that most corporations would require a staff of attorneys and financial consultants and CPAs and

what-have-you to prepare those reports.

I think what we are looking at on the union side is a little different approach, and I think most of the reports that we are talking about under the LMRDA can be prepared by a bookkeeper or

an accountant.

Senator KENNEDY. The only point, as I said, is that even with

those reporting, we have our Enrons and Worldcoms and the kind

of damage that has been done to the lifetime savings of workers.

We have reports and reports. What I hear you testifying to is what

can be effective in trying to reveal if there is going to be any degree

of corruption, something that can be transparent in terms of the
12

members, and I imagine toward the stockholders, so we are able

to blow the whistle on both. I think that certainly ought to be our

objective.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you.

Senator Alexander?

Senator ALEXANDER. I will give most of my time back so I can

hear the other testimony, but from listening to Senator Kennedy— do you know, Mr. Yud, whether in the District of Columbia, you are

required to join the teachers union in order to teach?

Mr. YUD. I am sorry to say that I do not know that.

Senator ALEXANDER. I believe in many parts of the country, at

least where there is not a right-to-work law in order to teach, that

it is necessary to join the union and pay the dues. I was thinking

about the comparison between corporations and unions, and I was

trying to think of a corporation that anyone was required to join

or required to invest in, and I could not.

Can you think of a corporation in which anyone is required to invest their money in?

Mr. YUD. No, sir, I cannot.

Senator ALEXANDER. I cannot, either, and it would seem to me,

therefore, that particularly in those states or jurisdictions where,

in order to teach, one might have to pay dues that were $500, $600,

$700, or $800 a year, it might be important to have more stringent

requirements about disclosure so that people who are compelled to

pay their dollars would know how the dollars are spent. And while

I do agree that teaching and unions are distinct and unique, if we

are reaching for analogies, maybe a more comparable analogy

would be campaign contributions. We do have in our country a system where no one is required to give a contribution to Senator

Gregg or to me or to Senator Kennedy or to Senator Dodd, but if

one does, then there are some very extensive requirements that we

have imposed upon ourselves and our whole process about who

gave the money and how it is spent, in some significant more detail

than the proposal for the reporting on union requirements, and the

whole rationale for that is that people would then know who gave

the money and how it was spent, and they could come to their own

judgments about whether it was properly done or properly spent.

So I am not so sure that the analogy between corporations and

unions in this case is a good one. I think a better one might be

campaign contributions, and probably the best one would be let us

just look at these circumstances in the teachers union.

I look forward to the other testimony, and I appreciate yours.

Mr. YUD. Thank you.

The CHAIRMAN. Senator Clinton?

Senator CLINTON. Thank you, Mr. Chairman.

I just wanted to make two preliminary remarks. First, I thank

you for holding this hearing. I think it is our first hearing on education and labor matters this year, and I hope we will have more

hearings on issues like no child left behind and special ed and

Head Start and some of the other concerns that certainly my constituents are talking to me about on a regular basis.

Second, I think that our hearing today is certainly premised on

an agreed-upon assumption that I know is shared by all of us, in-
13

cluding the representatives of the unions who are here, and that

is that we need a system that does provide transparency, and we

need a system that provides accurate information.

What we seem to be discussing is whether there are adequate

safeguards, and if not, what reasonably could be done to improve

those safeguards without looking to both undermine and burden

members of unions and union leadership. And I appreciate Senator

Kennedy’s line of questioning very much, because it does strike me

that with regard to the enforcement of all of our labor laws, in my

view, the administration has been less than enthusiastic when it

comes to organizing, collective bargaining, enforcement of work

conditions and safety standards. So I understand there is a political agenda at work, and I recognize that, but I also hope that in

the process of trying to come to some resolution of this issue, we

do so in a way that is fair and recognizing the limits that are appropriate for the Government to be setting forth.

I am troubled by what seems to me to be the evolution of this

concern over the last months. The original reporting requirements

as I understand them had legitimate questions but have now been

transformed into much more stringent expectations that would be

very difficult for a number of smaller unions to comply with; certainly those that are not electronically up-to-speed would have tremendous difficulties.

So I think there is some common ground here that we can attempt to claim if we put aside the political agenda and look to the

leadership and membership of unions that I think agree that we

need some hard look at what the standards are and that changes

that are appropriate and fair should be made.

I am particularly concerned about this idea of accounting for

one’s time. That is very difficult for me to understand. There is no

comparable requirement either when it comes to corporations, nor

is there a comparable requirement when it comes to campaign contributions. It would be very difficult for candidates and volunteers

and staff to account for their time. In-kind contributions, financial

contributions, and in the corporate world—which I think is still a

far better and closer analogy because we are looking at an institution, not at a biannual creation of an institution that comes and

goes; I do not think that is analogous whatsoever—but with respect

to this accounting for time, which I do not see in the law anywhere

else, how would you expect that to be complied with? It would open

up so many doors that would be impossible to answer the questions

that would be forthcoming. What is your understanding of that

kind of requirement?

Mr. YUD. Senator Clinton, I would first note that the reforms in

their current State really have not been changed much since the

law was passed, so I think there is a time to look at these and wonder whether they are as effective today as they were 40 years ago.

And again, our Notice of Proposed Rulemaking applies only to 20

percent of the unions, so 80 percent of the unions are not required

to file the LM-2 report. We also expect to provide compliance assistance to them and provide software to them to help them do

these reports.

As far as union officer time, when you look at a union as an institution, a very key component of union expenditures is the time.
14

In many cases, the salaries of the officers and employees make up

the majority of the expenses of the union. I think it is reasonable

to say that the members are entitled to have some idea of what

those salaries go for—in other words, where those folks are spending their time in representing their members’ interests.

We have made a proposal which allows this to be rounded to the

nearest 10 percent and just made on some reasonable basis. There

are unions actually that, like lawyers, keep time records. We are

not asking them to go to that degree of specificity, but in our proposal—and we are looking at the comments that we have received,

and we are assessing the burdens of these things—we have made

a proposal that there be some allocation of what activities they

spend their time on.

Senator CLINTON. And why wouldn’t there be an analogy based

on that argument with corporations? We have seen so many examples of what the press sometimes call ‘‘crony capitalism.’’ I may be

an investor in a corporation, and I have no idea whether the CEO

or the CFO is spending half his time on the golf course. I have no

idea whether he is spending his time feathering his own nest,

wining and dining the members of the compensation committee so

that he can get some kind of golden parachute. As a stockholder,

I deserve to know that if you are making the same argument analogously with a member of a union.

So it seems to me that what we are doing here is taking the time

of union leaders and saying that that has to be specified, quantified, and held accountable. And as far as I know, we do not do

that in any other area of Government accountability, and I think

you can understand why it raises questions about a political agenda as opposed to the legitimate questions that teachers, other

union members, union leaders with the kind of record that somebody like Sandy Feldman has of standing up for education reform,

of standing up for sometimes moving teachers beyond where their

comfort zone is to do the things she thinks are right for education.

So I do not understand how we can expect to accept these

changes on face value when it is clear that there is no only a political agenda behind them, and it is, as far as I can tell, the only area

where the administration is interested in enforcing labor laws, but

also that there is not any comparable expectation or standard imposed on any other person who does have a public trust. After all,

corporations are creations of the public. They are chartered. They

have obligations to the public—although they are sometimes forgotten, and we talk only about stockholders, bottom lines, etc.

So it is very difficult to understand the effort here, especially on

this time issue, which leaps out at me as being particularly burdensome.

Thank you.

The CHAIRMAN. Maybe we are reaching a consensus that we

should make unions subject to the SEC rules.

Senator Dodd?

Senator DODD. Thank you, Mr. Chairman.

Mr. Yud, let me join others in thanking you for your service over

the years.

Senator DODD. Let me just say in terms of full disclosure here

that George Springer, who has taken on this responsibility in
15

Washington, is someone whom I have known for 30 years. I have

enjoyed our working relationship with this remarkably fine individual who has taken on a very difficult task and done so with great

good judgment and tremendous hard work. I just want to thank

you, George, publicly at this hearing for the tremendous job that

you have done. We are very proud of you in Connecticut, having

worked with you for more than three decades on public policy

issues.

This is a thorny matter. Let me underscore the point that has

been made by everyone here. None of us here wants to be associated with anything that involves fraud and criminal behavior. That

should be a given. So we are not here to debate and discuss that

at all. Obviously, hard work needs to be done.

I think it is important for people to have some sense of what we

are talking about here. There are some 3,000 local unions under

the AFT. Unlike most unions, it is decentralized; is that not true,

Mr. Yud?

Mr. YUD. I am not an expert on how the AFT is organized.

Senator DODD. More than 2,700 of these locals have fewer than

1,000 members. Most of them are rather small unions, locals. I

think it is important to keep that in mind as we look at this. I will

State as a matter of fact that it is probably the most or one of the

most decentralized of the national unions in the sense that a lot

of autonomy is given at a local level.

So while we are talking about two very egregious cases here, and

certainly ones that deserve tremendous attention, and the AFT has

done just that—and President Bush to his credit has commended

the AFT for the steps they have taken, and I thank President Bush

for doing that, because there is too often the temptation to indict

and malign an entire group of people who have dedicated their

lives to teaching young Americans in our wonderful education system. So we thank him for that.

Because Senator Kennedy made some reference to it, Mr. Chairman, I am going to ask unanimous consent that a letter that was

sent in February of 1992 to Lynn Martin and Clayton Yeuter from

Newt Gingrich be included in the record, and I will just read part

of it—a letter being circulated in the House, calling for two specific

actions on the Beck decision. ‘‘These two steps are long overdue’’—

I quote the letter. ‘‘It will weaken our opponents and encourage our

allies if we take these two steps.’’ One, he talks about ordering the

Department to require posting of workplace notices. ‘‘No. 2, order

the Office of Labor-Management Standards to institute changes in

LM-2 union reporting and disclosure forms to provide people with

essential information on dues expenditures, so weaken our opponents and strengthen our allies.’’ That was 11 years ago, but nonetheless I think it is worth noting

that there have been certain political motivations beyond the obvious problem that we need to deal with in terms of these two particular cases.

Now, if I can, let me raise a specific question. I would like to get

some sense of budget if I can here. I note the President has asked

for a small increase, about $5.3 million, in the budget to conduct

these audits. There have been reductions, actually, in the budgets

of your office over the last number years. Is that not correct?
16

Mr. YUD. That is correct.

Senator DODD. So just as a practical matter in terms of the point

you make in your statement about the amount of work that has to

get done to conduct these audits, clearly, there is going to be an

increased amount of work as a result of these rules taking place

that will demand even more attention.

Are you satisfied that the budget increases you are going to be

receiving are going to make it possible for you to not only handle

this increase in the amount of workload but also the backlog that

has accumulated as a result of the decline in budget authority to

support the very office you are involved in?

Mr. YUD. Yes, Senator Dodd. One thing about the new forms, of

course, is that we were going to an electronic version, and that

should considerably help with the processing of that.

Another big advantage of that is that, as I say in my written

statement, we will have an electronic audit program which is very

efficient and requires very little hands-on, so that when these reports come in, they will be subjected to certain electronic audits,

and we can ensure that they meet certain minimum standards of

acceptability.

So I think we can apply those efficiencies, and yes, sir, I——

Senator DODD. And handle the backlog as well?

Mr. YUD. Yes, sir.

Senator DODD. I wonder if you might share with us what the

process was on the Notice of Proposed Rulemaking. Let me ask a

series of specific questions and ask you to comment on them if you

would.

I would like to know whether you worked with the AFT either

before proposing the rules or during the comment period, number

one. Were public hearings held, and did they hold comprehensive

stakeholder meetings; how many public comments were received;

and is there any final time line for the decision?

Mr. YUD. Public hearings were not held prior to the Notice of

Proposed Rulemaking——

Senator DODD. Why not?

Mr. YUD. Stakeholder meetings were held.

Senator DODD. But why not public hearings?

The CHAIRMAN. Why don’t you let him answer the question?

Senator DODD. Go ahead.

Mr. YUD. I think the approach was that international union officers were invited to participate in meetings, and I think as many

as 40 or more did participate in those meetings, and the approach

was taken to meet directly with I think an affected universe here,

which is primarily represented by the national union.

So two or three of those meetings were held. I think over 40

unions participated in those meetings, sent a representative to

those meeting. And—I am sorry—your other question—I honestly

do not know if the AFT participated in that or not.

The CHAIRMAN. The AFT is not subject—most of their unions are

not subject to these rules.

Mr. YUD. Right. The national union reports, and some of their affiliates do, but again, of those representatives that were there, I do

not know whether the AFT had a representative.
17

Once the Notice of Proposed Rulemaking went out, we received

nearly 36,000 comments, and we have not held individual meetings

with any unions concerning the rulemaking, and I do not think it

would be appropriate necessarily during this period of time. We

have received the comments, the period for commenting is closed,

and we are now analyzing those comments.

Senator DODD. Are you aware of any software available for

unions or others to handle the additional reporting requirements?

Some 2,700 of the 3,000 locals—some of them are rather small in

terms of their ability to be able to do this inexpensively.

Mr. YUD. Well, of course, we already have an electronic Form

LM-2 which many unions already use to complete their report, and

we will be providing unions with compliance assistance and information on alternative ways that they can set up their records to

facilitate completion of the reports.

A smaller union may simply fill out the report afresh, so to

speak, just make the entries right onto the form, or they might cutand-paste entries from their bookkeeping records onto the form.

We will provide unions with a software that will take their

records and put them on the form. So there will be a variety of approaches, but I think some of the smaller unions may just fill it out

afresh, so to speak, and make the entries directly onto the form.

The CHAIRMAN. I think we need to move on to Senator Bond, if

you do not mind.

Senator DODD. Let me just thank you, Mr. Chairman, and let me

also join in thanking Sandy Feldman as well, whom I have worked

with over a number of years, and comment her and her leadership

on this issue both here in Washington and in Dade-Miami. You are

to be commented for the efforts being made to deal with this, and

we thank you for your leadership.

Thank you, Mr. Chairman.

The CHAIRMAN. Senator Bond?

Senator BOND. Thank you, Mr. Chairman.

I do not want to prolong this because we need to get to the next

panel, but the 11 convictions per month over the last 5 years of

criminal activities is of great concern. Are the rules that you are

proposing designed to prevent or eliminate criminal activities—I

mean, criminal prosecutions deal with those who have stepped over

the line, but is it your hope that by providing greater information

to members and others, it will somehow lessen the frequency of

such criminal activity? How does this rule relate to the heavy

workload that you have had on the criminal side?

Mr. YUD. Senator Bond, as I said earlier, I think a primary purpose is to give union members the information they need to engage

in effective self-governance. I think as an additional result of that,

members who have more information will be able to exercise better

oversight and control on their own. So to the extent that somebody

has to provide a little more detail about exactly what kinds of expenditures are being made, it becomes more difficult, I think, to

cover that up or to disguise it, and so I would expect that it would

have a deterrent effect, yes.

Senator BOND. Thank you, Mr. Yud.

Thank you, Mr. Chairman.

The CHAIRMAN. Senator Reed, did you have any questions?
18

Senator REED. No, Mr. Chairman. I am ready to go forward.

The CHAIRMAN. Thank you very much.

Thank you, Mr. Yud, and we thank you again for your service

over 36 years. We appreciate it.

Mr. YUD. Thank you.

The CHAIRMAN. We are now joined by our second panel, if you

folks would come forward to the witness table.

While they are taking their seats, let me begin by introducing

our panel. We are joined, as has already been reflected by a number of members, by Sandra Feldman, who is the president of the

American Federation of Teachers. This union played a critical role

in uncovering some of the very egregious activity of the Washington Teachers Union. We congratulate them for their aggressive investigative activity and for bringing this to light and their attempts

to remedy the situation, and we look forward to hearing from Ms.

Feldman.

We are also joined by Thomas Donahue, who of course is a very

well-known national individual. He has led the AFL-CIO as president and as secretary-treasurer. We appreciate his taking the time

to be here. He presently serves as chair of the Advisory Committee

on Labor, which is a committee that assists the State Department.

We are also joined by Roland Ashby-Rier. Mr. Rier is a teacher,

and he is here in Washington—he has not yet joined us, but I think

he is going to join us—we had better wait to introduce him until

he makes it. I apologize.

Our next witness is Damaris Daugherty, who is involved in the

Miami issue. She helped found a group called the Teachers’ Rights

Advocacy Coalition, TRAC, back in 2001. For a considerable period

of time, Ms. Daugherty has been raising the red flag about concerns relative to the way the Miami union was being operated, especially about its management and its leadership, and therefore,

she brings to the table a very important element of the review of

that union’s leadership and their failure to properly protect their

membership.

We will begin with you, Ms. Feldman, if you do not mind.

STATEMENTS OF SANDRA FELDMAN, PRESIDENT, AMERICAN

FEDERATION OF TEACHERS, WASHINGTON, DC; THOMAS

DONAHUE, SENIOR FELLOW, WORK IN AMERICA INSTITUTE,

AND FORMER SECRETARY-TREASURER, AFL-CIO, WASHINGTON, DC; AND DAMARIS DAUGHERTY, FOUNDER, TEACHERS’

RIGHTS ADVOCACY COALITION, MIAMI, FL

Ms. FELDMAN. Thank you very much, Chairman Gregg and members of the committee. We are very grateful for the opportunity to

testify about the apparent and appalling misuse of funds and abuse

of trust that we have experienced in our union.

I am sickened and infuriated by the betrayal of the members’

trust and even more so, if that is possible, because of what public

education and teacher unionism mean to me. It was public education from kindergarten through college that made a successful

life possible for me, and it was through teacher unionism that I

could fight to improve the education of kids who great up as poor

as I did, while also striving to improve the working lives of the

men and women teaching them.
19

For me, teacher unionism has been about idealism. Corruption

has never been part of our past, and I can assure you I will continue to do everything in my power to see to it that it will not be

part of our future. To that end, we have just taken a series of important steps to increase fiscal oversight of locals, and I will describe them in a minute.

But I also want you to understand that at the heart of our history is an intense commitment to the independence of our local

union. The AFT, as has been pointed out, has a tradition of strong

local unions with complete autonomy, from electing officers to setting policies to setting their own local dues, making their own

budget, bargaining, ratifying, and enforcing collective bargaining

agreements with their own local boards of education.

This closely tracks the strong tradition of local control in the

public school systems, and it is why he AFT constitution has provided for relatively little fiscal oversight of local unions in the past.

Over the years, we have built a strong national union, but it does

not run locals. It exists for mutual self-help, to address national

concerns and to conduct research on and advocate for educational

improvements, high standards, and other issues of importance to

our members and the people they serve.

For example, President Bush and Secretary Paige have recognized the AFT’s leadership on how to best teach reading, and the

Department of Education is working with us, as did the previous

administration, to help provide the Nation’s teachers with solid research-based approaches to the teaching of reading.

So how did things go so terribly wrong in two of our locals? How

can we set things right and prevent this from ever happening

again? It is a question that I have been constantly asking myself—

could we have seen the warning signs sooner, and even if we had,

with hindsight, which of course we know is always 20/20, could we

have done more?

As I have said, the AFT consists of fiercely autonomous local

unions just under 3,000, ranging in size from two members in an

island community to 115,000 in New York City. Some 2,748 locals

out of that almost 3,000 have fewer than 1,000 members each, and

our Constitution, procedures and practices reflect our tradition of

local autonomy.

So while our Constitution requires that local unions undergo audits or financial reviews at least every 2 years, make them available to their members and submit a copy to the national office, we

have had no enforcement provisions because neither our history

nor our experience indicated that more was needed, and instead,

we have relied on the power of persuasion, not the persuasion of

power.

With regard to the Washington Teachers Union, we have repeatedly sought copies of audits from the president of the WTU and the

payment of back dues. But we first discovered that something was

seriously wrong last summer, when teachers alerted the AFT national office about an overcharge in the automatic dues deduction.

We sent in the AFT’s financial services department, which soon

found several serious irregular transactions, including checks and

credit card purchases, without proper authorization.
20

We then notified the U.S. Attorney’s Office, which began investigating the WTU with the full cooperation of the AFT. The local

executive board asked for the resignations of the officers allegedly

involved, and the AFT hired a forensic auditor who ultimately reported the misappropriation of some $5 million.

All the excruciatingly painful details that you have read about

came directly from our forensic audit, which we promptly provided

to all the AFT members and made public.

In January, the AFT executive council voted unanimously to appoint an administrator to run the day-to-day operations of the

WTU. The case in Miami first came to our attention in a different

manner. There, we had no knowledge of any alleged wrong-doing

by the local’s president until the FBI raided the union’s headquarters on April 29. Nor did we learn that the local was having

serious financial problems until representatives of the UTD came

to us last January requesting that we guarantee a large loan. We

never gave that guarantee because they failed to provide satisfactory answers to our questions about their financial situation.

Over the years, the UTD’s audits, conducted by a reputable national accounting firm, had never indicated that there were difficulties until a problem appeared on the very last audit conducted by

a local accounting firm and submitted in March of this year. And

as in the Washington situation, once we became aware of potential

financial mismanagement, the AFT executive council appointed an

administrator for the Miami-Dade local. Both in Washington and

in Miami-Dade, the administrations are now getting those locals

back on the right financial track.

Meanwhile, on the national level, we have created stronger procedures to help prevent or detect possible corruption in any local

union, and let me briefly describe them.

First, under our new rules, if a required audit or financial review

is not submitted to us within 6 months of the close of the local’s

fiscal year, the national AFT president is authorized to employ an

auditor to review the local’s finances, inform the local’s members

immediately, and report the results to the members and to the AFT

executive council.

In addition, because one sign that a local might be having financial difficulties for any reasons is if it falls significantly and unaccountably behind on its dues payments to the AFT, our executive

council strengthened the procedure for dealing with late payments.

Now the AFT, after notifying a local that becomes 2 months behind in its payments and does not correct it in a timely manner

will directly notify the local’s executive board and State affiliate. If

the payments are still not made, we will communicate directly with

the members of that local, and the AFT president is authorized to

send in an auditor to examine the books. So for the first time as

a national union, we can now directly inform a local’s members of

a potential problem, and we have a streamlined mechanism to employ our own auditor. We believe very strongly that the knowledge

and involvement of members is the strongest tool that we have.

What has happened in these two locals is a tragedy, but it is also

what educators call ‘‘a teachable moment.’’ Our newspapers and

website have kept our members and leadership throughout the

country informed about these situations. The website is carrying
21

the WTU’s full forensic audit, with all its ugly details, along with

our own AFT financial statement which is audited by an independent firm. A similar forensic audit will be completed and posted for

Miami.

We are developing additional training programs for local union

presidents, treasurers, and other officers in financial management,

recordkeeping and reporting.

I am determined, out of outrage and belief, to guard our historic

mission—to nurture the open, honest, democratic union that the

AFT has always been, which gives voice to teachers’ aspirations to

improve education for all of America’s children, for the good of our

communities and for our country.

Thank you for listening, and I am prepared to answer any questions you have.

The CHAIRMAN. Thank you, Ms. Feldman.

[The prepared statement of Ms. Feldman may be found in additional material.]

The CHAIRMAN. Mr. Donahue, we would be happy to hear any

statement you wish to make.

Mr. DONAHUE. Thank you, sir.

Mr. Chairman, committee members, Senator Bond, I thank you

for being patient. I have submitted a written statement for the

record, but I would like to make a few comments. The statement

that is filed includes a lengthy statement of my background, but for

your purposes, I think it is sufficient for me to say that I have

spent 41 years in the trade union movement working at the local

union, the national, and at the federation level, including 16 of

those years as secretary-treasurer of the AFL-CIO and a short term

as president of the AFL-CIO.

I think I bring to this hearing the unique perspective of a trade

unionist who has also served as assistant secretary of labor for

labor-management relations. Indeed, Mr. Yud was one of my staff

when I was in the Department of Labor. That was back when he

had blond hair, and I had a full head. [Laughter.]

Let me say at the outset that I have enormous respect for the

American Federation of Teachers and for all of its officers. I hold

it in such high regard because I sincerely believe that it is a primary reason why today’s teachers have greater professional development opportunities, why all of our States have academic standards in place.

My purpose in being here is to provide a little background of

union structure so that you will understand where the AFT fits in

that framework to enable you to see the current problems in two

locals of that union in their appropriate context. I would also like

to comment on the proposed LM-2 reporting requirements that the

Department has proposed and which have been discussed here by

Mr. Yud.

Those were not motivated by the WTU since they predate the

discovery of that misconduct and would not in my opinion have

prevented it. Unions are democratic structures in which members

elect their officials at the local, State and national levels, in free

and fair elections, meeting elaborate standards prescribed by the

Department of Labor. They seek the fullest involvement of their

members in union affairs, but each of my unions is a product of its
22

own history and orientation, and to some extent, that of the industry or government in which their members work.

The AFT is by design and tradition decentralized—highly decentralized—with teachers employed by thousands of school districts

across the country. It makes sense that the union is a federation,

a structure which affords local independence and responsiveness to

local issues and minimizes the degree of control and supervision

the national office exercises. Since its founding 80 years ago, that

approach worked superbly well for the national union, for its locals,

and most importantly, for all of its members.

You are here today talking about the exceptions—the shocking

exceptions—but it is important to remember the overwhelming majority of AFT locals operate democratically, under leaders who possess integrity, expertise, and a commitment to member service.

Let me suggest that the way to judge a national union is not by

the despicable actions of a few individuals; rather, judge the character of the AFT and its officers and board by their response to

those actions, and the AFT has responded well.

Ms. Feldman has described at length the steps the AFT has

taken to handle the current problem and to prevent any sort of repetition of it. I think the AFT is clearly on track in addressing the

problem. They are dealing with it at the local level, at the national

level, encouraging further member involvement in these issues, and

increasing the supervisory role of the national union.

The supervision and intervention of the AFT will now be able to

be exercised when the first warning signs appear of difficulties in

local unions. I think they are vigorously addressing the problem.

As people here who are concerned about those aberrations,

though, you should know that the proposed changes in the union

disclosure forms that are being considered here, described by Mr.

Yud, are not aimed at this occasional crook or at the trade unionist

who betrays the members’ trust, nor will they reduce the incidence

of this type of crime. What they will do is cause unions to spend

many more millions of dollars than have ever been stolen in an incredible maze of recordkeeping and filing. They represent an enormous intrusion into the details of a union’s operations never envisioned by the framers of the Labor-Management Reporting and

Disclosure Act. They would force unions to disclose to employers,

to the employer consultants who infest the labor relations scene,

details of union operations which might well telegraph a union’s organizing or bargaining strategy and deeply injure its members.

Unions currently disclose their spending willingly and gladly so

members know where their money is going, what it is being used

for—and most unions did that before any law required it. Every

union I know of presents to its conventions or annual/biennial

meetings a full accounting for all moneys received and expended.

Members get an opportunity to review financial statements which

are often posted on union websites and are published in union publications, and they obviously can and do ask questions of their leaders at any meeting they choose.

The current version of the LM-2 form requires unions to disclose

staff salaries, to include detailed categorical spending, which

means rigorous and detailed recordkeeping by unions. That is a
23

burden they have accepted because they believe it serves a useful

purpose.

Looking at the proposed regulations, the Airline Pilots’ Association did a detailed study of what these new regulations might

mean to their organization. They concluded that the new rules

would result in 15,863 pages of data from that union alone that

would not help the members in any way to understand ALPA’s financial picture any better than they do now.

The AFL-CIO study of the proposed changes concluded that the

average cost to a national union to apply would be over $1.2 million, and the average cost to each local would be $218,000. In aggregate, the AFL-CIO estimates a total cost to comply for all reporting unions of $1.2 billion, which would translate, incidently,

into a charge of about $96 per member in a reporting union. That

is a very heavy tax to lay on union members.

There is such an enormous disparity between the figures I offer

you and the figures which the Department of Labor offers that it

seems to me, if I may suggest, Mr. Chairman, that somebody needs

to ask the Department of Labor to try to reconcile these figures or

to rebut the AFL-CIO figures. You know the way the regulatory

process works, that is not happening, and yet you have this enormous disparity in the estimates of the cost of compliance.

The truth is that the profusion of information, the enormous detail that would be included, would not increase the accountability

of officers to members. It would instead tie them up in enormous

recordkeeping and time measurement chores. No union member

pouring over all that detail would be able to detect mis-spending,

and I question whether the Government would be able to do so.

Mr. Yud testified today that because of budget stringency, the

Department of Labor has abandoned the program of systematic

field audits that it had conducted for many years. That being the

case, it is difficult to see how the Department could deal with the

welter of detailed information the new report forms would engender. The proposed changes are simply not the answer to increased

accountability. Whether the proposed changes come from the best

intentions or the worst, their effect would be the same—more

money from workers would be spent to cover administrative and

accounting functions; less money could be spent to improve working

conditions, to raise the quality of the institutions in which they

work, and to help workers better serve the Nation.

Thank you, Senator.

The CHAIRMAN. Thank you, Mr. Donahue.

[The prepared statement of Mr. Donahue may be found in additional material.]

The CHAIRMAN. Ms. Daugherty?

Ms. DAUGHERTY. Thank you, Mr. Chairman.

Good morning. I am Damaris Perez Daugherty. I am the wife of

a public school teachers and mother of two children who are in the

public school system in Miami-Dade. I am also the daughter of two

Cuban immigrants who are an American success story, and I am

very proud to tell you today that my father was the founder of one

of the first labor unions in Cuba before coming to the United

States.
24

I am executive director of the Teacher Rights Advocacy Coalition,

or TRAC. TRAC is a professional organization dedicated to empowering educators and elevating their status. We are fighting to expose corruption in our school district and bring about accountability. Unlike the local teacher union, the United Teachers of Dad, we

are an open and democratic organization where each member has

a voice and a vote.

I would ask you today to consider one question: Would you feel

comfortable having a fox guarding a hen house?

While unions have undoubtedly achieved important goals and

helped to make America a more just and equitable society, in recent times, some unions have lost their focus and have allowed

their executives to enrich themselves at the expense of their membership. A few collective bargaining agreements go so far as to

erode constitutional rights such as the right of free speech, freedom

of association, and the right to counsel. Those organizations that

have stepped over the line need to refocus and must be made to

answer to the people they represent.

A well-publicized example of a union run amok is UTD. For

years, widespread rumors of corruption within UTD have abounded

in our school district. Numerous entities should have exposed the

corruption, but they chose to look the other way. The union boss,

Pat Tornillo, had his tentacles throughout the State, and many fear

or owe him.

While the stench of corruption and graft has been burning in the

noses of the citizens, the various powers have been handing out

snuff.

Teachers in Miami pay the highest dues in the Nation—$843.

Why? So that Pat Tornillo can take vacations around the world,

enjoy spa treatments for himself and his wife, buy liquor, and pay

for his maid with teachers’ dues moneys.

Tornillo enjoyed these illicit perks over and above his quartermillion-dollar salary, $42,000 unverified expense account, and a

very generous benefits package. These illicit expenses went unchallenged by the executive board of UTD—the same board that remains in power today at UTD.

As Tornillo was misappropriating the teachers’ dues moneys,

UTD was telling the teachers of Miami-Dade to apply for Medicare

health coverage for their children because the union was powerful

to negotiate an affordable health care package.

Why didn’t anyone intervene on behalf of these workers? The

local State attorney’s office has heard of the corruption for years,

but did not take one step toward investigating. AFT has told us

today, several times, that they are powerless by their own charter

to do anything.

Furthermore, AFT knew since 1999 about UTD’s financial troubles and did not intervene. Ms. Feldman referred to UTD’s audited

financial statements by a reputable national accounting firm, and

I just happen to have some of those financial statements in front

of me, and I will read from the financial statement dated September 30, 2001 and 2002.

‘‘In December 1999, the Union, UTD, obtained an unsecured loan

for $1.3 million from a bank to pay for back dues to the American
25

Federation of Teachers, an affiliated organization. This loan is

guaranteed by AFT.’’ So at least as far back as 1999, UTD was in arrears to AFT, and

AFT did not intervene to safeguard the teachers of Miami-Dade

County. So telling us that we can count on the AFT to clean up

the mess in Miami is the same as telling us that we should feel

comfortable sending in Fidel Castro to watch Saddam Hussein on

human rights issues.

The Florida legislature has proven itself powerless against the

unions. During the 2002 and 2003 session, bills were introduced by

different members both in the House and Senate, calling for greater accountability on the part of the unions. Both times, the union

lobbyists defeated those measures.

Our school district cannot be trusted to protect the workers. They

have colluded with the local union to deny workers their constitutional right to counsel. In addition, UTD has systematically denied

representation to teachers who are being brought up on charges by

the district. This has led to countless abuses in our school district.

The Florida Public Employee Relations Commission is the body

charged with ensuring union compliance with statutory reporting

requirements. PERC has not been granted powers to investigate or

impose sanctions.

The story of Judy Herrell exemplifies what happens when the fox

is guarding the hen house. Judy has been a teacher in our school

district for 30 years. She was a UTD shop steward for 12 years.

She had an amazing membership at her school because she was so

supportive of the union and its ideals. But slowly over time, she became very suspicious of UTD’s accounting practices. Eventually,

through her persistence, she discovered two dead people on the

payroll. When she questioned the union boss about it, she was told

to butt out. She was then put on trial by the union, and her stewardship was terminated for questioning the finances.

Workers who see value in belonging to a union should be able to

do so. However, they should not be at the mercy of union executives who believe themselves to be above the law. Unions exist for

the people; they are by the people, for the people. The people

should know what is being done with their own money.

Can educators in Miami-Dade count on the State attorney, AFT,

FEA, the State affiliate, the legislature, the school district, or

PERC to protect them? The answer is a resounding no.

We need Federal legislation that will wrest from UTD and similarly corrupt unions the power they have inappropriately usurped

from the workers of this country, and we need to return those

unions to their once lofty goals. Without your intervention, certain

union executives will continue to manage union funds as if they

were their personal expense account.

In closing, the newest justice of the Florida U.S. Supreme

Court—and a Cuban American, I might add—Raoul Cantero, has

been quoted as saying: ‘‘The true measure of a person is how he

treats those over whom he has power.’’ Measured by that standard,

some unions fall criminally short.

Thank you.

[The prepared statement of Ms. Daugherty may be found in additional material.]
26

The CHAIRMAN. Thank you very much, Ms. Daugherty, and I

thank all the witnesses for their testimony.

Ms. Feldman, I think one of the issues here which is fairly clear

is is there some process or some system that can be put in place

to assure that we adequately audit and have information that is

transparent for union membership to look at from unions and your

affiliated unions—all unions—I am not talking about the AFT.

Let me begin by saying that I congratulate the AFT for the effort

in Washington. I think it was a very, very strong effort and welldone. But I guess the question is this. As I understand it, essentially, if a union is current on its dues or, as Ms. Daugherty has

represented if she is correct, has even borrowed to pay its dues,

your national union is basically not going to be in a position to pursue any sort of audit oversight or transparency activity; is that correct?

Ms. FELDMAN. No, not currently. That was true before we adopted these new procedures which I just described to you, which as I

said was what we considered ‘‘a teachable moment.’’ And we are

going further than that in constitutional changes which we will

bring to our next convention.

But first, let me say a couple things about what you have raised

and some other issues. Most local unions in school districts do not

collect dues over the summer. So there is a certain amount of arrearage built in because they simply do not get the dues over the

summertime from the board of education. So we have a period, sort

of a grace period now, of 2 months.

If we find that local unions are in arrearage more than that, we

now will be able to take a series of steps which we were not able

to take before. We will go the local’s executive board, tell them that

the local has not paid its dues—obviously, if the members of that

executive board did not know it, they would know it now, and they

would now have some information on which to raise questions. If

something was not done about it that way, we would actually go

to the full membership of the local, which we never could have or

would have done before.

The CHAIRMAN. Not to interrupt, but actually to interrupt, my

point is that it appears that the enforcement mechanisms, what energizes an audit, what energizes an oversight review by the national in at least your organization, is tied to whether or not dues

are current.

Ms. FELDMAN. No. That is one of the things, because very often,

that is a sign that there is something wrong. The other thing is

that if we do not get an audit or financial review from them, then

we will also now have the power to go in, do our own audit, go to

the members, tell them that we think there is a problem there,

that we have not received an audit.

For example, we also have this administratorship going in the

Miami local and in the Washington, DC local. We have reduced the

dues in Miami. The local executive board is not currently in authority. So we have taken these steps—we have reduced the dues,

we have taken over the local. The local executive board does not

have authority over the local.

And I just wanted to straighten out one thing. You know, Florida

is a right-to-work State. No one can be compelled to join the union
27

in Florida. In fact, there is no place in the United States of American where a teacher cannot get a teaching job unless they join the

union. That was a statement that was made by Senator Alexander,

and I was hoping he would be back so I could correct the record

while he was here. That just is not a true statement. Teachers are

hired by local boards of education. If a union is in place, they can

join the union, and they may not want to join the union. They do

not have to join the union in any situation. There are some in

which they do pay a fee, just a fee that is calculated as a result

of what it costs the union to represent them in collective bargaining, and that would only be in collective bargaining situations.

In Miami, which is part of a right-to-work State, the State of

Florida, there is absolutely no compulsion to join the union. I just

wanted to get that on the record.

The CHAIRMAN. I appreciate your wanting to clarify that, and I

am going to put that clarification on Senator Alexander’s time, who

was not here.

Ms. FELDMAN. OK, that is fine with me.

The CHAIRMAN. The issue, though, is how do we put in place a

process which creates transparency and gives the information that

is necessary so that when an incident like Washington or Miami

occurs, there is a reaction from some oversight organization that

has the capacity to go in and correct it.

Ms. Daugherty’s point is that a lot of people who should have

been on top of this failed. Whether she is correct or not, I do not

know, but obviously, somebody failed because this went on for quite

a while. In the Washington situation, it was clear that there was

a failure. And I guess my question is it does not seem to me that

maybe it is even your national’s responsibility to go this far, which

brings us to the second question, which is what is the proper role

of the Department if Labor in this area. Most of your unions are

public and therefore are not subject to Department of Labor filing

requirements, so I guess I would ask the question of Mr.

Donahue—how do you think we can put in place a system that is

going to adequately address the issue of getting transparency to

the workers and making sure that, whether it is the local attorney

general, district attorney, or whether it is the Department of Labor

or the national union, has the capacity to step in and knows

enough information to see that there is a red flag there, the way

it should be.

Mr. DONAHUE. I think, Senator, we have such a system, and it

is called free and fair elections. These unions are required—local

unions are required—to hold an election every 3 years. If the members are unhappy with the reporting that they receive, if they think

that their business agent is not producing for them, that their officers, president, or executive board members are not producing for

them, they can vote them out of office.

I think that that is a self-policing mechanism, and it is the same

mechanism that you subjected yourself to. The representatives of

the workers have to satisfy the workers. They do not have to satisfy Sandy Feldman. The president in Miami does have to satisfy

Ms. Daugherty if she is a member of the union, because he is seeking reelection. I think that system will take care of it, and I believe
28

that it does. I mean, you are looking at an infinitesimally small

number of cases here.

Ms. FELDMAN. May I respond also to that question?

The CHAIRMAN. Yes, and then, Ms. Daugherty, if you would also

give us your thoughts because you said you wanted Federal legislation, and I want to get specifics there.

But go ahead, Ms. Feldman.

Ms. FELDMAN. From our perspective—and for a moment, I will

put on my hat as a local president; I was president of the local

union in New York City for 12 years—we published our audits in

our union newspaper; we made a budget in an executive board of

over 100 people, so that every, single line was looked at. We also

had a union—have a union—there which is very lively, full of membership involvement, lots of activity both at the building level and

at the local union level across the city. I was in those schools two

to four times a week, talking with members. Members had forums

in which to raise their questions, raise the issues.

So that from our perspective, we do the reporting—by the way,

you know, the Washington Teachers Union had reported on the

LM-2 falsely, not discovered by the Labor Department; the audits

had been in place in UTD Dade, and no one had really raised a

question until we started raising questions because we were asked

for a loan, which we ultimately did not give because of those growing concerns—so really, we believe that rather than bureaucratic

government paperwork being increased, what we need to do is further the democratic involvement of the members, and that is what

we as a national union—we will go in and do audits, we will provide an administratorship and take over a local if we see the kind

of terrible misdeeds that we have seen in these two locals, which

again I think needs to be emphasized really is a very small number

when you consider the unions out there. But the best insurance

against the kind of terrible things that were done in these two

locals is for the members to be active and involved and to make

sure that they look at the financial statements, that they ask the

questions. And I do not accept that a member can be intimidated

from asking those questions, because if there are democratic procedures in place, as Mr. Donahue said, you can vote somebody out

of office, or you can inform others. I was never informed by members of the local in Miami of potential problems, and the members

of that local have the right and the obligation to make sure that

their local is being run properly and that their money is being

spent properly.

The CHAIRMAN. Ms. Daugherty?

Ms. DAUGHERTY. Yes, sir. Pat Tornillo has been in power in

Miami-Dade for over 40 years. In that time, there have been no

real elections. These are not my words. I have a very good relationship with quite a number of the union stewards, who in fact have

contacted me on more than one occasion to thank me for my efforts

because for years, they had been trying internally to clean up UTD,

and they were met with resistance, and at council meetings where

the stewards met, if they dared to oppose him, they were ridiculed

publicly.

I have been told personally by a gentleman who has been a steward for 20 years that he did not dare run against Pat Tornillo be-
29

cause he would be put in ‘‘UTD purgatory.’’ And this is a union

man, his father was a union man; in fact, his father worked for the

teamsters.

The CHAIRMAN. You said you wanted specific Federal legislation.

Can you give us a general overview, if you have thought it through,

what that would be that would address the problems that you saw

in Miami?

Ms. DAUGHERTY. Well, sir, the rules that are being proposed are

fine. Unfortunately, we do not think they go far enough, because

number one, they would not affect a local like the local in Miami,

so members would still find it impossible to have financial data at

their fingertips to see what the union is doing with their money.

And also, the audited financial statements that we have discussed

before are insufficient because, reading again from one of them,

under ‘‘Expenses,’’ it says, ‘‘Program Services, Education and Legislative Program, $4.2 million.’’ No one knows what that is.

We would like to see the law expanded so that all unions would

have to report to either the State or the Federal Government and

provide full disclosure as to what they are doing with the members’

money. And I realize that it may be a burden. It is part of the cost

of doing business. I believe Senator Clinton said before that there

are no such requirements in the law that you have to account for

your time, but if you will look at the law concerning not-for-profits,

and you talk to the Internal Revenue Services, there are requirements on people accounting for their time for different activities,

because once again, these are organizations that are receiving

money that is not theirs; they owe a fiduciary trust to the people

who are giving them the money, so they would need to account for

that money.

So we would like to see the rules go further and the legislation

go further into detail, because I have seen the new form, and still,

the categories are rather large and vague.

The CHAIRMAN. Senator Bond?

Senator BOND. Thank you very much, Mr. Chairman.

Mr. Donahue, you talked about the fact that there were not audits by the Department of Labor. Are you here supporting additional resources so that there are more auditors? Will this help assure fidelity and transparency in union matters?

Mr. DONAHUE. I think, Senator, that is a question that you all

answer in your judgment——

Senator BOND. No, no. I want you to tell us how we clean it up.

Mr. DONAHUE. I would suggest to you that you are in a continual

struggle with priorities. I would put more money into OSHA investigations than into LM-2 investigations——

Senator BOND. So you do not think——

Mr. DONAHUE [continuing]. And I assure you that the audit program covers, even in the weakened condition that Mr. Yud describes, a higher percentage of unions than the OSHA inspections

cover as a percentage of workplaces.

So I would put much more money into OSHA investigations.

Senator BOND. In other words, you are not concerned about 11

criminal convictions a month. This is not something that we need

deal with. So let me turn——
30

Mr. DONAHUE. If I may respond, Senator, I think you have to

take a look at what are the 11 convictions. I have no idea what

they are. Is it somebody who misspent $1,000 over a 5-year period,

or is it somebody who is guilty of real thievery?

Senator BOND. I can assure you that the courts are not interested in the former.

Let me go to Ms. Feldman. You talked about the importance of

union elections. In the written testimony submitted by Dr. AshbyRier, he noted that in the AFT convention in July of last year in

Nevada, there was no secret ballot. The ballots were handed to him

and taken back by the union president. His written testimony indicates that the governance would be improved, and there would be

much more pressure to clean up unions if there were truly a secret

ballot. Is his statement correct, and is that the kind of election that

is conducted at the local level, or are they true secret ballots?

Ms. FELDMAN. Senator, thanks so much for asking that question,

because I think he is just confused. In our union, delegates are

elected to a convention at the local level. They represent the local.

They are elected in a secret ballot election by the membership.

They come to a convention much in the same way as you are elected in your State, by a secret ballot of the voters in your State. You

come to the congress, and you vote openly in the congress. In our

convention, we vote openly. These are delegates who are elected by

secret ballot in their local unions.

Senator BOND. There are secret ballots?

Ms. FELDMAN. Yes. They are elected by secret ballot—I believe

that is a requirement of the law—in their local unions. They come

to a congress, and in that congress when they vote on certain

issues—for example, when they elect the officers of the national

union—they vote in a roll call vote so the members who elected

them know how they vote, very much the same way as the people

of your State know how you vote on every issue since they sent you

here.

Senator BOND. Ms. Daugherty, is that the way it works in

Miami?

Ms. DAUGHERTY. No, sir. In Miami, there are no secret ballots,

and there has not been a real election since Pat Tornillo took

power, and the only person who dared to challenge president-forlife Pat Tornillo 20 years ago was a lady named Keanu Barriman,

who disappeared after challenging Mr. Tornillo.

The CHAIRMAN. How are the delegates chosen to the national

convention?

Ms. DAUGHERTY. That, I do not know, sir. I am speaking locally,

at the local level, to elect the president and the officers of the local.

Ms. FELDMAN. If there were a violation of that, then someone

could have done something about it, since the Labor Department

has rules about that.

The CHAIRMAN. I do not believe the Labor Department has jurisdiction in that specific area, because it is a public union, isn’t it?

Ms. FELDMAN. Well, it could be that in Miami it did not have jurisdiction. In Washington Teachers Union, it would have, depending on whether the local union has private members or not. But we

expect our locals to have a membership election for delegates.
31

The CHAIRMAN. If you would yield to me for just a second, do you

audit whether or not the local election of the local delegates is done

by secret ballot?

Ms. FELDMAN. No.

Senator BOND. Let me just ask one more question. I have a commitment and will have to leave.

There are two things that would trigger some action by the AFT.

No. 1, you do not get the dues, and number two, you do not get

the audit. What do you do with the audits and with the financial

statements? Do you have exercise any supervisory authority? Do

you have any way of sampling, doing testing to assure that these

audits have been properly handled and disseminated?

Ms. FELDMAN. Well, going forward, we intend to do that, Senator. We are developing a computerized program which will enable

us to look at these audits in a disaggregated way, make some assumptions which would tell us something about the way that the

local is operating, for example, depending on the size of the local,

the percentage of dues spent on staff salaries versus travel or conferences. We are developing a program which will enable us to do

that at a glance.

We also are having further discussion on our executive council,

and some of the things we intend to do will require convention action because they require constitutional amendment, so for example, one of the suggestions that has been made at our council is giving us the right to do roving audits so that there would be an expectation that there might be an audit coming from the national

organization. But we have right now the right to go in and do an

audit where we see something that looks wrong to us when the

audit comes in.

Senator BOND. Our staff research indicates that only six of the

278 locals listed on your website filed Federal forms. Would you

support a requirement that local public sector unions submit financial disclosure information to the U.S. Department of Labor?

Ms. FELDMAN. Well, I think they do submit forms to the IRS, and

many of them submit to their State government. They are required

to submit their financial statements and information similar to

what is required on an LM-2 to their States.

Senator BOND. Is that a ‘‘no’’?

Ms. FELDMAN. I would say that it is something that we would

consider, but we have not taken a position on it one way or another. But again, we think that there are sufficient reporting requirements, and the real problem here is making sure that the

members take up their right and responsibility in a democratic

manner to make sure that their local union is being governed appropriately.

Senator BOND. Thank you, Ms. Feldman.

I thank the witnesses and I thank the chair.

The CHAIRMAN. Senator Reed?

Senator REED. Thank you very much, Mr. Chairman, and I thank

the witnesses for their testimony.

First, no one can condone criminal activity, and certainly this

criminal activity has to be criticized strenuously.

The question before us, though, is whether there are systematic

problems that we have to address and also, I think related to that
32

is whether the interested parties have taken steps to try to preclude the recurrence of these events. And I think the chairman said

that the national AFT has taken steps. The question is are they

sufficient, or are there more steps that need to be taken.

One issue that you just alluded to is the question I was going to

raise—all of your unions do file with the IRS; is that correct?

Ms. FELDMAN. Yes.

Senator REED. And those filings are always subject to Internal

Revenue audits and Internal Revenue laws, etc.

Ms. FELDMAN. Yes, they are.

Senator REED. So that is another check on the fiduciary responsibilities of these people.

How many unions do you have, Ms. Feldman?

Ms. FELDMAN. We have close to 3,000 local unions.

Senator REED. And to your knowledge, is there any other incidence like this in the last several years other than Washington and

Miami of this scale?

Ms. FELDMAN. We have never had anything like this before in

our history. The scale—it is mind-boggling what has happened in

these two locals, and we are doing everything we can first of all

to correct it because we are disgusted by it, and second of all to

do everything we can to try to ensure that it never happens anywhere else.

Senator REED. You mentioned before that you were a local union

leader in New York City, and you suggested some of the things

that you were doing. Is it your intention to make those practices

common throughout the AFT?

Ms. FELDMAN. Yes. We developed what we call a local union profile, which is a description and in some ways an ability to check

off the kinds of things that a local, given whatever particular size

it is, ought to be doing to involve its members, to serve its members, and we have a task force at work on that to make sure that

every local is doing that.

Senator REED. Are you systematically looking at the governance

capability, the ability of elected leaders? It goes back to the point

that both you and Mr. Donahue made, that these are elected leaders. They stand for election, they get elected, and just like some of

our constituents, people shake their heads afterward. But anyway,

the point is that you, I think, should be engaged in trying to ensure

that they have the support, both institutionally and otherwise. Are

you doing that?

Ms. FELDMAN. Yes, we are. We are developing—I alluded to it

briefly in my testimony—we have always done training of local

leaders, but we are really beefing that up so that they understand

what their fiduciary responsibilities are, especially in the financial

area, but also what their responsibilities are in terms of making

sure that there is democracy and democratic involvement of the

members.

I have to say that I listened to Ms. Daugherty, and I know that

Pat Tornillo was elected over and over again over a period of many

years, but there were elections held in that local, and there was the

possibility of opposition organizing itself and electing someone else.

By the way, we have tremendous turnover in many of our local

unions because of elections, so it is really not all that unusual to
33

have an opposition candidate topple even a longstanding elected

leader. We know right here in the Congress of the United States

that incumbents generally have an edge, but if they are satisfactorily representing their constituents, they usually get reelected. If

not, if opposition grows, they can lose an election, and it is the

same way in a union.

Senator REED. One of the issues that occurs because of the nature of teachers’ unions is that we divide responsibilities between

the Federal Government and the State government with respect to

responsibility and enforcement. And I am not the expert, but if a

union has exclusively public employees, and generally, they are

governed by State rules, State regulations, and the States have

very zealously guarded that prerogative, which raises the issue

which, Ms. Daugherty, your testimony and your commitment to

these issues is commendable. You talked about the PERC, the Florida Public Employee Relations Commission. I assume that is the

agency that really has the front line responsibility to police the operations of these public unions in Florida. Is that correct, legally?

Ms. DAUGHERTY. Well, sir, they are responsible for collecting the

forms on a yearly basis, but I have a letter which I could provide

to the Senator from their general counsel stating that their responsibility is ministerial, they have no investigative powers, and they

cannot impose sanctions.

Senator REED. Now, that is a decision that the State of Florida

has made.

Ms. DAUGHERTY. Yes, sir, it is.

Senator REED. Who appoints these commissioners, Ms.

Daugherty?

Ms. DAUGHERTY. I believe they are appointed by the Governor of

the State.

Senator REED. So Governor Bush appoints these commissioners?

Ms. DAUGHERTY. Some of them have been his appointees; some

were prior.

Senator REED. But he will have the opportunity certainly in the

next several months, at least.

And a remedy of this situation would require the Florida legislature to enhance the powers of the PERC?

Ms. DAUGHERTY. Yes, sir, I believe so.

Senator REED. And I presume you are also working along those

lines?

Ms. DAUGHERTY. Yes, sir.

Senator REED. Good. Well, again, this is a situation that no one

wanted to see develop because no one wants to see the abuse of

trust that is implicit in these criminal activities. The responsibility

is to make sure it doesn’t happen again, to do it systematically, and

to do it, I think, in a way that when it comes to the teachers

unions, the roads lead not just to Washington, but in your case to

Tallahassee and other places. And I would say the way we have organized our response to public employees is that we have given the

States the lead, and I would hope that the State of Florida would

step us just as vigorously as others might. And I think the steps

that you are taking are not only commendable, but they are essential, and I thank you for that.

Thank you, Mr. Chairman.
34

The CHAIRMAN. Thank you.

I know our witnesses will have to head out, but I think Senator

Reed has touched on one of the issues here, which is that clearly

the national unions have a major role in oversight, and you attempt to do it, but there is also a public role in oversight which

the Department of Labor has or the State departments of labor

have, and as I understand it, only 12 States presently have laws

governing the issues of public labor unions and whether they are

audited and whether they are disclosed. So you have a majority of

the States basically not in the field of addressing the public unions,

and I can understand the resistance of public unions to having a

Federal role, because obviously, nobody wants to get another regulatory agency involved.

But I would be interested, Mr. Donahue, because of your great

expertise and your background as to why the dichotomy between

the private and the public unions being governed by the Department of Labor? Why shouldn’t all unions be under the Department

of Labor for reporting requirements? Why should public unions be

exempted? Is there a logic to that that is historical?

Mr. DONAHUE. Well, it is more than historical; I suspect it is constitutional, Mr. Chairman. The essential interest of the Federal

Government in regulating trade unions in 1935 was if they were

engaged in interstate commerce, so the National Labor Relations

Act will only apply in those circumstances and does not apply in

intrastate commerce.

Similarly, when the Labor-Management Reporting and Disclosure Act was formed, and when the WPPDA, the Welfare Pension

Plan Disclosure Act was developed in the late fifties, they focused

on private sector unions which were in a sense operating with some

degree of government sanction, approval, whatever.

I think it is terribly important to note that unions are independent creatures. They are not creatures of the State, and the State

needs to be very careful—the ‘‘State’’ meaning the Federal Government in that sense—needs to be very careful as to how far it wants

to encroach on the operation of an independent citizen organization. We do not regulate lots of other organizations. We do not regulate the VFW and the Moose and the Eagles and so forth. We regulate trade unions because of the connection to the job and the connection to the Federal supervision of the establishment of collective

bargaining rights, and I think that is the basis for the exclusion

of the public employee unions, and I think it is an appropriate one.

Second, as Senator Reed was pointing out, the States have an interest which they very jealously guard in the relationships with the

unions within the State, the unions which represent State employees or school employees or whatever. And that may be the place

where supervision should be exercised if it is not, but that is beyond the authority of the Congress, I would think.

The CHAIRMAN. This has been a good hearing, and I appreciate

all the testimony.

I would say there are few things that did come out of this that

I am interested in pursuing. I am obviously specifically interested

in pursuing whether there is a systematized approach that is going

to work to disclosure and transparency and how we can tighten

that up and make it more logical and more effective.
35

Along those lines, I was interested to note your concerns about

the cost that this new compliance is going to put on unions—$1 billion of new cost is your estimate; the Labor Department’s is signifi- cantly less. Clearly, $1 billion is a ridiculous number, and $96 per

union employee seems rather high, too.

So I would be interested in getting to the bottom of that question, quite honestly, and we will try to get some answers to that,

although I do think we ought to give the Department time to digest

the 36,000 items of comment that they have received, and hopefully, that will cause them to adjust where they see those comments to be appropriate.

But I thank you all for your testimony and for taking the time

to come here. It has not only been very valuable; it has been good

to get a public airing of some of these issues, because the integrity

of the union process is critical. It is a very important element of

our society, and the maintenance of a free society is to have transparency in a lot of areas, but especially in areas where you have

fiduciary responsibility, like unions.

So thank you very much, and we will keep the record open for

comments.

We are adjourned.

[Additional material follows.]
36

ADDITIONAL MATERIAL

PREPARED STATEMENT OF LARY F. YUD

Mr. Chairman and Members of the Committee: I am pleased to appear before the

Committee today to discuss the Department of Labor’s administration and enforcement of the Labor Management Reporting and Disclosure Act (tLMRDA), also

known as the Landrum-Griffin Act.

I understand that the Committee is interested in particular in matters involving

the Washington Teachers Union (WTU) and the United Teachers of Dade (UTD).

As the Committee is aware, the Washington Teachers Union is the subject of an investigation under the auspices of the United States Attorney for the District of Columbia and the Office of Labor-Management Standards is actively involved in this

investigation. In view of this pending investigation, it would be inappropriate for me

to discuss specific issues concerning that case. At this time our agency is not involved in any investigation involving the United Teachers of Dade.

We all share the public’s interest in the effective enforcement of the LMRDA, both

as a general matter and in connection with the WTU case. I can assure you that

the Department of Labor will assist the U.S. Attorney’s Office in every possible way

to see that all appropriate action is successfully undertaken.

Although I cannot discuss the current case involving the Washington Teachers

Union, I can provide a general overview of the LMRDA, which is centered on two

fundamental goals—promoting union democracy and ensuring; union financial integrity.

The Office of Labor-Management Standards (OLMS) administers and enforces the

provisions of the LMRDA that are within the jurisdiction of the Department of

Labor. These include civil and criminal provisions that provide standards for union

democracy and protect the financial integrity of labor organizations that represent

private sector employees. OLMS also administers and enforces provisions of the

Civil Service Reform Act of 1978 and the Foreign Service Act of 1980, which apply

similar standards to federal sector unions.

The rights of union members and important union responsibilities are set forth

in five Titles of the LMRDA.

Title I of the LMRDA creates a ‘‘bill of rights’’ for union members. Every union

member has an equal right to nominate candidates for union office, to vote in union

elections, and to attend and participate in union meetings. Title I provides that

unions may impose assessments and raise dues only by democratic procedures, and

contains safeguards against improper disciplinary action by unions. Title I also requires that every labor Organization inform its members about the provisions of the

LMRDA and establishes the right of members and employees to copies of collective

bargaining agreements.

Title II of the LMRDA requires reports from unions, union officers and employees,

employers, labor relations consultants, and surety companies. The Department of

Labor has authority to enforce these reporting requirements and the LMRDA-provides for the public disclosure of the reports. In addition, members leave the right

to examine union financial records, but only by demonstrating just cause. While the

statute gives a union member the right to sue in federal court to enforce that right,

neither records nor attorneys fees are available if the court does not agree that just

cause has been demonstrated.

Over the past year the Department has taken a number of important steps to improve administration of the LMRDA reporting requirements. In January 2002,

OLMS began distributing to labor organizations a free CD-ROM containing a computer software program that they can use to electronically complete the annual financial reports they are required to file. Those reports can now be submitted over

the Internet.

In June 2002, OLMS began making these annual financial reports, and more recently the reports of employers and labor relations consultants, available for public

disclosure on the Internet. All of these reports for the year 2000 and later can now

be examined from any computer with access to the Internet and printed free of

charge. Copies of earlier reports and of union constitutions and bylaws can be ordered from OLMS over the Internet. Since the activation of the Internet Disclosure

site in June 2002, there have been a half million visits to the home page of the site.

In December 2002, the Department published a Notice of Proposed Rulemaking

to substantially revise the Form LM-2, the annual reporting form used by the largest unions, and to revise, although less significantly, the Forms, LM-3, and LM-4,

which are used by smaller unions. Approximately 20 percent of all unions are required to file LM-2 reports. The new forms will provide union members, Congress,

and other interested parties with more information about the financial activities of
37

unions, including information about trusts operated for the benefit of the members.

These reporting improvements will give union members information they need to

engage in effective self-governance and the enhanced detail and disclosure will also

discourage financial mismanagement and embezzlement. The Department is currently reviewing the comments received on its Notice of Proposed Rule Making.

Finally, with respect to LMRDA reports, OLMS is in the process of implementing

an electronic report auditing program. This program will electronically audit every

labor organization annual financial report to ensure that certain minimum reporting

standards are met. The program will highlight possible reporting deficiencies that

the agency can deal with through a variety of means such as providing the filing

union with an advisory letter, seeking an amended report, or taking other appropriate action.

Title III of the LMRDA governs trusteeships imposed by a parent union over a

subordinate body. Under Title III, a parent union may impose a trusteeship only

for certain, legitimate purposes, for example, to correct financial malpractice or to

assure the performance of a collective bargaining agreement. Title III is enforceable

by the Department of Labor, on the written complaint of a union member.

Title IV of the LMRDA governs the election of union officers. It requires that elections be held periodically—at least every three years for local unions, at least every

four years for intermediate bodies and at least every five years for national and

international unions. It also creates election-related rights and safeguards. For example, all members in good standing have the right to vote and be candidates, subject only to reasonable rules uniformly imposed. Further, subject to certain time limits and a requirement to pursue internal remedies first, union members may file

complaints with the Department protesting violations of any provision of Title IV.

The Department must investigate such complaints, and take action to remedy material violations, within 60 days.

Finally, Title V of the LMRDA establishes financial safeguards for unions. It imposes fiduciary responsibilities on labor union officials. A union officer or employee

who embezzles or otherwise misappropriates union funds or assets commits a federal crime that is punishable by fine or imprisonment. Title V establishes bonding

requirements for union officers and employees, and prohibits persons convicted of

certain crimes from holding union office or employment for up to 13 years after conviction or the end of imprisonment.

In the last five fiscal years (FY 1998 to FY 2002), OLMS has: conducted 752 election investigations and supervised 173 elections; completed 75 trusteeship cases;

and conducted 1,994 criminal investigations, primarily involving the embezzlement

of union assets and related reporting violations. During this period, the Department’s investigative efforts resulted in 726 criminal indictments and 639 convictions, or approximately 11 convictions per month.

In addition to these enforcement activities. OLMS carries out an extensive program of compliance assistance, beginning with offers of assistance in understanding

and complying with the law to all officers of newly formed unions. OLMS publishes

a wide variety of compliance assistance materials, and every OLMS field office has

an active program of compliance assistance seminars. Much of the focus of this assistance is on the statutory reporting requirements.

Unfortunately, because of a significant decline in staff resources, the agency has

had to significantly curtail its discretionary program to audit local and national

unions and focus on mandatory activities such as election investigations and criminal referrals. The agency implemented its Compliance Audit Program in the early

1980’s following a recommendation by the General Accounting Office that was critical of the agency for not conducting sufficient onsite reviews directed to enforcement

of the LMRDA. In response to the GAO’s recommendation, OLMS designed a

streamlined investigative audit program designed to detect civil and criminal violation. The audits have the additional advantage of providing direct hands-on compliance assistance to union officials and employees.

However, between FY 1990 and FY 2002, the agency’s staff resources declined

nearly 40 percent, leaving it with insufficient resources to manage an effective audit

program. Thus, for example, over the past five years, the OLMS Washington District Office, which is ?responsible for nearly 1,500 reporting unions in Maryland, the

District of Columbia, and Virginia, has been able to conduct only an average of

three audits a year. The agency’s program to audit international unions has

buffered a similar fate. The agency has been able to conduct on average only one

audit a year of a national or international union over the past five years. Although

the program is nearly 20 years old, ten of the twenty-five largest unions have never

been audited by OLMS.

Both audits and investigations are often resource intensive. An audit of a large

national union can require the equivalent of three to four staff years. Similarly, a
38

large embezzlement case may require a number of investigators be devoted full-time

to the case for many months. At its FY 2002 authorized staffing level, OLMS had

only 138 investigators located in 20 District Offices and 18 other sub offices (usually

one or two person stations) spread throughout the country. After completing mandatory election casework and the most pressing embezzlement cases, these investigators have very little time to devote to audits designed to detect and deter other violations.

When OLMS is able to conduct an audit, our investigators and auditors perform

a number of mandatory and optional steps designed to detect even well disguised

misappropriations of funds. Records of banks and other financial institutions are obtained and other third-party checks are conducted to verify entries on union records.

In the case of one large international union, an OLMS audit uncovered an embezzlement of over $350,000 that for many years had gone undetected by the union’s own

external auditor.

On a bright note, the President and Congress have begun to rectify this lack of

effective oversight. In the recently enacted FY 2003 budget, OLMS was authorized

to increase its staff. That increase will enable the agency to begin to build back its

audit program, as well as to increase its compliance assistance activities designed

to help union officers, employees, and members understand the law and take steps

to place themselves into compliance.

Thank you for giving me the opportunity to discuss this important program. I

would be pleased to answer your questions, subject only to the constraints by which

the Department feels bound in light of the pending investigation.

PREPARED STATEMENT OF SANDRA FELDMAN

Thank you, Chairman Gregg and the members of this committee, for the opportunity to testify about the apparent—and appalling misuse of funds and abuse of

trust we have experienced in our union.

I want to talk, as clearly and concisely as I can, about the steps the American

Federation of Teachers has taken to correct this problem, and to do our very best

to ensure that nothing like what happened ever happens again.

I am sickened and infuriated by this apparent massive misuse of union funds, of

the betrayal of members’ trust; even more so, if that’s possible, because of what public education and teacher unionism mean to me.

I grew up in a Coney Island slum and then in a public housing project in Brooklyn, NY.

It was public education—from kindergarten through college—that made a successful life possible for me.

After becoming the first in my family to earn a college degree, I became a public

school teacher. I worked in a school on Manhattan’s Lower East Side where the students came from a housing project, and had problems similar to what I and the kids

I grew up with had experienced.

While in college, I had been active in the civil rights movement and worked with

leaders like A. Philip Randolph and Bayard Rustin, who took the time to mentor

me and so many other young idealists.

When I started teaching, I joined the union for the same reasons, to fight for the

things the children needed—from smaller class sizes to better curricula, and for

what I needed as a teacher: professional voice, better training, a decent wage.

That’s how our union was founded in New York City. First by the hundreds and

then by the thousands, teachers joined the union to win the resources and respect

they needed to do their best work.

Mine was Local 2 of the AFT. Local 1 was founded in Chicago at the turn of the

last century, long before anyone thought seriously about collective bargaining for

teachers.

It was organized under the leadership of Margaret Haley, a sixth-grade teacher

who started fighting for women’s rights long before women had ever won the right

to vote. Her organization of teachers into a labor union was a logical extension of

that fight.

The classroom teachers—the great majority of whom were (and still are) women

who fervently believed in their mission as educators and fought as fiercely for the

children as for themselves. They were joined by teachers from New York, Philadelphia, Detroit—yes, Washington, D.C.—and other major cities, and the AFT began

to grow.

I’ve taken the time to talk about our history because it has been about idealism.

Corruption has never been part of our past; and I can assure you I will continue

to do everything in my power to see to it that it won’t be part of our future.
39

To that end, we have just taken a series of important steps to increase fiscal oversight of locals. I’ll describe them shortly.

But I also want you to understand that at the heart of our history and our heritage is an intense commitment to the independence of our local unions.

The fiercely independent women (and men) who founded our local unions were determined to run their own affairs. They didn’t want to be dominated or dictated to

by school administrators or even by the American Federation of Labor.

That is why, when they affiliated, city by city, and local by local, with a national

union, it was the American Federation of Teachers, with the accent on the word

‘‘Federation.’’ In the AFT, to this very day, we have a tradition of strong local unions, with complete autonomy—from electing officers, to setting policies, to setting their own local

dues and making their own budget, and bargaining, ratifying and enforcing collective bargaining agreements.

This also closely tracks the strong tradition of local control in our public school

systems. Just as local school districts are fiercely proud and protective of their local

cultures, so are our local unions. That’s one of the things, by the way, that makes

the No Child Left Behind Act so daring—and so difficult to implement. (A few states

have threatened to turn back federal funds rather than have local school districts

forced to do certain things.)

It’s also important to understand that unlike some unions, the AFT doesn’t deal

with national employers. It’s our local unions that negotiate and administer the

union contracts with the local boards of education.

Over the years, we’ve built a strong national union, but it doesn’t run locals. It

exists for mutual self-help, to address national concerns, and to conduct research on

and advocate for education improvements and other issues of importance to our

members and the people they serve. We provide our local and state affiliates with

a great deal of professional support. We worked with both the Washington, D.C.,

and Miami-Dade locals, for example, on turning around low-performing schools, providing professional development in the teaching of reading, and more.

My legendary predecessor Albert Shanker was known nationally as a leader for

standards and accountability in our schools. But even he was criticized for not

bringing all our local unions along, all the time. When it came to convincing local

unions, even Al Shanker had to use the power of persuasion, not the persuasion of

power.

But persuasion can work. For example, almost all of our local unions are now on

the same page regarding many education improvements, such as how best to teach

reading, an area in which the AFT has taken a leadership role.

In fact, President Bush and Secretary Paige have recognized the AFT’s leadership

on this issue, and the Department of Education is working with us, as did the previous administration, to help provide the nation’s teachers with solid, researchbased approaches to teaching reading. And we have worked with many of you in

carrying out our belief that teacher unionism can be—and must be—a force for improvement for our students, our schools and our educators. In the AFT, we have

prided ourselves on being a union of professionals.

So how did things go so terribly wrong in two of our locals? How can we set things

right and prevent them from ever happening again?

I am constantly asking myself: Could we have seen the warning signs sooner?

Even if we had, with hindsight—always 20/20—could we have done more?

As I’ve said, the AFT consists of fiercely autonomous local unions—almost 3,000,

ranging in size from two or three in an island community to 115,000 in New York

City. 2,748 locals have fewer than 1,000 members each. Our Constitution—and our

procedures and practices—reflect our tradition of local autonomy.

Yes, our Constitution requires that local unions prepare audits at least every two

years, make them available to their members, and submit a copy to the national

office. But, we have had no enforcement provisions because neither our history nor

our experience indicated that they were needed. Instead, we’ve had to rely on persuasion. In fact, unlike many unions, for almost all of our history we prided ourselves on not having a constitutional provision for administratorships—relying on

our locals to involve the members democratically and conduct themselves with integrity. And through the years, we never had a problem like the one we’re now facing.

Only in the year 2000, after going through an extensive strategic planning process

to prepare for the future, did we amend our Constitution to allow for

administratorships should extreme circumstances arise, such as those that later did

occur in Washington and Miami—and I’m certainly glad we did.

You will recall that the situation here in Washington came to light because the

AFT discovered it, and brought it to the attention of the appropriate authorities. We
40

never covered it up. In fact, we reported on it extensively in our national union

newspaper and on our Web site.

Although our office repeatedly had sought copies of audits from the president of

the WTU and the payment of back dues, we first discovered that something was seriously wrong last summer when teachers alerted the AFT national office about an

overcharge in the automatic dues deduction. With the cooperation of the WTU executive board, we sent in the AFT’s financial services department, which soon found

several serious irregular transactions, including checks and credit card purchases

without proper authorization.

Again, with the involvement and support of the local’s executive board, we notified

the U.S. Attorney’s Office, which began investigating the WTU, with the full cooperation of the AFT. The local executive board asked for the resignations of the

officers allegedly involved, and the AFT hired a forensic auditor who ultimately reported the misappropriation of some $5 million. All the excruciatingly painful details you have read about came directly from our forensic audit, which we promptly

provided to all the AFT members and made public.

In January, the AFT executive council voted unanimously to appoint an administrator to run the day-to-day operations of the WTU. We appointed George Springer,

an experienced educator and unionist who once headed the AFT state federation in

Connecticut.

The case in Miami first came to our attention in a different manner. There, we

had no knowledge of any alleged wrongdoing by the local’s president until the FBI

raided the union’s headquarters on April 29.

Nor did we learn that the local was having serious financial problems—primarily

due to the combination of cost overruns in the construction of a new building and

a decline in membership—until representatives of UTD came to us last January, requesting that we guarantee a large loan. That guarantee was never given because

they failed to provide satisfactory answers to our questions about their fiscal situation.

Over the years, the Miami local’s audits—conducted by a reputable national accounting firm—had never indicated that there were financial problems, until a problem appeared on the very last audit, conducted by a local accounting firm and submitted in March of this year.

As in Washington, once aware of potential financial mismanagement, we moved

into that local immediately, appointing Mark Richard—a nationally known labor

lawyer and Miami law professor—as the AFT’s administrator.

Both Mr. Springer in Washington and Mr. Richard in Miami-Dade are meeting

regularly with their teachers, getting their local’s finances in order, and doing everything it takes to turn these unions around, rebuild their democratic processes and

return the locals to the members.

Meanwhile, on the national level, as I previously noted, we have created much

stronger procedures to help prevent or detect possible corruption in a union with

almost 3,000 separate and autonomous local unions within an education system

where local control is paramount. Let me briefly describe them.

First, under our new rules, if a required audit or financial review isn’t submitted

to us within six months of the close of the local’s fiscal year, the national AFT president is authorized to employ an auditor to review the local’s finances, inform the

local’s members immediately, and report the results to the members and to the AFT

executive council.

In addition, because one sign that a local might be having financial difficulties

for any reason is if it falls significantly and unaccountably behind on its dues payments to the AFT, our executive council strengthened the procedure for dealing with

late payments.

Under our new rules, any local that becomes two months behind in its payments

will receive notification in writing. If the situation isn’t corrected within 30 days,

the AFT will directly notify the local’s executive board and state affiliate. If the payments are not made within 30 days from that point, we will communicate directly

with the members of that local. And when a local is in bad standing because of late

dues payments, the president is authorized to send in an auditor to examine the

books. So for the first time, we can now directly inform a local’s members of a potential problem, and we have a streamlined mechanism to employ our own auditor.

Members’ knowledge and involvement are, perhaps, the strongest weapons we have.

What has happened in these two locals is a tragedy, but it is also what educators

call ‘‘a teachable moment.’’ As I mentioned, our newspapers and Web site have kept

our members and leadership throughout the country informed about these situations. The Web site is carrying WTU’s full forensic audit, along with our own AFT

financial statement audited by an independent firm. A similar forensic audit will

be completed and posted for Miami within months.
41

We are developing additional training programs for local union presidents, treasurers and other officers in financial management, recordkeeping and reporting.

I am determined—out of outrage and belief—to guard our historic mission: to nurture the open, honest, democratic union that the AFT has always been, which gives

voice to teachers’ aspirations to improve education for all of America’s children, for

the good of our communities and our country.

Thank you for listening. And now I would be glad to answer your questions.

PREPARED STATEMENT OF TOM DONAHUE

Chairman Gregg, Senator Kennedy, and committee members, thank you for inviting me to speak with you today.

Let me start by telling you briefly about my background and my experiences with

labor unions. I am a senior fellow of the Work in America Institute, a nonprofit organization dedicated to improving U.S. productivity and the quality of working life.

I also serve as chairman of the Special Advisory Committee to the President and

the Secretary of State on Labor Diplomacy.

I served in government—as an assistant secretary for labor-management relations

at the U.S. Department of Labor from 1967 to 1969. I served as chairman of the

U.S. Special Trade Representative’s Labor Advisory Committee during Republican

and Democratic administrations.

From 1979 to 1995, I was the secretary-treasurer of the AFL-CIO, and I was elected president in August 1995 to complete an unexpired term.

I believe these experiences give me a unique perspective.

I have tremendous respect for the American Federation of Teachers and for its

current president, Sandra Feldman. I hold the AFT in highest regard because it is

a primary reason why today’s teachers have greater professional development opportunities and why all 50 states have academic standards in place. The AFT is working hard to do what it can to raise academic achievement for all children and to

give its members the tools and support they need to achieve that goal.

As assistant secretary of labor and an officer of the AFL-CIO, I worked with

unions of all kinds. Union members, like American voters, elect their officials at the

local, state and national levels in fair and free elections. In this way, unions are

exemplary democratic institutions.

The national unions, which may have hundreds or thousands of local affiliates

across the country, while also democratic, do not all have the same form of democracy. Some, such as the United Auto Workers and the United Steelworkers of America, are highly centralized, with a great deal of authority and responsibility in the

hands of national officers and staff. That makes sense in industries that have so

many workers concentrated in a few main industrial centers, such as Detroit or

Pittsburgh.

Other national unions, like the AFT, encompass democracy in a different form.

The AFT is, by design and tradition, decentralized. Teachers are employed by school

districts across the country, and it makes sense that teachers would be in a federation, which affords local independence and responsiveness to local issues. The national union has limited oversight and is cautious about interfering in the affairs

of its local unions, which have a great deal of autonomy. Since the AFT’s founding

more than 80 years ago, that approach has worked superbly for the AFT national

union, for its locals, and, most important, for its members. We are here today to

talk about the exceptions, but it’s important to remember that the overwhelming

majority of AFT locals operate democratically, under leaders who possess integrity,

expertise and a commitment to member service.

It was the national AFT’s audit that uncovered the misappropriated funds at the

Washington Teachers Union. Let me suggest that the way to judge a national

union—and I have a lifetime of experience with unions—is not by the despicable actions of a few individuals at one or two of its locals. Rather, we should judge the

character of the AFT and its president by their response to these actions, and the

AFT has responded well.

Ms. Feldman and her staff moved quickly to bring in federal authorities, protect

Washington’s teachers and their organization from financial disaster, and put in

place George Springer as administrator. He has been a schoolteacher, a local teacher union president, president of the AFT’s Connecticut affiliate, and northeast regional director of the AFT.

I am confident Mr. Springer will put the WTU back on its feet. I know that he

already has taken steps in that direction. It will take some time to undo the damage

that has been done, but the AFT’s goal is to make this local an exemplary union,

regain the confidence of the members and the school community, and, ultimately,
42

rebuild the WTU so that it can be a well-run, member-driven, democratic organization.

The AFT is also taking aggressive actions in Florida to straighten out the problems at its Dade County local. AFT installed Mark Richard as administrator of that

local, and his team is working to turn around that union. He is a labor lawyer,

president of the higher education local at an AFT affiliate in south Florida, and,

perhaps most important, a person with strong family ties to Miami’s public schools.

AFT has selected highly qualified, knowledgeable administrators in both cases.

What’s more, its executive council has approved several measures to strengthen accountability, particularly for affiliates that fall behind in their dues to the national

union. The union’s president can now order, an external has fallen behind in its

dues or failed to submit a biennial audit of its finances.. And’ the AFT has established new procedures for notifying affiliates that show signs of financial trouble.

That is the way to solve these problems, and Ms. Feldman spoke at some length

about the steps the AFT is taking to prevent this kind of fraud—unprecedented in

AFT’s 80-plus years—from occurring again.

There are people, including some officials at the U.S. Department of Labor and

others who have spoken here today, who believe that what is needed is not the direct, decisive types of action taken by the AFT, but more reporting from unions. I

disagree with that approach.

The proposed changes to union disclosure forms under the LRMDA would not lead

to greater transparency or help avoid the rare instances of financial impropriety. If

these proposed changes would achieve that end, I can tell you that right now I

would be sitting here saying, ‘‘Sign me up.’’ And I know that Sandra Feldman and

other union leaders also would welcome that change, even if it required additional

effort from union staff.

But sadly, there is absolutely nothing in these changes that will offer additional

transparency to assist union members. Indeed, the current version of the LM-2s requires unions to disclose staff salaries and detailed categorical spending—more disclosure than is required of other nonprofit organizations and corporations. This requires rigorous and detailed recordkeeping by unions—a task they perform and have

performed for many years.

And these proposed changes do not give members the right under the LMRDA to

obtain financial information from the unions: Unions and the law already give members that right. They can get the financial information simply by asking for it. Many

unions go even a step further by making their audits public. Union audits are often

published on Web sites. They are discussed at meetings that the membership is free

to attend. Members can attend meetings where the union’s budget is voted on.

In contrast, the proposed reporting changes will not increase transparency; they

will not prevent the rare instances of financial impropriety; and they will not give

union members rights they don’t already possess. They will, however, as a detailed

study by the Air Line Pilots Association estimates, result in 15,863 pages of data

that will not help workers learn about their unions’ spending. What this arbitrary

requirement will mean is that more union dues will be used for accountants and

support staff, and more time will be spent filling out meaningless paperwork instead

of serving members. If the goal is to help members understand their unions’ finances, then this data dump of thousands of pages is not the answer.

The new rules would require unions to itemize each and every payment that

crosses a low threshold (proposed in the range of $2,000 to $5,000) and to allocate

the costs to one of eight ‘‘functional’’ categories. These rules apply even if several

small payments—added together—would cross the low threshold. For example,

unions would have to track and report five payments of $1,000 each to a printer

for organizing leaflets. If the monthly bill to the printer is $10,000—half for organizing materials and half for grievance handling—the union would have to allocate and

itemize these payments in separate categories.

Unions would have to include a description of the payment as well as its purpose.

This would reveal a host of sensitive decisions that could easily jeopardize the

union’s bargaining and organizing strategies.

And if an employee receives at least $10,000 per year, the union must analyze

the employees’ hours and estimate to the nearest 10 percent which category the

hours belong in. Unions also would have to itemize—by days past due—accounts

payable and receivable over $1,000. I have a feeling we would need a ninth category—to cover the hours that union employees would spend trying to comply with

the new regulations.

The list of new regulations goes on and on and never gets us any closer to the

kind of information that members need. The AFL-CIO has estimated that the average cost to each national or international union would be more than $1.2 million,

and the average cost to each local would be $218,000. The Department’s own fea-
43

sibility study shows that the largest union would have to report at least 150,000

disbursements; it would take 25,000 pages to report on the appropriate schedules.

Tracking the day-to-day activities and small expenditures would be a time-consuming, mind-numbing, pointless task. The only worse task I can imagine would be

poring over the forms and trying to monitor the accuracy of the information for

workers at more than 30,000 unions. Workers at the U.S. Department of Labor

would not have time to even skim these disclosure forms.

If these measures would eliminate, or greatly reduce, the possibility of fraud or

embezzlement, again I think I could speak for all labor leaders in saying we would

find a way to make them work. But the proposed changes wouldn’t accomplish that.

No union member is going to slog through 15,000 pages of financial statements, and,

even more important, the changes won’t do anything to stop misappropriations if

the people filling out the forms are intent on defrauding the union.

I know that there are well-intentioned people who believe that the proposed

changes to the LM-2 are improvements. But when I look at these so-called reforms—through the eye of someone who has been an official both at the Labor Department and at a labor union—I see the new LM-2s are simply not the answer.

Real reform is a positive concept that unions welcome; these changes are a negative

force that will harm workers’ rights.

It’s not clear to me that positive reform was on the minds of some of the people

behind the proposed changes. I don’t believe these changes would help teachers and

other working men and women get better representation through unions. In fact,

the revised LM-2s would bury unions in a pile of paperwork and weaken their ability to serve their members.

Whether the proposed changes come from the best intentions or the worst, their

effect would be the same—more money to cover administrative and accounting functions; less money spent for what workers really need.

The AFL-CIO has proposed a much more promising idea to make sure members

have all the information they need about their unions’ operations: annual independent audits to supplement the current LM-2 forms. Union members don’t want to be

overwhelmed by the minutiae; they want to know their money is being spent to improve the lives of members, their families, and the people they serve. With audits

that conform to generally accepted accounting practices, unions can achieve greater

transparency. Audits can also be tailored to take an in-depth look at particular

types of transactions.

There would still be issues to work out—for example, whether the threshold for

LM-2 reporting would need to be raised to protect small LM-2 filers from the financial burdens of conducting an audit, and whether small LM-2 filers should be subject to a review of their financial statements by an independent auditor in lieu of

having the auditor conduct a full-fledged audit.

But for large organizations, an annual audit requirement is the best method of

achieving financial transparency and deterring fraud. Congress, federal government

agencies, corporate watchdogs and scholars within the financial accounting world

have long recognized that audits provide the best way to monitor an entity’s financial health.

America’s workers have rights under current law to make sure their union dues

are well spent. The AFT and the AFL-CIO are taking steps to expand those rights,

improve communications with members, and help members evaluate their union’s

financial health. That’s what workers need.

And make no mistake: Americans need unions that aren’t hogtied by bizarre accounting regulations. This country needs unions that are allowed to focus on what

they do best and what their members pay them to do: negotiate better working conditions, improve the institutions in which their members work, and raise the living

standards of American workers and American families.

Thank you.

PREPARED STATEMENT OF DAMARIS DAUGHERTY

I am Damaris Perez Daugherty, wife of a public school teacher and mother of two

Miami public school children. I am also Executive Director of the Teacher Rights

Advocacy Coalition (TRAC) of Miami-Dade County, Florida. TRAC is a professional

organization dedicated to empowering educators and elevating their status. We are

fighting to expose unbridled corruption in our school district and bring about accountability. Unlike the local teacher union—the United Teachers of Dade (UTD),

we are an open and democratic organization where each member has a voice and

a vote.

I respectfully ask you to consider one question: ‘‘Would you feel comfortable having a fox guarding a hen house?’’
44

While unions have undoubtedly achieved important goals and helped make America a more just and equitable society, in recent times, some unions have lost their

focus and have allowed their executives to enrich themselves at the expense of the

individuals they represent. Some unions seem determined to push their own political agenda, which sometimes collide with the true interests of their members. Some

unions have eroded workers’ Right of Free Speech, Freedom of Association and the

Right to Counsel. Those unions have stepped over the line and now it is time to

make them answer to the workers.

A well-publicized example of a union run amuck is our own UTD. LTD was

formed 40+ years ago. Since its inception, President-for-Life, Pat Tornillo assumed

power and there has never been a bona fide election to fill the slate of UTD officers.

The collective bargaining unit represented by UTD consists of approximately 36,000

teachers, substitutes, office workers, social workers, counselors, occupational therapists, physical therapists and security monitors. In September of 2001, UTD represented close to 48% of the members in the bargaining unit or 17,000 employees.

Today, based on their latest filing with the Florida Public Employees Relations

Commission and data received from the Miami-Dade County Public School District,

TRAC calculates UTD represents approximately 31% of the members in the bargaining unit or just shy of 11,000. (It is close to impossible to provide numbers with

100% accuracy since UTD will not reveal them even to its own members.) Since the

FBI raid on April 29, 2003, when evidence of corruption was made public, UTD has

seen it membership drop by 500 members.

For many years, there have been widespread rumors concerning corruption within

UTD. Those rumors, while-credible, had not been proven—until now. TRAC has documented and made public complete fiscal irresponsibility and questionable practices

within UTD for over two years. Yet, no one took action until the FBI intervened.

There are numerous local entities that could have exposed the corruption much

sooner or could have called for an investigation but everyone chose to look the other

way. Tornillo has his powerful tentacles everywhere throughout the State of Florida

and many justifiably fear or owe him. While the stench of corruption, graft, nepotism and embezzlement was burning the noses and throats of our citizens, the appropriate powers were handing out snuff.

Teachers in Miami-Dade pay the highest dues in the nation—$843 a year. For the

past 10 years, our teachers have seen their dues rise every single year, while pay

has been stagnate and benefits have taken a nose dive. During this same time,

Tornillo and other UTD officers were living the high life. As a result of the FBI raid

and subsequent investigations by local media sources, we now have confirmed

Tornillo took vacations halfway around the world, enjoyed spa treatments, bought

liquor, paid for his personal maid and bought his personal groceries using teachers’ dues monies. Tornillo enjoyed all these ‘‘little’’ perks on top of his quarter of a mil- lion dollar salary, $42,000 unverified expense account and generous benefits package. This he did unchallenged by any member of the UTD executive board, the same

board that remains in power today. Why would UTD board members challenge him,

when they too were enjoying similar ‘‘benefits’’ such as Golden Parachute Packages?

The UTD Executive Board was turning a blind eye to the misappropriation of funds

at the same.time UTD was telling teachers in Miami-Dade to apply for Medicare

to insure their children because UTD could not negotiate healthcare coverage that

was affordable on a teacher’s salary. As members of the bargaining unit looked for

alternatives to insure their families, UTD and UTD’s state affiliate, the Florida

Educators Association (FEA) paid 100% of the healthcare premiums for staff and dependents using dues monies. FEA staff was not putting their children on Medicare,

rather their families enjoyed a $20,300 a year healthcare and dental insurance benefit, all at teachers’ expense.

To add insult to injury, during this same period, UTD was engaged in conduct

contrary to the interests of teachers and to the American spirit. On page 159 of

UTD’s contract with the district, they waived the right to counsel for every member

of the bargaining unit. Why would an organization that is well compensated to fight

for worker’s rights, waive a Constitutional right? Is the waiver of such a fundamental right even valid? As if this were not enough and to ensure his continued reign,

on September 5, 2002, Tornillo spent approximately $14,000 mailing letters to every

member of the bargaining unit. On the second page of that letter, the last bullet

point tells educators that the best way to win an election is never to hold one... so

much for the American way. As a further insult, UTD also sought to enrich itself

at the expense of the people it represents by getting into the charter school movement. UTD created a conflict of interest by pressing the Miami-Dade School Board

to give it a discount on the administrative fee other charters have to pay. The administrative fee ensures that the cost to the district to manage charters, that are

turning a profit, does not deplete the public education coffers. While other charter
45

schools in Miami pay a 5% fee, UTD negotiated a 1% fee for itself based on its connections within the district. It cared nothing about the negative impact this would

have on the district’s funds from which its members are compensated. UTD is not

looking out for members; UTD is looking out for UTD.

In some unions, financial data is so guarded it is next to impossible for members

to uncover fiscal irresponsibility and malfeasance. Current mandated reporting requirements do not remedy this problem. At the state level, reporting laws are outdated, forms are vague and enforcement is non-existent. The national level is just

as bad. For example, law mandates that statewide unions submit an LM-2 Annual

Labor Union Report to the U.S. Department of Labor (DOL) within 90 days of the

close of its fiscal year. The FEA’s most recent fiscal year ended on August 31, 2002.

Its LM-2 Report for that year was due to the DOL on or about November 1, 2002.

Numerous attempts to obtain a copy of the report after the deadline went unfulfilled

because the report had not yet been filed. The report arrived in late December. To

our knowledge, no action was taken against FEA for failing to report on time. It

is our understanding that there are no penalties in the law that could be levied.

In May 2002, a few UTD members attempted to exercise their statutory right to

financial disclosure and sent a letter to UTD’s Chief Financial Officer, James

Angleton, Jr., requesting an appointment to review UTD’s financial records at UTD

headquarters. Their request was cleverly side-stepped. Instead of advising them as

to a date and time they could review all records, UTD sent ‘‘audited’’ financial statements. That we know of, no dues paying member of UTD has ever been allowed to

exert their statutory right and review UTD’s financial records.

With this state of affairs in Miami, why didn’t anyone intervene on behalf of the

educators?

The local State Attorney’s office has been hearing the allegations of corruption

within UTD for years but chose not to investigate.

Counting on the American Federation of Teachers or AFT to clean-up UTD’s mess

is like sending in Castro to monitor Saddam Hussein on human rights issues. AFT

and FEA knew or should have known about gross fiscal mismanagement as far back

as 1999 but did nothing to protect the membership. The audited financial records

UTD sent to the members, show UTD was $1.3 million in arrears in its per capita

payments, at least as far back as 1999. Furthermore, news stories on the local ABC

affiliate, exposed questionable practices at UTD as far back as 2001.

In internal memos exchanged between UTD and FEA during 2003 which TRAC

has obtained, it is documented that UTD was so far in arrears in its per capita payments to both FEA and AFT that it was no longer considered a member in good

standing. UTD was to be denied a seat at AFT’s 2002 convention, until FEA intervened and paid UTD’s outstanding bill. When questioned in a written correspondence by a UTD member, FEA misrepresented UTD’s status stating UTD was current in its per capita payments. For at least 4 years AFT and FEA knew about the

problems; who’s guarding the hen house?

As AFT ‘‘corrects’’ the situation in Miami, AFT’s conduct raises more questions

than it answers: Why was Tornillo allowed to continue to draw a salary after the

raid? Has he repaid that salary as of this date? If, as AFT claims, it cut UTD’s staff

in half last week, why are dues only dropping 10%?

AFT has said it will give UTD $1.7 million to stop the massive defection by UTD

members. Have the members of other locals been advised and have they consented

to their monies being used to bail out a corrupt and fiscally irresponsible organization such as UTD? UTD Stewards and dues paying members are demanding to see

UTD’s financial records. AFT claims it cannot produce any records because they are

in FBI custody. Yet according to the FBI, it took records pertaining only to Tornillo.

The spending spree documented by the media only tracks Tornillo’s expenditures

since returning to the local Miami-bade presidency in May of 2000. No one has, as

of yet, reviewed his financial habits in the nearly 30 years in which he was president of FEA. It is doubtful that his big-time lavish spending habits began in May

of 2000. Union staffers knew of Tornillo’s indulgences when he was heading the

FEA. In the mid 1990’s Tornillo and Al Shanker, the now-deceased president of

AFT, took a whirlwind trip to Africa. In the summer of 2001, Tornillo and newlyelected president Maureen Dinnen were scheduled to go to Asia on another junket.

No information has been revealed concerning these trips, such as the purpose of the

trips, costs and who paid for them. This begs the question, ‘‘What do teacher union

presidents have to do in Africa and Asia that benefits teachers back in Florida? How

does a trip to Africa and Asia enhance the job of teachers in the inner city schools

in Miami, Florida or for that matter, a rural school in Palatka, Florida?’’

It is of great significance that both Tornillo and the President of the D.C. teachers

union, Barbara Bullock, were AFT Executive Officers during the same period of
46

time they are being investigated for embezzling funds from their locals. Who is to

say they were not also dipping into the national till?

FEA staff compensation provides another example of information not readily

available to workers that could affect membership and generate an outcry. FEA has

approximately 71 staff members. One-forth of them were paid in excess of $100,000

in the 2001-2002 school year. More than one-third of them were paid in excess of

$90,000 and more than half were paid in excess of $80,000. Only 6 staff members,

or less than 10 percent of the staff, were paid less than $40,000 a year. Compared

to the $40,000 average teacher salary in the State of Florida, these salaries are

scandalous.

Through conversations with educators, TRAC has learned that most UTD members are unaware that a significant portion of their dues leave Miami and are sent

to the state and national affiliates. The average dues for teacher locals in Florida

are $450 per year. (UTD dues are $843.20). After the national unions (AFT and

AFL/CIO) take their per capita share of $149.50 and FEA takes its cut of $183.50,

only about $117 remains at the local level.

The Florida legislature has proven itself powerless against the force of the unions

in our state. During the 2002 legislative session, Representative Annie Betancourt

introduced a bill granting more power to the state regulatory body and greater financial disclosure from the unions. In the 2003 session, Senator Mike Fasano introduced legislation that would have required unions to disclose the application of dues

monies. In both instances, the unions sent in their lobbyists and the bills were defeated.

Our school district cannot be counted on to protect employees. The district and

UTD have colluded to violate worker’s Constitutional rights by including a blanket

denial of the right to counsel in their contract. UTD, an organization paid handsomely to fight for worker’s rights, asked to have the right to counsel waived. In

addition, UTD has the option to refuse representation to any member of the bargaining unit, an option it exercises repeatedly. Workers are left with no representation and no attorney. This has led to countless abuses in the system. Many fine

teachers have left the system due to the abuses. Former UTD members, who are

now TRAC members, have shared their horror stories with us. Some have told us,

that UTD, during the time they were supposed to be defending them, went so far

as to say to these educators under investigation, ‘‘Just admit you are guilty and let’s get it over with.’’ The Florida Public Employees Relations Commission or PERC is the state organization charged with ensuring union compliance with statutory standards and reporting requirements. The form used by PERC to collect union financial data is outdated

and so vague as to render the information worthless. Furthermore, PERC is powerless to investigate or impose sanctions. For the reporting year ending September 30,

2001, UTD had to file four times to provide PERC with the correct information.

Many of these refilings can be attributed to my persistence of UTD’s compliance

with statutory requirements. Information regarding interest free loans to staff,

using dues monies, was improperly reported. PERC had not even reviewed the report in detail. Why have regulatory bodies whose powers are limited to rubber

stamping financial forms? Why have reporting at all, when unions can file these reports late, as UTD usually does because there are no fines imposed for late filing?

Why go through the motion of collecting paper when PERC does not bother to compare the current year filing to the prior year’s to make sure that thousands of dollars in interest-free loans UTD has made to its staff, haven’t mysteriously disappeared off of the books?

A case in point about what happens when the fox is guarding the hen house is

the story of Judy Herrell, a teacher of 30 years with our school district. Ms. Herrell

was a LTD steward for over 12 years and her school had the highest union penetration of any school in the district, with union membership hovering at about 85%.

Being a person that cares about the people she represents, Ms. Herrell became suspicious of the way LTD was handling dues monies. Ms. Herrell tried repeatedly to

obtain financial information, but her inquiries were met with stiff resistance from

union executives. After much insistence, Ms. Herrell discovered there were two dead

people on the payroll at UTD. When she questioned Tornillo about those payroll

items, she was told to mind her own business. The problems continued and Ms.

Herrell became very outspoken about the mismanagement within UTD including

speaking to the press. Within a short period of time, Ms. Herrell was put on trial

by UTD and removed as a steward, though she was allowed the privilege of continuing to pay dues with the condition that she never again speak to the press. Ms.

Herrell quit LTD and became one of TRAC’s founding members.

The State of Florida is a Right to Work State. Workers, who see value in belonging to a union and wish to belong, should be able to do so. However, that does not
47

mean workers should be at the mercy of a corrupt union and that union executives

should be above the law. Unions must be accountable to the people they represent.

Unions must provide those people with access to all financial data as required by

statutes. UTD, instead of providing access to financial records, provides audited financial reports which we have come to learn omitted much vital information. Under

penalty of law, unions should be required to file annual financial reports that provide complete disclosure of the application of dues monies, including all perks and

monies going to PACs and other political purposes. Members’ dues monies should

not be used to support political agenda not in line with the members’ own views,

without the member’s knowledge. State regulatory agencies, such as PERC, should

be charged with the authority, no the duty, to investigate and impose sanctions. The

onus should not be on workers to have to hire legal counsel and file an unfair labor

practice action to enforce compliance with state statutes.

Can teachers in Miami-Dade count on the state attorney, the AFT, the FEA, legislature, the school district or PERC to protect them? The answer is a resounding NO!

We need Federal Legislation that will wrest from UTD and similar corrupt unions

the power they have inappropriately usurped from the workers. We need you to

come to the aid of workers in this country so that workers can reclaim their organizations and return them to their lofty goals. Without Federal intervention, corrupt

union executives will continue to manage dues monies as their personal expense accounts. Unions should be by the people and for the people.

In closing the newest Justice of the Florida Supreme Court, Raoul Cantero has

been quoted as saying: ‘‘To me, the true measure of a person is how he treats those

over whom he has power.’’ Measured by that standard, there are unions that fall

criminally short.

WRITTEN TESTIMONY OF ROLAND ASHBY-RIER AND ALFRED HUBBARD

Good Morning to Senator Judd Gregg, Chairman of the Committee on Health,

Education, Labor, and Pensions, and Ranking member Senator Kennedy and other

members of the committee. I am Dr. Roland Ashby-Rier, a member of the Washington Teachers’ Union, along with Mr. Alfred Hubbard of W.T.U.

I am very much aware of the five minutes to present. Dr. Rier and Mr. Hubbard

will submit a two and an half minutes presentation(s). The two presentations will

be the following:

WHY THE AMERICAN FEDERATION OF TEACHERS MUST HAVE A SECRET BALLOT—

ROLAND ASHBY-RIER

As of July 2002, the American Federation of Teachers’ didn’t have a Secret Ballot—at its most recent convention in Las Vegas, Nevada. The following procedure(s)

are used to vote at the American Federation of Teachers’ Convention:

1. Your ballot is given to you by the president of your local, or the ranking delegate.

2. You mark your ballot and return the ballot to the president or the ranking delegate. (A secret ballot box is not used in this procedure)

Without a secret ballot, the AFT is able to control the elections of the officers,

and the Executive Board. It is my opinion; this election should be held like any public election. If AFT had a secret ballot the following would be possible:

The leadership would change

A new leadership would challenge and change the methods and procedures used

by AFT

Members would not be influenced on how to vote

The voting power would be with the membership, and not with the leadership of

the union.

The Washington Teachers’ Union and the Miami-bade union in Florida would not

have been allowed to rake off funds from union members.

In conclusion, when I and others vote at the AFT Convention, it would be better

if the union would have a secret ballot . . . In addition, severe penalties should be

used to enforce a secret ballot for all unions.

CHANGES TO THE LANDRUM-GRIFFIN ACT—ALFRED HUBBARD

Thank you Senator Gregg, Ranking member Senator Kennedy and other members

of this committee. I appreciate the opportunity to offer this statement on a matter

of paramount importance to me personally. It is also a matter that has great impact

upon me and my fellow professionals in the teaching profession.

As a Social Science teacher in the Nation’s Capitol, I have long been a forceful

advocate for organized labor and the founding principals upon which union organi-
48

zations have coalesced. Recently however, events within our labor union, The Washington Teachers’ Union, local #6 of the American Federation of Teachers, has left

many of us fraught with disillusionment and disappointment.

I will not rehash the history of events that has cast aspersions upon our local and

stained this most notable occupation with disrepute. I will, in my oral testimony,

offer more specific characterizations of what I believe transpired—if that be the desire of your committee. For now I will simply assert that certain sections of Title

29 need to be revised and strengthened if we are to move forward in a fashion that

has the capacity to restore membership trust and support in our labor union.

[Whereupon, at 12:17 p.m., the committee was adjourned.]

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